UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10Q - QUARTERLY REPORT UNDER SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[ X [ Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the quarterly period ended March 31, 2000.
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of1934
For the transition period from to
Commission File Number: (0-26663)
IPSWICH BANCSHARES, INC.
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(Exact name of Registrant as specified in its charter)
Massachusetts 04-3459169
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
23 Market Street, Ipswich, Massachusetts 01938
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (978) 356-7777
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class: Name of each exchange on which registered:
Common Stock, $0.10 par value NASDAQ National Market
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirement for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by court. Yes [ ] No [ ]
The number of shares outstanding of the Registrant's common stock as of April
28, 2000 was 2,495,427.
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<CAPTION>
IPSWICH BANCSHARES, INC. AND SUBSIDIARY
Consolidated Balance Sheets
(Dollars in thousands, except per share data)
March 31, December 31,
2000 1999
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Assets (unaudited) (audited)
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<S> <C> <C>
Cash and due from banks $ 5,673 $ 6,552
Interest-bearing deposits and federal funds sold 10,315 1,707
Investment and mortgage-backed securities available for sale 32,982 39,502
Investment and mortgage-backed securities held to maturity 27,873 28,069
Loans held for sale 607 0
Loans:
Residential 165,968 164,009
Home equity 24,467 23,385
Commercial 4,858 4,873
Consumer 987 1,060
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Total gross loans 196,280 193,327
Allowance for possible loan losses -1,801 -1,798
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Net loans 194,479 191,529
Stock in FHLB of Boston 3,977 3,977
Savings Bank Life Insurance Company stock 253 253
Banking premises and equipment, net 3,159 3,168
Other real estate owned 49 111
Accrued interest receivable 1,392 1,248
Other assets 191 182
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Total assets $ 280,950 $ 276,298
========== ==========
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Non-interest-bearing checking accounts $ 17,691 $ 15,209
Interest-bearing checking accounts 27,560 27,481
Savings accounts 39,247 37,704
Money market accounts 64,801 62,859
Certificates of deposit 66,946 66,829
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Total deposits 216,245 210,082
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<CAPTION>
<S> <C> <C>
Borrowed funds 43,000 45,000
Mortgagors' escrow accounts 1,157 993
Deferred income tax liability, accrued expenses and other liabilities 2,915 3,248
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Total liabilities 263,317 259,323
Equity capital 17,466 16,965
Unrealized gain on investment securities available for sale, net 167 10
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Total stockholders' equity 17,633 16,975
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Total liabilities and stockholders' equity $ 280,950 $ 276,298
========== ==========
Shares outstanding 2,525,427 2,525,427
Selected data (end of period):
Equity to assets (in %) 6.28 6.14
Total equity to risk-weighted assets (in %) 14.45 14.38
Total non-performing assets, net 80 142
Book value per share 6.98 6.72
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<CAPTION>
IPSWICH BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Income
(Dollars in thousands, except per share data)
Three Months Ended
March 31,
2000 1999
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(unaudited) (unaudited)
<S> <C> <C>
Interest and dividend income:
Loans $ 3,505 $ 3,812
Investment securities available for sale 668 549
Investment securities held to maturity 473 168
Federal funds and interest bearing deposits 29 15
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Total interest and dividend income 4,675 4,544
Interest expense:
Deposits 1,844 1,645
Borrowed funds 633 782
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Total interest expense 2,477 2,427
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Net interest and dividend income 2,198 2,117
Provision for possible loan losses 15 45
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Net interest and dividend income after
provision for possible loan losses 2,183 2,072
Non-interest income:
Mortgage banking revenues, net 44 495
Retail banking fees 377 345
Net gain on sales of securities 2 49
Other 5 2
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Total non-interest income 428 891
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Net interest, dividend and non-interest income 2,611 2,963
Non-interest expenses:
Salaries and employee benefits 817 772
Occupancy and equipment expenses 225 221
Data processing services 214 172
Marketing expense 194 142
Professional fees 129 65
Office expense 82 99
Other 97 171
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Total non-interest expenses 1,758 1,642
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<CAPTION>
<S> <C> <C>
Expenses from Holding Company & REIT formation 0 380
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Income before income taxes 853 941
Income tax expense 106 282
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Net income $ 747 $ 659
========== ==========
Basic earnings per share $ 0.30 $ 0.28
Diluted earnings per share $ 0.29 $ 0.26
Dividends per share $ 0.10 $ 0.05
========== ==========
Weighted average common shares outstanding (basic) 2,525,427 2,392,286
Weighted average common shares outstanding (diluted) 2,549,142 2,528,059
Selected performance data:
(Expense ratios exclude one time charges)
Return on average equity (in %) 17.12 18.12
Return on average assets (in %) 1.08 0.97
Net interest margin (in %) 3.26 3.16
Expenses to average assets (in %) 2.54 2.41
Efficiency ratio (in %) 67.62 55.74
Mortgage and equity loan production $ 12,645 $ 37,188
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<CAPTION>
IPSWICH BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Changes in Stockholders' Equity
Three Months Ended March 31, 2000 and 1999
(Dollars in thousands, except for share data)
(unaudited)
Accumulated
Additional other Total
Shares Common paid-in Retained comprehensive stockholders'
outstanding stock capital earnings income equity
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<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998 2,392,286 239 2,009 11,790 185 14,223
Issuance of stock rights 5 5
Cash dividends ($.05 per share) -120 -120
Comprehensive income:
Net income 659 659
Other comprehensive income:
Unrealized holding gains on
securities, net of taxes of $47 71
Reclassification adjustment
for amounts included in net
income, net of taxes of ($13) -19
-------
Other comprehensive income 52 52
Total comprehensive income 711
--------- --- ----- ------ --- ------
Balance at March 31, 1999 2,392,286 239 2,014 12,329 237 14,819
Stock options exercised 133,141 14 226 240
Issuance of stock rights 22 22
Cash dividends ($.20 per share) -509 -509
Comprehensive income:
Net income 2,630 2,630
Other comprehensive income:
Unrealized holding gains on
securities, net of taxes of ($197) -294
Reclassification adjustment
for amounts included in net
income, net of taxes of $46 67
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Other comprehensive income -227 -227
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Total comprehensive income 2,403
--------- --- ----- ------ --- ------
Balance at December 31, 1999 2,525,427 253 2,262 14,450 10 16,975
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<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Issuance of stock rights 7 7
Cash dividends ($.10 per share) -253 -253
Comprehensive income:
Net income 747 747
Other comprehensive income:
Unrealized holding gains on
securities, net of taxes of $106 161
Reclassification adjustment
for amounts included in net
income, net of taxes of ($2) -4
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Other comprehensive income 157 157
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Total comprehensive income 904
--------- --- ----- ------ --- ------
Balance at March 31, 2000 2,525,427 253 2,269 14,944 167 17,633
========= === ===== ====== === ======
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<CAPTION>
IPSWICH BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
Three Months Ended March 31, 2000 and 1999
(Dollars in thousands)
(unaudited)
2000 1999
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<S> <C> <C>
Net cash flows from operating activities:
Net income 747 659
Adjustments to reconcile net income to net cash (used) provided
by operating activities:
Provision for possible loan losses 15 45
Deferred income tax expense -190 -34
Depreciation expense 85 83
(Accretion) amortization of premiums on investment securities, net -4 19
(Gain) on sale of loans, net 0 -499
(Gain) on sale of real estate acquired by foreclosure -4 0
(Gain) on investment securities available for sale, net -2 -49
Origination of loans held for sale -2,556 -35,310
Proceeds from sale of loans 1,949 4,422
Proceeds from sale of securitized loans 0 37,474
Decrease in loan origination fees -84 -277
Decrease in loan discounts 2 1
Increase in deferred premium on loans sold and mortgage
servicing rights 0 -440
Increase in accrued interest receivable -144 -118
(Increase) decrease in other assets, net -9 11
Decrease in accrued expenses and other liabilities -249 -392
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Net cash (used) provided by operating activities -444 5,595
Net cash flows from investing activities:
Purchase of investment securities available for sale -2,105 -13,364
Principal paydowns on investment securities available for sale 1,909 4,364
Proceeds from the sale of investment securities available for sale 6,985 4,826
Principal paydowns on investment securities held to maturity 196 200
Purchases of stock in FHLB of Boston 0 -1,072
Net (increase) decrease in loans -2,883 7,646
Proceeds from sale of real estate acquired by foreclosure 66 0
Purchases of equipment, net -76 -39
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Net cash provided by investing activities 4,092 2,561
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<CAPTION>
<S> <C> <C>
Cash flows from financing activities:
Net proceeds from the issuance of common stock 7 5
Cash dividends -253 -120
Net increase (decrease) in deposits 6,163 -5,620
Proceeds from Federal Home Loan Bank advances 16,454 110,999
Repayment of Federal Home Loan Bank advances -18,454 -118,999
Increase in mortgagors' escrow accounts 164 99
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Net cash provided (used) by financing activities 4,081 -13,636
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Net increase (decrease) in cash and cash equivalents 7,729 -5,480
Cash and cash equivalents at beginning of year 8,259 12,095
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Cash and cash equivalents at end of year 15,988 6,615
======= =======
Supplemental disclosure of cash flow information:
Cash paid for:
Interest on deposit accounts 1,844 1,645
Interest on borrowed funds 633 782
Cash paid for income taxes 363 417
Supplemental schedule of non-cash investing and financing activities:
Conversion of residential real estate loans to mortgage-backed securities 0 39,039
Net increase required by Statement of Financial Accounting Standards No. 115:
Investment securities 263 88
Deferred income tax liability 106 36
Net unrealized gain on investment securities available for sale 157 52
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IPSWICH BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
March 31, 2000 and 1999
Basis of Presentation
- ---------------------
The consolidated financial statements include the accounts of Ipswich
Bancshares, Inc. and its wholly owned subsidiary, Ipswich Savings Bank (the
Bank) and the Bank's subsidiaries, Ipswich Preferred Capital Corporation,
Ipswich Securities Corporation, Historic Ipswich, Inc., North Shore Financial
Services, Inc. and Rowley Investment Corporation (collectively herein referred
to as the Company). All significant intercompany accounts and transactions have
been eliminated in consolidation.
Ipswich Preferred Capital Corporation (IPCC) was formed in 1999 as a
Massachusetts business corporation which elected to be taxed as a real estate
investment trust for Federal and Massachusetts tax purposes. IPCC is 99% owned
by Ipswich Savings Bank. IPCC holds mortgage loans which were previously
originated by the Company. Ipswich Securities Corporation was formed to
exclusively transact in securities on its own behalf as a wholly-owned
subsidiary of the Bank. Historic Ipswich, Inc. and North Shore Financial
Services, Inc. were incorporated for the purpose of holding direct investments
in real estate and foreclosed real estate, respectively. Rowley Investment
Corporation was incorporated to facilitate the holding and permitting of certain
bank-owned real estate.
The consolidated financial statements have been prepared in conformity with
generally accepted accounting principles. In preparing the financial statements,
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities as of the date of the balance sheet
and revenues and expenses for the period. Actual results could differ
significantly from those estimates.
Material estimates that are particularly susceptible to significant change in
the near-term relate to the determination of the allowance for possible loan
losses, the valuation of real estate acquired by foreclosure, and the valuation
of originated mortgage servicing rights.
The accompanying unaudited condensed and consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month period ended March 31, 2000
are not necessarily indicative of the results that may be expected for the
fiscal year ending December 31, 2000. For further information, refer to the
audited consolidated financial statements and footnotes thereto for the fiscal
year ended December 31, 1999 included in the Company's Annual Report on Form
10-K.
A substantial portion of the Company's loans are secured by real estate in Essex
County in Massachusetts. In addition, other real estate owned is located in that
market. Accordingly, the ultimate collectibility of a substantial portion of the
Company's loan portfolio and the recovery of the carrying amount of other real
estate owned are susceptible to changes in market conditions in its geographic
area.
<PAGE>
Earnings Per Share
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The computation of basic earnings per share is based on the weighted average
number of shares of common stock outstanding during each period. The computation
of diluted earnings per share is based on the weighted average number of shares
of common stock outstanding and dilutive potential common stock equivalents
outstanding during each period. Stock option grants are included only in periods
when the results are dilutive.
2000 Income Shares Per-Share
(Numerator) (Denominator) Amount
------------------------------------------------------
Basic EPS $747 2,525 $0.30
Effect of stock options --- 24 ---
-----
Diluted EPS $747 2,549 $0.29
==== ===== =====
1999
Basic EPS $659 2,392 $0.28
Effect of stock options --- 136 ---
-----
Diluted EPS $659 2,528 $0.26
==== ===== =====
Other Comprehensive Income
- --------------------------
Accumulated other comprehensive income consists solely of unrealized
appreciation on investment securities available for sale, net of taxes.
ITEM 2
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
- ------------ ---------- --- ----------- --------- --------- --------------
OPERATIONS
- ----------
Certain statements in this Form 10-Q constitute "forward looking statements", as
that term is defined under the Private Securities Litigation Reform Act of 1995.
The words "believe", "expect", "anticipate", "intend", "plan", "assume", and
other similar expressions which are predictions of or indicate future events and
trends and which do not relate to historical matters identify forward looking
statements. Reliance should not be placed on forward looking statements because
they involve known and unknown risks, uncertainties and other factors, which are
in some cases beyond the control of the Company and may cause the actual
results, performance, or achievements of the Company to differ materially from
anticipated future results, performance or achievements expressed or implied by
such forward looking statements.
Certain factors that may cause such differences include, but are not limited to
the following: interest rates may increase, adversely affecting the ability of
borrowers to repay adjustable rate loans and the Company's earnings and income
which derive in significant part from loans to borrowers; unemployment in the
Company's market area may increase, adversely affecting the ability of
individual borrowers to re-pay loans; property values may decline, adversely
affecting the ability of borrowers to re-pay loans and the value of real estate
securing repayment of loans; general economic and market conditions in the
<PAGE>
Company's market area may decline, adversely affecting the ability of borrowers
to re-pay loans, the value of real estate securing payment of loans and the
Company's ability to make profitable loans; adverse legislation or regulatory
requirements may be adopted; and competitive pressure among depository
institutions may increase. Any of the above may also result in lower interest
income, increased loan losses, additional charge-offs and write-downs and higher
operating expenses. The Company disclaims any intent or obligation to update
publicly any of the forward looking statements herein, whether in response to
new information, future events or otherwise.
GENERAL
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Ipswich Bancshares, Inc. (the Company) is a Massachusetts corporation whose
primary business is serving as the holding company for Ipswich Savings Bank (the
Bank). On July 1, 1999, in connection with the formation of the Company as the
holding company for the Bank, each share of the Bank's common stock previously
outstanding was converted automatically into one share of common stock of the
Company, and the Bank became a wholly owned subsidiary of the Company. The
reorganization had no impact on the consolidated financial statements.
The Company's operating results for the three months ended March 31, 2000
reflect the operations of the Company and its direct and indirect subsidiaries,
Ipswich Savings Bank, Ipswich Preferred Capital Corporation, Ipswich Securities
Corporation, North Shore Financial Services, Rowley Investment Corporation and
Historic Ipswich, Inc. The Company is in the business of making residential
mortgage loans, while attracting deposits from the general public to fund those
loans. The Company operates out of its main office located at 23 Market Street,
Ipswich, Essex County, Massachusetts, and its seven full-service retail branch
offices, located in Beverly, Essex, Marblehead, North Andover, Rowley, Reading
and Salem, Massachusetts. The Company operates Automatic Teller Machines at its
Main Office and each of its full-service retail branch offices. As a bank
holding company, the Company is subject to regulation, supervision and
examination by the Board of Governors of the Federal Reserve (the Federal
Reserve) and the Bank is subject to regulation, supervision and examination by
the Federal Deposit Insurance Corporation (the FDIC) and the Massachusetts
Commissioner of Banks (the Commissioner).
ASSET / LIABILITY MANAGEMENT
- ----------------------------
The Company does not use static GAP analysis to manage its interest rate risk.
It believes that simulation modeling more accurately encompasses the impact of
changes in interest rates on the earnings of the Company over time. However, the
Company prepares a GAP schedule to measure its static position.
Assets and liabilities are classified as interest rate sensitive if they have a
remaining term to maturity of 0-12 months, or are subject to interest rate
adjustment in those time periods. Adjustable rate loans and mortgage backed
securities are shown as if the entire balance comes due on the repricing date.
Estimates of fixed rate loan amortization prepayments are included with rate
sensitive assets. Because regular savings, demand deposits, money market
accounts and NOW accounts may be withdrawn at any time and are subject to
interest rate adjustments at any time, they are presented based upon assumed
maturity structures. As a result of this analysis, the static GAP position in
the 0 to 12 months range is a negative $1.8 million at March 31, 2000.
<PAGE>
Interest rate sensitivity statistics are static measures that do not necessarily
take into consideration external factors which may affect the sensitivity of
assets and liabilities, and consequently can not be used alone to predict the
operating results of a financial institution in a changing environment.
LIQUIDITY
- ---------
The Company seeks to ensure that sufficient liquidity is available to meet cash
requirements while earning a return on liquid assets. The Company uses its
liquidity primarily to fund loans and investment commitments, to supplement
deposit outflows, to fund its share repurchase program and to meet operating
expenses. The primary sources of liquidity are interest and principal
amortization from loans, mortgage backed securities and investments, sales and
maturities of investments, loan sales, deposits, and Federal Home Loan Bank of
Boston (the FHLBB) advances, which includes a $3.2 million overnight line of
credit. The Company also uses longer term borrowed facilities within its total
available credit line with the FHLBB. Advances from the FHLBB were $43.0 million
at March 31, 2000.
During 2000 the primary sources of liquidity were $1.9 million in loan sales,
principal amortization from mortgage backed securities of $2.1 million and the
sale of investment securities of $7.0 million. The primary uses of funds were
$12.6 million in residential mortgage loan originations and $2.1 million in
investment purchases.
CAPITAL RESOURCES
- -----------------
Total stockholders' equity at March 31, 2000 was $17.6 million, an increase of
$658,000 from $17.0 million at the end of 1999. Included in stockholders' equity
at March 31, 2000 is an unrealized gain on marketable securities available for
sale, net of taxes, of $167,000, an increase of $157,000 as compared to $10,000
at December 31, 1999. Future interest rate increases could reduce the market
value of these securities and reduce stockholders' equity. The Federal Reserve's
and the FDIC's capital guidelines require the Company and the Bank,
respectively, generally to maintain a minimum Tier 1 leverage capital ratio of
at least 4% (5% to be classified as "well-capitalized"). At March 31, 2000 Tier
1 leverage capital ratio for the Company was 6.32% compared to 6.33% at December
31, 1999 and 6.24% and 6.29% for the Bank on March 31, 2000 and December 31,
1999, respectively.
The Federal Reserve and the FDIC have also imposed risk-based capital
requirements on the Company and the Bank, respectively, which give different
risk weightings to assets and to off balance sheet assets, such as loan
commitments. The Federal Reserve's and the FDIC's risk-based capital guidelines
require the Company and the Bank, respectively, to maintain a minimum total
risk-based capital ratio of 8% (10% to be classified as "well-capitalized") and
a Tier 1 risk-based capital ratio of 4% (6% to be classified as
"well-capitalized"). At March 31, 2000, the Company's total and Tier 1
risk-based capital ratios were 14.45% and 13.20% (compared to 14.38% and 13.13%
at December 31, 1999). At March 31, 2000, the Bank's total and Tier 1 risk based
capital ratios were 14.31% and 13.06% (compared to 14.29% and 13.04% at December
31, 1999).
As of March 31, 2000, the Bank was considered "well-capitalized" under
applicable regulatory capital guidelines.
<PAGE>
FINANCIAL CONDITION
- -------------------
The Company's total assets at March 31, 2000 were $281 million, an increase of
$4.7 million from December 31, 1999, assets of $276.3 million. The increase was
largely due to the addition of $3 million in residential loans and $8.6 million
in fed funds sold, offset by a decrease in investment securities available for
sale of $6.5 million. Funding the increase in assets was first quarter of 2000
deposit growth of $6.2 million, primarily in checking accounts, savings and
money market accounts. Conversely, borrowed funds declined by $2 million in the
first quarter of 2000.
Federal Funds Sold
- ------------------
Interest-bearing deposits and federal funds sold at March 31, 2000 was $10.3
million, versus $1.7 million at December 31, 1999. The increase in fed funds
sold was primarily due to the Company's accumulation of cash to manage its
borrowing position in the second quarter of 2000 and to take advantage of
opportunities to purchase investment securities and manage the Company's
interest rate risk position.
Investment and Mortgage-Backed Securities
- -----------------------------------------
Total investments and mortgage backed securities available for sale at March 31,
2000 was $33 million, a decrease of $6.5 million in the first quarter. The
decrease was primarily the result of the sale of a $5 million US Treasury Bill
which was purchased with excess liquidity at year-end 1999. In addition, the
Company experienced a decrease in the portfolio as a result of principal
amortization of $1.9 million in its portfolio of mortgage-backed securities.
Total investments and mortgage-backed securities held to maturity was $27.9
million at March 31, 2000, versus $28.1 million at December 31, 1999. The
decline is due to principal amortization on the portfolio of mortgage-backed
securities.
The unrealized gain on the portfolio of available for sale securities, was
$278,000 at March 31, 2000. The increase in value is principally in the
portfolio of adjustable rate mortgage-backed securities, which in a rising rate
environment, will increase in yield as the underlying loans reprice. The
repricing aspect of these securities helps to sustain the market values.
Loans and Loans Held for Sale
- -----------------------------
Loans held for sale increased to $607,000 at March 31, 2000, versus $0 at
year-end 1999. The Bank's portfolio of mortgages held for sale remains at a low
level as a result of the current interest rate environment.
The loan portfolio at March 31, 2000 was $196.3 million, an increase of $3
million in comparison to the portfolio at December 31, 1999 of $193.3 million.
The increase was principally in adjustable rate mortgages, which are written for
portfolio versus sale in the secondary market. The Company will continue to
place adjustable rate mortgages in its portfolio as a result of the more
favorable interest rate risk profile for these loans in comparison to fixed rate
loans.
<PAGE>
CREDIT QUALITY
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Non-Performing Loans
- --------------------
Loans placed on non-performing status at March 31, 2000 was $31,000, unchanged
since year-end. Accrual of interest on loans is discontinued either when a
reasonable doubt exists, as to the full timely collection of principal and
interest, or when a loan comes contractually past due by ninety (90) days or
more, unless the loan is adequately secured and in the process of collection.
When a loan is placed on nonaccrual status, all interest previously accrued, but
not collected, is reversed against current period interest income. Income on
such loans is recognized to the extent that cash is received and the ultimate
collection of principal and interest is probable. Following collection
procedures, the Company generally institutes appropriate actions to foreclose
the property.
Real Estate Acquired by Foreclosure
- -----------------------------------
Real estate acquired by foreclosure totaled $49,000 at March 31, 2000, a
decrease of $62,000 since year-end 1999. The decrease is due to the sale of one
residential piece of OREO during the quarter. Real estate acquired by
foreclosure is reflected at the lower of the net carrying value, or fair value,
of the property, less estimated costs of disposition. The current portfolio of
real estate in foreclosure is comprised of three office condominiums, and two
pieces of raw land. The Company continues to make efforts to dispose of its OREO
properties.
Allowance for Loan Loss
- -----------------------
The allowance for loan loss at March 31, 2000 was $1.8 million, unchanged since
year-end 1999. The entire allowance for loan losses is available to absorb
charge-offs in any category of loans. Loan losses are charged against the
allowance when management believes that the collectibility of the loan principal
is unlikely. The allowance for possible loan losses is established by management
to absorb future charge-offs of loans deemed uncollectible. The allowance is
increased by provisions charged to operating expense and by recoveries on loans
previously charged-off. In evaluating current information and events regarding
borrowers ability to repay their obligations, management considers commercial
loans over $200,000 to be impaired when it is probable that the Company will be
unable to be able to collect all amounts due, according to the contractual terms
of the note agreement; other loans are evaluated collectively for impairment.
When a loan is considered to be impaired, the amount of the impairment is
measured based on the present value of expected future cash flows discounted at
the loan's effective interest rate or the fair value of collateral, if the loan
is collateral-dependent. Impairment losses are included in the allowance for
loan losses through a charge to the provision for loan losses. Management
believes that the allowance for possible loan losses is accurate as of March 31,
2000. While management uses available information to recognize losses on loans,
future additions to the allowance may be necessary.
<PAGE>
- ------
Liabilities
Deposits increased by $6.2 million in the first quarter of 2000, to end March
31, 2000 at $216.2 million. Deposits totaled $210.1 million at December 31,
1999. The increase in deposits resulted from the Company's ongoing checking
account program which generated $2.5 million in noninterest bearing checking
accounts balances in the first quarter. In addition, savings accounts increased
by $1.5 million, and money markets by $1.9 million in the first quarter,
respectively.
Federal Home Loan Bank of Boston advances decreased by $2.0 million in the first
quarter of 2000 to $43 million at March 31, 2000. Borrowed funds are typically
used to manage the liquidity of the Company and the utilization of borrowings is
dependent on cash flows from other assets and liabilities.
Equity Capital
- --------------
Equity capital increased by $658,000 to $17.6 million at March 31, 2000. Equity
was principally impacted by earnings for the first three months of the year of
$747,000 and an increase in the unrealized gain or loss on investment
securities, net of taxes of $157,000. Offsetting these increases were payments
of cash dividends to shareholders which totaled $253,000 in the first quarter.
<PAGE>
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2000
COMPARED TO THE THREE MONTHS ENDED MARCH 31, 1999
General
- -------
The Company reported net income of $747,000 or $.29 per fully diluted share for
the first quarter of 2000. This compares with $659,000 or $.26 per fully diluted
share for the first quarter of 1999. This represents a 13.4% increase in net
income in 2000 versus 1999. Earnings in the year 2000 were impacted by
recognition of a $190,000 tax benefit, resulting from a reduction in the
Company's valuation reserve. Offsetting the tax benefit was recognition of some
one-time consulting expenses totaling approximately $50,000, legal consulting
expenses of approximately $30,000, and expenses from the ongoing checking
account acquisition program which totaled $70,000.
Return on equity for the first quarter of 2000 was 17.12%, versus 18.12% for the
same quarter of 1999. The first quarter of 2000 return on assets was 1.08%
versus .97% for the first quarter of 1999.
Net Interest and Dividend Income
- --------------------------------
Net interest income for the first quarter of 2000 was $2.2 million, versus $2.1
million for the same time frame in 1999. The net interest margin percentage was
3.26% versus 3.16% for the same quarter the previous year.
As a result of the Bank's interest rate risk position, net interest margins,
while up in the first quarter of 2000, may experience pressure during the
remainder of the current year, due to the existing level and shape of the yield
curve.
Non-interest Income
- -------------------
Non-interest income for the first quarter of 2000 was $428,000 versus $891,000
in the first quarter of 1999. Non-interest income was significantly higher in
1999 as a result of mortgage banking gains generated in that quarter from a
strong mortgage refinance market at the end of 1998 and the beginning of 1999.
The current interest rate environment dictates lower origination volumes and
causes consumers to favor adjustable rate loan products, which the Company does
not sell for gains in the secondary market. Mortgage banking gains are expected
to be lower in the remainder of 2000 in comparison to 1999.
Retail banking fees increased by 9.3%, or $32,000 in the first quarter of 2000,
versus the same quarter in 1999. This is principally due to the Company's
ongoing efforts to generate checking account customers and overall growth in
both deposit dollars and the number of accounts.
Non-interest Expense
- --------------------
Total noninterest expenses were $1.8 million for the first quarter of 2000
versus $1.6 million for the same time frame in 1999. Expenses increased in the
current year over the previous year as a result of recognition of approximately
$150,000 in one-time non-recurring expenses. In 1999 the Bank recognized a
$380,000 expense charged as a result of the formation of its holding company and
its Real Estate Investment Trust. These expenses had a significant impact on
1999 earnings.
Income Tax Expense
- ------------------
The first quarter of 2000, effective tax rate was 12.4% versus 30% for the first
quarter of 1999. The tax rate in 2000 was impacted by the Bank's realization of
a $190,000 tax benefit resulting from a reduction in its valuation reserve.
Excluding the one-time tax credit, the tax rate in 2000 is expected to be 35%
versus 28.7% in 1999, which was impacted by one-time tax benefits.
<PAGE>
ITEM 3
- ------
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's success is dependent upon its ability to manage interest rate
risk. Interest rate risk can be defined as the exposure of the Company's net
interest income to adverse movements in interest rates. Although the Company
manages other risks, as in credit and liquidity risk, in the normal course of
its business, management considers interest rate risk to be its most significant
market risk and could potentially have the largest material effect on the
Company's financial condition and results of operations. Because the Company
does not maintain a trading portfolio, it is not exposed to significant market
risk from trading activities.
The Company's interest rate risk management is the responsibility of the
Asset/Liability Management Committee (ALCO). ALCO establishes policies that
monitor and coordinate the Company's sources, uses and pricing of funds. The
committee is also involved in formulating the economic projections for the
Company's budget and strategic plan.
The Company seeks to reduce the volatility of its net interest income by
managing the relationship of interest-rate sensitive assets to interest-rate
sensitive liabilities. In recent years, the focus has been to originate
adjustable-rate residential loans for portfolio, which reprice or mature more
quickly than fixed-rate residential loans. The Company's adjustable-rate loans
are primarily tied to published indices, such as the one-year Constant Maturity
Treasury (CMT).
The Company utilizes a simulation model to analyze net interest income
sensitivity to movements in interest rates. The simulation model projects net
interest income based on both a rise or fall in interest rates (rate shock) over
a twelve and twenty-four month period. The model is based on the actual maturity
and repricing characteristics of interest-rate sensitive assets and liabilities.
The model incorporates assumptions regarding the impact of changing interest
rates on the prepayment rate of certain assets and liabilities. The assumptions
are based on nationally published prepayment speeds on assets and liabilities
when interest rates increase or decrease by 200 basis points or greater. The
model factors in projections for anticipated activity levels by product lines
offered by the Company. The simulation model also takes into account the
Company's increased ability to control the rates on deposit products more so
than adjustable-rate loans tied to published indices.
Interest rate risk represents the sensitivity of earnings to changes in market
interest rates. As interest rates change the interest income and expense streams
associated with the Company's financial instruments also change, thereby
impacting net interest income (NII), the primary component of the Company's
earnings. ALCO utilizes the results of the simulation model and static GAP
reports to quantify the estimated exposure of NII to sustained interest rate
changes.
The following reflects the Company's NII sensitivity analysis as of the time
frames analyzed:
Rate Change Estimated NII Sensitivity Over Twelve Months
- --------------------------------------------------------------------------------
March 31, 2000 April 30, 1999
---------------------------------------------
+200bp -3.44% -5.60%
- -200bp -0.51% +5.59%
<PAGE>
The preceding sensitivity analysis does not represent the Company's forecast and
should not be relied upon as being indicative of expected operating results.
These hypothetical estimates are based upon numerous assumptions including: the
nature and timing of interest rate levels including yield curve shape,
prepayments on loans and securities, deposit decay rates, pricing decisions on
loans and deposits, reinvestment/replacement of asset and liability cash flows,
and others. While assumptions are developed based upon current economic and
local market conditions, the Company cannot make any assurances as to the
predictive nature of these assumptions including how customer preferences or
competitor influences might change.
Also, as market conditions vary from those assumed in the sensitivity analysis,
actual results will also differ due to: prepayment/refinancing levels likely
deviating from those assumed, the varying impact of interest rate change caps or
floors on adjustable-rate assets, the potential effect of changing debt service
levels on customers with adjustable-rate loans, depositor early withdrawals and
product preference changes, and other internal/external variables. Furthermore,
the sensitivity analysis does not reflect actions that ALCO might take in
responding to or anticipating changes in interest rates.
<PAGE>
IPSWICH BANCSHARES, INC. AND SUBSIDIARY
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
- --------------------------------
None
Item 2. Changes in Securities and use of Proceeds
- --------------------------------------------------------
None
Item 3. Defaults Upon Senior Securities
- ----------------------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------------
a. The Bank's Annual Meeting of Stockholders was held on April 26, 2000.
b. The following is a brief description of the matter voted upon at the
Annual Meeting, including the tabulation of votes:
1. Election of three Directors, each for a three-year term:
Votes for Votes Withheld
William M. Craft 2,142,055 130,664
David L. Grey 2,139,131 133,588
John H. Morrow 2,131,055 141,664
Item 5. Other Information
- --------------------------------
None
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------------
a. Exhibits
b. Reports on Form 8-K
1. The Company filed a current report on Form 8-K (Item 5) on March 22,
2000, detailing the institution of a Stock Repurchase Plan for the Company.
c. Exhibits
2.1 Plan of Reorganization and Acquisition dated as of February 17, 1999
between the Company and Ipswich Savings Bank incorporated by reference to the
Company's Form 8-K filed on July 9, 1999.
3.1 Articles of Organization of the Company dated February 12, 1999 and
incorporated by reference herein from the Company's June 30, 1999 Form 10-Q.
3.2 By-laws of the Company is incorporated by reference herein from the
Company's June 30, 1999 Form 10-Q.
4.1 Specimen stock certificate for the Company's Common Stock is
incorporated by reference herein from the Company's June 30, 1999 Form 10-Q.
<PAGE>
10.1 Lease dated August 10, 1992 for premises located at Route 133 and
Route 1, Rowley, Massachusetts is incorporated by reference herein from the
Company's June 30, 1999 Form 10-Q.
10.2 Lease dated April 25, 1994 for premises located at 451 Andover
Street, North Andover, Massachusetts is incorporated by reference herein from
the Company's June 30, 1999 Form 10-Q.
10.3 Lease dated March 4, 1996 for premises located at 588 Cabot Street,
Beverly, Massachusetts is incorporated by reference herein from the Company's
June 30, 1999 Form 10-Q.
10.4 Lease dated July 27, 1997 for premises located at 600 Loring
Avenue, Salem, Massachusetts is incorporated by reference herein from the
Company's June 30, 1999 Form 10-Q.
10.5 Lease dated February 27, 1998 for premises located at 89 Pleasant
Street, Marblehead, Massachusetts is incorporated by reference herein from the
Company's June 30, 1999 Form 10-Q.
10.6 Lease dated June 12, 1998 for premises located at 470 Main Street,
Reading, Massachusetts is incorporated by reference herein from the Company's
June 30, 1999 Form 10-Q.
10.7* Incentive Compensation Plan for Senior Management and certain
other officers dated September 15, 1995 is incorporated by reference herein from
the Company's June 30, 1999 Form 10-Q.
10.8* Director Recognition and Retirement Plan adopted as of May 18,
1999 is incorporated by reference herein from the Company's June 30, 1999 Form
10-Q.
10.9* Merger and Severance Benefits Program dated February 18, 1998 is
incorporated by reference herein from the Company's June 30, 1999 Form 10-Q.
10.10* Amended and Restated Employment and Severance Agreement dated May
18, 1999 between Ipswich Savings Bank and David L. Grey is incorporated by
reference herein from the Company's June 30, 1999 Form 10-Q.
10.11* Amended and Restated Employment and Severance Agreement dated May
18, 1999 between Ipswich Savings Bank and Francis Kenney is incorporated by
reference herein from the Company's June 30, 1999 Form 10-Q.
10.12* Amended and Restated Severance Agreement dated May 18, 1999
between Ipswich Savings Bank and Thomas R. Girard is incorporated by reference
herein from the Company's June 30, 1999 Form 10-Q.
10.13* Employment Agreement dated June 18, 1998 between Ipswich Savings
Bank and Richard P. Duffett is incorporated by reference herein from the
Company's June 30, 1999 Form 10-Q.
10.14(a)*Amended and Restated Split Dollar Agreement dated May 18, 1999
among Ipswich Savings Bank, Eastern Bank and David L. Grey is incorporated by
reference herein from the Company's June 30, 1999 Form 10-Q.
10.14(b)*Amended and Restated Ipswich Irrevocable Insurance Trust dated
as of May 18, 1999 by and between Ipswich Savings Bank and Eastern Bank is
incorporated by reference herein from the Company's June 30, 1999 Form10-Q.
<PAGE>
10.15 Contract with Bank's data processor dated February 14, 1997 is
incorporated by reference herein from the Company's June 30, 1999 Form 10-Q.
10.16* 1992 Incentive and Non-qualified Stock Option Plan incorporated
by reference to the Company's Registration Statement on Form S-8 filed on July
22, 1999.
10.17* 1996 Stock Incentive Plan incorporated by reference to the
Company's Registration Statement on Form S-8 filed on July 22, 1999.
10.18* 1998 Stock Incentive Plan incorporated by reference to the
Company's Registration Statement on Form S-8 filed on July 22, 1999.
10.19* Deferred Compensation Plan for Directors incorporated by
reference to the Company's Form S-8 filed on July 22, 1999.
10.20 Contract dated April 6, 2000 with US Bancorp for ATM processing
services.
11. A statement regarding the computation of earnings per share is
included in the Notes to Consolidated Financial Statements.
12. Not applicable.
27. Financial Data Schedule.
* Denotes Management Contract or Compensation Plan.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
IPSWICH BANCSHARES, INC.
By: /s/ David L. Grey Date: April 28, 2000
-----------------
David L. Grey
President and Chief Executive Officer
By: /s/ Francis Kenney Date: April 28, 2000
------------------
Francis Kenney
Treasurer
(Principal Financial Officer and Principal Accounting Officer)
<PAGE>
NETWORK SERVICES AGREEMENT
THIS NETWORK SERVICES AGREEMENT (this "Agreement") is entered
into effective as of the date provided in Section 15.1 below, by and between
U.S. BANK N. A., with its principal place of business at 601 Second Avenue
South, Minneapolis, Minnesota 55402 ("Bank"), and IPSWICH SAVINGS BANK, d/b/a
IPSWICHBANK, with its principal place of business at 23 Market Street, Ipswich,
MA 01038 ("Company").
Recitals
A. Bank maintains, operates, administers and participates in computerized
communication and data processing networks (collectively, the "Bank Network")
which permit and facilitate the transaction of computerized banking and other
similar computerized services on a national and international basis. Bank has
the capability to offer such computerized network services to third parties.
B. Company offers certain computerized network services to its customers
("Customers"), and/or requires certain computerized network services in
connection with Company's business.
C. Company desires to obtain from Bank and Bank desires to provide to
Company the computerized network services and other ancillary services described
herein.
Agreement
NOW THEREFORE, in consideration of the foregoing premises, the
mutual promises and covenants contained herein, and for other good and valuable
consideration, the sufficiency and receipt of which is hereby acknowledged, the
Parties agree as follows:
1. Definitions. In addition to other terms specifically defined in this
Agreement, the following terms used in this Agreement shall have the following
meanings (unless otherwise expressly provided herein):
1.1 "AAA" means the American Arbitration Association.
1.2 "AAA Rules" shall have the meaning given such term in
Section 15.10 below.
1.3 "ACH" means the Automated Clearing House.
1.4 "Affiliate" means, with respect to any Person, any Person that
controls, is controlled by or is under common control with such Person.
A Person shall be presumed to have control when it possesses the power,
directly or indirectly, to direct, or cause the direction of, the
management or policies of another Person, whether through ownership of
voting securities, by contract, or otherwise.
1.5 "Average Monthly Processing Fee" means an amount equal to the
fees, charges and expenses payable by Company to Bank pursuant to this
Agreement for the three highest volume months during the term of this
Agreement preceding Company's breach of this Agreement, which three
months need not be consecutive, divided by three, which amount shall
then be multiplied by the number of months remaining during the term of
this Agreement.
<PAGE>
1.6 "Agreement" means this Agreement, as amended, modified and
supplemented from time to time.
1.7 "ATM" means automated teller machine.
1.8 "Bank" means U.S. Bank N. A., a national banking
association.
1.9 "Bank Amendment" shall have the meaning given such term in
Section 13 below.
1.10 "Bank Indemnified Party" or "Bank Indemnified Parties" means
individually or collectively, as applicable, Bank, its Affiliates,
and/or their respective directors, officers, shareholders, members,
managers, partners, joint-venturers, agents, employees, spouses, and
legal, personal and/or other representatives.
1.11 "Bank Network" shall have the meaning given such term in
Recital A above.
1.12 "Base Agreement" means the body of this Agreement,
excluding the Exhibits.
1.13 "Company" means Ipswich Savings Bank D/B/A IpswichBank.
1.14 "Company Indemnified Party" or "Company Indemnified Parties"
means, individually or collectively, as applicable, Company, its
Affiliates, and/or their respective directors, officers, shareholders,
members, managers, partners, venturers, agents, employees, spouses, and
legal, personal and/or other representatives. Company Indemnified
Parties do not include Customers.
1.15 "Confidential Information" shall mean all trade secrets, and
confidential and proprietary business information received by one Party
from another Party in whatever form or medium. Without limiting the
generality of the foregoing Confidential Information shall include (i)
all technical and operational data, specifications, materials, manuals
and any other information received by Company from Bank from time to
time regarding this Agreement (including, without limitation fee and
payment provisions), Bank, the Network or the Network Services,
including, without limitation, (ii) information received by Bank from
Company relating to Company or Company's method of conducting business.
1.16 "Customers" shall have the meaning given such term in
Recital B above.
1.17 "Dispute" means any action, dispute, claim or controversy
between the Parties pertaining to or in connection with this Agreement.
1.18 "Effective Date" shall have the meaning given such term in
Section 15.1 below.
1.19 "Exhibits" means, collectively, the Exhibits attached to
this Agreement.
1.20 "Federal Arbitration Act" means Title 9 of the United States
Code, as amended, or any successor provisions thereto.
<PAGE>
1.21 "Insolvency" means a Party becoming insolvent or unable to pay
its debts as they mature, filing a voluntary petition in bankruptcy,
filing an answer admitting to the jurisdiction of the court and the
material allegations of an involuntary petition, making an assignment
for the benefit of creditors, or applying for or consenting to the
appointment of any receiver or trustee for all or substantially all of
its property.
1.22 "Laws" means, collectively, all foreign, federal, state
and local laws, rules, ordinances and regulations.
1.23 "Losses" means any and all claims, judgments, damages,
penalties, fines, costs, liabilities, losses or expenses (including,
without limitation, reasonable attorneys' fees and expenses).
1.24 "Material Bank Amendment" shall have the meaning given such
term in Section 13 below.
1.25 "Network Operating Regulations" means the bylaws, rules and
regulations of the Network Organizations, as amended from time to time,
and as such exist from time to time.
1.26 "Network Organization" or "Network Organizations" means
individually or collectively, as applicable, PLUS System, Inc., CIRRUS
System, Incorporated, VISA USA, Inc., MasterCard International, Inc.,
Greenwood Trust Company and/or American Express Travel Related Services
Company, Inc.
1.27 "Network Services" shall have the meaning given such term
in Section 2.1 below.
1.28 "Nonperformance" the failure of a Party to pay any monetary
obligation hereunder or to substantially perform any non-monetary
material condition, obligation, requirement or service hereunder.
1.29 "Orders" means, collectively, all orders or decrees of any
governmental agencies, courts or authorities.
1.30 "Party" or "Parties" means individually or collectively,
as applicable, the Bank and/or Company.
1.31 "Person" means an individual, partnership, limited
liability company, association, corporation or other entity.
1.32 "Renewal Term" shall have the meaning given such term in
Section 4.1 below.
1.33 "Settlement Account" shall have the meaning given such
term in Section 3.2(a) below.
1.34 "Transaction" shall have the meaning given such term in
the Exhibits.
2. Services; Exclusivity.
---------------------
2.1 Services. Subject to the terms and conditions of this
Agreement, Bank shall provide to Company the computerized network
services and other ancillary services set forth in Exhibits A and B
attached hereto (collectively, the "Network Services").
<PAGE>
2.2 Company Assistance. At the request of Company and in
accordance herewith, Bank shall assist Company as is reasonably
necessary to resolve Bank-based operational or systemic problems.
2.3 Exclusivity. During the term of this Agreement, Bank shall be
the sole and exclusive provider of the Network Services to Company. Bank
and Company acknowledge and agree that the damages that will be suffered
by Bank if Company breaches the provisions of this Section 2.3 are
uncertain in amount and will be difficult to prove. Accordingly,
notwithstanding anything to the contrary contained herein, Company and
Bank intend to liquidate such damages in the amount of the Average
Monthly Processing Fee, which amount shall be paid by Company to Bank
upon the demand of Bank in the manner specified in Section 3.2 below.
Company and Bank agree that such liquidated damages are not a penalty
and are a reasonable estimate of such damages. Notwithstanding Bank's
right to liquidated damages, Bank shall be entitled to pursue any and
all remedies available to Beneficiary hereunder, at law or in equity,
whether in addition to liquidated damages or as an alternative thereto.
3. Fees and Payment.
----------------
3.1 Fees. In consideration of the Network Services provided to the
Company hereunder, Company shall pay to Bank the fees, charges and
expenses as set forth in Exhibits A and B attached hereto. In addition
to such fees, charges and expenses, Company shall pay all fees, charges,
expenses, penalties, fines, assessments and additional or increased
costs of any nature as may be charged by a Network Organization or any
other third party, or as may be otherwise incurred by Bank in connection
with its performance of this Agreement, whether charged or incurred by
Bank, directly or indirectly.
3.2 Payment of Fees.
---------------
(a) Settlement Account. Company shall at all times maintain
a depository account at a financial institution acceptable to
Bank for the purposes of settling daily and monthly activity
pursuant to this Agreement, for billing and payment of fees,
charges and expenses due hereunder, and for all other purposes
described hereunder or determined to be appropriate by Bank (the
"Settlement Account").
(b) Payment. Within twenty-five (25) days after the end of
each calendar month during the term hereof, Bank shall calculate
the fees, charges and expenses payable to Bank by Company
hereunder with respect to such concluded calendar month, and
shall be entitled to debit the Settlement Account by ACH for all
such amounts on the last day of the month for the preceding
calendar month. In the event funds in the Settlement Account at
the time of such debit are insufficient to pay Bank the full
amounts due Bank, Company shall, upon demand by Bank, immediately
pay Bank such remaining amounts by ACH or other method specified
by Bank.
<PAGE>
(c) Billing Statements; Disputed Charges. Within twenty-five
(25) days after the end of each calendar month during the term
hereof, Bank shall deliver to Company a statement of the fees,
charges and expenses payable to Bank by Company hereunder with
respect to such concluded calendar month. All amounts reflected
on such statement shall be final unless Company delivers a
written notice to Bank disputing any such amounts within ninety
(90) days after Company's receipt of such statement.
4. Term and Termination.
--------------------
4.1 Term. Unless terminated earlier in accordance with Section 4.2
below, the initial term of this Agreement shall commence as of the
Effective Date and terminate five (5) years after the date of the first
successful Transaction, and shall be automatically renewed on the same
terms and conditions for successive three (3) year renewal terms (each,
a "Renewal Term") thereafter, unless one Party provides written notice
to the other Party of its intent not to renew at least one (1) year
prior to the expiration of the term then in effect.
4.2 Early Termination.
-----------------
(a) Termination By Bank. Bank may immediately terminate this
Agreement by written notice to Company upon or at any time after
the occurrence of any of the following events:
(i) The taking of control or possession of the
assets of Company by any governmental authority.
(ii) The dissolution, liquidation (partially or
wholly), consolidation or merger of the Company, or its
participation in any other business combination.
(iii) The sale, lease, assignment, transfer or
other disposition of any substantial part of the Company's
assets in a single transaction or series of transactions,
which Bank reasonably deems to be material and adverse to
Bank and/or Company.
(iv) Any change in the ownership of the voting
stock or equity of the Company in a single transaction or
series of transactions, which Bank reasonably deems to be
material and adverse to Bank and/or Company.
(v) The occurrence of any adverse change in the
financial condition of the Company, which Bank reasonably
deems to be material and adverse to Bank and/or Company.
(vi) If any statement, representation or warranty
made by Company to Bank, or materials provided by Company
to Bank, is or are deemed by Bank to be untrue in any
material respect, either when made or provided, or during
the term of this Agreement.
<PAGE>
(vii) This Agreement is prohibited by a Network
Organization, or the performance of this Agreement is
substantially impaired by any Network Operating
Regulations, as determined by Bank.
(viii) The conviction by a court of competent
jurisdiction of a Company principal or manager for fraud,
dishonesty or theft.
(ix) Based upon the financial information provided
by Company pursuant to this Agreement and such other
information obtained by Bank from any source, which Bank
deems to be relevant, the failure of Company to satisfy
Bank's credit standards and criteria in effect from time
to time with respect to the Network Services and/or
Company's relationships with Bank.
(x) Termination or suspension of Company's
membership rights in any applicable Network Organization.
(b) Termination by Company. In the event of a Material Bank
Amendment to which Company objects, Company shall provide a
written notice of objection to Bank (an "Objection Notice")
within thirty (30) days after Company's receipt of written notice
of such Material Bank Amendment from Bank. Company and Bank shall
then use their reasonable best efforts to resolve such dispute
for a thirty (30) day period after Bank's receipt of an Objection
Notice. In the event Bank and Company are unable to resolve such
dispute within such thirty (30) day period, Company may terminate
this Agreement by delivering a written termination notice to Bank
after the expiration of such thirty (30) day resolution period.
Pending resolution of such dispute, the Parties shall continue to
diligently observe the terms and provisions of this Agreement
without an increase in fees or charges payable to Bank by
Company, if any, related to such Material Bank Amendment. In the
event Company fails to timely deliver an Objection Notice to
Bank, Company shall be deemed to be have accepted such Material
Bank Amendment.
(c) Termination Upon Event of Default.
---------------------------------
(i) Event of Default. The occurrence of any of the
following events shall constitute an "event of default"
hereunder:
(I) Nonperformance. A nonperforming Party
shall have (a) ten (10) days to cure any
Nonperformance of a monetary obligation
following written notice from the other Party
of nonpayment, and (b) sixty (60) days to cure
any Nonperformance of a non-monetary condition,
obligation, requirement or service following
written notice from the other Party of the
Nonperformance, and so long thereafter as may
be reasonably necessary, provided the
non-performing Party proceeds in good faith and
with due diligence to remedy and cure such
<PAGE>
Nonperformance. Such notice shall specify the
Nonperformance in reasonable detail. If
Nonperformance is not cured within the
applicable cure period, an event of default
hereunder shall be deemed to have occurred.
(II) Insolvency. If Insolvency occurs with
respect to either Party, an event of default
hereunder shall be deemed to have occurred
hereunder.
(ii) Result of Default. Upon an event of default
hereunder, the performing Party may immediately terminate
this Agreement by delivering a written termination notice
to the other Party and/or may pursue any other remedy
available to the performing Party at law or in equity. The
exercise of any right or remedy shall not preclude the
concurrent or subsequent exercise of any other right or
remedy, and all rights and remedies shall be cumulative.
(d) Penalty for Early Termination. In addition to the
Deconversion Fees set forth in Exhibits A and B hereto, in the
event of early termination by Company, Company shall pay to Bank
an Early Termination Fee in an amount equal to the average of the
three (3) largest monthly processing fees for the terminated
services during the Term of the Agreement, multiplied by the
number of months remaining in the then current Term, then divided
by fifty percent (50%). Notwithstanding the above, however, in
the event fifty percent (50%) or more of the ownership of the
Company is acquired by one or more unrelated third parties, Bank
will not assess an Early Termination Fee.
(e) No Other Termination. Except for the right of a Party to
give notice of non-renewal of this Agreement pursuant to Section
4.1 above, neither Party may terminate this Agreement, except as
provided in this Section 4.2.
5. Exhibits; Network Operating Regulations; Conflict.
-------------------------------------------------
5.1 Governing Authority. The Parties' respective rights and
obligations hereunder are governed by this Agreement, and the Network
Operating Regulations, as applicable.
5.2 Exhibits; Conflict. The Exhibits are incorporated herein by
this reference. Notwithstanding anything to the contrary contained
herein, the terms and provisions of the Base Agreement shall be
modified, supplemented and/or replaced by the terms and provisions of
the Exhibits. Without limiting the applicability of the other provisions
of the Base Agreement, the provisions of the Exhibits shall be in
addition to, and not in lieu of, the other provisions of the Base
Agreement; provided, however, where a provision or any portion of an
Exhibit conflicts with the other provisions of the Base Agreement, the
provision or portion thereof set forth in such Exhibit shall prevail to
the extent of such conflict.
5.3 Network Operating Regulations; Conflict. The Network Operating
Regulations, if and to the extent applicable, are incorporated herein by
this reference. Notwithstanding anything to the contrary contained
<PAGE>
herein, the terms and provisions of this Agreement shall be modified,
supplemented and/or replaced by the terms and provisions of the Network
Operating Regulations. Without limiting the applicability of the other
provisions of this Agreement, the provisions of the Network Operating
Regulations shall be in addition to, and not in lieu of, the other
provisions of this Agreement; provided, however, where a provision or
any portion of the Network Operating Regulations conflicts with the
other provisions of this Agreement, the provision or portion thereof set
forth in the Network Operating Regulations shall prevail to the extent
of such conflict. Company acknowledges it will abide by applicable
Network Operating Regulations, as in effect as of the Effective Date.
6. Company Obligations.
-------------------
6.1 Customer Service and Communications. Except as otherwise
specifically set forth in this Agreement, Company shall be solely
responsible for providing all customer service to the Customers with
respect to the Network Services and Company's provision of services to
the Customers, including without limitation all related charges and
expenses of Bank, and settlement, reconciliation and other problems, and
otherwise communicating with and servicing the Customers. Bank's
obligations under this Agreement are limited to providing the Network
Services to Company to enable Company to provide its goods and/or
services to the Customers.
6.2 Hardware, Software, Equipment and Supplies. Company, either
directly and/or as arranged by Company with the Customers, is
responsible for supplying and maintaining all electricity,
communications hardware and software, and all other equipment,
materials, supplies and other requirements, necessary for the effective
use of the Network Services.
6.3 Information Delivery Requirements.
---------------------------------
(a) Generally. Company shall provide Bank with true,
accurate and complete information regarding Company and the
Customers, as and when requested by Bank, in order to permit Bank
to perform its obligations hereunder.
(b) Financial Information. Within thirty (30) days after
Company's receipt of Bank's written request, Company shall
provide to Bank a copy or copies of Company's audited financial
statements as prepared by an independent certified public
accountant selected by Company, or Form 10-K as filed by Company
with the Securities and Exchange Commission, for Company's most
recent fiscal year. Company shall also provide to Bank from time
to time, as and when requested by Bank, such other information
regarding the financial condition of Company. In the event that
Company has provided the foregoing financial information pursuant
to another relationship between Company and Bank, or between
Company and any Affiliate of Bank (if such information is
available to Bank), Company will be deemed to have complied with
the requirements of this Section.
<PAGE>
6.4 Compliance With Network Operating Regulations and Network
Agreements. Company shall (and shall cause its Affiliates and the
Customers to) at all times comply with and conduct their respective
activities in accordance with all the terms and provisions of the
Network Operating Regulations, and any other agreement to which Company
and a Network Organization are parties (including, without limitation,
any Network Organization membership agreements), all as applicable to
the Network Services and Company's provision of goods and/or services to
the Customers.
6.5 Compliance with Laws and Orders. Company shall (and shall cause
its Affiliates and the Customers to) at all times comply with and
conduct their respective activities in accordance with all Laws and
Orders applicable to the Network Services and Company's provision of
goods and/or services to the Customers.
7. Network Organizations.
---------------------
7.1 Network Organization Membership and Sponsorship. If it becomes
necessary for Company to obtain some form of membership with any Network
Organization(s) in connection with the Network Services, Company shall
obtain and maintain such membership(s). Bank may, as part of the Network
Services, use all reasonable efforts to perform such acts and do such
things as may be required by a Network Organization to assist Company in
obtaining such membership(s), including sponsoring the Company in the
Network Organization(s). Company shall pay any and all initial and other
ongoing registration and membership fees assessed by any Network
Organization(s) with respect to Company's membership(s) therein, and
shall reimburse Bank on demand in the manner specified in Section 3.2
above for any and all costs and expenses incurred by Bank in connection
with assisting Company in obtaining such membership(s).
7.2 Network Organization Obligations. Company shall take all
actions required from time to time by any Network Organization in
connection with the Network Services, and shall pay all fees, charges,
fines, penalties or other costs assessed from time to time by any
Network Organization in connection with the Network Services related to
Company's acts or omissions. In the event a Network Organization bills
Bank or requires Bank to pay any such fees, charges, fines, penalties or
other costs, Bank shall provide an invoice or written notice to Company
of such assessed amounts, and Company shall, at the direction of Bank,
pay such amounts directly to the Network Organization or reimburse Bank
on demand for such amounts in the manner specified in Section 3.2 above.
7.3 Information Reporting by Bank. Company acknowledges that the
Network Operating Regulations may require or encourage Bank to obtain
and/or report information regarding Company to one or more Network
Organizations. Accordingly, notwithstanding Section 8.2 below, Company
hereby authorizes Bank to provide any information obtained by Bank in
connection with this Agreement to each Network Organization, and hereby
forever releases, discharges and acquits Bank from any Losses incurred
by Company arising from or directly or indirectly related to Bank
obtaining and/or reporting such information to the Network
Organizations, and shall indemnify, defend and hold harmless the Bank
Indemnified Parties from and against any Losses incurred by any Bank
Indemnified Party arising from or directly or indirectly related to Bank
obtaining and/or reporting such information to the Network
Organizations.
<PAGE>
8. Confidentiality.
---------------
8.1 Nondisclosure and Nonuse by Company. Except as set forth in
Section 8.3 below, and subject to compliance with applicable court
procedures, if any, Company will hold and use any and all Confidential
Information of Bank in confidence and as trade secrets of Bank, and will
not copy, sell, transfer, sublicense, assign, distribute or otherwise
disclose in any manner such Confidential Information or any portion
thereof, in any form, to any Person, nor permit any third party to do so
(including without limitation, Company's employees, agents and
representatives), without the prior written consent of Bank. Internal
dissemination of any Confidential Information of Bank by Company shall
be limited to those employees, agents and representatives of Company
whose duties justify the need to know such Confidential Information and
then only on the basis of a clear understanding by such employees,
agents and representatives of their obligation to maintain the trade
secret and/or confidential status of such Confidential Information.
Company shall be responsible for the actions of its employees, agents
and representatives with respect to such Confidential Information.
Immediately upon termination of this Agreement, or earlier upon Bank's
request, Company shall return all Confidential Information of Bank to
Bank without retaining any copies thereof (including any abstracts
thereof).
8.2 Nondisclosure and Nonuse by Bank. Except as set forth in
Section 8.3 below, and subject to compliance with applicable court
procedures, if any, Bank will hold and use any and all Confidential
Information of Company in confidence and as trade secrets of Company,
and will not copy, sell, transfer, sublicense, assign, distribute or
disclose in any manner such Confidential Information or any portion
thereof, in any form, to any non-Affiliate, nor permit its Affiliates,
or the respective employees, agents or representatives of Bank and its
Affiliates to do so, without the prior written consent of Company.
Internal dissemination of any Confidential Information of Company by
Bank and/or its Affiliates shall be limited to their respective
employees, agents and representatives whose duties justify the need to
know such Confidential Information, and then only on the basis of a
clear understanding by such employees, agents and representatives of
their obligation to maintain the trade secret and/or confidential status
of such Confidential Information. Bank shall be responsible for the
actions of its Affiliates, and the respective employees, agents and
representatives of Bank and its Affiliates with respect to such
Confidential Information.
8.3 Exceptions. Notwithstanding Sections 8.1 and 8.2 above, the
following shall not constitute Confidential Information: (i) information
which is publicly available, other than as the result of a breach of
Sections 8.1 or 8.2 by a Party, (ii) information disclosed by a Party
pursuant to any applicable legal or regulatory requirement, (iii)
information disclosed by Bank to a Network Organization as contemplated
by Section 7.3 above, or (iv) information disclosed by a Party in
connection with any civil, criminal or administrative proceeding or
arbitration to which the Parties are parties.
8.4 Remedies. Notwithstanding anything to the contrary contained
herein, if a Party or any of its employees, agents or representatives
shall use, disclose, or attempt to use or disclose any Confidential
<PAGE>
Information of the other Party in any manner other than in connection
with supporting Company's use of the Network Services, the other Party
shall have the right, in addition to such other remedies which may be
available to it hereunder, at law or in equity, to immediate injunctive
relief enjoining such use, disclosure, or attempted use or attempted
disclosure, without the requirement of posting bond or necessity of
proving actual monetary damages, it being acknowledged that legal
remedies are inadequate to protect such other Party under such
circumstances and that the unavailability of immediate injunctive relief
would subject such other Party to irreparable harm.
9. Legal Compliance.
----------------
9.1 Suspension of Network Services. Bank may, at its sole option,
suspend any or all Network Services based upon Bank's reasonable
determination of the occurrence or potential for occurrence of illegal
or wrongful activity, fraudulent use or attempted fraudulent activity by
Company, any Customer or any other third party.
9.2 Notification of Noncompliance. Company shall promptly notify
Bank of any failure, of which Company obtains knowledge, by any Company,
its Affiliates or any Customer to comply with any Laws or Orders
applicable to the Network Services or Company's provision of goods
and/or services to the Customers.
10. Insurance. Company shall obtain and maintain in full force and effect
at all times during the term of this Agreement all insurance that may be
required to be obtained from time to time by Bank, any government agencies, any
Network Organization or reasonably prudent business practices, and will, upon
request, provide Bank with written evidence of such insurance. Without limiting
the generality of the foregoing, Company shall obtain and maintain in full force
and effect at all times during the term of this Agreement, a policy or policies
of comprehensive general liability insurance, including products and contractual
liability insurance, in an amount not less than one million dollars ($1,000,000)
combined single limit with an insurance company acceptable to Bank. If any such
insurance is on a claims made basis, such insurance shall include appropriate
"tail" coverage in comparable amounts, which requirement shall survive the
expiration or termination of this Agreement as to the Network Services provided
hereunder. If possible, all such insurance shall include an extended discovery
period endorsement. Each such insurance policy shall name Bank as an additional
insured. Company shall promptly inform Bank of Company's receipt of notice of
cancellation or material change in the terms of such insurance.
11. Indemnification.
---------------
11.1 Indemnification by Company. Company shall indemnify, defend
and hold Bank Indemnified Parties harmless from and against any and all
Losses paid or incurred by any Bank Indemnified Party arising from or
directly or indirectly relating to:
(a) Company's breach of any term or provision of this
Agreement;
(b) The violation by Company, its Affiliates, or their
respective employees, agents or representatives of any Law or
Order with respect to the use of or provision of Network Services
or Company's provision of goods and/or services to the Customers;
<PAGE>
(c) The breach by Company, its Affiliates, or their
employees, agents or representatives of any term or provision of
the Network Organization Regulations with respect to the use of
or provision of Network Services or Company's provision of goods
and/or services to the Customers;
(d) The willful misconduct, fraud, intentional tort or
negligence of Company, the Customers, or their respective
employees, agents or representatives with respect to the use of
or provision of Network Services, Company's provision of goods
and/or services to the Customers, or the Customers' provision of
goods and/or services to their respective customers; or
(e) Any claim made by any third party (including, without
limitation, any Customer, or customers of a Customer) against any
Bank Indemnified Party, attributable in whole or in part to
Company, its Affiliates, the Customers, or their respective
employees, agents or representatives with respect to the use of
or provision of Network Services, Company's provision of goods
and/or services to the Customers, or the Customers' provision of
goods and/or services to their respective customers.
11.2 Indemnification by Bank. Bank shall indemnify, defend and hold
Company Indemnified Parties harmless from and against any and all Losses
paid or incurred by any Company Indemnified Party arising from or
directly or indirectly relating to Bank's willful misconduct, fraud,
intentional tort or gross negligence in the performance or lack of
performance of the Network Services. Notwithstanding anything to the
contrary contained herein, (i) except as expressly set forth in this
Section 11.2, Bank shall have no duty of indemnity or liability to any
Company Indemnified Party for any Losses; and (ii) Bank shall have no
duty of indemnity or liability to any person claiming through a Company
Indemnified Party (including, without limitation, the Customers, or any
customers of the Customers) for any Losses.
11.3 Survival. This Section 11 shall survive the termination or
expiration of this Agreement.
12. Representations and Warranties. Each Party represents and warrants to
the other Party as follows:
12.1 Organization. Such Party is duly organized, validly existing
and in good standing pursuant to applicable state and/or federal laws
under which it is organized, and is qualified to do business in all
jurisdictions as may be required for the conduct of its business
activities hereunder.
12.2 Power and Authority. Such Party has full power and lawful
authority to (i) own and operate its assets, properties and business;
(ii) carry on its business as presently conducted and (iii) enter into
and perform this Agreement. The persons executing this Agreement have
full authority to bind such Party to the terms and conditions hereof.
12.3 Authorizations; No Violations. Such Party's execution and
delivery of this Agreement, and performance hereof: (i) are within its
organizational powers; (ii) have been duly authorized by all necessary
organizational action, if required by its governing organizational
documents; (iii) does not and will not conflict with or constitute a
<PAGE>
breach or violation of its governing organizational documents, (iv) does
not and will not conflict with or constitute a breach or violation of
any Law or Order by which such Party or any of its properties, assets or
business is bound or affected; (v) does not and will not conflict with
or constitute a breach or violation of any material agreement,
indenture, deed of trust, lease, mortgage, loan agreement or any other
material instrument or undertaking to which such Party is a party, or by
which such Party or any of its properties, assets or business may be
bound or affected; and (vi) does not and will not require the
authorization or consent of any third party.
12.4 Binding Obligation. This Agreement constitutes a valid and
legally binding obligation of such Party, enforceable in accordance with
its terms and conditions.
13. Bank Amendments. Bank shall have the right from time to time, in its
sole discretion, to amend all or any portion of this Agreement and/or to make
any and all modifications, updates, improvements, adjustments, changes or other
amendments to the Bank Network and/or the Network Services (collectively, a
"Bank Amendment"). Bank shall give Company written notice of a Bank Amendment
not less than thirty (30) days before the effective date of such Bank Amendment;
provided, however, Bank shall not be required to notify Company of Bank
Amendments relating to the Bank Network or the Network Services which are not
material and adverse to Company, as reasonably determined by Bank. If any Bank
Amendment results in a material increase in fees or charges payable to Bank by
Company, or is otherwise material and adverse to Company as reasonably
determined by Bank (collectively, a "Material Bank Amendment"), the notice of
Bank Amendment sent by Bank to Company shall so specify.
14. Use of Service Marks, Trademarks, Names and Logos.
-------------------------------------------------
14.1 Bank Service Marks, Trademarks, Names and Logos. Company may
not use a service mark, the name or logo of Bank or any Affiliate of
Bank for promotion or any other purpose without Bank's prior written
consent, which consent shall not be unreasonably withheld. Any request
for such consent shall be in writing and shall include samples of, or
designs for, Company's proposed use, which shall conform with the
graphic standards adopted from time-to-time by Bank or its Affiliates.
Such use shall be in full compliance with such other terms and
conditions specified by Bank.
14.2 Network Organization Service Marks, Trademarks, Names and
Logos. Company may not use a trademark, service mark, name or logo of a
Network Organization for promotion or any other purpose unless such use
is authorized by such Network Organization. Such use shall be in full
compliance with the Network Organization's Operating Regulations, and
such other terms and conditions specified by such Network Organization.
15. Miscellaneous.
-------------
15.1 Effective Date. This Agreement will be deemed binding on the
date of the last party's execution hereof, as set forth in the signature
blocks below (the "Effective Date").
<PAGE>
15.2 Force Majeure. Notwithstanding anything to the contrary
contained herein, no Party shall be liable to the other Party for any
failure or delay on its part to perform, and shall be excused from
performing, any of its obligations hereunder if such failure, delay or
nonperformance results in whole or in part from any cause beyond the
reasonable control of such Party, including, without limitation, any act
of God; any fire, flood or weather condition; any earthquake; any act of
a public enemy, war, riot, explosion, labor or material shortage,
blackouts or brownouts; any interruption or shortage of, or failure or
delay in, transportation, utilities, material, supplies, equipment,
machinery, power or spare parts; and any act of any military or civil
authority.
15.3 Survival. All obligations of a Party hereunder and/or under
the Network Operating Regulations arising or accruing prior to the
termination or expiration of this Agreement shall survive and continue
in full force and effect notwithstanding such termination or expiration,
including, without limitation, any obligation for the payment of fees,
charges, penalties or other amounts.
15.4 Notices. All notices, demands or other communications required
or permitted to be given hereunder shall be in writing, and any and all
such items shall be deemed to have been duly delivered upon personal
delivery; or as of the third business day after mailing by United States
mail, registered or certified, return receipt requested, postage
prepaid, addressed as follows; or as of the immediately following
business day after deposit with Federal Express or a similar overnight
courier service by which receipt may be confirmed, charges prepaid,
addressed as follows; or upon delivery by facsimile (with telephone
confirmation of delivery and machine generated proof of transmission) to
the facsimile number set forth below:
<TABLE>
<CAPTION>
To Bank: with a copy to:
<S> <C> <C>
U.S. Bank National Association U.S. Bank Legal Department
One Mellon Bank Center 950 Seventeenth Street, Suite 600
500 Grant Street Denver, Colorado 80202
Pittsburgh, Pennsylvania 15258-0001 Attn: Network Services Counsel
Attention: Network Services Phone: (303) 585-4631
Phone: (800) 541-4583 Facsimile: (303) 585-4646
Facsimile: (412) 236-2249
To Company: with a copy to:
IpswichBank IpswichBank
23 Market Street 23 Market Street
Ipswich, MA 01938 Ipswich, MA 01938
Attention: Richard P. Duffett, SVP Attn: David L. Grey, President
Or Operations Department Head Phone: 978-356-7777
Phone: 978-356-7777 Facsimile: 978-356-9732
Facsimile: 978-356-9732
</TABLE>
<PAGE>
Any Party may change its notice information by written notice given to the other
Party in accordance with this Section.
15.5 Entire Agreement. This Agreement, the Exhibits, the Network
Operating Regulations and all other matters incorporated by reference herein
or therein constitute the entire agreement between the Parties with respect
to the subject matter hereof, and supersedes and replaces in their entirety
any and all prior agreements between the Parties with respect to such
subject matter, either oral or in writing.
15.6 Waivers. No course of dealing and no failure by a Party to
enforce any provision of or to exercise any right under this Agreement shall
be construed as a waiver of such provision or right or affect the validity
of this Agreement or limit, prevent or impair the right of any Party
subsequently to enforce such provision or exercise such right. The waiver by
a Party of any breach or default of this Agreement by the other Party shall
be in writing, and will not operate or be construed as a waiver of any
subsequent or other breach or default.
15.7 Assignability; Binding Effect. Neither Party may assign this
Agreement to any third entity or person without the prior written consent of
the other Party; except that either Party may assign or delegate this
Agreement or any portion hereof to any entity or person controlling,
controlled by, or under common control of either Party, or to any entity or
person acquiring substantially all of the assets of either Party. Subject to
the preceding sentences, this Agreement shall be binding upon and shall
inure to the benefit of the Parties and their respective successors and
permitted assigns.
15.8 Amendments. Except as specifically provided elsewhere in
this Agreement, no amendment to this Agreement shall be effective or bind
any Party unless set forth in writing and signed by the duly authorized
representatives of the Parties.
15.9 Headings. Titles and headings preceding the text of sections
and paragraphs of this Agreement have been inserted solely for
convenience of reference and shall neither constitute a part of this
Agreement nor affect its meaning, interpretation or effect.
15.10 Arbitration.
-----------
(a) Arbitration Proceedings. Notwithstanding anything to the
contrary contained herein, upon the demand of either Party,
whether made before or after the initiation of legal proceedings,
but not more than thirty (30) days after service of process for
such proceeding, any Dispute shall be resolved by binding
arbitration administered by the AAA in accordance with its
Arbitration Rules for Commercial Financial Disputes in effect at
the time, including, if applicable, the Supplementary Procedures
for Large, Complex Disputes, but excluding the use of the
Expedited Procedures (as modified, the "AAA Rules"). Arbitration
shall be governed by the Federal Arbitration Act and shall be
conducted in the State of Massachusetts. Judgment upon any award
rendered may be entered in any court having jurisdiction. The
award of the arbitrators shall specify in writing the factual and
<PAGE>
legal bases for the award. All awards shall be based on the
Parties' actual damages and the arbitrators shall have no
authority to award punitive damages. The Parties agree to keep
all Disputes and arbitration proceedings hereunder confidential.
If a Party fails to answer or otherwise acknowledge a demand to
arbitrate a Dispute in accordance with the AAA Rules, the
arbitrators shall enter an award without a hearing in favor of
the Party demanding the arbitration. The Parties understand and
agree that no Dispute decided by arbitration may later be pursued
before a court except for the purpose of enforcing (i) compliance
with this arbitration provision, or (ii) a final decision by the
arbitrators.
(b) No Limitation on Remedies. This provision shall not
limit the right of any Party to seek equitable relief, or to
exercise any self-help or other rights or remedies available
pursuant to the express terms of this Agreement.
(c) Costs and Expenses. The arbitrators may make an award of
attorney fees and expenses of arbitration proceedings if
permitted by law. Any Party who refuses to submit to arbitration
as requested or who refuses to comply with the award rendered by
arbitrators or the court shall bear the reasonable costs and
expenses of enforcement or compliance, whether incurred in
connection with arbitration or judicial proceedings.
15.11 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Colorado, without
regard to conflicts of laws principles.
15.12 Severability. The provisions of this Agreement will be
deemed severable, and if any provision of this Agreement is held
illegal, void or invalid under applicable law, such provision may be
changed to the extent reasonably necessary to make the provision legal,
valid and binding. If any provision of this Agreement is held illegal,
void or invalid in its entirety, the remaining provisions of this
Agreement will not be affected, but will remain binding in accordance
with their terms.
15.13 Expenses. Subject to Section 15.10(c) above, in any
proceeding or other attempt to enforce, construe or to determine the
validity of this Agreement, the non-prevailing Party will pay the
reasonable expenses of the prevailing Party, including reasonable
attorneys' fees and costs, expert witness fees, fees of consultants and
court costs incurred in connection therewith.
15.14 Employment of Agents. Bank in its sole discretion may
engage agents, including, without limitation, its Affiliates and the
Network Organizations, to perform part or all of its obligations under
this Agreement at any time without the consent of Company; provided
however that such action shall not affect Bank's obligations to Company
hereunder.
<PAGE>
15.15 Relationship of the Parties. The Parties to this Agreement
are independent contractors. The Parties expressly acknowledge and agree
that it is not their intention or purpose hereunder to create, nor shall
this Agreement be construed as creating any type of partnership, joint
venture, employer/employee relationship, franchise, or agency between
the Parties. Neither Party to have any authority to act, or attempt to
act, or represent itself, directly or by implication, as an agent of the
other or in any manner assume or create, or attempt to assume or create,
any obligation on behalf of or in the name of the other.
15.16 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original and all of
which, when taken together, shall constitute one and the same Agreement.
15.17 Facsimile Signature. This Agreement may be executed by
facsimile signature and a facsimile signature of this Agreement shall
constitute an original signature.
15.18 Consent to Jurisdiction; Venue; Service of Process. Company
submits to personal jurisdiction in the State of Massachusetts for the
enforcement of the provisions of this Agreement and irrevocably waives
any and all rights to object to such jurisdiction for the purposes of
litigation to enforce or interpret any provision of this Agreement.
Company hereby consents to the jurisdiction of any, and agrees that any
action, suit or proceeding initiating or involving any Party to enforce
or interpret this Agreement shall be brought in a, state or federal
court in the State of Massachusetts. Company hereby irrevocably waives
any objection which it may have to the laying of the venue of any such
action, suit or proceeding in any such court and hereby further
irrevocably waives any claim that any such action, suit or proceeding
brought in such a court has been brought in an inconvenient forum. In
the event Company at any time does not maintain a registered agent for
service of process in the State of Massachusetts, Company hereby
appoints the Secretary of the State of Massachusetts as its agent for
service of process; provided, however, Bank shall deliver to Company in
accordance with the notice requirements of this Agreement a copy of any
such service of process made upon the Secretary of the State of
Massachusetts. Bank and Company hereby consent that service of process
in any action, suit or proceeding may be made by service upon the
aforesaid agent for service of process (in the case of service to be
made upon Company), by personal service upon the party being served, or
by delivery in accordance with the notice requirements of this
Agreement.
15.19 Waiver of Jury Trial. EACH PARTY IRREVOCABLY WAIVES ITS RIGHT TO
TRIAL BY JURY IN ANY ACTION OR PROCEEDING OF ANY ISSUE, CLAIM,
COUNTERCLAIM OR OTHER CAUSE OF ACTION, WHETHER IN CONTRACT OR TORT,
BASED UPON OR ARISING OUT OF THIS AGREEMENT, OR ANY OTHER AGREEMENT OR
DEALINGS RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT.
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement as
of the last date written below.
BANK:
U.S. BANK N.A.
By:
Name:
Title:
Effective Date:
COMPANY:
IPSWICH SAVINGS BANK
d/b/a IPSWICHBANK
By:
Name: Richard P. Duffett
Title: Senior Vice President
Effective Date:
<PAGE>
EXHIBIT A
to NETWORK SERVICES AGREEMENT
between
U.S. BANK and IPSWICHBANK
EFT AUTHORIZATION
- -----------------
Services Rendered:
------------------
- ---- -------------- ------------------------------------------------
1~~ X Sponsored Membership to Cirrus
- ---- -------------- ------------------------------------------------
1 X Amexco Program Participation
- ---- -------------- ------------------------------------------------
1~~ X Sponsored Membership to Plus
- ---- -------------- ------------------------------------------------
A. EFT PROCESSING SERVICES
1. Authorization. In accordance with the agreed upon authorization method,
and the Cardholder data supplied by the Company, Bank will authorize and
deny transaction activity initiated by the Company's Cardholders at ATM
and POS terminals.
2. Dial-Up Terminal Driving. Bank shall provide electronic links between
Company's terminals and the Bank switch to facilitate the operation and
transaction routing in a dial-up environment.
3. Gateway Services. Bank shall provide to the Company electronic links to
regional and national Networks as set forth in Section C below and as
Section C may be amended from time to time.
4. Leased Line Terminal Driving. Bank shall provide electronic links
between Company terminals and the Bankswitch to facilitate the operation
and monitoring of Company ATMs.
5. Reporting. Bank shall provide a variety of reports available on a daily,
weekly and/or monthly basis, including: settlement information,
maintenance activity, ATM performance, cardholder activity and
specialized report requests. Reports shall be distributed through remote
job entry, hardcopy, microfiche and datamover. Log reports, critical to
investigation of Company inquiries, can be viewed on-line.
6. Surcharge/Service Charge Support. Bank shall support surcharging of
fixed amounts and associated terminal messages required by the Networks.
Bank shall provide reports necessary to track income and automated
interfaces to host systems in order for Company to meet service charge
requirements.
7. Transaction Processing. Bank shall provide base transaction processing,
which includes: authorization; placing holds on accounts; transaction
posting and settlement; and availability of stand in services.
<PAGE>
8. Transaction Settlement Processing. Bank shall offer "Single Point
Settlement" by which Bank shall settle the net difference between debits
and credits for transactions each day. This includes transactions
processed through each Network to which Bank has Gateway connections.
9. 24 - Hour Monitoring. Bank hotline group shall provide monitoring
services 24 hours a day, seven days a week. This service varies by type
of telecommunications solution used by the Company.
B. SPONSORED MEMBERSHIPS
1. Sponsorship. Bank has developed and owns certain computer programs and
equipment ("Access Equipment") used to provide Company with access to
each of Cirrus, Plus and/or Amexco Networks (each a "Membership
Network"). Bank desires to provide and Company desires to accept
Sponsored Membership so that Company may use the Access Equipment to
interface with the Membership Network.
2. Settlement. Bank shall initiate settlement of Membership Network
transactions each day to Company. Company shall maintain appropriate
settlement accounts according to the operating procedures established by
Bank as the same may be amended from time to time.
3. Incorporation of Membership Network Operating Rules. Company
acknowledges receipt of a copy of Membership Network's operating Rules
and agrees to be bound by said Rules as they may be amended from time to
time. Company further agrees to promptly discharge all duties and
liabilities which are imposed upon it by Membership Network's operating
Rules.
4. Indemnification. With respect to Sponsored Membership, Company shall be
responsible for any and all loss resulting from any transaction
initiated by a Card issued by Company or its affiliates except to the
extent that such loss was caused by the malfunction of an ATM for which
another member of Membership Network is responsible. Company shall be
responsible for any and all loss resulting from the malfunction of an
ATM for which it is responsible. Company shall indemnify Bank and hold
Bank harmless from any and all loss for which Company is liable under
this paragraph or under the Membership Network operating Rules. Company
shall indemnify Bank against any loss including attorneys fees and
expenses) arising out of the failure of Company to meet its obligations
pursuant to the Sponsored Membership or under the Membership Network
operating Rules as amended from time to time.
5. Compliance with Applicable Law. With respect to the Sponsored
Membership, Company shall be solely responsible for its compliance with
any and all federal, state, local statutes and regulations applicable to
its ownership and operation of ATMs, its participation in the Membership
Network and its utilization of the service of Bank in connection
therewith, including without limitation any disclosure of other
obligations under Regulation E of the Federal Reserve Board of
Governors, the Electronic Funds Transfer Act and all analogous state
laws and regulations.
6. Termination. Either party may terminate the Sponsored Membership without
cause upon one year (1) year prior written notice to the other. Company
acknowledges that in the event the Sponsored Membership is terminated in
accordance with the foregoing, Company's membership in the Membership
Network shall terminate contemporaneously therewith unless Company has
obtained a new sponsor.
<PAGE>
In the event that Company breaches any of its obligations under the
Sponsored Membership including Company's obligation to abide by the
Membership Network operating Rules, Bank shall have the right to
terminate the Sponsored Membership immediately upon the provision of
written notice to Company.
C. NETWORKS
*
Company elects to connect through Bank interface with the following
Network Gateways:
- --------- ----------------------------- --------- ----- ------------------------
n/a AFFN n/a MAC 3RD PARTY
- --------- ----------------------------- --------- ----- ------------------------
n/a ALASKA OPTION n/a MAGICLINE
- --------- ----------------------------- --------- ----- ------------------------
X AMEX n/a MONEY STATION
- --------- ----------------------------- --------- ----- ------------------------
n/a BANKMATE X NYCE
- --------- ----------------------------- --------- ----- ------------------------
n/a CASHSTATION X PLUS
- --------- ----------------------------- --------- ----- ------------------------
n/a CASHSTREAM n/a PLUS DUALITY
- --------- ----------------------------- --------- ----- ------------------------
X CIRRUS n/a PRESTOP-PUBLIX
- --------- ----------------------------- --------- ----- ------------------------
n/a CIRRUS DUALITY n/a PULSE
- --------- ----------------------------- --------- ----- ------------------------
X DISCOVER n/a SHAZAM
- --------- ----------------------------- --------- ----- ------------------------
n/a EXCHANGE/ACCEL n/a STAR
- --------- ----------------------------- --------- ----- ------------------------
n/a EXPLORE/STARR n/a TYME
- --------- ----------------------------- --------- ----- ------------------------
n/a HONOR X VISA
- --------- ----------------------------- --------- ----- ------------------------
n/a MAC n/a VISANET
- --------- ----------------------------- --------- ----- ------------------------
<PAGE>
D. FEES
1. Sponsored Memberships. Bank shall charge and reimburse Company for
services of the Membership Network that Company uses as set forth in
Section C above. Fees may be adjusted from time to time as determined by
either the Membership Network or Bank. In the event that changes are
initiated by Membership Network, such change shall be effective on the
date defined by Membership Network. In the event that changes are
initiated by Bank and such changes result in an increased fee to
Company, such increase shall be effective upon ninety (90) days prior
written notice to Company.
Conversion and One Time Processing Fees
- --------------------------------------------------------------------------------
Conversion Support Fee - ATM Waived per FIID
- --------------------------------------------------------------------------------
Conversion Support Fee - Debit Waived per FIID
- --------------------------------------------------------------------------------
Gateway/On-Line Processor - Std X9.5 100 per hour, not to exceed
$5,000
- --------------------------------------------------------------------------------
Gateway/On-Line Processor - Non Std 7,000 plus $250 per hour
over 50 hrs.
- --------------------------------------------------------------------------------
Telecommunications TBD
- --------------------------------------------------------------------------------
Travel Expenses [Out Of Pocket] At Cost
Transaction and Service Processing Fees*
- --------------------------------------------------------------------------------
ATM & POS "PIN Based" Transactions
- --------------------------------------------------------------------------------
Transactions 1 - 10,000 875 monthly minimum
- --------------------------------------------------------------------------------
Transactions 10,001 - 50,000 0.07 per transaction
- --------------------------------------------------------------------------------
Transactions 50,001 - 100,000 0.06 per transaction - during the
first three years of the
Agreement
- --------------------------------------------------------------------------------
Transactions 50,001 - 100,000 0.06 per transaction - during
years four and five of the
Agreement
- --------------------------------------------------------------------------------
Transactions >100,000 0.06 per transaction
- --------------------------------------------------------------------------------
Dial-up ATMs 0.15 per transaction
- --------------------------------------------------------------------------------
<PAGE>
Debit "Signature-based" Transactions
MasterCard or Visa Gateway 100 per month
- --------------------------------------------------------------------------------
Transactions [Completed, Denied &
Reversed]
- --------------------------------------------------------------------------------
Transactions 1 - 20,000 0.09 per transaction
- --------------------------------------------------------------------------------
Transactions 20,001 - 50,000 0.08 per transaction
- --------------------------------------------------------------------------------
Transactions >50,000 0.07 per transaction
- --------------------------------------------------------------------------------
RAP Transaction 0.03 per reapply
- --------------------------------------------------------------------------------
Quarterly Reporting Fees 100 per quarter
- --------------------------------------------------------------------------------
Off-line Float Assessment [VISA only] At Cost monthly
- --------------------------------------------------------------------------------
Settlement & Adjustments ASAP ASAP Manual
- --------------------------------------------------------------------------------
ATM & POS Debit
- --------------------------------------------------------------------------------
Closed Non-settled Per Item 3 15 20
Transaction
- --------------------------------------------------------------------------------
Closed Settled Per Item 3 15 20
Transaction
- --------------------------------------------------------------------------------
ASAP Error Per Item 1 1 N/A
- --------------------------------------------------------------------------------
ATM Monthly Support Fees
- --------------------------------------------------------------------------------
Full monitoring [Lease line or Dial-up 50 per ATM
ATMs]
- --------------------------------------------------------------------------------
800# Monitoring [Dial-up ATMs only] 10 per ATM
- --------------------------------------------------------------------------------
*Transaction fee includes: gateway access to Cirrus, Plus, Visa, MasterCard,
Discover, Amexco & one regional network; positive balance authorization, one
daily balance refresh; one daily ACH transmission & CRT terminal transactions.
<PAGE>
Optional Processing Fees
- --------------------------------------------------------------------------------
Administrative
- --------------------------------------------------------------------------------
Delivery/Postage/Ground Transportation At cost
- --------------------------------------------------------------------------------
Third Party Audit Review 250 per copy
- --------------------------------------------------------------------------------
ACH Posting Tapes 500 per tape
- --------------------------------------------------------------------------------
Customer Requested Training 600 per day, + expenses
- --------------------------------------------------------------------------------
Custom Programming 250 per hour
- --------------------------------------------------------------------------------
Research Fee (In Excess Of 30 Days)* 100 per hour
- --------------------------------------------------------------------------------
*There is a 30 minute minimum for research requests
Business Card
- --------------------------------------------------------------------------------
Business Card Set-Up 500 one time
- --------------------------------------------------------------------------------
Business Card Support 50 per month
- --------------------------------------------------------------------------------
Card Management
- --------------------------------------------------------------------------------
Card Postage At Cost
- --------------------------------------------------------------------------------
Card Transmission Fee 3.75
- --------------------------------------------------------------------------------
Pin Mailers 0.15
- --------------------------------------------------------------------------------
Pin Postage At Cost
- --------------------------------------------------------------------------------
Re-issue Cards To Be Quoted
- --------------------------------------------------------------------------------
Re-issue PINS To Be Quoted
- --------------------------------------------------------------------------------
Debit Card Activation
- --------------------------------------------------------------------------------
Automated Debit Card Activation System 0.5 per call
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Fraud Reporting Service Core Mid-Tier Strategic
- --------------------------------------------------------------------------------
Visa RIS Reporting 25 50 75 per month
- --------------------------------------------------------------------------------
MasterCard SAFE Reporting 25 50 75 per month
- --------------------------------------------------------------------------------
<PAGE>
Fraud Watch [Self Service License]
- --------------------------------------------------------------------------------
Fraud License 7,500 one time
- --------------------------------------------------------------------------------
Fraud Setup Fee 500 one time
- --------------------------------------------------------------------------------
Fraud File Fix 250 per hour
- --------------------------------------------------------------------------------
Fraud Transaction Fee 0 per transaction
- --------------------------------------------------------------------------------
Account Residing Fee 0.01 per active card
- --------------------------------------------------------------------------------
Fraud Watch [Service Bureau]
- --------------------------------------------------------------------------------
Fraud Setup Fee 500 one time
- --------------------------------------------------------------------------------
Fraud File Fix 250 per hour
- --------------------------------------------------------------------------------
Fraud Transaction Fee 0 per transaction*
- --------------------------------------------------------------------------------
Account Residency Fee 0.01 per card*
- --------------------------------------------------------------------------------
*The minimum monthly fee for the total of the fraud transaction and account
residency fees is $100.
Hot Card Service
- --------------------------------------------------------------------------------
Hot Carding 15 per call
- --------------------------------------------------------------------------------
Misdirected Calls 5 per call
- --------------------------------------------------------------------------------
Report Options
- --------------------------------------------------------------------------------
Datamover Transmission RJE 0.03 per 100 lines
- --------------------------------------------------------------------------------
Datamover Transmission In 0.06 per 100 lines
- --------------------------------------------------------------------------------
Datamover Transmission Out 0.11 per 100 lines
- --------------------------------------------------------------------------------
Microfiche Original 2.25 per sheet
- --------------------------------------------------------------------------------
Microfiche Copy 0.25 per sheet
- --------------------------------------------------------------------------------
<PAGE>
Set Up Fees [Post Conversion]
- --------------------------------------------------------------------------------
ATM Deployment/Re-deployment Fee 250 per ATM
- --------------------------------------------------------------------------------
ATM Feature Set-Up 250 per ATM
- --------------------------------------------------------------------------------
ATM Screen Group Change 250 per Group
- --------------------------------------------------------------------------------
Bilingual Screen Setup 250 per Group
- --------------------------------------------------------------------------------
Administrative Terminal Set-Up 100 per CRT
- --------------------------------------------------------------------------------
Datamover Set-Up Fee 500 per FIID
- --------------------------------------------------------------------------------
File Mergers 5,000 + $100 per custom
program hr
- --------------------------------------------------------------------------------
Gateway Setup Fee 250 per Gateway
- --------------------------------------------------------------------------------
Multi- Marketing Message Set-Up 200 per Set Up
- --------------------------------------------------------------------------------
Optional Receipt Set-Up 250 per Set Up
- --------------------------------------------------------------------------------
Surcharging Routine Set-Up 2,500 per FIID
- --------------------------------------------------------------------------------
Interactive ATM Change 1,000 per ATM
- --------------------------------------------------------------------------------
Bank Acquisition/Project Management To Be Quoted
- --------------------------------------------------------------------------------
Special Report Options
- --------------------------------------------------------------------------------
CAF [Cardholder Account File] Report 50 per report
- --------------------------------------------------------------------------------
CAF Tape 100 per tape
- --------------------------------------------------------------------------------
CMF [Card Management File] Report 50 per report
- --------------------------------------------------------------------------------
CMF Tape 100 per tape
- --------------------------------------------------------------------------------
CAF/CMF Combined Report 250 per report
- --------------------------------------------------------------------------------
Special Reports 125 per prgrm hr. $50
setup per report
- --------------------------------------------------------------------------------
Raw Data File 300 per month +
transmission costs
- --------------------------------------------------------------------------------
<PAGE>
Special Support Services
- --------------------------------------------------------------------------------
Bilingual Screen Support Fee 25 per ATM
- --------------------------------------------------------------------------------
On-Line Processor 250 per month
- --------------------------------------------------------------------------------
Multiple Account Access 200 per month
- --------------------------------------------------------------------------------
ATM Local Surcharging Support* 0.05 per tran [$25 per
month minimum]
- --------------------------------------------------------------------------------
ATM Host Surcharging Support* 0.07 per tran [$25 per
month minimum]
- --------------------------------------------------------------------------------
*The $25 per month minimum is per ATM
- --------------------------------------------------------------------------------
Full Statement Print 0.25 per statement
- --------------------------------------------------------------------------------
Mini Statement Print 0.15 per statement
- --------------------------------------------------------------------------------
Other Regional Networks 100 per month, per
network
- --------------------------------------------------------------------------------
Telecommunication Services
- --------------------------------------------------------------------------------
Monthly Telecommunications Fees
- --------------------------------------------------------------------------------
Packet Switching Com Fee [Dial-up] 0.25 per minute
- --------------------------------------------------------------------------------
Special Processor Line [Point To 700 per month
Point]
- --------------------------------------------------------------------------------
Special Processor Line [Shared] 150 per month
- --------------------------------------------------------------------------------
Line Rental 150 per drop
- --------------------------------------------------------------------------------
Dial Back-Up 84 per month
- --------------------------------------------------------------------------------
One Time Telecommunications Fees
- --------------------------------------------------------------------------------
ATM Line Install - Regular [>= 45 Business 650
Days]
- --------------------------------------------------------------------------------
ATM Line Install - Expedited [< 45 1,350
Business Days]
- --------------------------------------------------------------------------------
ATM Disconnect Fee 200 per ATM
- --------------------------------------------------------------------------------
Back End/Intercept Processor Line 2,200
Install - Regular
- --------------------------------------------------------------------------------
Back End/Intercept Processor Line 2,900
Install - Expedite
- --------------------------------------------------------------------------------
Line Disconnect Fee 200 per drop
- --------------------------------------------------------------------------------
Modem Install 300 per modem
- --------------------------------------------------------------------------------
Modem Disconnect 200 per modem
- --------------------------------------------------------------------------------
<PAGE>
Equipment and Software Sales
- --------------------------------------------------------------------------------
Cables And Connectors TBD
- --------------------------------------------------------------------------------
Outside View(R)32 280 per seat
- --------------------------------------------------------------------------------
Data Talker - Cleo Board 750 per PC
- --------------------------------------------------------------------------------
Digital DSU's 750 per DSU
- --------------------------------------------------------------------------------
Modem Maintenance [AT&T] 252 annual per unit
- --------------------------------------------------------------------------------
Modem Purchase 250 per modem
- --------------------------------------------------------------------------------
Modem Splitter - 4 Port 345 per splitter
- --------------------------------------------------------------------------------
Modem Splitter - 8 Port 1,170 per splitter
- --------------------------------------------------------------------------------
Leasing
- --------------------------------------------------------------------------------
ATM Modem Lease 30 per unit per month
- --------------------------------------------------------------------------------
Digital DSU Lease 150 per unit per month
- --------------------------------------------------------------------------------
De-conversion Fees
- --------------------------------------------------------------------------------
De-conversion Support Fee 2,500 per FIID
- --------------------------------------------------------------------------------
ATM Disconnect Fee 200 per ATM
- --------------------------------------------------------------------------------
In addition to de-conversion fees, customer will pay all third party charges
including ATM, modem & line disconnect fees.
IN ADDITION TO THE FEES AND CHARGES SET FORTH IN THIS ADDENDUM, COMPANY AGREES
TO PAY ALL FEES, CHARGES, PENALTIES, FINES, ASSESSMENTS AND ADDITIONAL OR
INCREASED COSTS OF ANY NATURE AS MAY BE CHARGED BY MASTERCARD OR VISA OR BY ANY
THIRD PARTY OR AS MAY BE OTHERWISE INCURRED BY BANK IN CONNECTION WITH THE
MATTERS CONTEMPLATED BY THIS AGREEMENT, WHETHER CHARGED OR INCURRED BY BANK
EITHER DIRECTLY OR INDIRECTLY.
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 5,673
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 10,315
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 32,982
<INVESTMENTS-CARRYING> 27,873
<INVESTMENTS-MARKET> 26,746
<LOANS> 196,280
<ALLOWANCE> 1,801
<TOTAL-ASSETS> 280,950
<DEPOSITS> 216,245
<SHORT-TERM> 43,000
<LIABILITIES-OTHER> 4,072
<LONG-TERM> 0
0
0
<COMMON> 253
<OTHER-SE> 17,380
<TOTAL-LIABILITIES-AND-EQUITY> 280,950
<INTEREST-LOAN> 3,505
<INTEREST-INVEST> 1,141
<INTEREST-OTHER> 29
<INTEREST-TOTAL> 4,675
<INTEREST-DEPOSIT> 1,844
<INTEREST-EXPENSE> 2,477
<INTEREST-INCOME-NET> 2,198
<LOAN-LOSSES> 15
<SECURITIES-GAINS> 2
<EXPENSE-OTHER> 1,758
<INCOME-PRETAX> 853
<INCOME-PRE-EXTRAORDINARY> 747
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 747
<EPS-BASIC> .30
<EPS-DILUTED> .29
<YIELD-ACTUAL> 0
<LOANS-NON> 31
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,798
<CHARGE-OFFS> 25
<RECOVERIES> 13
<ALLOWANCE-CLOSE> 1,801
<ALLOWANCE-DOMESTIC> 1,801
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
