UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________to
Commission file number 000-25027
COHOES BANCORP, INC.
(Exact name of registrant as specified in its charter)
Delaware 14-1807865
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
75 Remsen Street, Cohoes, New York 12047
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (518) 233-6500
Securities Registered Pursuant to Section 12(b) of the Act:
None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, par value $0.01 per share
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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 ___.
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-K contained herein, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant, computed by reference to the average of the bid and ask price
of such stock as of September 1, 1999, was approximately $107,082,637. (The
exclusion from such amount of the market value of the shares owned by any
person shall not be deemed an admission by the registrant that such person is
an affiliate of the registrant.)
As of September 1, 1999, there were 9,075,588 shares issued and
outstanding of the Registrant's Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Part II of Form 10-K - Annual Report to Stockholders for the fiscal year
ended June 30, 1999.
Part III of Form 10-K - Portions of Proxy Statement for 1999 Annual Meeting
of Stockholders.
<PAGE>
PART I
Item 1. Description of Business
General
The Company. Cohoes Bancorp, Inc. (the "Company") was formed at the
direction of Cohoes Savings Bank (the "Bank" or "Cohoes") in September 1998
for the purpose of becoming a savings and loan holding company and owning all
of the outstanding stock of the Bank. The Company is incorporated under the
laws of the State of Delaware. The Company is authorized to do business in
the State of New York, and generally is authorized to engage in any activity
that is permitted by the Delaware General Corporation Law. The business of
the Company consists only of the business of the Bank. The Company structure,
however, provides the Company with greater flexibility than the Bank has to
diversify its business activities, through existing or newly formed
subsidiaries, or through acquisitions or mergers of stock financial
institutions, as well as other companies. Although there are no current
arrangements, understandings or agreements regarding any such activity or
acquisition, the Company is in a position, subject to regulatory
restrictions, to take advantage of favorable acquisition opportunities that
may arise.
The assets of the Company consist of the stock of the Bank, a note
evidencing the Company's loan to its Employee Stock Ownership Plan (the
"ESOP") and the investments of the net proceeds from the sale of its stock
retained by the Company. Activities of the Company may also be funded through
sales of additional securities, through borrowings and through income
generated by other activities of the Company. At this time, there are no
plans regarding such other activities.
The executive office of the Company is located at 75 Remsen Street,
Cohoes, New York 12047-2892. Its telephone number at that address is (518)
233-6500.
The Bank. The Bank serves the financial needs of communities in its
market area through its main office and 18 other full service branch offices
located throughout the Bank's primary market area. Its deposits are insured
up to applicable limits by the Federal Deposit Insurance Corporation
("FDIC"). At June 30, 1999, the Bank had total assets of $649.7 million,
deposits of $446.2 million and total equity of $93.0 million (or 14.3% of
total assets).
The Bank has been, and intends to continue to be, an independent,
community oriented financial institution. The Bank's business involves
attracting deposits from the general public and using such deposits, together
with other funds, to originate primarily residential mortgage loans, and to a
lesser extent, commercial and multi-family real estate, consumer and
commercial business loans. The Bank originates its loans primarily in the
Bank's market area and to a lesser extent, it has in the past originated
multi-family and commercial real estate loans in New York City. However,
depending upon market conditions and as a result of the somewhat depressed
economy in the Bank's primary market area, the Bank may explore lending
opportunities outside its primary market area in the future. At June 30,
1999, $320.7 million, or 61.1%, of the Bank's total loan portfolio consisted
of residential mortgage loans. The Bank also invests in government agency and
corporate debt securities and other permissible investments.
<PAGE>
The executive office of the Bank is located at 75 Remsen Street, Cohoes,
New York 12047-2892. Its telephone number at that address is (518) 233-6500.
Lending Activities
General. The Bank primarily originates fixed- and adjustable-rate, one-
to four-family mortgage loans, including home equity lines of credit and
second mortgages, secured by the borrower's primary residence. The Bank's
general practice is to originate fixed and adjustable rate mortgage loans
(ARM) with terms to maturity between 5 and 30 years and, until December 1997,
sold substantially all its fixed rate mortgage loans on the secondary market.
Currently, the Bank has been retaining its 30-year and 15-year fixed rate
mortgage loans for its portfolio as the declining interest rate environment
has made it more difficult to originate adjustable-rate loans. The Bank
retains all adjustable rate mortgage loans in its portfolio. The Bank also
originates multi-family and commercial real estate, consumer and commercial
business loans. In-market loan originations are generated by eight on-staff
loan originators, the Bank's marketing efforts, which include print, radio
and television advertising, lobby displays and direct contact with local
civic and religious organizations, as well as by the Bank's present
customers, walk-in customers and referrals from real estate agents, brokers
and builders. The Bank also has established relationships with certain
mortgage brokers that take applications for residential mortgage loans (under
Cohoes underwriting guidelines) on behalf of Cohoes. During fiscal 1999,
$10.0 million of the Bank's loans were originated through mortgage brokers.
At June 30, 1999, the Bank's loan portfolio totaled approximately $525.0
million.
The Bank originates fixed and adjustable rate consumer loans. ARM and
consumer loans are originated in order to increase the percentage of loans
with more frequent terms to repricing or shorter maturities than long-term
fixed-rate, one-to four-family mortgage loans. Loan applications are
initially considered and approved at various levels of authority, depending
on the type and amount of the loan. Bank employees with lending authority are
designated, and their lending limit authority defined, by the Board of
Directors. The approval of the Bank's Board of Directors is required for any
loans over $500,000. Pursuant to the Bank's lending policy, certain senior
officers may approve loans up to $500,000.
The Bank is not subject to state or federal regulation limiting the
aggregate amount of mortgage loans it is permitted to make to one borrower or
affiliated groups of borrowers. New York law does require lending policies
that avoid imprudent mortgage concentrations. The aggregate amount of
commercial non-mortgage loans that the Bank is permitted to make to any one
borrower or group of related borrowers is generally limited to 15% of
unimpaired capital and surplus. At June 30, 1999, the Bank's
loans-to-one-borrower limit for non-mortgage loans was approximately $13.9
million. On the same date, the Bank had no borrowers with outstanding
balances in excess of this amount.
At June 30, 1999, the Bank's largest lending relationship consisted of
eight loans to a group of borrowers secured by mobile home parks and a car
wash facility totaling $7.3 million. The next largest lending relationship
consisted of five loans aggregating approximately $6.7 million primarily
secured by an office building and four retail facilities. The third largest
lending relationship consisted of seven loans totaling approximately $5.4
million secured by office buildings, retail facilities and a warehouse
facility. The fourth largest lending relationship consisted of six loans
totaling approximately $3.9 million secured by office buildings and a
<PAGE>
self-storage facility. The fifth largest lending relationship consisted of
two loans totaling approximately $3.1 million secured by two office
buildings. As of June 30, 1999, each of the five relationships discussed
above was performing in accordance with its terms.
The types of loans that the Bank may originate are subject to federal
and state laws and regulations. Interest rates charged by the Bank on loans
are affected by the demand for such loans, the supply of money available for
lending purposes and the rates offered by competitors. These factors are in
turn affected by, among other things, economic conditions, monetary policies
of the federal government, including the Federal Reserve Board of Governors,
and tax policies.
<PAGE>
The following table sets forth the composition of the Bank's loan
portfolio in dollar amounts and as a percentage of the portfolio at the dates
indicated.
<TABLE>
<CAPTION>
June 30,
1999 1998 1997
Amount % of Total Amount % of Total Amount % of Total
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Real estate loans:
One- to four-family real estate $320,721 61.12% $258,399 62.07% $243,620 60.62%
Multi-family and commercial
real estate 138,288 26.35 93,229 22.39 93,979 23.39
Total real estate loans 459,009 87.47 351,628 84.46 337,599 84.01
Consumer loans:
Home equity lines of credit 20,090 3.83 21,976 5.28 25,205 6.27
Conventional second mortgages 12,724 2.42 15,093 3.63 14,069 3.50
Automobile loans 9,658 1.84 9,783 2.35 9,290 2.31
Credit cards - - 1,655 0.40 2,152 0.54
Other consumer loans 1,244 .24 1,184 0.28 1,438 0.36
Total consumer loans 43,716 8.33 49,691 11.94 52,154 12.98
Commercial business loans 22,054 4.20 14,991 3.60 12,096 3.01
Total loans 524,779 100.00% 416,310 100.00% 401,849 100.00%
Less:
Net deferred loan origination
fees and costs 251 (18) (214)
Allowance for loan losses (4,025) (3,533) (3,105)
Total loans, net $521,005 $412,759 $398,530
</TABLE>
<TABLE>
<CAPTION>
June 30,
1996 1995
Amount % of Total Amount % of Total
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Real estate loans:
One- to four-family real estate $234,900 59.06% $227,253 59.38%
Multi-family and commercial
real estate 96,623 24.29 86,659 22.65
Total real estate loans 331,523 83.35 313,912 82.03
Consumer loans:
Home equity lines of credit 27,342 6.87 30,792 8.05
Conventional second mortgages 11,111 2.79 10,765 2.81
Automobile loans 9,982 2.51 9,790 2.56
Credit cards 2,767 0.70 3,350 0.88
Other consumer loans 1,776 0.45 2,117 0.55
Total consumer loans 52,978 13.32 56,814 14.85
Commercial business loans 13,250 3.33 11,942 3.12
Total loans 397,751 100.00% 382,668 100.00%
Less:
Net deferred loan origination
fees and costs (532) (447)
Allowance for loan losses (3,249) (3,133)
Total loans, net $393,970 $379,088
</TABLE>
<PAGE>
The following table shows the composition of the Bank's loan portfolio
by fixed- and adjustable-rate at the dates indicated.
<TABLE>
<CAPTION>
June 30,
1999 1998 1997
Amount Percent Amount Percent Amount Percent
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Fixed Rate Loans
Real estate:
One- to four-family real estate $186,302 35.50% $ 88,389 21.23% $ 21,365 5.32%
Multi-family and commercial real estate 72,858 13.88 42,274 10.15 51,859 12.90
Total real estate loans 259,160 49.38 130,663 31.38 73,224 18.22
Consumer:
Home equity lines of credit - - - - - -
Conventional second mortgages 12,724 2.42 15,093 3.63 14,069 3.50
Automobile loans 9,658 1.84 9,783 2.35 9,290 2.31
Credit cards - - 1,655 0.40 2,152 0.54
Other consumer loans 1,244 .24 1,184 0.28 1,438 0.36
Total consumer loans 23,626 4.50 27,715 6.66 26,949 6.71
Commercial business loans 9,795 1.87 5,651 1.36 3,700 0.92
Total fixed-rate loans 292,581 55.75 164,029 39.40 103,873 25.85
Adjustable-Rate Loans
Real estate:
One- to four-family real estate 134,419 25.61 170,010 40.84 222,255 55.31
Multi-family and commercial real estate 65,430 12.47 50,955 12.24 42,120 10.48
Total real estate loans 199,849 38.08 220,965 53.08 264,375 65.79
Consumer:
Home equity lines of credit 20,090 3.83 21,976 5.28 25,205 6.27
Conventional second mortgages - - - - - -
Automobile loans - - - - - -
Credit cards - - - - - -
Other consumer loans - - - - - -
Total consumer loans 20,090 3.83 21,976 5.28 25,205 6.27
Commercial business loans 12,259 2.34 9,340 2.24 8,396 2.09
Total adjustable-rate loans 232,198 44.25 252,281 60.60 297,976 74.15
Total loans 524,779 100.00% 416,310 100.00% 401,849 100.00%
Less:
Net deferred loan origination fees
and costs 251 (18) (214)
Allowance for loan losses (4,025) (3,533) (3,105)
Total loans receivable, net $521,005 $412,759 $398,530
</TABLE>
<PAGE>
The following table illustrates the contractual maturity of the Bank's
loan portfolio at June 30, 1999. Mortgages which have adjustable or
renegotiable interest rates are shown as maturing in the period in which the
contract is due. The schedule does not reflect the effects of possible
prepayments or enforcement of due-on-sale clauses.
<TABLE>
<CAPTION>
Real Estate Loans
One- to Multi-family Commercial
four-Family Commercial Business loans
(Dollars in Thousands)
<S> <C> <C> <C>
Amounts Due:
0 months to 1 year
$ 40 $ 10,089 $ 8,377
After 1 year:
1 to 2 years 44 5,932 1,755
2 to 3 years 120 7,004 3,055
3 to 5 years 1,486 8,215 4,878
5 to 10 years 13,847 82,462 2,910
10 to 15 years 68,280 17,057 232
Over 15 years 236,904 7,529 847
Total due after 1 year 320,681 128,199 13,677
Total amount due $320,721 $138,288 $22,054
</TABLE>
<TABLE>
<CAPTION>
Consumer Loans Total
Other Weighted
Home equity Conventional Automobile Consumer Average
Lines of credit second mortgages Loans Credit cards Loans Amount Rate
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Amounts Due:
0 months to 1 year
$ - $ 102 $ 508 $- $ 54 $ 19,170 8.61%
After 1 year:
1 to 2 years - 334 1,352 - 121 9,538 8.29
2 to 3 years - 1,619 2,978 - 336 15,112 8.26
3 to 5 years - 3,370 4,791 - 178 22,918 7.94
5 to 10 years 293 5,918 29 - 287 105,746 7.76
10 to 15 years 2,744 1,376 - - 31 89,720 7.21
Over 15 years 17,053 5 - - 237 262,575 7.41
Total due after 1 year 20,090 12,622 9,150 - 1,190 505,609 7.51
Total amount due $20,090 $12,724 $9,658 $- $1,244 524,779 7.55
Less:
Net deferred loan
origination fees and costs 251
Allowance for loan losses (4,025)
Total loans receivable, net $521,005
</TABLE>
<PAGE>
The following table sets forth the dollar amounts in each loan category
at June 30, 1999 that are contractually due after June 30, 2000, and whether
such loans have fixed or adjustable interest rates.
Due after June 30, 2000
Fixed Adjustable Total
(In Thousands)
Residential real estate $186,273 $134,408 $320,681
Commercial real estate 63,815 64,384 128,199
Total real estate loans 250,088 198,792 448,880
Commercial business loans 9,579 4,098 13,677
Consumer loans
Home equity lines of credit - 20,090 20,090
Conventional second mortgages 12,622 - 12,622
Automobile loans 9,150 - 9,150
Credit cards - - -
Other consumer loans 1,190 - 1,190
Total consumer loans 22,962 20,090 43,052
Total loans $282,629 $222,980 $505,609
Residential Real Estate Lending
Cohoes' residential real estate loans consist of primarily one- to
four-family, owner occupied mortgage loans. At June 30, 1999, $320.7 million,
or 61.1% of Cohoes' total loans consisted of one- to four-family residential
first mortgage loans. At June 30, 1999, approximately $186.3 million or 35.5%
of Cohoes' one- to four-family residential first mortgage loans provided for
fixed rates of interest and for repayment of principal over a fixed period
not to exceed 30 years. Cohoes does not originate fixed-rate loans for terms
longer than 30 years. Cohoes' fixed-rate one- to four-family residential
mortgage loans are priced competitively with the market. Accordingly, Cohoes
attempts to distinguish itself from its competitors based on quality of
service.
Cohoes generally underwrites its fixed-rate one- to four-family
residential first mortgage loans using Fannie Mae guidelines. Until December
1997, the Bank sold substantially all fixed-rate residential mortgage loans
it originated to the secondary market, and generally continued to service the
loans it sold. Currently, the Bank generally holds for investment all
adjustable and fixed rate one- to four-family residential first mortgage
loans it originates, but it may recommence selling loans in the future. In
underwriting one- to four-family residential first mortgage loans, Cohoes
evaluates, among other things, the borrower's ability to make monthly
payments and the value of the property securing the loan. Properties securing
real estate loans made by Cohoes are appraised by independent fee appraisers
approved by the Bank's Board of Directors. Cohoes requires borrowers to
obtain title insurance, and fire and property insurance (including flood
insurance, if necessary) in an amount not less than the amount of the loan or
the replacement cost of the dwelling.
<PAGE>
The Bank currently offers one-, five- and seven-year residential ARM
loans with an interest rate that adjusts annually after the initial period,
based on the change in the corresponding term United States Treasury index.
These loans provide for up to a 2.0% periodic interest rate cap and a
lifetime interest rate cap up to 6.75% over the initial rate. As a
consequence of using caps, the interest rates on these loans may not be as
rate sensitive as the Bank's cost of funds. Borrowers of ARM loans are
generally qualified at the initial interest rate (however, for one-year ARMs,
borrowers are qualified at the maximum rate after the first adjustment). The
Bank offers one-year ARM loans that are convertible (from the second through
the fifth year of the loan) into fixed-rate loans with interest rates based
upon the then current market rates. ARM loans generally pose greater credit
risks than fixed-rate loans, primarily because as interest rates rise, the
required periodic payment by the borrower rises, increasing the potential for
default. However, as of June 30, 1999, the Bank had not experienced higher
default rates on these loans relative to its other loans.
The Bank's one- to four-family mortgage loans do not contain prepayment
penalties and do not permit negative amortization of principal. Real estate
loans originated by the Bank generally contain a "due on sale" clause
allowing the Bank to declare the unpaid principal balance due and payable
upon the sale of the security property. The Bank has waived the due on sale
clause on loans held in its portfolio from time to time to permit assumptions
of the loans by qualified borrowers.
Generally, Cohoes does not originate residential mortgage loans where
the ratio of the loan amount to the value of the property securing the loan
(i.e., the "loan-to-value" ratio) exceeds 95%. If the loan-to-value ratio
exceeds 80%, Cohoes generally requires that the borrower obtain private
mortgage insurance in amounts intended to reduce the Bank's exposure to 80%
or less of the lower of the appraised value or the purchase price of the
property securing the loan. In addition, on occasion the Bank will make a
loan for the construction of the borrower's primary residence. At June 30,
1999 the Bank had $2.6 million in loans outstanding for the construction of
the borrower's residence.
Multi-Family and Commercial Real Estate Lending
The Bank has engaged in multi-family and commercial real estate lending
secured primarily by apartment buildings, office buildings, nursing homes,
strip shopping centers and mobile home parks located in the Bank's primary
market area. At June 30, 1999, the Bank had $138.3 million of multi-family
and commercial real estate loans, representing 26.4% of the Bank's total loan
portfolio. As of June 30, 1999, $22.3 million of this portfolio was secured
by property located in New York City.
Multi-family and commercial real estate loans generally have terms to
maturity that do not exceed 20 years. Cohoes' current lending guidelines
generally require that the property securing a loan generate net cash flows
of at least 120% of debt service after the payment of all operating expenses,
excluding depreciation, and the loan-to-value ratio not exceed 80% on loans
secured by such properties. As a result of a decline in the value of some
properties in the Bank's primary market area and due to economic conditions,
the current loan-to-value ratio of some commercial real estate loans in the
Bank's portfolio may exceed the initial loan-to-value ratio. Adjustable rate
multi-family and commercial real estate loans are generally written as
ten-year balloon loans, which adjust after five years to a margin over the
five-year United States Treasury index, and amortize over a term up to 20
<PAGE>
years. In underwriting commercial real estate loans, the Bank analyzes the
financial condition of the borrower, the borrower's credit history, the
reliability and predictability of the net income generated by the property
securing the loan and the value of the property itself. The Bank generally
requires personal guarantees of the borrowers in addition to the secured
property as collateral for such loans. Appraisals on properties securing
commercial real estate loans originated by the Bank are performed by
independent fee appraisers approved by the Board of Directors.
Multi-family and commercial real estate loans generally present a higher
level of risk than loans secured by one- to four-family residences. This
greater risk is due to several factors, including the concentration of
principal in a limited number of loans and borrowers, the effect of general
economic conditions on income producing properties and the increased
difficulty of evaluating and monitoring these types of loans. Furthermore,
the repayment of loans secured by commercial real estate is typically
dependent upon the successful operation of the related real estate project.
If the cash flow from the project is reduced (for example, if leases are not
obtained or renewed, or a bankruptcy court modifies a lease term, or a major
tenant is unable to fulfill its lease obligations), the borrower's ability to
repay the loan may be impaired and the value of the property may be reduced.
Consumer Lending
The Bank offers a variety of secured and unsecured consumer loans,
including home equity lines of credit and second mortgages and, to a lesser
extent, automobile and personal loans. Substantially all of the Bank's
consumer loans are originated on property located or for customers residing
in the Bank's primary market area. At June 30, 1999, the Bank's consumer loan
portfolio totaled $43.7 million, or 8.3% of the Bank's total loan portfolio.
The Bank's home equity lines of credit and second mortgages are secured
by a lien on the borrower's residence and generally do not exceed $100,000.
Cohoes uses the same underwriting standards for home equity lines of credit
and second mortgages as it uses for one- to four-family residential mortgage
loans. Home equity lines of credit and second mortgages are generally
originated in amounts which, together with all prior liens on such residence,
do not exceed 80% of the appraised value of the property securing the loan.
The interest rates for home equity lines of credit float with the prime rate
and second mortgages generally have fixed interest rates. Home equity lines
of credit require interest and principal payments on the outstanding balance
for the term of the loan. The terms of the Bank's home equity lines of credit
are generally 25 years. As of June 30, 1999, the Bank had $20.1 million, or
3.8% of the Bank's total loan portfolio outstanding, in home equity lines of
credit, with an additional $14.2 million of unused home equity lines of
credit, and $12.7 million, or 2.4% of the Bank's total loan portfolio, in
second mortgages.
The underwriting standards employed by the Bank for consumer loans other
than home equity lines of credit and second mortgages generally include a
determination of the applicant's payment history on other debts and an
assessment of ability to meet existing obligations and payments on the
proposed loan. Although creditworthiness of the applicant is the primary
consideration, the underwriting process also includes a comparison of the
value of the property securing the loan, if any, in relation to the proposed
loan amount.
<PAGE>
The Bank's automobile loans are originated as installment loans with a
fixed interest rate and terms of up to 60 months for new vehicles and up to
60 months for certain used vehicles. The Bank originates its automobile loans
directly and will loan up to 100% of the value of a new automobile and up to
90% of the value of a used automobile. At June 30, 1999, Cohoes had $9.7
million of automobile loans.
The Bank does not originate any consumer loans on an indirect basis
(i.e., where loan contracts are purchased from retailers of goods or services
which have extended credit to their customers).
Consumer loans may entail greater credit risk than residential mortgage
loans, particularly in the case of consumer loans which are unsecured or are
secured by assets which may decline in value. In such cases, any repossessed
collateral for a defaulted consumer loan may not provide an adequate source
of repayment of the outstanding loan balance as a result of high initial
loan-to-value ratios, repossession, rehabilitation and carrying costs, and
the greater likelihood of damage, loss or depreciation of the property, and
thus are more likely to be affected by adverse personal circumstances. In the
case of automobile loans, which may have loan balances in excess of the
resale value of the collateral, borrowers may abandon the collateral property
making repossession by the Bank and subsequent losses more likely. The
application of various federal and state laws, including bankruptcy and
insolvency laws, may limit the amount which can be recovered on consumer
loans, including automobile loans.
Commercial Business Lending
At June 30, 1999, commercial business loans comprised $22.1 million, or
4.2% of the Bank's total loan portfolio. Most of the Bank's commercial
business loans have been extended to finance local businesses and include
primarily short term loans to finance machinery and equipment purchases,
inventory and accounts receivable. Commercial business loans also involve the
extension of revolving credit for a combination of equipment acquisitions and
working capital needs.
The terms of loans extended on machinery and equipment are based on the
projected useful life of such machinery and equipment, generally not to
exceed seven years. Lines of credit generally are available to borrowers
provided that the outstanding balance is paid in full (i.e., the credit line
has a zero balance) for at least 30 days every year. All lines of credit are
reviewed on an annual basis. In the event the borrower does not meet this 30
day requirement, the line of credit may be terminated and the outstanding
balance may be converted into a fixed term loan. The Bank has a few standby
letters of credit outstanding which are offered at competitive rates and
terms and are generally on a secured basis.
Unlike residential mortgage loans, commercial business loans are
typically made on the basis of the borrower's ability to make repayment from
the cash flow of the borrower's business. As a result, the availability of
funds for the repayment of commercial business loans may be substantially
dependent on the success of the business itself (which, in turn, is often
dependent in part upon general economic conditions). The Bank's commercial
business loans are usually, but not always, secured by business assets.
However, the collateral securing the loans may depreciate over time, may be
difficult to appraise and may fluctuate in value based on the success of the
business.
<PAGE>
The Bank's commercial business lending policy includes credit file
documentation and analysis of the borrower's background, capacity to repay
the loan, the adequacy of the borrower's capital and collateral as well as an
evaluation of other conditions affecting the borrower. Analysis of the
borrower's past, present and future cash flows is also an important aspect of
the Bank's current credit analysis. The Bank generally obtains personal
guarantees on its commercial business loans. Nonetheless, such loans are
believed to carry higher credit risk than more traditional savings bank
loans.
Loan Originations and Sales
Mortgage and commercial loan originations are developed from the
continuing business with depositors and borrowers, soliciting realtors and
other brokers and walk-in customers. Residential and commercial loans are
originated by the Bank's staff of salaried and commissioned loan personnel,
as well as through established relationships with certain mortgage brokers.
The Bank currently originates substantially all its mortgage loans to conform
with the underwriting standards of Fannie Mae and Freddie Mac. As such, these
loans are saleable to the secondary market.
While the Bank originates both fixed- and adjustable-rate loans, its
ability to originate loans is dependent upon demand for loans in the markets
in which it serves. Demand is affected by the applicable local economy and
the interest rate environment. Until December 1997, the Bank sold all its
fixed-rate loans to the secondary market, servicing retained. Currently, the
Bank generally retains its fixed-rate and adjustable-rate real estate loans
in its portfolio. At June 30, 1999, the Bank serviced approximately $189.7
million of loans for others.
During the year ended June 30, 1999, the Bank originated $245.4 million
of loans, compared to $180.7 million in fiscal 1998.
In periods of economic uncertainty, the Bank's ability to originate
large dollar volumes of loans with acceptable underwriting characteristics
may be substantially reduced or restricted which may result in a decrease in
operating earnings.
<PAGE>
The following table shows the loan origination and repayment activities
of the Bank for the periods indicated.
<TABLE>
<CAPTION>
Year Ended June 30,
1999 1998 1997
(In Thousands)
<S> <C> <C> <C>
Loans at beginning of period $416,310 $401,849 $397,751
Originations by type:
Real estate loans:
One- to four-family 108,610 107,991 74,641
Multi-family and commercial real estate 99,473 33,171 32,132
Total real estate loans 208,083 141,162 106,773
Consumer loans:
Home equity lines of credit 3,819 8,243 9,092
Conventional second mortgages 3,374 5,918 7,069
Automobile loans 5,747 6,766 5,189
Credit cards 2,674 2,561 3,052
Other consumer loans 571 822 814
Total consumer loans 16,185 24,310 25,216
Commercial business loans 21,114 15,195 9,461
Total loans originated 245,382 180,667 141,450
Less:
Principal repayments 133,231 155,969 123,732
Loan sales 861 8,105 9,567
Charge-offs 994 1,038 1,376
Transfers to ORE 1,827 1,094 2,677
Total loan reductions 136,913 166,206 137,352
Net Loan Activity 108,469 14,461 4,098
Loans at end of period $524,779 $416,310 $401,849
</TABLE>
<PAGE>
Asset Quality
Delinquency Procedures. When a borrower fails to make a required payment
on a one- to four-family residential mortgage loan, the Bank attempts to cure
the deficiency by contacting the borrower. Written contacts are made after
payment is 15 days past due and, in most cases, deficiencies are cured
promptly. The Bank attempts to contact the borrower by telephone to arrange
payment of the delinquency between the 16th and the 30th day. If these
efforts have not resolved the delinquency within 45 days after the due date,
a second written notice is sent to the borrower, and on the 60th day a notice
is sent to the borrower warning that foreclosure proceedings will be
commenced unless the delinquent amount is paid. If the delinquency has not
been cured within a reasonable period of time after the foreclosure notice
has been sent, the Bank may obtain a forbearance agreement or may institute
appropriate legal action to foreclose upon the property. If foreclosed,
property collateralizing the loan is sold at a public sale and may be
purchased by the Bank. If the Bank is in fact the successful bidder at the
foreclosure sale, upon receipt of a deed to the property, the Bank generally
sells the property at the earliest possible date.
Collection efforts on consumer, commercial business and multi-family and
commercial real estate loans are similar to efforts on one- to four-family
residential mortgage loans, except that collection efforts on consumer and
multi-family commercial real estate loans generally begin within 15 days
after the payment date is missed. The Bank also maintains periodic contact
with commercial loan customers and monitors and reviews the borrowers'
financial statements and compliance with debt covenants on a regular basis.
Delinquent Loans. The following table sets forth information concerning
delinquent loans as June 30, 1999, in dollar amounts and as a percentage of
the Bank's loan portfolio. The amounts presented represent the total
remaining principal balances of the related loans, rather than the actual
payment amounts which are overdue.
<TABLE>
<CAPTION>
June 30, 1999
60-89 days 90 days or more Total loans delinquent 60 days
or more
Number Principal Percent Number Principal Percent Number Principal Percent
of Balance of Loan of Balance of Loan of Balance of Loan
Loans of Loans Category Loans of Loans Category Loans of Loans Category
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate loans:
One- to four-family real estate 2 $146 .05% 26 $2,674 .83% 28 $2,820 .88%
Multi-family and commercial
real estate 2 249 .18 12 1,364 .99 14 1,613 1.17
Total real estate loans 4 395 .09 38 4,038 .88 42 4,433 .97
Consumer loans:
Home equity lines of credit - - - 4 163 .81 4 163 .81
Conventional second mortgages - - - 2 9 .07 2 9 .07
Automobile loans 2 5 .05 7 28 .29 9 33 .34
Other consumer loans 2 8 .64 8 21 1.69 10 29 2.33
Total consumer loans 4 13 .03 21 221 .51 25 234 .54
Commercial business loans 2 162 .73 1 62 .28 3 224 1.01
Total delinquent loans 10 $570 .11% 60 $4,321 .82% 70 $4,891 .93%
</TABLE>
<PAGE>
Non-Performing Assets. The table below sets forth the amounts and
categories of the Company's non-performing assets. Loans are generally placed
on non-accrual status when the loan is contractually past due 90 days or more
or when the collection of principal and/or interest in full becomes doubtful.
When loans are designated as non-accrual, all accrued but unpaid interest is
reversed against current period income and, as long as the loan remains on
non-accrual status, interest is recognized only when received, if considered
appropriate by management. ORE includes assets acquired in settlement of
loans.
<TABLE>
<CAPTION>
June 30,
1999 1998 1997 1996 1995
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Non-accrual loans:
One- to four-family real estate $2,674 $2,635 $2,835 $1,852 $ 441
Multi-family and commercial real estate 1,364 823 1,246 3,438 1,820
Conventional second mortgages 9 35 62 48 35
Consumer loans 212 105 380 245 40
Commercial business loans 62 65 217 - -
Total non-accrual loans 4,321 3,663 4,740 5,583 2,336
Loans contractually past due 90 days or
more and still accruing interest:
Multi-family and commercial real estate - - - - 308
Consumer loans _ 57 42 158 67
Total loans 90 days or more past due
and still accruing interest - 57 42 158 375
Troubled debt restructurings 672 1,929 1,906 2,052 2,352
Total non-performing loans 4,993 5,649 6,688 7,793 5,063
Real estate owned (ORE) 724 509 1,874 421 396
Total non-performing assets $5,717 $6,158 $8,562 $8,214 $5,459
Allowance for loan losses $4,025 $3,533 $3,105 $3,249 $3,133
Coverage of non-performing loans 80.61% 62.54% 46.43% 41.69% 61.88%
Total non-performing loans as a percentage
of total loans .95% 1.36% 1.66% 1.96% 1.32%
Total non-performing loans as a percentage
of total assets .77% 1.05% 1.36% 1.68% 1.10%
</TABLE>
<PAGE>
Non-Accruing Loans. At June 30, 1999, the Bank had approximately $4.3
million in non-accruing loans, which constituted .8% of the Bank's total loan
portfolio. As of such date, there were no non-accruing loans or aggregate
non-accruing loans-to-one-borrower in excess of $750,000.
For the year ended June 30, 1999 accumulated interest income on
nonaccrual loans of approximately $381,000 was not recognized as income.
Accruing Loans Contractually Past Due 90 Days or More. As of June 30,
1999, the Bank had no accruing loans contractually past due 90 days or more.
Troubled Debt Restructurings. As of June 30, 1999, the Bank had
approximately $672,000 of troubled debt restructurings (which involve
forgiving a portion of interest or principal on the loan or restructuring a
loan to a rate materially less than that of market rates). At that date,
there were no troubled debt restructurings in excess of $750,000.
ORE. As of June 30, 1999, the Bank had approximately $724,000 of ORE. At
that date, ORE consisted of 13 residential properties located in the Bank's
primary market area. Real estate and other assets acquired by the Bank as a
result of foreclosure or by deed-in-lieu of foreclosure or repossession are
classified as ORE until sold. When property is classified as ORE, it is
recorded at the lower of cost or fair value (net of disposition costs) at
that date and any writedown resulting therefrom is charged to the allowance
for loan losses. Subsequent writedowns are charged to operating expenses. Net
expense from ORE is expensed as incurred.
Other Loans of Concern. As of June 30, 1999, there was approximately
$72,000 of other loans not included in the table or discussed above where
known information about the possible credit or other problems of borrowers
caused management to have doubts as to the ability of the borrower to comply
with present loan repayment terms. These loans have been considered by
management in conjunction with the analysis of the adequacy of the allowance
for loan losses.
Allowance for Loan Losses. The allowance for loan losses is replenished
through a provision for loan losses charged to operations. Loans are charged
against the allowance for loan losses when management believes that the
collectibility of the principal is unlikely. Recoveries on loans previously
charged-off are credited to the allowance for loan losses. The allowance is
an amount that management believes will be adequate to absorb losses on
existing loans that may become uncollectible. Management's evaluation of the
adequacy of the allowance for loan losses is performed on a periodic basis
and takes into consideration such factors as the historical loan loss
experience, changes in the nature and volume of the loan portfolio, overall
portfolio quality, review of specific problem loans and current economic
conditions that may affect borrowers' ability to pay.
Although management believes that it uses the best information available
to determine the allowance, unforeseen market conditions could result in
adjustments and net earnings could be significantly affected if circumstances
differ substantially from the assumptions used in determining the level of
the allowance. Future additions to the Bank's allowance will be the result of
periodic loan, property and collateral reviews and thus cannot be predicted
in advance. In addition, regulatory agencies, as an integral part of the
examination process, periodically review the Bank's allowance for loan
losses. Such agencies may require the Bank to recognize additions to the
<PAGE>
allowance based upon their judgment of the information available to them at
the time of their examination. At June 30, 1999, the Bank had a total
allowance for loan losses of $4.0 million, representing .95% of total
non-performing loans.
The following table sets forth an analysis of the Bank's allowance for
loan losses at the dates and for the periods indicated.
<TABLE>
<CAPTION>
At or for the fiscal year ended June 30,
1999 1998 1997 1996 1995
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Allowance for loan losses, beginning $3,533 $3,105 $ 3,249 $3,133 $3,011
Charged-off loans:
Real estate loans
One- to four-family real estate 270 432 619 128 79
Multi-family and commercial real estate 487 93 343 21 -
Total real estate loan charge-offs 757 525 962 149 79
Commercial business loans charge-offs - 218 105 4 -
Consumer loans
Home equity lines of credit - 84 39 18 -
Conventional second mortgages 24 16 1 - -
Automobile loans 23 121 55 23 28
Credit cards 144 212 353 132 91
Other consumer loans
46 41 56 75 37
Total consumer loan charge-offs 237 474 504 248 156
Total charged-off loans 994 1,217 1,571 401 235
Recoveries on loans previously charged-off:
One- to four-family real estate 132 78 28 4 -
Multi-family and commercial real estate 53 93 40 13 -
Total real estate loan recoveries 185 171 68 17 -
Commercial business loan recoveries 1 35 - 1 -
Consumer loans
Home equity lines of credit 19 - 4 - -
Conventional second mortgages - - - 3 8
Automobile loans 4 8 5 - 3
Credit cards 30 23 16 4 2
Other consumer loans 12 8 9 2 14
Total consumer loan recoveries 65 39 34 9 27
Total recoveries 251 245 102 27 27
Net loans charged-off (743) (972) (1,469) (374) (208)
Provision for loan losses 1,235 1,400 1,325 490 330
Allowance for loan losses, end of period $4,025 $3,533 $ 3,105 $3,249 $3,133
Net charged-off loans to average loans 0.16% 0.24% 0.37% 0.10% 0.06%
Allowance for loan losses to total loans 0.77% 0.85% 0.77% 0.82% 0.82%
Allowance for loan losses to nonperforming loans 80.61% 62.54% 46.43% 41.69% 61.88%
Net charged-off loans to allowance for loan losses 18.46% 27.51% 47.31% 11.51% 6.64%
Recoveries to charged-offs 25.25% 20.13% 6.49% 6.73% 11.49%
</TABLE>
<PAGE>
Allocation of the Allowance for Loan Losses
The following table sets forth the allocation of the allowance for loan
losses by category as prepared by the Bank. This allocation is based on
management's assessment as of a given point in time of the risk
characteristics of each of the component parts of the total loan portfolio
and is subject to changes as and when the risk factors of each such component
part change. The allocation is not indicative of either the specific amounts
or the loan categories in which future charge-offs may be taken, nor should
it be taken as an indicator of future loss trends. The allocation to each
category does not restrict the use of the allowance to absorb losses in any
category.
<TABLE>
<CAPTION>
June 30,
1999 1998
Percent Percent
of Loans of Loans
Percent of in Each Percent of in Each
Allowance Allowance Category Allowance Allowance Category
for Loan to Total to Total for Loan to Total to Total
Losses Allowance Allowance Losses Allowance Allowance
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Real estate loans
One- to four-family real estate $ 708 17.59% 61.12% $ 649 18.37% 62.07%
Multi-family and commercial 1,686 41.89 26.35 1,438 40.70 22.39
real estate
Total real estate loans 2,394 59.48 87.47 2,087 59.07 84.46
Consumer loans
Home equity lines of credit 29 .72 3.83 41 1.16 5.28
Conventional second mortgages 19 .47 2.42 26 0.74 3.63
Automobile loans 69 1.71 1.84 74 2.09 2.35
Credit cards - - - 154 4.36 0.40
Other consumer loans 51 1.27 .24 45 1.27 0.28
Total consumer loans 168 4.17 8.33 340 9.62 11.94
Commercial business loans 220 5.47 4.20 164 4.64 3.60
Unallocated 1,243 30.88 - 942 26.67 -
Total $4,025 100.00% 100.00% $3,533 100.00% 100.00%
</TABLE>
<TABLE>
<CAPTION>
June 30,
1997 1996
Percent Percent
of Loans of Loans
Percent of in Each Percent of in Each
Allowance Allowance Category Allowance Allowance Category
for Loan To Total to Total For Loan to Total to Total
Losses Allowance Allowance Losses Allowance Allowance
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Real estate loans
One- to four-family real estate $ 493 15.88% 60.62% $ 591 18.19% 59.06%
Multi-family and commercial 1,339 43.12 23.39 1,848 56.88 24.29
real estate
Total real estate loans 1,832 59.00 84.01 2,439 75.07 83.35
Consumer loans
Home equity lines of credit 24 0.77 6.27 158 4.86 6.87
Conventional second mortgages 22 0.71 3.50 9 0.28 2.79
Automobile loans 35 1.13 2.31 40 1.23 2.51
Credit cards 132 4.25 0.54 183 5.63 0.70
Other consumer loans 56 1.80 0.36 102 3.14 0.45
Total consumer loans 269 8.66 12.98 492 15.14 13.32
Commercial business loans 215 6.93 3.01 227 6.99 3.33
Unallocated 789 25.41 - 91 2.80 -
Total $3,105 100.00% 100.00% $3,249 100.00% 100.00%
</TABLE>
<TABLE>
<CAPTION>
June 30,
1995
Percent
of Loans
Percent of in Each
Allowance Allowance Category
for Loan to Total to Total
Losses Allowance Allowance
(Dollars in Thousands)
<S> <C> <C> <C>
Real estate loans
One- to four-family real estate $ 861 27.48% 59.38%
Multi-family and commercial 1,426 45.52 22.65
real estate
Total real estate loans 2,287 73.00 82.03
Consumer loans
Home equity lines of credit - - 8.05
Conventional second mortgages 75 2.39 2.81
Automobile loans 66 2.11 2.56
Credit cards 382 12.19 0.88
Other consumer loans 158 5.04 0.55
Total consumer loans 681 21.73 14.85
Commercial business loans 102 3.26 3.12
Unallocated 63 2.01 -
Total $3,133 100.00% 100.00%
</TABLE>
<PAGE>
Investment Activities
The Company is generally authorized to invest available funds in
whatever investments the Board of Directors deems appropriate. The Bank, as a
New York State chartered savings bank, may invest assets only in those
investments which the New York Banking Law permits. The Bank is authorized to
invest in various types of liquid assets, including United States Treasury
obligations, securities of various federal agencies, certain certificates of
deposit of insured banks and savings institutions, certain bankers'
acceptances, repurchase agreements and federal funds. Subject to various
restrictions, the Bank may also invest its assets in investment grade
commercial paper and corporate debt securities and mutual funds whose assets
conform to the investments that the Bank is otherwise authorized to make
directly.
Generally, the investment policy of the Company is to invest funds among
various categories of investments and maturities based upon the Company's
need for liquidity, to achieve the proper balance between its desire to
minimize risk and maximize yield, and, to a much lesser extent, to provide
collateral for borrowings and to fulfill the Company's asset/liability
management policies. To date, the Company's investment strategy has been
directed toward high-quality assets (primarily federal agency obligations and
mortgage-backed securities) with short and intermediate terms (five years or
less) to maturity. At June 30, 1999, the weighted average term to maturity or
repricing of the security portfolio was 5.7 years. This did not take into
account securities which may be called prior to their contractual maturity or
repricing.
Management determines the appropriate classification of securities at
the time of purchase. If management has the intent and ability to hold debt
securities to maturity, they are stated at amortized cost and are classified
as investment securities. If securities are purchased for the purpose of
selling them in the near term, they are classified as trading securities and
are reported at fair value with unrealized holding gains and losses reflected
in current earnings. All other debt and marketable equity securities are
classified as securities available for sale and are reported at fair value,
with net unrealized gains or losses reported, net of income taxes, as a
separate component of equity. As a member of the FHLB of New York, the Bank
is required to hold stock in the FHLB of New York which is carried at cost
since there is no readily available market value. Historically, the Bank has
not held any securities considered to be trading securities.
<PAGE>
The following table sets forth the composition of the Company's
securities available for sale and investment securities at the dates
indicated.
<TABLE>
<CAPTION>
June 30,
1999 1998 1997
Carrying % of Carrying % of Carrying % of
Value Total Value Total Value Total
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Securities available for sale, at fair value:
Debt securities
US Government and Agency obligations $15,747 35.20% $23,237 47.69% $18,437 51.97%
Other obligations 379 .85 276 0.57 493 1.39
Mortgage-backed securities 20,917 46.74 16,946 34.78 6,762 19.06
Collateralized mortgage obligations 1,399 3.13 4,003 8.22 6,302 17.77
Total debt securities 38,442 85.92 44,462 91.26 31,994 90.19
Equity securities 6,300 14.08 4,258 8.74 3,481 9.81
Total securities available for sale $44,742 100.00% $48,720 100.00% $35,475 100.00%
Investment securities at amortized cost:
US Government and Agency obligations $27,505 50.51% $22,025 48.49% $ 6,049 23.93%
Other obligations 2,148 3.94 388 0.85 848 3.36
Mortgage-backed securities 24,802 45.55 23,011 50.66 18,376 72.71
Industrial and financial - - - - -
Total investment securities $54,455 100.00% $45,424 100.00% $25,273 100.00%
Investment securities at fair value $53,721 $45,547 $25,186
</TABLE>
<PAGE>
The following table sets forth information regarding the scheduled
maturities, amortized cost, and weighted average yields for the Company's
securities portfolios at June 30, 1999 by contractual maturity. The table
does not take into consideration the effects of scheduled repayments or
possible prepayments.
<TABLE>
<CAPTION>
At June 30, 1999
Less than 1 year 1 to 5 years 5 to 10 years
Weighted Weighted Weighted
Amortized Average Amortized Average Amortized Average
Cost Yield Cost Yield Cost Yield
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Securities available for sale:
US Government and Agency obligations $1,000 5.88% $14,991 5.92% $ - -%
Other obligations - - 179 4.25 200 6.60
Mortgage-backed securities - - 11,227 6.33 - -
Collateralized mortgage obligations - - - - 650 6.66
Other equity securities - - - - - -
Sub-total 1,000 5.88 26,397 6.08 850 6.65
FHLB stock - - - - - -
Total securities available for sale $1,000 5.88 $26,397 6.08 $ 850 6.65
Investment securities:
US Government and Agency obligations $2,514 5.55 $24,992 5.92 $ - -
Other obligations - - 2,148 6.17 - -
Mortgage-backed securities 582 6.50 11,111 6.43 2,932 6.12
Total investment securities $3,096 5.73% $38,251 6.08% $2,932 6.12%
</TABLE>
<TABLE>
<CAPTION>
At June 30, 1999
Over 10 years Total Securities
Weighted Weighted
Amortized Average Amortized Average Fair
Cost Yield Cost Yield Value
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Securities available for sale:
US Government and Agency obligations $ - -% $15,991 5.92% $15,747
Other obligations - - 379 5.49 379
Mortgage-backed securities 9,915 6.50 21,142 6.41 20,917
Collateralized mortgage obligations 761 5.11 1,411 5.83 1,399
Other equity securities 2,199 3.10 2,199 3.10 2,287
Sub-total 12,875 5.84 41,122 6.01 40,729
FHLB stock 4,013 6.74 4,013 6.74 4,013
Total securities available for sale $16,888 6.05 $45,135 6.08 $44,742
Investment securities:
US Government and Agency obligations $ - - $27,506 5.89 $27,049
Other obligations - - 2,148 6.17 2,145
Mortgage-backed securities 10,176 6.50 24,801 6.42 24,527
Total investment securities $10,176 6.50% $54,455 6.14% $53,721
</TABLE>
<PAGE>
Sources of Funds
General. The Company's primary sources of funds are deposits,
amortization and prepayment of loan principal, maturities of securities,
short-term investments, funds provided from operations and borrowings.
Deposits. The Bank offers a variety of deposit accounts having a range
of interest rates and terms. The Bank's deposits consist of savings accounts,
school savings accounts (a volunteer program in which students are given the
opportunity to open and maintain a savings account while at school in order
to teach wise money management), money market accounts, demand deposit
accounts and time deposits currently ranging in terms from three months to
five years. The Bank only solicits deposits from its primary market area and
does not currently solicit brokered deposits. However, in the past, the Bank
has solicited brokered deposits and at June 30, 1999, the Bank had $298,000
in brokered deposits. The Bank relies primarily on competitive pricing
policies, advertising and customer service to attract and retain its
deposits. At June 30, 1999, the Bank's deposits totaled $446.1 million, of
which $407.2 million were interest-bearing deposits.
The flow of deposits is influenced significantly by general economic
conditions, changes in money market and prevailing interest rates, and
competition. The variety of deposit accounts offered by the Bank has allowed
it to be competitive in obtaining funds and to respond with flexibility to
changes in consumer demand. The Bank has become more susceptible to
short-term fluctuations in deposit flows, as customers have become more
interest rate conscious. The Bank manages the pricing of its deposits in
keeping with its asset/liability management, liquidity and profitability
objectives. Based on its experience, the Bank believes that its savings,
school savings, money market and demand deposit accounts are relatively
stable sources of deposits. However, the ability of the Bank to attract and
maintain time deposits and the rates paid on these deposits has been and will
continue to be significantly affected by market conditions.
The following table sets forth the distribution and deposit activity of
the Company's deposit accounts for the periods indicated.
<TABLE>
<CAPTION>
School Money Demand Time Total Number
Savings Savings Market Deposits Deposits Total of
Accounts
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance as of June 30, 1996 $128,961 $10,622 $16,567 $38,683 $209,706 $404,539 79,283
Net deposits (withdrawals) (8,780) 2,698 (1,565) 6,887 7,990 7,230
Interest credited 3,700 589 448 274 12,610 17,621
Balance as of June 30, 1997 123,881 13,909 15,450 45,844 230,306 429,390 86,741
Net deposits (withdrawals) (1,898) 2,558 5,653 7,806 (12,778) 1,341
Interest credited 3,629 788 569 303 13,521 18,810
Balance as of June 30, 1998 125,612 17,255 21,672 53,953 231,049 449,541 89,370
Net deposits (withdrawals) 5,409 (1,180) 970 11,510 (37,644) (20,935)
Interest credited 3,454 1,213 687 353 11,810 17,517
Balance as of June 30, 1999 $134,475 $17,288 $23,329 $65,816 $205,215 $446,123 88,891
</TABLE>
<PAGE>
The following table sets forth the dollar amount of deposits in the
various types of deposit programs offered by the Bank as of the dates
indicated.
<TABLE>
<CAPTION>
Balance as of June 30,
1999 1998 1997
Percent Percent Percent
Amount of Total Amount of Total Amount of Total
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Savings accounts (3.0%) $134,475 30.14% $125,612 27.94% $123,881 28.85%
School savings accounts (5.5%) 17,288 3.88 17,255 3.84 13,909 3.24
Money market accounts (2.75% to 3.93%) 23,329 5.23 21,672 4.82 15,450 3.60
Demand deposits (0% to 1.75%) 65,816 14.75 53,953 12.00 45,844 10.68
Time deposits:
1.00-1.99% 500 .11 - - - -
2.00-2.99% 1,123 .25 - - - -
3.00-3.99% 17,218 3.86 2 - 14 -
4.00-4.99% 78,798 17.66 4,105 0.91 10,325 2.40
5.00-5.99% 86,433 19.37 190,539 42.39 166,966 38.88
6.00-6.99% 9,090 2.04 17,664 3.93 25,244 5.88
7.00-7.99% 12,053 2.70 18,709 4.16 27,727 6.46
8.00-8.99% - - 30 0.01 30 0.01
Total time deposits 205,215 46.00 231,049 51.40 230,306 53.63
Total deposits $446,123 100.00% $449,541 100.00% $429,390 100.00%
</TABLE>
<PAGE>
The following table shows rate and maturity information for the Bank's
time deposits as of June 30, 1999.
<TABLE>
<CAPTION>
Amount Due
12 months 12 months 12 months 12 months 12 months
ended ended ended ended ended
June 30, 2000 June 30, 2001 June 30, 2002 June 30, 2003 June 30, 2004 Thereafter Total
(In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest Rate
1.00-1.99% $ 500 $ - $ - $ - $ - $- $ 500
2.00-2.99% 1,123 - - - - - 1,123
3.00-3.99% 17,218 - - - - - 17,218
4.00-4.99% 55,721 16,794 1,505 3,899 879 - 78,798
5.00-5.99% 53,456 17,152 4,332 7,731 3,762 - 86,433
6.00-6.99% 5,597 1,204 1,743 546 - - 9,090
7.00-7.99% 11,774 279 - - - - 12,053
8.00-8.99% - - - - - - -
Total $145,389 $35,429 $7,580 $12,176 $4,641 $- $205,215
</TABLE>
The following table indicates the amount of the Bank's time deposits by
the time remaining until maturity as of June 30, 1999.
<TABLE>
<CAPTION>
Maturity
Over Over
3 Months 3 to 6 6 to 12 Over
or Less Months Months 12 Months Total
(In Thousands)
<S> <C> <C> <C> <C> <C>
Time deposits less than $100,000 $32,066 $43,056 $48,573 $53,677 $177,372
Time deposits $100,000 or more 6,088 4,387 11,219 6,149 27,843
Total time deposits $38,154 $47,443 $59,792 $59,826 $205,215
</TABLE>
Borrowings. Although deposits are the Bank's primary source of funds,
the Bank's practice has been to utilize borrowings when they are a less
costly source of funds, can be invested at a positive interest rate spread or
when the Bank needs additional funds to satisfy loan demand.
Cohoes' borrowings historically have consisted primarily of advances
from the FHLB of New York. FHLB advances can be made pursuant to several
different credit programs, each of which has its own interest rate and range
of maturities. The Bank currently maintains available lines of credit and is
currently authorized to borrow up to $53.6 million on lines of credit with
the FHLB of New York. At June 30, 1999, the Bank had outstanding $49.0
million in other borrowings from the FHLB of New York.
<PAGE>
The following table sets forth the maximum month-end balance and average
balance of FHLB advances and other borrowings for the periods indicated.
Year Ended June 30,
1999 1998 1997
(In Thousands)
Maximum Balance:
FHLB advances $52,038 $19,983 $ 16,145
Other borrowings - - 12
Average Balance:
FHLB advances $43,270 $ 5,467 $ 2,390
Other borrowings - - 2
The following table sets forth the amount and rate of the Bank's
borrowings at the dates indicated.
June 30,
1999 1998 1997
(Dollars in Thousands)
FHLB advances $49,045 $19,897 $ -
Other borrowings - - -
Total borrowings $49.045 $19,897 $ -
Weighted average interest rate
of FHLB advances 5.73% 6.07% 5.56%
Weighted average interest rate
of other borrowings - - 9.50%
<PAGE>
Subsidiary and Other Activities
The Bank maintains four wholly-owned subsidiaries: CSB Financial
Services, Inc., CSB Funding, Inc., CSB Services Agency, Inc. and Cohoes
Realty, Incorporated. CSB Financial Services, Inc. earns commission income
through the sale of securities, mutual funds, annuities and other insurance
products. During the fiscal year ended June 30, 1999, CSB Financial Services
had revenues of approximately $309,000 and net income of approximately
$23,000. As of June 30, 1999, CSB Funding, Inc. was active with no reported
income.
CSB Services Agency, Inc. owns a 50 percent interest in Community Bank
Insurance Brokers of New York, LLC, which is a joint venture formed for the
purpose of selling property and casualty insurance to the Bank's customers
and to the general public. The joint venture was formed in July 1998. The
joint venture has entered into a service agreement with the insurance agency
which owns the other 50% joint venture interest in Community Bank Insurance
Brokers of New York, LLC. Such agency will provide administrative services
and support directly to the joint venture. During fiscal year ended June
30,1999, Community Bank Insurance Brokers of New York, LLC had revenues of
approximately $91,000 and a net loss of approximately $31,000.
Cohoes Realty, Incorporated is a real estate investment trust formed in
1999 to enhance liquidity, portfolio yields and capital growth. The Bank
funded Cohoes Realty, Incorporated with approximately $105.0 million of
earning assets consisting of commercial real estate loans and debt
securities. Interest income earned on the assets held by Cohoes Realty,
Incorporated will be passed through to the Bank in the form of dividends.
Cohoes Realty, Incorporated intends to sell a limited amount of preferred
stock with a fixed rate of return to directors, officers and employees of the
Bank and their family members in order to satisfy Internal Revenue Code
requirements to qualify as a real estate investment trust.
Competition
The Company faces strong competition, both in originating real estate
and other loans and in attracting deposits. Competition in originating real
estate loans comes primarily from other savings institutions, commercial
banks, credit unions and mortgage bankers making loans secured by real estate
located in the Bank's primary market area. Other savings institutions,
commercial banks, credit unions and finance companies provide vigorous
competition in consumer lending.
The Bank attracts all of its deposits through its branch offices,
primarily from the communities in which those branch offices are located;
therefore, competition for those deposits is principally from mutual funds
and other savings institutions, commercial banks and credit unions located in
the same communities. The Bank competes for these deposits by offering a
variety of deposit accounts at competitive rates, convenient business hours,
and convenient branch locations with interbranch deposit and withdrawal
privileges. Automated teller machine facilities are also available.
<PAGE>
Employees
At June 30, 1999, the Company had 185 full-time employees and 38
part-time employees. The Company's employees are not represented by any
collective bargaining group. Management considers its employee relations to
be good.
REGULATION
The Company
General. The Company is subject to regulation as a savings and loan
holding company under the HOLA. The Company is required to register with the
Office of Thrift Supervision ("OTS") and is subject to OTS regulations,
examinations, supervision and reporting requirements relating to savings and
loan holding companies. The Company is also required to file certain reports
with, and otherwise comply with the rules and regulations of, the New York
Banking Board ("NYBB") and the Securities and Exchange Commission ("SEC"). As
a subsidiary of a savings and loan holding company, the Bank is subject to
certain restrictions in its dealings with the Company and affiliates thereof.
Activities Restrictions. The Bank is the sole savings association
subsidiary of the Company. There are generally no restrictions on the
activities of a savings and loan holding company which holds only one
subsidiary savings institution. However, if the Director of the OTS
determines that there is reasonable cause to believe that the continuation by
a savings and loan holding company of an activity constitutes a serious risk
to the financial safety, soundness or stability of its subsidiary savings
institution, he may impose such restrictions as are deemed necessary to
address such risk, including limiting (i) payment of dividends by the savings
institution; (ii) transactions between the savings institution and its
affiliates; and (iii) any activities of the savings institution that might
create a serious risk that the liabilities of the holding company and its
affiliates may be imposed on the savings institution. Notwithstanding the
above rules as to permissible business activities of unitary savings and loan
holding companies, if the savings institution subsidiary of such a holding
company fails to meet the QTL test, as discussed under "--Qualified Thrift
Lender Test," then such unitary holding company also shall become subject to
the activities restrictions applicable to multiple savings and loan holding
companies and, unless the savings institution requalifies as a QTL within one
year thereafter, shall register as, and become subject to the restrictions
applicable to, a bank holding company.
If the Company were to acquire control of another savings institution,
other than through merger or other business combination with the Bank, the
Company would thereupon become a multiple savings and loan holding company.
Except where such acquisition is pursuant to the authority to approve
emergency thrift acquisitions and where each subsidiary savings institution
meets the QTL test, as set forth below, the activities of the Company and any
of its subsidiaries (other than the Bank or other subsidiary savings
institutions) would thereafter be subject to further restrictions. Among
other things, no multiple savings and loan holding company or subsidiary
thereof which is not a savings institution shall commence or continue for a
limited period of time after becoming a multiple savings and loan holding
company or subsidiary thereof any business activity other than: (i)
furnishing or performing management services for a subsidiary savings
institution; (ii) conducting an insurance agency or escrow business; (iii)
holding, managing, or liquidating assets owned by or acquired from a
<PAGE>
subsidiary savings institution; (iv) holding or managing properties used or
occupied by a subsidiary savings institution; (v) acting as Director under
deeds of trust; (vi) those activities authorized by regulation as of March 5,
1987 to be engaged in by multiple savings and loan holding companies; or
(vii) unless the Director of the OTS by regulation prohibits or limits such
activities for savings and loan holding companies, those activities
authorized by the FRB as permissible for bank holding companies. Those
activities described in clause (vii) above also must be approved by the
Director of the OTS prior to being engaged in by a multiple savings and loan
holding company.
Qualified Thrift Lender Test. Under Section 2303 of the Economic Growth
and Regulatory Paperwork Reduction Act of 1996, a savings association can
comply with the QTL test by either meeting the QTL test set forth in the HOLA
and implementing regulations or qualifying as a domestic building and loan
association as defined in Section 7701(a)(19) of the Internal Revenue Code of
1986, as amended. A savings bank subsidiary of a savings and loan holding
company that does not comply with the QTL test must comply with the following
restrictions on its operations: (i) the institution may not engage in any new
activity or make any new investment, directly or indirectly, unless such
activity or investment is permissible for a national bank; (ii) the branching
powers of the institution shall be restricted to those of a national bank,
(iii) the institution shall not be eligible to obtain any advances from its
FHLB; and (iv) payment of dividends by the institution shall be subject to
the rules regarding payment of dividends by a national bank. Upon the
expiration of three years from the date the savings institution ceases to
meet the QTL test, it must cease any activity and divest any investment not
permissible for a national bank and immediately repay any outstanding FHLB
advances (subject to safety and soundness considerations).
The QTL test set forth in the HOLA requires that qualified thrift
investments ("QTLs") represent 65% of portfolio assets of the savings
institution and its consolidated subsidiaries. Portfolio assets are defined
as total assets less intangibles, property used by a savings association in
its business and liquidity investments in an amount not exceeding 20% of
assets. Generally, QTLs are residential housing related assets. The 1996
amendments to allow small business loans, credit card loans, student loans
and loans for personal, family and household purposes to be included without
limitation as qualified investments. At June 30, 1999, approximately 71.1% of
the Bank's assets were invested in QTLs, which was in excess of the
percentage required to qualify the Bank under the QTL test in effect at that
time.
Limitations on Transactions with Affiliates. Transactions between
savings institutions and any affiliate are governed by Sections 23A and 23B
of the Federal Reserve Act. An affiliate of a savings institution is any
company or entity which controls, is controlled by or is under common control
with the savings institution. In a holding company context, the parent
holding company of a savings institution (such as the Company) and any
companies which are controlled by such parent holding company are affiliates
of the savings institution. Generally, Sections 23A and 23B (i) limit the
extent to which the savings institution or its subsidiaries may engage in
"covered transactions" with any one affiliate to an amount equal to 10% of
such institution's capital stock and surplus, and contain an aggregate limit
on all such transactions with all affiliates to an amount equal to 20% of
such capital stock and surplus and (ii) require that all such transactions be
on terms substantially the same, or, at least as favorable, to the
institution or subsidiary as those provided to a non-affiliate. The term
"covered transaction" includes the making of loans, purchase of assets,
issuance of a guarantee and other similar transactions.
<PAGE>
In addition, Sections 22(g) and (h) of the Federal Reserve Act place
restrictions on loans to executive officers, directors and principal
stockholders. Under Section 22 (h), loans to a director, an executive officer
and to a greater than 10% stockholder of a savings institution, and certain
affiliated interests of either, may not exceed, together with all other
outstanding loans to such person and affiliated interests, the savings
institution's loans to one borrower limit (generally equal to 15% of the
institution's unimpaired capital and surplus). Section 22(h) also requires
that loans to directors, executive officers and principal stockholders be
made on terms substantially the same as offered in comparable transactions to
other persons unless the loans are made pursuant to a benefit or compensation
program that (i) is widely available to employees of the institution and (ii)
does not give preference to any director, executive officer or principal
stockholder, or certain affiliated interests of either, over other employees
of the savings institution. Section 22(h) also requires prior board approval
for certain loans. In addition, the aggregate amount of extensions of credit
by a savings institution to all insiders cannot exceed the institution's
unimpaired capital and surplus. Furthermore, Section 22(g) places additional
restrictions on loans to executive officers. At June 30, 1999, the Bank was
in compliance with the above restrictions.
Restrictions on Acquisitions. Except under limited circumstances,
savings and loan holding companies are prohibited from acquiring, without
prior approval of the Director of the OTS, (i) control of any other savings
institution or savings and loan holding company or substantially all the
assets thereof or (ii) more than 5% of the voting shares of a savings
institution or holding company thereof which is not a subsidiary. Except with
the prior approval of the Director of the OTS, no director or officer of a
savings and loan holding company or person owning or controlling by proxy or
otherwise more than 25% of such company's stock, may acquire control of any
savings institution, other than a subsidiary savings institution, or of any
other savings and loan holding company.
The Director of the OTS may only approve acquisitions resulting in the
formation of a multiple savings and loan holding company which controls
savings institutions in more than one state if (i) the multiple savings and
loan holding company involved controls a savings institution which operated a
home or branch office located in the state of the institution to be acquired
as of March 5, 1987; (ii) the acquiror is authorized to acquire control of
the savings institution pursuant to the emergency acquisition provisions of
the Federal Deposit Insurance Act ("FDIA"); or (iii) the statutes of the
state in which the institution to be acquired is located specifically permit
institutions to be acquired by the state-chartered institutions or savings
and loan holding companies located in the state where the acquiring entity is
located (or by a holding company that controls such state chartered savings
institutions).
Federal Securities Laws. The Company Common Stock has been registered
with the SEC under Section 12(g) of the Securities Exchange Act of 1934, as
amended. The Company is subject to the proxy and tender offer rules, insider
trading reporting requirements and restrictions, and certain other
requirements under the Exchange Act, including periodic reports and quarterly
and annual financial data.
The registration under the Securities Act of shares of the Company
Common Stock does not cover the resale of such shares. Shares of Company
Common Stock purchased by persons who are not affiliates of the Company may
be sold without registration. Shares purchased by an affiliate of the Company
will be subject to the resale restrictions of Rule 144 under the Securities
<PAGE>
Act. If the Company meets the current public information requirements of Rule
144 under the Securities Act, each affiliate of the Company who complies with
the other conditions of Rule 144 (including those that require the
affiliate's sale to be aggregated with those of certain other persons) would
be able to sell in the public market, without registration, a number of
shares not to exceed, in any three-month period, the greater of (i) 1% of the
outstanding shares of the Company or (ii) the average weekly volume of
trading in such shares during the preceding four calendar weeks.
The Bank
General. The Bank is subject to extensive regulation and examination by
the New York State Banking Department (the "Department"), as its chartering
authority, and by the FDIC, as the insurer of its deposits, and is subject to
certain requirements established by the OTS as a result of the Company's
savings and loan holding company status. The federal and state laws and
regulations which are applicable to banks regulate, among other things, the
scope of their business, their investments, their reserves against deposits,
the timing of the availability of deposited funds and the nature and amount
of and collateral for certain loans. The Bank must file reports with the NYBB
and the FDIC concerning its activities and financial condition, in addition
to obtaining regulatory approvals prior to entering into certain transactions
such as establishing branches and mergers with, or acquisitions of, other
depository institutions. There are periodic examinations by the Department
and the FDIC to test the Bank's compliance with various regulatory
requirements, to look into the condition of the Bank and to assure that it is
being operated in a safe and sound manner. This regulation and supervision
establishes a comprehensive framework of activities in which an institution
can engage and is intended primarily for the protection of the insurance fund
and depositors. The regulatory structure also gives the regulatory
authorities extensive discretion in connection with their supervisory and
enforcement activities and examination policies, including policies with
respect to the classification of assets and the establishment of adequate
loan loss reserves for regulatory purposes. Any change in such regulation,
whether by the Department, the FDIC or as a result of the enactment of
legislation, could have a material adverse impact on the Company, the Bank
and their operations.
Capital Requirements. The FDIC has promulgated regulations and adopted a
statement of policy regarding the capital adequacy of state-chartered banks
which, like the Bank, are not members of the Federal Reserve System.
The FDIC's capital regulations establish a minimum 3.0% Tier I leverage
capital requirement for the most highly-rated state-chartered, non-member
banks, with an additional cushion of at least 100 to 200 basis points for all
other state-chartered, non-member banks, which effectively will increase the
minimum Tier I leverage ratio for such other banks to 4.0% to 5.0% or more.
Under the FDIC's regulation, the highest-rated banks are those that the FDIC
determines are not anticipating or experiencing significant growth and have
well diversified risk, including no undue interest rate risk exposure,
excellent asset quality, high liquidity, good earnings and, in general, which
are considered a strong banking organization and are rated composite I under
the Uniform Financial Institutions Rating System. Leverage or core capital is
defined as the sum of common stockholders' equity (including retained
earnings), noncumulative perpetual preferred stock and related surplus, and
minority interests in consolidated subsidiaries, minus all intangible assets
<PAGE>
other than certain qualifying supervisory goodwill and certain mortgage
servicing rights.
The FDIC also requires that savings banks meet a risk-based capital
standard. The risk-based capital standard for savings banks requires the
maintenance of total capital (which is defined as Tier 1 capital and
supplementary (Tier 2) capital) to risk-weighted assets of 8%. In determining
the amount of risk-weighted assets, all assets, plus certain off-balance
sheet assets, are multiplied by a risk-weight of 0% to 100%, based on the
risks the FDIC believes are inherent in the type of asset or item. The
components of Tier I capital are equivalent to those discussed above under
the 3% leverage capital standard. The components of supplementary capital
include certain perpetual preferred stock, certain mandatory convertible
securities, certain subordinated debt and intermediate preferred stock and
general allowances for loan and lease losses. Allowance for loan and lease
losses includable in supplementary capital is limited to a maximum of 1.25%
of risk-weighted assets. Overall, the amount of capital counted toward
supplementary capital cannot exceed 100% of core capital. At June 30, 1999
the Bank met each of its capital requirements.
In August 1995, the FDIC, along with the other federal banking agencies,
adopted a regulation providing that the agencies will take account of the
exposure of a bank's capital and economic value to changes in interest rate
risk in assessing a bank's capital adequacy. According to the agencies,
applicable considerations include the quality of the bank's interest rate
risk management process, the overall financial condition of the bank and the
level of other risks at the bank for which capital is needed. Institutions
with significant interest rate risk may be required to hold additional
capital. The agencies recently issued a joint policy statement providing
guidance on interest rate risk management, including a discussion of the
critical factors affecting the agencies' evaluation of interest rate risk in
connection with capital adequacy. The agencies have determined not to proceed
with a previously issued proposal to develop a supervisory framework for
measuring interest rate risk and an explicit capital component for interest
rate risk.
Activities and Investments of New York-Chartered Savings Banks. The Bank
derives its lending, investment and other authority primarily from the
applicable provisions of New York State Banking Law and the regulations of
the Department, as limited by FDIC regulations and other federal laws and
regulations. These New York laws and regulations authorize savings banks,
including the Bank, to invest in real estate mortgages, consumer and
commercial loans, certain types of debt securities, including certain
corporate debt securities and obligations of federal, State and local
governments and agencies, certain types of corporate equity securities and
certain other assets. Under the statutory authority for investing in equity
securities, a savings bank may directly invest up to 7.5% of its assets in
certain corporate stock and may also invest up to 7.5% of its assets in
certain mutual fund securities. Investment in stock of a single corporation
is limited to the lesser of 2% of the outstanding stock of such corporation
or 1% of the savings bank's assets, except as set forth below. Such equity
securities must meet certain tests of financial performance. A savings bank's
lending powers are not subject to percentage of asset limitations, although
there are limits applicable to single borrowers. A savings bank may also,
pursuant to the "leeway" authority, make investments not otherwise permitted
under the New York State Banking Law. This authority permits investments in
otherwise impermissible investments of up to 1% of the savings bank's assets
in any single investment, subject to certain restrictions and to an aggregate
limit for all such investments of up to 5% of assets. Additionally, in lieu
<PAGE>
of investing in such securities in accordance with the reliance upon the
specific investment authority set forth in the New York State Banking Law,
savings banks are authorized to elect to invest under a "prudent person"
standard in a wider range of debt and equity securities as compared to the
types of investments permissible under such specific investment authority.
However, in the event a savings bank elects to utilize the "prudent person"
standard, it will be unable to avail itself of the other provisions of the
New York State Banking Law and regulations which set forth specific
investment authority. A New York chartered stock savings bank may also
exercise trust powers upon approval of the NYBB. The Bank has not sought
approval to exercise trust powers.
Under recently enacted legislation, the Department has been granted the
authority to maintain the power of state-chartered banks reciprocal with
those of a national bank. Under the terms of the legislation, the Department
is granted such authority for only one year unless legislation is adopted
within such period which extends the effective period of such power. However,
any regulations adopted by the Department pursuant to the authority granted
by such legislation would be effective regardless of whether legislation is
enacted extending the effective period.
New York-chartered savings banks may also invest in subsidiaries under
their service corporation investment power. A savings bank may use this power
to invest in corporations that engage in various activities authorized for
savings banks, plus any additional activities which may be authorized by the
NYBB. Investment by a savings bank in the stock, capital notes and debentures
of its service corporations is limited to 3% of the bank's assets, and such
investments, together with the bank's loans to its service corporations, may
not exceed 10% of the savings bank's assets.
With certain limited exceptions, a New York-chartered savings bank may
not make loans or extend credit for commercial, corporate or business
purposes (including lease financing) to a single borrower, the aggregate
amount of which would be in excess of 15% of the Bank's unimpaired capital
and surplus. The Bank currently complies with all applicable
loans-to-one-borrower limitations.
Activities and Investments of FDIC-Insured State-Chartered Banks. The
activities and equity investments of FDIC-insured, state-chartered banks are
generally limited to those that are permissible for national banks. Under
regulations dealing with equity investments, an insured state bank generally
may not directly or indirectly acquire or retain any equity investment of a
type, or in an amount, that is not permissible for a national bank. An
insured state bank is not prohibited from, among other things, (i) acquiring
or retaining a majority interest in a subsidiary, (ii) investing as a limited
partner in a partnership the sole purpose of which is direct or indirect
investment in the acquisition, rehabilitation or new construction of a
qualified housing project, provided that such limited partnership investments
may not exceed 2% of the bank's total assets, (iii) acquiring up to 10% of
the voting stock of a company that solely provides or reinsures directors',
trustees' and officers' liability insurance coverage or bankers' blanket bond
group insurance coverage for insured depository institutions, and (iv)
acquiring or retaining the voting shares of a depository institution if
certain requirements are met. In addition, an FDIC-insured state-chartered
bank may not directly, or indirectly through a subsidiary, engage as
"principal" in any activity that is not permissible for a national bank
unless the FDIC has determined that such activities would pose no risk to the
insurance fund of which it is a member and the bank is in compliance with
applicable regulatory capital requirements.
<PAGE>
Regulatory Enforcement Authority. Applicable banking laws include
substantial enforcement powers available to federal banking regulators. This
enforcement authority includes, among other things, the ability to assess
civil money penalties, to issue cease-and-desist or removal orders and to
initiate injunctive actions against banking organizations and
institution-affiliated parties, as defined. In general, these enforcement
actions may be initiated for violations of laws and regulations and unsafe or
unsound practices. Other actions or inactions may provide the basis for
enforcement action, including misleading or untimely reports filed with
regulatory authorities.
Under the New York State Banking Law, the New York Superintendent of
Banks (the "Superintendent") may issue an order to a New York-chartered
banking institution to appear and explain an apparent violation of law, to
discontinue unauthorized or unsafe practices and to keep prescribed books and
accounts. Upon a finding by the Superintendent that any director, trustee or
officer of any banking organization has violated any law, or has continued
unauthorized or unsafe practices in conducting the business of the banking
organization after having been notified by the Superintendent to discontinue
such practices, such director, trustee or officer may be removed from office
by the Superintendent after notice and an opportunity to be heard. The Bank
does not know of any past or current practice, condition or violation that
might lead to any proceeding by the Department against the Bank or any of its
directors or officers. The Superintendent also may take possession of a
banking organization under specified statutory criteria.
Prompt Corrective Action. Section 38 of the FDIA provides the federal
banking regulators with broad power to take "prompt corrective action" to
resolve the problems of undercapitalized institutions. The extent of the
regulators' powers depends on whether the institution in question is "well
capitalized," "adequately capitalized," "undercapitalized," "significantly
undercapitalized" or "critically undercapitalized." Under regulations adopted
by the federal banking regulators, an institution shall be deemed to be (i)
"well capitalized" if it has a total risk-based capital ratio of 10.0% or
more, has a Tier I risk-based capital ratio of 6.0% or more, has a Tier I
leverage capital ratio of 5.0% or more and is not subject to specified
requirements to meet and maintain a specific capital level for any capital
measure, (ii) "adequately capitalized" if it has a total risk-based capital
ratio of 8.0% or more, a Tier I risk-based capital ratio of 4.0% or more and
a Tier I leverage capital ratio of 4.0% or more (3.0% under certain
circumstances) and does not meet the definition of "well capitalized," (iii)
"undercapitalized" if it has a total risk-based capital ratio that is less
than 8.0%, a Tier I risk-based capital ratio that is less than 4.0% or a Tier
I leverage capital ratio that is less than 4.0% (3.0% under certain
circumstances), (iv) "significantly undercapitalized" if it has a total
risk-based capital ratio that is less than 6.0%, a Tier I risk-based capital
ratio that is less than 3.0% or a Tier I leverage capital ratio that is less
than 3.0%, and (v) "critically undercapitalized" if it has a ratio of
tangible equity to total assets that is equal to or less than 2.0%. The
regulations also provide that a federal banking regulator may, after notice
and an opportunity for a hearing, reclassify a "well capitalized" institution
as "adequately capitalized" and may require an "adequately capitalized"
institution or an "undercapitalized" institution to comply with supervisory
actions as if it were in the next lower category if the institution is in an
unsafe or unsound condition or engaging in an unsafe or unsound practice. The
federal banking regulator may not, however, reclassify a "significantly
undercapitalized" institution as "critically undercapitalized."
<PAGE>
An institution generally must file a written capital restoration plan
which meets specified requirements, as well as a performance guaranty by each
company that controls the institution, with an appropriate federal banking
regulator within 45 days of the date that the institution receives notice or
is deemed to have notice that it is "undercapitalized," "significantly
undercapitalized" or "critically undercapitalized." Immediately upon becoming
undercapitalized, an institution becomes subject to statutory provisions
which, among other things, set forth various mandatory and discretionary
restrictions on the operations of such an institution.
At June 30, 1999, the Bank had capital levels which qualified it as a
"well capitalized" institution.
FDIC Insurance Premiums. The Bank is a member of the Bank Insurance Fund
administered by the FDIC. As insurer, the FDIC is authorized to conduct
examinations of, and to require reporting by, FDIC-insured institutions. It
also may prohibit any FDIC-insured institution from engaging in any activity
the FDIC determines by regulation or order to pose a serious threat to the
FDIC.
The FDIC may terminate the deposit insurance of any insured depository
institution, including the Bank, if it determines after a hearing that the
institution has engaged or is engaging in unsafe or unsound practices, is in
an unsafe or unsound condition to continue operations, or has violated any
applicable law, regulation, order or any condition imposed by an agreement
with the FDIC. It also may suspend deposit insurance temporarily during the
hearing process for the permanent termination of insurance, if the
institution has no tangible capital. If insurance of accounts is terminated,
the accounts at the institution at the time of the termination, less
subsequent withdrawals, shall continue to be insured for a period of six
months to two years, as determined by the FDIC. Management is aware of no
existing circumstances which would result in termination of the Bank's
deposit insurance.
Brokered Deposits. The FDIA restricts the use of brokered deposits by
certain depository institutions. Under the FDIA and applicable regulations,
(i) a "well capitalized insured depository institution" may solicit and
accept, renew or roll over any brokered deposit without restriction, (ii) an
"adequately capitalized insured depository institution" may not accept, renew
or roll over any brokered deposit unless it has applied for and been granted
a waiver of this prohibition by the FDIC and (iii) an "undercapitalized
insured depository institution" may not (x) accept, renew or roll over any
brokered deposit or (y) solicit deposits by offering an effective yield that
exceeds by more than 75 basis points the prevailing effective yields on
insured deposits of comparable maturity in such institution's normal market
area or in the market area in which such deposits are being solicited. The
Bank had $298,000 in brokered deposits outstanding at June 30, 1999. However,
it is not currently soliciting brokered deposits.
Community Investment and Consumer Protection Laws. In connection with
its lending activities, the Bank is subject to a variety of federal laws
designed to protect borrowers and promote lending to various sectors of the
economy and population. Included among these are the federal Home Mortgage
Disclosure Act, Real Estate Settlement Procedures Act, Truth-in-Lending Act,
Equal Credit Opportunity Act, Fair Credit Reporting Act and the Community
Reinvestment Act (the "CRA").
The CRA requires that the FDIC assess the Bank's record of meeting the
credit needs of its entire community, including low and moderate income
neighborhoods. The FDIC must also take that record into account when
<PAGE>
evaluating certain applications made by the Bank. The FDIC assigns the Bank a
CRA rating of "outstanding," "satisfactory," "needs improvement" or
"unsatisfactory." The Bank's current federal CRA rating is "satisfactory."
The Bank is also subject to provisions of the New York State Banking Law
which impose continuing and affirmative obligations upon banking institutions
organized in New York State to serve the credit needs of its local community
("NYCRA"), which are similar to those imposed by the CRA. Pursuant to the
NYCRA, a bank must file an annual NYCRA report and copies of all federal CRA
reports with the Department. The NYCRA requires the Department to make an
annual written assessment of a bank's compliance with the NYCRA, utilizing a
four-tiered rating system, and make such assessment available to the public.
The NYCRA also requires the Department to consider a bank's NYCRA rating when
reviewing a bank's application to engage in certain transactions, including
Mergers, asset purchases and the establishment of branch offices or automated
teller machines, and provides that such assessment may serve as a basis for
the denial of any such application. The Bank's latest NYCRA rating, received
from the Department was "outstanding."
Limitations on Dividends. The Company is a legal entity separate and
distinct from the Bank. The Company's principal source of revenue consists of
dividends from the Bank. The payment of dividends by the Bank is subject to
various regulatory requirements including a requirement, as a result of the
Company's savings and loan holding company status, that the Bank notify the
OTS not less than 30 days in advance of any proposed declaration by its
directors of a dividend.
Under New York State Banking Law, a New York-chartered stock savings
bank may declare and pay dividends out of its net profits, unless there is an
impairment of capital, but approval of the Department is required if the
total of all dividends declared in a calendar year would exceed the total of
its net profits for that year combined with its retained net profits of the
preceding two years, subject to certain adjustments.
Miscellaneous. The Bank is subject to certain restrictions on loans to
the Company or its non-bank subsidiaries, on investments in the stock or
securities thereof, on the taking of such stock or securities as collateral
for loans to any borrower, and on the issuance of a guarantee or letter of
credit on behalf of the Company or its non-bank subsidiaries. The Bank also
is subject to certain restrictions on most types of transactions with the
Company or its non-bank subsidiaries, requiring that the terms of such
transactions be substantially equivalent to terms of similar transactions
with non-affiliated firms.
FHLB System. The Bank is a member of the FHLB of New York, which is one
of 12 regional FHLBs that administers the home financing credit function of
savings institutions. Each FHLB serves as a reserve or central bank for its
members within its assigned region. It is funded primarily from proceeds
derived from the sale of consolidated obligations of the FHLB System. It
makes loans to members (i.e., advances) in accordance with policies and
procedures established by the Board of Directors of the FHLB. The Bank had
$49.0 million of FHLB advances at June 30, 1999.
As a FHLB member, the Bank is required to purchase and maintain stock in
the FHLB of New York in an amount equal to at least 1% of its aggregate
unpaid residential mortgage loans, home purchase contracts or similar
<PAGE>
obligations at the beginning of each year or 5% of its advances from the FHLB
of New York, whichever is greater. At June 30, 1999, the Bank had
approximately $4.0 million in FHLB stock, which resulted in its compliance
with this requirement.
The FHLBs are required to provide funds for the resolution of troubled
savings institutions and to contribute to affordable housing programs through
direct loans or interest subsidies on advances targeted for community
investment and low- and moderate-income housing projects. These contributions
have adversely affected the level of FHLB dividends paid in the past and
could continue to do so in the future. These contributions also could have an
adverse effect on the value of FHLB stock in the future.
Federal Reserve System. The FRB requires all depository institutions to
maintain reserves against their transaction accounts (primarily checking
accounts, including NOW and Super NOW accounts) and non-personal time
deposits. As of June 30, 1999, the Bank was in compliance with applicable
requirements. However, because required reserves must be maintained in the
form of vault cash or a non-interest-bearing account at a Federal Reserve
Bank, this reserve requirement may reduce the Bank's earning assets.
Federal Taxation
General. The Company and the Bank will be subject to federal income
taxation in the same general manner as other corporations with some
exceptions discussed below. The following discussion of federal taxation is
intended only to summarize certain pertinent federal income tax matters and
is not a comprehensive description of the tax rules applicable to the Bank.
The Bank's federal income tax returns have been audited or closed without
audit by the Internal Revenue Service through December 31, 1994.
Method of Accounting. For federal income tax purposes, the Company
currently reports its income and expenses on the accrual method of accounting
and uses a tax year ending June 30 for filing its consolidated federal income
tax returns.
Bad Debt Reserves. In 1996, federal tax laws were amended to eliminate
certain methods formerly used by the Bank to calculate tax deductions for bad
debts. The new law also requires the Bank to gradually recapture certain
excess bad debt deductions taken from 1988 through 1995. The total remaining
amount required to be recaptured at June 30, 1999 was approximately $1.1
million. The effect of the recapture of this entire amount has already been
reflected on the Company's financial statements.
Also in 1996, New York State tax laws were amended to retain the method
of calculating tax bad debt deductions which were eliminated that year for
federal tax purposes. Thus, for state income tax purposes, the Bank can
calculate its tax bad debt deduction based upon either its historical loss
experience or 32% of its New York State taxable income, so long as the Bank
continues to satisfy certain definitional tests.
Taxable Distributions and Recapture. Prior to the 1996 Act, bad debt
reserves created prior to January 1, 1988 were subject to recapture into
taxable income should the Bank fail to meet certain thrift asset and
definitional tests. New federal legislation eliminated these thrift related
<PAGE>
recapture rules. However, under current law, pre-1988 reserves remain subject
to recapture should the Bank make certain non-dividend distributions,
dividend distributions in excess of historical earnings and profits or cease
to maintain a bank charter.
At June 30, 1999 the Bank's total federal base-year reserve was
approximately $3.7 million. These reserves reflect the cumulative effects of
federal tax deductions by the Bank for which no Federal income tax provision
has been made.
Minimum Tax. The Code imposes an AMT at a rate of 20% on a base of
regular taxable income plus certain tax preferences ("alternative minimum
taxable income" or "AMTI"). The AMT is payable to the extent such AMTI is in
excess of an exemption amount and regular income tax. Net operating losses
can offset no more than 90% of AMTI. Certain payments of alternative minimum
tax may be used as credits against regular tax liabilities in future years.
The Bank has not been subject to the alternative minimum tax and has no such
amounts available as credits for carryover.
Net Operating Loss Carryovers. For the years beginning after August 5,
1997, a financial institution may carry back net operating losses to the
preceding two taxable years and forward to the succeeding 20 taxable years.
At June 30, 1999, the Bank had no net operating loss carryforwards for
federal income tax purposes.
Corporate Dividends-Received Deduction. The Company may exclude from its
income 100% of dividends received from the Bank as a member of the same
affiliated group of corporations. The corporate dividends-received deduction
is 80% in the case of dividends received from corporations with which a
corporate recipient does not file a consolidated tax return, and corporations
which own less than 20% of the stock of a corporation distributing a dividend
may deduct only 70% of dividends received or accrued on their behalf.
State and Local Taxation
New York State Taxation. The Company and the Bank will report income on
a combined basis utilizing a fiscal year. New York State Franchise Tax on
corporations is imposed in an amount equal to the greater of (a) 9% of
"entire net income" allocable to New York State (b) 3% of "alternative entire
net income" allocable to New York State (c) 0.01% of the average value of
assets allocable to New York State or (d) nominal minimum tax. Entire net
income is based on federal taxable income, subject to certain modifications.
Delaware State Taxation. As a Delaware holding company not earning
income in Delaware, the Company is exempt from Delaware corporate income tax
but is required to file an annual report with and pay an annual franchise tax
to the State of Delaware. The tax is imposed as a percentage of the capital
base of the Company with an annual maximum of $150,000.
<PAGE>
Item 2. Description of Properties
The Company conducts business at the main office and 18 other banking
offices. The following table sets forth information relating to each of the
Company's offices as of June 30, 1999. The net book value of the Company's
premises and equipment (including land, building and leasehold improvements
and furniture, fixtures and equipment) at June 30, 1999 was $7.8 million.
<TABLE>
<CAPTION>
Net Book Value
Original Total of Property or
Leased Year Date of Approximate Leasehold
or Leased or Leased Square Improvements at
Locations Owned Acquired Expiration Footage June 30, 1999
(In thousands)
<S> <C> <C> <C> <C> <C>
Cohoes Loan Center Owned 1992 N/A 10,500 $ 667
50 Mohawk Street
Cohoes, NY 12047
Annex Owned 1981 N/A 3,723 167
60 Remsen Street
Cohoes, NY 12047
Operation Center Owned 1987 N/A 11,190 309
244 North Mohawk Street
Cohoes, NY 12047
Community Outreach Center Leased 1995 01/16/99 200 ___
Urban League Headquarters
95 Livingston Avenue
Albany, NY
Building Adjacent Latham Office Owned 1986 N/A 3,024 80
Storage Facility
771 New Loudon Road
Latham, NY 12110
Branch Offices:
Main Office Owned 1924 N/A 15,223 443
75 Remsen Street
Cohoes, NY 12047
Cohoes/I-787 Office Owned 1976 N/A 988 119
New Courtland Street
Cohoes, NY 12047
Latham Office Owned 1967 N/A 9,041 508
Corner of Pine & Route 9
Latham, NY 12110
Clifton Park Office Owned 1972 N/A 5,297 310
525 Visher Ferry Road
Clifton Park, NY 12065
Delmar Office Owned 1994 N/A 4,768 1,460
197 Delaware Avenue
Delmar, NY 12182
Lansingburgh Office Owned 1976 N/A 3,216 258
820 Second Avenue
Troy, NY 12182
Loudonville Office Leased 1996 07/31/01 4,000 7
475 Albany-Shaker Road
Loudonville, NY 12211
Guilderland Office Leased 1995 10/31/05 3,500<F1> 1
1973 Western Avenue
Albany, NY 12203
<PAGE>
Branch Offices (Continued)
Schaghticoke Leased 1999 03/31/04 900 $ 94
Route 40 and 67
Schaghticoke, NY 12154
Supermarket Branches:
Glenville Leased 1993 10/31/03 323 87
290 Saratoga Road
Scotia, NY 12302
Rotterdam Leased 1993 03/31/03 350 76
1879 Altamont Avenue
Schenectady, NY 12303
Colonie Leased 1993 09/30/03 336 89
1892 central Avenue
Colonie, NY 12205
Westgate Leased 1995 04/30/00 565 72
911 Central Avenue
Albany, NY 12206
Brunswick Leased 1996 10/31/01 304 63
716 Hoosick Road
Brunswick, NY 12180
Bethlehem Leased 1997 05/31/02 312 58
1395 New Scotland Road
Slingerlands, NY 12159
Malta Leased 1996 05/31/01 524 109
1 Kendall Way
Malta, NY 12020
Niskyuna Leased 1996 06/30/01 544 110
2333 Nott Street East
Niskayuna, NY 12309
Queensbury Leased 1998 05/31/03 360 95
677 Upper Glen Street
Queensbury, NY 12804
Catskill Leased 1999 03/31/04 304 116
320 West Bridge Street
Catskill, NY 12414
<FN>
<F1> 3,500 square feet of which 1,265 square feet subleased by a third party.
</FN>
</TABLE>
Item 3. Legal Proceedings
The Bank is involved as plaintiff or defendant in various legal actions
arising in the normal course of its business. While the ultimate outcome of
these proceedings cannot be predicted with certainty, it is the opinion of
management, after consultation with counsel representing the Bank in the
proceedings, that the resolution of these proceedings should not have a
material effect on the Bank's results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the quarter ended June 30, 1999.
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Information contained under the caption "Common Stock" in the 1999
Annual Report to Stockholders included as Exhibit 13 hereto is herein
incorporated by reference.
Item 6. Selected Financial Data
Information contained under the caption "Financial Highlights" in the
1999 Annual Report to Stockholders included as Exhibit 13 hereto is herein
incorporated by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Information contained under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the 1999 Annual
Report to Stockholders included as Exhibit 13 hereto are herein incorporated
by reference.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk
Information contained under the caption "Market Risk and Asset/Liability
Management" in the 1999 Annual Report to Stockholders included as Exhibit 13
hereto are herein incorporated by reference.
Item 8. Financial Statements
The following information appearing in the Company's Annual Report to
Stockholders for the year ended June 30, 1999, which is included as Exhibit
13 hereto is incorporated by reference in this Annual Report on Form 10-K.
Annual Report Section incorporated herein by reference
Report of Independent Public Accountants
Consolidated Statements of Financial Condition
as of June 30, 1999 and 1998
Consolidated Statements of Operations for the
Years Ended June 30, 1999, 1998 and 1997
Consolidated Statements of Stockholders' Equity
for Years Ended June 30, 1999, 1998 and 1997
Consolidated Statements of Cash Flows for Years
Ended June 30, 1999, 1998 and 1997
Notes to Consolidated Financial Statements
With the exception of the information expressly incorporated herein by
reference, the Company's Annual Report to Stockholders for the year ended
June 30, 1999, is not deemed filed as part of this Annual Report on Form
10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
<PAGE>
PART III
Item 10. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
Directors
Information concerning Directors of the Company is incorporated herein
by reference from page 5 of the definitive Proxy Statement for the Annual
Meeting of Stockholders to be held on October 26, 1999, as filed with the
Commission on September 24, 1999.
Executive Officers
Information concerning Executive Officers of the Company is incorporated
herein by reference from page 6 of the definitive Proxy Statement for the
Annual Meeting of Stockholders to be held on October 26, 1999, as filed with
the Commission on September 24, 1999.
Compliance with Section 16(a)
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than 10%
of a registered class of the Company's equity securities, to file with the
SEC initial reports of ownership and reports of changes in ownership of
Common Stock and other equity securities of the Company. Officers, directors
and greater than 10% stockholders are required by SEC regulation to furnish
the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written representations that no
other reports were required, during the fiscal year ended June 30, 1999, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than 10 percent beneficial owners were complied with.
Item 11. Executive Compensation
Information concerning executive compensation is incorporated herein by
reference from pages 6 through 12 of the definitive Proxy Statement for the
Annual Meeting of Stockholders to be held on October 26, 1999, as filed with
the Commission on September 24, 1999.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information concerning security ownership of certain beneficial owners
and management is incorporated herein by reference from pages 2 through 4 of
the definitive Proxy Statement for the Annual Meeting of Stockholders to be
held on October 26, 1999, as filed with the Commission on September 24, 1999.
<PAGE>
Item 13. Certain Relationships and Related Transactions
Information concerning certain relationships and related transactions is
incorporated herein by reference from the definitive Proxy Statement for the
Annual Meeting of Stockholders to be held on October 26, 1999, as filed with
the Commission on September 24, 1999.
Item 14. Exhibits and Reports on Form 8-K
(a) Exhibits
See Index to Exhibits
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K during the quarter ended June
30, 1999.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
COHOES BANCORP, INC.
Date: September 24, 1999 By: /s/ Harry L. Robinson
Harry L. Robinson
(Duly Authorized Representative)
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.
By: /s/ Harry L. Robinson By: /s/ Richard A. Ahl
Harry L. Robinson, Director, Richard A. Ahl, Executive Vice
President and Chief Executive President, Chief Financial Officer
Officer (Principal Executive and Secretary
and Operating Officer) (Chief Financial and
Accounting Officer)
Date: September 24, 1999 Date: September 24, 1999
By: /s/ Arthur E. Bowen By: /s/ Peter G. Casabonne
Arthur E. Bowen, Director Peter G. Casabonne, Director
Date: September 24, 1999 Date: September 24, 1999
By: /s/ Michael L. Crotty By: /s/ Chester C. DeLaMater
Michael L. Crotty, Director Chester C. DeLaMater, Director
Date: September 24, 1999 Date: September 24, 1999
By: /s/ Frederick G. Field, Jr. By: /s/ Duncan S. Mac Affer
Frederick G. Field, Jr., Director Duncan S. Mac Affer, Director
Date: September 24, 1999 Date: September 24, 1999
By: /s/ J. Timothy O'Hearn By: /s/ R. Douglas Paton
J. Timothy O'Hearn, Director R. Douglas Paton, Director
Date: September 24, 1999 Date: September 24, 1999
By: /s/ Walter H. Speidel By: /s/ Donald A. Wilson
Walter H. Speidel, Director Donald A. Wilson, Director
Date: September 24, 1999 Date: September 24, 1999
<PAGE>
INDEX TO EXHIBITS
Regulation Reference to
S-K Prior Filing or
Exhibit Exhibit Number
Number Document Attached Hereto
3(i) Certificate of Incorporation *
3(ii) Bylaws 3(ii)
4 Instruments defining the rights of security holders, **
including debentures
10.1 Employment Agreement between Cohoes Savings Bank and Harry 10.1
L. Robinson
10.2 Schedule of Employment Agreement with Cohoes Savings Bank 10.2
10.3 Employment Agreement between Cohoes Savings 10.3
Bank and Albert J. Picchi
10.4 Employment Agreement between Cohoes Bancorp, Inc. and Harry 10.4
L. Robinson
10.5 Schedule of Employment Agreement with Cohoes Bancorp, Inc. 10.5
10.6 Change-In-Control Severance Agreement between Cohoes Savings 10.6
Bank and Johanna O. Robbins
10.7 Schedule of Change-In-Control Severance Agreements with 10.7
Cohoes Savings Bank
10.8 Cohoes Savings Bank Employee Severance Compensation Plan *
10.9 Employee Stock Ownership Plan *
10.10 Cohoes Savings Bank 401(k) Savings Plan **
10.11 Benefit Restoration Plan *
10.12 Stock Option and Incentive Plan *
10.13 Recognition and Retention Plan *
13 Annual Report to Stockholders 13
21 Subsidiaries of Registrant 21
23 Consents of Experts and Counsel 23
27 Financial Data Schedule 27
* Filed as exhibits to the Company's Form S-1 registration statement filed
on September 16, 1998 (File No. 333-63539) of the Securities Act of
1933. All of such previously filed documents are hereby incorporated
herein by reference in accordance with Item 601 of Regulation S-B.
** Filed as exhibits to the Company's Pre-effective Amendment No. One to
Form S-1 filed on October 30, 1998 (File No. 333-63539) of the
Securities Act of 1933. All of such previously filed documents are
hereby incorporated herein by reference in accordance with Item 601 of
Regulation S-B.
<PAGE>
EXHIBIT 3 (ii)
BY - LAWS
<PAGE>
COHOES BANCORP, INC.
AMENDED AND RESTATED BY-LAWS
ARTICLE I
STOCKHOLDERS
Section 1. Annual Meeting.
An annual meeting of the stockholders, for the election of directors to
succeed those whose terms expire and for the transaction of such other
business as may properly come before the meeting, shall be held at such
place, on such date, and at such time as the Board of Directors shall each
year fix.
Section 2. Special Meetings.
Subject to the rights of the holders of any class or series of preferred
stock of the Corporation, special meetings of stockholders of the Corporation
may be called only by the Board of Directors pursuant to a resolution adopted
by a majority of the total number of directors which the Corporation would
have if there were no vacancies on the Board of Directors (hereinafter the
"Whole Board").
Section 3. Notice of Meetings.
Written notice of the place, date, and time of all meetings of the
stockholders shall be given, not less than ten nor more than 60 days before
the date on which the meeting is to be held, to each stockholder entitled to
vote at such meeting, except as otherwise provided herein or required by law
(meaning, here and hereinafter, as required from time to time by the Delaware
General Corporation Law or the Certificate of Incorporation of the
Corporation).
When a meeting is adjourned to another place, date or time, written
notice need not be given of the adjourned meeting if the place, date and time
thereof are announced at the meeting at which the adjournment is taken;
provided, however, that if the date of any adjourned meeting is more than 30
days after the date for which the meeting was originally noticed, or if a new
record date is fixed for the adjourned meeting, written notice of the place,
date and time of the adjourned meeting shall be given in conformity herewith.
At any adjourned meeting, any business may be transacted which might have
been transacted at the original meeting.
<PAGE>
Section 4. Quorum.
At any meeting of the stockholders, the holders of at least one-third of
all of the shares of the stock entitled to vote at the meeting, present in
person or by proxy, shall constitute a quorum for all purposes, unless or
except to the extent that the presence of a larger number may be required by
law. Where a separate vote by a class or classes is required, a majority of
the shares of such class or classes, present in person or represented by
proxy, shall constitute a quorum entitled to take action with respect to that
vote on that matter.
If a quorum shall fail to attend any meeting, the chairman of the
meeting or the holders of a majority of the shares of stock entitled to vote
who are present, in person or by proxy, may adjourn the meeting to another
place, date or time.
If a notice of any adjourned special meeting of stockholders is sent to
all stockholders entitled to vote thereat, stating that it will be held with
those present constituting a quorum, then except as otherwise required by
law, those present at such adjourned meeting shall constitute a quorum, and
all matters shall be determined by a majority of the votes cast at such
meeting.
Section 5. Organization.
Such person as the Board of Directors may have designated or, in the
absence of such a person, the President of the Corporation or, in his or her
absence, such person as may be chosen by the holders of a majority of the
shares entitled to vote who are present, in person or by proxy, shall call to
order any meeting of the stockholders and act as chairman of the meeting. In
the absence of the Secretary of the Corporation, the secretary of the meeting
shall be such person as the chairman appoints.
Section 6. Conduct of Business.
(a) The chairman of any meeting of stockholders shall determine the
order of business and the procedure at the meeting, including such regulation
of the manner of voting and the conduct of discussion as seem to him or her
in order.
(b) At any annual meeting of the stockholders, only such business shall
be conducted as shall have been brought before the meeting (i) by or at the
direction of the Board of Directors or (ii) by any stockholder of the
Corporation who is entitled to vote with respect thereto and who complies
with the notice procedures set forth in this Section 6(b). For business to be
properly brought before an annual meeting by a stockholder, the stockholder
must have given timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice must be delivered or mailed
to and received at the principal executive offices of the Corporation not
less than 60 days prior to the anniversary of the preceding year's annual
meeting; provided, however, that in the event that the date of the annual
meeting is advanced by more than twenty days, or delayed by more than 60 days
from such anniversary date, notice by the stockholder to be timely must be so
delivered not later than the close of business on the later of the 60th day
prior to such annual meeting or the earlier of the tenth day following the
<PAGE>
day on which notice of the date of the annual meeting was mailed or public
announcement of the date of such meeting is first made. A stockholder's
notice to the Secretary shall set forth as to each matter such stockholder
proposes to bring before the annual meeting (i) a brief description of the
business desired to be brought before the annual meeting and the reasons for
conducting such business at the annual meeting, (ii) the name and address, as
they appear on the Corporation's books, of the stockholder who proposed such
business, (iii) the class and number of shares of the Corporation's capital
stock that are beneficially owned by such stockholder and (iv) any material
interest of such stockholder in such business. Notwithstanding anything in
these By-laws to the contrary, no business shall be brought before or
conducted at an annual meeting except in accordance with the provisions of
this Section 6(b). The officer of the Corporation or other person presiding
over the annual meeting shall, if the facts so warrant, determine and declare
to the meeting that business was not properly brought before the meeting in
accordance with the provisions of this Section 6(b) and, if he should so
determine, he shall so declare to the meeting and any such business so
determined to be not properly brought before the meeting shall not be
transacted.
At any special meeting of the stockholders, only such business shall be
conducted as shall have been brought before the meeting by or at the
direction of the Board of Directors.
(c) Only persons who are nominated in accordance with the procedures set
forth in these By-laws shall be eligible for election as directors.
Nominations of persons for election to the Board of Directors of the
Corporation may be made at a meeting of stockholders at which directors are
to be elected only (i) by or at the direction of the Board of Directors or
(ii) by any stockholder of the Corporation entitled to vote for the election
of directors at the meeting who complies with the notice procedures set forth
in this Section 6(c). Such nominations, other than those made by or at the
direction of the Board of Directors, shall be made by timely notice in
writing to the Secretary of the Corporation. To be timely, a stockholder's
notice shall be delivered or mailed to and received at the principal
executive offices of the Corporation not less than 60 days prior to the date
of the meeting; provided, however, that in the event that less than 70 days'
notice of the date of the meeting is given or made to stockholders, notice by
the stockholder to be timely must be so received not later than the close of
business on the earlier of the tenth day following the day on which such
notice of the date of the meeting was mailed or public announcement of the
date of such meeting was first made. Such stockholder's notice shall set
forth (1) as to each person whom such stockholder proposes to nominate for
election or re-election as a director, all information relating to such
person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended
(including such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected); and (2) as
to the stockholder giving the notice: (x) the name and address, as they
appear on the Corporation's books, of such stockholder and (y) the class and
number of shares of the Corporation's capital stock that are beneficially
owned by such stockholder. At the request of the Board of Directors, any
person nominated by the Board of Directors for election as a director shall
furnish to the Secretary of the Corporation that information required to be
set forth in a stockholder's notice of nomination which pertains to the
nominee. No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the provisions of this
Section 6(c). The officer of the Corporation or other person presiding at the
<PAGE>
meeting shall, if the facts so warrant, determine that a nomination was not
made in accordance with such provisions and, if he or she should so
determine, he or she shall so declare to the meeting and the defective
nomination shall be disregarded.
Section 7. Proxies and Voting.
At any meeting of the stockholders, every stockholder entitled to vote
may vote in person or by proxy authorized by an instrument in writing (or as
otherwise permitted under applicable law) by the stockholder or his duly
authorized attorney-in-fact filed in accordance with the procedure
established for the meeting. Proxies solicited on behalf of the management
shall be voted as directed by the stockholder or in the absence of such
direction, as determined by a majority of the Board of Directors. No proxy
shall be valid after eleven months from the date of its execution except for
a proxy coupled with an interest.
Each stockholder shall have one vote for every share of stock entitled
to vote which is registered in his or her name on the record date for the
meeting, except as otherwise provided herein or in the Certificate of
Incorporation of the Corporation or as required by law.
All voting, including on the election of directors but excepting where
otherwise required by law, may be by a voice vote; provided, however, that
upon demand therefore by a stockholder entitled to vote or his or her proxy,
a stock vote shall be taken. Every stock vote shall be taken by ballot, each
of which shall state the name of the stockholder or proxy voting and such
other information as may be required under the procedure established for the
meeting. Every vote taken by ballot shall be counted by an inspector or
inspectors appointed by the chairman of the meeting.
All elections shall be determined by a plurality of the votes cast, and
except as otherwise required by law or as provided in the Certificate of
Incorporation, all other matters shall be determined by a majority of the
votes cast.
Section 8. Stock List.
The officer who has charge of the stock transfer books of the
Corporation shall prepare and make, in the time and manner required by
applicable law, a list of stockholders entitled to vote and shall make such
list available for such purposes, at such places, at such times and to such
persons as required by applicable law. The stock transfer books shall be the
only evidence as to the identity of the stockholders entitled to examine the
stock transfer books or to vote in person or by proxy at any meeting of
stockholders.
Section 9. Consent of Stockholders in Lieu of Meeting.
Subject to the rights of the holders of any class or series of preferred
stock of the Corporation, any action required or permitted to be taken by the
stockholders of the Corporation must be effected at a duly called annual or
special meeting of stockholders of the Corporation and may not be effected by
any consent in writing by such stockholders.
<PAGE>
Section 10. Inspectors of Election
The Board of Directors shall, in advance of any meeting of stockholders,
appoint one or more persons as inspectors of election, to act at the meeting
or any adjournment thereof and make a written report thereof, in accordance
with applicable law.
ARTICLE II
BOARD OF DIRECTORS
Section 1. General Powers, Number and Term of Office.
The business and affairs of the Corporation shall be managed by or under
the direction of the Board of Directors. The number of directors shall be as
provided for in the Certificate of Incorporation. The Board of Directors
shall annually elect a Chairman of the Board and a President from among its
members and shall designate, when present, either the Chairman of the Board
or the President to preside at its meetings.
The directors, other than those who may be elected by the holders of any
class or series of preferred stock, shall be divided into three classes, as
nearly equal in number as reasonably possible, with the term of office of the
first class to expire at the conclusion of the first annual meeting of
stockholders, the term of office of the second class to expire at the
conclusion of the annual meeting of stockholders one year thereafter and the
term of office of the third class to expire at the conclusion of the annual
meeting of stockholders two years thereafter, with each director to hold
office until his or her successor shall have been duly elected and qualified.
At each annual meeting of stockholders, commencing with the first annual
meeting, directors elected to succeed those directors whose terms expire
shall be elected for a term of office to expire at the third succeeding
annual meeting of stockholders after their election, with each director to
hold office until his or her successor shall have been duly elected and
qualified.
Section 2. Vacancies and Newly Created Directorships.
Subject to the rights of the holders of any class or series of preferred
stock then outstanding, newly created directorships resulting from any
increase in the authorized number of directors or any vacancies in the Board
of Directors resulting from death, resignation, retirement, disqualification,
removal from office or other cause may be filled only by a majority vote of
the directors then in office, though less than a quorum, and directors so
chosen shall hold office for a term expiring at the annual meeting of
stockholders at which the term of office of the class to which they have been
elected expires, and until such director's successor shall have been duly
elected and qualified. No decrease in the number of authorized directors
constituting the Board shall shorten the term of any incumbent director.
<PAGE>
Section 3. Regular Meetings.
Regular meetings of the Board of Directors shall be held at such place
or places, on such date or dates, and at such time or times as shall have
been established by the Board of Directors and publicized among all
directors. A notice of each regular meeting shall not be required.
Section 4. Special Meetings.
Special meetings of the Board of Directors may be called by one-third
(1/3) of the directors then in office (rounded up to the nearest whole
number) or by the President and shall be held at such place, on such date,
and at such time as they or he or she shall fix. Notice of the place, date,
and time of each such special meeting shall be given to each director by whom
it is not waived by mailing written notice not less than five days before the
meeting or by telegraphing or telexing or by facsimile transmission of the
same not less than twenty-four (24) hours before the meeting. Unless
otherwise indicated in the notice thereof, any and all business may be
transacted at a special meeting.
Section 5. Quorum.
At any meeting of the Board of Directors, a majority of the authorized
number of directors then constituting the Board shall constitute a quorum for
all purposes. If a quorum shall fail to attend any meeting, a majority of
those present may adjourn the meeting to another place, date, or time,
without further notice or waiver thereof.
Section 6. Participation in Meetings By Conference Telephone.
Members of the Board of Directors, or of any committee thereof, may
participate in a meeting of such Board or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other and such participation shall
constitute presence in person at such meeting.
Section 7. Conduct of Business.
At any meeting of the Board of Directors, business shall be transacted
in such order and manner as the Board may from time to time determine, and
all matters shall be determined by the vote of a majority of the directors
present, except as otherwise provided herein or required by law. Action may
be taken by the Board of Directors without a meeting if all members thereof
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board of Directors.
Section 8. Powers.
The Board of Directors may, except as otherwise required by law,
exercise all such powers and do all such acts and things as may be exercised
or done by the Corporation, including, without limiting the generality of the
foregoing, the unqualified power:
<PAGE>
(1) To declare dividends from time to time in accordance with law;
(2) To purchase or otherwise acquire any property, rights or privileges
on such terms as it shall determine;
(3) To authorize the creation, making and issuance, in such form as it
may determine, of written obligations of every kind, negotiable or
non-negotiable, secured or unsecured, and to do all things necessary in
connection therewith;
(4) To remove any officer of the Corporation with or without cause, and
from time to time to devolve the powers and duties of any officer upon any
other person for the time being;
(5) To confer upon any officer of the Corporation the power to appoint,
remove and suspend subordinate officers, employees and agents;
(6) To adopt from time to time such stock, option, stock purchase, bonus
or other compensation plans for directors, officers, employees and agents of
the Corporation and its subsidiaries as it may determine;
(7) To adopt from time to time such insurance, retirement, and other
benefit plans for directors, officers, employees and agents of the
Corporation and its subsidiaries as it may determine; and
(8) To adopt from time to time regulations, not inconsistent with these
By-laws, for the management of the Corporation's business and affairs.
Section 9. Compensation of Directors.
Directors, as such, may receive, pursuant to resolution of the Board of
Directors, fixed fees and other compensation for their services as directors,
including, without limitation, their services as members of committees of the
Board of Directors.
Section 10. Qualifications.
Any person first appointed or elected to the Board of Directors after
June 30, 1999 shall, in order to qualify as such, reside in or have his or
her primary place of business located within a 35 mile radius of any
operating office of the Corporation or any subsidiary.
<PAGE>
ARTICLE III
COMMITTEES
Section 1. Committees of the Board of Directors.
The Board of Directors, by a vote of a majority of the Board of
Directors, may from time to time designate committees of the Board, with such
lawfully delegable powers and duties as it thereby confers, to serve at the
pleasure of the Board and shall, for those committees and any others provided
for herein, elect a director or directors to serve as the member or members,
designating, if it desires, other directors as alternate members who may
replace any absent or disqualified member at any meeting of the committee.
Any such committee, to the extent provided in the resolution(s) of the Board
of Directors, shall have and may exercise all the powers and authority of the
Board in the management of the business and affairs of the Corporation, and
may authorize the seal of the Corporation to be affixed to all papers which
may require it; but no such committee shall have the power or authority to:
(i) approve or adopt, or recommend to the stockholders, any action or matter
expressly required by law to be submitted to stockholders for approval, or
(ii) adopt, amend or repeal any bylaw of the Corporation. In the absence or
disqualification of any member of any committee and any alternate member in
his or her place, the member or members of the committee present at the
meeting and not disqualified from voting, whether or not he or she or they
constitute a quorum, may by unanimous vote appoint another member of the
Board of Directors to act at the meeting in the place of the absent or
disqualified member.
Section 2. Conduct of Business.
Each committee may determine the procedural rules for meeting and
conducting its business and shall act in accordance therewith, except as
otherwise provided herein or required by law. Adequate provision shall be
made for notice to members of all meetings; one-third (1/3) of the members
shall constitute a quorum unless the committee shall consist of one or two
members, in which event one member shall constitute a quorum; and all matters
shall be determined by a majority vote of the members present. Action may be
taken by any committee without a meeting if all members thereof consent
thereto in writing, and the writing or writings are filed with the minutes of
the proceedings of such committee.
Section 3. Nominating Committee.
The Board of Directors may appoint a Nominating Committee of the Board,
consisting of not less than three members, one of which shall be the
President if, and only so long as, the President remains in office as a
member of the Board of Directors. The Nominating Committee shall have
authority (i) to review any nominations for election to the Board of
Directors made by a stockholder of the Corporation pursuant to Section
6(c)(ii) of Article I of these By-laws in order to determine compliance with
such By-law and (ii) to recommend to the Whole Board nominees for election to
the Board of Directors to replace those directors whose terms expire at the
annual meeting of stockholders next ensuing.
<PAGE>
ARTICLE IV
OFFICERS
Section 1. Generally.
(a) The Board of Directors as soon as may be practicable after the
annual meeting of stockholders shall choose a President, a Secretary and a
Treasurer and from time to time may choose such other officers as it may deem
proper. The President shall be chosen from among the directors. Any number of
offices may be held by the same person.
(b) The term of office of all officers shall be until the next annual
election of officers and until their respective successors are chosen, but
any officer may be removed from office at any time by the affirmative vote of
a majority of the authorized number of directors then constituting the Board
of Directors.
(c) All officers chosen by the Board of Directors shall each have such
powers and duties as generally pertain to their respective offices, subject
to the specific provisions of this Article IV. Such officers shall also have
such powers and duties as from time to time may be conferred by the Board of
Directors or by any committee thereof.
Section 2. President.
The President shall be the chief executive officer and, subject to the
control of the Board of Directors, shall have general power over the
management and oversight of the administration and operation of the
Corporation's business and general supervisory power and authority over its
policies and affairs. The President shall see that all orders and resolutions
of the Board of Directors and of any committee thereof are carried into
effect.
Each meeting of the stockholders and of the Board of Directors shall be
presided over by such officer as has been designated by the Board of
Directors or, in his absence, by such officer or other person as is chosen at
the meeting. The Secretary or, in the Secretary's absence, the General
Counsel of the Corporation or such officer as has been designated by the
Board of Directors or, in his absence, such officer or other person as is
chosen by the person presiding, shall act as secretary of each such meeting.
Section 3. Vice President.
The Vice President or Vice Presidents, if any, shall perform the duties
of the President in his absence or during his disability to act. In addition,
the Vice Presidents shall perform the duties and exercise the powers usually
incident to their respective offices and/or such other duties and powers as
may be properly assigned to them from time to time by the Board of Directors,
the Chairman of the Board or the President.
<PAGE>
Section 4. Secretary.
The Secretary or an Assistant Secretary shall issue notices of meetings,
shall keep their minutes, shall have charge of the seal and the corporate
books, shall perform such other duties and exercise such other powers as are
usually incident to such offices and/or such other duties and powers as are
properly assigned thereto by the Board of Directors, the Chairman of the
Board or the President.
Section 5. Treasurer.
The Treasurer shall have charge of all monies and securities of the
Corporation, other than monies and securities of any division of the
Corporation which has a treasurer or financial officer appointed by the Board
of Directors, and shall keep regular books of account. The funds of the
Corporation shall be deposited in the name of the Corporation by the
Treasurer with such banks or trust companies or other entities as the Board
of Directors from time to time shall designate. The Treasurer shall sign or
countersign such instruments as require his signature, shall perform all such
duties and have all such powers as are usually incident to such office and/or
such other duties and powers as are properly assigned to him by the Board of
Directors, the Chairman of the Board or the President, and may be required to
give bond, payable by the Corporation, for the faithful performance of his
duties in such sum and with such surety as may be required by the Board of
Directors.
Section 6. Assistant Secretaries and Other Officers.
The Board of Directors may appoint one or more assistant secretaries and
one or more assistant treasurers, or one appointee to both such positions,
which officers shall have such powers and shall perform such duties as are
provided in these By-laws or as may be assigned to them by the Board of
Directors, the Chairman of the Board or the President.
Section 7. Action with Respect to Securities of Other Corporations
Unless otherwise directed by the Board of Directors, the President or
any officer of the Corporation authorized by the President shall have power
to vote and otherwise act on behalf of the Corporation, in person or by
proxy, at any meeting of stockholders of or with respect to any action of
stockholders of any other corporation in which this Corporation may hold
securities and otherwise to exercise any and all rights and powers which this
Corporation may possess by reason of its ownership of securities in such
other Corporation.
<PAGE>
ARTICLE V
STOCK
Section 1. Certificates of Stock.
Each stockholder shall be entitled to a certificate signed by, or in the
name of the Corporation by, the President or a Vice President, and by the
Secretary or an Assistant Secretary, or the Treasurer or an Assistant
Treasurer, certifying the number of shares owned by him or her. Any or all of
the signatures on the certificate may be by facsimile.
Section 2. Transfers of Stock.
Transfers of stock shall be made only upon the transfer books of the
Corporation kept at an office of the Corporation or by transfer agents
designated to transfer shares of the stock of the Corporation. Except where a
certificate is issued in accordance with Section 4 of Article V of these
By-laws, an outstanding certificate for the number of shares involved shall
be surrendered for cancellation before a new certificate is issued therefore.
Section 3. Record Date.
In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders, or to receive payment of
any dividend or other distribution or allotment of any rights or to exercise
any rights in respect of any change, conversion or exchange of stock or for
the purpose of any other lawful action, the Board of Directors may fix a
record date, which record date shall not precede the date on which the
resolution fixing the record date is adopted and which record date shall not
be more than 60 nor less than ten days before the date of any meeting of
stockholders, nor more than 60 days prior to the time for such other action
as hereinbefore described; provided, however, that if no record date is fixed
by the Board of Directors, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given
or, if notice is waived, at the close of business on the day next preceding
the day on which the meeting is held, and, for determining stockholders
entitled to receive payment of any dividend or other distribution or
allotment of rights or to exercise any rights of change, conversion or
exchange of stock or for any other purpose, the record date shall be at the
close of business on the day on which the Board of Directors adopts a
resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
<PAGE>
Section 4. Lost, Stolen or Destroyed Certificates.
In the event of the loss, theft or destruction of any certificate of
stock, another may be issued in its place pursuant to such regulations as the
Board of Directors may establish concerning proof of such loss, theft or
destruction and concerning the giving of a satisfactory bond or bonds of
indemnity.
Section 5. Regulations.
The issue, transfer, conversion and registration of certificates of
stock shall be governed by such other regulations as the Board of Directors
may establish.
ARTICLE VI
NOTICES
Section 1. Notices.
Except as otherwise specifically provided herein or required by law, all
notices required to be given to any stockholder, director, officer, employee
or agent shall be in writing and may in every instance be effectively given
by hand delivery to the recipient thereof, by depositing such notice in the
mail, postage paid, by sending such notice by prepaid telegram or mailgram or
by sending such notice by facsimile machine or other electronic transmission.
Any such notice shall be addressed to such stockholder, director, officer,
employee or agent at his or her last known address as the same appears on the
books of the Corporation. The time when such notice is received, if hand
delivered, or dispatched, if delivered through the mail, by telegram or
mailgram or by facsimile machine or other electronic transmission, shall be
the time of the giving of the notice.
Section 2. Waivers.
A written waiver of any notice, signed by a stockholder, director,
officer, employee or agent, whether before or after the time of the event for
which notice is to be given, shall be deemed equivalent to the notice
required to be given to such stockholder, director, officer, employee or
agent. Neither the business nor the purpose of any meeting need be specified
in such a waiver.
<PAGE>
ARTICLE VII
MISCELLANEOUS
Section 1. Facsimile Signatures.
In addition to the provisions for use of facsimile signatures elsewhere
specifically authorized in these By-laws, facsimile signatures of any officer
or officers of the Corporation may be used whenever and as authorized by the
Board of Directors or a committee thereof.
Section 2. Corporate Seal.
The Board of Directors may provide a suitable seal, containing the name
of the Corporation, which seal shall be in the charge of the Secretary. If
and when so directed by the Board of Directors or a committee thereof,
duplicates of the seal may be kept and used by the Treasurer or by an
Assistant Secretary or Assistant Treasurer.
Section 3. Reliance upon Books, Reports and Records.
Each director, each member of any committee designated by the Board of
Directors, and each officer of the Corporation shall, in the performance of
his or her duties, be fully protected in relying in good faith upon the books
of account or other records of the Corporation and upon such information,
opinions, reports or statements presented to the Corporation by any of its
officers or employees, or committees of the Board of Directors so designated,
or by any other person as to matters which such director or committee member
reasonably believes are within such other person's professional or expert
competence and who has been selected with reasonable care by or on behalf of
the Corporation.
Section 4. Fiscal Year.
The fiscal year of the Corporation shall be as fixed by the Board of
Directors.
Section 5. Time Periods.
In applying any provision of these By-laws which requires that an act be
done or not be done a specified number of days prior to an event or that an
act be done during a period of a specified number of days prior to an event,
calendar days shall be used, the day of the doing of the act shall be
excluded and the day of the event shall be included.
ARTICLE VIII
AMENDMENTS
The By-laws of the Corporation may be adopted, amended or repealed as
provided in Article SEVENTH of the Certificate of Incorporation of the
Corporation.
<PAGE>
EXHIBIT 10.1
EMPLOYMENT AGREEMENT BETWEEN COHOES SAVINGS BANK AND HARRY L. ROBINSON
<PAGE>
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
January 6, 1999 by and between Cohoes Savings Bank, a state-chartered savings
bank organized and existing under the laws of the State of New York (the
"Bank"), and Harry L. Robinson (the "Executive").
WITNESSETH:
WHEREAS, the Executive currently serves as the President and Chief
Executive Officer of the Bank and as the President and Chief Executive
Officer of Cohoes Bancorp, Inc. (the "Company"), and effective as of the date
of this Agreement, the Bank has converted from mutual to capital stock form
and has become the wholly owned subsidiary of the Company; and
WHEREAS, the Bank desires to assure for itself the continued
availability of the Executive's services as provided in this Agreement, and
the Board of Directors of the Bank (the "Board") recognizes the need for the
Executive to be able to perform such services with a minimum of personal
distraction in the event of a pending or threatened Change in Control (as
hereinafter defined); and
WHEREAS, the Executive is willing to continue to serve the Bank on the
terms and conditions hereinafter set forth;
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 date of this Agreement and ending on the third
anniversary date of this Agreement, plus such extensions, if any, as are
provided pursuant to section 2(b).
(b) Except as provided in Section 2(c), beginning on the first
anniversary of the date of this Agreement, and on each anniversary
thereafter, the term of this Agreement shall be extended for a period of one
<PAGE>
year in addition to the then-remaining term, provided that neither the
Executive nor the Bank has given notice to the other in writing at least 90
days prior to such anniversary that the term of this Agreement shall not be
extended further. 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 last day of the Employment Period taking into
account any extensions under this section 2(b). Upon termination of the
Executive's employment with the Bank for any reason whatsoever, any
extensions provided pursuant to this section 2(b), if not theretofore
discontinued, shall automatically cease.
(c) Nothing in this Agreement shall be deemed to prohibit the Bank at
any time from terminating the Executive's employment 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.
The Executive shall serve as President and Chief Executive Officer of
the Bank, having such power, authority and responsibility and performing such
duties as are prescribed by or under the By-Laws of the Bank and as are
customarily associated with such position. The Executive shall devote his
full business time and attention as he has customarily done to the business
and affairs of the Bank and shall use his 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 him a salary equal to the base
salary from the Company and the Bank in effect on the date of this Agreement,
less the amount of base salary actually paid to the Executive by the Company
during the Employment Period. The Executive's salary shall be payable in
approximately equal installments in accordance with the Bank's customary
payroll practices for senior officers. The 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 therein. In addition to salary, the
Executive may receive other cash compensation from the Bank for services
hereunder 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 disability insurance plans, and any other employee benefit and
compensation plans (including, but not limited 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, in accordance with the terms and conditions of such employee
benefit plans and programs
<PAGE>
and compensation plans and programs and consistent with the Bank's customary
practices. In addition, the Executive shall be entitled to receive such
perquisites as are customary for an individual employed in the Executive's
position in a firm of the size and nature of the Bank, including, but not
limited to, the use of an automobile and the payment of country club and
other club fees and expenses.
SECTION 6. INDEMNIFICATION AND INSURANCE.
(a) During the Employment Period and for a period of six 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 the
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) To the maximum extent permitted under applicable law, during the
Employment Period and for a period of six years thereafter, the Bank shall
indemnify the Executive against and hold him 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.
SECTION 7. OUTSIDE ACTIVITIES.
The Executive may serve as a member of the boards of directors of such
business, community and charitable organizations as he 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 his duties under this Agreement. The
Executive may also engage in personal business and investment activities
which do not materially interfere with the performance of his duties
hereunder; provided, however, that such activities are not prohibited under
any code of conduct or investment or securities trading policy established by
the Bank and generally applicable to all similarly situated Executives. The
Executive may also serve as an officer or director of the Company on such
terms and conditions as the Company and the Bank may mutually agree upon, and
such service shall not be deemed to materially interfere with the Executive's
performance of his duties hereunder or otherwise result in a material breach
of this Agreement. If the Executive is discharged or suspended, or is subject
to any regulatory prohibition or restriction with respect to participation in
the affairs of the Company, he shall continue to perform services for the
Bank in accordance with this Agreement but shall not directly or indirectly
provide services to or participate in the affairs of the Company in a manner
inconsistent with the terms of such discharge or suspension or any applicable
regulatory order.
<PAGE>
SECTION 8. WORKING FACILITIES AND EXPENSES.
The Executive's principal place of employment shall be at the Bank's
executive offices located in Cohoes, New York, or at such other location
within 50 miles of the address 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 his
principal place of employment with a private office, secretarial services and
other support services and facilities suitable to his position with the Bank
and necessary or appropriate in connection with the performance of his
assigned duties under this Agreement. The Bank shall reimburse the Executive
for his ordinary and necessary business expenses, including, without
limitation, the Executive's travel and entertainment expenses incurred in
connection with the performance of his duties under this Agreement, 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 BENEFITS.
(a) The Executive shall be entitled to the benefits described in section
9(b) in the event that:
(i) his employment with the Bank terminates during the Employment Period
as a result of the Executive's voluntary resignation within 90 days
following:
(A) the failure of the Board to appoint or re-appoint or elect or
re-elect the Executive to the position with the Bank stated in section 3 of
this Agreement (or a more senior office);
(B) if the Executive is a member of the Board, the failure of the
shareholders of the Bank to elect or re-elect the 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 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 Restated Organization Certificate, the Bank's
By-Laws, action of the Board or the Bank's shareholders or otherwise, to vest
in the Executive the functions, duties, or responsibilities prescribed in
section 3 of this Agreement, unless, during such 30-day period, the Bank
cures such failure;
(D) the expiration of a 30-day period following the date on which the
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 the Executive's rate of base salary in effect
from time to time and any change in the terms and conditions of any
compensation or benefit program in which the Executive participates which,
either individually or together with other changes, has a material adverse
effect on the aggregate value of his total compensation package), unless,
during such 30-day period, the Bank cures such failure; or
<PAGE>
(E) a change in the Executive's principal place of employment for a
distance in excess of 50 miles from the Bank's principal office in Cohoes,
New York; or
(F) the liquidation, dissolution, bankruptcy, or insolvency of the Bank,
the Bank or any of their respective subsidiaries or affiliates; or
(ii) the Executive's employment with the Bank is terminated by the Bank
during the Employment Period for any reason other than for "cause," as
provided in section 10(a).
(b) Upon the occurrence of any of the events described in section 9(a)
of this Agreement, the Bank shall pay and provide to the Executive (or, in
the event of his death, to his estate):
(i) his earned but unpaid salary (including, without limitation, all
items which constitute wages under applicable law and the payment of which is
not otherwise provided for in this section 9(b)) as of the date of the
termination of his employment with the Bank, 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 30 days after termination of employment;
(ii) the benefits, if any, to which he 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 the Executive, for the
Remaining Unexpired Employment Period, coverage equivalent to the coverage to
which he would have been entitled under such plans (as in effect on the date
of his termination of employment, or, if his termination of employment occurs
after a Change in Control, on the date of such Change in Control, whichever
benefits are greater), if he had continued working for the Bank during the
Remaining Unexpired Employment Period at the highest annual rate of salary
achieved during the Employment Period;
(iv) within 30 days following the Executive's termination of employment
with the Bank, a lump sum payment, in an amount equal to the present value of
the salary (excluding any additional payments made to the Executive in lieu
of the use of an automobile) that the Executive would have earned if he had
continued working for the Bank during the Remaining Unexpired Employment
Period at the highest annual rate of salary achieved during the Employment
Period, where such present value is to be determined using a discount rate
equal to the applicable short-term federal rate prescribed under section
1274(d) of the Internal Revenue Code of 1986, as amended (the "Code"),
compounded using the compounding periods corresponding to the Bank's regular
<PAGE>
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;
(v) within 30 days following the Executive's termination of employment
with the Bank, a lump sum payment in an amount equal to the present value of
the additional employer contributions to which he would have been entitled
under the Cohoes Savings Bank 401(k) Savings and Profit-Sharing Plan, the
Cohoes Bancorp, Inc. Employee Stock Ownership Plan (together with the defined
contribution portion of the Benefit Restoration Plan of Cohoes Bancorp, Inc.,
or any other supplemental defined contribution plan) and any and all other
qualified and non-qualified defined contribution plans maintained by, or
covering employees of, the Bank as if he were 100% vested thereunder and had
continued working for the Bank during the Remaining Unexpired Employment
Period at the highest annual rate of salary achieved during the Employment
Period and making the maximum amount of employee contributions, if any,
required or permitted under such plan or plans, such present value to be
determined on the basis of a discount rate, compounded using the compounding
period that corresponds to the frequency with which employer contributions
are made to the relevant plan, equal to the Applicable PBGC Rate;
(vi) within 30 days following the Executive's termination of employment
with the Bank, a lump sum payment in an amount equal to the payments that
would have been made (without discounting for early payment) to the Executive
under any cash bonus or long-term or short-term cash incentive compensation
plan maintained by, or covering employees of, the Bank if he had continued
working for the Bank during the Remaining Unexpired Employment Period and had
earned the maximum bonus or incentive award in each calendar year that ends
during the Remaining Unexpired Employment Period, such payments to be equal
to the product of:
(A) the maximum percentage rate at which an award was ever available to
the Executive under such incentive compensation plan; multiplied by
(B) the salary that would have been paid to the Executive during each
such calendar year at the highest annual rate of salary achieved during the
Employment Period.
(vii) at the election of the Bank made within 30 days following the
occurrence of the event described in section 9(a), upon the surrender of
options or appreciation rights issued to the Executive under any stock option
and appreciation rights plan or program maintained by, or covering employees
of, the Bank, a lump sum payment in an amount equal to the product of:
(A) the excess of (I) the fair market value of a share of stock of the
same class as the stock subject to the option or appreciation right,
determined as of the date of termination of employment, over (II) the
exercise price per share for such option or appreciation right, as specified
in or under the relevant plan or program; multiplied by
<PAGE>
(B) the number of shares with respect to which options or appreciation
rights are being surrendered.
For purposes of this section 9(b)(vii), the Executive shall be deemed fully
vested in all options and appreciation rights under any stock option or
appreciation rights plan or program maintained by, or covering employees of,
the Bank, even if he is not vested under the terms of such plan or program;
and
(viii) at the election of the Bank made within 30 days following the
occurrence of the event described in section 9(a), upon the surrender of any
shares awarded to the Executive under any restricted stock plan maintained
by, or covering employees of, the Bank, a lump sum payment in an amount equal
to the product of:
(A) the fair market value of a share of stock of the same class of stock
granted under such plan, determined as of the date of the Executive's
termination of employment; multiplied by
(B) the number of shares which are being surrendered.
For purposes of this section 9(b)(viii), the Executive shall be deemed fully
vested in all shares awarded under any restricted stock plan maintained by,
or covering employees of, the Bank, even if he is not vested under the terms
of such plan.
The Bank and the Executive hereby stipulate that the damages which may be
incurred by the 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 the 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), (iv), (v) and (vi) on the receipt of the
Executive's resignation from any and all positions which he holds as an
officer, director or committee member with respect to the Bank or any of its
subsidiaries or affiliates.
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 a discharge because the Board determines that the
Executive: (i) has intentionally failed to perform his assigned duties under
this Agreement (including, for these purposes, the Executive's inability to
perform such duties as a result of drug or alcohol dependency); (ii) has
intentionally engaged in dishonest or illegal conduct in connection with his
performance of services for the Bank or has been convicted of a felony; (iii)
<PAGE>
has willfully violated, in any material respect, any law, rule, regulation,
written agreement or final cease-and-desist order with respect to his
performance of services for the Bank, as determined by the Board; or (iv) has
intentionally breached the material terms of this Agreement;
(b) the Executive's voluntary resignation from employment with the Bank
for reasons other than those specified in section 9(a)(i); or
(c) the death of the Executive while employed by the Bank, or the
termination of the Executive's employment because of "total and permanent
disability" within the meaning of the Company's or the Bank's long-term
disability plan for employees; then the Bank shall have no further
obligations under this Agreement, other than the payment to the Executive of
his earned but unpaid salary as of the date of the termination of his
employment and the provision of such other benefits, if any, to which he is
entitled as a former employee under the Bank's employee benefit plans and
programs and compensation plans and programs.
For purposes of this section 10, no act or failure to act, on the part
of the Executive, shall be considered "willful" unless it is done, or omitted
to be done, by the Executive in bad faith or without reasonable belief that
the Executive's action or omission was in the best interests of the Bank. 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 the
Executive in good faith and in the best interests of the Bank. Prior to the
date on which a Change in Control occurs, the cessation of employment of the
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 the Executive a
copy of a resolution duly adopted by the affirmative vote of three-fourths of
the members of the Board at a meeting of the Board called and held for such
purpose (after reasonable notice is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard before
the Board), finding that, in the good faith opinion of the Board, the
Executive is guilty of the conduct described in section 10(a) above, and
specifying the particulars thereof in detail. On and after the date that a
Change in Control occurs, a determination under this section 10 shall require
the affirmative vote of at least three-fourths of the members of the Board
acting in good faith, and such vote shall not be made prior to the expiration
of a 60-day period following the date on which the Board shall, by written
notice to the Executive, furnish to him a statement of its grounds for
proposing to make such determination, during which period the Executive shall
be afforded a reasonable opportunity to make oral and written presentations
to the members of the Board, and to be represented by his legal counsel at
such presentations to refute the grounds for the proposed determination.
SECTION 11. TERMINATION UPON OR FOLLOWING A CHANGE IN CONTROL.
(a) A Change in Control of the Bank ("Change in Control") shall be
deemed to have occurred upon the happening of any of the following events:
<PAGE>
(i) approval by the shareholders of the Bank of a transaction that would
result and does 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 shareholders 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 shareholders of the Bank of a plan for such liquidation or dissolution;
(iv) the occurrence of any event if, immediately following such event,
at least 50% of the members of the Board do not belong to any of the
following groups:
(A) individuals who were members of the Board on the date of this
Agreement; or
(B) individuals who first became members of the Board after the date of
this Agreement either:
(1) upon election to serve as a member of the Board 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
(2) upon election by the shareholders of the Board to serve as a member
of the Board, but only if nominated for election by affirmative vote of
<PAGE>
three-quarters of the members of the board of directors 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; or
(v) any event which would be described in section 11(a)(i), (ii), (iii)
or (iv) if the term "Company" were substituted for the term "Bank" therein
and the term "Company Board" were substituted for the term "Board" therein.
In no event, however, shall a Change in Control be deemed to have occurred as
a result of any acquisition of securities or assets of the Company, the Bank,
or a subsidiary of either of them, by the Company, the Bank, or any
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 that the Executive's employment with the Bank
terminates within eighteen months following a Change in Control for any
reason other than for "cause," as described in section 10, the Bank shall pay
to the Executive, in addition to the amounts payable pursuant to section 9, a
severance benefit in a lump sum payment, within 25 days after the later of
the effective time of such Change in Control or his termination of
employment, equal to the greater of (i) the sum of the amounts payable as
salary pursuant to section 4 hereof during the Remaining Unexpired Employment
Period and as additional cash compensation pursuant to the terms of section
9(b)(vi) hereof, or (ii) three times the annual average of the amount paid or
payable to the Executive under section 4 of this Agreement or the
corresponding section of any prior employment agreement with the Bank or its
predecessor during the five preceding taxable years of the Executive (or
during the entire period of the Executive's employment with the Bank or its
predecessor if such period is less than five years). The Bank shall also
continue to provide to the Executive and to his eligible dependents the
benefits described in section 9(b)(iii) hereof for a period of at least 36
months following the later of the effective time of such Change in Control or
his termination of employment.
SECTION 12. TAX INDEMNIFICATION.
(a) This section 12 shall apply if the Executive's employment is
terminated upon or following (i) a Change in Control (as defined in section
11 of this Agreement); or (ii) a change "in the ownership or effective
control" of the Company or the Bank or "in the ownership of a substantial
portion of the assets" of the Company or the Bank within the meaning of
section 280G of the Code. If this section 12 applies, then, if for any
taxable year, the Executive shall be liable for the payment of an excise tax
under section 4999 of the Code with respect to any payment in the nature of
compensation made by the Bank or any direct or indirect subsidiary or
affiliate of the Bank to (or
<PAGE>
for the benefit of) the Executive, the Bank shall pay to the Executive an
amount equal to X determined under the following formula:
E x P
X = ---------------------------------
1 - [FI x (1-SLI)) + SLI + E + M]
where
E = the rate at which the excise tax is assessed under section 4999 of
the Code;
P = the amount with respect to which such excise tax is assessed,
determined without regard to this section 12;
FI = the highest marginal rate of income tax applicable to the Executive
under the Code for the taxable year in question;
SLI = the sum of the highest marginal rates of income tax applicable to
the Executive under all applicable state and local laws for the taxable year
in question; and
M = the highest marginal rate of Medicare tax applicable to the
Executive under the Code for the taxable year in question.
With respect to any payment in the nature of compensation that is made to (or
for the benefit of) the Executive under the terms of this Agreement, the
Executive's employment agreement with the Company, or otherwise, and on which
an excise tax under section 4999 of the Code will be assessed, the payment
determined under this section 12(a) shall be made to the Executive on the
earlier of (i) the date the Company, the Bank or any direct or indirect
subsidiary or affiliate of the Company or the Bank is required to withhold
such tax, or (ii) the date the tax is required to be paid by the Executive.
(b) Notwithstanding anything in this section 12 to the contrary, in the
event that the Executive's liability for the excise tax under section 4999 of
the Code for a taxable year is subsequently determined to be different than
the amount determined by the formula (X + P) x E, where X, P and E have the
meanings provided in section 12(a), the Executive or the Bank, as the case
may be, shall pay to the other party at the time that the amount of such
excise tax is finally determined, an appropriate amount, plus interest, such
that the payment made under section 12(a), when increased by the amount of
the payment made to the Executive under this section 12(b) by the Bank, or
when reduced by the amount of the payment made to the Bank under this section
12(b) by the Executive, equals the amount that should have properly been paid
to the Executive under section 12(a). The interest paid under this section
12(b) shall be determined at the rate provided under section 1274(b)(2)(B) of
the Code. To confirm that the proper amount, if any, was paid to the
Executive under this section 12, the Executive shall furnish to the Bank a
<PAGE>
copy of each tax return which reflects a liability for an excise tax payment
made by the Bank, at least 20 days before the date on which such return is
required to be filed with the Internal Revenue Service.
SECTION 13. COVENANT NOT TO COMPETE.
The Executive hereby covenants and agrees that, in the event of his
termination of employment with the Bank prior to the expiration of the
Employment Period, for a period of one year following the date of his
termination of employment with the Bank (or, if less, for the Remaining
Unexpired Employment Period), he shall not, without the written consent of
the Bank, become an officer, employee, consultant, director or trustee of any
savings bank, 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, that entails working within any county in which
the Bank maintains an office; provided, however, that this section 13 shall
not apply if the Executive's employment is terminated for the reasons set
forth in section 9(a).
SECTION 14. CONFIDENTIALITY.
Unless he 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 his 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 his own) until the same ceases to be material (or becomes so ascertainable
or available); provided, however, that nothing in this section 14 shall
prevent the Executive, with or without the Bank's consent, from participating
in or disclosing documents or information in connection with any judicial or
administrative investigation, inquiry or proceeding to the extent that such
participation or disclosure is required under applicable law.
SECTION 15. SOLICITATION.
The Executive hereby covenants and agrees that, for a period of one year
following his termination of employment with the Bank, he 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 of its
subsidiaries or affiliates to terminate his employment and accept employment
or become affiliated with, or provide services for compensation in any
capacity whatsoever to, any savings bank, savings and loan association, bank,
bank holding company, savings and loan holding company, or other institution
engaged in the business of accepting deposits, making loans or doing business
within the counties specified in section 13;
<PAGE>
(b) provide any information, advice or recommendation with respect to
any such officer or employee of any savings bank, savings and loan
association, bank, bank holding company, savings and loan holding company, or
other institution engaged in the business of accepting deposits, making loans
or doing business within the counties specified in section 13, 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 of its subsidiaries or affiliates to terminate his employment and accept
employment or become affiliated with, or provide services for compensation in
any capacity whatsoever to, any savings bank, savings and loan association,
bank, bank holding company, savings and loan holding company, or other
institution engaged in the business of accepting deposits, making loans or
doing business within the counties specified in section 13;
(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 16. NO EFFECT ON EMPLOYEE BENEFIT PLANS OR PROGRAMS.
The termination of the Executive's employment during the term of this
Agreement or thereafter, whether by the Bank or by the 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 plans or programs,
or compensation plans or programs, as may be maintained by, or cover
employees of, the Bank from time to time; provided, however, that nothing in
this Agreement shall be deemed to duplicate any compensation or benefits
provided under any agreement, plan or program covering the Executive to which
the Bank is a party and any duplicative amount payable under any such
agreement, plan or program shall be applied as an offset to reduce the
amounts otherwise payable hereunder.
SECTION 17. SUCCESSORS AND ASSIGNS.
This Agreement will inure to the benefit of and be binding upon the
Executive, his legal representatives and testate or intestate distributees,
and the Bank and its successors and assigns, including 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 60 days in advance of the scheduled effective
date of any such succession shall be deemed a material breach of this
Agreement.
<PAGE>
SECTION 18. 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 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 the Executive:
Harry L. Robinson
At the address last appearing
on the personnel records of
the Executive
If to the Bank:
Cohoes Savings Bank
75 Remsen Street
Cohoes, New York 12047
Attention: President
with a copy to:
Silver, Freedman & Taff, L.L.P.
1100 New York Avenue
Washington, D.C. 20005-3934
Attention: Robert L. Freedman, P.C.
SECTION 19. INDEMNIFICATION FOR ATTORNEYS' FEES.
(a) The Bank shall indemnify, hold harmless and defend the Executive
against reasonable costs, including legal fees and expenses, incurred by him
in connection with or arising out of any action, suit or proceeding in which
he may be involved, as a result of his efforts, in good faith, to defend or
enforce the terms of this Agreement. For purposes of this Agreement, any
settlement agreement which provides for payment of any amounts in settlement
of the Bank's obligations hereunder shall be conclusive evidence of the
Executive's entitlement to indemnification hereunder, and any such
indemnification payments shall be in addition to amounts payable pursuant to
such settlement agreement, unless such settlement agreement expressly
provides otherwise.
(b) The Bank's obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
<PAGE>
affected by any set-off, counterclaim, recoupment, defense or other claim,
right or action which the Bank may have against the Executive or others. In
no event shall the Executive be obligated to seek other employment or take
any other action by way of mitigation of the amounts payable to the Executive
under any of the provisions of this Agreement, and such amounts shall not be
reduced whether or not the Executive obtains other employment. Unless it is
determined that a claim made by the Executive was either frivolous or made in
bad faith, the Bank agrees to pay as incurred, to the full extent permitted
by law, all legal fees and expenses which the Executive may reasonably incur
as a result of or in connection with his consultation with legal counsel or
arising out of any action, suit, proceeding or contest (regardless of the
outcome thereof) by the Bank, the Executive or others regarding the validity
or enforceability of, or liability under, any provision of this Agreement or
any guarantee of performance thereof (including as a result of any contest by
the Executive about the amount of any payment pursuant to this Agreement),
plus in each case interest on any delayed payment at the applicable Federal
rate provided for in section 7872(f)(2)(A) of the Code. This section 19(b)
shall apply whether such consultation, action, suit, proceeding or contest
arises before, on, after or as a result of a Change in Control.
SECTION 20. 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 21. 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 22. COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, and all of which shall constitute one and
the same Agreement.
SECTION 23. 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 State of New
York applicable to contracts entered into and to be performed entirely within
the State of New York.
SECTION 24. HEADINGS AND CONSTRUCTION.
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.
<PAGE>
SECTION 25. 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 representations 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 26. NON-DUPLICATION.
In the event that the Executive shall perform services for the Company
or any other direct or indirect subsidiary or affiliate of the Bank, it is
intended that any compensation or benefits provided to the Executive by such
other employer shall not duplicate the compensation or benefits provided
under this Agreement. The compensation and benefits payable under this
Agreement shall be reduced to the extent necessary to effectuate this
intention.
SECTION 27. REQUIRED REGULATORY PROVISIONS.
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, 12 U.S.C. Section 1828(k), and
any regulations promulgated thereunder.
<PAGE>
IN WITNESS WHEREOF, the Bank has caused this Agreement to be executed
and the Executive has hereunto set his hand, all as of the day and year first
above written.
/s/ Harry L. Robinson
EXECUTIVE
ATTEST: COHOES SAVINGS BANK
By /s/ Jacqueline E. Brennan By /s/ Richard A. Ahl
Name: Richard A. Ahl
Its: Executive VP, CFO
and Secretary
[Seal]
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF Albany )
On this 6th day of January, 1999, before me personally came Harry L.
Robinson, 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 he
resides at the address set forth in said instrument, and that he signed his
name to the foregoing instrument.
/s/ Jacqueline E. Brennan
Notary Public
My commission expires:
1/31/2001
<PAGE>
STATE OF NEW YORK
)
) ss.:
COUNTY OF Albany )
On this 6th day of January, 1999, before me personally came Richard A.
Ahl, to me known who, being by me duly sworn, did depose and say that he is
the Exec. VP, CFO & Sec. of Cohoes Savings Bank, the New York State chartered
stock savings bank described in and which executed the foregoing instrument;
that he knows the seal of said corporation; that the seal affixed to said
instrument is such seal; that it was so affixed by order of the Board of
Directors of said corporation; and that he or she signed his name thereto by
like order.
/s/ Jacqueline E. Brennan
Notary Public
My commission expires:
1/31/2001
<PAGE>
EXHIBIT 10.2
SCHEDULE OF EMPLOYMENT AGREEMENT WITH COHOES SAVINGS BANK
<PAGE>
EXHIBIT 10.2
SCHEDULE OF EMPLOYMENT AGREEMENT WITH COHOES SAVINGS BANK
Cohoes Savings Bank has an employment agreement with another employee which
is identical to the agreement included as Exhibit 10.1 except for the
following differences:
Name of Employee Title of Employee
Richard A. Ahl Executive Vice President, Chief Financial
Officer and Secretary
<PAGE>
EXHIBIT 10.3
EMPLOYMENT AGREEMENT BETWEEN COHOES SAVINGS BANK AND ALBERT J. PICCHI
<PAGE>
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
January 29, 1999 by and between Cohoes Savings Bank, a state-chartered
savings bank organized and existing under the laws of the State of New York,
the ("Bank"), and Albert J. Picchi (the "Executive").
WITNESSETH:
WHEREAS, the Executive currently serves as the Senior Vice President of
the Bank, and effective as of the date of this Agreement, the Bank has
converted from mutual to capital stock form and has become the wholly owned
subsidiary of Cohoes Bancorp, Inc. (the "Company"); and
WHEREAS, the Bank desires to assure for itself the continued
availability of the Executive's services as provided in this Agreement; and
WHEREAS, the Executive is willing to continue to serve the Bank on the
terms and conditions hereinafter set forth;
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
two years beginning on the date of this Agreement and ending on the second
anniversary date of this Agreement, plus such extensions, if any, as are
provided pursuant to section 2(b).
(b) Except as provided in Section 2(c), beginning on the first
anniversary of the date of this Agreement, and on each anniversary
thereafter, the term of this Agreement shall be extended for a period of one
<PAGE>
year in addition to the then-remaining term, provided that neither the
Executive nor the Bank has given notice to the other in writing at least 90
days prior to such anniversary that the term of this Agreement shall not be
extended further. 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 last day of the Employment Period taking into
account any extensions under this section 2(b). Upon termination of the
Executive's employment with the Bank for any reason whatsoever, any
extensions provided pursuant to this section 2(b), if not theretofore
discontinued, shall automatically cease.
(c) Nothing in this Agreement shall be deemed to prohibit the Bank at
any time from terminating the Executive's employment 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.
The Executive shall serve as Senior Vice President of the Bank, having
such power, authority and responsibility and performing such duties as are
prescribed by or under the By-Laws of the Bank and as are customarily
associated with such position. The Executive shall devote his 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 his 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 him a salary equal to the base salary from
the Bank in effect on the date of this Agreement. The Executive's salary
shall be payable in approximately equal installments in accordance with the
Bank's customary payroll practices for senior officers. The 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 therein.
In addition to salary, the Executive may receive other cash compensation from
the Bank for services hereunder 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 disability insurance plans, and any other employee benefit and
compensation plans (including, but not limited 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, in accordance with the terms and conditions of such employee
<PAGE>
benefit plans and programs and compensation plans and programs and consistent
with the Bank's customary practices. In addition, the Executive shall be
entitled to receive such perquisites as are customary for an individual
employed in the Executive's position in a firm of the size and nature of the
Bank.
SECTION 6. INDEMNIFICATION AND INSURANCE.
(a) During the Employment Period and for a period of six 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 the
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) To the maximum extent permitted under applicable law, during the
Employment Period and for a period of six years thereafter, the Bank shall
indemnify the Executive against and hold him 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.
SECTION 7. OUTSIDE ACTIVITIES.
The Executive may serve as a member of the boards of directors of such
business, community and charitable organizations as he 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 his duties under this Agreement. The
Executive may also engage in personal business and investment activities
which do not materially interfere with the performance of his duties
hereunder; provided, however, that such activities are not prohibited under
any code of conduct or investment or securities trading policy established by
the Bank and generally applicable to all similarly situated Executives. If
the Executive is discharged or suspended, or is subject to any regulatory
prohibition or restriction with respect to participation in the affairs of
the Company, he shall continue to perform services for the Bank in accordance
with this Agreement but shall not directly or indirectly provide services to
or participate in the affairs of the Company in a manner inconsistent with
the terms of such discharge or suspension or any applicable regulatory order.
SECTION 8. WORKING FACILITIES AND EXPENSES.
The Executive's principal place of employment shall be at the Bank's
executive offices located in Cohoes, New York, or at such other location
within 50 miles of the address 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 his
principal place of employment with a private office, secretarial services and
other support services and facilities suitable to his position with the Bank
<PAGE>
and necessary or appropriate in connection with the performance of his
assigned duties under this Agreement. The Bank shall reimburse the Executive
for his ordinary and necessary business expenses, including, without
limitation, the Executive's travel and entertainment expenses incurred in
connection with the performance of his duties under this Agreement, 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 BENEFITS.
(a) The Executive shall be entitled to the benefits described in section
9(b) in the event that:
(i) his employment with the Bank terminates during the Employment Period
as a result of the Executive's voluntary resignation within 90 days
following:
(A) the failure of the Board to appoint or re-appoint or elect or
re-elect the Executive to the position with the Bank stated in section 3 of
this Agreement (or a more senior office);
(B) if the Executive is a member of the Board, the failure of the
shareholders of the Bank to elect or re-elect the 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 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 Restated Organization Certificate, the Bank's
By-Laws, action of the Board or the Bank's shareholders or otherwise, to vest
in the Executive the functions, duties, or responsibilities prescribed in
section 3 of this Agreement, unless, during such 30-day period, the Bank
cures such failure;
(D) the expiration of a 30-day period following the date on which the
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 the Executive's rate of base salary in effect
from time to time and any change in the terms and conditions of any
compensation or benefit program in which the Executive participates which,
either individually or together with other changes, has a material adverse
effect on the aggregate value of his total compensation package), unless,
during such 30-day period, the Bank cures such failure; or
(E) a change in the Executive's principal place of employment for a
distance in excess of 50 miles from the Bank's principal office in Cohoes,
New York; or
(F) the liquidation, dissolution, bankruptcy, or insolvency of the Bank,
the Bank or any of their respective subsidiaries or affiliates; or
<PAGE>
(ii) the Executive's employment with the Bank is terminated by the Bank
during the Employment Period for any reason other than for "cause," as
provided in section 10(a).
(b) Upon the occurrence of any of the events described in section 9(a)
of this Agreement, the Bank shall pay and provide to the Executive (or, in
the event of his death, to his estate):
(i) his earned but unpaid salary (including, without limitation, all
items which constitute wages under applicable law and the payment of which is
not otherwise provided for in this section 9(b)) as of the date of the
termination of his employment with the Bank, 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 30 days after termination of employment;
(ii) the benefits, if any, to which he 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 the Executive, for the
Remaining Unexpired Employment Period, coverage equivalent to the coverage to
which he would have been entitled under such plans (as in effect on the date
of his termination of employment), if he had continued working for the Bank
during the Remaining Unexpired Employment Period at the highest annual rate
of salary achieved during the Employment Period;
(iv) within 30 days following the Executive's termination of employment
with the Bank, a lump sum payment, in an amount equal to the present value of
the salary (excluding any additional payments made to the Executive in lieu
of the use of an automobile) that the Executive would have earned if he had
continued working for the Bank during the Remaining Unexpired Employment
Period at the highest annual rate of salary achieved during the Employment
Period, where such present value is to be determined using a discount rate
equal to the applicable short-term federal rate prescribed under section
1274(d) of the Internal Revenue Code of 1986, as amended (the "Code"),
compounded using the compounding periods 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;
(v) within 30 days following the Executive's termination of employment
with the Bank, a lump sum payment in an amount equal to the present value of
the additional employer contributions to which he would have been entitled
under the Cohoes Savings Bank 401(k) Savings and Profit-Sharing Plan, the
<PAGE>
Cohoes Savings Bank Employee Stock Ownership Plan (together with the defined
contribution portion of the Benefit Restoration Plan of Cohoes Bancorp, Inc.
or any other supplemental defined contribution plan) and any and all other
qualified and non-qualified defined contribution plans maintained by, or
covering employees of, the Bank as if he were 100% vested thereunder and had
continued working for the Bank during the Remaining Unexpired Employment
Period at the highest annual rate of salary achieved during the Employment
Period and making the maximum amount of employee contributions, if any,
required or permitted under such plan or plans, such present value to be
determined on the basis of a discount rate, compounded using the compounding
period that corresponds to the frequency with which employer contributions
are made to the relevant plan, equal to the Applicable PBGC Rate;
(vi) within 30 days following the Executive's termination of employment
with the Bank, a lump sum payment in an amount equal to the payments that
would have been made (without discounting for early payment) to the Executive
under any cash bonus or long-term or short-term cash incentive compensation
plan maintained by, or covering employees of, the Bank if he had continued
working for the Bank during the Remaining Unexpired Employment Period and had
earned the maximum bonus or incentive award in each calendar year that ends
during the Remaining Unexpired Employment Period, such payments to be equal
to the product of:
(A) the maximum percentage rate at which an award was ever available to
the Executive under such incentive compensation plan; multiplied by
(B) the salary that would have been paid to the Executive during each
such calendar year at the highest annual rate of salary achieved during the
Employment Period.
(vii) at the election of the Bank made within 30 days following the
occurrence of the event described in section 9(a), upon the surrender of
options or appreciation rights issued to the Executive under any stock option
and appreciation rights plan or program maintained by, or covering employees
of, the Bank, a lump sum payment in an amount equal to the product of:
(A) the excess of (I) the fair market value of a share of stock of the
same class as the stock subject to the option or appreciation right,
determined as of the date of termination of employment, over (II) the
exercise price per share for such option or appreciation right, as specified
in or under the relevant plan or program; multiplied by
(B) the number of shares with respect to which options or appreciation
rights are being surrendered.
For purposes of this section 9(b)(vii), the Executive shall be deemed fully
vested in all options and appreciation rights under any stock option or
appreciation rights plan or program maintained by, or covering employees of,
the Bank, even if he is not vested under the terms of such plan or program;
and
<PAGE>
(viii) at the election of the Bank made within 30 days following the
occurrence of the event described in section 9(a), upon the surrender of any
shares awarded to the Executive under any restricted stock plan maintained
by, or covering employees of, the Bank, a lump sum payment in an amount equal
to the product of:
(A) the fair market value of a share of stock of the same class of stock
granted under such plan, determined as of the date of the Executive's
termination of employment; multiplied by
(B) the number of shares which are being surrendered.
For purposes of this section 9(b)(viii), the Executive shall be deemed fully
vested in all shares awarded under any restricted stock plan maintained by,
or covering employees of, the Bank, even if he is not vested under the terms
of such plan.
The Bank and the Executive hereby stipulate that the damages which may be
incurred by the 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 the 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), (iv), (v) and (vi) on the receipt of the
Executive's resignation from any and all positions which he holds as an
officer, director or committee member with respect to the Bank or any of its
subsidiaries or affiliates.
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 a discharge because the Board determines that the
Executive: (i) has intentionally failed to perform his assigned duties under
this Agreement (including, for these purposes, the Executive's inability to
perform such duties as a result of drug or alcohol dependency); (ii) has
intentionally engaged in dishonest or illegal conduct in connection with his
performance of services for the Bank or has been convicted of a felony; (iii)
has willfully violated, in any material respect, any law, rule, regulation,
written agreement or final cease-and-desist order with respect to his
performance of services for the Bank, as determined by the Board; or (iv) has
intentionally breached the material terms of this Agreement;
(b) the Executive's voluntary resignation from employment with the Bank
for reasons other than those specified in section 9(a)(i); or
<PAGE>
(c) the death of the Executive while employed by the Bank, or the
termination of the Executive's employment because of "total and permanent
disability" within the meaning of the Bank's long-term disability plan for
employees; then the Bank shall have no further obligations under this
Agreement, other than the payment to the Executive of his earned but unpaid
salary as of the date of the termination of his employment and the provision
of such other benefits, if any, to which he is entitled as a former employee
under the Bank's employee benefit plans and programs and compensation plans
and programs.
For purposes of this section 10, no act or failure to act, on the part
of the Executive, shall be considered "willful" unless it is done, or omitted
to be done, by the Executive in bad faith or without reasonable belief that
the Executive's action or omission was in the best interests of the Bank. 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 the
Executive in good faith and in the best interests of the Bank. The cessation
of employment of the 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 the Executive a copy of a resolution duly adopted by the affirmative vote
of three-fourths of the members of the Board at a meeting of the Board called
and held for such purpose (after reasonable notice is provided to the
Executive and the Executive is given an opportunity, together with counsel,
to be heard before the Board), finding that, in the good faith opinion of the
Board, the Executive is guilty of the conduct described in section 10(a)
above, and specifying the particulars thereof in detail.
SECTION 11. COVENANT NOT TO COMPETE.
The Executive hereby covenants and agrees that, in the event of his
termination of employment with the Bank prior to the expiration of the
Employment Period, for a period of one year following the date of his
termination of employment with the Bank (or, if less, for the Remaining
Unexpired Employment Period), he shall not, without the written consent of
the Bank, become an officer, employee, consultant, director or trustee of any
savings bank, 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, that entails working within any county in which
the Bank maintains an office; provided, however, that this section 11 shall
not apply if the Executive's employment is terminated for the reasons set
forth in section 9(a).
SECTION 12. CONFIDENTIALITY.
Unless he 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 his 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 his own) until the same ceases to be material (or becomes so ascertainable
or available); provided, however, that nothing in this section 12 shall
prevent the Executive, with or without the Bank's consent, from participating
in or disclosing documents or information in connection with any judicial or
administrative investigation, inquiry or proceeding to the extent that such
participation or disclosure is required under applicable law.
<PAGE>
SECTION 13. SOLICITATION.
The Executive hereby covenants and agrees that, for a period of one year
following his termination of employment with the Bank, he 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 of its
subsidiaries or affiliates to terminate his employment and accept employment
or become affiliated with, or provide services for compensation in any
capacity whatsoever to, any savings bank, savings and loan association, bank,
bank holding company, savings and loan holding company, or other institution
engaged in the business of accepting deposits, making loans or doing business
within the counties specified in section 11;
(b) provide any information, advice or recommendation with respect to
any such officer or employee of any savings bank, savings and loan
association, bank, bank holding company, savings and loan holding company, or
other institution engaged in the business of accepting deposits, making loans
or doing business within the counties specified in section 11, 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 of its subsidiaries or affiliates to terminate his employment and accept
employment or become affiliated with, or provide services for compensation in
any capacity whatsoever to, any savings bank, savings and loan association,
bank, bank holding company, savings and loan holding company, or other
institution engaged in the business of accepting deposits, making loans or
doing business within the counties specified in section 11;
(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 14. NO EFFECT ON EMPLOYEE BENEFIT PLANS OR PROGRAMS.
The termination of the Executive's employment during the term of this
Agreement or thereafter, whether by the Bank or by the 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 plans or programs,
or compensation plans or programs, as may be maintained by, or cover
employees of, the Bank from time to time; provided, however, that nothing in
this Agreement shall be deemed to duplicate any compensation or benefits
provided under any agreement, plan or program covering the Executive to which
the Bank is a party and any duplicative amount payable under any such
agreement, plan or program shall be applied as an offset to reduce the
amounts otherwise payable hereunder.
<PAGE>
SECTION 15. SUCCESSORS AND ASSIGNS.
This Agreement will inure to the benefit of and be binding upon the
Executive, his legal representatives and testate or intestate distributees,
and the Bank and its successors and assigns, including 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 60 days in advance of the scheduled effective
date of any such succession shall be deemed a material breach of this
Agreement.
SECTION 16. 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 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 the Executive:
Albert J. Picchi
At the address last appearing
on the personnel records of
the Executive
If to the Bank:
75 Remsen Street
Cohoes, New York 12047
Attention: President
with a copy to:
Silver, Freedman & Taff, L.L.P.
1100 New York Avenue
Washington, D.C. 20005-3934
Attention: Robert L. Freedman, P.C.
SECTION 17. INDEMNIFICATION FOR ATTORNEYS' FEES.
(a) The Bank shall indemnify, hold harmless and defend the Executive
against reasonable costs, including legal fees and expenses, incurred by him
in connection with or arising out of any action, suit or proceeding in which
he may be involved, as a result of his efforts, in good faith, to defend or
<PAGE>
enforce the terms of this Agreement. For purposes of this Agreement, any
settlement agreement which provides for payment of any amounts in settlement
of the Bank's obligations hereunder shall be conclusive evidence of the
Executive's entitlement to indemnification hereunder, and any such
indemnification payments shall be in addition to amounts payable pursuant to
such settlement agreement, unless such settlement agreement expressly
provides otherwise.
(b) The Bank's obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim,
right or action which the Bank may have against the Executive or others. In
no event shall the Executive be obligated to seek other employment or take
any other action by way of mitigation of the amounts payable to the Executive
under any of the provisions of this Agreement, and such amounts shall not be
reduced whether or not the Executive obtains other employment. Unless it is
determined that a claim made by the Executive was either frivolous or made in
bad faith, the Bank agrees to pay as incurred, to the full extent permitted
by law, all legal fees and expenses which the Executive may reasonably incur
as a result of or in connection with his consultation with legal counsel or
arising out of any action, suit, proceeding or contest (regardless of the
outcome thereof) by the Bank, the Executive or others regarding the validity
or enforceability of, or liability under, any provision of this Agreement or
any guarantee of performance thereof (including as a result of any contest by
the Executive about the amount of any payment pursuant to this Agreement),
plus in each case interest on any delayed payment at the applicable Federal
rate provided for in section 7872(f)(2)(A) of the Code.
SECTION 18. 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 19. 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 20. COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, and all of which shall constitute one and
the same Agreement.
<PAGE>
SECTION 21. 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 State of New
York applicable to contracts entered into and to be performed entirely within
the State of New York.
SECTION 22. HEADINGS AND CONSTRUCTION.
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 23. 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 representations 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 24. NON-DUPLICATION.
In the event that the Executive shall perform services for the Company
or any other direct or indirect subsidiary or affiliate of the Bank, it is
intended that any compensation or benefits provided to the Executive by such
other employer shall not duplicate the compensation or benefits provided
under this Agreement. The compensation and benefits payable under this
Agreement shall be reduced to the extent necessary to effectuate this
intention.
SECTION 25. REQUIRED REGULATORY PROVISIONS.
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, 12 U.S.C. Section 1828(k), and
any regulations promulgated thereunder.
<PAGE>
IN WITNESS WHEREOF, the Bank has caused this Agreement to be executed
and the Executive has hereunto set his hand, all as of the day and year first
above written.
/s/ Albert J. Picchi
EXECUTIVE Albert J. Picchi
ATTEST: COHOES SAVINGS BANK
By /s/ Jacqueline E. Brennan By /s/ Harry L. Robinson
Harry L. Robinson
President & CEO
- -------------------
[Seal]
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF Albany )
On this 29th day of January, 1999, before me personally came Albert J.
Picchi, 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 he
resides at the address set forth in said instrument, and that he signed his
name to the foregoing instrument.
/s/ Jacqueline E. Brennan
Notary Public
My commission expires:
1/31/2001
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF Albany )
On this 29th day of January, 1999, before me personally came Harry L.
Robinson, to me known, who, being by me duly sworn, did depose and say that
he is the President & CEO of Cohoes Savings Bank, the New York State
chartered stock savings bank described in and which executed the foregoing
instrument; that he knows the seal of said corporation; that the seal affixed
to said instrument is such seal; that it was so affixed by order of the Board
of Directors of said corporation; and that he or she signed his name thereto
by like order.
/s/ Jacqueline E. Brennan
Notary Public
My commission expires:
1/31/2001
<PAGE>
EXHIBIT 10.4
EMPLOYMENT AGREEMENT BETWEEN COHOES BANCORP, INC. AND HARRY L. ROBINSON
<PAGE>
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
January 6, 1999 by and between Cohoes Bancorp, Inc., a business corporation
organized and existing under the laws of the State of Delaware (the
"Company"), and Harry L. Robinson (the "Executive").
WITNESSETH:
WHEREAS, the Executive currently serves as the President and Chief
Executive Officer of the Company and as the President and Chief Executive
Officer of Cohoes Savings Bank (the "Bank"), and effective as of the date of
this Agreement, the Bank has converted from mutual to capital stock form and
has become the wholly owned subsidiary of the Company; and
WHEREAS, the Company desires to assure for itself the continued
availability of the Executive's services as provided in this Agreement, and
the Board of Directors of the Company (the "Board") recognizes the need for
the Executive to be able to perform such services with a minimum of personal
distraction in the event of a pending or threatened Change in Control (as
hereinafter defined); and
WHEREAS, the Executive is willing to continue to serve the Company on
the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and conditions hereinafter set forth, the Company and the Executive
hereby agree as follows:
SECTION 1. EMPLOYMENT.
The Company 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 date of this Agreement and ending on the third
anniversary date of this Agreement (each, an "Anniversary Date"), plus such
extensions, if any, as are provided pursuant to section 2(b).
(b) Except as provided in section 2(c), beginning on the date of this
Agreement, the Employment Period shall automatically be extended for one
additional day each day, unless either
<PAGE>
the Company or the Executive elects not to extend the Agreement further by
giving written notice thereof to the other party, in which case the
Employment Period shall end on the third anniversary of the date on which
such written notice is given. 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 last day of the Employment Period
taking into account any extensions under this section 2(b). Upon termination
of the Executive's employment with the Company for any reason whatsoever, any
daily extensions provided pursuant to this section 2(b), if not theretofore
discontinued, shall automatically cease.
(c) Nothing in this Agreement shall be deemed to prohibit the Company at
any time from terminating the Executive's employment during the Employment
Period with or without notice for any reason; provided, however, that the
relative rights and obligations of the Company and the Executive in the event
of any such termination shall be determined under this Agreement.
SECTION 3. DUTIES.
The Executive shall serve as the President and Chief Executive Officer
of the Company, having such power, authority and responsibility and
performing such duties as are prescribed by or under the By-Laws of the
Company and as are customarily associated with such position. The Executive
shall devote his full business time and attention as he has customarily done
to the business and affairs of the Company and shall use his best efforts to
advance the interests of the Company.
SECTION 4. CASH COMPENSATION.
In consideration for the services to be rendered by the Executive
hereunder, the Company shall pay to him a salary equal to the base salary
from the Company and the Bank in effect on the date of this Agreement, less
the amount of base salary actually paid to the Executive by the Bank during
the Employment Period. The Executive's salary shall be payable in
approximately equal installments in accordance with the Company's customary
payroll practices for senior officers. The 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 therein. In addition to salary, the
Executive may receive other cash compensation from the Company for services
hereunder 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 Company 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 disability insurance plans, and any other employee benefit and
compensation plans (including, but not limited 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
<PAGE>
of, the Company, in accordance with the terms and conditions of such employee
benefit plans and programs and compensation plans and programs and consistent
with the Company's customary practices.
SECTION 6. INDEMNIFICATION AND INSURANCE.
(a) During the Employment Period and for a period of six years
thereafter, the Company 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 Company
or service in other capacities at the request of the Company. The coverage
provided to the 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 Company.
(b) To the maximum extent permitted under applicable law, during the
Employment Period and for a period of six years thereafter, the Company shall
indemnify the Executive against and hold him 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 Company or any subsidiary or affiliate thereof.
SECTION 7. OUTSIDE ACTIVITIES.
The Executive may serve as a member of the boards of directors of such
business, community and charitable organizations as he 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 his duties under this Agreement. The
Executive may also engage in personal business and investment activities
which do not materially interfere with the performance of his duties
hereunder; provided, however, that such activities are not prohibited under
any code of conduct or investment or securities trading policy established by
the Company and generally applicable to all similarly situated Executives.
The Executive may also serve as an officer or director of the Bank on such
terms and conditions as the Company and the Bank may mutually agree upon, and
such service shall not be deemed to materially interfere with the Executive's
performance of his duties hereunder or otherwise result in a material breach
of this Agreement. If the Executive is discharged or suspended, or is subject
to any regulatory prohibition or restriction with respect to participation in
the affairs of the Bank, he shall continue to perform services for the
Company in accordance with this Agreement but shall not directly or
indirectly provide services to or participate in the affairs of the Bank in a
manner inconsistent with the terms of such discharge or suspension or any
applicable regulatory order.
SECTION 8. WORKING FACILITIES AND EXPENSES.
The Executive's principal place of employment shall be at the Company's
executive offices located in Cohoes, New York, or at such other location
<PAGE>
within 50 miles of the address at which the Company shall maintain its
principal executive offices, or at such other location as the Company and the
Executive may mutually agree upon. The Company shall provide the Executive at
his principal place of employment with a private office, secretarial services
and other support services and facilities suitable to his position with the
Company and necessary or appropriate in connection with the performance of
his assigned duties under this Agreement. The Company shall reimburse the
Executive for his ordinary and necessary business expenses, including,
without limitation, the Executive's travel and entertainment expenses
incurred in connection with the performance of his duties under this
Agreement, in each case upon presentation to the Company of an itemized
account of such expenses in such form as the Company may reasonably require.
SECTION 9. TERMINATION OF EMPLOYMENT WITH BENEFITS.
(a) The Executive shall be entitled to the benefits described in section
9(b) in the event that:
(i) his employment with the Company terminates during the Employment
Period as a result of the Executive's voluntary resignation within 90 days
following:
(A) the failure of the Board to appoint or re-appoint or elect or
re-elect the Executive to the position with the Company stated in section 3
of this Agreement (or a more senior office);
(B) if the Executive is a member of the Board, the failure of the
shareholders of the Company to elect or re-elect the 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 30-day period following the date on which the
Executive gives written notice to the Company of its material failure,
whether by amendment of the Company's Certificate of Incorporation, the
Company's By-Laws, action of the Board or the Company's shareholders or
otherwise, to vest in the Executive the functions, duties, or
responsibilities prescribed in section 3 of this Agreement, unless, during
such 30-day period, the Company cures such failure;
(D) the expiration of a 30-day period following the date on which the
Executive gives written notice to the Company of its material breach of any
term, condition or covenant contained in this Agreement (including, without
limitation, any reduction of the Executive's rate of base salary in effect
from time to time and any change in the terms and conditions of any
compensation or benefit program in which the Executive participates which,
either individually or together with other changes, has a material adverse
effect on the aggregate value of his total compensation package), unless,
during such 30-day period, the Company cures such failure; or
<PAGE>
(E) a change in the Executive's principal place of employment for a
distance in excess of 50 miles from the Company's principal office in Cohoes,
New York; or
(F) the liquidation, dissolution, bankruptcy, or insolvency of the
Company, the Bank or any of their respective subsidiaries or affiliates; or
(ii) the Executive's employment with the Company is terminated by the
Company during the Employment Period for any reason other than for "cause,"
as provided in section 10(a).
(b) Upon the occurrence of any of the events described in section 9(a)
of this Agreement, the Company shall pay and provide to the Executive (or, in
the event of his death, to his estate):
(i) his earned but unpaid salary (including, without limitation, all
items which constitute wages under applicable law and the payment of which is
not otherwise provided for in this section 9(b)) as of the date of the
termination of his employment with the Company, 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 30 days after termination of employment;
(ii) the benefits, if any, to which he is entitled as a former employee
under the employee benefit plans and programs and compensation plans and
programs maintained for the benefit of the Company'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 the Executive, for the
Remaining Unexpired Employment Period, coverage equivalent to the coverage to
which he would have been entitled under such plans (as in effect on the date
of his termination of employment, or, if his termination of employment occurs
after a Change in Control, on the date of such Change in Control, whichever
benefits are greater), if he had continued working for the Company during the
Remaining Unexpired Employment Period at the highest annual rate of salary
achieved during the Employment Period;
(iv) within 30 days following the Executive's termination of employment
with the Company, a lump sum payment, in an amount equal to the present value
of the salary (excluding any additional payments made to the Executive in
lieu of the use of an automobile) that the Executive would have earned if he
had continued working for the Company during the Remaining Unexpired
Employment Period at the highest annual rate of salary achieved during the
Employment Period, where such present value is to be determined using a
discount rate equal to the applicable short-term federal rate prescribed
under section 1274(d) of the Internal Revenue Code of 1986, as amended (the
<PAGE>
"Code"), compounded using the compounding periods corresponding to the
Company'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;
(v) within 30 days following the Executive's termination of employment
with the Company, a lump sum payment in an amount equal to the present value
of the additional employer contributions to which he would have been entitled
under the Cohoes Savings Bank 401(k) Savings and Profit-Sharing Plan, the
Cohoes Bancorp, Inc. Employee Stock Ownership Plan (together with the defined
contribution portion of the Benefit Restoration Plan of Cohoes Bancorp, Inc.,
or any other supplemental defined contribution plan) and any and all other
qualified and non-qualified defined contribution plans maintained by, or
covering employees of, the Company as if he were 100% vested thereunder and
had continued working for the Company during the Remaining Unexpired
Employment Period at the highest annual rate of salary achieved during the
Employment Period and making the maximum amount of employee contributions, if
any, required or permitted under such plan or plans, such present value to be
determined on the basis of a discount rate, compounded using the compounding
period that corresponds to the frequency with which employer contributions
are made to the relevant plan, equal to the Applicable PBGC Rate;
(vi) within 30 days following the Executive's termination of employment
with the Company, a lump sum payment in an amount equal to the payments that
would have been made (without discounting for early payment) to the Executive
under any cash bonus or long-term or short-term cash incentive compensation
plan maintained by, or covering employees of, the Company if he had continued
working for the Company during the Remaining Unexpired Employment Period and
had earned the maximum bonus or incentive award in each calendar year that
ends during the Remaining Unexpired Employment Period, such payments to be
equal to the product of:
(A) the maximum percentage rate at which an award was ever available to
the Executive under such incentive compensation plan; multiplied by
(B) the salary that would have been paid to the Executive during each
such calendar year at the highest annual rate of salary achieved during the
Employment Period.
(vii) at the election of the Company made within 30 days following the
occurrence of the event described in section 9(a), upon the surrender of
options or appreciation rights issued to the Executive under any stock option
and appreciation rights plan or program maintained by, or covering employees
of, the Company, a lump sum payment in an amount equal to the product of:
(A) the excess of (I) the fair market value of a share of stock of the
same class as the stock subject to the option or appreciation right,
determined as of the date of termination of employment, over (II) the
exercise price per share for such option or appreciation right, as specified
in or under the relevant plan or program; multiplied by
<PAGE>
(B) the number of shares with respect to which options or appreciation
rights are being surrendered.
For purposes of this section 9(b)(vii), the Executive shall be deemed fully
vested in all options and appreciation rights under any stock option or
appreciation rights plan or program maintained by, or covering employees of,
the Company, even if he is not vested under the terms of such plan or
program; and
(viii) at the election of the Company made within 30 days following the
occurrence of the event described in section 9(a), upon the surrender of any
shares awarded to the Executive under any restricted stock plan maintained
by, or covering employees of, the Company, a lump sum payment in an amount
equal to the product of:
(A) the fair market value of a share of stock of the same class of stock
granted under such plan, determined as of the date of the Executive's
termination of employment; multiplied by
(B) the number of shares which are being surrendered.
For purposes of this section 9(b)(viii), the Executive shall be deemed fully
vested in all shares awarded under any restricted stock plan maintained by,
or covering employees of, the Company, even if he is not vested under the
terms of such plan.
The Company and the Executive hereby stipulate that the damages which may be
incurred by the 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 the Executive's
efforts, if any, to mitigate damages. The Company and the Executive further
agree that the Company may condition the payments and benefits (if any) due
under sections 9(b)(iii), (iv), (v) and (vi) on the receipt of the
Executive's resignation from any and all positions which he holds as an
officer, director or committee member with respect to the Company or any of
its subsidiaries or affiliates.
SECTION 10. TERMINATION WITHOUT ADDITIONAL COMPANY LIABILITY.
In the event that the Executive's employment with the Company 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 a discharge because the Board determines that the
Executive: (i) has intentionally failed to perform his assigned duties under
this Agreement (including, for these purposes, the Executive's inability to
perform such duties as a result of drug or alcohol dependency); (ii) has
intentionally engaged in dishonest or illegal conduct in connection with his
performance of services for the Company or has been convicted of a felony;
<PAGE>
(iii) has willfully violated, in any material respect, any law, rule,
regulation, written agreement or final cease-and-desist order with respect to
his performance of services for the Company, as determined by the Board; or
(iv) has intentionally breached the material terms of this Agreement;
(b) the Executive's voluntary resignation from employment with the
Company for reasons other than those specified in section 9(a)(i); or
(c) the death of the Executive while employed by the Company, or the
termination of the Executive's employment because of "total and permanent
disability" within the meaning of the Company's or the Bank's long-term
disability plan for employees; then the Company shall have no further
obligations under this Agreement, other than the payment to the Executive of
his earned but unpaid salary as of the date of the termination of his
employment and the provision of such other benefits, if any, to which he is
entitled as a former employee under the Company's employee benefit plans and
programs and compensation plans and programs.
For purposes of this section 10, no act or failure to act, on the part
of the Executive, shall be considered "willful" unless it is done, or omitted
to be done, by the Executive in bad faith or without reasonable belief that
the Executive's action or omission was in the best interests of the Company.
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 Company shall be conclusively presumed to be done, or omitted
to be done, by the Executive in good faith and in the best interests of the
Company. Prior to the date on which a Change in Control occurs, the cessation
of employment of the 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 the Executive a copy of a resolution duly adopted by the affirmative vote
of three-fourths of the members of the Board at a meeting of the Board called
and held for such purpose (after reasonable notice is provided to the
Executive and the Executive is given an opportunity, together with counsel,
to be heard before the Board), finding that, in the good faith opinion of the
Board, the Executive is guilty of the conduct described in section 10(a)
above, and specifying the particulars thereof in detail. On and after the
date that a Change in Control occurs, a determination under this section 10
shall require the affirmative vote of at least three-fourths of the members
of the Board acting in good faith, and such vote shall not be made prior to
the expiration of a 60-day period following the date on which the Board
shall, by written notice to the Executive, furnish to him a statement of its
grounds for proposing to make such determination, during which period the
Executive shall be afforded a reasonable opportunity to make oral and written
presentations to the members of the Board, and to be represented by his legal
counsel at such presentations to refute the grounds for the proposed
determination;
SECTION 11. TERMINATION UPON OR FOLLOWING A CHANGE IN CONTROL.
(a) A Change in Control of the Company ("Change in Control") shall be
deemed to have occurred upon the happening of any of the following events:
<PAGE>
(i) approval by the shareholders of the Company of a transaction that
would result and does result in the reorganization, merger or consolidation
of the Company, 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 Company; 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
Company;
(ii) the acquisition of all or substantially all of the assets of the
Company 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
Company entitled to vote generally in the election of directors by any person
or by any persons acting in concert, or approval by the shareholders of the
Company of any transaction which would result in such an acquisition;
(iii) a complete liquidation or dissolution of the Company, or approval
by the shareholders of the Company of a plan for such liquidation or
dissolution;
(iv) the occurrence of any event if, immediately following such event,
at least 50% of the members of the Board do not belong to any of the
following groups:
(A) individuals who were members of the Board on the date of this
Agreement; or
(B) individuals who first became members of the Board after the date of
this Agreement either:
(1) upon election to serve as a member of the Board 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
(2) upon election by the shareholders of the Board to serve as a member
of the Board, but only if nominated for election by affirmative vote of
<PAGE>
three-quarters of the members of the board of directors 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 Company; or
(v) any event which would be described in section 11(a)(i), (ii), (iii)
or (iv) if the term "Bank" were substituted for the term "Company" therein
and the term "Bank Board" were substituted for the term "Board" therein.
In no event, however, shall a Change in Control be deemed to have occurred as
a result of any acquisition of securities or assets of the Company, the Bank,
or a subsidiary of either of them, by the Company, the Bank, or any
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 that the Executive's employment with the Company
terminates within eighteen months following a Change in Control for any
reason other than for "cause," as described in section 10, the Company shall
pay to the Executive, in addition to the amounts payable pursuant to section
9, a severance benefit in a lump sum payment, within 25 days after the later
of the effective time of such Change in Control or his termination of
employment, equal to the greater of (i) the sum of the amounts payable as
salary pursuant to section 4 hereof during the Remaining Unexpired Employment
Period and as additional cash compensation pursuant to the terms of section
9(b)(vi) hereof, or (ii) three times the annual average of the amount paid or
payable to the Executive under section 4 of this Agreement or the
corresponding section of any prior employment agreement with the Company or
its predecessor during the five preceding taxable years of the Executive (or
during the entire period of the Executive's employment with the Company or
its predecessor if such period is less than five years). The Company shall
also continue to provide to the Executive and to his eligible dependents the
benefits described in section 9(b)(iii) hereof for a period of at least 36
months following the later of the effective time of such Change in Control or
his termination of employment. In addition, the Company will guarantee the
payment of the severance benefit provided pursuant to section 11(b) of the
Executive's employment agreement with the Bank.
SECTION 12. TAX INDEMNIFICATION.
(a) This section 12 shall apply if the Executive's employment is
terminated upon or following (i) a Change in Control (as defined in section
11 of this Agreement); or (ii) a change "in the ownership or effective
control" of the Company or the Bank or "in the ownership of a substantial
portion of the assets" of the Company or the Bank within the meaning of
section 280G of the Code. If this section 12 applies, then, if for any
taxable year, the Executive shall be liable for the payment of an excise tax
under section 4999 of the Code with respect to any payment in the nature of
compensation made by the Company or any direct or indirect subsidiary or
affiliate of the Company
<PAGE>
to (or for the benefit of) the Executive, the Company shall pay to the
Executive an amount equal to X determined under the following formula:
E x P
X = ---------------------------------
1 - [FI x (1-SLI)) + SLI + E + M]
where
E = the rate at which the excise tax is assessed under section 4999 of
the Code;
P = the amount with respect to which such excise tax is assessed,
determined without regard to this section 12;
FI = the highest marginal rate of income tax applicable to the Executive
under the Code for the taxable year in question;
SLI = the sum of the highest marginal rates of income tax applicable to
the Executive under all applicable state and local laws for the taxable year
in question; and
M = the highest marginal rate of Medicare tax applicable to the
Executive under the Code for the taxable year in question.
The Company will guarantee the payment of the tax indemnification provided
pursuant to section 12(a) of the Executive's employment agreement with the
Bank. With respect to any payment in the nature of compensation that is made
to (or for the benefit of) the Executive under the terms of this Agreement,
the Executive's employment agreement with the Bank, or otherwise, and on
which an excise tax under section 4999 of the Code will be assessed, the
payment determined under this section 12(a) shall be made to the Executive on
the earlier of (i) the date the Company, the Bank or any direct or indirect
subsidiary or affiliate of the Company or the Bank is required to withhold
such tax, or (ii) the date the tax is required to be paid by the Executive.
(b) Notwithstanding anything in this section 12 to the contrary, in the
event that the Executive's liability for the excise tax under section 4999 of
the Code for a taxable year is subsequently determined to be different than
the amount determined by the formula (X + P) x E, where X, P and E have the
meanings provided in section 12(a), the Executive or the Company, as the case
may be, shall pay to the other party at the time that the amount of such
excise tax is finally determined, an appropriate amount, plus interest, such
that the payment made under section 12(a), when increased by the amount of
the payment made to the Executive under this section 12(b) by the Company, or
when reduced by the amount of the payment made to the Company under this
section 12(b) by the Executive, equals the amount that should have properly
been paid to the Executive under section 12(a). The interest paid under this
section 12(b) shall be determined at the rate provided under section
1274(b)(2)(B) of the Code. To confirm that the proper amount, if any, was
<PAGE>
paid to the Executive under this section 12, the Executive shall furnish to
the Company a copy of each tax return which reflects a liability for an
excise tax payment made by the Company, at least 20 days before the date on
which such return is required to be filed with the Internal Revenue Service.
SECTION 13. COVENANT NOT TO COMPETE.
The Executive hereby covenants and agrees that, in the event of his
termination of employment with the Company prior to the expiration of the
Employment Period, for a period of one year following the date of his
termination of employment with the Company (or, if less, for the Remaining
Unexpired Employment Period), he shall not, without the written consent of
the Company, become an officer, employee, consultant, director or trustee of
any savings bank, 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, that entails working within any county in
which the Company maintains an office; provided, however, that this section
13 shall not apply if the Executive's employment is terminated for the
reasons set forth in section 9(a).
SECTION 14. CONFIDENTIALITY.
Unless he obtains the prior written consent of the Company, the
Executive shall keep confidential and shall refrain from using for the
benefit of himself, or any person or entity other than the Company or any
entity which is a subsidiary of the Company or of which the Company is a
subsidiary, any material document or information obtained from the Company,
or from its parent or subsidiaries, in the course of his 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 his own) until the same ceases to be material (or
becomes so ascertainable or available); provided, however, that nothing in
this section 14 shall prevent the Executive, with or without the Company's
consent, from participating in or disclosing documents or information in
connection with any judicial or administrative investigation, inquiry or
proceeding to the extent that such participation or disclosure is required
under applicable law.
SECTION 15. SOLICITATION.
The Executive hereby covenants and agrees that, for a period of one year
following his termination of employment with the Company, he shall not,
without the written consent of the Company, 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 Company or any of its
subsidiaries or affiliates to terminate his employment and accept employment
or become affiliated with, or provide services for compensation in any
capacity whatsoever to, any savings bank, savings and loan association, bank,
bank holding company, savings and loan holding company, or other institution
<PAGE>
engaged in the business of accepting deposits, making loans or doing business
within the counties specified in section 13;
(b) provide any information, advice or recommendation with respect to
any such officer or employee of any savings bank, savings and loan
association, bank, bank holding company, savings and loan holding company, or
other institution engaged in the business of accepting deposits, making loans
or doing business within the counties specified in section 13, 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 Company
or any of its subsidiaries or affiliates to terminate his employment and
accept employment or become affiliated with, or provide services for
compensation in any capacity whatsoever to, any savings bank, savings and
loan association, bank, bank holding company, savings and loan holding
company, or other institution engaged in the business of accepting deposits,
making loans or doing business within the counties specified in section 13;
(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
Company to terminate an existing business or commercial relationship with the
Company.
SECTION 16. NO EFFECT ON EMPLOYEE BENEFIT PLANS OR PROGRAMS.
The termination of the Executive's employment during the term of this
Agreement or thereafter, whether by the Company or by the Executive, shall
have no effect on the rights and obligations of the parties hereto under the
Company'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 plans or programs,
or compensation plans or programs, as may be maintained by, or cover
employees of, the Company from time to time; provided, however, that nothing
in this Agreement shall be deemed to duplicate any compensation or benefits
provided under any agreement, plan or program covering the Executive to which
the Company is a party and any duplicative amount payable under any such
agreement, plan or program shall be applied as an offset to reduce the
amounts otherwise payable hereunder.
SECTION 17. SUCCESSORS AND ASSIGNS.
This Agreement will inure to the benefit of and be binding upon the
Executive, his legal representatives and testate or intestate distributees,
and the Company and its successors and assigns, including 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 Company may be sold or otherwise transferred. Failure of the Company
to obtain from any successor its express written assumption of the Company's
<PAGE>
obligations hereunder at least 60 days in advance of the scheduled effective
date of any such succession shall be deemed a material breach of this
Agreement.
SECTION 18. 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 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 the Executive:
Harry L. Robinson
At the address last appearing
on the personnel records of
the Executive
If to the Company:
Cohoes Bancorp, Inc.
75 Remsen Street
Cohoes, New York 12047
Attention: President
with a copy to:
Silver, Freedman & Taff, L.L.P.
1100 New York Avenue
Washington, D.C. 20005-3934
Attention: Robert L. Freedman, P.C.
SECTION 19. INDEMNIFICATION FOR ATTORNEYS' FEES.
(a) The Company shall indemnify, hold harmless and defend the Executive
against reasonable costs, including legal fees and expenses, incurred by him
in connection with or arising out of any action, suit or proceeding in which
he may be involved, as a result of his efforts, in good faith, to defend or
enforce the terms of this Agreement. For purposes of this Agreement, any
settlement agreement which provides for payment of any amounts in settlement
of the Company's obligations hereunder shall be conclusive evidence of the
Executive's entitlement to indemnification hereunder, and any such
indemnification payments shall be in addition to amounts payable pursuant to
such settlement agreement, unless such settlement agreement expressly
provides otherwise.
<PAGE>
(b) The Company's obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim,
right or action which the Company may have against the Executive or others.
In no event shall the Executive be obligated to seek other employment or take
any other action by way of mitigation of the amounts payable to the Executive
under any of the provisions of this Agreement, and such amounts shall not be
reduced whether or not the Executive obtains other employment. Unless it is
determined that a claim made by the Executive was either frivolous or made in
bad faith, the Company agrees to pay as incurred, to the full extent
permitted by law, all legal fees and expenses which the Executive may
reasonably incur as a result of or in connection with his consultation with
legal counsel or arising out of any action, suit, proceeding or contest
(regardless of the outcome thereof) by the Company, the Executive or others
regarding the validity or enforceability of, or liability under, any
provision of this Agreement or any guarantee of performance thereof
(including as a result of any contest by the Executive about the amount of
any payment pursuant to this Agreement), plus in each case interest on any
delayed payment at the applicable Federal rate provided for in section
7872(f)(2)(A) of the Code. This section 19(b) shall apply whether such
consultation, action, suit, proceeding or contest arises before, on, after or
as a result of a Change in Control.
SECTION 20. 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 21. 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 22. COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, and all of which shall constitute one and
the same Agreement.
SECTION 23. 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 State of New
York applicable to contracts entered into and to be performed entirely within
the State of New York.
<PAGE>
SECTION 24. HEADINGS AND CONSTRUCTION.
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 25. 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 representations 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 26. NON-DUPLICATION.
In the event that the Executive shall perform services for the Bank or
any other direct or indirect subsidiary or affiliate of the Company, it is
intended that any compensation or benefits provided to the Executive by such
other employer shall not duplicate the compensation or benefits provided
under this Agreement. The compensation and benefits payable under this
Agreement shall be reduced to the extent necessary to effectuate this
intention.
SECTION 27. REQUIRED REGULATORY PROVISIONS.
Notwithstanding anything herein contained to the contrary, any payments
to the Executive by the Company, 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, 12 U.S.C. Section 1828(k), and
any regulations promulgated thereunder.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
and the Executive has hereunto set his hand, all as of the day and year first
above written.
/s/ Harry L. Robinson
EXECUTIVE
ATTEST: COHOES BANCORP, INC.
By /s/ Jacqueline E. Brennan By /s/ Richard A. Ahl
____________________________ Name: Richard A. Ahl
____________________________ Its: Executive VP, CFO and
Secretary
[Seal]
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF Albany )
On this 6th day of January, 1999, before me personally came Harry L.
Robinson, 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 he
resides at the address set forth in said instrument, and that he signed his
name to the foregoing instrument.
/s/ Jacqueline E. Brennan
Notary Public
My commission expires:
1/31/2001
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF Albany )
On this 6th day of January, 1999, before me personally came
Richard A. Ahl, to me known, who, being by me duly sworn, did depose and say
that he is the Exec. VP, CFO & Sec. of Cohoes Bancorp, Inc., the Delaware
corporation described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument
is such seal; that it was so affixed by order of the Board of Directors of
said corporation; and that he or she signed his name thereto by like order.
/s/ Jacqueline E. Brennan
Notary Public
My commission expires:
1/31/2001
<PAGE>
EXHIBIT 10.5
SCHEDULE OF EMPLOYMENT AGREEMENT WITH COHOES BANCORP, INC.
<PAGE>
EXHIBIT 10.5
SCHEDULE OF EMPLOYMENT AGREEMENT WITH COHOES BANCORP, INC.
Cohoes Bancorp, Inc. has an employment agreement with another employee which
is identical to the agreement included as Exhibit 10.4 except for the
following differences:
Name of Employee Title of Employee
Richard A. Ahl Executive Vice President, Chief Financial
Officer and Secretary
<PAGE>
EXHIBIT 10.6
CHANGE-IN-CONTROL SEVERANCE AGREEMENT BETWEEN COHOES SAVINGS BANK AND
JOHANNA O. ROBBINS
<PAGE>
CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS CHANGE IN CONTROL SEVERANCE AGREEMENT (the "Agreement") is made and
entered into as of this 4th day of February, 1999 (the "Commencement Date"),
by and between COHOES SAVINGS BANK (which, together with any successor
thereto which executes and delivers the assumption agreement provided for in
Section 5(a) hereof or which otherwise becomes bound by all of the terms and
provisions of this Agreement by operation of law, is hereinafter referred to
as the "Bank"), and Johanna O. Robbins (the "Executive").
WHEREAS, the Executive is currently serving as Treasurer; and
WHEREAS, the Board of Directors of the Bank (the "Board") recognizes
that, as is the case with many publicly held corporations, the possibility of
a change in control of the Bank or of its holding company, Cohoes Bancorp,
Inc. (the "Company"), may exist and that such possibility, and the
uncertainty and questions which it may raise among management, may result in
the departure or distraction of management personnel to the detriment of the
Bank, the Company and its stockholders; and
WHEREAS, the Board believes it is in the best interests of the Bank to
enter into this Agreement with the Executive in order to assure continuity of
management of the Bank and to reinforce and encourage the continued attention
and dedication of the Executive to the Executive's assigned duties without
distraction in the face of potentially disruptive circumstances arising from
the possibility of a change in control of the Company and/or the Bank,
although no such change is now contemplated; and
WHEREAS, the Board has approved and authorized the execution of this
Agreement with the Executive;
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements of the parties herein, it is AGREED as follows:
1. Certain Definitions.
(a) The term "Change in Control" means (i) any "person," as such term is
used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (other than the Company, any Consolidated
Subsidiaries (as hereinafter defined), any person (as hereinabove defined)
acting on behalf of the Company as underwriter pursuant to an offering who is
temporarily holding securities in connection with such offering, any trustee
or other fiduciary holding securities under an employee benefit plan of the
Company, or any corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company), is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 25% or more of the combined voting
power of the Company's then outstanding securities; (ii) individuals who are
members of the Board on the Commencement Date (the "Incumbent Board") cease
for any reason to constitute at least a majority thereof, provided that any
person becoming a director subsequent to the Commencement Date whose election
<PAGE>
was approved by a vote of at least three-quarters of the directors comprising
the Incumbent Board or whose nomination for election by the Company's
stockholders was approved by the nominating committee serving under an
Incumbent Board, shall be considered a member of the Incumbent Board; (iii)
the stockholders of the Company approve a merger or consolidation of the
Company with any other corporation, other than (1) a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) more than 50% of the combined voting power of the voting securities
of the Company or such surviving entity outstanding immediately after such
merger or consolidation or (2) a merger or consolidation effected to
implement a recapitalization of the Company (or similar transaction) in which
no person (as hereinabove defined) acquires more than 25% of the combined
voting power of the Company's then outstanding securities; or (iv) the
stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets (or any transaction having a
similar effect).
(b) The term "Commencement Date" means January 5, 1999.
(c) The term "Consolidated Subsidiaries" means any subsidiary or
subsidiaries of the Company that are part of the affiliated group (as defined
in Section 1504 of the Internal Revenue Code of 1986, as amended (the
"Code"), without regard to subsection (b) thereof) that includes the Bank,
including but not limited to the Company.
(d) The term "Date of Termination" means the date specified in the
Notice of Termination (which, in the case of a Termination for Cause shall
not be less than 30 days from the date such Notice of Termination is given,
and in the case of a termination for Good Reason shall not be less than 15
nor more than 60 days from the date such Notice of Termination is given);
provided, however, that if within 15 days after any Notice of Termination is
given, or, if later, prior to the Date of Termination (as determined without
regard to this proviso), the party receiving such Notice of Termination
notifies the other party that a dispute exists concerning the termination,
then the Date of Termination shall be the date on which the dispute is
finally determined, whether by mutual written agreement of the parties, by a
binding arbitration award, or by a final judgment, order or decree of a court
of competent jurisdiction (which is not appealable or with respect to which
the time for appeal therefrom has expired and no appeal has been perfected);
and provided, further, that the Date of Termination shall be extended by a
notice of dispute only if such notice is given in good faith and the party
giving such notice pursues the resolution of such dispute with reasonable
diligence. Notwithstanding the pendency of any such dispute, the Bank will
continue to pay the Executive the Executive's full salary at the rate in
effect when the notice giving rise to the dispute was given and continue the
Executive as a participant in all benefit and fringe benefit plans in which
the Executive was participating when the notice giving rise to the dispute
was given, until the dispute is finally resolved in accordance with this
Section 1(d).
(e) The term "Good Reason" means the occurrence, without the Executive's
express written consent, of a material diminution of or interference with the
Executive's duties, responsibilities or benefits, including (without
<PAGE>
limitation) any of the following circumstances unless such circumstances are
fully corrected prior to the Date of Termination specified in the Notice of
Termination given by the Executive in respect thereof:
(i) a requirement that the Executive be based at any location not within
50 miles of Cohoes, New York, or that she substantially increase her travel
on Company or Bank business;
(ii) a material demotion of the Executive;
(iii) a material reduction in the number or seniority of personnel
reporting to the Executive or a material reduction in the frequency with
which, or in the nature of the matters with respect to which such personnel
are to report to the Executive, other than as part of a Company-wide or
Bank-wide reduction in staff;
(iv) a reduction in the Executive's salary or a material adverse change
in the Executive's perquisites, benefits, contingent benefits or vacation,
other than as part of an overall program applied uniformly and with equitable
effect to all members of the senior management of the Company or the Bank;
(v) a material and extended increase in the required hours of work or
the workload of the Executive;
(vi) the failure of the Bank to obtain a satisfactory agreement from any
successor to assume the obligations and liabilities under this Agreement, as
contemplated in Section 5(a) hereof; or
(vii) any purported termination of the Executive's employment that is
not effected pursuant to a Notice of Termination satisfying the requirements
of Section 4 hereof (and, if applicable, the requirements of Section 1(g)
hereof), which purported termination shall not be effective for purposes of
this Agreement.
(f) The term "Notice of Termination" means a notice of termination of
the Executive's employment pursuant to Section 7 of this Agreement.
(g) The term "Termination for Cause" means termination of the employment
of the Employee because of the Employee's personal dishonesty, incompetence,
willful misconduct, breach of a fiduciary duty involving personal profit,
intentional failure to perform stated duties, willful violation of any law,
rule, or regulation (other than traffic violations or similar offenses) or
final cease-and-desist order, or material breach of any provision of this
Agreement. No act or failure to act by the Executive shall be considered
intentional unless the Executive acted or failed to act with an absence of
good faith and without a reasonable belief that her action or failure to act
was in the best interest of the Bank. Notwithstanding the foregoing, no
Termination for Cause shall be deemed to have occurred unless and until there
shall have been delivered to the Executive a copy of a resolution, duly
adopted by the affirmative vote of not less than three-quarters of the entire
<PAGE>
membership of the Board at a meeting of the Board duly called and held for
such purpose (after reasonable notice to the Executive and an opportunity for
the Executive, together with the Executive's counsel, to be heard before the
Board), stating that in the good faith opinion of the Board the Executive has
engaged in conduct described in the preceding sentence and specifying the
particulars thereof in detail.
2. Term.
(a) The term of this Agreement shall be a period of one year commencing
on the Commencement Date, subject to extension or earlier termination as
provided herein.
(b) Except as provided in section 2(c), beginning on the date of this
Agreement, the term of this Agreement shall automatically be extended for one
additional day each day, unless either the Bank or the Executive elects not
to extend the Agreement further by giving written notice thereof to the other
party, in which case the term of this Agreement shall end on the one
anniversary of the date on which such written notice is given. Upon
termination of the Executive's employment with the Bank for any reason
whatsoever, any daily extensions provided pursuant to this section 2(b), if
not theretofore discontinued, shall automatically cease.
(c) Nothing in this Agreement shall be deemed to prohibit the Bank at
any time from terminating the Executive's employment during the term of this
Agreement 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.
3. Severance Benefits.
(a) In the event that the Bank shall terminate the Executive's
employment other than Termination for Cause, or the Executive shall terminate
her employment for Good Reason, within 12 months following a Change in
Control, the Bank shall (i) pay the Executive her salary through the Date of
Termination at the rate in effect at the time the Notice of Termination is
given, at the time such payments are due; (ii) continue to pay, for a period
of 12 months following the Date of Termination, for the life, health and
disability coverage that is in effect with respect to the Executive and her
eligible dependents at the time the Notice of Termination is given; and (iii)
pay to the Executive in a lump sum in cash, within 25 days after the later of
the date of such Change in Control or the Date of Termination, an amount
equal to 100% of the Executive's "base amount" as determined under Section
280G of the Code, less the aggregate present value of the payments or
benefits, if any, in the nature of compensation for the benefit of the
Executive, arising under any other plans or arrangements (i.e., not this
Agreement) between the Company or any of the Consolidated Subsidiaries and
the Executive, which constitute "parachute payments" under Section 280G of
the Code.
While it is not contemplated that the Executive will receive any amounts
or benefits that will constitute "excess parachute payments" under Section
280G of the Code, in the event that any payments or benefits provided or to
be provided to the Executive pursuant to this Agreement, in combination with
payments or benefits, if any, from other plans or arrangements maintained by
the Company or any of the Consolidated Subsidiaries, constitute "excess
parachute payments" under Section 280G of the Code that are subject to the
excise tax under Section 4999 of the Code, the Bank shall pay to the
<PAGE>
Executive in cash an additional amount equal to the amount of the Gross Up
Payment (as hereinafter defined). The "Gross Up Payment" shall be the amount
needed to ensure that the amount of such payments and the value of such
benefits received by the Executive (net of such excise tax and any federal,
state and local tax on the Bank's payment to her attributable to such excise
tax) equals the amount of such payments and value of such benefits as she
would receive in the absence of such excise tax and any federal, state and
local tax on the Bank's payment to her attributable to such excise tax. The
Bank shall pay the Gross Up Payment within 30 days after the Date of
Termination. For purposes of determining the amount of the Gross Up Payment,
the value of any non-cash benefits and deferred payments or benefits shall be
determined by the Bank's independent auditors in accordance with the
principles of Section 280G(d)(3) and (4) of the Code. In the event that,
after the Gross Up Payment is made, the amount of the excise tax is
determined to be less than the amount calculated in the determination of the
actual Gross Up Payment made by the Bank, the Executive shall repay to the
Bank, at the time that such reduction in the amount of excise tax is finally
determined, the portion of the Gross Up Payment attributable to such
reduction, plus interest on the amount of such repayment at the applicable
federal rate under Section 1274 of the Code from the date of the Gross Up
Payment to the date of the repayment. The amount of the reduction of the
Gross Up Payment shall reflect any subsequent reduction in excise taxes
resulting from such repayment. In the event that, after the Gross Up Payment
is made, the amount of the excise tax is determined to exceed the amount
anticipated at the time the Gross Up Payment was made, the Bank shall pay to
the Executive, in immediately available funds, at the time that such
additional amount of excise tax is finally determined, an additional payment
("Additional Gross Up Payment") equal to such additional amount of excise tax
and any federal, state and local taxes thereon, plus all interest and
penalties, if any, owed by the Executive with respect to such additional
amount of excise and other tax. The Bank shall have the right to challenge,
on the Executive's behalf, any excise tax assessment against her as to which
the Executive is entitled to (or would be entitled if such assessment is
finally determined to be proper) a Gross Up Payment or Additional Gross Up
Payment, provided that all costs and expenses incurred in such a challenge
shall be borne by the Bank and the Bank shall indemnify the Executive and
hold her harmless, on an after-tax basis, from any excise or other tax
(including interest and penalties with respect thereto) imposed as a result
of such payment of costs and expenses by the Bank.
(b) The Executive shall not be required to mitigate the amount of any
payment or benefit provided for in this Agreement by seeking other employment
or otherwise, nor shall the amount of any payment or benefit provided for in
this Agreement be reduced by any compensation earned by the Executive as the
result of employment by another employer, by retirement benefits after the
Date of Termination or otherwise. This Agreement shall not be construed as
providing the Executive any right to be retained in the employ of the Bank or
any affiliate of the Bank.
4. Notice of Termination. In the event that the Bank desires to
terminate the employment of the Executive during the term of this Agreement,
the Bank shall deliver to the Executive a written notice of termination,
stating (i) whether su ch termination constitutes Termination for Cause, and,
if so, setting forth in reasonable detail the facts and circumstances that
are the basis for the Termination for Cause, and (ii) specifying the Date of
Termination. In the event that the Executive desires to terminate her
employment and determines in good faith that she has experienced Good Reason
to terminate her employment, she shall send a written notice to the Bank
stating the circumstances that constitute Good Reason and the Date of
Termination.
The Executive's right to terminate her employment for Good Reason shall
not be affected by the Executive's incapacity due to physical or mental
illness. The Executive's continued employment shall not constitute consent
to, or a waiver of rights with respect to, any circumstance constituting Good
Reason under this Agreement.
<PAGE>
5. No Assignments.
(a) This Agreement is personal to each of the parties hereto, and
neither party may assign or delegate any of its rights or obligations
hereunder without first obtaining the written consent of the other party;
provided, however, that the Bank shall require any successor or assign
(whether direct or indirect, by purchase, merger, consolidation, operation of
law or otherwise) to all or substantially all of the business and/or assets
of the Bank, by an assumption agreement in form and substance satisfactory to
the Executive, to expressly assume and agree to perform this Agreement in the
same manner and to the same extent that the Bank would be required to perform
it if no such succession or assignment had taken place. Failure of the Bank
to obtain such an assumption agreement prior to the effectiveness of any such
succession or assignment shall be a breach of this Agreement and shall
entitle the Executive to compensation and benefits from the Bank in the same
amount and on the same terms that she would be entitled to hereunder if she
terminated her employment for Good Reason, in addition to any payments and
benefits to which the Executive is entitled under Section 3 hereof. For
purposes of implementing the provisions of this Section 5(a), the date on
which any such succession becomes effective shall be deemed the Date of
Termination.
(b) This Agreement and all rights of the Executive hereunder shall inure
to the benefit of and be enforceable by the Executive's personal and legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. In the event of the death of the Executive, unless
otherwise provided herein, all amounts payable hereunder shall be paid to the
Executive's devisee, legatee, or other designee or, if there be no such
designee, to the Executive's estate.
6. Deferred Payments. If following a termination of the Executive, the
aggregate payments to be made by the Bank under this Agreement and all other
plans or arrangements maintained by the Company or any of the Consolidated
Subsidiaries would exceed the limitation on deductible compensation contained
in Section 162(m) of the Code in any calendar year, any such amounts in
excess of such limitation shall be mandatorily deferred with interest thereon
at 7.0% per annum to a calendar year such that the amount to be paid to the
Executive in such calendar year, including deferred amounts, does not exceed
such limitation.
7. Delivery of Notices. For the purposes of this Agreement, all notices
and other communications to any party hereto shall be in writing and shall be
deemed to have been duly given when delivered or sent by certified mail,
return receipt requested, postage prepaid, addressed as follows:
If to the Executive: Johanna O. Robbins
At the address last appearing
on the personnel records of
the Executive
If to the Bank: Cohoes Savings Bank
75 Remsen Street
Cohoes, New York 12047
Attention: Secretary
<PAGE>
or to such other address as such party may have furnished to the other in
writing in accordance herewith, except that a notice of change of address
shall be effective only upon receipt.
8. Amendments. No amendments or additions to this Agreement shall be
binding unless in writing and signed by both parties, except as herein
otherwise provided.
9. Headings. The headings used in this Agreement are included solely for
convenience and shall not affect, or be used in connection with, the
interpretation of this Agreement.
10. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
11. Governing Law. This Agreement shall be governed by the laws of the
State of New York to the extent that federal law does not govern.
12. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by binding
arbitration, conducted before a panel of three arbitrators in a location
selected by the Executive within 100 miles of such Executive's job location
with the Bank, in accordance with the rules of the American Arbitration
Association then in effect; provided, however, that the Executive shall be
entitled to seek specific performance of her rights under Section 1(d) during
the pendency of any dispute or controversy arising under or in connection
with this Agreement. Judgment may be entered on the arbitrators' award in any
court having jurisdiction.
13. Reimbursement of Expenses. In the event any dispute shall arise
between the Executive and the Bank as to the terms or interpretation of this
Agreement, including this Section 13, whether instituted by formal legal
proceedings or otherwise, including any action taken by the Executive to
enforce the terms of this Section 13, or in defending against any action
taken by the Bank, the Bank shall reimburse the Executive for all costs and
expenses incurred by the Executive, including reasonable attorney's fees,
arising from such dispute, proceedings or actions, unless a court of
competent jurisdiction renders a final and nonappealable judgment against the
Executive as to the matter in dispute. Reimbursement of the Executive's
expenses shall be paid within ten days of the Executive furnishing to the
Bank written evidence, which may be in the form, among other things, of a
canceled check or receipt, of any costs or expenses incurred by the
Executive.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE
ENFORCED BY THE PARTIES.
Attest: Cohoes Savings Bank
/s/ Jacqueline E. Brennan /s/ Harry L. Robinson
_________________________ By: Harry L. Robinson
_________________________ Its: President & CEO
EXECUTIVE
/s/ Johanna O. Robbins
Johanna O. Robbins
<PAGE>
EXHIBIT 10.7
SCHEDULE OF CHANGE-IN-CONTROL SEVERANCE AGREEMENTS WITH COHOES SAVINGS BANK
<PAGE>
EXHIBIT 10.7
SCHEDULE OF CHANGE-IN-CONTROL SEVERANCE AGREEMENTS WITH COHOES SAVINGS BANK
Cohoes Savings Bank has change-in-control severance agreements with
additional employees which are identical to the agreement included as Exhibit
10.6 except for the following differences:
Name of Employee Title of Employee
Tammy L. Kimble Director of Human Resources
John G. Sturn Vice President, Director of Retail Banking
Kathleen Kelleher Operations Officer
Lisa A. Malone Directing of Lending
<PAGE>
EXHIBIT 13
ANNUAL REPORT TO STOCKHOLDERS
<PAGE>
THE POWER OF COMMUNITY BANKING
COHOES BANCORP, INC.
Annual Report 1999
<PAGE>
Almost 150 years ago, a community bank was founded in Cohoes, New York at the
confluence of the Hudson and Mohawk Rivers, not far from Cohoes Falls, that
natural wonder that, when unleashed, thunders with energy and resilience.
Today, 20 branches later, Cohoes Savings Bank, a wholly owned subsidiary
of Cohoes Bancorp, Inc., is a community bank with a threefold purpose: (1) to
offer innovative products and courteous service; (2) to be a true neighbor to
the communities we service; (3) to increase shareholder value by responsible
and vigorous growth.
This is the power of community banking: that we can provide resources
for others so that we may all prosper.
Contents
Financial Highlights.........................................................1
Letter to Shareholders.......................................................2
New Locations and Businesses.................................................4
Cohoes Savings Foundation....................................................6
School Banking Club..........................................................8
Commercial Lending..........................................................10
New Products and Services...................................................12
Financial Section...........................................................13
Corporate Information.......................................................56
Board of Directors/Officers..................................Inside back cover
Cover:
Our main headquarters is situated near the
base of Cohoes Falls. We see them every day
and cannot help but be inspired by their
majesty.
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
At June 30,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Selected Consolidated Financial Data: (In Thousands)
Total assets $650,470 $535,716 $491,700 $463,363 $459,336
Cash and cash equivalents 11,114 14,229 16,664 8,900 15,179
Loans, net 521,005 412,759 398,530 393,970 379,088
Investment securities 54,455 45,424 25,273 25,969 40,052
Securities available-for-sale 44,742 48,720 35,475 20,886 10,433
Deposits 446,123 449,541 429,390 404,539 398,963
Borrowings 49,045 19,897 -- 2,116 6,117
Stockholders' equity 139,430 53,282 49,092 44,290 40,130
Real estate owned 724 509 1,874 421 396
Nonperforming loans 4,993 5,649 6,688 7,793 5,063
For the Fiscal Year Ended June 30,
1999 1998 1997 1996 1995
Selected Operating Data: (Dollars in Thousands)
Interest income $ 43,038 $ 38,423 $ 36,285 $ 35,383 $ 32,100
Interest expense 20,334 19,262 17,821 18,164 15,405
Net interest income 22,704 19,161 18,464 17,219 16,695
Provision for loan losses 1,235 1,400 1,325 490 330
Net interest income after
provision for loan losses 21,469 17,761 17,139 16,729 16,365
Noninterest income 2,916 2,743 2,790 2,467 2,191
Noninterest expense 20,443 13,767 12,314 11,919 12,152
Income before income taxes 3,942 6,737 7,615 7,277 6,404
Income taxes 1,511 2,650 2,972 2,882 2,565
Net income $ 2,431 $ 4,087 $ 4,643 $ 4,395 $ 3,839
Selected Operating Ratios and Other Data:
Performance Ratios:
Yield on average interest-earning assets 7.42% 7.96% 8.04% 7.98% 7.76%
Rate paid on average interest-bearing liabilities 4.06% 4.33% 4.27% 4.42% 3.99%
Net interest rate spread 3.36% 3.63% 3.77% 3.56% 3.77%
Net interest income after provision for
loan losses to noninterest expense 105.02% 129.01% 139.18% 140.36% 134.67%
Noninterest expense as a percent of average assets 3.40% 2.75% 2.62% 2.59% 2.82%
Return on average assets 0.40% 0.82% 0.99% 0.95% 0.89%
Return on average equity 2.53% 7.88% 9.87% 10.28% 9.95%
Ratio of average equity to average assets 15.95% 10.35% 10.03% 9.28% 8.95%
Efficiency ratio 79.79% 62.85% 57.94% 60.55% 64.34%
Asset Quality Ratios:
Nonperforming loans as a percent of total loans 0.95% 1.36% 1.66% 1.96% 1.32%
Nonperforming assets as a percent of total assets 0.88% 1.15% 1.74% 1.77% 1.19%
Allowance for loan losses as a percent of
total loans 0.77% 0.85% 0.77% 0.82% 0.82%
Allowance for loan losses as a percent of
nonperforming loans 80.62% 62.54% 46.43% 41.69% 61.88%
Net loans charged-off to average loans 0.16% 0.24% 0.37% 0.10% 0.06%
</TABLE>
<PAGE>
LETTER TO SHAREHOLDERS
It was a pivotal year in our history as we converted from a mutual
savings bank to a public company.
Book value rose to $14.62 a share with earnings per share for our fourth
quarter up to 19 cents a share.
Dear Fellow Shareholders:
With almost 150 years of history behind it, Cohoes Savings Bank has a
rich past, replete with successful tales of growth and service. This past
year, however, was a true milestone, one not likely to be equaled for some
time. For this year, in December of 1998, Cohoes Savings Bank went public.
And in our conversion from a mutual savings bank to a public company, we are
as vigorous as ever and happy that new challenges lie ahead as we continue to
satisfy all our constituents: loyal customers; neighbors and neighborhoods;
and our shareholders. All of you have shown great faith in us and we are more
than ready to meet--better yet, exceed--your highest expectations.
Growing a Business
In this fiscal year ended June 1999, we did in fact exceed our own
expectations. Operating income increased to $5.4 million, a $1.3 million,
31.7%, increase over the previous year. Total assets increased 21.4% to
$650.5 million, through strong growth in the loan portfolio following the
conversion. Our net loan growth of 26.2% for the fiscal year was heavily
influenced by dramatic growth in residential mortgages and prudent commercial
real estate and business lending.
It was with an unwavering focus on quality, that we accomplished
tremendous loan growth. Non-performing loans as a percentage of total loans
declined to 0.95% compared with 1.36% the previous year, while the allowance
for loan losses increased 13.9% to $4.0 million.
Net income declined 40.5% to $2.4 million, which was due to a one time
contribution made to establish the Cohoes Savings Foundation, a charitable
entity which will permit an independent means of funding community causes.
The Foundation was funded with authorized but unissued shares of the
Company's common stock. Net income was also affected by a one-time charge to
earnings, arising from the termination of the purchase of another bank. Since
the conversion, quarterly earnings have been strong and in line with our
excellent historical earnings growth.
The Board of Directors, management, and staff are focused on increasing
shareholder value. After the completion of the conversion, we implemented a
plan to increase earnings and enhance the value of our franchise. We
initiated a policy of paying quarterly dividends, starting with a 6 cent a
share dividend paid in May 1999. In July 1999 we announced a stock repurchase
program and began repurchasing 9% of outstanding shares.
Expanding Our Reach
As a public company, we have new opportunities before us that we intend
to seize with wholehearted enthusiasm. In the past 12 months, we have
increased our geographic reach and our market share, establishing four new
branches throughout the Capital Region in Queensbury, Catskill, Schaghticoke,
and in the heart of Albany's financial district. Another branch in Halfmoon
is under way, and we continue to evaluate sites, either to enter new markets
or bridge gaps between communities for greater customer convenience.
Expanding Our Business
Not only did we expand our geographic reach, we added to our core
business with the launching of Community Bank Insurance Brokers of New York,
LLC (CBIB) and the enhancement of CSB Financial Services. CBIB, established
in conjunction with Jardine Group Services Corporation, offers customers the
opportunity to buy all forms of insurance. CSB Financial Services makes
financial management more convenient since our customers can now buy stocks,
bonds, and other investment products where they bank.
<PAGE>
Enhancing Products and Services
Products and services are the lifeblood of any financial institution and
this fiscal year we have developed new products and innovative services
customers want to make their banking more efficient.
We introduced the Visa(R) Check Card, finalized our check imaging
program, enhanced Touchtone Banking services, and witnessed more and more
customer use of our Web site. Other long-time services continue to win
widespread customer support, such as the School Banking Club, which
contributes positively to our exceptional reputation and which has garnered
us much ancillary business.
Many of these products utilize the best of technology, as did our Y2K
preparations. The Bank's Y2K Committee has assessed and tested all
computer-related systems and suppliers and approached major lending
relationships to ascertain their state of readiness. Contingency plans are in
place should we have to operate without power or telephone service. Our
efforts to educate customers about Y2K readiness even drew the attention of
CBS Evening News.
Supporting a Community
Cohoes Savings Banks has always been a responsible corporate citizen and
the establishment of the Cohoes Savings Foundation reflects this commitment.
This year, we also committed $1.5 million in equity to the Commons, LLC, a
project spearheaded by the Urban League of Northeastern New York.
Our employees also reached out on their own. When asked by St. Jude
Children's Research Hospital to participate in a fund-raising endeavor
separate from the Foundation, employees mobilized and raised $25,000 for the
second year in a row. The charitable work ended up being fun for everyone as
employees and their families, customers, and the entire community took part
in various activities including a walkathon, raffle, silent auction, and
telethon.
Remaining True to Ourselves
We are who we are: a community bank with far-reaching ideals and even
higher aspirations. Even though this year has been a turning point as we
became a publicly traded company, we have not altered the essential
philosophy that has served us so well for so many years.
We remain a bank of the community and for the community. Our Board of
Directors embraces this guiding principle, for over the years it always
yielded rich results: for our communities, our customers, our employees, and,
we feel sure, for our new shareholders. This is not just soft sentiment. It
is a way of doing business, with the best of new-fashioned boldness and
old-fashioned grace. It is a way of achieving goals in customer service,
ensuring an excellent return on investment, and taking pride in what we do
and how we do it.
We began this annual report with a reference to the power of community
banking; we end there as well, for we intend to use that power for the
benefit of all.
Very truly yours,
/s/ Harry L. Robinson
Harry L. Robinson
President and Chief Executive Officer
<PAGE>
BRANCHING OUT
Now 20 branches strong, Cohoes Savings Bank has locations all around New
York's Capital Region, which both expands our market area and provides
customers with banking services where they live and work.
New Locations and Businesses
The business of banking has reinvented itself over the past years. The term
"full-service" is now more encompassing than ever as financial institutions
reach out to different markets in new and innovative ways.
Cohoes Savings Bank, never one to be a follower, has stretched its
capabilities and products these past months to accommodate existing customers
and attract new customers in both personal and commercial banking
relationships. Our banking products are richer than ever before. We offer
them in more locations--and more convenient locations--than ever before.
Plus, we've launched one new allied business and strengthened another, both
of which support our menu of services while functioning as independent
entities.
In July 1998, we began Community Bank Insurance Brokers of New York, LLC
(CBIB) entering into a relationship with Jardine Group Services Corporation,
one of the largest and most respected insurance brokers in the world. With
CBIB products and services available at each Cohoes Savings Bank branch,
customers now have the option of buying all forms of insurance through their
bank, including homeowners, auto, disability, life, and commercial insurance.
We enhanced another related enterprise this year, CSB Financial
Services. This allied business helps to make financial portfolio management
one-stop shopping for our customers, giving them access to a full range of
investment tools including stocks, bonds, annuities, and other products. As
well as being a resource for customers, CSB Financial is a profit center for
Cohoes Bancorp, attracting new customers, providing additional revenue, and
enabling us to build shareholder value.
<PAGE>
While our lives get busier and the hours in a day seem to shrink, we all want
more convenient ways to accomplish the necessities of life. People want--and
deserve--convenient full-service banking. So instead of asking customers to
come to the bank, we've gone to them, opening branches in supermarket
locations so they can do their banking and grocery shopping at the same time.
At each location, our supermarket branch representatives are in the position
to assist over 2,500 individuals a day, giving them access to a full range of
banking services from deposit accounts to consumer loans to mortgages.
<PAGE>
REACHING OUT
We intend to nurture our communities by providing the seeds to grow. The
holding company committed 277,725 shares-- currently valued at over $3.0
million--to the Cohoes Savings Foundation, which will contribute at least 5%
of its assets every year to charitable causes.
Cohoes Savings Foundation.
Since its founding in 1851, Cohoes Savings Bank has always given back to the
community. We are, after all, interdependent, relying on one another for
support. And so just as local communities have supported us, we return the
support as a gesture of our appreciation.
As part of its conversion to a public company, Cohoes Saving Bank
established the Cohoes Savings Foundation, a way of formalizing our giving to
charitable and community endeavors. The Foundation is completely dedicated to
maintaining the common bond that exists between Cohoes Savings Bank and the
communities it serves.
Through the conversion, the Foundation received 277,725 shares,
originally valued at $2.8 million, and currently valued at over $3.0 million.
Each year, at least 5% of the Foundation's assets--or more than $150,000 in
1999--will be used to support good works throughout our communities. Through
the Cohoes Savings Foundation, we have the opportunity to assist a diverse
range of causes: medical facilities, senior centers, daycare centers, housing
developments, and many other important projects.
These projects are the centers of our communities. Just as we enable
neighborhoods to grow and develop, we support the dedicated people who put
their time and energy into the life of the neighborhood.
For years, Cohoes Savings Bank and its communities have participated in
a relationship of mutual support--a partnership that has enabled us to
prosper and our neighborhoods to grow. The Cohoes Savings Foundation
continues that tradition, and in the end we all benefit from the generosity.
<PAGE>
Harry L. Robinson, President and Chief Executive Officer of Cohoes Savings
Bank, and Aaron Dare, President and Chief Executive Officer, of the Urban
League of Northeastern New York, stand before new construction marking the
beginnings of the Gateway Commons in the Arbor Hill section of Albany. Cohoes
Savings Bank collaborated with the Urban League as an equity investor on this
important project, which will bring new services to the local community. The
Urban League and Cohoes Savings have had a banking relationship since 1995;
Cohoes Savings has a lending officer located in the Urban League of
North-eastern New York's Albany headquarters.
<PAGE>
CULTIVATING NEW CUSTOMERS
A penny saved is a penny earned. The School Banking Club, established in
1991, has grown to 125 schools and 27,000 children, 1,500 of whom became
shareholders and many more of whom we hope will become lifelong customers.
School Banking Club.
Some consider us a nation of nonsavers. But if you visit the 125 schools that
participate in Cohoes Savings Bank's School Banking Club, you might think a
little differently. You might see children so enamored with the idea of
saving that they set specific goals and then put their money aside to achieve
them.
Since 1991, we have been cultivating the savings habit among young
people throughout the Capital Region. The School Banking Club, started with
idealistic intentions, has yielded big results, making advocates of everyone
involved: the 27,000 elementary and middle-school children who participate,
the volunteers who make the program possible, and the school administrators
who enthusiastically support the purpose of the Club.
Considered one of the premier programs of its kind, the Club promotes
the savings habit while rewarding children who participate. A regular
"banking" day occurs at participating schools each week, a time when children
contribute to their individual accounts and the Club's adult volunteers carry
the deposits to the nearest Cohoes Savings Bank branch. Each child receives a
statement twice a year, which shows the progress made toward a savings
objective. To reward the effort to save, we give these accounts a premium
interest rate.
The story doesn't stop there. As these children become older and
college-bound, we help them make the transition to the world of adult
finances, offering them an incentive package with special offers on checking
accounts and other products. Our goal? To encourage these young people to
continue the savings habit and become lifelong customers of the Bank.
<PAGE>
The opportunity to become a millionaire for a day is just one of the perks of
the School Banking Club. This year, 9-year-old Jacqueline Dall was one of
three participants who submitted top award-winning entries. Her reward? A day
on the town and the opportunity to see $1,000,000 posted to her account for
the day. While Jacqueline and the other two top winners, Lina Dzekciorius and
Sarah Furman, didn't get to keep the million, they did earn the $150.00
interest posted for the day and this year's special prize: a savings account
with a $250.00 deposit.
<PAGE>
BUILDING BETTER BUSINESSES
Our commercial lending department provides businesses with the tools they
need to thrive. During the past 12 months, both commercial real estate loans
and business loans increased by almost 50%.
Commercial Lending.
As an organization of savvy businesspeople, we're in business to support
business. We see the chain of events: what is good for our customers'
business endeavors is good for us and consequently good for the communities
we serve.
Commercial products and services have been a mainstay of Cohoes Savings
Bank for many years and each year we grow the service. This past fiscal year,
growth has been exceptional: our commercial real estate loan portfolio jumped
from $93.2 million to $138.3 million, an increase of 48.4 percent. Commercial
business loans are equally impressive, with a 47.1% growth from $15.0 million
to $22.1 million in the past 12 months.
Much of this vigor is the result of our ongoing commitment to assist
high-quality local businesses by supplying them with lines of credit, term
notes, new construction and real estate development loans, letters of credit,
and other products such as business checking, merchant services, night
depository, and sweep accounts.
We focus on responsible, good-quality borrowers, establishing
relationships with a diverse range of companies including real estate
developers, professional service providers, retail establishments, industrial
operations, health facilities, and small businesses that look to a hometown
bank that makes decisions locally. The fact that we are a locally based bank,
with locations in and around the Capital Region, appeals to many of our
commercial customers, for they perceive us as invested in the area, here to
stay and growing as they grow.
Ultimately, this active effort to reach out to diverse area businesses
comes full circle, strengthening our loan portfolio, creating a stronger
community, and enhancing returns on our--and your--investment.
<PAGE>
When Michael Benson, president of BCI, Inc, General Contractor/ Construction
Manager, decided to buy and renovate a commercial space that could house his
company, he began investigating credit options. At the recommendation of both
his accountant and attorney, Mr. Benson contacted Cohoes Savings. Cohoes
representatives responded promptly, structuring an innovative and competitive
package that was just right for BCI. "I was looking for a banking
relationship," says Mr. Benson, "not just a deal. I found it at Cohoes
Savings Bank, which made a decision locally and handled my situation
individually, coming through with an attractive loan package the first time
around."
<PAGE>
LEADING THE WAY
The convenience of a credit card--without racking up credit card charges. We
introduced the Visa(R) Check Card this year, giving our customers access to
their checking accounts in any store or other location that accepts Visa.
New Products and Services.
When Cohoes Savings Bank ran a small ad inviting customers to a Y2K seminar,
we received a call from CBS Evening News. Could they come and interview
customers about their Y2K concerns? Of course, we said, and on the day of the
seminar they conducted interviews with our customers and attended our
seminar. Some weeks later portions were shown on the CBS Evening News "Eye on
America" segment. For us, the best thing that happened was not the publicity.
It was what the reporters discovered: our customers, while well aware of the
potential problems of the upcoming century change, had complete confidence in
their bank--Cohoes Savings Bank.
Like many other institutions, Cohoes Savings Bank has worked hard to
eliminate potential Y2K problems. Throughout the year we've communicated with
our customers, educated them about the meaning of Y2K and reassured them that
we're ready for the new millennium.
We are ready--in other ways as well. This past year, we've developed
products and services customers want that make banking more efficient. We
introduced a Visa(R) Check Card, so customers can access their accounts
without writing a check. We initiated check imaging technology, doing away
with the costs of returning original checks and providing a more streamlined
way to manage checking accounts.
We enhanced our Web site, which provides on-line information about
products and rates. And we added options to Touchtone Banking, a 24-hour a
day convenience for customers who can check their balances, transfer money,
and make loan payments without ever leaving home.
<PAGE>
FINANCIAL SECTION
Contents
Management's Discussion & Analysis...............................14
Report of Independent Public Accountants.........................28
Consolidated Statements of Financial Condition...................29
Consolidated Statements of Operations............................30
Consolidated Statements of Changes
in Stockholders' Equity..........................................31
Consolidated Statements of Cash Flows............................32
Notes to Consolidated Financial Statements.......................33
Corporate Information............................................56
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS * Cohoes Bancorp, Inc. & Subsidiary
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General
Cohoes Bancorp, Inc. ("Company"), headquartered in Cohoes, New York is a
savings and loan holding company incorporated in September 1998 under the
laws of the State of Delaware. The Company was organized at the direction of
Cohoes Savings Bank ("Bank") for the purpose of acquiring all of the common
stock of the Bank issued in connection with the conversion of the Bank from
mutual to stock form ("Conversion"). On December 31, 1998, the Bank completed
its Conversion, and the Company sold 9,257,500 shares of its common stock at
a price of $10.00 per share in a subscription offering ("Offering") to
certain depositors of the Bank. In connection with the Conversion and
Offering, the Company established the Cohoes Savings Foundation, Inc.
("Foundation") and made a charitable contribution of 277,725 shares of the
Company's common stock to the Foundation, which resulted in a one-time charge
relating to the funding of the Foundation of $2.8 million ($1.7 million net
of tax). The net proceeds from the Offering amounted to $90.4 million, and
the Company contributed 50% of the net proceeds from the Offering to the Bank
in exchange for all of the issued and outstanding shares of common stock of
the Bank. The Company had no significant assets or operations prior to
December 31, 1998. Per share data is reported for the period since
Conversion. Presently, the only significant assets of the Company are the
capital stock of the Bank, the Company's loan to the Employee Stock Ownership
Plan ("ESOP") of the Company and the investments of the net proceeds from the
Offering retained by the Company. The Company is subject to the financial
reporting requirements of the Securities Exchange Act of 1934, as amended.
The Company's results of operations are significantly affected by general
economic and competitive conditions (particularly changes in market interest
rates), government policies, changes in accounting standards and actions of
regulatory agencies. Future changes in applicable laws, regulations or
government policies may have a material impact on the Company. Lending
activities are substantially influenced by the demand for and supply of
housing, competition among lenders, and level of interest rates and the
availability of funds. The ability to gather deposits and the cost of funds
are influenced by prevailing market interest rates, fees and terms on deposit
products, as well as the availability of alternative investments, including
mutual funds and stocks.
FINANCIAL CONDITION
Comparison of June 30, 1999 and June 30, 1998
General. Total assets at June 30, 1999 stood at $650.5 million, up $114.8
million, or 21.4%, from $535.7 million at June 30, 1998. The increase was
concentrated in the loan portfolio which increased $108.7 million, reaching
$525.0 million at June 30, 1999. The Company funded the growth in loans with
an increase of $29.1 million in borrowings from $19.9 million on June 30,
1998 to $49.0 million at June 30, 1999 and $90.4 million in net proceeds
raised by the Company in its Offering in connection with the Bank's
Conversion. The increase in capital far outweighed a $3.4 million decrease in
deposits which management believes occurred because some depositors used
deposited funds to purchase stock in the Conversion.
<PAGE>
Loans. The Company was able to originate a large volume of loans by offering
competitive pricing and quality service at a time when economic conditions
were favorable to the origination of commercial real estate and commercial
business loans. Low market interest rates also stimulated residential sales
and refinances which provided an environment conducive to the origination of
residential mortgage loans. The additional capital raised in the Conversion,
which is not an interest-sensitive liability, also allowed the Company to
retain in portfolio a higher volume of fixed-rate loans which might have
otherwise been sold on the secondary market due to interest rate sensitivity
concerns. Total one to four family real estate loans increased $62.3 million,
or 24.1% from June 30, 1998 to June 30, 1999. Commercial real estate loans
increased $40.1 million during the same period, from $93.2 million to $138.3
million. At June 30, 1999, commercial real estate loans represented 26.4% of
total loans, up from 22.4% at June 30, 1998. Commercial business loans
increased $7.1 million during fiscal 1999 to $22.1 million from $15.0
million. Commercial business loans are generally loans to businesses which
are either unsecured or are secured by non-real estate business assets.
Allowance for Loan Losses. The allowance for loan losses increased from $3.5
million at June 30, 1998 to $4.0 million at June 30, 1999, an increase of
$492,000. This increase was primarily driven by the 26.1% increase in the
total loan portfolio rather than by an increase in problem loans, as
nonperforming loans declined from $5.6 million to $5.0 million during the
year. The increase was caused by the net effect of a $1.2 million provision
for loan losses for the year ended June 30, 1999 offset by $743,000 in net
charge-offs for the same period. The adequacy of the allowance for loan
losses is evaluated quarterly by management based upon a review of multiple
factors, such as the size and general composition of the loan portfolio,
historical delinquency and charge-off rates, and an assessment of significant
loans, with particular emphasis on nonperforming and delinquent loans that
management believes warrant special attention. At June 30, 1999 the allowance
for loan losses provided coverage of 80.6% of total non-performing loans, up
from 62.5% at June 30, 1998. The balance of the allowance is maintained at a
level which is, in management's judgment, representative of the amount of
risk inherent in the Bank's loan portfolio.
Securities Available for Sale and Investment Securities. The balance of
securities available for sale decreased from $48.7 million at June 30, 1998
to $44.7 million as of June 30, 1999. Investment securities classified as
held to maturity increased from $45.4 million to $54.5 million during the
same period. The $5.1 million combined net increase was primarily driven by
the general increase in the size of the Company and the need to maintain an
appropriate level of securities investments as part of the overall asset
portfolio.
Premises and Equipment. Premises and equipment increased from $7.3 million at
June 30, 1998 to $7.8 million at June 30, 1999. This increase was a result of
expenditures totaling $1.8 million for the most part relating to the opening
of three new branch locations during the year ended June 30, 1999 offset by
$1.3 million in depreciation.
Other Real Estate Owned. Other real estate owned increased from $509,000 at
June 30, 1998 to $724,000 at June 30, 1999, an increase of approximately
$215,000. The increase was part of the normal process of collecting
delinquent mortgage loans.
Deposits. Total deposits decreased $3.4 million, or 0.8%, from $449.5 million
at June 30, 1998 to $446.1 million at June 30, 1999. Of this total decrease,
time deposits decreased $25.8 million (11.2%), while savings accounts
increased $8.9 million (6.2%), commercial deposits and demand accounts
increased $11.8 million (21.9%) and money market accounts increased $1.6
million (7.4%). The increase in savings deposits and the decrease in time
deposits was a result of the Company's decision to focus on core deposit
growth to control the cost of funds and improve the stability of the
Company's deposit liability base.
Borrowings. Borrowings, comprised primarily of Federal Home Loan Bank
advances, increased $29.1 million, or 146.2%, from $19.9 million at June 30,
1998 to $49.0 million at June 30, 1999. This increase was primarily the
result of additional longer term fixed rate Federal Home Loan Bank advances
used to fund long-term fixed rate residential mortgages held in the
portfolio.
<PAGE>
Analysis of Net Interest Income
Average Balance Sheets. The following table sets forth certain information
relating to the Company for the years ended June 30, 1999, 1998 and 1997. The
yields and costs were derived by dividing interest income or expense by the
average balance of assets or liabilities, respectively, for the periods
shown. The yields include deferred fees and discounts which are considered
yield adjustments.
<TABLE>
<CAPTION>
Year Ended June 30, 1999 1998 1997
Average Interest Average Interest Average Interest
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Paid Rate Balance Paid Rate Balance Paid Rate
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING
ASSETS
Loans receivable $463,331 $36,256 7.83% $404,781 $33,573 8.29% $401,262 $33,166 8.27%
Securities available
for sale 37,927 2,298 6.06% 30,336 1,933 6.37% 19,330 1,253 6.48%
Investments
Securities 50,442 3,024 6.00% 30,372 1,926 6.34% 22,240 1,373 6.17%
Federal Funds Sold 23,839 1,182 4.96% 13,321 739 5.55% 4,641 245 5.28%
FHLB stock 3,680 253 6.88% 3,479 249 7.16% 3,400 218 6.41%
Other interest-earning
assets 480 25 5.21% 184 3 1.63% 416 30 7.21%
Total interest-earning
assets 579,699 43,038 7.42% 482,473 38,423 7.96% 451,289 36,285 8.04%
Non-earning assets 22,202 18,714 17,919
Total assets $601,901 $501,187 $469,208
INTEREST-BEARING
LIABILITIES
Savings accounts $128,774 3,849 2.99% $120,959 3,623 3.00% $123,518 3,698 2.99%
School Savings accounts 17,152 818 4.77% 15,112 837 5.54% 11,895 661 5.56%
Money Market accounts 20,594 686 3.33% 18,163 569 3.13% 15,607 447 2.86%
Demand deposits 60,384 353 0.58% 47,075 304 0.65% 41,124 275 0.67%
Time deposits 215,801 11,810 5.47% 230,794 13,483 5.84% 215,183 12,487 5.80%
Escrow accounts 14,469 339 2.34% 7,065 114 1.61% 7,396 120 1.62%
Borrowings 43,204 2,479 5.74% 5,467 332 6.07% 2,392 133 5.56%
Total interest-bearing
liabilities 500,378 20,334 4.06% 444,635 19,262 4.33% 417,115 17,821 4.27%
Other liabilities 5,513 4,677 5,033
Stockholders' Equity 96,010 51,875 47,060
Total liabilities
and stockholders'
equity $601,901 $501,187 $469,208
Net interest income $22,704 $19,161 $18,464
Net interest rate spread 3.36% 3.63% 3.77%
Net earning assets $ 79,321 $ 37,838 $ 34,174
Net yield on average
interest-earning assets 3.92% 3.97% 4.09%
Average interest-earning
assets to average interest
bearing liabilities 1.16X 1.09X 1.08X
</TABLE>
<PAGE>
Rate/Volume Analysis. The following table presents the extent to which
changes in interest rates and changes in the volume of interest-earning
assets and interest-bearing liabilities have affected the Company's interest
income and interest expense during the periods indicated. Information is
provided in each category with respect to (i) changes attributable to changes
in volume (changes in volume multiplied by prior rate), (ii) changes
attributable to changes in rate (changes in rate multiplied by prior volume)
and (iii) the net change. The changes attributable to the combined impact of
volume and rate have been allocated proportionately to the changes due to
volume and the changes due to rate.
<TABLE>
<CAPTION>
Year Ended June 30, 1999 Year Ended June 30, 1998
Compared to Compared to
Year Ended June 30, 1998 Year Ended June 30, 1997
Increase (Decrease) Increase (Decrease)
Due To Due To
Total Total
Increase Increase
(Dollars in thousands) Volume Rate (Decrease) Volume Rate (Decrease)
<S> <C> <C> <C> <C> <C> <C>
Interest and dividend income from:
Loans receivable $4,659 $(1,976) $ 2,683 $ 292 $115 $ 407
Securities available for sale 464 (99) 365 701 (21) 680
Investment securities 1,209 (111) 1,098 515 38 553
Federal funds sold 529 (86) 443 481 13 494
FHLB stock 14 (10) 4 5 26 31
Other interest-earning assets 9 13 22 (11) (16) (27)
Total interest and
dividend income 6,884 (2,269) 4,615 1,983 155 2,138
Interest expense from:
Savings accounts 234 (8) 226 (77) 2 (75)
School savings accounts 105 (124) (19) 178 (2) 176
Money market accounts 79 38 117 78 44 122
Demand deposits 80 (31) 49 39 (10) 29
Time deposits (848) (825) (1,673) 911 85 996
Escrow accounts 157 68 225 (5) (1) (6)
Borrowings 2,166 (19) 2,147 186 13 99
Total interest expense 1,973 (901) 1,072 1,310 131 1,441
Net interest income $4,911 $(1,368) $ 3,543 $ 673 $ 24 $ 697
</TABLE>
<PAGE>
RESULTS OF OPERATIONS
Comparison of Year Ended June 30, 1999 and Year Ended June 30, 1998
General. Net income for the year ended June 30, 1999 was $2.4 million,
down from $4.1 million for the year ended June 30, 1998. The principal
reasons for the decline were two unusual items which the Company does not
expect to recur, and which represented $4.8 of a $6.6 million increase in
noninterest expense. These two items, a charitable contribution to the Cohoes
Savings Foundation and the payment of a break-up fee in connection with a
proposed acquisition by the Company, are discussed below. The increase in
noninterest expense was partially offset by increases in net interest income
of $3.5 million and noninterest income of $173,000 and decreases in the
provision for loan losses of $165,000 and income tax expense of $1.2 million
for the year ended June 30, 1999 as compared to the previous year.
Net Interest Income. Net interest income for the year ended June 30, 1999 was
$22.7 million, up $3.5 million from the year ended June 30,1998. The increase
was the result of the increase of $97.2 million in average earning assets
from $482.5 million for the year ended June 30, 1998 to $579.7 million for
the same period in 1999 as the Company experienced substantial growth during
the year. Average interest-bearing liabilities also increased from fiscal
1998 to fiscal 1999, up $55.8 million. The Company estimates that the larger
increase in average interest-earning assets than interest-bearing
liabilities, coupled with the fact that asset yields were higher than the
cost of funds, resulted in an increase in the net interest income of $4.9
million. This increase was partially offset by a reduction in the Company's
spread from 3.63% to 3.36%. The decline in spread was caused primarily by a
46 basis point decline in the average yield on loans due to lower market
interest rates which caused a downward adjustment in yields on adjustable
rate loans in the Company's portfolio at the same time the Company originated
new loans at lower yields and customers refinanced existing higher-rate loans
into new loans at lower rates. The yield on average earning assets decreased
from 7.96% to 7.42%, while the rate paid on average interest-bearing
liabilities decreased from 4.33% to 4.06%. The Company estimates that the
decline in yields, partially offset by a decline in the cost of funds,
reduced net interest income by approximately $1.4 million.
The Company's net interest margin for the year ended June 30, 1999 was 3.92%,
down 5 basis points from 3.97% for the year ended June 30, 1998. Net interest
margin declined more slowly than the spread because of the availability of
the new capital raised in the Conversion to fund asset growth without a
corresponding interest cost.
Interest Income. Interest income for the year ended June 30, 1999 was $43.0
million, up from $38.4 million for the comparable period in 1998. The largest
component of interest income is interest on loans. Interest on loans
increased from $33.6 million for the year ended June 30, 1998 to $36.3
million for the year ended June 30, 1999. This increase of $2.7 million is
primarily the result of a $58.5 million increase in the average balance of
loans due to the loan growth which the Company experienced as discussed
above, while the yield on loans decreased 46 basis points. The increase in
interest on loans was complemented by increases in interest on securities
available for sale and investment securities due primarily to increases in
average volume as the Company initially invested stock subscriptions received
and then stock sale proceeds in securities and other investments pending
deployment in loans. The Company also increased its level of securities
investments by year end to maintain satisfactory levels of primary and
secondary liquidity as the Company grew. The average balance of securities
available for sale increased from $30.3 million for the year ended June 30,
1998 to $37.9 million for the year ended June 30, 1999. The Company estimates
that this increase in volume resulted in a $464,000 increase in interest
income. The average balance of investment securities increased from $30.4
million in 1998 to $50.4 million in 1999, which the Company estimates caused
a $1.2 million increase in interest income. An increase in the average volume
of federal funds sold also contributed an estimated $529,000 in interest
income. The average balance of federal funds sold increased due to the need
to invest the influx of funds received in the Conversion in short term liquid
investments pending redeployment. All of these increases in interest income
due to increases in volume were partially offset by decreases in yields
caused by general market interest rate declines.
<PAGE>
Interest Expense. Interest expense increased during the year ended June 30,
1999 to $20.3 million, up from $19.3 million for the comparable period in
1998. Substantially all of the Company's interest expense is from the
Company's interest-bearing deposits. The largest category of interest-bearing
deposits is time deposits, which also have the highest average cost. Both the
average volume and the average rate on time deposits declined from the year
ended June 30, 1998 to the year ended June 30, 1999 as the Company emphasized
the maintenance and growth of core deposits. The Company offered competitive
rates on its time deposits designed to retain most of those deposits but not
so high as to generate an influx of new time deposits. This, coupled with
lower market interest rates, allowed the Company to reduce the average cost
of its time deposits by 37 basis points. The average balance of time deposits
also decreased by $15.0 million due to the combined effect of the Company's
core deposit emphasis and the use of time deposits to fund stock purchases.
The average volume of all other deposit categories increased, while the
average rate paid on savings accounts remained the same. The average rate
paid on money market accounts increased by 20 basis points as a result of
higher rates paid on new tiered rate accounts. The average rate paid on
demand deposit accounts declined as a result of an increase in noninterest
bearing business checking accounts.
During the year ended June 30, 1999, the Company increased its outstanding
borrowings from $5.5 million to $43.2 million. The increase was undertaken in
order to fund asset growth as the Company began the process of leveraging its
additional capital at a time when substantial increases in deposits were not
possible without an upward shift in the Company's deposit pricing. Although
borrowings usually have higher rates than deposits, the Company can borrow
funds without affecting the rates paid on existing deposits. It is more
difficult, if not impossible, to increase rates to attract new deposits
without simultaneously increasing the rates paid on existing deposits.
Overall, the Company estimates that the increase in the average balance of
interest-bearing liabilities resulted in approximately a $2.0 million
increase in interest expense while the decrease in the average rate paid
resulted in approximately a $901,000 decline in interest expense.
Provision for Loan Losses. The provision for loan losses decreased from $1.4
million in the year ended June 30, 1998 to $1.2 million in the year ended
June 30, 1999. This decrease is primarily the result of decreases in net
charge-offs from $972,000 for the year ended June 30, 1998 to $743,000 for
the year ended June 30, 1999. Changes in general economic conditions,
interest rates, management's assessment of the collectability of loans in the
portfolio and other factors could cause management to change materially the
level of the provision in the future.
Noninterest Income. Total noninterest income increased $173,000 for the year
ended June 30, 1999 as compared to the same period in 1998. Income from
service charges on deposits increased only slightly to $779,000 for the year
ended June 30, 1999, from $746,000 for the year ended June 30, 1998. Loan
servicing revenue decreased $119,000 from $495,000 in the year ended June 30,
1998 to $376,000 in the year ended June 30, 1999. The decline relates to a
reduction in the balance of loans serviced for others. During the year, a
relatively high level of loans serviced for others were paid off due to
refinancing activity at a time when the Company retained a higher portion of
its new loan originations in portfolio rather than selling the loans and
retaining the servicing. Net gain on the sale of loans decreased from $81,000
for the year ended June 30, 1998 to $6,000 for the year ended June 30, 1999,
also because of the decision to retain a higher percentage of new loan
originations in portfolio. Other noninterest income increased from $1.4
million for the year ended June 30, 1998 to $1.8 million for the year ended
June 30, 1999. This increase was the result of increases in ATM fees as the
Company began charging non-customers for ATM transactions, loan prepayment
and assignment fees due to the high level of refinances, and rents collected
on other real estate owned ("ORE") properties because the Company had more
ORE properties with rent paying tenants.
<PAGE>
Noninterest Expense. Total noninterest expense increased $6.6 million to
$20.4 million for the year ended June 30, 1999, up from $13.8 million for the
year ended June 30, 1998. The primary components of this increase were a $2.0
million acquisition break-up fee, the contribution of $2.8 million to the
Cohoes Savings Foundation, Inc., and a $1.3 million increase in compensation
and benefits expense. The break-up fee was paid as a result of the
termination of a pending merger agreement with SFS Bancorp, Inc. in October
1998. The contribution to the Cohoes Savings Foundation, Inc. was in the form
of 277,725 shares of the Company's common stock which the Company contributed
in connection with the Conversion. These shares represented 3% of the shares
issued in the Conversion and the Company recognized the entire expense of the
contribution, net of the anticipated tax benefit during the 1999 fiscal year.
The increase in compensation and benefits was primarily attributable to the
establishment of the Company's Employee Stock Ownership Plan in connection
with the Conversion and annual merit increases. The ESOP expense fluctuates
based upon the market value of the Company's common stock but averaged
$145,000 per quarter during the period from January 1, 1999 to June 30, 1999
after an initial ESOP contribution expense of $220,000 on December 31, 1998.
Occupancy increased as a result of the opening of two new branch locations.
The increase in other noninterest expense was attributable to an increase in
professional service fees associated with being a public company, increases
in ORE expense, expenses related to the proposed merger with SFS Bancorp, Y2K
expense and a general increase in other operating expenses related to
increased size.
Income Tax Expense. Income tax expense decreased from $2.7 million for the
year ended June 30, 1998 to $1.5 million for the comparable period in 1999.
The decrease is the result of less income before income tax expense, $3.9
million in 1999 as compared to $6.7 million in 1998.
Comparison of Year Ended June 30, 1998 and Year Ended June 30, 1997
Net income for the year ended June 30, 1998 was $4.1 million, down from $4.6
million for the year ended June 30, 1997. Other expenses increased $1.5
million for the year ended June 30, 1998 as compared to the previous year.
This increase was in part offset by an increase in net interest income of
$697,000 and a reduction in income tax expense of $322,000.
Net Interest Income. Net interest income for the year ended June 30, 1998 was
$19.2 million, up $697,000 from the year ended June 30,1997. The increase was
primarily the result of the increase of $31.2 million in average earning
assets from $451.3 million for the year ended June 30, 1997 to $482.5 million
for the same period in 1998. Interest-bearing liabilities also increased
during the same period, up $27.5 million. The net impact of these volume
increases resulted in an increase in the net interest income of $673,000. The
Bank's net interest margin for the year ended June 30, 1998 was 3.97%, down
12 basis points from 4.09% for the year ended June 30, 1997. The yield on
average earning assets decreased from 8.04% to 7.96%, while the rate paid on
average interest-bearing liabilities increased from 4.27% to 4.33%, producing
a decrease in net interest spread of 14 basis points from 3.77% during fiscal
1997 to 3.63% during fiscal 1998.
Interest Income. Interest income for the year ended June 30, 1998 was $38.4
million, up from $36.3 million for the comparable period in 1997. The largest
component of interest income is interest on loans. Interest on loans
increased from $33.2 million for the year ended June 30, 1997 to $33.6
million for the year ended June 30, 1998. This increase of $407,000 is the
result of both volume increases and rate increases. The average balance of
loans increased $3.5 million to $404.8 million, while the yield on loans
increased 2 basis points from 8.27% to 8.29%. The increase in interest on
loans was supplemented by increases in interest on securities available for
sale, investment securities and federal funds. Interest income on these
categories of earning assets increased $680,000, $553,000 and $494,000,
respectively. Substantially all of the increases in interest income on these
assets are attributed to increases in volume. The average balance of
securities available for sale increased from $19.3 million for the year ended
June 30, 1997 to $30.3 million for the year ended June 30, 1998. This
increase in volume resulted in an increase in interest income of $701,000.
The average balance of investment securities increased from $22.2 million in
1997 to $30.4 million in 1998, resulting in a $515,000 increase in interest
<PAGE>
income due to volume. The average balance of federal funds increased from
$4.6 million in 1997 to $13.3 million in 1998. The increase in the volume of
federal funds resulted in a $481,000 increase in interest income in the year
ended June 30, 1998 as compared to the year ended June 30, 1997. The changes
in rates on securities available for sale, investment securities and federal
funds, as well as the changes in volume and rate on other categories of
interest earning assets was not significant.
Interest Expense. Interest expense increased during the year ended June 30,
1998 to $19.3 million, up from $17.8 million for the comparable period in
1997. Substantially all of the Bank's interest expense is from the Bank's
interest-bearing deposits. The largest category of interest-bearing deposits
is time deposits. Interest on time deposits for the year ended June 30, 1998
was $13.5 million, up $1.0 million from the $12.5 million in 1997. This
increase is the result of an increase in the average balance of time
deposits, from $215.2 million in 1997 to $230.8 million in 1998 and an
increase of 4 basis points in the rates paid on these deposits from 5.80% in
1997 to 5.84% in 1998, primarily due to competitive market conditions.
Interest expense on savings accounts was relatively flat, decreasing $75,000
from 1997 to 1998, almost entirely attributed to a reduction in the average
balance of savings accounts of $2.6 million. Interest on school savings
accounts increased $176,000, from $661,000 for the year ended June 30, 1997
to $837,000 for the year ended June 30, 1998, substantially all of which was
the result of an increase in the average balance of school savings accounts
of $3.2 million. Interest on money market accounts increased $122,000, from
$447,000 for the year ended June 30, 1997 to $569,000 for the year ended June
30, 1998. The increase is attributed to an increase in the average balance of
money market accounts of $2.6 million as well as an increase of 27 basis
points in the rates paid on these money market accounts, from 2.86% to 3.13%
in compliance with the Bank's strategy to attract money market accounts and
remain competitive in its primary market area. Interest on borrowings for the
year ended June 30, 1998 was $332,000, up from $133,000 in 1997. Most of this
increase was attributable to an increase in the average balance of
borrowings, from $2.4 million in 1997 to $5.5 million in 1998 as the Bank
attempted to match fund fixed rate residential loans with borrowings.
Fluctuations in interest expense on other categories of interest-bearing
liabilities were not significant.
Provision for Loan Losses. The provision for loan losses of $1.4 million in
the year ended June 30, 1998 remained consistent with the $1.3 million
provision in the year ended June 30, 1997. The amount of the provision is
attributed to the $13.3 million increase in outstanding loans tempered by the
reduction in the level of net charge-offs from $1.5 million for the year
ended June 30, 1997 to $972,000 for the year ended June 30, 1998.
Noninterest Income. Total noninterest income for the year ended June 30, 1998
was $2.7 million, relatively unchanged from the $2.8 million for the year
ended June 30, 1997. Service charges on deposits declined only slightly to
$746,000 for the year ended June 30, 1998, from $765,000 for the year ended
June 30, 1997. Loan servicing revenue declined $73,000 from $568,000 for the
year ended June 30, 1997 to $495,000 for the year ended June 30, 1998. The
decline relates to a reduction in the balance of loans serviced for others.
Fluctuations in other noninterest income categories were not significant.
Noninterest Expense. Total noninterest expense increased $1.5 million to
$13.8 million for the year ended June 30, 1998, up from $12.3 million for the
comparable period in 1997. Increases in compensation and benefits of $1.1
million, occupancy of $193,000 and advertising of $123,000 were the primary
contributors to the overall increase. The increase in compensation and
benefits is the result of a decrease in the post-retirement benefit expense
based on revised actuarial assumptions in 1997, the recognition of a full
year's expenses on four new branch locations opened in the year ended June
30, 1997, an increase in the cost of health insurance benefits of $114,000 as
well as general merit increases for the Bank's employees during the year
ended June 30, 1998. The increase in occupancy is directly attributed to a
full year's cost associated with the opening of the four branch locations
mentioned above. The increase in advertising is generally the result of the
additional cost of customer binders, brochures and media print for the
introduction of imaging for all demand account products during the month of
June 1998. The remaining categories of noninterest expense did not experience
significant fluctuation.
<PAGE>
Income Tax Expense. Income tax expense decreased from $3.0 million for the
year ended June 30, 1997 to $2.7 million for the comparable period in 1998.
The reduction is primarily the result of less income before income tax
expense, $6.7 million in 1998 as compared to $7.6 million in 1997.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity. Liquidity is defined as the ability to generate sufficient cash
flow to meet all present and future funding commitments, depositor
withdrawals and operating expenses. Management monitors the Company's
liquidity position on a daily basis and evaluates it ability to meet
depositor withdrawals or make new loans or investments. The company's liquid
assets include cash and cash equivalents, investment securities that mature
within one year, and its portfolio of securities available for sale.
The Company's cash inflows result primarily from loan repayments, maturities,
calls and paydowns of securities, new deposits, and to a lesser extent,
drawing upon the Company's credit lines with the Federal Home Loan Bank of
New York. The Company's cash outflows are substantially new loan
originations, securities purchases, and deposit withdrawals. The timing of
cash inflows and outflows are closely monitored by management although
changes in interest rates, economic conditions, and competitive forces
strongly impact the predictability of these cash flows. The Company attempts
to provide stable and flexible sources of funding through the management of
its liabilities, including core deposit products offered through its branch
network as well as with limited use of borrowings. Management believes that
the level of the Company's liquid assets combined with daily monitoring of
inflows and outflows provide adequate liquidity to fund outstanding loan
commitments, meet daily withdrawal requirements of our depositors, and meet
all other daily obligations of the Company.
Capital. Consistent with its goals to operate a sound and profitable
financial organization, the Bank actively seeks to maintain a "well
capitalized" institution in accordance with regulatory standards. The Bank's
total equity was $93.2 million at June 30, 1999, 14.3% of total assets on
that date. As of June 30, 1999, the Bank exceeded all of the capital
requirements of the FDIC. The Bank's regulatory capital ratios at June 30,
1999 were as follows: Tier I (leverage) capital, 15.5%; Tier I risk-based
capital, 22.4%; and Total risk-based capital, 23.4%. The regulatory capital
minimum requirements to be considered well capitalized are 5.0%, 6.0%, and
10.0%, respectively.
Market Risk and Asset/Liability Management
Interest rate risk is the most significant market risk affecting the Company.
Other types of market risk, such as foreign currency exchange rate risk and
commodity price risk, do not arise in the normal course of the Company's
business activities.
Interest rate risk is defined as an exposure to a movement in interest rates
that could have an adverse effect on the Company's net interest income. Net
interest income is susceptible to interest rate risk to the degree that
interest-bearing liabilities mature or reprice on a different basis than
earning assets. When interest-bearing liabilities mature or reprice more
quickly than earning assets in a given period, a significant increase in
market rates of interest could adversely affect net income. Similarly, when
earning assets mature or reprice more quickly than interest-bearing
liabilities, falling interest rates could result in a decrease in net income.
In an attempt to manage its exposure to changes in interest rates, management
monitors the Company's interest rate risk. Management's asset/liability
committee meets monthly to review the Company's interest rate risk position
and profitability, and to recommend adjustments for consideration by the
Board of Directors. Management also reviews loan and deposit pricing, and the
Company's securities portfolio, formulates investment strategies and oversees
the timing and implementation of transactions. Notwithstanding the Company's
interest rate risk management activities, the potential for changing interest
rates is an uncertainty that can adversely affect net income.
<PAGE>
In adjusting the Company's asset/liability position, the Board and management
attempt to manage the Company's interest rate risk while enhancing net
interest margins. At times, depending on the level of general interest rates,
the relationship between long- and short-term interest rates, market
conditions and competitive factors, the Board and management may determine to
increase the Company's interest rate risk position somewhat in order to
increase its net interest margins. The Company's results of operations and
net portfolio values remain vulnerable to changes in interest rates and to
fluctuations in the difference between long- and short-term interest rates.
One approach used to quantify interest rate risk is the net market value
analysis. In essence, this analysis calculates the difference between the
present value of liabilities and the present value of expected cash flows
from assets and off-balance sheet contracts. A second approach is to quantify
the impact on net interest income due to changes in cash flows, interest
income and interest expense resulting from shifts in interest rates. The
following tables set forth, at June 30, 1999, an analysis of the Company's
interest rate risk as measured by the estimated changes in net market value
of its assets and liabilities and net interest income resulting from
instantaneous and sustained parallel shifts in interest rates (+ or -200
basis points, measured in 50 basis point increments).
Assumed Change
in Interest Rates
(Dollars in thousands) Net
Interest Dollar Percent
(Basis Points) Income Change Change
+200 $25,396 $ 46 0.18%
+150 25,464 114 0.45%
+100 25,461 111 0.44%
+50 25,418 68 0.27%
0 25,350 -- 0.00%
-50 25,300 (50) (0.20)%
- -100 25,167 (183) (0.72)%
- -150 24,956 (394) (1.55)%
- -200 24,727 (623) (2.46)%
Assumed Change
in Interest Rates
(Dollars in thousands) Net
Market Dollar Percent
(Basis Points) Value Change Change
+200 $172,107 $(12,501) (6.77)%
+150 171,022 (13,586) (7.36)%
+100 174,373 (10,235) (5.54)%
+50 177,324 (7,284) (3.95)%
0 184,608 -- 0.00%
-50 183,017 (1,591) (.86)%
- -100 185,007 399 0.22%
- -150 186,278 1,670 0.90%
- -200 187,010 2,402 1.30%
<PAGE>
Certain assumptions utilized by management in assessing the interest rate
risk of the Company were employed in preparing data included in the preceding
table. These assumptions were based upon proprietary data selected by
management and are reflective of historical results or current market
conditions. These assumptions relate to interest rates, repayment rates,
deposit decay rates, and the market values of certain assets under the
various interest rate scenarios.
Prepayment assumptions for mortgage backed securities and residential
mortgage loans were based upon industry standards for prepayments. The
Company's mortgage backed securities and residential mortgages are the only
assets or liabilities which management assumed possess optionality for
purposes of determining market value changes.
Management assumed that non-maturity deposits could be maintained with rate
adjustments not directly proportionate to the change in market interest rate.
These assumptions are based upon management's analysis of its customer base
and competitive factors.
The net market value and net interest income tables presented above are
predicated upon a stable balance sheet with no growth or change in asset or
liability mix. In addition, the net market value table is based upon the
present value of discounted cash flows using management's estimates of
current replacement rates to discount the cash flows. The net interest income
table is based upon a cash flow simulation of the Company's existing assets
and liabilities. It was also assumed that delinquency rates would not change
as a result of changes in interest rates although there can be no assurance
that this will be the case. Even if interest rates change in the designated
amounts, there can be no assurance that the Company's assets and liabilities
would perform as set forth above. Also, a change in the US Treasury rates in
the designated amounts accompanied by a change in the shape of the Treasury
yield curve would cause changes to the net market value and net interest
income other than those indicated above.
The Company does not currently engage in trading activities or use derivative
instruments to manage interest rate risk. Instruments such as interest rate
swaps, caps and floors may be utilized under certain interest rate risk
scenarios in order to manage interest rate risk. Such activities may be
permitted with the approval of the Board of Directors, and management
continually evaluates the usefulness of such instruments in managing interest
rate risk.
IMPACT OF THE YEAR 2000
General. The year 2000 ("Y2K") issue confronting the Bank and its suppliers,
customers, customers' suppliers and competitors centers on the inability of
computer systems to recognize the year 2000. Many existing computer programs
and systems originally were programmed with six digit dates that provided
only two digits to identify the calendar year in the date field. With the
impending new millennium, these programs and computers will recognize "00" as
the year 1900 rather than the year 2000.
Financial institution regulators recently have increased their focus upon Y2K
compliance issues and have issued guidance concerning the responsibilities of
senior management and directors. The Federal Financial Institutions
Examination Council ("FFIEC") has issued several interagency statements on
Y2K Project Management Awareness. These statements require financial
institutions to, among other things, examine the Y2K implications of their
reliance on vendors and with respect to data exchange and the potential
impact of the Y2K issue on their customers, suppliers and borrowers. These
statements also require each federally regulated financial institution to
survey its exposure, measure risk and prepare a plan to address the Y2K
issue. In addition, the federal banking regulators have issued safety and
soundness guidelines to be followed by insured depository institutions, such
as the Bank, to assure resolution of any Y2K problems. The federal banking
agencies have asserted that Y2K testing and certification is a key safety and
soundness issue in conjunction with regulatory examinations and, thus, that
an institution's failure to address appropriately the Y2K issue could result
<PAGE>
in supervisory action, including the reduction of the institution's
supervisory ratings, the denial of applications for approval of mergers or
acquisitions or the imposition of civil money penalties.
Risk. Like most financial institutions service providers, the Bank and its
operations may be significantly affected by the Y2K issue due to its
dependence on technology and date-sensitive data. Computer software and
hardware and other equipment, both within and outside the Bank's direct
control and third parties with whom the Bank electronically or operationally
interfaces (including without limitation its customers and third party
vendors) are likely to be affected. If computer systems are not modified in
order to be able to identify the year 2000, many computer applications could
fail or create erroneous results. As a result, many calculations which rely
on date field information, such as interest, payment or due dates and other
operating functions, could generate results which are significantly
misstated, and the Bank could experience an inability to process
transactions, prepare statements or engage in similar normal business
activities. Likewise, under certain circumstances, a failure to adequately
address the Y2K issue could adversely affect the viability of the Bank's
suppliers and creditors and the creditworthiness of its borrowers. Thus, if
not adequately addressed, the Y2K issue could result in a significant adverse
impact on the Bank's operations and, in turn, its financial condition and
results of operations.
State of Readiness. During November 1997, the Bank formulated its plan to
address the Y2K issue. Since that time, the Bank has taken the following
steps:
* Established senior management advisory and review responsibilities;
* Completed a Bank-wide inventory of applications and system software;
* Built an internal tracking database for application and vendor software;
* Developed compliance plans and schedules for all lines of business;
* Initiated vendor compliance verification;
* Begun awareness and education activities for employees through existing
internal communication channels;
* Developed a process to respond to customer inquiries as well as help
educate customers on the Y2K issue.
The following paragraphs summarize the phases of the Bank's Y2K plan:
Awareness Phase. The Bank formally established a Y2K plan headed by a senior
manager, and a project team was assembled for management of the Y2K project.
The project team created a plan of action that includes milestones, budget
estimates, strategies, and methodologies to track and report the status of
the project. Members of the project team also attended conferences and
information sharing sessions to gain more insight into the Y2K issue and
potential strategies for addressing it. This phase is substantially complete.
Assessment Phase. The Bank's strategies were further developed with respect
to how the objectives of the Y2K plan would be achieved, and a Y2K business
risk assessment was made to quantify the extent of the Bank's Y2K exposure. A
corporate inventory (which is periodically updated as new technology is
acquired and as systems progress through subsequent phases) was developed to
identify and monitor Y2K readiness for information systems (hardware,
software, utilities and vendors) as well as environmental systems (security
systems, facilities, etc.). Systems were prioritized based on business impact
and available alternatives. Mission critical systems supplied by vendors were
researched to determine Y2K readiness. If Y2K-ready versions were not
available, the Bank began identifying functional replacements which were
either upgradable or currently Y2K-ready, and a formal plan was developed to
repair, upgrade or replace all mission critical systems. This phase is
substantially complete.
<PAGE>
Beginning in October 1998, all unsecured credits greater than $100,000 were
sent a questionnaire developed by the Bank's credit administration staff to
evaluate Y2K exposure. The Bank also contacted its most significant borrowers
informing them of the Y2K issue. Because the Bank's loan portfolio is
primarily real estate-based and is diversified with regard to individual
borrowers and types of businesses, and the Bank's primary market area is not
significantly dependent on one employer or industry, the Bank does not expect
any significant or prolonged Y2K-related difficulties that will affect net
earnings or cash flow. As part of the current credit approval process, all
new and renewed loans are evaluated for Y2K risk.
Renovation Phase. The Bank's corporate inventory revealed that Y2K upgrades
were available for all vendor supplied mission critical systems, and all
these Y2K-ready versions have been delivered and placed into production. The
upgrades include the automated teller machines, the voice response unit,
network equipment, and the Bank's voice mail system.
Validation Phase. The validation phase is designed to test the ability of
hardware and software to accurately process date sensitive data. As of March
31, 1999, the Bank completed the validation testing of its mission critical
systems. The remainder of the validation phase, including testing with our
service providers and supply vendors, was completed as of June 30, 1999. To
date, the validation testing indicates that the mission critical systems are
Y2K-ready.
Implementation Phase. After passing the validation phase, the modified or
upgraded versions of hardware/ software have been placed into production. As
of March 31, 1999, the Bank has been operating all mission critical systems
with Y2K compliant versions. Any remaining systems requiring Y2K upgrades
were remedied by June 30, 1999.
Contingency Plans. During the assessment phase, the Bank began to develop
back-up or contingency plans for each of its mission critical systems. Since
virtually all of the Bank's mission critical systems are dependent upon third
party vendors or service providers, the contingency plan included the option
of selecting new vendors or service provider if Y2K-ready products could not
be delivered by our current suppliers. To date, it has not been necessary to
exercise this option. In addition, the Bank is preparing and testing
contingency plans in the event of power outages or telecommunication
disruptions. These plans include backup generators, reversion to manual
procedures, and the use of paper reports until the problems are corrected.
Cost. The Y2K related costs have been expensed as incurred. Management
believes that additional Y2K costs will not be material.
Customer Education. In October 1998, the Bank sent out a FDIC Y2K brochure
with all statement mailings, explaining the Y2K problem and reassuring
customers that FDIC insurance coverage guarantees the safety of their deposit
accounts. All Bank employees have attended special Y2K classes and there is
an ongoing awareness campaign to encourage Y2K dialogue with customers. A
statement mailer with an updated status of our system testing was distributed
during the month of May. Y2K messages will be displayed on ATM screens,
transaction receipts and monthly statements throughout the remainder of 1999.
In June of 1999, the Bank hosted a Y2K informational seminar. In addition to
newspaper advertising and branch signs, the Bank publicized the event by
calling hundreds of customers. On September 15, 1999 the Bank co-sponsored a
Community Conversation in conjunction with the President's Council on Year
2000 Conversion.
<PAGE>
FORWARD-LOOKING STATEMENTS
In this Annual Report, and in other public information that the Company makes
available, the Company may, when discussing the future, use words like "will
probably result," "are expected to," "may cause," "is anticipated,"
"estimate," "project," or similar words. These words represent
forward-looking statements. In addition, certain disclosures and information
about financial institutions and their holding companies, such as an analysis
of the adequacy of the allowance for loan losses or an analysis of the
interest rate sensitivity of the Company's assets and liabilities, are based
upon attempts to predict future events and circumstances and also represent
forward-looking statements.
Many factors could cause the Company's actual future results and future
experience to be different from what is described in the Company's
forward-looking statements. For example, adverse changes in economic
conditions could cause an increase in loan delinquencies, a decrease in
property values, or a change in the housing turnover rate. Changes in market
interest rates or changes in the speed at which market interest rates change
could cause a reduction in the Company's interest rate spread or an increase
in loan delinquencies. Changes in laws and regulations affecting the
financial service industry could increase expenses or reduce operating
flexibility. Changes in consumer preferences could affect the Company's
ability to generate deposits or originate loans. These and other future
conditions could all have a material effect on our financial condition or
results of operations.
Please do not rely heavily on any forward-looking statements. They speak only
as of the date made and they are not guarantees of what will happen in the
future. Remember that various factors, including those described above and
others, could affect the Company's financial performance and could cause the
Company's actual results or circumstances for future periods to be materially
different from what the Company anticipates or projects in its
forward-looking statements.
IMPACT OF INFLATION AND CHANGING PRICES
The Company's consolidated financial statements are prepared in accordance
with generally accepted accounting principles which require the measurement
of financial condition and operating results in terms of historical dollars
without considering the changes in the relative purchasing power of money
over time due to inflation. The impact of inflation is reflected in the
increasing cost of the Company's operations. Unlike most industrial
companies, nearly all assets and liabilities of the Company are monetary. As
a result, interest rates have a greater impact on the Company's performance
than do the effects of general levels of inflation. In addition, interest
rates do not necessarily move in the direction, or to the same extent as the
price of goods and services.
IMPACT OF NEW ACCOUNTING STANDARDS
See "Note 1 Summary of Significant Accounting Policies" in the Consolidated
Financial Statements.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS * Cohoes Bancorp, Inc. & Subsidiary
To the Board of Directors and Stockholders of Cohoes Bancorp, Inc.:
We have audited the accompanying consolidated statements of financial
condition of Cohoes Bancorp, Inc. and subsidiary as of June 30, 1999 and
1998, and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for each of the years in the three-year
period ended June 30, 1999. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Cohoes Bancorp, Inc. and
subsidiary as of June 30, 1999 and 1998, and the results of their operations
and their cash flows for each of the years in the three-year period ended
June 30, 1999, in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
New York, New York
August 5, 1999
<PAGE>
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION * Cohoes Bancorp, Inc.
& Subsidiary
JUNE 30, JUNE 30,
(000's omitted, except share data) 1999 1998
ASSETS
Cash and due from banks $ 8,886 $ 8,653
Federal funds sold 1,870 5,000
Interest-bearing deposits with banks 358 576
Total cash and cash equivalents 11,114 14,229
Mortgage loans held for sale 339 38
Securities available for sale, at fair value 44,742 48,720
Investment securities, at amortized cost
(approximate fair value of $53,721
and $45,547) 54,455 45,424
Net loans receivable 521,005 412,759
Accrued interest receivable 3,776 3,482
Premises and equipment 7,801 7,303
Other real estate owned 724 509
Mortgage servicing rights 840 1,042
Other assets 5,674 2,210
Total assets $650,470 $535,716
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Due to depositors $446,123 $449,541
Mortgagors' escrow deposits 10,787 8,994
Borrowings 49,045 19,897
Other liabilities 5,085 4,002
Total liabilities 511,040 482,434
COMMITMENTS AND CONTINGENT LIABILITIES
(Note 15)
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 5,000,000
shares authorized; none issued -- --
Common stock, $.01 par value; 25,000,000
shares authorized; 9,535,225 shares issued 95 --
Additional paid-in capital 93,004 --
Retained earnings--subject to restrictions 55,173 53,270
Unallocated common stock held by ESOP (8,598) --
Accumulated other comprehensive (loss)
income, net of tax (244) 12
Total stockholders' equity 139,430 53,282
Total liabilities and stockholders' equity $650,470 $535,716
The accompanying notes are an integral part of these statements.
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS * Cohoes Bancorp, Inc. & Subsidiary
FOR THE YEARS ENDED JUNE 30,
(000's omitted, except per share data) 1999 1998 1997
INTEREST INCOME:
Interest and fees on loans $36,256 $33,573 $33,166
Securities available for sale 2,298 1,933 1,253
Investment securities 3,024 1,926 1,373
FHLB stock dividends 253 249 218
Federal funds sold 1,182 739 245
Interest-bearing deposits 25 3 30
Total interest income 43,038 38,423 36,285
INTEREST EXPENSE:
Deposits 17,516 18,816 17,568
Mortgagors' escrow deposits 339 114 120
Borrowings 2,479 332 133
Total interest expense 20,334 19,262 17,821
Net interest income 22,704 19,161 18,464
PROVISION FOR LOAN LOSSES 1,235 1,400 1,325
Net interest income after
provision for loan losses 21,469 17,761 17,139
NONINTEREST INCOME:
Service charges on deposits 779 746 765
Loan servicing revenue 376 495 568
Net gain on sale of mortgage loans 6 81 106
Other 1,755 1,421 1,351
Total noninterest income 2,916 2,743 2,790
NONINTEREST EXPENSE:
Compensation and benefits 8,571 7,322 6,253
Occupancy 2,933 2,686 2,493
FDIC deposit insurance premium 63 65 37
Advertising 434 430 307
Contribution to the Cohoes
Savings Foundation, Inc. 2,777 -- --
Merger termination fee 2,000 -- --
Other 3,665 3,264 3,224
Total noninterest expense 20,443 13,767 12,314
Income before provision for
income taxes 3,942 6,737 7,615
PROVISION FOR INCOME TAXES 1,511 2,650 2,972
Net income $ 2,431 $ 4,087 $ 4,643
EARNINGS PER SHARE SINCE CONVERSION:
Basic $ .37 N/A N/A
Diluted $ .37 N/A N/A
The accompanying notes are an integral part of these statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY * Cohoes Bancorp,
Inc. & Subsidiary
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
Unallocated Accumulated
Additional Common Other Total
Common Paid-in Retained Stock Held Comprehensive Stockholders' Comprehen-
(000's omitted) Stock Capital Earnings by ESOP Income, Net Equity sive Income
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, June 30, 1996 $-- $ -- $44,540 $ -- $(249) $ 44,291
Net income for the year
ended June 30, 1997 -- -- 4,643 -- -- 4,643 $4,643
Change in unrealized gain
(loss) on securities available
for sale, net of tax -- -- -- -- 158 158 158
BALANCE, June 30, 1997/
Comprehensive income -- -- 49,183 -- (91) 49,092 $4,801
Net income for the year ended
June 30, 1998 -- -- 4,087 -- -- 4,087 $4,087
Change in unrealized gain
(loss) on securities available
for sale, net of tax -- -- -- -- 103 103 103
BALANCE, June 30, 1998/
Comprehensive income -- -- 53,270 -- 12 53,282 $4,190
Net income for the year ended
June 30, 1999 -- -- 2,431 -- -- 2,431 $2,431
Change in unrealized gain
(loss) on securities available
for sale, net of tax -- -- -- -- (256) (256) (256)
Comprehensive income -- -- -- -- -- -- $2,175
Issuance of 9,257,500 shares
of $.01 par value common
stock in initial public
offering, net of conversion-
related expenses 92 90,258 -- -- -- 90,350
Issuance of 277,725 shares
of $.01 par value common
stock to the Cohoes Savings
Foundation, Inc. 3 2,774 -- -- -- 2,777
Cash dividends paid -- -- (528) -- -- (528)
Public market purchases
of 762,818 shares of Cohoes
Bancorp, Inc. common stock
by ESOP -- -- -- (9,137) -- (9,137)
ESOP shares allocated and
committed to be released -- (28) -- 539 -- 511
BALANCE, June 30, 1999 $95 $93,004 $55,173 $(8,598) $(244) $139,430
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS * Cohoes Bancorp, Inc. & Subsidiary
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JUNE 30,
(000's omitted) 1999 1998 1997
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,431 $ 4,087 $ 4,643
Adjustments to reconcile net income to net cash provided by
operating activities--Charitable contribution to the
Cohoes Savings Foundation, Inc. 2,777 -- --
Depreciation 1,296 1,117 1,101
Amortization of purchased and originated
mortgage servicing rights 203 185 169
Provision for loan losses 1,235 1,400 1,325
ESOP compensation expense 511 -- --
(Increase) decrease in deferred income tax (1,028) (317) 1
Net gain on investment securities redeemed -- -- (3)
Net (gain) loss on securities available for sale redeemed (2) 1 (37)
Net premium amortization of investment securities 45 33 49
Net (discount) premium amortization of securities
available for sale (7) 4 (16)
Net gain on sale of mortgage loans (6) (81) (106)
Proceeds from sale of loans held for sale 867 8,304 7,265
Loans originated for sale (1,162) (8,087) (6,745)
Increase in interest receivable (294) (272) (87)
Increase in other assets (2,436) (197) (547)
Increase (decrease) in other liabilities 1,083 (154) 856
Net loss on sale/write-downs of other real estate owned 151 644 55
Total adjustments 3,233 2,580 3,280
Net cash provided by operating activities 5,664 6,667 7,923
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturity of/called investment securities 20,025 13,000 6,624
Purchase of investment securities (37,609) (40,591) (10,194)
Proceeds from the maturity of/called securities
available for sale 26,300 23,650 --
Proceeds from the sale of securities available for sale -- 60 287
Purchase of securities available for sale (30,600) (42,305) (18,552)
Proceeds from principal reduction in investment securities 8,508 7,408 4,219
Proceeds from principal reduction
in securities available for sale 8,031 5,448 3,887
Net loans made to customers (111,308) (16,723) (8,418)
Originated mortgage servicing rights (1) (81) (104)
Proceeds from sale of other real estate owned 1,461 1,815 1,239
Capital expenditures (1,794) (763) (1,827)
Net cash used in investing activities (116,987) (49,082) (22,839)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in mortgagors' escrow deposits 1,793 (68) (71)
Net increase (decrease) in borrowings 29,148 19,897 (2,100)
Net (decrease) increase in deposits (3,418) 20,151 24,851
Issuance of common stock, net 90,350 -- --
Cash dividends paid (528) -- --
Purchase of shares for ESOP (9,137) -- --
Net cash provided by financing activities 108,208 39,980 22,680
Net increase (decrease) in cash and cash equivalents (3,115) (2,435) 7,764
CASH AND CASH EQUIVALENTS, beginning of year 14,229 16,664 8,900
CASH AND CASH EQUIVALENTS, end of year $ 11,114 $ 14,229 $ 16,664
ADDITIONAL DISCLOSURE RELATIVE TO CASH FLOWS:
Interest paid $ 20,171 $ 19,235 $ 17,664
Taxes paid 1,893 2,780 3,113
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES:
Transfer of loans to other real estate owned $ 1,827 $ 1,094 $ 2,677
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS * Cohoes Bancorp, Inc. & Subsidiary
JUNE 30, 1999, 1998 AND 1997
(000's omitted, except share data)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements of Cohoes Bancorp, Inc.
(the "Company") and subsidiary conform, in all material respects, to
generally accepted accounting principles and to general practice within the
savings bank industry. The Company utilizes the accrual method of accounting
for financial reporting purposes.
As more fully discussed in Note 2, Cohoes Bancorp, Inc., a Delaware
corporation, was organized by the Bank for the purpose of acquiring all of
the capital stock of the Bank pursuant to the conversion of the Bank from a
New York mutual savings bank to a New York stock savings bank. The Company is
subject to the financial reporting requirements of the Securities and
Exchange Act of 1934, as amended.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary, Cohoes Savings Bank (the "Bank"). All
significant intercompany accounts and transactions are eliminated in
consolidation.
Use of Estimates
In preparing the consolidated financial statements, management is required to
make estimates and assumptions that affect the reported assets and
liabilities as of the date of the consolidated statements of financial
condition. The same is true of revenues and expenses reported for the period.
Actual results could differ from those estimates.
Material estimates that are particularly susceptible to significant change in
the near term relate to the determination of the allowance for loan losses
and the valuation of other real estate acquired in connection with
foreclosures. In connection with the determination of the allowance for loan
losses and the valuation of other real estate owned, management obtains
appraisals for significant properties.
Investment Securities and Securities Available for Sale
In accordance with Statement of Financial Accounting Standards ("SFAS") No.
115, "Accounting for Certain Investments in Debt and Equity Securities,"
management determines the appropriate classification of securities, including
mortgage-backed securities, at the time of purchase. If management has the
positive intent and ability to hold debt securities to maturity, they are
classified as investment securities held to maturity and are stated at
amortized cost. If securities are purchased for the purpose of selling them
in the near term, they are classified as trading securities and are reported
at fair value with unrealized holding gains and losses reflected in current
earnings. All other debt and equity securities are classified as securities
available for sale and are reported at fair value, with net unrealized gains
or losses reported, net of income taxes, as a separate component of
stockholders' equity. Gains and losses on disposition of all investment
securities are based on the adjusted cost of the specific security sold. At
June 30, 1999 and 1998, the Bank did not hold any securities considered to be
trading securities.
Unrealized losses on securities which reflect a decline in value which is
other than temporary, if any, are charged to income and reported as a
component of "other noninterest income" in the consolidated statements of
operations.
The cost of securities is adjusted for amortization of premium and accretion
of discount, which is calculated on an effective interest method.
<PAGE>
Loans Receivable and Loan Fees
Loans receivable are reported at the principal amount outstanding, net of
unearned discount, net deferred loan fees and an allowance for loan losses.
Discounts on loans are accreted to income using a method which approximates
the level yield interest method. Interest income on loans is not recognized
when considered doubtful of collection by management.
The Bank accounts for fees and costs associated with loan originations in
accordance with SFAS No. 91, "Accounting for Nonrefundable Fees and Costs
Associated With Originating and Acquiring Loans and Initial Direct Costs of
Leases." Fees received from loan originations and certain related costs are
deferred and are amortized into income so as to provide for a level-yield of
interest on the underlying loans.
Allowance for Loan Losses
A substantial portion of the Bank's loans are secured by real estate located
in the Albany, New York area and the Metropolitan New York City area. In
addition, a substantial portion of the other real estate owned is located in
the Albany, New York area. Accordingly, the ultimate collectibility of a
substantial portion of the Bank's loan portfolio and the recovery of a
substantial portion of the carrying amount of other real estate owned are
dependent upon market conditions in these market areas.
Management believes that the allowance for loan losses is adequate and that
other real estate owned is recorded at its fair value less an estimated cost
to sell these properties. While management uses available information to
recognize losses on loans and other real estate owned, future additions to
the allowance or write-downs of other real estate owned may be necessary
based on changes in economic conditions. In addition, various regulatory
agencies, as an integral part of their examination process, periodically
review the Bank's allowance for loan losses and other real estate owned. Such
agencies may require the Bank to recognize additions to the allowance or
write down other real estate owned based on their judgments about information
available to them at the time of their examination, which may not be
currently available to management.
The allowance for loan losses is established through a provision for loan
losses charged to operations. Loans are charged against the allowance for
loan losses when management believes that the collectibility of the principal
is unlikely. The allowance is an amount that management believes will be
adequate to absorb losses on existing loans that may become uncollectible,
based on evaluations of the collectibility of loans and prior loan loss
experience. Management's evaluation of the adequacy of the allowance for loan
losses is performed on a periodic basis and takes into consideration such
factors as the historical loan loss experience, changes in the nature and
volume of the loan portfolio, overall portfolio quality, review of specific
problem loans and current economic conditions that may affect borrowers'
ability to pay.
SFAS No. 114 defines an impaired loan as a loan for which it is probable,
based on current information, that the lender will not collect all amounts
due under the contractual terms of the loan agreement. The Bank applies the
impairment criteria to all loans, except for large groups of smaller balance
homogenous loans that are collectively evaluated for impairment, such as
residential mortgages and consumer installment loans.
Mortgage Loans Held for Sale
Management determines the appropriate classification of mortgage loans at the
time that rate lock agreements are entered into with the customer. If
management has the intent and the Bank has the ability at the time of rate
lock to hold the loans to maturity, they are classified as mortgage loans and
carried at the amount of unpaid principal, net of deferred fees, reduced by
the allowance for loan losses. Mortgage loans not intended to be held to
maturity are classified as "held for sale" and carried at the lower of
aggregate cost or fair value as determined by outstanding commitments from
investors or current market prices for loans with no commitments.
<PAGE>
Loan servicing revenues and expenses are recognized when service fees are
earned and expenses are incurred. The mortgage loans being serviced are not
included in these consolidated financial statements as they are not assets of
the Bank. Purchased mortgage servicing rights represent the costs of
acquiring the rights to service mortgage loans originated by other
institutions; such costs are capitalized and amortized into servicing fee
income over the estimated period of net servicing income, adjusted for
significant prepayments and payoffs of the underlying serviced loans.
Gains or losses on sales of mortgage loans held for sale are recognized based
upon the difference between the selling price and the carrying value of the
related mortgage loans sold. Such gains and losses are increased or decreased
by the amount of excess servicing fees recorded, if any. Net deferred
origination fees are recognized at the time of sale in the gain or loss
determination. Gains and losses are decreased or increased for commissions
and legal fees on loan closings, and direct employee costs related to loan
originations. These costs amounted to $2, $36 and $34, for the years ended
June 30, 1999, 1998 and 1997, respectively.
Premises and Equipment
Premises and equipment are carried at cost, less accumulated depreciation.
Depreciation is computed on a straight-line basis over the estimated useful
lives of the assets.
Other Real Estate Owned
Other real estate owned includes foreclosed real estate properties. Other
real estate owned is recorded at the lower of cost or the fair value of the
asset acquired less an estimate of the costs to sell the asset. Fair value of
other real estate owned is generally determined through independent
appraisals. At the time of foreclosure, the excess, if any, of the loan value
over the estimated fair value of the asset received less costs to sell, is
charged to the allowance for loan losses. Subsequent declines in the fair
value of such assets, or increases in the estimated costs to sell the
properties and net operating expenses of such assets, are charged directly to
other noninterest expense. At June 30, 1999 and 1998, these properties
consisted of residential and commercial mortgage properties located in the
Albany, New York area.
Income Taxes
For Federal income and New York State franchise tax purposes, the Bank
utilizes the accrual basis method of accounting.
The Bank utilizes the asset and liability method of accounting for income
taxes required under SFAS No. 109, "Accounting for Income Taxes." Under the
asset and liability method of SFAS No. 109, deferred tax assets are
recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax basis. To the extent that current
available evidence about the future raises doubt about the realization of a
deferred tax asset, a valuation allowance must be established. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date.
Financial Instruments
In the normal course of business, the Bank is a party to certain financial
instruments with off-balance sheet risk such as commitments to extend credit,
unused lines of credit and letters of credit. The Bank's policy is to record
such instruments when funded.
<PAGE>
Cash and Cash Equivalents
For purposes of the consolidated statement of cash flows, cash and cash
equivalents consist of cash, due from banks, federal funds sold and
interest-bearing deposits with banks.
Earnings Per Share
Earnings per share is computed in accordance with the provisions of SFAS No.
128, "Earnings per Share." Basic earnings per share is computed by dividing
net income since conversion by the weighted average number of common shares
outstanding. Diluted EPS is computed using the same method as basic EPS, but
reflects the potential dilution of common stock equivalents. There were no
dilutive common stock equivalents for the year ended June 30, 1999. Employee
Stock Ownership Plan (ESOP) shares that have been allocated to participants'
accounts or are committed to be released for allocation are considered
outstanding for EPS calculation. Since the conversion on December 31, 1998,
basic and diluted weighted average common shares outstanding was 8,797,601
shares (adjusted for unallocated ESOP shares). Net income since conversion
was $3.3 million.
Employee Benefits
The Company follows the provisions of the AICPA's Statement of Position 93-6,
"Employers' Accounting for Employee Stock Ownership Plans." SOP 93-6 requires
that compensation expense be recognized in an amount equal to the shares
allocated by the ESOP multiplied by the average fair value of the common
stock during the year. The difference between the average fair value and the
weighted average per share cost of shares allocated by the ESOP is recorded
as an adjustment to additional paid-in-capital.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures About
Pension and Other Postretirement Benefits." SFAS No. 132 only addresses
disclosure and does not change any of the measurement or recognition
provisions provided for in previously issued accounting standards. The
Company adopted SFAS No. 132 in fiscal 1999 and restated the fiscal 1998
disclosure accordingly.
Comprehensive Income
The Company adopted SFAS No. 130, "Reporting Comprehensive Income" in fiscal
1999. All comparative financial statements provided for earlier periods have
been reclassified to reflect application of the provisions of this Statement.
Comprehensive income includes net income and all other changes in equity
during a period except those resulting from investments by owners and
distributions to owners. Other comprehensive income includes revenues,
expenses, gains and losses that under generally accepted accounting
principles are included in comprehensive income but excluded from net income.
Comprehensive income and accumulated other comprehensive income are reported
net of related income taxes. Accumulated other comprehensive income for the
Company consists solely of unrealized holding gains or losses on
available-for-sale securities.
New Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting
and reporting standards for derivative instruments and for hedging
activities.
In June 1999, the FASB issued SFAS No. 137, "Deferral of the Effective Date
of SFAS No. 133". This statement defers the adoption of SFAS No. 133 by one
year.
<PAGE>
As the Company does not engage in derivatives trading and does not hold any
derivative positions as of June 30, 1999, this statement will not have an
effect on the Company's financial statements when adopted prospectively by
the Company on July 1, 2000.
Reclassifications
Amounts in the prior year's consolidated financial statements are
reclassified whenever necessary to conform with the current year's
presentation.
2. ORGANIZATION/FORM OF OWNERSHIP
On May 21,1998, the Board of Trustees adopted a Plan of Conversion ("Plan")
to convert the Bank from a New York mutual savings bank to a New York stock
savings bank and to become a wholly owned subsidiary of a new Delaware
corporation to be organized at the direction of the Bank. The Company is
regulated by the Office of Thrift Supervision ("OTS"). The Company completed
its initial public offering on December 31, 1998 and issued 9,257,500 shares
of common stock resulting in proceeds of $90.4 million, net of expenses
totaling $2.2 million. The Company used $45.2 million or 50% of the net
proceeds to purchase all of the outstanding stock of the Bank. The Company
also loaned $9.1 million to the ESOP which purchased 762,818 shares of the
Company's stock in the initial public offering.
As part of the Plan of Conversion, the Company formed the Cohoes Savings
Foundation, Inc. and donated 277,725 shares of the Company valued at
approximately $2.8 million. The Company recorded a contribution expense
charge and a corresponding deferred tax benefit of $1.1 million for this
donation. The formation of this private charitable foundation is to further
the Bank's commitment to the communities that it serves.
Additionally, the Bank established, in accordance with the requirements of
the OTS a liquidation account for $54.5 million which was equal to its
capital as of the date of the latest consolidated statement of financial
condition (September 30, 1998) appearing in the IPO prospectus. The
liquidation account is reduced as and to the extent that eligible account
holders have reduced their qualifying deposits. Subsequent increases in
deposits do not restore an eligible account holder's interest in the
liquidation account. In the unlikely event of a complete liquidation of the
Bank, each eligible account holder will be entitled to receive a distribution
from the liquidation account in an amount proportionate to the adjusted
qualifying balances for accounts then held.
In addition to the restriction described above, the Company may not declare
or pay cash dividends on or repurchase any of its shares of common stock if
the effect thereof would cause stockholders' equity to be reduced below
applicable regulatory capital maintenance requirements or if such declaration
and payment would otherwise violate regulatory requirements. During fiscal
1999, the Company paid cash dividends totaling $528.
3. MERGER TERMINATION
On July 31, 1998, the Bank and SFS Bancorp, Inc. ("SFS"), parent of
Schenectady Federal Savings Bank, executed an Agreement and Plan of Merger.
On October 23, 1998, the proposed merger was terminated. In connection with
the termination, the Bank paid an agreed-upon breakup fee of $2.0 million to
SFS.
<PAGE>
4. REGULATORY MATTERS
The Bank is subject to various regulatory capital requirements administered
by the federal banking agencies. Failure to meet minimum capital requirements
can initiate certain mandatory and possibly additional discretionary actions
by regulators that, if undertaken, could have a direct material effect on the
Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet
specific capital guidelines that involve quantitative measures of the Bank's
assets, liabilities and certain off-balance sheet items calculated under
regulatory accounting practices. The Bank's capital amounts and
classification are also subject to qualitative judgments by the regulators
about components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the
table below) of total and Tier 1 capital (as defined in the regulations) to
risk weighted assets (as defined), and of Tier 1 capital (as defined) to
average assets (as defined). Management believes, as of June 30, 1999, that
the Bank meets all capital adequacy requirements to which it is subject.
As of June 30, 1999, the most recent notification from the Federal Deposit
Insurance Corporation categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized, the Bank must maintain minimum total risk-based, Tier 1
risk-based, Tier 1 leverage ratios as set forth in the table. There are no
conditions or events since that notification that management believes have
changed the institution's category.
The Bank's and the Company's actual capital amounts and ratios are presented
in the following tables:
<TABLE>
<CAPTION>
To Be Well
For Capital Capitalized Under
Adequacy Prompt Corrective
Actual Purposes Action Provisions
Bank Amount Ratio Amount Ratio Amount Ratio
<S> <C> <C> <C> <C> <C> <C>
As of June 30, 1999:
Total capital
(to risk weighted assets) $97,254 23.4% $33,271 >8.0% $41,589 >10.0%
Tier 1 capital
(to risk weighted assets) 93,229 22.4 16,636 >4.0 24,953 >6.0
Tier 1 capital
(to average assets) 93,229 15.5 24,076 >4.0 30,095 >5.0
</TABLE>
Actual
Consolidated Amount Ratio
As of June 30, 1999:
Total capital
(to risk weighted assets) $143,455 34.4%
Tier 1 capital
(to risk weighted assets) 139,430 33.5
Tier 1 capital
(to average assets) 139,430 23.2
<PAGE>
<TABLE>
<CAPTION>
To Be Well
For Capital Capitalized Under
Adequacy Prompt Corrective
Actual Purposes Action Provisions
Bank Amount Ratio Amount Ratio Amount Ratio
<S> <C> <C> <C> <C> <C> <C>
As of June 30, 1998:
Total capital
(to risk weighted assets) $56,803 17.1% $26,601 >8.0% $33,251 >10.0%
Tier 1 capital
(to risk weighted assets) 53,270 16.0 13,300 >4.0 19,951 >6.0
Tier 1 capital
(to average assets) 53,270 10.6 20,063 >4.0 25,079 >5.0
</TABLE>
5. SECURITIES AVAILABLE FOR SALE
The amortized cost of securities available for sale and their related
estimated fair values at June 30, 1999 and 1998, are as follows:
<TABLE>
<CAPTION>
June 30, 1999
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
<S> <C> <C> <C> <C>
Debt securities:
U.S. Government and agencies $15,991 $ 1 $(245) $15,747
Other obligations 379 5 (5) 379
Mortgage-backed securities 21,142 32 (257) 20,917
Collateralized mortgage obligations 1,411 1 (13) 1,399
Total debt securities 38,923 39 (520) 38,442
Equity securities 6,212 89 (1) 6,300
Total securities available for sale $45,135 $128 $(521) $44,742
</TABLE>
<TABLE>
<CAPTION>
June 30, 1998
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
<S> <C> <C> <C> <C>
Debt securities:
U.S. Government and agencies $23,296 $ -- $(59) $23,237
Other obligations 271 5 -- 276
Mortgage-backed securities 16,855 91 -- 16,946
Collateralized mortgage obligations 4,019 8 (24) 4,003
Total debt securities 44,441 104 (83) 44,462
Equity securities 4,260 -- (2) 4,258
Total securities available for sale $48,701 $104 $(85) $48,720
</TABLE>
The equity investment securities at June 30, 1999 and 1998 consist primarily
of common stock of the Federal Home Loan Bank of New York.
<PAGE>
A summary of maturities of debt securities available for sale at June 30,
1999 is as follows:
Amortized Estimated
Cost Fair Value
Within one year $ 1,000 $ 1,002
From one to five years 27,211 26,912
After five years to ten years 797 798
After ten years 9,915 9,730
Total debt securities available for sale $38,923 $38,442
During the three years ended June 30, 1999, there were no sales of debt
securities available for sale.
6. INVESTMENT SECURITIES
The amortized cost of securities held for investment and their related
estimated fair values at June 30, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
June 30, 1999
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
<S> <C> <C> <C> <C>
Investment securities:
U.S. Government and agencies $27,505 $-- $(457) $27,048
Other obligations 2,148 1 (4) 2,145
Mortgage-backed securities 24,802 47 (321) 24,528
Total investment securities $54,455 $48 $(782) $53,721
</TABLE>
<TABLE>
<CAPTION>
June 30, 1998
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
<S> <C> <C> <C> <C>
Investment securities:
U.S. Government and agencies $22,025 $ 6 $(32) $21,999
Other obligations 388 1 -- 389
Mortgage-backed securities 23,011 153 (5) 23,159
Total investment securities $45,424 $160 $(37) $45,547
</TABLE>
A summary of maturities of debt securities held for investment at June 30,
1999 is as follows:
Amortized Estimated
Cost Fair Value
Within one year $ 3,096 $ 3,088
From one to five years 38,380 37,923
After five years to ten years 2,924 2,865
After ten years 10,055 9,845
Total debt securities held for investment $54,455 $53,721
There were no sales of securities held for investment during the three years
ended June 30, 1999.
<PAGE>
7. NET LOANS RECEIVABLE
A summary of loans at June 30, 1999 and 1998 is as follows:
1999 1998
Mortgage loans on real estate:
Residential adjustable rate loans $134,419 $170,010
Commercial real estate 138,288 93,229
Residential fixed rate loans 185,769 87,715
FHA and VA insured loans 533 674
Total mortgage loans 459,009 351,628
Other loans:
Conventional second mortgages 12,724 15,093
Home equity lines of credit 20,090 21,976
Commercial business loans 22,054 14,991
Home improvement loans 349 547
Auto loans 9,658 9,783
Credit card loans -- 1,655
Personal loans, secured and unsecured 565 409
Other loans 330 228
Total other loans 65,770 64,682
Less:
Deferred loan origination fees and costs 251 (18)
Allowance for loan losses (4,025) (3,533)
Net loans $521,005 $412,759
Changes in the allowance for loan losses for the three years ended June 30,
1999 were as follows:
1999 1998 1997
Balance, beginning of year $3,533 $3,105 $ 3,249
Provision charged to operations 1,235 1,400 1,325
Loans charged-off, net (743) (972) (1,469)
Balance, end of year $4,025 $3,533 $ 3,105
The following table sets forth the information with regard to nonperforming
loans at June 30, 1999 and 1998:
1999 1998
Loans on nonaccrual status and in the
process of foreclosure $3,548 $2,545
Loans on nonaccrual status but not in
the process of foreclosure 773 1,118
Loans past due 90 days or more and
still accruing interest -- 57
Loans restructured as to payment terms
and/or interest rates 672 1,929
Total nonperforming loans $4,993 $5,649
Accumulated interest income on nonaccrual loans of approximately $381, $214
and $262 was not recognized as income in the years ended June 30, 1999, 1998
and 1997, respectively. There are no commitments to extend further credit on
nonperforming loans.
<PAGE>
As of June 30, 1999 and 1998, the Bank's recorded investment in impaired
loans and the related valuation allowance calculated under SFAS No. 114 are
as follows:
1999 1998
Recorded Valuation Recorded Valuation
Investment Allowance Investment Allowance
Valuation allowance required $672 $73 $1,638 $344
Valuation allowance
not required -- -- 630 --
Total $672 $73 $2,268 $344
This allowance is included in the allowance for loan losses on the
consolidated statements of financial condition.
The average recorded investment in impaired loans for the years ended June
30, 1999 and 1998 was approximately $1.8 million and $2.1 million,
respectively.
Interest payments received on impaired loans are recorded as interest income
unless collection of the remaining investment is doubtful in which case
payments received are recorded as reductions of principal. The Bank
recognized interest of $198, $215 and $185 on impaired loans for the years
ended June 30, 1999, 1998 and 1997, respectively. Accumulated interest income
on impaired loans of approximately $9, $15 and $18 was not recognized as
income in the years ended June 30, 1999, 1998 and 1997, respectively.
8. ACCRUED INTEREST RECEIVABLE
Accrued interest receivable consists of the following at June 30, 1999 and
1998:
1999 1998
Loans $2,827 $2,531
Investment securities and securities available for sale 949 951
Total accrued interest receivable $3,776 $3,482
9. PREMISES AND EQUIPMENT
Premises and equipment consist of the following at June 30, 1999 and 1998:
1999 1998
Land $ 1,707 $ 1,529
Building and leasehold improvements 7,060 6,553
Furniture, fixtures and equipment 7,390 6,284
16,157 14,366
Less--Accumulated depreciation (8,356) (7,063)
Premises and equipment, net $ 7,801 $ 7,303
Amount charged to depreciation expense was $1.3 million, $1.1 million and
$1.1 million for the years ended June 30, 1999, 1998 and 1997, respectively.
<PAGE>
10. MORTGAGE SERVICING RIGHTS
The following is a summary of the mortgage servicing rights activity during
the years ended June 30, 1999, 1998 and 1997:
1999 1998 1997
Balance, beginning of year $1,042 $1,146 $1,211
Mortgage servicing rights originated
from unrelated third parties 1 81 104
Amortization of mortgage servicing
rights included as a reduction of
servicing fee income in the
consolidated statements of operations (203) (185) (169)
Balance, end of year $ 840 $1,042 $1,146
Serviced Loans
The total loans serviced by the Bank for unrelated third parties were
approximately $189.7 million, $233.1 million and $256.9 million at June 30,
1999, 1998 and 1997, respectively.
11. DUE TO DEPOSITORS
Due to depositors account balances as of June 30, 1999 and 1998 are
summarized as follows:
Range of
Interest Rate 1999 1998
Savings accounts 2.0%-4.9% $151,763 $142,867
Money market accounts 2.8-4.0 23,329 21,672
Time deposits 1.5-7.6 205,215 231,049
Commercial deposits 0.0-1.8 19,271 15,957
Demand accounts 0.0-1.5 46,545 37,996
Total due to depositors $446,123 $449,541
Time deposits over $100,000 amounted to approximately $27.8 million and $31.1
million at June 30, 1999 and 1998, respectively.
The approximate amount of contractual maturities of time deposits for the
years subsequent to June 30, 1999 is as follows:
Years ending June 30:
2000 $145,389
2001 35,295
2002 7,714
2003 12,176
2004 and thereafter 4,641
Total time deposits $205,215
<PAGE>
Interest expense on deposits for the years ended June 30, 1999, 1998 and
1997, is summarized as follows:
1999 1998 1997
Savings accounts $ 4,667 $ 4,459 $ 4,359
Money market accounts 686 569 447
Time deposits 11,810 13,484 12,487
Demand accounts 353 304 275
Total interest expense on deposits $17,516 $18,816 $17,568
12. BORROWINGS
Information concerning borrowings, which primarily consist of Federal Home
Loan Bank ("FHLB") advances, for the years ended June 30, 1999, 1998 and 1997
is summarized as follows:
1999 1998 1997
Average balance during the year $43,270 $ 5,467 $ 2,392
Average interest rate during the year 5.73% 6.07% 5.56%
Maximum month-end balance during the year $52,038 $19,983 $16,157
Interest expense on borrowings $ 2,479 $ 332 $ 133
FHLB advances are made at fixed rates with remaining maturities of
approximately 9 years as of June 30, 1999.
FHLB advances are collateralized by all FHLB stock owned by the Bank in
addition to a blanket pledge of eligible assets in an amount required to be
maintained so that the estimated fair value of such eligible assets exceeds,
at all times, 110% of the outstanding advances.
13. EMPLOYEE BENEFITS
401(k) Retirement Savings Plan
The Bank sponsors a 401(k) Retirement Savings Plan which is available to all
full-time employees who have been employed by the Bank for a minimum of one
year and are at least 21 years of age. The Plan allows employees to defer up
to 15% of their salary on a pretax basis through contributions to the
Retirement Savings Plan. The Bank matches 50% of employee contributions up to
a maximum of 6% of the amount deferred by the employee. The maximum
contribution an employee may make which is subject to matching by the Bank is
set annually by the Board of Directors.
Employees may also make additional voluntary after-tax contributions to the
Plan, which are not matched by the Bank, up to an additional 10% of the
employee's salary. Total 401(k) Plan expenses for the years ended June 30,
1999, 1998 and 1997 were approximately $399, $378 and $319, respectively.
Postretirement Medical and Life Insurance Benefits
The Bank provides postretirement medical and life insurance benefits for
full-time employees. All employees who meet the criteria for either normal or
early retirement and have at least 10 years of service are eligible. Retired
employees are required to contribute toward the cost of coverage as
established by the Bank, based on medical and life insurance costs.
<PAGE>
Benefit and premium payments are made when they are due and are not funded in
advance.
The following table sets forth the status of the postretirement benefit
obligation:
1999 1998
Benefit obligation at beginning of year $ 716 $ 695
Service cost 13 12
Interest cost 65 49
Benefits paid (61) (40)
Actuarial (gains)/losses 236 --
Benefit obligation at end of year $ 969 $ 716
Funded status $ (969) $(716)
Unrecognized net (gain)/losses from
actual experience different from assumed (45) (281)
Accrued postretirement benefit cost $(1,014) $(997)
Net periodic postretirement benefit cost included the following components:
1999 1998 1997
Service cost $13 $ 12 $ 10
Interest cost 65 49 48
Amortization of net gain from actual experience
different from assumed -- (61) (58)
Net periodic benefit cost $78 $ -- $ --
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7% as of June 30, 1999 and 7.25% as of
June 30, 1998 and 1997. For measurement purposes, the assumed health care
cost trend rate of 9.5% decreases gradually until an ultimate trend rate of
5.5% is reached over 8 years. In accordance with the terms of the
Postretirement Medical Benefit Plan, once costs are 150% of the 1993 level,
additional increases become the responsibility of the retiree.
The health care cost trend rate assumption has a significant effect on the
amount of obligation and expense reported. To illustrate, increasing the
health care trend rate by one percent each year would increase (decrease) the
accumulated postretirement benefit obligation as of June 30, 1999 and 1998 by
approximately ($5) and $2, respectively, and would have no material effect
on the net periodic postretirement benefit cost for the three years ended
June 30, 1999.
Employee Stock Ownership Plan
The Company has established an ESOP for eligible employees. Generally all
employees of the Company or the Bank who are at least age 21 and have been
credited with at least 1,000 hours during a twelve-month period are eligible
to participate.
<PAGE>
The ESOP borrowed $9.1 million at an interest rate of 7.25% from the Company
and used the funds to purchase 762,818 shares of the Company's common stock
in the public trading market. The loan is being repaid principally from the
Bank's discretionary contributions to the ESOP over a 15-year period. At June
30, 1999, the loan had an outstanding balance of $8.7 million. Shares
purchased with the loan proceeds are held in a suspense account for
allocation among participants as the loan is paid. Contributions to the ESOP
and shares released from the loan collateral in an amount proportional to the
repayment of the ESOP loan are allocated among participants on the basis of
compensation, as described in the plan, in the year of allocation. Benefits
generally become 100% vested after 5 years of vesting service and are
immediately vested on death, retirement or disability. In addition, in the
event of a change in control, as defined in the plan, any unvested portion of
benefits shall vest immediately. Forfeitures are added to the employer
contributions to the Plan and allocated to other participants.
As of June 30, 1999, 18,363 shares had been specifically allocated, 26,588
shares were committed to be released and 717,867 shares remain unallocated.
The fair value of the unallocated ESOP shares was $8.6 million at June 30,
1999.
In accordance with SOP 93-6, the Company recorded compensation expense of
$511 for the year ended June 30, 1999 which is equal to the shares
specifically allocated and committed to be released by the ESOP multiplied by
the average estimated fair value of common stock.
Benefit Restoration Plan
The Bank adopted the Benefit Restoration Plan of Cohoes Savings Bank ("BRP"),
in connection with the Conversion, to provide certain designated employees
with the benefits that would be due to such employees under the other benefit
plans if such benefits were not limited under the Internal Revenue Code.
Expense related to the BRP included in the consolidated statement of income
for the year ended June 30, 1999 was $17.
14. INCOME TAXES
The components of the income tax expense (benefit) are as follows:
1999 1998 1997
Current tax expense:
Federal $ 2,155 $2,450 $2,440
State 384 517 531
Deferred tax expense (benefit) (1,028) (317) 1
Total income tax expense $ 1,511 $2,650 $2,972
The provision for income taxes differs from that computed at the federal
statutory rate as follows:
1999 1998 1997
Tax at federal statutory rate $1,341 $2,291 $2,589
ESOP adjustment (10) -- --
State taxes, net of federal benefit 253 341 350
Other, net (73) 18 33
Total income tax expense $1,511 $2,650 $2,972
Effective rate 38.33% 39.34% 39.03%
<PAGE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at June 30,
1999 and 1998 are presented below:
1999 1998
Deferred tax assets:
Differences in reporting the provision for loan losses $ 1,731 $1,519
Differences in reporting certain accrued expenses 862 789
Contribution carryforward 762 --
Other 146 297
Total gross deferred tax assets 3,501 2,605
Deferred tax liabilities:
Differences in reporting the provision for loan losses 257 385
Deferred net loan origination fees 240 218
Differences in reporting depreciation -- 107
Differences in reporting certain accrued expenses 381 296
Other -- 4
Total gross deferred tax liabilities 878 1,010
Net deferred tax asset at end of year 2,623 1,595
Net deferred tax asset at beginning of year 1,595 1,278
Deferred tax expense (benefit) for the year $(1,028) $ (317)
The total deferred tax asset as of June 30, 1999 and 1998 is considered by
the Bank to be more likely than not realizable based upon the historical
level of taxable income in the prior years as well as the time period during
which the items giving rise to the deferred tax assets are expected to turn
around.
In addition to the deferred tax assets and liabilities described above, the
Bank also has a deferred tax (asset) liability of approximately $(150) and
$19 at June 30, 1999 and 1998, respectively, related to the net unrealized
gain (loss) on securities available for sale.
Under Section 593 of the Internal Revenue Code, thrift institutions such as
the Bank which met certain definitional tests, primarily relating to their
assets and the nature of their business, were permitted to establish a tax
reserve for bad debts and to make annual additions thereto, which additions
may, within specified limitations, be deducted in arriving at their taxable
income. The Bank's deduction with respect to "qualifying loans," which are
generally loans secured by certain interests in real property, could have
been computed using an amount based on the Bank's actual loss experience (the
"Experience Method"), or a percentage equal to 8% of the Bank's taxable
income (the "PTI Method"), computed without regard to this deduction and with
additional modifications and reduced by the amount of any permitted addition
to the nonqualifying reserve. Similar deductions or additions to the Bank's
bad debt reserve are permitted under the New York State Bank Franchise Tax;
however, for purposes of these taxes, the effective allowable percentage
under the PTI Method is approximately 32% rather than 8%.
<PAGE>
Effective January 1, 1997, Section 593 was amended, and the Bank is unable to
make additions to its tax bad debt reserve, is permitted to deduct bad debts
only as they occur and is additionally required to recapture (that is, take
into taxable income) over a multiyear period, beginning with the Bank's
taxable year beginning on January 1, 1997, the excess of the balance of its
bad debt reserves as of December 31, 1995 over the balance of such reserves
as of December 31, 1987, or over a lesser amount if the Bank's loan portfolio
has decreased since December 31, 1987. Such recapture requirements would be
deferred for each of the two successive taxable years beginning January 1,
1997, in which the Bank originates a minimum amount of certain residential
loans based upon the average of the principal amounts of such loans
originated by the Bank during its six taxable years preceding January 1,
1997. This amendment has no impact on the Bank's results of operations for
federal income tax purposes. The New York State tax law has been amended to
prevent a similar recapture of the Bank's bad debt reserve, and to permit
continued future use of the bad debt reserve method for purposes of
determining the Bank's New York State tax liability.
In addition, the Bank has accumulated bad debt reserves for tax purposes of
$3.7 million under Section 593 through December 31, 1987 for which no
deferred taxes have been provided. Under the tax laws as amended, the event
that would result in taxation of these reserves is the failure of the Bank to
maintain a specified qualifying-assets ratio or meet other thrift definition
tests for New York State tax purposes.
15. COMMITMENTS AND CONTINGENT LIABILITIES
Off-Balance Sheet Financing and Concentrations of Credit
The Bank is a party to certain financial instruments with off-balance sheet
risk in the normal course of business to meet the financing needs of its
customers. These financial instruments include the Bank's commitments to
extend credit. Those instruments involve, to varying degrees, elements of
credit risk in excess of the amount recognized on the consolidated statements
of financial condition. The contract amounts of those instruments reflect the
extent of involvement the Bank has in particular classes of financial
instruments.
The Bank's exposure to credit loss in the event of nonperformance by the
other party to the commitments to extend credit is represented by the
contractual notional amount of those instruments. The Bank uses the same
credit policies in making commitments as it does for on-balance sheet
instruments.
Unless otherwise noted, the Bank does not require collateral or other
security to support financial instruments with credit risk.
Contract amounts of financial instruments that represent credit risk as of
June 30, 1999 and 1998 at fixed and variable interest rates are as follows:
1999
Fixed Variable Total
Financial instruments whose contract amounts
represent credit risk (including unused lines
of credit and unadvanced funds):
Commercial business loans $ -- $25,529 $25,529
Conventional mortgages 8,195 2,623 10,818
Commercial mortgage loans 5,893 20,264 26,157
Construction loans -- 1,439 1,439
Credit card loans -- -- --
Consumer loans 1,586 14,227 15,813
Total $15,674 $64,082 $79,756
<PAGE>
1998
Fixed Variable Total
Financial instruments whose contract amounts
represent credit risk (including unused lines
of credit and unadvanced funds):
Commercial business loans $ -- $14,897 $14,897
Conventional mortgages 11,971 1,338 13,309
Commercial mortgage loans -- 11,991 11,991
Construction loans -- 890 890
Credit card loans -- 2,996 2,996
Consumer loans 203 12,886 13,089
Total $12,174 $44,998 $57,172
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since certain commitments are
expected to expire without being fully drawn upon, the total commitment
amounts do not necessarily represent future cash requirements. The Bank
evaluates each customer's credit-worthiness on a case-by-case basis. The
amount of collateral, if any, required by the Bank upon the extension of
credit is based on management's credit evaluation of the customer. Mortgage
and construction loan commitments are secured by a first lien on real estate.
Commitments to extend credit may be written on a fixed rate basis, thus
exposing the Bank to interest rate risk, given the possibility that market
rates may change between commitment and actual extension of credit.
Certain mortgage loans are written on an adjustable basis and include
interest rate caps which limit annual and lifetime increases in the interest
rates on such loans. Generally, adjustable rate mortgages have an annual rate
increase cap of 2% and lifetime rate increase cap of 4.5% to 6.75%. These
caps expose the Bank to interest rate risk should market rates increase above
these limits. As of June 30, 1999 and 1998, $199.3 million and $221.0
million, respectively, of mortgage loans had interest rate caps.
The Bank generally enters into rate lock agreements at the time that loan
applications are made. These rate lock agreements fix the interest rate at
which the loan, if ultimately made, will be originated. Such agreements may
exist with borrowers with whom commitments to extend credit have been made,
as well as with individuals who have not yet received a commitment.
In order to reduce the interest rate risk associated with these items as well
as its portfolio of loans held for sale, the Bank enters into agreements to
sell loans in the secondary market to unrelated investors. At June 30, 1999
and 1998, the Bank has no commitments to sell loans to unrelated investors.
Concentrations of Credit
The Bank primarily grants consumer and residential loans to customers located
in the New York State counties of Albany, Rensselaer, Schenectady and
Saratoga. Although the Bank has a diversified loan portfolio, a substantial
portion of its debtors' ability to honor their contracts are dependent upon
the real estate and construction-related sectors of the economy.
<PAGE>
Borrowing Arrangements
The Bank has lines of credit available with a correspondent bank totaling
approximately $53.6 million. These lines of credit expire on October 28,
1999. As of June 30, 1999, there was no outstanding balances on these lines.
Leases
The Bank leases certain branches, equipment and automobiles under various
noncancelable operating leases. The future minimum payments by year and the
aggregate, under all significant noncancelable operating leases with initial
or remaining terms of one year or more, are as follows:
Operating
Leases
Year ending June 30:
2000 $ 457
2001 389
2002 250
2003 178
2004 and thereafter 60
Total $1,334
Total lease expense was approximately $441, $383 and $298 for the years ended
June 30, 1999, 1998 and 1997, respectively.
Contingent Liabilities
In the ordinary course of business, there are various legal proceedings
pending against the Bank. Based on consultation with outside counsel,
management considers that the aggregate exposure, if any, arising from such
litigation would not have a material adverse effect on the Bank's statement
of financial condition.
16. DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures About the Fair Value of Financial Instruments,"
requires that the Bank disclose estimated fair values for financial
instruments. Fair value estimates, methods and assumptions are set forth
below.
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. These
estimates do not reflect any premium or discount that could result from
offering for sale at one time the Bank's entire holdings of a particular
financial instrument. The fair value estimates of a significant portion of
the Bank's financial instruments were based on judgments regarding future
expected net cash flow, current economic conditions, risk characteristics of
various financial instruments and other factors. These estimates are
subjective in nature and involve uncertainties and matters of significant
judgment and, therefore, cannot be determined with precision. Changes in
assumptions could significantly affect the estimates.
Fair value estimates are based on existing on and off-balance sheet financial
instruments without attempting to estimate the value of anticipated future
business and the value of assets and liabilities that are not considered
financial instruments. In addition, the tax ramifications related to the
realization of the unrealized gains and losses can have a significant effect
on fair value estimates and have not been considered in the estimate of fair
value under SFAS No. 107.
<PAGE>
Short-Term Financial Instruments
The fair value of certain financial instruments is estimated to approximate
their carrying values because the remaining term to maturity of the financial
instruments is less than 90 days or the financial instrument reprices in 90
days or less. Such financial instruments include cash and due from banks,
federal funds sold, interest-bearing deposits with banks and accrued interest
receivable.
Securities Available for Sale and Investment Securities
Fair values are based upon market prices. If a quoted market price is not
available for a particular security, the fair value is determined by
reference to quoted market prices for securities with similar
characteristics.
Loans
Fair values are estimated for portfolios of loans with similar financial
characteristics. Loans are segregated by type, including residential real
estate, commercial real estate and other consumer loans.
The estimated fair value of performing loans is calculated by discounting
scheduled cash flows through the estimated maturity using estimated market
discount rates that reflect the credit and interest rate risk inherent in the
respective loan portfolio.
Estimated fair value for nonperforming loans is based on estimated cash flows
discounted using a rate commensurate with the risk associated with the
estimated cash flows. Assumptions regarding credit risk, cash flows and
discount rates are judgmentally determined using available market information
and specific borrower information.
Management has made estimates of fair value discount rates that it believes
to be reasonable. However, because there is no market for many of these
financial instruments, management has no basis to determine whether the
estimated fair value would be indicative of the value negotiated in an actual
sale.
Loans Held for Sale
The estimated fair value of loans held for sale is calculated by either using
quoted market rates or, in the case where a firm commitment has been made to
sell the loan, the firm committed price was used. The estimated fair value of
loans held for sale approximated their book value.
Deposit Liabilities
The estimated fair value of deposits with no stated maturity, such as
noninterest-bearing demand deposits, savings and money market accounts, is
regarded to be the amount payable on demand. The estimated fair value of time
deposits is based on the discounted value of contractual cash flows. The
discount rate is estimated using the rates currently offered for deposits of
similar remaining maturities. The fair value estimates for deposits do not
include the benefit that results from the low-cost funding provided by the
deposit liabilities as compared to the cost of borrowing funds in the market.
Borrowings
The estimated fair value of FHLB borrowings is based on the discounted value
of their contractual cash flows. The discount rate used in the present value
computation is estimated by comparison to the current interest rates charged
by the FHLB for advances of similar remaining maturities.
<PAGE>
Table of Financial Instruments
The carrying values and estimated fair values of financial instruments as of
June 30, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
1999 1998
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents $ 11,114 $ 11,114 $ 14,229 $ 14,229
Mortgage loans held for sale 339 339 38 38
Securities available for sale 44,742 44,742 48,720 48,720
Investment securities 54,455 53,721 45,424 45,547
Loans 525,030 491,167 416,292 425,774
Less--Allowance for loan losses (4,025) -- (3,533) --
Net loans receivable 521,005 491,167 412,759 425,774
Accrued interest receivable 3,776 3,776 3,482 3,482
Financial liabilities:
Due to depositors--
Demand, savings and money market
accounts 240,908 240,908 218,492 218,492
Time deposits 205,215 206,811 231,049 246,220
Mortgagors' escrow deposits 10,787 10,787 8,994 8,994
Borrowings 49,045 50,804 19,897 18,858
</TABLE>
Commitments to Extend Credit, Unused Lines of Credit and Standby Letters
of Credit
The fair value of commitments to extend credit, unused lines of credit and
standby letters of credit is estimated using the fees currently charged to
enter into similar agreements, taking into account the remaining terms of the
agreements and the present creditworthiness of the counterparties. For fixed
rate commitments to extend credit and unused lines of credit, fair value also
considers the difference between current levels of interest rates and the
committed rates. Based upon the estimated fair value of commitments to extend
credit and unused lines of credit, there are no significant unrealized gains
or losses associated with these financial instruments.
<PAGE>
17. COHOES BANCORP, INC.--PARENT COMPANY ONLY FINANCIAL STATEMENTS
The following condensed statement of financial condition as of June 30, 1999
and condensed statements of operations and cash flows for the period from
December 31, 1998 through June 30, 1999 should be read in conjunction with
the consolidated financial statements and the notes thereto.
Condensed Statement of Financial Condition
(000's omitted) June 30, 1999
Assets:
Checking account with subsidiary $ 28
Investment in subsidiary 92,985
Loan receivable from ESOP 8,742
Loan receivable from subsidiary 35,700
Other assets 2,125
Total assets $139,580
Liabilities:
Other liabilities $ 150
Stockholders' equity:
Preferred stock, $.01 par value; 5,000,000 shares
authorized; none issued
Common stock, $.01 par value; 25,000,000 shares
authorized; 9,535,225 shares issued 95
Additional paid-in capital 93,004
Retained earnings subject to restrictions 55,173
Unallocated common stock held by ESOP (8,598)
Accumulated other comprehensive loss, net of tax (244)
Total stockholders' equity 139,430
Total liabilities and stockholders' equity $139,580
Condensed Statement of Operations
(000's omitted) For the Period Ended
June 30, 1999
Interest income $ 1,371
Interest expense --
Net interest income 1,371
Noninterest income --
Noninterest expenses:
Contribution to Cohoes Savings Foundation, Inc. 2,777
Other noninterest expense 200
Total noninterest expense 2,977
Net loss before income tax benefit (1,606)
Benefit for income taxes 627
Loss before equity in undistributed
earnings of subsidiary (979)
Equity in undistributed earnings of subsidiary 3,410
Net income $ 2,431
<PAGE>
Condensed Statement of Cash Flows
(000's omitted) For the Period Ended
June 30, 1999
Cash flows from operating activities:
Net income $ 2,431
Adjustments to reconcile net loss to net cash used
in operating activities:
Charitable contribution to the Cohoes Savings
Foundation, Inc. 2,777
Increase in deferred income taxes (708)
Increase in other assets (1,417)
Increase in other liabilities 150
Undistributed earnings of subsidiary bank (3,410)
Total adjustments (2,608)
Net cash used by operating activities (177)
Cash flows from investing activities:
Investment in common stock of subsidiary (45,175)
Loan made to subsidiary (35,700)
Loan made to ESOP (8,742)
Net cash used in investing activities (89,617)
Cash flows from financing activities:
Net proceeds from issuance of common stock in
initial public offering 90,350
Cash dividends paid (528)
Net cash provided by financing activities 89,822
Net increase in cash 28
Cash, beginning of year --
Cash, end of year $ 28
<PAGE>
18. QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected unaudited quarterly financial data for the years ended June 30, 1999
and 1998 is presented below:
Fourth Third Second First
Quarter Quarter Quarter Quarter
1999:
Interest income $11,209 $11,157 $10,556 $10,116
Interest expense 4,803 4,786 5,536 5,209
Net interest income 6,406 6,371 5,020 4,907
Provision for loan losses 450 425 180 180
Noninterest income 740 701 797 678
Noninterest expense 4,038 3,984 8,628 3,793
Income before income taxes 2,658 2,663 (2,991) 1,612
Income taxes 992 1,043 (1,153) 629
Net income (loss) $ 1,666 $ 1,620 $(1,838) $ 983
Earnings per share since
conversion:
Basic $ .19 $ .18 N/A N/A
Diluted $ .19 $ .18 N/A N/A
1998:
Interest income $ 9,965 $ 9,415 $ 9,558 $ 9,485
Interest expense 5,056 4,655 4,785 4,766
Net interest income 4,909 4,760 4,773 4,719
Provision for loan losses 820 180 250 150
Noninterest income 632 706 746 659
Noninterest expense 3,735 3,420 3,380 3,232
Income before income taxes 986 1,866 1,889 1,996
Income taxes 371 731 750 798
Net income $ 615 $ 1,135 $ 1,139 $ 1,198
19. SUBSEQUENT EVENT
On July 2, 1999, a special meeting of Stockholders of the Company was held in
which the stockholders voted and approved the adoption of the 1999 Stock
Option and Incentive Plan (Option Plan) and the 1999 Recognition and
Retention Plan (RRP).
The Company has reserved for future issuance pursuant to the Option Plan
953,523 shares of common stock, which is equal to 10% of the common stock
issued in the conversion. Under the Option Plan, stock options (which expire
ten years from the date of grant) will be granted to the directors, officers
and key employees of the Bank. Each option entitles the holder to purchase
one share of the Company's common stock at an exercise price equal to the
fair market value of the stock at the date of the grant. Options will be
exercisable in whole or in part over the vesting period. The options vest
ratably over a 5-year period. However, all options become 100% exercisable in
the event of death or disability.
Pursuant to the RRP, a total of 381,409 shares of common stock, which is
equal to 4% of the common stock issued in the Conversion, will be granted to
directors, officers and key employees of the Company. The objective of the
RRP is to enable the Company to provide officers, key employees and directors
with a proprietary interest in the Company as an incentive to contribute to
its success. The RRP shares will be purchased on the public trading market.
These purchases will be funded by the Company. Awards vest at a rate of 20%
per year, commencing one year from the date of the award. Awards become 100%
vested in the event of death or disability.
<PAGE>
CORPORATE INFORMATION * Cohoes Bancorp, Inc. & Subsidiary
Corporate Offices
Cohoes Bancorp, Inc.
75 Remsen St.
Cohoes, New York 12047
(518) 233-6500
Annual Meeting
The annual meeting of Cohoes Bancorp, Inc. will be held 10:00 a.m. Tuesday,
October 26, 1999 at The Century House, 977 New Loudon Road, Route 9 in
Latham, New York.
Form 10-K
For the 1999 fiscal year, Cohoes Bancorp, Inc. will file an Annual Report on
Form 10-K. Shareholders wishing a copy may obtain one free of charge by
writing:
Richard A. Ahl
Executive Vice President, Secretary & CFO
Cohoes Bancorp, Inc.
75 Remsen St.
Cohoes, New York 12047
Transfer Agent and Registrar
American Stock Transfer & Trust Company 40 Wall Street New York, New York 10005
Independent Public Accountants
Arthur Andersen LLP 1345 Avenue of the Americas New York, New York 10105
Special Counsel
Serchuk & Zelermyer, L.L.P. 81 Main Street White Plains, New York 10601
Common Stock
The common stock of Cohoes Bancorp, Inc. trades on the Nasdaq stock market
under the symbol "COHB." At September 1, 1999, there were approximately 5,000
holders of record and approximately 2,500 beneficial shareholders.
Cohoes Bancorp, Inc. common stock was issued at $10.00 per share in
connection with the Company's initial public offering completed on December
31, 1998. The following table shows the range of high and low sale prices for
each quarterly period the Company began trading in January 1999.
1999 High Low
Third Quarter $13.00 $10.38
Fourth Quarter $12.00 $ 9.25
During fiscal 1999, the Company declared dividends totaling $528,000 or $.06
per share on its common stock. Dividend payment decisions are made with
consideration of a variety of factors including earnings, financial
condition, market considerations and regulatory restrictions. Restrictions on
dividend payments are described in Note 2 of the Notes to Consolidated
Financial Statements included in this Annual Report.
<PAGE>
COHOES BANCORP, INC.
BOARD OF DIRECTORS
Duncan S. MacAffer
Chairman, Cohoes Bancorp, Inc.; Attorney
Arthur E. Bowen
President, Bowen Funeral Home, Inc.
Walter H. Speidel
Retired President & CEO, Cohoes Savings Bank
Harry L. Robinson
President & CEO, Cohoes Bancorp, Inc.
R. Douglas Paton
Retired stockbroker; independent financial consultant
J. Timothy O'Hearn
President, Century House, Inc.
Chester C. DeLaMater
Retired Executive Vice President & Secretary, Cohoes Savings Bank
Peter G. Casabonne
Managing Partner, Fuller Realty, Inc.
Michael L. Crotty
President, Capitol Equipment, Inc.
Donald A. Wilson
President, Wilson & Stark CPA, PC.
Frederick G. Field Jr.
President, Capitol Hill Management, Inc.
Directors of Cohoes Bancorp, Inc. also serve as Directors of Cohoes Savings Bank
DIRECTOR EMERITUS
Charles R. Crotty
OFFICERS
Harry L. Robinson, President & CEO
Richard A. Ahl Executive Vice President, Secretary & CFO
COHOES SAVINGS BANK
OFFICERS
Harry L. Robinson, President & CEO
Richard A. Ahl, Executive Vice President, Secretary & CFO
Albert J. Picchi, Senior Vice President
Johanna O. Robbins, Treasurer
Kathleen Kelleher, Operations Officer
Tammy L. Kimble, Director of Human Resources
John G. Sturn, Director of Retail Banking
Lisa A. Malone, Director of Lending
<PAGE>
Corporate Offices
Cohoes Bancorp, Inc.
75 Remsen Street
Cohoes, New York 12047
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
State of
Percent of Incorporation
Parent Subsidiary Ownership or Organization
Cohoes Bancorp, Inc. Cohoes Savings Bank 100% New York
Cohoes Savings Bank CSB Financial Services, Inc. 100% New York
Cohoes Savings Bank CSB Funding, Inc. 100% New York
Cohoes Savings Bank CSB Services Agency, Inc. 100% New York
Cohoes Savings Bank Cohoes Realty, Incorporated 100% New York
CSB Services Agency, Community Bank Insurance 50% New York
Inc. Brokers of New York, LLC
<PAGE>
EXHIBIT 23
CONSENTS OF EXPERTS AND COUNSEL
<PAGE>
EXHIBIT 23
ARTHUR ANDERSEN
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in the Registration Statements (Nos. 333-87571 and 333-87569)
on Form S-8 of Cohoes Bancorp, Inc. of our report dated August 5,1999
incorporated by reference in Cohoes Bancorp, Inc.'s June 30, 1999 Annual
Report on Form 10-K and to all references to our Firm included in these
registration statements.
/s/ Arthur Andersen LLP
New York, New York
September 24, 1999
<PAGE>
EXHIBIT 27
FINANCIAL DATA SCHEDULE
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated statement of financial condition and the consolidated statement
of income and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 8,886
<INT-BEARING-DEPOSITS> 358
<FED-FUNDS-SOLD> 1,870
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 44,742
<INVESTMENTS-CARRYING> 54,455
<INVESTMENTS-MARKET> 53,721
<LOANS> 524,779
<ALLOWANCE> 4,025
<TOTAL-ASSETS> 650,470
<DEPOSITS> 446,123
<SHORT-TERM> 0
<LIABILITIES-OTHER> 5,085
<LONG-TERM> 49,045
0
0
<COMMON> 95
<OTHER-SE> 139,335
<TOTAL-LIABILITIES-AND-EQUITY> 650,470
<INTEREST-LOAN> 36,256
<INTEREST-INVEST> 5,575
<INTEREST-OTHER> 1,207
<INTEREST-TOTAL> 43,038
<INTEREST-DEPOSIT> 17,516
<INTEREST-EXPENSE> 20,334
<INTEREST-INCOME-NET> 22,704
<LOAN-LOSSES> 1,235
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 20,443
<INCOME-PRETAX> 3,942
<INCOME-PRE-EXTRAORDINARY> 2,431
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,431
<EPS-BASIC> .37
<EPS-DILUTED> .37
<YIELD-ACTUAL> 3.92
<LOANS-NON> 4,321
<LOANS-PAST> 0
<LOANS-TROUBLED> 672
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,533
<CHARGE-OFFS> 994
<RECOVERIES> 65
<ALLOWANCE-CLOSE> 4,025
<ALLOWANCE-DOMESTIC> 2,782
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,243
</TABLE>
