SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2)
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
Oswego County Bancorp, Inc.
________________________________________________________________________________
(Name of Registrant as Specified In Its Charter)
Oswego County Bancorp, Inc.
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No Fee Required
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
--------------------------------------------------------------------
2. Aggregate number of securities to which transaction applies:
--------------------------------------------------------------------
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
--------------------------------------------------------------------
4. Proposed maximum aggregate value transaction:
--------------------------------------------------------------------
5. Total fee paid:
--------------------------------------------------------------------
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration number, or
the Form or Schedule and the date of its filing.
1. Amount previously paid:
--------------------------------------------------------------------
2. Form, Schedule or Registration Statement No.:
--------------------------------------------------------------------
3. Filing Party:
--------------------------------------------------------------------
4. Date Filed:
--------------------------------------------------------------------
<PAGE>
OSWEGO COUNTY BANCORP, INC.
44 East Bridge Street
Oswego, New York 13126
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO THE STOCKHOLDERS OF OSWEGO COUNTY BANCORP, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of OSWEGO
COUNTY BANCORP, INC. (the "Company") will be held at the EconoLodge, 70 East
First Street, Oswego, New York, on April 20, 2000, at 4:00 P.M. for the
following purposes:
1. To elect two directors of the Company, to serve a three year term
expiring in 2003, or until the election and qualification of their successors;
2. To approve and adopt the Oswego County Bancorp, Inc. Stock Option Plan
(the "Stock Option Plan"), and reserve 39,950 shares of the Company's common
stock for grant of options under the Stock Option Plan to certain employees and
directors of the Company;
3. To approve and adopt the Oswego County Bancorp, Inc. Restricted Stock
Plan (the "Restricted Stock Plan"), and reserve 11,985 shares of the Company's
common stock for grant of restricted stock under the Restricted Stock Plan to
certain employees and directors of the Company;
4. To amend the Certificate of Incorporation to reduce the number of
authorized shares from a total of 8,500,000, consisting of 7,500,000 common
shares and 1,000,000 preferred shares, to a total of 3,500,000 shares,
consisting of 3,000,000 common shares and 500,000 preferred shares.
5. To ratify and approve the appointment of independent accountants for
2000; and
6. To transact such other business as may properly come before the meeting
or any adjournment or adjournments thereof.
NOTICE IS HEREBY GIVEN that the stock transfer books of the Company will
not be closed, but only stockholders of record at the close of business on March
16, 2000 will be entitled to notice of and to vote at the meeting.
STOCKHOLDERS WHO ARE UNABLE TO BE PRESENT PERSONALLY MAY ATTEND THE
MEETING BY PROXY. SUCH STOCKHOLDERS ARE REQUESTED TO DATE, SIGN AND RETURN THE
ENCLOSED PROXY. THE PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS VOTED.
BY ORDER OF THE BOARD OF DIRECTORS
----------------------------------------
Gregory J. Kreis
President and Chief Executive Officer
DATED: March 20, 2000
Oswego, New York
- 2 -
<PAGE>
PROXY STATEMENT
FOR THE
ANNUAL MEETING OF STOCKHOLDERS
OF
OSWEGO COUNTY BANCORP, INC.
-------------------------
TO BE HELD AT THE ECONOLODGE, 70 EAST FIRST STREET,
OSWEGO, NEW YORK
APRIL 20, 2000
This Proxy Statement is furnished to Stockholders by the Board of
Directors of Oswego County Bancorp, Inc. in connection with the solicitation of
proxies for use at the Annual Meeting of Stockholders to be held on April 20,
2000, at 4:00 P.M., and at any adjournments of the meeting, for the purposes set
forth in the accompanying Notice of Annual Meeting of Stockholders. This Proxy
Statement and the accompanying form of proxy are being mailed to Stockholders
commencing on or about March 24, 2000.
If the enclosed form of proxy is properly executed and returned, the
shares represented by the proxy will be voted in accordance with the proxy's
instructions. Any proxy given pursuant to this solicitation may be revoked by
the Stockholder at any time prior to its use by written notice to the President
of the Company.
RECORD DATE AND VOTING SECURITIES
The By-laws of the Company provide that the Annual Meeting of Shareholders
shall be held at any time chosen by the Board of Directors within thirteen (13)
months after the later of the date of incorporation of the Company or the last
annual meeting of stockholders. In accordance with the By-laws, the Board of
Directors has established April 20, 2000, as the date for the first Annual
Meeting of Stockholders. The Board of Directors has fixed the close of business
on March 16, 2000 as the record date (the "Record Date") for determining the
holders of common stock entitled to notice of and to vote at the meeting. On the
Record Date, the Company had outstanding and entitled to vote a total of 887,230
shares of common stock.
Each outstanding share of common stock is entitled to one vote on all
matters to be brought before the meeting, except that the shares of Oswego
County MHC shall not be voted for or against the adoption of the Oswego County
Bancorp, Inc. Stock Option Plan and the Oswego County Bancorp, Inc. Restricted
Stock Plan. Shares held by the Oswego County Charitable Foundation will be voted
in the same ratio as all other shares of common stock, other
3
<PAGE>
than shares held by Oswego County MHC, which are voting on proposals considered
by the stockholders of the Company.
The presence in person or by proxy of a majority of the shares of common
stock outstanding on the Record Date will constitute a quorum for purposes of
conducting business at the Annual Meeting. For purposes of determining the votes
cast with respect to any matter presented for consideration at the Annual
Meeting, only those votes cast "FOR" or "AGAINST" are included. Abstentions and
broker non-votes (shares held by brokers on behalf of their customers, which may
not be voted on certain matters because the brokers have not received specific
voting instructions from their customers with respect to such matters) will be
counted solely for the purpose of determining whether a quorum is present.
CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of the Record Date, the shares of
common stock beneficially owned by Oswego County MHC, which is the only person
or organization known by the Company to own more than 5% of the Company's common
stock; by Directors individually; by executive officers individually; and by
Directors and executive officers as a group.
<TABLE>
<CAPTION>
Name of Number of
Beneficial Owner(1) Shares Owned(2) Percent (%) of Class
<S> <C> <C>
Oswego County MHC 471,750 53.2%
Gregory J. Kreis 15,437(3) 1.7%
President and Chief Executive Officer
Michael R. Brower, Director 1,150 0.1%
Bruce P. Frassinelli, Director 1,000 0.1%
Paul J. Heins, Director 3,500 0.4%
Paul W. Schneible, Director 8,000(4) 0.9%
Bernard Shapiro, Director 2,500(5) 0.3%
Deborah F. Stanley, Director 750 0.1%
Carl K. Walrath, Director 5,000(6) 0.6%
Stephen B. Albright -0- -0-
Senior Vice President and Treasurer
Gregory H. May 576(7) 0.1%
Senior Vice President, Consumer Lending
Judith S. Perry 2,130(8) 0.2%
Senior Vice President, Operations
Mary E. Lilly 1,048(9) 0.1%
Vice President, Loan Operations
- 2 -
<PAGE>
Ronald Tascarella 1,094 0.1%
Vice President, Commercial Lending
All Directors and executive officers
as a group 42,185 4.8%
</TABLE>
(1) The mailing address for each person listed is 44 East Bridge Street,
Oswego, New York 13126.
(2) A Director or executive officer owning Company Common Stock in the Bank's
401(k) plan has sole voting power and sole power to sell ("investment
power") with respect to such stock. A Director or executive officer owning
stock held by the Employee Stock Ownership Plan ("ESOP") has sole voting
power with respect to such stock but does not have the investment power
with respect to such stock.
(3) Includes 15,162 shares in the 401(k) plan and 274 shares in the ESOP.
(4) Mr. Schneible shares voting and investment power.
(5) Mr. Shapiro shares voting and investment power with respect to 1,500
shares.
(6) Mr. Walrath shares voting and investment power with respect to 2,500
shares.
(7) Held in 401(k) plan.
(8) Includes 123 shares in the 401(k) plan and 99 shares in the ESOP.
(9) Includes 870 shares in the 401(k) plan and 78 shares in the ESOP.
(10) Includes 98 shares in the ESOP.
(11) Includes 1,731 shares in the 401(k) plan and 451 shares in the ESOP.
Item 1. ELECTION OF DIRECTORS
Each person nominated for election at this Annual Meeting of Stockholders
has held various positions for the past five years with either the Company or
Oswego County Savings Bank, as specified in the table below, and has sole voting
power with respect to the securities beneficially owned. Beneficial ownership
includes securities which could become exercisable within 60 days of the date of
this Proxy Statement. In the event that any of the nominees are unable to serve,
the proxy will be voted in accordance with the best judgment of the person or
persons acting under it. It is not anticipated that any of the nominees will be
unable to serve. The nominees presently serve as directors and as Trustees of
Oswego County MHC.
If elected, each nominee has agreed to serve as a director.
Nominees and Directors
Class 1
Positions held with
Term expiring Oswego County Director
in 2000 Age(1) Bancorp Since(2)
Gregory J. Kreis 53 President and Chief 1997
Executive Officer
Paul W. Schneible 52 Director 1996
- 4 -
<PAGE>
Class 2
Positions held with
Term expiring Oswego County Director
in 2001 Age(1) Bancorp Since(2)
Bruce P. Frassinelli 61 Chairman of the Board 1995
Paul J. Heins 61 Director 1989
Deborah F. Stanley 50 Director 2000
Class 3
Positions held with
Term expiring Oswego County Director
in 2002 Age(1) Bancorp Since(2)
Michael R. Brower 50 Director 1996
Bernard Shapiro 74 Director 1963
Carl K. Walrath 73 Director 1974
(1) As of December 31, 1999.
(2) Includes service as a Trustee of Oswego County Savings Bank.
Nominees to the Board of Directors must be elected by a plurality of
affirmative votes cast by Shareholders.
Management recommends a vote "FOR" Item 1.
BOARD OF DIRECTORS AND COMMITTEE MEETINGS
The Board of Directors of Oswego County Bancorp also acts as the Board of
Directors of the Bank. The Board of Directors meets at least monthly and may
have additional special meetings. Following the effectiveness of the
reorganization of the Bank on July 13, 1999, the Board of Directors met 7 times
in 1999, with 100% of the directors in attendance.
There are currently five committees of the Board of Directors, consisting
of the Executive Committee, the Audit Committee, the Loan Committee, the
Nominating Committee, and the Personnel and Compensation Committee.
- 5 -
<PAGE>
The Executive Committee, to the extent permitted by law, decides all
corporate matters which need to be decided between regular Board meetings. The
Executive Committee members rotate monthly. The Executive Committee did not meet
in 1999.
The Audit Committee is comprised of four of the outside directors of the
Company, Messrs. Brower (Chairman), Frassinelli, Heins and Schneible and has, as
its function, the review and implementation of accounting and audit procedures
utilized by the Company and the Bank internally, and as recommended by the
independent accountants. The Audit Committee also makes recommendations to the
Board regarding selection of the accountants for the forthcoming fiscal year.
The Audit Committee met once in 1999, with 100% of the members in attendance.
The Loan Committee meets as needed to review and approve loan
applications. The Loan Committee has three members, consisting of Mr. Kreis and
two directors who rotate monthly. The Loan Committee met 21 times in 1999, with
100% of the members in attendance.
The Nominating Committee meets to nominate Directors to fill the terms of
the upcoming year. The members of the Nominating Committee are Heins (Chairman),
Brower and Schneible. The Nominating Committee met once in 1999, with 100% of
the members in attendance. The Committee will consider recommendations from
stockholders if submitted in a timely manner and will apply the same criteria to
all persons being considered.
The Personnel and Compensation Committee, comprised of Messrs. Frassinelli
(Chairman), Brower and Heins, reviews the compensation of the President and
Chief Executive Officer of the Bank and makes recommendations in that regard to
the Board as a whole. The Committee will administer the Stock Option Plan and
the Restricted Stock Plan, if the stockholders approve these Plans. The
Personnel and Compensation Committee met 7 times in 1999, with 100% of the
members in attendance.
The Chairman of the Board receives $1,450 per board meeting while the
other non-employee directors receive $1,250 per meeting. In addition, the
outside directors receive $350 per committee meeting and the Chairmen of the
Audit Committee and the Personnel and Compensation Committee receive $100 per
meeting in addition. Directors receive a fee only for the board and committee
meetings that they attend.
BUSINESS EXPERIENCE OF DIRECTORS
The business experience of each director for at least the past five years
is set forth below.
Michael R. Brower. Mr. Brower is currently managing member and Chief
Executive Officer of the Oswego Cranberry Company. Previously, Mr. Brower served
as Executive Director of the Oswego County Co-Operative Extension.
Bruce P. Frassinelli. Mr. Frassinelli retired as of January 1, 1999.
Previously, he was the publisher and editor of the Palladium Times Newspaper,
Oswego, New York.
- 6 -
<PAGE>
Paul J. Heins. Mr. Heins is the owner of Paul's Big M Grocery Store,
Oswego, New York.
Gregory J. Kreis. Mr. Kreis has served as president and chief executive
officer of Oswego County Savings since January 1997. Previously, Mr. Kreis
served as president and chief executive officer of Factory Point National Bank,
Manchester, Vermont.
Paul W. Schneible. Mr. Schneible is the owner of Paul W. Schneible, CPA,
Accountants and Consultants, Oswego, New York.
Bernard Shapiro. Mr. Shapiro is currently retired. Previously, Mr. Shapiro
was the owner of a retail clothing store.
Deborah F. Stanley. Mrs. Stanley is the President of Oswego State
University.
Carl K. Walrath. Mr. Walrath is currently retired. Previously, Mr. Walrath
owned an insurance agency.
EXECUTIVE OFFICERS
The executive officers of the Company and the Bank are, in addition to Mr.
Kreis:
Stephen Albright. Mr. Albright joined the Bank in January, 2000 as Senior
Vice President and Treasurer. He previously worked at Rochester Community
Savings Bank as Senior Vice President/Controller. He is a certified public
accountant.
Gregory H. May. Mr. May was promoted to Senior Vice President, Consumer
Lending of the Bank in December 1998. He joined the Bank in April 1997 as vice
president, consumer lending. Prior to April 1997, he held a variety of
mortgage-related positions in Upstate New York and most recently was regional
manager for the central region of Marine Midland Mortgage Company.
Judith S. Percy. Ms. Percy was promoted to Senior Vice President,
Operations in December 1998. She is responsible for management information
systems as well as internal operations and facilities management. Previously,
she served as vice president of operations and has held a variety of positions
at the Bank since June 1979.
Mary E. Lilly. Ms. Lilly has been Vice President, Loan Operations since
June 1999. Previously, she had worked in most areas of the Bank since starting
in April 1974. Most recently she had been security and compliance officer.
Ronald Tascarella. Mr. Tascarella has been Vice President, Commercial
Lending since June 1998. He has worked at several banks in Central New York in
the commercial lending area since 1979. Most recently he had worked at
Skaneateles Savings Bank and The Savings Bank of Utica.
- 7 -
<PAGE>
DEFERRED COMPENSATION PLAN FOR DIRECTORS
In 1997, the Bank instituted a deferred compensation plan for Directors
who may elect to defer all or part of their Directors fees to fund the plan. The
plan provides that deferred fees are to be invested in mutual funds, as selected
by the individual Directors. At December 31, 1999, deferred Directors fees
included in the Bank's other liabilities aggregated $329,629.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on the Company's review of copies of forms received, or the
written representations from reporting persons to the Company that no Forms 5
were required, the Company believes that all directors, officers and beneficial
owners of more than 10% of the securities of the Company have timely filed all
reports of ownership and changes in ownership in the Company's stock with the
Securities and Exchange Commission, and that these reporting persons have been
in compliance with reporting requirements for fiscal 1999, as required by
Section 16(a) of the Securities Exchange Act of 1934.
EXECUTIVE COMPENSATION
The following table sets forth the cash and certain other compensation
paid by the Bank for services rendered in all capacities during the fiscal years
ended December 31, 1999, 1998 and 1997 to the two highest paid officers of the
Bank and to all of the Bank's officers as a group. Officers of the Bank do not
receive separate compensation for service as officers of the Company or Oswego
County MHC.
<TABLE>
<CAPTION>
Annual Compensation(1)
------------------------------------------------------
Name and Fiscal All Other
Principal Position Year Salary Bonus Compensation
<S> <C> <C> <C> <C>
Gregory J. Kreis 1999 $ 175,000 $ --(2) $ 6,911
President and Chief 1998 $ 150,000 $ 20,000 $ 7,693
Executive Officer 1997 $ 140,000 $ -- $ 2,149
Gregory H. May 1999 $ 78,000 $ --(3) $ --
Senior Vice President, 1998 $ 72,800 $ -- $ --
Consumer Lending 1997 $ 70,000 $ -- $ --
All officers as a group 1999 $ 484,246 $ 3,900 $ 9,595
1998 $ 452,358 $ -- $ 9,560
1997(4) $ 502,614 $ 4,620 $ 14,782
</TABLE>
- 8 -
<PAGE>
(1) The Bank also provides Mr. Kreis with the use of an automobile, club
membership dues and certain other personal benefits, the value of which is
not shown on the table. The aggregate amount of these other benefits did
not exceed the lesser of $50,000 or 10% of Mr. Kreis's salary and bonus.
(2) Does not reflect the $15,000 bonus received in 2000 for his performance in
fiscal 1999.
(3) Does not reflect the $1,600 bonus received in 2000 for his performance in
fiscal 1999.
(4) Includes five persons whose service as officers of the Bank ended in 1997.
The column "All Other Compensation" reflects matching contributions to Mr.
Kreis of $4,800 and $5,338 made by the Bank under the 401(k) plan in 1999 and
1998 and life insurance premiums of $2,111, $2,355 and $2,149 in 1999, 1998 and
1997; and matching contributions of $7,940, $7,918 and $11,824 to all officers
as a group under the 401(k) plan in 1999, 1998 and 1997 and life insurance
premiums of $1,655, $1,642 and $2,958.
401(k) PLAN
The Bank has a tax-qualified savings plan with a salary deferral feature.
Generally, a full-time employee who has attained the age of 21 and completed one
year of employment is eligible to participate. A participant may make a deferral
from 2% to 12% of his compensation up to $10,500, indexed annually. The Bank
makes matching contributions of 50% of each participant's annual deferrals up to
a maximum of 3% of compensation. The Bank made aggregate matching contributions
for all participants of $30,493 for fiscal 1999, $36,000 for fiscal 1998, and
$44,620 for fiscal 1997.
A participant is fully vested for his own deferrals, and vests over five
years in any matching contributions, other permissible discretionary
contributions, and reallocations of plan forfeitures. The plan allows a
participant to direct the investment of his individual plan accounts among
several investment options.
As part of the reorganization, the Bank amended the 401(k) plan to permit
investments in a fund established to invest primarily in the Common Stock of the
Company (Oswego County Bancorp, Inc.). Company Common Stock is held by the
plan's trustee for the benefit of the individual participants who choose to
direct their investments into the newly-created fund. Generally, a participant
controls the exercise of the voting and tendering rights relating to the common
stock held for his benefit.
DEFINED BENEFIT PENSION PLAN
The Bank maintains a non-contributory defined benefit pension plan
covering substantially all of its full-time employees. A participant is fully
vested in the plan upon reaching five years of service after obtaining the age
of 18.
The normal retirement benefit is based upon a participant's highest
three-year average annual base earnings during the participant's final ten years
of service, subject to certain limitations required by the plan
- 9 -
<PAGE>
and the Internal Revenue Code. The annual benefit provided to a participant at
normal retirement age (generally age 65) is determined as follows:
2% of the participant's average annual earnings
multiplied by
the participant's years of credited service
(Limited to 60% of the participant's average annual earnings)
The plan also provides for early retirement benefits which are calculated
in the same manner as normal retirement benefits. However, benefits are reduced
when the participant chooses to begin the receipt of his benefits prior to
normal retirement age.
RETIREMENT PLANS
Each Director participates in the Bank's Directors Retirement Plan. Under
this plan, upon reaching the benefit eligibility date, defined individually for
each Director, a Director becomes entitled to 120 monthly payments, each equal
to the projected value of 75% of the highest three-year average of projected
monthly fees at retirement. A director fully vests in the plan after 10 years of
continued service with the Bank, commencing March 16, 2000, or upon a change in
control of the Bank.
The President and Chief Executive Officer of the Bank is covered by a
supplemental retirement income agreement designed to provide the amount of
retirement benefits which cannot be paid from the defined benefit pension plan
by reason of certain Internal Revenue Code limitations on qualified plan
benefits. In the event of termination of employment following a change in
control, the agreement provides for annual payments of $152,033 each over a
period equal to the longer of 180 months or life.
EMPLOYEE STOCK OWNERSHIP PLAN
The Company has established the Employee Stock Ownership Plan ("ESOP") for
employees of the Company and the Bank. Full-time employees of the Company or the
Bank who have been credited with at least 1,000 hours of service during a
twelve-month period are eligible to participate in the ESOP.
The ESOP borrowed funds from the Company to fund the purchase of Common
Stock. The loan amount equaled 100% of the aggregate purchase price of the
Common Stock acquired by the ESOP. The loan by the ESOP will be repaid
principally from the Company's and the Bank's contributions to the ESOP over a
period of not less than 10 years. The collateral for the loan is the Common
Stock purchased by the ESOP. Although it is anticipated that the Bank will
continue to make contributions to the ESOP, it is under no obligation to make
those contributions. The interest rate for the ESOP loan is the New York prime
rate plus 0.5%. The Company may, in any plan year, make additional discretionary
contributions for the benefit of plan participants in either cash or shares of
Common Stock. These purchases would be funded through additional borrowings by
the ESOP or additional contributions from the Company. The timing, amount and
- 10 -
<PAGE>
manner of future contributions to the ESOP will be affected by various factors,
including prevailing regulatory policies, the requirements of applicable laws
and regulations and market conditions.
Shares purchased by the ESOP with the proceeds of the loan are held in a
suspense account and released to participant's accounts as debt service payments
are made. Shares released from the ESOP are allocated to each eligible
participant's ESOP account based on the ratio of each such participant's
compensation to the total compensation of all eligible ESOP participants.
Forfeitures are reallocated among remaining participating employees and may
reduce any amount the Company might otherwise have contributed to the ESOP. Upon
the completion of seven years of service, the account balances of participants
within the ESOP will become 100% vested. Credit is given for years of service
with the Bank prior to adoption of the ESOP. In the case of a "change in
control," as defined, however, participants will become immediately fully vested
in their account balances. Benefits may be payable upon retirement or separation
from service. The Company's contributions to the ESOP are not fixed, so benefits
payable under the ESOP cannot be estimated.
Messrs. Kreis and Albright serve as trustees of the ESOP. Under the ESOP,
the trustees must vote all allocated shares held in the ESOP in accordance with
the instructions of the participating employees, and unallocated shares will be
voted in the same ratio on any matter as those allocated shares for which
instructions are given.
The ESOP is subject to the requirements of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and the regulations of the IRS and
the Department of Labor thereunder.
RELATED PARTY TRANSACTIONS
Deborah F. Stanley, a Director, is a mortgage loan customer of the Bank.
The total principal amount outstanding of such mortgage loans at December 31,
1999 was $102,543. The loans were made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons and did not involve more than normal
risk of collectibility or present other unfavorable features.
- 11 -
<PAGE>
Item 2. APPROVAL OF OSWEGO COUNTY BANCORP, INC. STOCK OPTION PLAN
THE STOCK OPTION PLAN HAS RECEIVED THE PRELIMINARY APPROVAL OF THE NEW
YORK SUPERINTENDENT OF BANKS UNDER THE REGULATIONS OF THE NEW YORK BANKING
BOARD. THE SUPERINTENDENT'S PRELIMINARY REVIEW OF THE STOCK OPTION PLAN IMPLIES
NEITHER APPROVAL NOR DISAPPROVAL OF ITS CONTENTS.
The Oswego County Bancorp, Inc. Stock Option Plan (the "Stock Option
Plan") provides for the grant of options to purchase common stock in the Company
to certain employees of the Company and any subsidiary, the majority of the
voting stock of which is owned, directly or indirectly, by the Company
("Subsidiary"), as well as to the Company's Directors. The employees will be
selected by the Personnel and Compensation Committee ("Committee") of the Board
of Directors of the Company, which is comprised of two or more Directors,
appointed by the Board, selected from those Directors who are not employees of
the Company or any Subsidiary. The current Personnel and Compensation Committee
members are Messrs. Frassinelli, Brower, and Heins.
The Committee is authorized to designate an option as either an "Incentive
Stock Option" or a "Non-Qualified Stock Option" under the provisions of the
Internal Revenue Code of 1986, as amended ("Code"). Under the Stock Option Plan,
the aggregate number of shares of common stock which may be issued under the
Plan shall not exceed 39,950 shares.
The option price shall be 100% of the fair market value of each share of
common stock on the date the option is granted. The Code provides that, if an
Incentive Stock Option is granted to an individual owning (directly or
indirectly) more than 10% of the total combined voting power of outstanding
Common Stock, the purchase price per share shall be 110% of the fair market
value of the stock at the date of grant, and the option, by its terms, will not
be exercisable more than five years from the date of grant. On the date of this
Proxy Statement, the Company is not aware of any eligible participant in the
Stock Option Plan who owns more than 10% of the total combined voting power of
Common Stock.
For purposes of the Stock Option Plan, "fair market value" of a share of
Common Stock shall be the mean between the high and low prices for a share of
Common Stock as quoted by the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") for the day of the grant; if there is only
one price quoted for the day of the grant, then the fair market value shall be
such price; and if no such price is quoted for the day of the grant, the fair
market value shall be the previous closing price. If the Common Stock is not
reported on NASDAQ, the fair market value of share shall mean the average sale
price of all shares of Common Stock sold during the period of 30 calendar days
immediately preceding the date on which the options were granted, and if no
shares of Common Stock have been sold within such 30-day period, then fair
market value shall be determined by the Committee. Common Stock currently is not
reported on NASDAQ but is quoted on the Over-the-Counter Bulletin Board
("OTCBB").
The Stock Option Plan provides for a one-time grant of 1,712 Non-Qualified
Stock Options to each non-employee Director service in such capacity on March
16, 2000. After the
- 12 -
<PAGE>
grant on March 16, 2000, no member of the Committee may be
under consideration for a grant of options at the time the Committee acts.
Options granted under the Stock Option Plan shall terminate on the date
determined by the Committee and specified in the option agreement which will
accompany each grant of an option, but, in any event, not later than 10 years
after the date of grant. An option held by an individual whose employment is
terminated shall terminate (1) if the option holder is permanently and totally
disabled, one year after the date of termination of employment (in the case of
Incentive Stock Options) and upon the expiration date (in the case of
Non-Qualified Stock Options); (2) in the case of a Non-Qualified Option held by
an individual who dies, within one year from the date of death of such
individual; (3) immediately, if employment is terminated for cause, unless some
other expiration date is fixed by the Committee; or (4) three months after the
date employment terminates for any other reason (in the case of Incentive Stock
Options), or (in the case of Non-Qualified Stock Options) 18 months after
employment terminates or such other date as the Committee may fix. Upon
termination of employment or service due to death, disability, change in control
or, in the case of an officer or employee, upon normal retirement, all Options
held by the individual, whether or not vested at that time, shall vest and
become exercisable following termination of employment, but in no event shall
any Option be exercisable after its expiration date.
Whether an authorized leave of absence for military or governmental
service constitutes termination of employment for purposes of the Stock Option
Plan shall be determined by the Committee.
No option granted under the Stock Option Plan is assignable or
transferable, other than by will or the laws of descent and distribution; during
the lifetime of the optionee, the option shall be exercisable only by the
optionee.
The full text of the Stock Option Plan is annexed as Exhibit "A".
If the Stock Option Plan is approved by the stockholders, the following
awards of stock options will be effective as of March 16, 2000:
Number of Shares
Name and to Be Received on
Principal Position Exercise of Options(1)
Gregory J. Kreis
President and Chief Executive Officer 9,987
Michael R. Brower, Director 1,712
Bruce P. Frassinelli, Director 1,712
Paul J. Heins, Director 1,712
Paul W. Schneible, Director 1.712
Bernard Shapiro, Director 1,712
Deborah F. Stanley, Director 1,712
- 13 -
<PAGE>
Carl K. Walrath, Director 1,712
All non-employee directors
as a group (7 persons) 11,984
All executive officers as a group,
other than the President and Chief
Executive Officer (5 persons) 12,000
(1) All options granted to Mr. Kreis are Incentive Stock Options and all
options granted to non-employee directors will be Non-Qualified Stock
Options. Options that may be granted to employees in the future may be
Incentive Stock Options or Non-Qualified Stock Options, in the Committee's
discretion.
The exercise price of the options will be $8.875 each, which was the fair
market value per share of Common Stock at March 16, 2000, the date of the award.
ACCOUNTING TREATMENT
Because the option price will equal the fair market value of the Common
Stock on the date of grant, the Company will not recognize any compensation
expense in connection with the grant of options under the Stock Option Plan or
their exercise for cash.
TAX TREATMENT
The Company is advised by counsel that, under the present provisions of
the Code and Code regulations, the federal income tax treatment of stock options
under the Stock Option Plan will depend upon whether the option is (1) an
Incentive Stock Option intended to qualify under Section 422 of the Code or (2)
a Non-Qualified Stock Option (all other options).
The federal income tax consequences described in this section are based on
laws and regulations in effect on March 20, 2000, and there is no assurance that
the laws and regulations will not change in the future and affect the tax
consequences of the matters discussed in this section. Optionees also may be
subject to additional taxes under state tax laws which may differ from the
applicable federal income tax laws described in this section.
Incentive Stock Options. Generally, no taxable ordinary income is
recognized by an employee upon the exercise of an Incentive Stock Option.
- 14 -
<PAGE>
If common stock acquired pursuant to the exercise of an Incentive Stock
Option is held by the employee for at least two years from the date of grant and
at least one year from the date the common stock is transferred to that
employee, and, if that employee remains employed by the Company at all times
from the date of grant of the option until three months before the date of
exercise (or one year before the date of exercise in the case of a disabled
employee or three months before death in the case of a deceased employee), the
employee will not recognize income for regular tax purposes upon the exercise of
the option. Exercise may result in recognition of income for alternative minimum
tax purposes. Upon the later disposition of the common stock, the employee will
recognize long-term capital gain or loss equal to the difference between the
sales price and the purchase price. Under these circumstances, the Company will
not receive a tax deduction at the time of either exercise or disposition. If
the common stock acquired pursuant to the exercise of an Incentive Stock Option
is not held by the employee for the time periods indicated above or otherwise
fails to qualify, the option will be treated as a Non-Qualified Stock Option and
the disposition will be subject to the income tax treatment described below
under "Non-Qualified Stock Options". Under the terms of the Stock Option Plan, a
person whose employment terminates due to disability has the right to exercise
the option until the option would have expired had the person remained employed.
If such an option is exercised later than one year after termination of
employment due to disability, the exercise will be treated for income tax
purposes as the exercise of a Non-Qualified Stock Option.
The Committee may, in its discretion, grant options that expire later than
three months after termination of employment. Options exercised later than three
months after termination of employment (except in the case of disability of the
employee or death of the employee within three months of termination, in which
case the applicable period is one year) will be treated for income tax purposes
as Non-Qualified Stock Options.
The amount by which the fair market value of the common stock on the
exercise date of an Incentive Stock Option exceeds the purchase price will be an
item of "tax preference" for purposes of the federal alternative minimum tax
provisions of the Internal Revenue Code.
Non-Qualified Stock Options. Unlike an Incentive Stock Option, the
exercise of a Non-Qualified Stock Option results in the recognition of income
for tax purposes which is subject to income tax withholding and may be subject
to FICA tax withholding. However, the exercise of a Non-Qualified Stock Option
does not result in an item of "tax preference" for purposes of the federal
alternative minimum income tax.
Upon exercise of a Non-Qualified Stock Option, an optionee, other than a
person subject to Section 16(b) of the Securities Exchange Act of 1934
("Reporting Person"), will recognize compensation, taxable as ordinary income,
in an amount equal to the excess of the fair market value of the common stock
over the purchase price on the date of exercise.
If, during the six months preceding the exercise of a Non-Qualified Stock
Option, a Reporting Person has had a transaction in common stock which is
treated as a purchase under Section 16(b) of the Securities Exchange Act of
1934, then the Reporting Person will not recognize compensation from the
exercise of such option until the expiration of six months following the date of
the purchase transaction. At the expiration of that six month period, the
Reporting Person will recognize compensation equal to the excess of the then
fair market value
- 15 -
<PAGE>
of the common stock over any purchase price paid. However, a Reporting Person
may make an election under Section 83(b) of the Internal Revenue Code within 30
days after the date of exercise, to be taxed at the time of exercise upon the
excess, if any, of the fair market value of the common stock on the date of
exercise over the purchase price paid.
An optionee's tax basis in common stock received upon exercise of options
will generally be any purchase price paid plus the amount of taxable
compensation recognized.
To the Company. In general, the Company will be entitled to a deduction
(subject to any general limitations) in connection with awards under the Plan
only at such time, and in such amount, as optionees recognize ordinary income in
connection with the awards. Thus, in the case of an Incentive Stock Option,
assuming there is no disqualifying disposition, the Company will not be entitled
to a deduction because the optionees will not recognize ordinary income. When
exercise of a Non-Qualified Stock Option results in ordinary income to the
optionee, the Company will be entitled to claim the available deduction. The
Code requires satisfaction of the applicable reporting requirements as a
condition to the Company's claiming its deduction.
Gain and Loss. If common stock acquired through the exercise of a
Non-Qualified Stock Option is sold, the optionee will generally recognize
capital gain (or loss) equal to the amount by which the proceeds of sale exceed
(or are less than) the optionee's basis in that common stock. The gain (or loss)
will be long term if the common stock acquired under the Stock Option Plan has
been held for more than 18 months. If an optionee pays part or all of the
exercise price of a Non-Qualified Stock Option by surrendering previously
acquired Company common stock, then such optionee's tax basis (and capital gains
holding period) in the surrendered shares carries over to an equivalent number
of shares purchased by exercise of the Option. If the optionee uses stock
previously acquired as Incentive Stock Option stock for purposes of paying for
stock in a later exercise but prior to the expiration of the required holding
period for the Incentive Stock Option stock, this will be treated as a
disqualifying disposition for such stock.
General. The common stock to be issued or transferred pursuant to the
Stock Option Plan will be stock which will be made available, at the discretion
of the Board of Directors of the Company, either from authorized but unissued
shares, or from shares reacquired by the Company, including shares purchased on
the open market. Shares acquired pursuant to the exercise of options under the
Stock Option Plan by a Reporting Person shall not be sold or transferred for at
least six months after the date of grant.
No preemptive rights are applicable to the shares covered by the Stock
Option Plan. The cash proceeds to be received by the Company upon exercise of
the options will be used for general corporate purposes.
Resolution. In order to adopt the Stock Option Plan, Shareholders are
requested to approve and adopt the following resolution at the Annual Meeting of
Shareholders:
RESOLVED, that the Oswego County Bancorp, Inc. Stock Option Plan,
attached as Exhibit "A" to the Company's Proxy Statement and
furnished to Shareholders in connection with the Annual Meeting of
Stockholders of the Company held on April 20, 2000, be, and hereby
is, approved and adopted.
- 16 -
<PAGE>
If approved and adopted, the Stock Option Plan will become effective from
March 16, 2000. Approval and adoption of this Item 2 requires the affirmative
vote of the holders of a majority of the outstanding shares of the Company,
excluding shares held by Oswego County MHC.
Management recommends a vote "FOR" Item 2.
- 17 -
<PAGE>
Item 3. APPROVAL OF THE OSWEGO COUNTY BANCORP, INC. RESTRICTED STOCK PLAN
The Board of Directors of the Company has adopted the Oswego County
Bancorp, Inc. Restricted Stock Plan (the "Restricted Stock Plan") as a method of
providing certain employees and non-employee directors of the Company with a
proprietary interest in the Company and to provide these individuals with an
incentive to increase the value of the Company. The following discussion is
qualified in its entirety by reference to the Restricted Stock Plan, which is
attached hereto as Appendix B.
Under the Restricted Stock Plan, shares of Common Stock will be awarded in
the following amounts to named executive officers, executive officers as a
group, non-employee directors, and employees as a group. Shares issued under the
Restricted Stock Plan will be authorized but previously unissued shares. Funding
the Restricted Stock Plan with authorized but unissued shares will have a
dilutive effect on the ownership interests of existing stockholders.
If the Restricted Stock Plan is approved by stockholders, the following
awards of Restricted Stock will be effective as of March 16, 2000:
Name and Number
Principal Position of Shares
Gregory J. Kreis 2,996
President and Chief Executive Officer
Michael R. Brower 514
Bruce P. Frassinelli 514
Paul J. Heins 514
Paul W. Schneible 514
Bernard Shapiro 514
Deborah F. Stanley 514
Carl K. Walrath 514
All non-employee directors as
a group (7 persons) 3,598
The Compensation Committee will administer the Restricted Stock Plan, and
make awards pursuant to the Restricted Stock Plan. Awards of Common Stock under
the Restricted
- 18 -
<PAGE>
Stock Plan ("Restricted Stock") are nontransferable and nonassignable. Awards of
Restricted Stock will become effective following receipt of stockholder
approval. Participants in the Restricted Stock Plan will earn (become vested in)
shares of Restricted Stock covered by an award and all restrictions will lapse
at a rate of 20% per year commencing with the first lapse of restrictions on
April 20, 2001, and succeeding installments being earned on April 20 of each
following year. Upon termination of employment or service due to death,
disability, change in control or, in the case of an officer or employee, normal
retirement, all restrictions will lapse. Upon termination of employment or
service for any other reason, unvested shares are forfeited. When a
participant's shares become vested in accordance with the Restricted Stock Plan,
the participant will recognize income equal to the fair market value of the
restricted Stock so vested at that time, unless the participant has made an
irrevocable election to be taxed on the shares of Restricted Stock awarded to
him in the year of the award. The amount of income recognized by a participant
will be a deductible expense of the Company for Federal income tax purposes.
After Restricted Stock has been granted, but before the Restricted Stock has
vested, the recipient shall receive any cash dividends paid with respect to such
shares. Stock dividends declared by the Company and paid on shares that have not
been earned shall be subject to the same restrictions as the Restricted Stock
until such shares are earned. Prior to vesting, recipients of awards under the
Restricted Stock Plan may vote the shares of Restricted Stock allocated to them.
If approved, the Restricted Stock Plan will become effective from April
20, 2000. Approval of this Item 3 requires the affirmative vote of the holders
of a majority of the outstanding shares of the Company, excluding shares held by
Oswego County MHC.
Unless marked to the contrary, the shares represented by the enclosed,
signed Proxy will be voted FOR the approval of the Restricted Stock Plan.
Management recommends a vote "FOR" Item 3.
Item 4. AMENDMENT OF THE CERTIFICATE OF INCORPORATION
The Board of Directors has approved, and recommends that the stockholders
approve, an amendment to Article 4 of the Company's Certificate of Incorporation
to reduce the aggregate number of authorized shares from a total of 8,500,000
shares, of which 7,500,000 shares consist of Common Stock and 1,000,000 shares
consist of Preferred Stock, to a total of 3,500,000 shares, of which 3,000,000
shall consist of Common Stock and 500,000 shall be Preferred Stock. Article 4 of
the Certificate of Incorporation will be amended to read as follows:
A. The total number of shares of all classes of stock which the
corporation shall have authority to issue is 3,500,000 consisting of
3,000,000 shares of Common Stock, par value one cent ($.01) per
share (the "Common Stock") and 500,000 shares of Preferred Stock,
par value one cent ($.01) per share (the "Preferred Stock").
- 19 -
<PAGE>
The proposed amendment is identical to the existing text in the paragraph
(A) of Article 4 of the current Certificate of Incorporation, except that the
existing paragraph (A) provides that the total aggregate number of authorized
shares is 8,500,000, consisting of 7,500,000 shares of Common Stock and
1,000,000 of Preferred Stock.
As a Delaware corporation, the Company pays an annual corporation
franchise tax under Delaware law. The amount of the tax is based upon the total
number of shares authorized by the Company's Certificate of Incorporation. At
present, the Company's annual franchise tax is $42,540.00. The Company expects
that adoption of the proposed amendment will reduce the Company's annual
Delaware franchise tax to $17,540.00, thereby resulting in an estimated annual
savings to the Company of $25,000.00.
Approval of this Item 4 requires the affirmative vote of a majority of the
outstanding shares of Common Stock.
Unless marked to the contrary, the shares represented by the enclosed,
signed Proxy will be voted FOR the amendment of the Certificate of
Incorporation.
Management recommends a vote "FOR" Item 4.
Item 5. RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed KPMG LLP as the independent
accountants for the Company and the Bank for the year ending December 31, 2000.
KPMG has served as the accountants for the Bank since 1997. Services provided by
KPMG in 1999 included the audit of the consolidated financial statements of the
Company and the Bank, limited reviews of quarterly reports, services related to
filings with the Securities and Exchange Commission, and consultations on
various tax matters.
Approval of this Item 5 requires the affirmative vote of a majority of the
votes cast at the Annual Meeting.
Unless marked to the contrary, the shares represented by the enclosed,
signed Proxy will be voted FOR the ratification of the appointment of KPMG LLP
as independent accountants.
Management recommends a vote "FOR" Item 5.
PROPOSALS OF STOCKHOLDERS
Proposals of stockholders intended to be presented to the 2001 Annual
Meeting of Stockholders must be received a reasonable time before the Company
begins to print and
- 20 -
<PAGE>
mail its proxy materials, for inclusion in the Proxy Statement and form of
proxy. Proposals received by November 24, 2000 will be considered by the Company
to have been received within a reasonable time. Stockholders wishing to propose
matters for consideration at the 2001 annual meeting must follow certain
specified advance notice procedures set forth in the Company's By-laws, a copy
of which is available upon written request to:
Gregory J. Kreis
President and Chief Executive Officer
Oswego County Bancorp, Inc.
44 East Bridge Street
Oswego, New York 13126
The By-laws designate procedures for the calling and conduct of a meeting
of stockholders, including, but not limited to specifying who may call the
meeting, what business may be conducted, the procedures with respect to the
making of stockholder proposals, and the procedures and requirements for
stockholder nomination of directors. The By-laws require a stockholder's notice
to be received at the above address not less than 90 days before the annual
meeting. However, if the Company makes public disclosure of the date of the
annual meeting less than 100 days in advance, then the stockholder's notice
delivery deadline is the 10th day following the day on which the Company
publicly disclosed the date of the meeting.
OTHER MATTERS
The expenses of this solicitation, including the costs of preparing and
mailing this Proxy Statement and accompanying material, will be borne by the
Company. Regular employees of the Bank may solicit proxies in person, by mail or
by telephone, but no employee of the Bank will receive any compensation for
solicitation activities in addition to his or her regular compensation. Expenses
may also include the charges and expenses of brokerage houses, nominees,
custodians and fiduciaries for forwarding proxies and proxy materials to
beneficial owners of shares.
The Board of Directors knows of no other matters to be voted upon at the
Annual Meeting. If any other matters properly come before the Annual Meeting, it
is the intention of the persons named in the enclosed form of proxy to vote on
such matters in accordance with their judgment.
BY ORDER OF THE BOARD OF DIRECTORS
----------------------------------------
Gregory J. Kreis
President and Chief Executive Officer
DATED: March 20, 2000
- 21 -
<PAGE>
Oswego, New York
- 22 -
<PAGE>
EXHIBIT A
OSWEGO COUNTY BANCORP, INC.
TEXT OF THE OSWEGO COUNTY BANCORP, INC.
STOCK OPTION PLAN AS PROPOSED
1. PURPOSES OF THE PLAN
The purpose of the Oswego County Bancorp, Inc. Stock Option Plan is to
provide a method by which those directors, officers and employees of the Company
and its Subsidiaries who are largely responsible for the management, growth, and
protection of the business, and who are making and can continue to make
substantial contributions to the success of the business, may be encouraged to
acquire a larger stock ownership in the Company thus increasing their
proprietary interest in the business, providing them with greater incentive for
their continued employment, and promoting the interests of the Company and all
its stockholders. Accordingly, the Company will, from time to time during the
term of the Plan, grant to such employees as may be selected in the manner
provided in the Plan, options to purchase shares of Common Stock of the Company
subject to the conditions provided in the Plan. The Plan is subject to the
provisions of Section 140-a of the New York Banking Law, the regulations of the
New York Banking Board and any other applicable law or regulation.
2. DEFINITIONS
Unless the context clearly indicates otherwise, the following terms have
the meanings set forth below.
(a) "Bank" means Oswego County Savings Bank.
(b) "Board of Directors" or "Board" means the Board of Directors of the
Company.
(c) "Change in Control" of the Bank or the Company means:
(1) a reorganization, merger, conversion, consolidation, or sale of
all or substantially all of the assets of the Bank, the Company or Oswego County
MHC, or a similar transaction in which the Bank, the Company, or Oswego County
MHC is not the resulting entity and that is not approved by a majority of the
Board of Directors of the Company; or
(2) individuals who constitute the incumbent board of the Bank, the
Company or Oswego County MHC cease for any reason to constitute a majority
thereof;
<PAGE>
provided that any person becoming a director subsequent to the date hereof whose
election was approved by a vote of at least three-fourths of the directors
composing the incumbent board or whose nomination for election by the Company's
stockholders was approved by the same nominating committee serving under the
incumbent board shall be, for purposes of this Section, considered as through he
or she were a member of the incumbent board;
(3) an acquisition of "control" of the Bank or the Company as
defined in the Bank Holding Company Act of 1956, as amended and applicable rules
and regulations promulgated thereunder as in effect at the time of the Change in
Control (collectively, the "BHCA"), as determined by the Board of Directors of
the Bank, the Company or Oswego County MHC; or
(4) an acquisition of the Bank's stock requiring submission of
notice under the Change in Bank Control Act; provided, however, that a Change in
Control shall not be deemed to have occurred under paragraph (1), (3) or (4) of
this subsection (c) if the transactions constituting a Change in Control are
approved by a majority of the Board of Directors of the Company; or
(5) (A) an event of a nature that would be required to be reported
in response to Item 1 of the current report on Form 8-K, as in effect on the
date hereof, pursuant to Section 13 of 15(d) of the Exchange Act or results in a
change in control of the Bank, the Company or Oswego County MHC within the
meaning of the BHCA; or (B) such time as (i) any "person" (as the term is used
in Section 13(d) and 14(d) of the Exchange Act) other than Oswego County MHC is
a becomes a "beneficial owner" (as defined in Section 13(d)(3) of the Exchange
Act) directly or indirectly, of securities of the Company or the Bank
representing 25 or more of the outstanding securities ordinarily having the
right to vote at the election of directors except for any securities of the
Company purchased by the Bank's employee stock ownership plan and trust shall
not be counted in determining whether such plan is the beneficial owner of more
than 25% of the Bank's securities, (ii) a proxy statement soliciting proxies
from stockholders of the Company, by someone other than the current management
of the Company, seeking stockholder approval of a plan or reorganization, merger
or consolidation of the Company or the Bank or similar transaction with one or
more corporations as a result of which the outstanding shares of the class of
securities then subject to the plan or transaction are exchanged or converted
into cash or property or securities not issued by the Bank or the Company, or
(iii) a tender offer is made for 25% or more of the voting securities of the
Company and the stockholders owning beneficially or of record 25% or more of the
outstanding securities of the Company have tendered or offered to sell their
shares pursuant to such tender offer and such tendered shares have been accepted
by the tender offeror.
(d) "Code" means the Internal Revenue Code of 1986, as amended. References
in this Plan to Sections of the Code are intended to refer to Sections of the
Code as enacted at the time of this Plan's adoption by the Board and as
subsequently
- 2 -
<PAGE>
amended, or to any substantially similar successor provisions of the Code
resulting from recodification, renumbering or otherwise.
(e) "Committee" means a Committee of two or more Non-Employee Directors,
appointed by the Board, to administer and interpret this Plan.
(f) "Common Stock" means the common stock of the Company, par value $0.01
per share.
(g) "Company" means Oswego County Bancorp, Inc., a Delaware corporation
with its principal place of business at 44 East Bridge Street, Oswego, New York
13126.
(h ) "Director" means a member of the Board of Directors.
(i) "Exchange Act" means the Securities Exchange Act of 1934.
(j) "Grant Date" as used with respect to a particular Option, means the
date as of which such Option is granted by the Board or Committee pursuant to
the Plan.
(k) "Incentive Stock Option" means an Option that qualifies as an
Incentive Stock Option as described in Section 422 of the Code.
(l) "Non-Employee Director" shall the meaning provided in Rule
16b-3(b)(3)(i) under the Exchange Act.
(m) "Non-Qualified Stock Option" means any Option granted under the Plan
other than an Incentive Stock Option.
(n) "Option" means an option granted pursuant to Section 5 of the Plan to
purchase shares of Common Stock and which shall be designated as either an
Incentive Stock Option or a Non-Qualified Stock Option.
(o) "Optionee" means an individual to whom an Incentive Stock Option or a
Non-Qualified Stock Option is granted pursuant to the Plan.
(p) "Permanent and Total Disability," as applied to an Optionee, means
that the Optionee has (1) established to the satisfaction of the Company that
the Optionee is unable to engage in any substantial gainful activity by reason
of any medically determinable physical or mental impairment which can be
expected to result in death or which has lasted or can be expected to last for a
continuous period of not less than twelve months, all within the meaning of
Section 22(e)(3) of the Code, and (2) satisfied any requirement imposed by the
Committee.
(q) "Plan" means the Oswego County Bancorp, Inc. Stock Option Plan as set
forth herein and as may be amended from time to time.
- 3 -
<PAGE>
(r) "Subsidiary" means any banking institution, stock corporation or other
entity of which a majority of the voting common or capital stock is owned,
directly or indirectly, by the Company and any company designated as such by the
Committee, but only during the period of such ownership or designation.
3. ADMINISTRATION OF THE PLAN
(a) The Committee will administer this Plan. On the date hereof, the
Committee is the Personnel and Compensation Committee of the Board. The Board
may from time to time remove members from or add members to the Committee.
Vacancies on the Committee, howsoever caused, shall be filled by the Board. The
Board shall select one of the Committee's members as Chairman. The Committee
shall hold meetings at such times and places as it may determine, subject to
such rules as to procedures not inconsistent with the provisions of the Plan as
are prescribed by the Board, set forth in the Company's By-Laws, and as
prescribed by the Committee itself. A majority of the authorized number of
members of the Committee shall constitute a quorum for the transaction of
business. Acts reduced to or approved in writing by a majority of the members of
the Committee then serving shall be valid acts of the Committee.
(b) The Committee shall be vested with full authority to make such rules
and regulations as it deems necessary or desirable to administer the Plan and to
interpret the provisions of the Plan. Any determination, decision, or action of
the Committee in connection with the construction, interpretation,
administration, or application of the Plan shall be final, conclusive, and
binding upon all Optionees and any person claiming under or through an Optionee
unless otherwise determined by the Board.
(c) No member of the Committee may be under consideration for a grant of
Options at the time the Committee grants Options or otherwise acts (except for
the specific grants on the date of this Plan set forth in subsection (b) of
Section 5). No member of the Committee or of the Board shall be liable for any
determination, decision, or action made in good faith with respect to the Plan
or any Option granted under the Plan.
4. STOCK SUBJECT TO THE PLAN
(a) The Common Stock to be issued or transferred under the Plan will be
the Company's Common Stock which will be made available, at the discretion of
the Board, either from authorized but unissued Common Stock or from Common Stock
reacquired by the Company, including shares purchased in the open market. The
aggregate number of shares of Common Stock which may be issued under the Plan
shall not exceed 39,950 shares.
- 4 -
<PAGE>
(b) In the event that any outstanding Options for any reason expire or are
terminated without exercise, the shares of Common Stock allocable to the
unexercised Options shall not again be made subject to Option under the Plan.
5. GRANT OF THE OPTIONS
(a) Officers and Key Employees
The Committee may from time to time grant Options to officers and key
employees of the Company and its Subsidiaries to purchase shares of Common
Stock. The Committee may designate any Options granted as either Incentive Stock
Options or as Non-Qualified Stock Options, or the Committee may designate a
portion of the Incentive Stock Options and the remaining portion as
Non-Qualified Stock Options. Options granted to officers and key employees shall
vest and be exercisable in accordance with a schedule fixed by the Committee at
the time of grant. No Optionee shall receive more than 25% of the total Options
under this Plan.
(b) Directors
Each Director who on March 16, 2000 is also an employee of the Company or
a Subsidiary shall be granted Incentive Stock Options on such date to purchase
9,987 shares of Common Stock. Each Director who is serving in such capacity on
March 16, 2000, and who is not on such date an employee of the Company or any
Subsidiary, shall be granted on such date Non-Qualified Stock Options to
purchase 1,712 shares of Common Stock. Such Options shall vest and be
exercisable in accordance with the following schedule:
Percent Vested Anniversary Date of Grant
20% 1st
40% 2nd
60% 3rd
80% 4th
100% 5th
Such Options shall expire upon the date 10 years after the date of grant. No
additional Options may be granted to Directors who are not employees of the
Company or a Subsidiary, absent an amendment to this Plan in accordance with
Section 13. Directors who are not employees of the Company or a Subsidiary shall
not receive more than 5% of the total Options under the Plan individually, or
more than 30% of the total available Options in the aggregate.
- 5 -
<PAGE>
(c) Vesting upon Change in Control
In the event of a Change in Control of the Company or the Bank, all
Options that have been awarded shall immediately vest and become exercisable.
6. OPTION PRICE
The purchase price per share of any Option granted under the Plan shall be
100 percent of the fair market value of one share of Common Stock on the date
the Option is granted. For purposes of the Plan, the fair market value of a
share of Common Stock shall be the mean between the high and low prices for a
share of Common Stock as quoted by the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") for the day of the grant; if there
is only one price quoted for the day of the grant, then the fair market value
shall be such price; and if no such price is quoted for the day of the grant,
the fair market value shall be the previous closing price. If the Common Stock
is not reported on NASDAQ, the fair market value of share shall mean the average
sale price of all shares of Common Stock sold during the period of 30 calendar
days immediately preceding the date on which the Options were granted, and if no
shares of Common Stock have been sold within such 30-day period, then fair
market value shall be determined by the Committee.
7. ELIGIBILITY OF OPTIONEES
(a) Options shall be granted only to persons who are either key employees
of the Company and its Subsidiaries, or Directors of the Company, in each case
as determined by the Committee at the time of the grant.
(b) Subject to the terms, provisions, and conditions of the Plan and
subject to review by the Board, the Committee shall have exclusive jurisdiction
to (1) select the key employees and directors to be granted Options, (2)
determine the number of Options to be granted to each Optionee, (3) determine
the date or dates when Options will be granted, (4) determine the purchase price
of the shares subject to each Option in accordance with Section 6 of the Plan,
(5) determine the date when each Option shall vest and become non-forfeitable by
the Optionee, (6) determine the date or dates when each Option may be exercised
within the term of the Option specified pursuant to Section 9 of the Plan, (7)
determine whether or not an option constitutes an Incentive Stock Option, and
(8) prescribe the form, which will be consistent with the Plan, of the documents
evidencing any Options granted under the Plan.
(c) Neither anything contained in the Plan or in any document under the
Plan nor the grant of any Option under the Plan shall confer upon any Optionee
any right to continue in the employ of the Company or of any Subsidiary or limit
in any respect the right of the Company or any Subsidiary to terminate the
Optionee's employment at any time and for any reason.
- 6 -
<PAGE>
8. NON-TRANSFERABILITY
No Option granted under the Plan shall be assignable or transferable by
the Optionee other than by will or the laws of descent and distribution, and
during the lifetime of an Optionee, the Option shall be exercisable only by such
Optionee.
9. TERM AND EXERCISE OF OPTIONS
(a) Each Option granted under the Plan shall terminate on the date
determined by the Committee and specified in the Option Agreement, provided that
each Option shall terminate not later than ten years after the Grant Date. The
Committee, at its discretion, may provide further limitations on the
exercisability of Options granted under the Plan. An Option may be exercised
only during the continuance of the Optionee's employment, except as provided in
Section 10 of the Plan.
(b) A person electing to exercise an Option shall give written notice to
the Company, in such form as the Committee shall have prescribed or approved, of
such election and of the number of shares he or she has elected to purchase and
shall at the time of exercise tender the full purchase price of any shares he or
she has elected to purchase. The purchase price upon the exercise of an Option
shall be paid in full in cash; provided, however, that in lieu of cash, with the
approval of the Committee at or prior to exercise, an Optionee may exercise his
or her Option by tendering to the Company shares of Common Stock owned by him or
her and having a fair market value equal to the cash exercise price applicable
to his or her Option, with the then fair market value of such stock to be
determined in the manner provided in Section 6 of the Plan (with respect to the
determination of the fair market value of Common Stock on the date an Option is
granted). However, if an Optionee pays the Option exercise price of a
Non-Qualified Stock Option in whole or in part in the form of Common Stock
already owned by the Optionee, the Company may require that the Optionee have
owned the stock for a period of time that would not cause the exercise to create
a charge to the Company's earnings. Such provisions may be used by the Company
to prevent a pyramid exercise. As conditions to exercising an Option, the holder
must (1) arrange to pay the Company any amount required to be withheld under any
tax law on the account of the exercise, and (2) in the case of an Incentive
Stock Option, agree to notify the Company of any disqualifying disposition (as
defined in Section 421 of the Code) of the Common Stock acquired upon the
exercise and agree to pay the Company any amount required to be withheld under
any tax law on account of the disposition. Any payment on account of withholding
taxes shall be made in a form acceptable to the Committee.
(c) An Optionee or a transferee of an Option shall have no rights as a
stockholder with respect to any shares covered by his or her Option until the
date the Stock Certificate is issued evidencing ownership of the shares. No
adjustment shall be made for dividends (ordinary or extraordinary) whether in
cash, securities, or other
- 7 -
<PAGE>
property, or distributions or other rights for which the record date is prior to
the date such Stock Certificate is issued, except as provided in Section 14 of
the Plan.
(d) A person may, in accordance with other provisions of the Plan, elect
to exercise Options in any order, notwithstanding the fact that Options granted
to him or her prior to the grant of the Options selected for exercise are
unexpired.
10. TERMINATION OF EMPLOYMENT
If an Optionee severs from all employment with the Company and/or its
Subsidiaries, any Option granted to him or her under the Plan shall terminate as
follows:
(a) An Option held by an Optionee who is Permanently and Totally Disabled
shall terminate (i) in the case of an Incentive Stock Option, one year after the
date of termination of employment, and (ii) in the case of a Non-Qualified Stock
Option, upon its expiration date;
(b) A Non-Qualified Stock Option held by an Optionee shall be exercisable
within a period of one year from the date the Optionee's death by the executor
or administrator of the Optionee's estate or by the person to whom the Optionee
shall have transferred such right by last will and testament or by the laws of
descent or distribution;
(c) An Incentive Stock Option or a Non-Qualified Stock Option held by an
Optionee whose employment terminates for cause, as determined by the Committee,
shall expire immediately upon the date of termination unless some other
expiration date is fixed by the Committee; and
(d) An Option held by an Optionee whose employment terminates for any
reason other than those specified in subsection (a), (b), or (c) above shall
expire (i) in the case of an Incentive Stock Option, three months after the date
of termination of employment, and (ii) in the case of a Non-Qualified Stock
Option, unless another date is fixed by the Committee, eighteen months after the
date of termination.
Upon termination of an Optionee's employment (or service) due to death,
disability, Change in Control or, in the case of an officer or employee, normal
retirement, all Options held by the Optionee, whether or not vested at that
time, shall vest and become exercisable upon termination of employment. In no
event, however, shall any Option be exercisable after its expiration date.
Whether an authorized leave of absence or an absence for military or
governmental service shall constitute termination of employment for purposes of
the Plan shall be determined by the Committee, which determination shall be
final, conclusive, and binding upon the affected Optionee and any person
claiming under or through such Optionee. Termination of employment with any
Subsidiary in order to accept employment with another Subsidiary or while
remaining an employee of the Company or
- 8 -
<PAGE>
of any of its Subsidiaries shall not be a termination of employment for the
purposes of this Section 10.
11. MODIFICATION, EXTENSION, AND RENEWAL
Subject to the terms and conditions and within the limitations of the
Plan, the Committee may modify, extend, or renew outstanding Options (to the
extent not theretofore exercised) and authorize the granting of new Options in
substitution therefor. Without in any way limiting the generality of the
foregoing, the Committee may grant to an Optionee, if he or she is otherwise
eligible and consents thereto, a new or modified Option in lieu of an
outstanding Option for a number of shares at an exercise price and for a term
which are greater or less than under the earlier Option or may do so by
cancellation and re-grant, amendment, substitution, or otherwise, subject only
to the general limitations and conditions of the Plan. The foregoing
notwithstanding, no modification of an Option shall, without consent of the
Optionee, alter or impair any rights or obligations under any Option theretofore
granted under the Plan.
12. PERIOD IN WHICH GRANTS MAY BE MADE
Options may be granted under the Plan at any time on or before March 16,
2010.
13. AMENDMENT
The Board may at any time amend, modify, or suspend the Plan, subject only
to the approval of the New York Superintendent of Banks, provided that, without
the approval of the stockholders of the Company, no amendment or modification
shall be made by the Board which (a) increases the maximum number of shares as
to which Options may be granted under the Plan; (b) changes the number of shares
which may be optioned to any single individual; (c) alters the method by which
the Option price is determined, or decreases the Option price; (d) extends the
term of this Plan or extends any Option for a period of longer than ten years
after the date of the grant; (e) changes the persons or category of persons
eligible to be granted Options; or (f) alters this Section 13 so as to defeat
its purpose. Further, no amendment, modification, or suspension, or termination
of the Plan shall in any manner affect any Option theretofore granted under the
Plan without the consent of the Optionee or any person validly claiming under or
through the Optionee.
14. CHANGES IN CAPITALIZATION
(a) In the event that the Common Stock, as presently constituted, shall be
changed into or exchanged for a different number or kind or shares of stock or
other securities of the Company or of another corporation (whether by reason of
merger,
- 9 -
<PAGE>
consolidation, recapitalization, reclassification, split-up, combination of
shares, or otherwise), or if the number of shares of Common Stock shall be
increased through the payment of a stock dividend, then the Board, subject to
the approval of the New York Superintendent of Banks, shall substitute for or
add to each share of Common Stock which was theretofore appropriated or which
thereafter may become subject to an Option under the Plan the number and kind of
shares of stock or other securities into which each outstanding share of Common
Stock shall be so changed, or for which each such share shall be exchanged, or
to which each such share shall be entitled, as the case may be. Outstanding
Options shall also be appropriately amended as to the price and other terms as
may be necessary to reflect the foregoing events. The maximum number of shares
of Common Stock upon which Options may be granted, as provided in Section 4(a)
of the Plan, shall be adjusted proportionately to reflect any of the foregoing
events.
(b) Fractional shares resulting from any adjustment in Options pursuant to
this Section 14 may be settled as the Board shall determine.
(c) Notice of any of the foregoing adjustments shall be given by the
Company to each holder of an Option which shall have been so adjusted.
(d) The grant of an Option pursuant to the Plan shall not affect in any
way the right or power of the Company to make adjustments, reclassification,
reorganizations, or changes of its capital or business structure or to merge,
consolidate, dissolve, liquidate, sell or transfer all or any part of its
business assets.
15. LISTING AND REGISTRATION OF SHARES
(a) No Option granted pursuant to the Plan shall be exercisable in whole
or in part if at any time the Board or the Committee, as the case may be, shall
determine, in its discretion, that the listing, registration, or qualification
of the shares of Common Stock subject to such Option on any securities exchange
or under any applicable law, or the consent or approval of any government
regulatory body, is necessary or desirable as a condition of or in connection
with the granting of such Option or the issue of shares thereunder unless such
listing, registration, qualification, consent, or approval shall have been
affected or obtained free of any conditions not acceptable to the Board.
(b) If a registration statement under the Securities Act of 1933 with
respect to shares issuable upon exercise of any Option granted under the Plan is
not in effect at the time of exercise, the person exercising such Option shall
give the Committee a written statement, satisfactory in form and substance to
the Committee, that he or she is acquiring the shares for his or her own account
for investment and not with a view to their disposition, the Company may place
upon any stock certificate for shares issuable upon exercise of such Option such
legend as the Committee may prescribe to prevent disposition of the shares in
violation of the Securities Act of 1933 or any other applicable law.
- 10 -
<PAGE>
16. SIX MONTH HOLDING PERIOD
Shares acquired pursuant to the exercise of Options shall not be sold or
transferred for at least six months after the exercise date with respect to such
Options.
17. EFFECTIVE DATE OF PLAN
Upon the ratification and approval of the stockholders of the Company at
the 2000 Annual Meeting of Stockholders, the Plan shall be effective as of March
16, 2000.
- 11 -
<PAGE>
EXHIBIT B
OSWEGO COUNTY BANCORP, INC.
RESTRICTED STOCK PLAN
1. PURPOSE: EFFECTIVENESS OF THE PLAN.
(a) The purpose of this Plan is to advance the interests of the Company
and its stockholders by helping the Company obtain and retain the services of
employees, officers, and directors, upon whose judgment, initiative and efforts
the Company is substantially dependent, and to provide those persons with
further incentives to advance the interests of the Company.
(b) This Plan will become effective on March 16, 2000, upon ratification
and approval by the stockholders of the Company.
2. CERTAIN DEFINITIONS.
Unless the context otherwise requires, the following defined terms
(together with other capitalized terms defined elsewhere in this Plan) will
govern the construction of this Plan, and of any agreements entered into
pursuant to this Plan:
(a) "1933 Act" means the federal Securities Act of 1933.
(b) "1934 Act" means the federal Securities Exchange Act of 1934.
(c) "Bank" means Oswego County Savings Bank.
(d) "Change in Control" of the Bank or the Company means:
(1) a reorganization, merger, conversion, consolidation, or sale of
all or substantially all of the assets of the Bank, the Company or Oswego County
MHC, or a similar transaction in which the Bank, the Company, or Oswego County
MHC is not the resulting entity and that is not approved by a majority of the
Board of Directors of the Company; or
(2) individuals who constitute the incumbent board of the Bank, the
Company or Oswego County MHC cease for any reason to constitute a majority
thereof; provided that any person becoming a director subsequent to the date
hereof whose election was approved by a vote of at least three-fourths of the
directors composing the incumbent board or whose nomination for election by the
Company's stockholders was approved by the same nominating committee serving
under the incumbent board shall be,
<PAGE>
for purposes of this Section, considered as through he or she were a member of
the incumbent board;
(3) an acquisition of "control" of the Bank or the Company as
defined in the Bank Holding Company Act of 1956, as amended and applicable rules
and regulations promulgated thereunder as in effect at the time of the Change in
Control (collectively, the "BHCA"), as determined by the Board of Directors of
the Bank, the Company or Oswego County MHC; or
(4) an acquisition of the Bank's stock requiring submission of
notice under the Change in Bank Control Act; provided, however, that a Change in
Control shall not be deemed to have occurred under paragraph (1), (3) or (4) of
this subsection (c) if the transactions constituting a Change in Control are
approved by a majority of the Board of Directors of the Company; or
(5) (A) an event of a nature that would be required to be reported
in response to Item 1 of the current report on Form 8-K, as in effect on the
date hereof, pursuant to Section 13 of 15(d) of the 1934 Act or results in a
change in control of the Bank, the Company or Oswego County MHC within the
meaning of the BHCA; or (B) such time as (i) any "person" (as the term is used
in Section 13(d) and 14(d) of the 1934 Act) other than Oswego County MHC is a
becomes a "beneficial owner" (as defined in Section 13(d)(3) of the 1934)
directly or indirectly, of securities of the Company or the Bank representing 25
or more of the outstanding securities ordinarily having the right to vote at the
election of directors except for any securities of the Company purchased by the
Bank's employee stock ownership plan and trust shall not be counted in
determining whether such plan is the beneficial owner of more than 25% of the
Bank's securities, (ii) a proxy statement soliciting proxies from stockholders
of the Company, by someone other than the current management of the Company,
seeking stockholder approval of a plan or reorganization, merger or
consolidation of the Company or the Bank or similar transaction with one or more
corporations as a result of which the outstanding shares of the class of
securities then subject to the plan or transaction are exchanged or converted
into cash or property or securities not issued by the Bank or the Company, or
(iii) a tender offer is made for 25% or more of the voting securities of the
Company and the stockholders owning beneficially or of record 25% or more of the
outstanding securities of the Company have tendered or offered to sell their
shares pursuant to such tender offer and such tendered shares have been accepted
by the tender offeror.
(e) "Board" means the Board of Directors of the Company.
(f) "Code" means the Internal Revenue Code of 1986, as amended. References
in this Plan to Sections of the Code are intended to refer to Sections of the
Code as enacted at the time of this Plan's adoption by the Board and as
subsequently amended, or to any substantially similar successor provisions of
the Code resulting from recodification, renumbering or otherwise.
- 2 -
<PAGE>
(g) "Committee" means a Compensation Committee of two or more Non-Employee
Directors, appointed by the Board, to administer and interpret this Plan.
(h) "Company" means Oswego County Bancorp, Inc., a Delaware corporation
with its principal place of business at 44 East Bridge Street, Oswego, New York
13126.
(i) "Non-Employee Director" shall the meaning provided in Rule
16b-3(b)(3)(i) under the 1934 Act.
(j) "Eligible Participants" means persons who, at a particular time, are
employees, officers or directors of the Company or any of its Subsidiaries.
(k) "Holder" means an Eligible Participant to whom any Restricted Stock is
issue hereunder, and any transferee thereof pursuant to a Transfer authorized
under this Plan.
(l) "Plan" means this Restricted Stock Plan of the Company.
(m) "Restricted Stock" means Stock issued or issuable by the Company
pursuant to this Plan.
(n) "Restricted Stock Grant Agreement" means an agreement between the
Company and an Eligible Participant to evidence the terms and conditions of the
issuance of Restricted Stock under this Plan.
(o) "Stock" means shares of the Company's common stock, par value $.01 per
share.
(p) "Subsidiary" has the same meaning as "Subsidiary Corporation" as
defined in Section 424(f) of the Code.
(q) "Termination Event" means, with respect to any Holder of Restricted
Stock, any event that results in such Holder no longer being an Eligible
Participant hereunder for any reason whatsoever, except for death, disability,
Change in Control, or, in the case of an officer or employee, normal retirement.
(r) "Transfer," with respect to Restricted Stock, includes, without
limitation, a voluntary or involuntary sale, assignment, transfer, conveyance,
pledge, hypothecation, encumbrance, disposal, loan, gift, attachment or levy of
such Restricted Stock, including without limitation an assignment for the
benefit of creditors of the Holder, a transfer by operation of law, such as a
transfer by will or under the laws of descent and distribution, an execution of
judgment against the Restricted Stock or the acquisition of record or beneficial
ownership thereof by a lender or creditor, a transfer pursuant to a qualified
domestic relations order, or to any decree of divorce, dissolution or separate
maintenance, any property settlement, any separation agreement or any other
agreement with a spouse
- 3 -
<PAGE>
(except for estate planning purposes) under which a part or all of the shares of
Restricted Stock are transferred or awarded to the spouse of the Holder or are
required to be sold; or a transfer resulting from the filing by the Holder of a
petition for relief, or the filing of an involuntary petition against such
Holder, under the bankruptcy laws of the United States or of any other nation.
3. ELIGIBILITY.
The Company may issue Restricted Stock under this Plan only to person who
are Eligible Participants as of the time of such issuance. Subject to the
provisions of Section 5 of this Plan, there is no limitation on the amount of
Restricted Stock that may be issued to an Eligible Participant.
4. ADMINISTRATION.
(a) Committee. The Committee, if appointed by the Board, will administer
this Plan. If the Board, in its discretion, does not appoint such a Committee,
the Board itself will administer this Plan and take such other actions as the
Committee is authorized to take hereunder.
(b) Authority and Discretion of Committee. The Committee will have full
and final authority in its discretion, at any time and from time to time,
subject only to the express terms, conditions and other provisions of the
Company's Certificate of Incorporation, By-laws and this Plan:
(i) to select and approve the persons to whom Restricted Stock will
be issued under this plan from among the Eligible Participants, including
the number of shares of Restricted Stock so issued to each such person;
(ii) to determine the Purchase Price of Restricted Stock issued
under this Plan, the period or periods of time during which the Company
will have the right to repurchase such Restricted Stock and the terms and
conditions of such repurchase, and other matters to be determined by the
Committee in connection with specific issuances of Restricted Stock and
Restricted Stock Grant Agreements as provided in this Plan; and
(iii) to interpret this Plan, to prescribe, amend and rescind rules
and regulations relating to this Plan, and to make all other
determinations necessary or advisable for the operation and administration
of this Plan.
(c) Restricted Stock Grant Agreements. Restricted Stock will be issued
hereunder only upon the execution and delivery of a Restricted Stock Grant
Agreement by the Holder and a duly authorized officer of the Company. Restricted
Stock will not be deemed issued merely upon the authorization of such issuance
by the Company.
- 4 -
<PAGE>
5. SHARES RESERVED FOR RESTRICTED STOCK.
(a) Restricted Stock Pool. The aggregate number of shares of Restricted
Stock that may be issued pursuant to this Plan will not exceed 11,985 (the
"Restricted Stock Pool"). In the event that any Restricted Stock is forfeited,
the shares of Common Stock forfeited to the Company shall not again be made
available for grant under the Plan.
(b) Adjustments Upon Changes in Stock. In the event of any change in the
outstanding Stock of the Company as a result of a stock split, reverse stock
split, stock dividend, recapitalization, combination or reclassification,
appropriate proportionate adjustments will be made in: (i) the aggregate number
of shares of Restricted Stock in the Restricted Stock Pool that may be issued
pursuant to this Plan; (ii) the exercise price of any rights of repurchase or of
first refusal under this Plan; and (iii) other rights and matters determined on
a per share basis under this Plan or any Restricted Stock Grant Agreement
hereunder. Any such adjustments will be made only by the Board, and when so made
will be effective, conclusive and binding for all purposes with respect to this
Plan. If there is any other change in the number or kind of the outstanding
shares of Stock of the Company, or of any other security into which that Stock
has been changed or for which it has been exchanged, and if the Board, in its
sole discretion, determines that this change requires any adjustment in the
restrictions of Transfer, rights of repurchase, or rights of first refusal in
Restricted Stock then subject to this Plan, such an adjustment will be made in
accordance with the determination of the Board. No such adjustments will be
required by reason of the issuance or sale by the Company for cash or other
consideration of additional shares of its Stock or securities convertible into
or exchangeable for shares of its stock.
6. TERMS OF RESTRICTED STOCK GRANT AGREEMENTS.
Each issuance of Restricted Stock pursuant to this Plan will be evidenced
by a Restricted Stock Grant Agreement between the Company and the Eligible
Participant to whom such Restricted Stock is to be issued, in form and substance
satisfactory to the Committee in its sole discretion, consistent with this Plan.
Without limiting the foregoing, each Restricted Stock Grant Agreement (unless
otherwise stated therein) will be deemed to include the following terms and
conditions:
(a) No Agreement to Employ. Nothing contained in this Plan, any Restricted
Stock Grant Agreement or in any other agreement executed in connection with the
issuance of Restricted Stock under this Plan will confer upon any Holder any
right with respect to the continuation of his or her status as an employee of,
consultant or independent contractor to, or director of the Company or any
Subsidiary.
(b) Vesting Periods; Forfeiture to Company.
(i) Vesting. Except as otherwise provided herein, each Restricted
Stock Grant Agreement may specify the period or periods of time within
which
- 5 -
<PAGE>
the Restricted Stock issued thereunder shall be forfeited to the Company
or its assignee (the "Vesting Period"), as set forth in this Section 6(b).
Such Vesting Periods will be fixed by the Committee in its discretion, and
may be accelerated or shortened by the Committee in its discretion.
Unless the Restricted Stock Purchase Agreement executed by a Holder
expressly otherwise provides and except as set forth in this Plan, as of
the date issued, all of the shares of Restricted Stock issued pursuant to
the agreement (the "Total Award Shares") will be deemed "Unvested" and
will become "Vested" according to the following schedule:
(1) No portion of the Total Award Shares will be deemed
"Vested" prior to the first anniversary of the date on which the
Restricted Stock was issued to the Holder (the "Issue Date");
(2) The Restricted Stock will become "Vested" on a cumulative
basis as to twenty percent (20%) of the Total Award Shares on each
of the first, second, third, fourth and fifth anniversaries of the
Issue Date, so that the Total Award Shares will have become fully
"Vested," subject to the Holder's remaining an Eligible Participant,
on the fifth anniversary of such Issue Date.
(ii) Vesting Upon Certain Events. Upon termination of a Holder's
employment (or service) due to death, disability, Change in Control or, in
the case of an officer or employee, normal retirement, all Restricted
Stock of the Holder, whether or not "Vested" at that time, shall become
"Vested."
(iii) Forfeiture Upon Termination. Upon the occurrence of any
Termination Event with respect to any Holder of Restricted Stock, any
Unvested shares of Restricted Stock owned by such Holder at the time of
such Termination Event shall be forfeited to the Company.
(c) Restrictions on Transfer of Restricted Stock.
(i) General Rule on Permissible Transfer of Restricted Stock.
Restricted Stock may be Transferred only in (1) accordance with the
limitations on the Transfer of Restricted Stock imposed by applicable
state or federal securities laws, (2) as set forth below, and (3) subject
to certain undertakings of the transferee (Section 6(c)(iii)). All
Transfers of Restricted Stock not meeting the conditions set forth in this
Section 6(c) are expressly prohibited.
(ii) Effect of Prohibited Transfer. Any prohibited Transfer of
Restricted Stock is void and of no effect. Should such a Transfer purport
to occur, the Company may refuse to carry out the Transfer on its books,
attempt to set aside the Transfer, enforce any undertaking or right under
this Section 6(c), or exercise any other legal or equitable remedy.
- 6 -
<PAGE>
(iii) Required Undertaking. Any Transfer that would otherwise be
permitted under the terms of this Plan is prohibited unless the transferee
executes such documents as the Company may reasonably require to ensure
that the Company's rights under a Restricted Stock Grant Agreement and
this Plan are adequately protected with respect to the Restricted Stock so
Transferred. Such documents may include, without limitation, an agreement
by the transferee to be bound by all of the terms of this Plan, and of the
applicable Restricted Stock Grant Agreement, as if the transferee were the
original Holder of such Restricted Stock.
(iv) Escrow. To facilitate the enforcement of the restrictions on
Transfer set forth in this Plan, the Committee may, at its discretion,
require the Holder of shares of Restricted Stock to deliver the
certificate(s) for such shares with a stock power executed in blank by
Holder and Holder's spouse (if required for transfer), to the Secretary of
the Company or his or her designee, to hold said certificate(s) and stock
power(s) in escrow and to take all such actions and to effectuate all such
Transfers and/or releases as are in accordance with the terms of this
Plan. The certificates may be held in escrow so long as the shares of
Restricted Stock whose ownership they evidence is subject to forfeiture
under this Plan or under a Restricted Stock Grant Agreement. Each Holder
acknowledges that the Secretary of the Company (or his or her designee) is
so appointed as the escrow holder with the foregoing authorities as a
material inducement to the issuance of shares of Restricted Stock under
this Plan, that the appointment is coupled with an interest, and that it
accordingly will be irrevocable. The escrow holder will not be liable to
any party to a Restricted Stock Grant Agreement (or to any other party)
for any actions or omissions unless the escrow holder is grossly negligent
relative thereto. The escrow holder may rely upon any letter, notice or
other document executed by any signature purported to be genuine.
(d) Additional Restrictions on Transfer. By accepting Restricted Stock
under this Plan, the Holder will be deemed to represent, warrant and agree as
follows:
(i) Securities Act of 1933. The Holder understands that the shares
of Restricted Stock have not been registered under the 1933 Act, and that
such shares are not freely tradable and must be held indefinitely unless
such shares are either registered under the 1933 Act or an exemption from
such registration is available.
(ii) Other Applicable Laws. The Holder further understands that each
Transfer of the Restricted Stock requires full compliance with the
provisions of applicable laws.
(iii) Investment Intent. Unless a registration statement under the
1933 Act is in effect with respect to the sale and issuance of the
Restricted Stock to the Holder: (1) the Holder is purchasing the
Restricted Stock for his or her own
- 7 -
<PAGE>
account and not with a view to distribution within the meaning of the 1933
Act, other than as may be effected in compliance with the 1933 Act and the
rules and regulations promulgated thereunder; (2) no one else will have
any beneficial interest in the Restricted Stock; and (3) Holder has no
present intention of disposing of the Restricted Stock at any particular
time.
(e) Compliance with Law. Notwithstanding any other provision of this Plan,
Restricted Stock may be issued pursuant to this Plan only after there has been
compliance with all applicable federal and state securities laws, and such
issuance will be subject to this overriding condition. The Company will not be
required to register or qualify Restricted Stock with the Securities and
Exchange Commission or any State agency, except that the Company will register
with, or as required by local law, file for and secure an exemption from such
registration requirements from, the applicable securities administrator and
other officials of each jurisdiction in which an Eligible Participant would be
issued Restricted Stock hereunder prior to such issuance.
(f) Stock Certificates. Certificates representing the Restricted Stock
issued pursuant to this Plan will bear all legends required by law and necessary
to effectuate this Plan's provisions. The Company may place a "stop transfer"
order against shares of the Restricted Stock until all restrictions and
conditions set forth in this Plan and in the legends referred to in this Section
6(f) have been complied with.
(g) Market Standoff. To the extent requested by the Company and any
underwriter of securities of the Company in connection with a firm commitment
underwriting, no Holder of any shares of Restricted Stock will sell or otherwise
transfer any such shares not included in such underwriting, or not previously
registered pursuant to a registration statement filed under the 1933 Act, during
the one hundred twenty (120) day period following the effective date of the
registration statement filed with the Securities and Exchange Commission in
connection with such offering.
(h) Notices. Any notice to be given to the Company under the terms of a
Restricted Stock Grant Agreement will be addressed to the Company at its
principal executive office, Attn: Corporate Secretary, or at such other address
as the Company may designate in writing. Any notice to be given to a Holder will
be addressed to the Holder at the address provided to the Company by the Holder.
Any such notice will be deemed to have been duly given if an when enclosed in a
properly sealed envelope, addressed as aforesaid, registered and deposited,
postage and registry fee prepaid, in a post office or branch post office
regularly maintained by the United States Postal Service.
(i) Other Provisions. The Restricted Stock Grant Agreement may contain
such other terms, provisions and conditions, including such special forfeiture
conditions, rights of repurchase, rights of first refusal and other restrictions
on Transfer of Restricted Stock issued hereunder, not inconsistent with this
Plan, as may be determined by the Committee in its sole discretion.
- 8 -
<PAGE>
7. PERIOD IN WHICH GRANTS CAN BE MADE.
Restricted Stock may be granted under this Plan at any time on or before
March 16, 2010.
8. AMENDMENT AND DISCONTINUANCE.
The Board may amend, suspend or discontinue this Plan at any time or from
time to time; provided that (a) no such action of the Board shall alter or
impair any rights previously granted to Holders under the Plan without the
consent of such affected Holders (or their successors or assignees), and (b) the
Plan may not be amended without approval of the Company's stockholders if the
amendment would materially increase the benefits accruing to participants under
the Plan, increase the number of shares of Restricted Stock that may be issued
under the Plan, or materially modify the requirements as to eligibility for
participation in the Plan.
9. PLAN COMPLIANCE WITH RULE 16b-3.
With respect to persons subject to the liability and reporting
requirements of Section 16 of 1934 Act, transactions under this Plan are
intended to comply with all applicable conditions of Rule 16b-3 or its
successors under the 1934 Act.
10. COPIES OF PLAN.
A copy of this Plan will be delivered to each Holder at or before the time
he or she executes a Restricted Stock Grant Agreement.
- 9 -
<PAGE>
Oswego County Bancorp, Inc.
Annual Report to Shareholders
<PAGE>
Oswego County Savings Bank
Mission Statement:
Our mission is to be a financial service organization of undisputed integrity
serving central New York.
Our goal is to maximize the value of our shareholders' equity by helping our
customers attain their financial goals and potential.
Our specialty is providing individuals and small businesses with the personal,
professional and innovative financial services they desire delivered in a manner
that is above their expectations.
Our pledge is to manage entrusted resources for the benefit of our stockholders,
customers, communities and staff.
Strategic Objectives 2000-2002
Become a diversified financial service organization.
Expand traditional markets and methods of delivery.
Provide a work environment that attracts and retains highly qualified
individuals dedicated to the bank's goals.
Use technology to improve staff efficiency and provide electronic service
options.
<PAGE>
Oswego County Bancorp, Inc. and Oswego County Savings Bank
Board of Directors
[picture]
Back row, left to right: Paul J. Heins, Vice Chairman, Gregory J. Kreis, Bruce
P. Frassinelli, Deborah F. Stanley. Front row, left to right: Michael L. Brower,
Paul W. Schneible, Chairman, Carl K. Walrath. Missing: Bernard Shapiro.
Management Team
[picture]
Back row, left to right: Stephen Albright, Gregory J. Kreis, Gregory H. May,
Ronald Tascarella. Front row: Judith S. Percy, Mary E. Lilly.
<PAGE>
Annual Message to Shareholders
The year 1999 saw the most dramatic change for Oswego County Savings Bank in the
129 history of the Bank. Oswego County Savings Bank and Oswego City Savings Bank
jointly announced the termination of the merger agreement between the two banks
in January, seventeen months after signing the agreement. Although both banks
believed the merger would have been positive for our customers and the Oswego
County community, we were unsuccessful in gaining necessary regulatory
approvals. The Board of Trustees voted unanimously to begin the process to
convert from a mutual savings bank to a mutual holding company and stock bank
form of ownership. The Board felt strongly that to accommodate the strategic
vision for the future that the Bank would need additional capital. The
conversion was accomplished on the 14th of July with the completion of a
successful initial public offering of our stock.
In 1997 the Bank started an extensive review of all of our systems to determine
what needed to be done to ensure that a smooth transition to the year 2000 would
be accomplished. Hundreds of man-hours were dedicated to the project as well as
a substantial investment in new computer equipment and computer software. The
effort was successful and the New Year rolled in without a problem.
The good news regarding all of the Y2K preparation work was that our technology
took a significant step forward. New high-speed phone lines were installed to
all of our locations and a wide area network was established to improve customer
service and internal communication. Faster and more efficient personal computers
were acquired and additional software was installed to streamline tasks and add
new services.
The Main Office facility was renovated from top to bottom. Our Main Office
branch received new ceilings, lighting, carpet, fresh paint and a redesigned
teller line with a manager's office located next to it. All of our back room
operations were consolidated on our third floor in freshly remodeled space which
improved workflow.
In August a new branch located at 700 North Main Street in North Syracuse was
opened and represented the Bank's first branch outside of Oswego County. The
reception in that market has been gratifying and our growth is on target to meet
our first year budget. Also in August the Bank installed an ATM in the Hewitt
Student Union on the Oswego State University campus.
The Bank also began offering several new products during the year. A home equity
line of credit and several new fixed rate residential mortgage products were
introduced. An automatic overdraft privilege was added for our consumer checking
account customer's convenience. The OCSB MasterMoney Card was also introduced to
our checking account customers. This debit card may be used at OCSB ATMs as well
as a worldwide network of ATMs. Additionally the debit card can be used at
businesses worldwide that accept MasterCard transactions. The amount is
automatically deducted from the customer's checking account giving them
universal access to their funds.
<PAGE>
We expanded our services to the business community and were received warmly by
that group. Business loan and deposit balances grew substantially and two more
staff members were added to accommodate that growth. Our strategic direction is
to continue to grow this very important segment of the market. Based on the
volume of activity we are currently experiencing additional staff will be added
in 2000 to keep up with the demand.
The year 1999 was truly exciting as the Bank positioned itself to succeed in the
twenty first century. The year 2000 promises to be an equally exciting year as
many new loan and deposit product offerings are being readied for introduction.
A package to allow our customer's to bank from home or work via the Internet
will also be introduced. Non traditional banking services will also be available
in 2000 with a goal of being one stop financial services provider.
The Bank will celebrate our 130th anniversary in August. The Board's and
management's that have guided the Bank throughout those 130 years have steered a
course that kept the Bank sound and allowed it to grow and serve the citizens
and businesses of this region. The current Board, management team and staff are
equally committed to operating a strong and growing financial institution
dedicated to excellent service while meeting the changing needs of our
customers.
Paul W. Schneible Gregory J. Kreis
Chairman of the Board President & CEO
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
On July 13, 1999, Oswego County Savings Bank (the "Bank") reorganized under a
mutual holding company structure as a wholly owned subsidiary of Oswego County
Bancorp, Inc. (the "Company" or "OCB"), a mid-tier stock holding company that
became the majority-owned subsidiary of Oswego County MHC (the "MHC").
Contemporaneously with the reorganization, the Company sold in a public offering
399,500 shares of its common stock, par value $.01 ("Company Common Stock") at
$10.00 per share, raising net proceeds of $3.0 million. As an integral part of
the reorganization and public offering and in furtherance of the Company's
commitment to the communities it serves, the Bank and the Company have
established a charitable foundation known as the Oswego County Charitable
Foundation (the "Foundation") and have contributed 15,980 shares to the
Foundation. The Foundation will provide funding to support charitable causes and
community development activities, which will complement the Bank's existing
community activities. In addition, the Company established an Employee Stock
Ownership Plan (ESOP) for employees of the Company and the Bank, which became
effective with completion of the reorganization. The ESOP plan acquired 31,960
shares of OCB stock through January 2000 and has no immediate plans to purchase
additional shares.
The consolidated financial condition and operating results of the Company are
primarily dependent on its wholly owned subsidiary, the Bank, and all references
to the Company prior to July 13, 1999, except where otherwise indicated are to
the Bank.
Comparison of Financial Condition at December 31, 1999 and December 31, 1998
Total assets increased by $12.0 million or 10.8% to $122.8 million at December
31, 1999 from $110.9 million at December 31, 1998. The increase was primarily
due to a $2.6 million or 18.8% increase in securities held to maturity and a
$6.1 million or 40.9% increase in securities available for sale. Loans
outstanding increased $1.0 million from $72.1 million at December 31, 1998 to
$73.1 million at December 31, 1999. These asset increases were funded with net
stock offering proceeds of $3.0 million, $5.0 million in long-term borrowings
and a $3.6 million increase in total deposits from $96.6 million at December 31,
1998 to $100.1 million at December 31, 1999.
While total loans increased $1.0 million during 1999, the mix of outstanding
loans changed due to continued mortgage refinancings and successful efforts in
commercial lending. Total residential and home equity loans decreased $5.2
million from $60.8 million at December 31, 1998 to $55.6 million at December 31,
1999. The decrease in mortgage and home equity loans reflects consumer
preference in lower interest rate environments for fixed-rate residential
mortgage loans and the continued high levels of mortgage loan refinancings in
1999. As interest rates have risen in the latter part of 1999 and in early 2000,
refinancing has slowed and consumer interest in adjustable-rate mortgages has
increased. Commercial loans increased from $265,000 at December 31, 1998 to $5.9
million at December 31, 1999. This increase reflects the Company's continued
efforts to diversify the loan portfolio and to expand product offerings to
include commercial term loans and lines of credit. At December 31, 1999, net
loans amounted
<PAGE>
to $72.0 million or 58.6% of total assets, compared to $71.0 million or 64.1% at
December 31, 1998. Total securities available for sale increased $6.1 million
from $14.8 million at December 31, 1998 to $20.8 million at December 31, 1999.
Securities held to maturity increased $2.6 million from $13.7 million at
December 31, 1998 to $16.3 million at December 31, 1999. The increase in
securities available for sale was funded by increased deposit balances and long
term borrowings. The increases in securities held to maturity were primarily in
municipal issues which offer the Company favorable income tax benefits.
Securities represented 30.2% of total assets at December 31, 1999 and 25.7% of
total assets at December 31, 1998.
Real estate owned at December 31, 1999 was $255,000 compared to $195,000 at
December 31, 1998. During 1999, the Company continued to reduce the level of
non-performing loan amounts. Total non-performing loans decreased from $1.7
million at December 31, 1998 to $1.3 million at December 31, 1999. Loan
charge-offs have also decreased from $526,000 in 1998 to $157,000 in 1999. At
December 31, 1999, the allowance for loan losses equaled $1.1 million
representing 1.46% of total loans outstanding and 81.35% of total non-performing
loans.
Total deposits increased during 1999 by $3.6 million to $100.1 million at
December 31, 1999 from $96.6 million at December 31, 1998. The increase was
centered in demand and savings deposits which increased $1.7 million and $2.3
million, respectively. Time deposit levels were consistent with the prior year.
Total shareholders' equity was $14.2 million at December 31, 1999, an increase
of $2.5 million from December 31, 1998. The increase was due primarily to the
offering proceeds offset by the increase in accumulated other comprehensive loss
and the unallocated ESOP shares, which are presented as a reduction of
shareholders' equity.
Results of Operations for the Year Ended December 31, 1999 Versus the Year Ended
December 31, 1998
Net income was $169,000 for the year ended December 31, 1999, compared to
$309,000 in 1998, reflecting the Company's 1999 contribution of $160,000 worth
of common stock to a charitable foundation and costs associated with opening a
fifth banking office. Fiscal 1999 was a year of transition to public company
status and to an expanded base of operations.
Net Interest Income. Net interest income is determined by the average interest
rate spread (i.e., the difference between the average yields earned on
interest-earning assets and the average rates paid on interest-bearing
liabilities) and the relative amounts of interest-earning assets and
interest-bearing liabilities. Net interest income increased from $4.5 million in
1998 to $4.6 million in 1999 during a year in which market levels for short-term
interest rates increased by approximately 1.50%. The Company views favorably its
ability in 1999 to maintain a consistent level of net interest income in a
rising rate environment. OCB can offer no assurance, however, that it would be
able to achieve similar results during future periods. For the year ended
December 31, 1999, taxable equivalent net interest income increased by $57,000
due to volume and $49,000 as the result of interest rate variances.
<PAGE>
Interest Income. Total interest income decreased by $134,000, or 2.1%, to $7.8
million for 1999 compared to $7.9 million for 1998. The primary reason for the
decrease in interest income was a $483,000 decrease in interest earned on
outstanding loans reflecting mainly the pay down of higher yielding adjustable
rate residential mortgage loans. The average balance of loans decreased $3.5
million from $75.6 million in 1998 to $72.1 million in 1999. The average yield
on the loan portfolio also decreased from 8.27% in 1998 to 8.01% in 1999.
Income from securities increased by $374,000 during 1999 to $1.9 million,
compared to $1.5 million in 1998. The increase in interest income from
securities during 1999 was due primarily to a $6.4 million increase in the
average balance of securities to $31.1 million for 1999 compared to $24.7
million in 1998. The average yield on the securities portfolio decreased
slightly to 6.01% in 1999 compared to 6.05% in 1998.
Other interest income, which consists of interest on federal funds sold and
other short-term investments, was $156,000 in 1999 as compared to $181,000 in
1998. The average amount of federal funds and short-term investments decreased
from $3.2 million in 1998 to $2.9 million in 1999. The average yields on these
investments decreased from 5.60% in 1998 to 5.32% in 1999.
Interest Expense. Interest expense, which consisted primarily of interest paid
on deposits, was $3.1 million in 1999 compared to $3.4 million in 1998. The
primary reason for the $240,000 decrease in interest expense was a 31 basis
point reduction in the average rate paid on these deposits in 1999 compared to
1998. This reflects the Company's increase in lower costing savings and demand
deposits, and reduced average rates paid on savings, demand and time deposits.
OCB offers its deposit customers tiered pricing schedules whereby higher
balances earn higher rates of interest.
Provision for Loan Losses. The provision for loan losses was $120,000 in both
1999 and 1998. Provisions for loan losses are recorded to maintain the allowance
for loan losses at an amount management considers adequate to cover losses which
are deemed probable and can be estimated. These provisions were based upon a
number of factors, including asset classifications, management's assessment of
the credit risk inherent in the portfolio, historical loan loss experience,
economic trends, industry experience and trends, estimated collateral values and
underwriting policies. Net loan charge-offs were $119,000 in 1999 and $461,000
in 1998, reflecting the Company's efforts during the past three years to address
problem loan situations in a timely manner. As a result of improvement in loan
portfolio quality, charge-offs and non-performing loans declined during 1999.
Total non-performing loans decreased from $1.7 million at December 31, 1998 to
$1.3 million at December 31, 1999. At December 31, 1999, the allowance for loan
losses equaled $1.1 million, representing 1.46% of total loans outstanding and
81.35% of total non-performing loans.
Noninterest Income. Noninterest income increased by $116,000 during 1999 as
compared to 1998. The increase reflects the Company's efforts to expand
commercial loan and deposit products, which result in greater service fee
levels. In addition, the Company extended efforts to reduce fee and service
charge waivers during 1999.
<PAGE>
Noninterest Expenses. Noninterest expenses increased during 1999 by $459,000, or
10.4%, to $4.9 million compared to $4.4 million in 1998. The primary reasons for
the increase were a 10.3% increase in salaries and benefits, a 15.6% increase in
occupancy and equipment expenses, a $170,000 increase in professional fees, a
$98,000 increase in data processing costs and a $160,000 increase in charitable
contributions. Partially offsetting these increases were the absence in 1999 of
$171,000 in terminated merger expenses, and a reduction of $217,000 in ORE
expenses. Higher salary and benefit costs reflect the branch opening, wage
increases and inflationary increases in benefit expenses. The increase in
occupancy and equipment expense was caused by higher depreciation expense on
capital expenditures, primarily for the new branch and computer equipment. The
increase in data processing costs in 1999 reflects efforts to continue to
improve data processing capabilities, inflationary increases in a data
processing servicing contract, expenses associated with ATMs installed in mid
1998, and costs to bring a new branch on line. Professional fees include the
costs of a profitability study, Y2K consulting costs, and increased costs from
operating as a publicly held company. Increased charitable contributions reflect
the $160,000 contribution of common stock to Oswego County Charitable
Foundation.
Income Taxes. Income tax expense decreased by $125,000 in 1999 to $37,000 as
compared to $162,000 in 1998, reflecting reduced pretax income and a greater
volume of tax exempt securities in 1999. The effective income tax rate declined
to 18.0% in 1999 from 34.4% in 1998.
[picture]
700 North Main Street, North Syracuse
Our newest branch opened August of 1999.
Stephen Sharkey Assistant Vice President and Branch Manager.
<PAGE>
OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY
Consolidated Financial Statements
Years ended December 31, 1999 and 1998
(With Independent Auditors' Report Thereon)
<PAGE>
Independent Auditors' Report
The Board of Directors
Oswego County Bancorp, Inc.:
We have audited the accompanying consolidated statements of financial condition
of Oswego County Bancorp, Inc. and subsidiary (the "Company") as of December 31,
1999 and 1998, and the related consolidated statements of income, changes in
shareholders' equity, and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Oswego County
Bancorp, Inc. and subsidiary as of December 31, 1999 and 1998, and the results
of their operations and their cash flows for the years then ended, in conformity
with generally accepted accounting principles.
KPMG LLP
February 28, 2000
Syracuse, New York
<PAGE>
Statements of Financial Condition, p. 2
Statements of Operations, p. 4
Statements of Changes in Net Worth, p. 7
Statements of Cash Flows, p. 9
<PAGE>
OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Financial Condition
December 31, 1999 and 1998
(In thousands, except share data)
Assets 1999 1998
---- ----
Cash and due from banks $ 6,450 4,007
Federal funds sold and other short-term investments -- 2,600
Securities held to maturity, fair value of $15,829 in
1999 and $13,792 in 1998 16,307 13,730
Securities available for sale, at fair value 20,834 14,784
Loans 73,098 72,081
Less allowance for loan losses 1,069 1,068
-------- -------
Loans, net 72,029 71,013
-------- -------
Real estate owned 255 195
Premises and equipment, net 3,056 2,245
Accrued interest receivable 938 856
Other assets 2,980 1,436
-------- -------
Total assets $122,849 110,866
======== =======
Liabilities and Shareholders' Equity
Liabilities:
Deposits:
Demand 13,329 11,630
Savings and money market 49,000 46,687
Time 37,789 38,247
-------- -------
100,118 96,564
Escrow deposits 1,286 1,319
Short-term borrowings 900 --
Long-term debt 5,000 --
Other liabilities 1,326 1,289
-------- -------
Total liabilities 108,630 99,172
-------- -------
Commitments and contingencies (note 13)
2
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Shareholders' equity:
Preferred stock, $0.01 par value, 1,000,000 shares authorized,
no shares issued -- --
Common stock, $0.01 par value, 7,500,000 shares authorized,
887,230 shares issued at December 31, 1999 9 --
Additional paid-in capital 3,182 --
Retained earnings 11,764 11,695
Accumulated other comprehensive income (loss) (498) (1)
Unallocated common stock held by Employee Stock
Ownership
Plan (ESOP), 24,284 shares at December 31, 1999 (238) --
--------- -------
Total shareholders' equity 14,219 11,694
--------- -------
Total liabilities and shareholders' equity $ 122,849 110,866
========= =======
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Income
Years ended December 31, 1999 and 1998
(In thousands, except share data)
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
Interest income:
Loans $ 5,770 6,253
Securities 1,827 1,481
Federal funds sold and other short-term investments 156 181
------- -------
Total interest income 7,753 7,915
Interest expense:
Deposits and escrow accounts 3,131 3,388
Borrowings 17 --
------- -------
Total interest expense 3,148 3,388
------- -------
Net interest income 4,605 4,527
Provision for loan losses 120 120
------- -------
Net interest income after provision for loan losses 4,485 4,407
------- -------
Noninterest income:
Service charges 450 387
Nationar recovery -- 22
Net gains on securities transactions 7 2
Other 128 58
------- -------
Total noninterest income 585 469
------- -------
Noninterest expenses:
Salaries and employee benefits 2,122 1,924
Occupancy and equipment 776 671
Data processing 435 337
Office supplies, printing and postage 219 187
Professional fees 421 251
Merger expenses -- 171
Real estate owned, net 85 302
Director fees 128 138
Marketing and advertising 159 121
Contributions 200 40
</TABLE>
4
<PAGE>
<TABLE>
<S> <C> <C>
Deposit insurance premiums 11 12
Other 308 251
------- -------
Total noninterest expenses 4,864 4,405
------- -------
Income before income tax expense 206 471
Income tax expense 37 162
------- -------
Net income $ 169 309
======= =======
Basic loss per share (for period after conversion to stock form) $ (0.17) ~~
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Changes in Shareholders' Equity
Years ended December 31, 1999 and 1998
(In thousands, except share data)
<TABLE>
<CAPTION>
Additional
Common paid-in Retained
Stock capital earnings
---------------- ---------------- ------------------
<S> <C> <C> <C>
Balance at December 31, 1997 $ -- -- 11,386
Comprehensive income:
Net income -- -- 309
Net change in the unrealized gain (loss) on securities
available for sale, net of taxes -- -- --
Total comprehensive income
------------------- ---------------- ------------------
Balance at December 31, 1998 -- -- 11,695
Net proceeds from sale of 399,500 shares of common
stock in initial public offering 4 3,027 --
Initial capital contributions and issuance of common
stock to Oswego MHC (471,750 shares) 5 (5) (100)
Charitable contribution of common stock to the
Oswego County Charitable Foundation (15,980 -- 160 --
</TABLE>
6
<PAGE>
<TABLE>
shares)
Acquisition of common stock by ESOP (26,460 shares) -- -- --
Allocation of ESOP stock (2,176 shares) -- -- --
Comprehensive income:
Net income -- -- 169
Net change in the unrealized gain (loss) on securities
available for sale, net of taxes -- -- --
Total comprehensive income (loss)
-- ---------------- ---------------- ------------------
Balance at December 31, 1999 $ 9 3,182 11,764
=================== ================ ==================
<CAPTION>
Unallocated
Accumulated common
other stock
comprehensive held by
income (loss) ESOP Total
------------------- ----------------- -----------------
<S> <C> <C> <C>
Balance at December 31, 1997 5 -- 11,391
Comprehensive income:
Net income -- -- 309
Net change in the unrealized gain (loss) on securities
available for sale, net of taxes (6) -- (6)
-----------------
Total comprehensive income 303
------------------- ----------------- -----------------
Balance at December 31, 1998 (1) -- 11,694
Net proceeds from sale of 399,500 shares of common
stock in initial public offering -- -- 3,031
Initial capital contributions and issuance of common
stock to Oswego MHC (471,750 shares) -- -- (100)
Charitable contribution of common stock to the
Oswego County Charitable Foundation (15,980 shares) -- -- 160
Acquisition of common stock by ESOP (26,460 shares) -- (259) (259)
Allocation of ESOP stock (2,176 shares) -- 21 21
Comprehensive income:
Net income -- -- 169
Net change in the unrealized gain (loss) on securities
available for sale, net of taxes (497) -- (497)
-----------------
Total comprehensive income (loss) (328)
------------------- ----------------- -----------------
Balance at December 31, 1999 (498) (238) 14,219
=================== ================= =================
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE>
OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
Years ended December 31, 1999 and 1998
(In
thousands)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 169 309
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 318 256
Provision for loan losses 120 120
Nationar recovery -- (22)
Writedown on real estate owned 46 32
(Gain) loss on sale of real estate owned (34) 113
Net gains on securities transactions (7) (2)
Net amortization on securities 31 32
Deferred income tax expense (benefit) (160) 99
Contribution to foundation 160 --
ESOP compensation expense 21 --
Change in:
Accrued interest receivable (82) 69
Other assets (1,052) (538)
Escrow deposits (33) (140)
Other liabilities 37 44
------- -------
Net cash provided by (used in) operating activities 466) 372
------- -------
Cash flows from investing activities:
Proceeds from maturity of and principal collected on
securities held to maturity 3,428 9,723
Proceeds from sale of securities available for sale 2,019 2,002
Proceeds from maturity of and principal collected on
securities available for sale 7,440 6,896
Purchases of securities held to maturity (6,039) (13,039)
Purchases of securities available for sale (16,328) (12,778)
Net (disbursements) receipts on loan originations and principal collections (1,496) 7,644
Proceeds from sale of real estate owned 288 534
Purchases of premises and equipment, net of disposals (1,129) (177)
------- -------
Net cash provided by (used in) investing activities (11,817) 805
------- -------
Cash flows from financing activities:
Net increase in demand, savings and money market deposits 4,012 116
Net decrease in time deposits (458) (1,450)
Net increase in short-term borrowings 900 --
Proceeds from issuance of long-term debt 5,000 --
Net proceeds from the issuance of common stock 3,031 --
Purchase of common stock by ESOP (259) --
Capitalization of Oswego MHC (100) --
------- -------
Net cash provided by (used in) in financing activities 12,126 (1,334)
------- -------
Net decrease in cash and cash equivalents (157) (157)
Cash and cash equivalents at beginning of year 6,607 6,764
------- -------
8
<PAGE>
Cash and cash equivalents at end of year $ 6,450 6,607
======== =======
Supplemental disclosure of cash flow information:
Cash paid (received) during the year for:
Interest $ 3,131 3,388
Income taxes (1) 196
======== =======
Non-cash investing and financing activities:
Transfer of loans to real estate owned $ 360 275
======== =======
Adjustment of securities available for sale to fair value, net of taxes $ 497) (6)
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
9
<PAGE>
OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(1) Summary of Significant Accounting Policies
The accounting and reporting policies of Oswego County Bancorp, Inc. (the
"Parent Company") and its subsidiary (referred to together as the
"Company") conform to generally accepted accounting principles and
reporting practices followed by the banking industry. The more significant
policies are described below.
(a) Reorganization and Stock Offering
Oswego County Bancorp, Inc. is the parent company of Oswego County
Savings Bank (the "Bank"). On July 13, 1999, Oswego County Savings
Bank reorganized into the mutual holding company form of
organization as a wholly owned subsidiary of Oswego County Bancorp,
Inc., a mid-tier stock holding company that became the
majority-owned subsidiary of Oswego County MHC (the "MHC").
Contemporaneously with the reorganization, Oswego County Bancorp,
Inc. sold 399,500 shares of its common stock at $10.00 per share,
raising net proceeds of $3.0 million, after offering costs of
$900,000. As an integral part of the reorganization and public
offering, the Company established a charitable foundation known as
the Oswego County Charitable Foundation (the "Foundation") and
contributed 15,980 shares to the Foundation. Contributions expense
for 1999 includes $160,000 for the fair value of these shares at the
contribution date. The Foundation will provide funding to support
charitable causes and community development activities. In addition,
the Company established an Employee Stock Ownership Plan (ESOP)
which became effective with the completion of the reorganization.
(b) Merger Termination
On January 28, 1999, the Bank terminated a proposed merger, as a
result of certain regulatory considerations. Expenses related to
this terminated merger totaling $171,000 in 1998 are included in
noninterest expenses.
(c) Basis of Presentation
The consolidated financial statements include the accounts of Oswego
County Bancorp, Inc. and its subsidiary, Oswego County Savings Bank.
All inter-company accounts and transactions have been eliminated in
consolidation. The Company utilizes the accrual method of accounting
for financial reporting purposes. Amounts in the prior years'
consolidated financial statements have been reclassified whenever
necessary to conform to the current year's presentation.
(Continued)
10
<PAGE>
OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(d) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
income and expenses during the reporting period. Actual results
could differ from those estimates.
(e) Securities
The Company classifies its securities as either available for sale
or held to maturity, as the Company does not hold any securities
considered to be trading. Held to maturity securities are those debt
securities for which the Company has the positive intent and the
ability to hold until maturity. All other securities not included in
held to maturity are classified as available for sale.
Held to maturity securities are recorded at cost, adjusted for the
amortization or accretion of premiums or discounts. Available for
sale securities are recorded at fair value. Unrealized holding gains
and losses, net of the related tax effect, on available for sale
securities are excluded from earnings and are reported as
accumulated other comprehensive income or loss until realized.
Non-marketable equity securities (principally Federal Home Loan Bank
Stock) are included in securities available for sale at cost since
there is no readily available market value.
A decline in the fair value of any available for sale or held to
maturity security below cost, that is deemed other than temporary,
is charged to earnings resulting in the establishment of a new cost
basis for the security.
Premiums and discounts are amortized or accreted over the life of
the related security as an adjustment to yield using the effective
interest method. Dividends and interest income are recognized when
earned. Realized gains and losses on securities are recognized on
the trade date and are calculated using the specific identification
method for determining the cost of securities sold.
(f) Loans
Loans (other than those held for sale) are reported at the principal
amount outstanding. Fees and certain direct origination costs
related to lending activities are recognized in income as incurred,
as the amounts are immaterial.
Mortgage loans originated and intended for sale in the secondary
market are carried at the lower of cost or estimated market value in
the aggregate. Net unrealized losses are recognized through a
valuation allowance by charges to income.
(Continued)
11
<PAGE>
OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
Generally, the Company places all loans that are 90 days or more
past due on non-accrual status. In addition, the Company places any
loan on non-accrual status if any part of it is classified as
doubtful or loss, or if any part has been charged off. When a loan
is placed on non-accrual status, total interest accrued and unpaid
to date is reversed by a charge to interest income. Subsequent
payments are either applied to the outstanding principal balance or
recorded as interest income, depending on the assessment of the
ultimate collectibility of the loan.
(g) Allowance for Loan Losses
The Company's provision for loan losses charged to operations is
based upon management's evaluation of the loan portfolio. The
allowance for loan losses is maintained at an amount management
deems adequate to provide for probable loan losses considering the
character of the loan portfolio, economic conditions, analysis of
specific loans and historical loss experience. While management uses
available information to recognize losses on loans, future additions
to the allowance 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 Company's
allowance for loan losses. Such agencies may require the Company to
recognize additions to the allowance based on their judgments about
information available to them at the time of their examinations.
The Company considers a loan impaired when, based on current
information and events, it is probable that it will be unable to
collect all amounts of principal and interest under the original
terms of the agreement. Large groups of smaller balance, homogeneous
loans such as the Company's residential mortgages, home equity loans
and consumer loans are collectively evaluated for impairment.
Accordingly, the Company measures impaired commercial mortgages and
commercial loans based on the present value of future cash flows
discounted at the loan's effective interest rate, or at the fair
value of the collateral if the loan is collateral dependent.
Impairment losses are recognized as a component of the allowance for
loan losses.
(h) Real Estate Owned
Real estate owned includes property acquired through, or in lieu of,
formal foreclosure. Write-downs to estimated fair value which are
required at the time of foreclosure are charged to the allowance for
loan losses. After transfer, the property is carried at the lower of
cost or fair value, less estimated selling expenses. Adjustments to
the carrying value of such properties that result from subsequent
declines in fair value are charged to operations in the period in
which the declines occur.
(i) Premises and Equipment
Land is carried at cost, and buildings, furniture and equipment are
stated at cost less accumulated depreciation. Depreciation is
computed primarily on the straight-line method over the estimated
service lives of the assets.
(Continued)
12
<PAGE>
OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(j) Income Taxes
Deferred tax assets and liabilities are recognized for the estimated
future tax consequences attributable to temporary differences
between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets
are also recognized for tax carryforwards such as charitable
contributions. Deferred tax assets and liabilities are measured
using enacted tax rates in effect for the year in which those
temporary differences are expected to be recovered or settled. If it
is more likely than not that all, or a portion of the Company's
deferred tax assets will not be realized a valuation must be
established. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income tax expense in the
period which includes the enactment date.
(k) Pension and Other Postretirement Benefits
The Company has a defined benefit pension plan covering
substantially all of its employees. Benefits are based on credited
years of service and the employee's average compensation prior to
retirement. The Company's funding policy is to contribute annually
at least the minimum required by law.
The Company sponsors an unfunded defined benefit plan that covers
all of its full time employees and provides postretirement medical
and life insurance benefits. Employees are eligible for these
benefits if they retire under the Company's defined benefit pension
plan and have attained age 55 with at least 5 years of service.
Employees are required to contribute a portion of the medical
insurance premium. The Company accrues the cost of these benefits to
employees and the employees' beneficiaries during the years that the
employees render the necessary service.
(l) Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents
include cash on hand, amounts due from banks and Federal funds sold
and other short-term investments with maturities less than 90 days.
(m) Financial Instruments With Off-Balance Sheet Risk
The Company does not engage in the use of derivative financial
instruments and the Company's only financial instruments with
off-balance sheet risk are commercial and residential mortgage
commitments. These off-balance sheet items are shown in the
Company's statement of financial condition upon funding.
(Continued)
13
<PAGE>
OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(n) Comprehensive Income
Comprehensive income, presented in the consolidated statements of
changes in shareholders' equity, consists of net income and the net
change for the period in after-tax unrealized gains or losses on
securities available for sale. Accumulated other comprehensive
income in the accompanying statements of financial condition
represents the net unrealized gains or losses on securities
available for sale as of the reporting dates.
(o) Segment Information
Statement of Financial Accounting Standards No. 131, Disclosures
about Segments of an Enterprise and Related Information requires
public companies to report financial and other information about key
revenue producing segments of the entity for which such information
is available and is utilized by the chief operating decision maker.
Specific information to be reported for individual segments includes
profit or loss, certain specific revenue and expense items, and
total assets. A reconciliation of segment financial information to
amounts reported in the financial statements is also provided. As a
community-oriented financial institution, substantially all of the
Company's operations involve the delivery of loan and deposit
products to customers. Management makes operating decisions and
assesses performance based on an ongoing review of these community
banking operations, which constitute the Company's only operating
segment for financial reporting purposes. Therefore, the adoption of
SFAS No. 131 in 1998 did not result in any changes in the Company's
reporting.
(p) Other Accounting Standards
SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities, was issued in June 1998. This statement requires that
all derivatives be recognized as either assets or liabilities in the
statement of financial condition and that those instruments be
measured at fair value. The accounting for changes in the fair value
of a derivative (that is, gains and losses) depends on the intended
use of the derivative and the resulting designation. This statement,
after amendment by SFAS No. 137, is effective for fiscal years
beginning after June 15, 2000, although earlier adoption is
permitted. The Company anticipates, based on current activities,
that the adoption of SFAS No. 133 will not have a significant effect
on its financial position or results of operations. SFAS No. 133
also permits certain reclassification of securities to the available
for sale category from the held to maturity category.
(Continued)
14
<PAGE>
OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
In 1999, the Company adopted SFAS No. 134, Accounting for Mortgage-Backed
Securities Retained After the Securitization of Mortgage Loans Held for Sale by
a Mortgage-Banking Enterprise, which amends SFAS No. 65, Accounting for Certain
Mortgage Banking Activities. This statement conforms the subsequent accounting
for securities retained after the securitization of mortgage loans by a mortgage
banking enterprise with the accounting for such securities by a nonmortgage
banking enterprise. Adoption of SFAS No. 134 did not have any impact on the
Company's financial position or results of operations.
(2) Securities
The amortized cost and fair value of securities are as follows:
<TABLE>
<CAPTION>
December 31, 1999
--------------------------------------------------------------
Gross Gross
Amortized unrealized unrealized Fair
cost gains losses value
--------- ---------- ---------- ----
(in thousands)
<S> <C> <C> <C> <C>
Securities available for sale
Debt securities:
United States Government
agency obligations $ 21,032 -- 830 20,202
Corporate stocks 632 -- -- 632
----------- -- --- ------
Total securities available
for sale $ 21,664 -- 830 20,834
=========== == === ======
Securities held to maturity
Debt securities:
United States Government
agency obligations $ 4,995 -- 77 4,918
Corporate and municipal securities 8,171 -- 339 7,832
Mortgage-backed securities:
Ginnie Mae 1,369 -- 17 1,352
Fannie Mae 1,014 1 37 978
Freddie Mac 47 1 -- 48
Small Business Administration 711 -- 10 701
----------- -- --- ------
Total securities held
to maturity $ 16,307 2 480 15,829
=========== == === ======
</TABLE>
(Continued)
15
<PAGE>
OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
<TABLE>
<CAPTION>
December 31, 1999
--------------------------------------------------------------
Gross Gross
Amortized unrealized unrealized Fair
cost gains losses value
--------- ---------- ---------- ----
(in thousands)
<S> <C> <C> <C> <C>
Securities available for sale
Debt securities:
United States Treasury $ 1,007 13 -- 1,020
United States Government
agency obligations 13,776 47 61 13,762
Total debt securities 14,783 60 61 14,782
Equity securities:
Corporate stocks 2 -- -- 2
Total securities available
for sale $14,785 60 61 14,784
Securities held to maturity
Debt securities:
United States Government
agency obligations 6,491 57 4 6,544
Corporate and municipal securities 4,125 37 6 4,156
Mortgage-backed securities:
Ginnie Mae 2,164 3 17 2,150
Fannie Mae 426 1 8 419
Freddie Mac 22 1 -- 23
Small Business Administration 502 -- 2 500
Total securities held
to maturity $13,730 99 37 13,792
</TABLE>
Proceeds from the sale of securities available for sale during 1999 were
approximately $2,019,000 with gross gains of approximately $12,000 and no gross
losses realized on those sales. No gross gains and gross losses of approximately
$5,000 were realized from securities called during 1999. Proceeds from the sale
of securities available for sale during 1998 were approximately $2,002,000, with
gross gains of approximately $2,000 and no gross losses realized on those sales.
No securities held to maturity were sold in 1999 and 1998.
(Continued)
16
<PAGE>
OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
The net gains on securities transactions included in 1999 net income, net of
tax, was approximately $4,000 which adjusted the unrealized holding loss on
securities available for sale arising during the year ended December 31, 1999 to
approximately $493,000. Net gains on securities transactions included in 1998
net income, net of tax, was approximately $1,000 which adjusted the unrealized
holding loss on securities available for sale arising during the year ended
December 31, 1998 to approximately $5,000.
Securities available for sale with an amortized cost of approximately $6.2
million at December 31, 1999 were pledged to secure borrowings from the Federal
Home Loan Bank. There were no securities pledged at December 31, 1998.
The following is a tabulation of debt securities, excluding mortgage-backed
securities, by contractual maturity as of December 31, 1999. Expected maturities
will differ from contractual maturities because issuers may have the right to
call or prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Available for sale Held to maturity
------------------ ----------------
Amortized Fair Amortized Fair
cost value cost value
--------- ---- --------- ----
(in thousands)
<S> <C> <C> <C> <C>
Due in one year or less $ -- -- 1,252 1,251
Due after one year through five years 6,785 6,565 7,462 7,303
Due after five years through ten years 14,247 13,637 3,401 3,201
Due after ten years -- -- 1,051 995
Total $ 21,032 20,202 13,166 12,750
========== ====== ====== ======
</TABLE>
(3) Loans
The following is a summary of loans outstanding:
December 31,
--------------------------------
1999 1998
---- ----
(in thousands)
Residential mortgages and
home equity loans $ 55,594 60,829
Commercial mortgages 7,857 8,950
Commercial loans 5,903 265
Consumer loans 3,744 2,037
----------- ------
Total loans 73,098 72,081
Allowance for loan losses (1,069) (1,068)
----------- ------
Net loans $ 72,029 71,013
=========== ======
(Continued)
17
<PAGE>
OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
Included in residential mortgages and home equity loans at December 31, 1998
were $4.3 million of mortgage loans held for sale. During the second quarter of
1999 all mortgage loans held for sale were transferred to the loan portfolio.
Fair value of the loans held for sale approximated the carrying value at the
date of transfer.
The Company's market area is generally Oswego County and Onondaga County in
Central New York State. Substantially all of the Company's portfolio is located
in its market area and, accordingly, the ultimate collectibility of the
Company's loan portfolio is susceptible to changes in market conditions in this
area. The Company's concentration of credit risk by loan type is shown in the
above schedule of loans outstanding. Other than general economic risks,
management is not aware of any material concentrations of credit risk to any
industry or individual borrower.
(4) Allowance for Loan Losses
The following is a summary of changes in the allowance for loan losses:
Years ended December 31,
------------------------
1999 1998
---- ----
(in thousands)
Balance at beginning of year $ 1,068 1,409
------------ -----
Provision for loan losses 120 120
Loan charge-offs (157) (526)
Recoveries 38 65
------------ -----
Balance at end of year $ 1,069 1,068
============ =====
The principal balance of all loans not accruing interest amounted to
approximately $1,064,000 and $1,688,000 at December 31, 1999 and 1998,
respectively. The forgone interest income on non-accruing loans was
approximately $56,000 and $81,000 for the years ended December 31, 1999 and
1998, respectively.
At December 31, 1999 and 1998, the recorded investment in impaired loans totaled
approximately $558,000 and $979,900, respectively. The impairment allowance
associated with these loans was approximately $99,000 and $168,000 at December
31, 1999 and 1998, respectively. The average recorded investment in impaired
loans during the year was approximately $701,000 and $1,301,000 for 1999 and
1998, respectively. The amount of interest income recognized on impaired loans
(while such loans were considered impaired) was not significant for the years
ended December 31, 1999 and 1998.
(Continued)
18
<PAGE>
OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(5) Premises and Equipment
Premises and equipment at December 31 consist of the following:
1999 1998
---- ----
(in thousands)
Land $ 601 426
Buildings and improvements 3,270 2,569
Furniture, fixtures and equipment 2,155 1,933
----------- ---
6,026 4,928
Accumulated depreciation (2,970) (2,683)
----------- ---
Premises and equipment, net $ 3,056 2,245
=========== =====
Depreciation expense was approximately $318,000 and $256,000 for the years ended
December 31, 1999 and 1998, respectively.
(6) Deposits
Time deposit contractual maturities are summarized as follows:
December 31,
------------
1999 1998
---- ----
(in thousands)
Within one year $ 27,076 28,299
After one year and within two years 5,420 4,122
After two years and within three years 1,650 1,897
After three years and within four years 2,977 1,169
After four years and within five years 666 2,760
--------- ------
$ 37,789 38,247
========= ======
Certificates of deposit of $100,000 and over were approximately $6,541,000 and
$5,578,000 at December 31, 1999 and 1998, respectively.
(Continued)
19
<PAGE>
OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(7) Long-Term Debt
In 1999, the Company began using fixed rate long-term borrowings,
principally convertible advances from the FHLB, as a source of funds.
Information on the borrowings at December 31, 1999 is summarized as follows:
Maturity date Amount Rate Call Date
(in thousands)
December 13, 2004 $ 5,000 6.00% Quarterly, beginning
December 13, 2001
(8) Income Taxes
Total income tax expense for the years ended December 31 was allocated as
follows:
1999 1998
(in thousands)
Income before income tax expense $ 37 162
Change in shareholders' equity
for unrealized loss on securities
available for sale (332) (4)
Total $(295) 158
(Continued)
20
<PAGE>
OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
Income tax expense attributable to income before income taxes consisted
of the following:
<TABLE>
<CAPTION>
Current Deferred Total
------- -------- -----
(in thousands)
<S> <C> <C> <C>
Year ended December 31, 1999:
Federal $ 139 (96) 43
State 58 (64) (6)
------ --- --
Total $ 197 (160) 37
====== ==== ==
Year ended December 31, 1998:
Federal $ 51 74 126
State 12 25 36
------ --- --
Total $ 63 99 162
====== ==== ===
</TABLE>
Actual income tax expense attributable to income before income taxes differed
from the amounts computed by applying the Federal statutory income tax rate to
pre-tax income as follows:
Years ended December 31,
------------------------
1999 1998
---- ----
(in thousands)
Federal income tax expense
at statutory rate $ 70 160
Increase (decrease) resulting from:
Tax-exempt interest income (36) (13)
State taxes, net of Federal income
tax effect (4) 24
Merger costs -- (46)
Other, net 7 37
---- ---
Actual income tax expense $ 37 162
==== ===
(Continued)
21
<PAGE>
OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31 are
presented below:
1999 1998
------ -----
(in thousands)
Deferred tax assets:
Allowance for loan losses $ 417 427
Postretirement benefits 189 163
Deferred compensation 179 150
Charitable contribution carryover 74 --
Net unrealized loss on securities
available for sale 332 --
Other 12 63
------ ----
Total gross deferred tax assets 1,203 803
------ ----
Deferred tax liabilities:
Excess tax bad debt reserve over base year 158 211
Depreciation 73 97
Prepaid pension expenses 101 114
Net unrealized gain on securities
available for sale -- --
Other 12 14
------ ----
Total gross deferred tax liabilities 344 436
------ ----
Net deferred tax asset, included in
other assets $ 859 367
======= ====
In accordance with SFAS No. 109, the Company has not recognized deferred tax
liabilities with respect to the Bank's Federal and state base-year reserves of
approximately $1,107,000 at December 31, 1999, since the Company does not expect
that these amounts will become taxable in the foreseeable future. Under the tax
laws, as amended, events that would result in taxation of these reserves include
redemptions of the Bank's stock or certain excess distributions to the Parent
Company. The unrecognized deferred tax liability at December 31, 1999 with
respect to the base-year reserve was approximately $450,000.
Realization of deferred tax assets is dependent upon the generation of future
taxable income or the existence of sufficient taxable income within the loss
carryback period. A valuation allowance is provided when it is more likely than
not that some portion or all of the deferred tax assets will not be realized. In
assessing the need for a valuation allowance, management considers the scheduled
reversal of the deferred tax liabilities, the level of historical taxable income
and projected future taxable income over the periods in which the temporary
differences comprising the deferred tax assets will be deductible. Based on its
assessment, management determined that no valuation allowance is necessary.
(Continued)
22
<PAGE>
OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(9) Earnings Per Share
The following table sets forth certain information regarding the
calculation of basic earnings per share for the year ended December 31,
1999, based on net loss for the period from July 14, 1999 to December 31,
1999. Earnings per share information for periods prior to the Company's
initial public offering on July 13, 1999 is not applicable. Unallocated
ESOP shares are not considered outstanding for earnings per share
computations. The shares become outstanding for earnings per share
computations when they are released for allocation. During the year ended
December 31, 1999, the Company did not have any potentially dilutive
securities outstanding.
Weighted
Net Average Per Share
Loss Shares Amount
-------------- -------- ---------
(in thousands)
Basic loss per share $ (150) 867,524 $ (0.17)
(10) Benefit Plans
Pension and Other Postretirement Benefit Plans
The following table sets forth the defined benefit pension plan's and the
other postretirement benefit plan's change in benefit obligation, change
in fair value of plan assets, and the funded status for the years ended
December 31, 1999 and 1998, using the most recent actuarial data measured
at October 1, 1999 and 1998 for the defined benefit pension plan and at
December 31, 1999 and 1998 for the other postretirement benefit plan:
<TABLE>
<CAPTION>
Pension benefits Postretirement benefits
---------------------- ----------------------
1999 1998 1999 1998
------- ------ ------ -----
(in thousands)
Change in benefit obligation:
<S> <C> <C> <C> <C>
Benefit obligation at beginning of year $ 3,238 2,961 841 756
Service cost 106 67 21 42
Interest cost 209 202 55 53
Amendments -- -- -- (71)
Actuarial (gain)/loss (375) 172 (16) 83
Benefits paid (164) (164) (49) (22)
Settlements (93) -- -- --
-------- ------- ------ ------
Benefit obligation at end of year 2,921 3,238 852 841
-------- ------- ------ ------
Change in plan assets:
Fair value of plan assets at beginning of year 3,430 3,587 -- --
Actual return on plan assets 612 7 -- --
Employer contributions -- -- 49 22
Benefits paid (164) (164) (49) (22)
Settlements (93) -- -- --
-------- ------- ------ ------
Fair value of plan assets at end of year 3,785 3,430 -- --
-------- ------- ------ ------
Funded status (deficit) 864 192 (852) (841)
Unamortized net (asset) obligation at transition (29) (50) 407 434
Unamortized net (gain) loss subsequent to transition (577) 142 (44) --
Unamortized prior service cost 1 2 -- --
-------- ------- ------ ------
Prepaid (accrued) benefit cost $ 259 286 (489) (407)
======== ======= ====== ======
</TABLE>
(Continued)
23
<PAGE>
OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
Net periodic pension cost (income) consists of the following components
for the years ended December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
------ ------
(dollars in thousands)
<S> <C> <C>
Service cost $ 106 67
Interest on projected benefit obligation 209 202
Expected return on plan assets (268) (281)
Amortization of net transition asset (21) (21)
Amortization of unrecognized gain -- (3)
Amortization of prior service cost 1 1
Settlement credit -- (52)
------- -------
Net periodic pension cost (income) $ 27 (87)
======= =======
Weighted average discount rate 7.75% 6.50%
======= =======
Expected long-term rate of return 8.00% 8.00%
======= =======
</TABLE>
The projected benefit obligation assumed a long-term rate of increase in
future compensation levels of 5.5% for 1999 and 4.5% for 1998. The
unamortized net asset at transition is being amortized over 12 years from
inception.
Net periodic postretirement benefit cost for the years ended December 31,
1999 and 1998 included the following components:
<TABLE>
<CAPTION>
1999 1998
------- ------
(in thousands)
<S> <C> <C>
Service cost $ 49 42
Interest cost on accumulated benefit
obligation 55 53
Amortization of transition obligation 27 39
Amortization of prior service asset -- (2)
Amortization of unrecognized loss -- (8)
------- -------
Net periodic postretirement benefit cost $131 124
======= =======
</TABLE>
(Continued)
24
<PAGE>
OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
For measurement purposes, a 7.5% and 9.0% annual rate of increase in the
per capita cost of average health care benefits for retirees was assumed
for 1999 and 1998, respectively. The rate was assumed to decrease
gradually to 5.0% by 2008 and remain at that level thereafter. The health
care cost trend rate assumption has a significant effect on the amounts
reported. To illustrate, increasing the assumed health care cost trend
rates by 1% in each year would increase the accumulated postretirement
benefit obligation at December 31, 1998 by approximately $89,000, and the
net periodic postretirement benefit cost by approximately $10,000 for the
year then ended. The weighted average discount rate used in determining
the accumulated postretirement obligation was 7.0% for 1999 and 6.5% for
1998.
Other Benefit Plans
In 1997, the Company instituted a nonqualified deferred compensation plan
for directors, under which participants may elect to defer all or part of
their annual director fees. The plan provides that deferred fees are to be
invested in mutual funds, as selected by the individual directors. At
December 31, 1999 and 1998, deferred director fees included in other
liabilities aggregated approximately $330,000 and $204,000, respectively.
The Company sponsors a defined contribution profit sharing 401(k) plan
covering substantially all employees. The Company matches certain
percentages of each eligible employee's contribution to the plan. Expense
for the plan amounted to approximately $36,000 and $38,000 in 1999 and
1998, respectively.
(11) Employee Stock Ownership Plan (ESOP)
The Company established an ESOP in conjunction with the Company's initial
public offering to provide substantially all employees of the Company the
opportunity to also become shareholders. The ESOP borrowed approximately
$259,000 from the Company and used the funds to purchase 26,460 shares of
the common stock of the Company. The loan will be repaid from the
Company's discretionary contributions to the ESOP over a period of
approximately ten years. At December 31, 1999, the loan had an outstanding
balance of approximately $259,000 and an interest rate of 8.5%. Both the
loan obligation and the unearned compensation will be reduced by the
amount of loan repayments to be made by the ESOP at the end of each plan
year ending on December 31. Shares purchased with the loan proceeds are
held in a suspense account for allocation among participants as the loan
is repaid. Shares released from the suspense account are allocated among
participants at the end of the plan year on the basis of relative
compensation in the year of allocation.
(Continued)
25
<PAGE>
OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
Unallocated ESOP shares are pledged as collateral on the loan and are
reported as a reduction of shareholders' equity. The Company reports
compensation expense equal to the average market price of the shares to be
released from collateral at the end of the plan year. The Company recorded
approximately $21,000 of compensation expense related to the ESOP for the
year ended December 31, 1999.
The ESOP shares as of December 31, 1999 were as follows:
Allocated shares --
Shares released for allocation 2,176
Unallocated shares 24,284
-------
Total ESOP shares 26,460
=======
Market value of unallocated shares at
December 31, 1999 (in thousands) $ 228
=======
(12) Shareholders' Equity and Regulatory Matters
The Company's ability to pay dividends is primarily dependent upon the
ability of its subsidiary bank to pay dividends to the Company. The
payment of dividends by the Bank is subject to continued compliance with
minimum regulatory capital requirements. In addition, regulatory approval
is generally required prior to the Bank declaring dividends in an amount
in excess of net income for that year plus net income retained in the
preceding two years.
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 Company'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 as calculated under regulatory accounting
practices. The Bank's capital amounts and classification are also subject
to qualitative judgments by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank and the Company (consolidated) to maintain minimum
amounts and ratios (set forth in the table below) of total and Tier I
capital (as defined in the regulations) to risk-weighted assets (as
defined), and Tier I capital (as defined) to average assets (as defined).
Management believes that, as of December 31, 1999 and 1998, the Bank and
the Company met all capital adequacy requirements to which they were
subject.
(Continued)
26
<PAGE>
OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
As of December 31, 1999, the most recent notification from the FDIC 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 I risk-based, and Tier I leverage ratios
as set forth in the table. There have been no conditions or events since that
notification that management believes have changed the Bank's capital
classification.
The Bank and consolidated Company's regulatory capital amounts and ratios are
presented in the following table:
<TABLE>
<CAPTION>
Required Ratios
Actual -------------------------------
Regulatory Capital Minimum Classification
------------------------- Capital as Well
Amount Ratio Adequacy Capitalized
------ ----- -------- -----------
(dollars in thousands)
As of December 31, 1999:
<S> <C> <C> <C> <C>
Bank
Total Capital
(to risk weighted assets) $ 14,451 15.0% 8.0% 10.0%
Tier I Capital
(to risk weighted assets) 13,383 13.9 4.0 6.0
Tier I Capital
(to average assets) 13,383 11.7 4.0 5.0
Consolidated
Total Capital
(to risk weighted assets) 15,786 16.4 8.0 10.0
Tier I Capital
(to risk weighted assets) 14,717 15.3 4.0 6.0
Tier I Capital
(to average assets) 14,717 12.9 4.0 5.0
As of December 31, 1998:
Bank
Total Capital
(to risk weighted assets) 12,639 16.7 8.0 10.0
Tier I Capital
(to risk weighted assets) 11,694 15.5 4.0 6.0
Tier I Capital
(to average assets) 11,694 10.7 4.0 5.0
</TABLE>
In order to grant priority in the conversion to the eligible depositors, the
Bank established a special account at the time of conversion in an amount equal
to its total net worth at June 30, 1999. In the event of a future liquidation of
the converted bank (and only in such event), eligible account holders who
continue to maintain accounts shall be entitled to receive a distribution from
the special account. The total amount of the special account will be decreased
(as balances of eligible accounts are reduced) on annual determination dates. No
cash dividends may be paid to the shareholders and no shares may be repurchased
by the Company if such actions would reduce the Bank's shareholders' equity
below the amount required for the special account. At December 31, 1999, the
amount remaining in this liquidation account was $__________million.
(Continued)
27
<PAGE>
OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(13) Commitments and Contingencies
In the normal course of business, there are various outstanding
commitments and contingent liabilities, such as guarantees, and
commitments to extend credit, which are not reflected in the accompanying
financial statements. The Company does not anticipate losses as a result
of these transactions. Mortgage and other loan commitments outstanding at
December 31, 1999 and 1998 amounted to approximately $5.9 million and $2.4
million, respectively. Fixed interest rates on mortgage and other loan
commitments outstanding can change prior to closing only if interest rates
decrease. Variable rate loans float prior to closing. Outstanding
commitments on letters of credit at December 31, 1999 and 1998 amounted to
approximately $233,000 and $20,000, respectively.
In the normal conduct of business, the Company is currently involved in
various litigation matters. In the opinion of management, the ultimate
disposition of these matters should not have a material adverse effect on
the financial position of the Company.
(14) Fair Value of Financial Instruments
SFAS No. 107, Disclosures About Fair Value of Financial Instruments, as
amended by SFAS No. 119, Disclosure About Derivative Financial Instruments
and Fair Value of Financial Instruments, requires disclosures about the
fair value of financial instruments for which it is practicable to
estimate fair value. The definition of a financial instrument includes
many of the assets and liabilities recognized in the Bank's statement of
financial condition, as well as certain off-balance sheet items. Fair
value is defined in SFAS Nos. 107 and 119 as the amount at which a
financial instrument could be exchanged in a current transaction between
willing parties, other than in a forced or liquidation sale.
The following methods and assumptions were used by the Company in
estimating the fair values of its financial instruments:
(a) Short-Term Financial Instruments
For short-term instruments that are available on demand or that
generally mature in ninety days or less, the carrying value
approximates fair value. Such instruments include cash and cash
equivalents, accrued interest receivable and accrued interest
payable.
(b) Securities
Fair values for securities are based on quoted market prices, where
available. Where quoted market prices are not available, fair values
are based on quoted market prices of comparable instruments.
(Continued)
28
<PAGE>
OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(c) Loans
For variable rate loans that reprice frequently and have no significant credit
risk, fair values are based on carrying amounts. The fair values of fixed rate
loans are estimated through discounted cash flow analyses using interest rates
currently being offered for loans with similar terms and credit quality.
Delinquent loans are valued using the discounted cash flow methods described
above. While credit risk is a component of the discount rate used to value
loans, delinquent loans are presumed to possess additional risk. Therefore, the
calculated fair values of loans are reduced by the allowance for loan losses.
(d) Deposits
The fair values disclosed for demand, savings and money market deposits are, by
definition, equal to the carrying amounts payable on demand at the reporting
date. The fair value of fixed maturity time deposits is estimated using a
discounted cash flow approach. This approach applies interest rates currently
being offered on these accounts to a schedule of weighted average expected
monthly maturities on time deposits.
The estimated fair values of the Company's financial instruments as of December
31, 1999 and 1998 are as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998
----------------------------- ------------------------------
Carrying Fair Carrying Fair
amount value amount value
-------- -------- -------- -------
(in thousands)
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents $ 6,450 6,450 6,607 6,607
Accrued interest receivable 938 938 856 856
Securities 37,141 36,663 28,514 28,576
Net loans 72,029 70,758 71,013 71,038
Financial liabilities:
Demand, savings and
money market deposits 62,329 62,329 58,317 58,317
Time deposits 37,789 37,739 38,247 38,214
Escrow deposits 1,286 1,286 1,319 1,319
Accrued interest payable 16 16 -- --
</TABLE>
The fair value of commitments to extend credit are equal to the deferred fees
outstanding, as the contractual rates and fees approximate those currently
charged to originate similar commitments.
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. 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.
(Continued)
29
<PAGE>
OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(15) Condensed Financial Information of the Parent Company
The Parent Company began operations in conjunction with the Bank's
mutual-to-stock conversion and the Parent Company's initial public
offering of its common stock. The following represents the Parent
Company's statement of financial condition as of December 31, 1999, and
its statement of income and statement of cash flows for the period from
July 13, 1999 through December 31, 1999.
Statement of Financial Condition
as of December 31, 1999
(in thousands)
Assets
Cash and cash equivalents $ 1,268
Loan receivable from ESOP 259
Other assets 41
Investment in equity of subsidiary 12,885
--------
Total assets $ 14,453
========
Liabilities and Shareholders' Equity
Liabilities:
Payable to subsidiary $ 234
Total shareholders' equity 14,219
--------
Total liabilities and shareholders' equity $ 14,453
========
(Continued)
30
<PAGE>
OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
Statement of Income
For the period July 13, 1999 through December 31, 1999
(in thousands)
Interest income:
Loans $ 8
Interest-bearing deposits 12
--------
Total interest income 20
--------
Non-interest expenses:
Contributions 160
Other non-interest expenses 35
--------
Total non-interest expenses 195
--------
Loss before income tax benefit and equity
in loss of subsidiary (175)
Income tax benefit 71
--------
Loss before equity in loss of
subsidiary (104)
Equity in loss of subsidiary (46)
--------
Net loss $ (150)
========
(Continued)
31
<PAGE>
OSWEGO COUNTY BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
Statement of Cash Flows
For the period July 13, 1999 through December 31, 1999
(in thousands)
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss $ (150)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Equity in loss of subsidiary 46
Contribution to foundation 160
Net increase in other assets (41)
Net increase in intercompany payable to
subsidiary 234
--------
Net cash provided by operating
activities 249
--------
Cash flows from investing activities:
Investment in subsidiary (1,753)
Loan made to ESOP (259)
--------
Net cash used in investing activities (2,012)
--------
Cash flows from financing activities:
Net proceeds from the issuance of common stock 3,031
--------
Net increase in cash and cash
equivalents 1,268
Cash and cash equivalents at beginning of period --
--------
Cash and cash equivalents at end of period $ 1,268
--------
</TABLE>
32
<PAGE>
OSWEGO COUNTY BANCORP, INC.
PROXY SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD APRIL 20, 2000, AT 4:00
P.M. ECONOLODGE, 70 EAST FIRST STREET,
OSWEGO, NEW YORK
The undersigned hereby appoints Mary E. Lilly and Lisa King, and each of
them, with full power of substitution as proxies for the undersigned to attend
the Annual Meeting of Stockholders of OSWEGO COUNTY BANCORP, INC. to be held at
the EconoLodge, 70 East First Street, Oswego, New York at 4:00 P.M on April
20,2000, and at any adjournment thereof, to vote and act with respect to all
Common Shares of Oswego County Bancorp, Inc. which the undersigned would be
entitled to vote, with all the power the undersigned would possess if present in
person, as follows:
The Board of Directors recommends that you vote FOR:
1. ELECTION OF DIRECTORS
Nominees: Gregory J. Kreis and Paul W. Schneible
FOR Withhold Authority Withhold Authority as
All Nominees for All Nominees Indicated
|_| |_| |_|
______________________________________
______________________________________
(Withhold authority for nominees whose names are written above)
2. ADOPTION OF OSWEGO COUNTY BANCORP, INC. STOCK OPTION PLAN
|_| FOR |_| AGAINST |_| ABSTAIN
<PAGE>
3. ADOPTION OF OSWEGO COUNTY BANCORP, INC. RESTRICTED STOCK PLAN
|_| FOR |_| AGAINST |_| ABSTAIN
4. AMENDMENT OF THE CERTIFICATE OF INCORPORATION
|_| FOR |_| AGAINST |_| ABSTAIN
5. RATIFICATION OF APPOINTMENT OF KPMG LLP AS INDEPENDENT ACCOUNTANTS
|_| FOR |_| AGAINST |_| ABSTAIN
6. In their discretion, the proxies are authorized to vote on any other
business that may properly come before the meeting or any adjournment(s).
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
This proxy will be voted as directed, but if no direction is indicated, it will
be voted FOR the nominees described in Item 1; FOR the Stock Option Plan
described in Item 2; FOR the Restricted Stock Plan described in Item 3; FOR the
Amendment of the Certificate of Incorporation in Item 4; FOR the ratification of
appointment of independent accounts in Item 5; and in the discretion of the
proxies, on such other matters as may properly come before the Annual Meeting of
any adjournment or postponements thereof.
Receipt of thc Notice of Annual Meeting of SharehoiLders and accompanying Proxy
Statement is hereby acknowledged.
|_| Please check this box if you plan to attend the Annual Meeting.
SIGNATURE: _______________________________________ DATED:________________, 2000
_______________________________________
Please sign exactly as your name appears on this proxy. Joint owners should each
sign personally. If signing as attorney, executor, administrator, trustee or
guardian, please include your full title. Corporate proxies should be signed by
an authorized officer. PLEASE SIGN, DATE AND RETURN THIS CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
-2-
