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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File Number 0-9517
BANK OF NEW HAMPSHIRE CORPORATION
(Exact name of Registrant as specified in its charter)
New Hampshire 02-0346918
(State or other jurisdition of (I.R.S. Employer
incorporation or organization) Identification No.)
300 Franklin Street, Manchester, New Hampshire 03101
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (603) 624-6600
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value, with a stated value of $2.50 per share
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports re-
quired 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 report(s), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
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The aggregate market value of the shares of common stock held by nonaffiliates
of the registrant was $79,347,424, based upon the reported closing price per
share on March 15, 1995 of $23.00. The Registrant, solely for the purpose of
this required presentation, has deemed the Rule 13 d-5(b)(1) Group, (Thurber
Family, so called,) to be affiliates, and deducted from its outstanding shares
in determining the aggregate market value, their beneficial holdings of
614,268 shares or $14,128,164.
Number of Shares Outstanding at March 24, 1995 - 4,064,156 shares
DOCUMENTS INCORPORATED BY REFERENCE
Sections of the Company's 1994 Part I, Items 1 and 2
Annual Report to Shareholders Part II, Items 5, 6, 7, and 8; and
Part IV, Item 14
Sections of the Company's Part III, Items 10, 11, 12 and 13
Proxy Statement, 1995 Annual Meeting
of Shareholders
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INDEX
Name of Item Page
PART I
ITEM 1. BUSINESS 4
Table of Contents of Statistical Information 11
ITEM 2. PROPERTIES 25
ITEM 3. LEGAL PROCEEDINGS 25
ITEM 3A. EXECUTIVE OFFICERS OF THE COMPANY 25
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 26
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS 26
ITEM 6. SELECTED FINANCIAL DATA 26
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 26
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 27
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE 27
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY 27
ITEM 11. EXECUTIVE COMPENSATION 28
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT 28
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 28
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K 28
SIGNATURES
SIGNATURES 30
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PART I
ITEM 1. BUSINESS
THE COMPANY
Bank of New Hampshire Corporation (the "Company") is a registered bank holding
company incorporated in 1979 under New Hampshire law. The Company is
regulated by the State of New Hampshire Banking Department and by the Federal
Reserve System and transacts its business through its only subsidiary, Bank of
New Hampshire (the "Bank"), a state-chartered commercial bank organized under
New Hampshire law, headquartered, along with the executive offices of the
Company, at 300 Franklin Street, Manchester, New Hampshire 03105 (telephone
603-624-6600).
The Company employs approximately 500 employees and conducts its business
through twenty-nine offices of the Bank located throughout the southern,
central, seacoast, and lakes regions of New Hampshire, which areas contain
approximately 80% of the State's population.
On Saturday, January 21, 1995, a fire forced a temporary closing of its branch
office in downtown Dover. The loss was insured. Management expects that
repairs and renovations to the office will take several months to complete and
has provided temporary alternative banking facilities for customers.
BUSINESS OF THE COMPANY
The Company, primarily, provides management resources to the Bank. The Bank
is a full service commercial bank engaged in providing a wide variety of
financial services to New Hampshire individuals, businesses and governments,
including commercial and real estate lending; retail banking; consumer
finance; mortgage origination, sales and servicing; cash management; and trust
and investment services. Through its Trust and Investment Services Division,
the Bank administers estates, personal and corporate trusts, and provides
fiduciary services to individuals, businesses, and governments. The Bank also
offers electronic banking services through a network of twenty-three ATMs.
The Bank maintains a centralized data processing facility at its Data Services
Center located in Manchester, New Hampshire.
Activities in which the Company and the Bank are presently engaged or which
they may undertake in the future are subject to certain statutory and regula-
tory restrictions. Banks and bank holding companies are extensively regulated
under both federal and state law. There are various legal limitations upon
the extent to which the Bank can finance or otherwise supply funds to the
Company. In addition, there are certain regulatory limitations on the payment
of dividends by the Company and by the Bank. See "SUPERVISION AND REGULATION"
and "Dividends and Dividend Policy" on pages 5 and 7 of this Report.
COMPETITION AND INDUSTRY CONSOLIDATION
The business of the Bank is extremely competitive. In addition to competing
actively with other commercial banks in its market area for deposits and
loans, the Bank competes with larger commercial banks located outside of New
Hampshire. The Bank also competes with other financial institutions,
including mutual and stock savings banks, savings and loan associations,
finance companies and credit unions. In addition, it competes with
non-banking institutions including insurance companies and other financial
services organizations. Competition among financial institutions is based
upon product pricing, customer service, convenience of banking locations and a
variety of other factors. At December 31, 1994, the Bank's deposits totalled
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$825.9 million, which represents approximately 5.5% of the total time, savings
and demand deposits of all banks, state co-operatives and savings and loan's
in New Hampshire.
The banking industry has been experiencing continued consolidation in New
Hampshire and in other states. The Company, from time to time, may
investigate possible future acquisitions of deposits and banking assets which
could strengthen the Company and enhance market coverage within New Hampshire.
No agreements presently exist regarding possible future acquisitions.
SUPERVISION AND REGULATION
The Company is a bank holding company registered under the Bank Holding
Company Act of 1956 (the "BHCA") and is subject to supervision by the State
Banking Department and by the Board of Governors of the Federal Reserve
("FRB"). The Company is required to file quarterly reports and certain other
information with the Federal Reserve Bank of Boston ("FRBB"). The FRBB also
examines the Company.
The Bank is a state-chartered institution and is not a member of the FRB
system. The Bank is, therefore, subject to supervision, regulation and
examination by both the FDIC and the State Banking Department. Deposits in
the Bank are insured by the FDIC to the extent allowed by law.
Several of the more significant regulatory provisions applicable to bank
holding companies and banks to which the Company and the Bank are subject are
noted below. To the extent that the following information describes statutory
or regulatory provisions, it is qualified in its entirety by reference to the
particular statutory provisions. Any change in applicable law or regulation
could have a material effect on the Company's business.
NEW LEGISLATION
Interstate Banking Efficiency Act
On September 29, 1994, the Federal government enacted the Interstate Banking
Efficiency Act, which authorizes nationwide banking and branching. Under the
new federal law, subject to states' rights and Community Reinvestment Act
provisions, nationwide banking will be permitted one year after enactment, and
nationwide branching will be permitted after June 1, 1997.
Interstate Banking
Under the new law, one year after enactment, bank holding companies will be
allowed to acquire banking subsidiaries anywhere in the country. States
cannot opt out of the interstate banking provisions. However, states can
require that the target institution be above a certain age, though that age
cannot exceed five years. A bank holding company will not be allowed to
control more than 10% of the nationwide total or more than 30% of the state
total amount of insured deposits. States may waive the 30% limit or set their
own limit, subject to certain restrictions. In addition, the 30% limit does
not apply to mergers of affililated banks nor to the acquisition of deposits,
already exceeding the 30% limit, by an acquiror new to the state. The FRB,
however, can waive any interstate restriction, if necessary, in a troubled
bank acquisition.
Interstate Branching
Under the new law, states are permitted to authorize out-of-state banks to
open de novo (new) branches in their states. De novo branching across state
lines is otherwise generally barred. Similarly, acquisitions of branches
across state lines are barred unless authorized by state law. One year after
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enactment, banks will be allowed to accept deposits, close and service loans
and accept loan payments on behalf of affiliated banks from other states, in
effect a preview of interstate branching. However, banks cannot originate
loans or open deposit accounts on an affiliates behalf.
After June 1, 1997, bank holding companies are allowed to convert all or part
of their branch networks into interstate branches. They can also acquire
banks in other states concurrent with converting them to branches. States now
have three options (i) opt-in before June 1, 1997 (ii) opt-out by May 31, 1997
or (iii) accept the provisions of the new law based on the federal timetable.
The selection of option (ii) above would bar branching in their state and also
bar in-state banks from branching into other states or acquiring banks across
state lines. Bank holding companies that convert their banks into branches
across state lines retain the branching capacity of the original banks in
their respective states.
Other Provisions
Under the new law, Federal regulators must implement regulations which prevent
interstate branching from being used to create "deposit production offices";
the FRB must conduct an annual survey of banks' fees for retail financial
services; the FDIC can revive an expired state statute of limitations if the
statute expired within five years of the FDIC's takeover of a failed bank only
in cases of fraud, intentional misconduct leading to personal enrichment or
intentional misconduct leading to substantial loss to the bank; the General
Accounting Office must compile a report on the efficiency of current reporting
requirements in light of nationwide interstate banking and branching; and the
Secretary of the Treasury must establish a commission to study the U.S.
financial services systems' strengths and weaknesses in meeting customer
needs.
The Company is reviewing the new law, but its impact is not determinable at
this time. The New Hampshire legislature is in the process of considering a
bill to address the options allowed under the new law.
BANK HOLDING COMPANY REGULATION
Acquisitions by Bank Holding Companies
The BHCA prohibits the Company from acquiring direct or indirect control of
more than 5% of the outstanding shares of any class of voting stock or
substantially all of the assets of any bank, or merging or consolidating with
another bank holding company, without prior approval of the FRB. Restrictions
also apply to similar acquisition of shares of stock of the Company by other
bank holding companies.
The BHCA also prohibits the Company from engaging in, or from acquiring
ownership or control of, more than 5% of the outstanding shares of any class
of voting stock of any company engaged in a nonbanking activity unless such
activity has been determined by the FRB to be so closely related to banking as
to be a proper incident thereto. The BHCA does not place territorial
restrictions on the activities of such nonbanking-related activities.
Control of Bank Holding Companies
The Change in Bank Control Act (the "CBCA") requires notice to and approval by
the FRB prior to the acquisition by any person or entity of "control" of a
bank holding company. The CBCA defines "control" as the power, directly or
indirectly, to vote 25% or more of any class of voting securities. The FRB
has promulgated regulations pursuant to which it presumes that one has
"control" of a bank holding company if one owns, controls, or holds with the
power to vote 10% or more of any class of voting securities of a
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publicly-traded bank holding company.
New Hampshire law currently may restrict acquisitions of control of New
Hampshire bank holding companies. The Board of Directors of individual banks
or bank holding companies may adopt regulations which, upon filing with the
State Banking Department, prohibit acquisitions by out-of-state banks.
Neither the Company's nor the Bank's Board has taken action with regard to
these resolutions.
Capital Adequacy
The FRB uses risk-based capital adequacy guidelines to evaluate the capital
adequacy of bank holding companies. Such guidelines require bank holding
companies to maintain risk-based capital ratios substantially similar to those
required for state banks, as described below. In addition to the risk-based
capital guidelines, the FRB and the FDIC require the use of the leverage ratio
as an additional tool to evaluate the capital adequacy of bank holding
companies. Bank holding companies are required to maintain a leverage ratio
of 3.0% plus an additional cushion of at least 100 to 200 basis points.
Information concerning the Company and the Bank with respect to capital is set
forth in Management's Financial Review - "Consolidated Balance Sheet" and
"Capital Resources", contained in the Company's 1994 Annual Report to
Shareholders on pages 12 and 20, respectively, filed as Exhibit 13, which is
incorporated herein by reference.
Dividends and Dividend Policy
The Company is a legal entity separate and distinct from the Bank. The
Company's revenues (on a Parent Company only basis) result, in part, from
dividends paid to the Company by the Bank. During 1994, the Bank paid $1.0
million in dividends to the Company. The right of the Company, and its
creditors and shareholders, to participate in any distribution of the assets
of the Bank is subject to the prior claims of creditors of the Bank, including
depositors.
The Company's dividend policy with respect to its common stock is reviewed
quarterly. During 1994, the Company paid $1.6 million in dividends to
shareholders. Any dividend declaration by the Company or the Bank must con-
sider the amount of current period earnings, capital adequacy and other
factors (as discussed below). However, federal and state regulators have the
authority to prohibit the Bank and the Company from paying dividends at any
time if they deem such payment to be an unsafe or unsound practice.
The FRB issued a policy statement that bank holding companies should serve as
a source of managerial and financial strength to their subsidiary banks. As
part of this policy, the FRB expects that if a major subsidiary bank is unable
to pay dividends to a bank holding company, the bank holding company should
consider reducing or eliminating its dividends to shareholders in order to
conserve its capacity to provide capital assistance to the subsidiary bank.
The policy also discourages bank holding companies with subsidiary banks which
are experiencing earnings weaknesses, other serious problems, or that have
inadequate capital, from paying dividends not covered by current earnings,
from borrowed funds, or from unusual or nonrecurring gains. In addition, a
bank holding company is prohibited under the Federal Deposit Insurance Act
from paying dividends without the prior approval of the FRB if an insured bank
subsidiary is deemed to be "significantly undercapitalized" (as discussed
below) or is deemed to be "undercapitalized" and has failed to submit and
implement a required capital restoration plan.
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BANK REGULATION
The Bank is required to maintain cash reserves against deposits and is subject
to restrictions, among others, upon the nature and amount of loans which it
may make to a borrower, the nature and amount of securities in which it may
invest, the amount of its assets which may be invested in bank premises, the
geographic location of its branches, and the nature and extent to which it can
borrow money.
FDICIA
The Federal government enacted the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA") which, in general, required the adoption of
regulations establishing minimum capital ratio requirements for insured
institutions, established a system of classifications for insured institutions
based on capital ratios and other factors under which federal regulatory
agencies are required to take "prompt corrective action" with regard to
capital and other deficiencies, and provided for the recapitalization of the
FDIC's Bank Insurance Fund (the "BIF") by setting up a risk-based scheme of
premium assessments of insured institutions.
Capital Adequacy
Under the FDIC's minimum capital ratio regulations, state banks are required
to have a ratio of "Tier 1," or core, capital-to-total risk-weighted assets of
4.0% and a ratio of total capital-to-total risk-weighted assets of 8.0%.
Except in the case of the strongest institutions, the FDIC expects state banks
to substantially exceed these minimum risk-based capital ratios. As of
December 31, 1994, the Bank's ratio of "Tier 1" capital-to-total risk-weighted
assets was 14.67% and its ratio of total capital-to-total risk-weighted assets
was 15.94%. Also under FDIC regulations, state banks are required, in most
cases, to maintain a leverage ratio, or "Tier 1" capital-to-average total
assets ratio, of no less than 4.0%. As of December 31, 1994, the Bank's
leverage ratio was 7.06%. Under certain circumstances, the FDIC may establish
higher minimum capital ratio requirements than set forth above; for example,
when a bank has received special regulatory attention or has high
susceptibility to interest rate risk. A bank is restricted from paying
dividends if it is, or as a result of the dividend would be, considered to be
undercapitalized under these minimum capital ratio requirements. Banks with
capital ratios below the required minimums are also subject to certain
administrative actions, including termination of deposit insurance upon notice
and hearing, or temporary suspension of insurance without a hearing in the
event the institution has no tangible capital.
Prompt Corrective Action
The regulations relating to "prompt corrective action" establish five
classifications based on capital levels, some of which require or permit the
FRB or the FDIC to take supervisory action -- "well capitalized," "adequately
capitalized," "undercapitalized," "signficantly undercapitalized," and
"critically undercapitalized." The classifications are determined by the
ratios of the institution's "Tier 1" capital-to-total risk-weighted assets, its
total capital-to-total risk-weighted assets, and its leverage ratio. To fall
within the "well capitalized" category, ratios (as described above) must be at
least 6.0%, 10.0%, and 5.0%, respectively. The regulations require a bank to
notify the appropriate agency of material events that decrease the capital
level of the bank, and to do so within 15 days. In addition, federal banking
regulators are authorized to effectively downgrade an institution to a lower
capital category than the institution's capital ratios would otherwise
indicate, based upon safety and soundness considerations, such as when the
institution has received a less than satisfactory examination rating for any of
the rating categories for asset quality, management, earnings, or liquidity.
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The scope and degree of regulatory intervention is linked to the amount of any
shortfall in the capital ratios of the insured institution. In the case of an
insured institution which is "critically undercapitalized" (a term defined to
include institutions which have a positive net worth), the federal bank
regulatory authorities are generally required to appoint a conservator or
receiver. An "undercapitalized" bank must develop a capital restoration plan
and its parent holding company must guarantee the bank's compliance with the
plan. The liability of the parent holding company under any such guarantee is
limited to the lesser of 5% of the bank's assets at the time it became
"undercapitalized" or the amount needed to comply with the plan. An
"undercapitalized" bank also is subject to limitations in numerous areas,
including, but not limited to: capital distributions, asset growth,
acquisitions, branching, new business lines and borrowings from the FRB.
Under the regulations relating to brokered deposits, "well capitalized" banks
may accept brokered deposits without restriction, "adequately capitalized"
banks may accept such funds only if they first obtain a waiver from the FDIC,
and "undercapitalized" banks are prohibited from accepting such deposits. In
addition, banks which are not "well capitalized" (even if meeting minimum
capital requirements) are subject to limits on the rates of interest they may
pay on brokered and other deposits. Based on its capital ratios as of
December 31, 1994, the Bank is deemed to be "well capitalized" under the
prompt corrective action regulations.
FDICIA contains numerous other provisions, including accounting, audit and
reporting requirements, the termination of the "too big to fail" doctrine
except in special cases, regulatory standards in areas such as asset quality,
earnings and compensation, and revised regulatory standards for, among other
things, powers of state chartered banks, real estate lending, branch closures,
and capital adequacy.
Deposit Insurance Assessments
In order to implement the recapitalization of the BIF pursuant to FDICIA, the
FDIC established a schedule to increase the reserve ratio of the BIF to 1.25%
of insured deposits by January 1, 2002. However, the FDIC reported that the
BIF is expected to be fully recapitalized by July 31, 1995.
Each institution is placed in one of nine risk categories using a two-step
process. First, a bank is assigned to one of three groups based on whether it
is "well capitalized," "adequately capitalzied," or "undercapitalized".
Second, a bank is assigned to one of three subgroups based on an evaluation of
the risk posed by the bank. Based on these classifications, the FDIC uses an
insurance premium schedule under which the safest banks currently pay $.23
cents per $100 of deposits. The rates increase incrementally to a top rate of
$.31 cents for the weakest banks. The Bank pays $.23 cents per $100 of
deposits.
The FDIC has the authority to change the premium rates and, on January 31,
1995, proposed cutting premiums to $.04 cents for the safest banks effective
in the second half of 1995. The FDIC also plans to widen the range of risk-
based premiums charged from $.04 cents for the safest banks to $.31 cents for
the weakest banks.
FIRREA
The Federal government enacted the Financial Institutions Reform, Recovery and
Enforcement Act of 1989 ("FIRREA") which empowers regulatory authorities to
use their "cease-and-desist" authority to require institutions to take certain
affirmative actions. Such cease-and-desist orders may include restricting the
growth of the institution, disposing of any loan or assets, rescinding
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agreements or contracts, employing qualified officers or employees or taking
other actions. Regulatory agencies also have the authority to order
restitution where an institution or "institution-affiliated party" (a term
which does not include bank holding companies) was "unjustly enriched" or
recklessly disregarded the law.
GOVERNMENTAL POLICIES AND ECONOMIC CONDITIONS
The earnings and business of the Company and the Bank are and will be affected
by a number of external influences, including general economic conditions and
the policies of various regulatory authorities. In addition to those
enumerated under "SUPERVISION AND REGULATION" important FRB functions are to
regulate the supply of money and of bank credit, to deal with general economic
conditions within the United States and to be responsive to international
economic conditions. Among the means available to the FRB to affect the money
supply are open market operations in U.S. Government securities, changes in
the discount rate on member bank borrowings, and changes in reserve re-
quirements against member bank deposits. These means are used in varying
combinations to influence overall growth and distribution of bank loans,
investments and deposits, and their use may affect interest rates charged on
loans or paid for deposits. From time to time, the FRB has taken specific
steps to control domestic inflation and to control the country's money supply.
For example, the FRB raised the discount rate four times and the federal funds
rate seven times since February, 1994. FRB monetary policies have materially
affected the operating results of commercial banks in the past and are
expected to continue to do so in the future. The nature of future monetary
policies and the effect of such policies on the business and earnings of the
Company cannot be predicted.
The FRB reported that it moved to keep inflation contained and thereby foster
sustainable economic growth by raising short-term interest rates, as noted
above. The Commerce Department reported that the gross domestic product,
measuring the output of all goods and services produced in the United States,
rose at a 4.0% adjusted rate in the third quarter and at a 4.5% rate in the
fourth quarter of 1994. The FRB has indicated it wants to hold down inflation
by slowing economic growth to about 2.5%. Most economic indicators now
suggest minimal inflation. Many economists are forecasting continued growth
through the middle of the year, followed by a slowing in the economy due to
the effects of higher interest rates.
The effect upon the future business and earnings of the Company, of
prospective economic and political conditions, and of the policies of the FRB
as well as other regulatory authorities, cannot be determined at this time.
This section should be read in conjunction with "Management's Financial
Review" contained in the Company's 1994 Annual Report to Shareholders, filed
as Exhibit 13, which is incorporated herein by reference.
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Table of Contents of Statistical Information Page No.
I. A. Distribution of Assets, Liabilities,
and Shareholders' Equity 12
B. Interest Income and Expense 13
C. Interest Rates 14
D. Volume and Rate Analysis 15
II. Securities 16
III. A. Loans 17
B. Maturities and Interest Rate
Sensitivity of Loans 18
C. Nonperforming Assets 19
IV. A. Analysis of Allowance for Possible Loan
Losses 20
B. Allocation of Allowance for Possible
Loan Losses 21
V. Deposits 22
VI. Return on Equity and Assets and Other Ratios 22
VII. Federal Funds Purchased and Securities Sold
Under Agreements to Repurchase 23
VIII. Trust Data 24
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I. A. Distribution of Assets, Liabilities and Shareholders' Equity
The following Table presents, for the years indicated, the
average balances of each principal category of assets and
liabilities, and shareholders' equity.
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
(In thousands)
ASSETS
<S> <C> <C> <C>
Earning assets:
Loans $520,294 $573,561 $646,040
Taxable securities 278,699 207,846 189,844
Non-taxable securities 2,759 2,464 3,795
Federal funds sold and securities
purchased under agreements to resell 72,652 84,320 62,692
Total earning assets 874,404 868,191 902,371
Cash and due from banks 53,556 56,767 51,752
Premises and equipment, net 10,840 11,581 11,547
Other real estate 12,920 15,406 20,205
Other assets 16,255 16,539 19,057
Allowance for possible loan losses (13,837) (15,950) (18,812)
Total assets $954,138 $952,534 $986,120
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities:
Savings deposits $489,080 $481,521 $477,460
Certificates of deposit of $100,000 or more 10,169 12,896 19,073
Other time deposits 200,306 222,097 259,591
Federal funds purchased and securities sold
under agreements to repurchase 33,346 35,431 46,417
Other borrowed funds 2,720 3,529 4,063
Total interest bearing liabilities 735,621 755,474 806,604
Demand deposits 138,676 131,335 120,988
Other liabilities 8,556 9,032 11,065
Total liabilities 882,853 895,841 938,657
Shareholders' equity 71,285 56,693 47,463
Total liabilities and shareholders' equity $954,138 $952,534 $986,120
</TABLE>
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I. B. Interest Income and Expense
The following Table presents, for the years indicated, interest
income on earning assets on a fully taxable equivalent ("FTE")
basis, interest expense on interest bearing liabilities and net
interest income. Interest earned from loans includes fees earned
on loans.
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
(In thousands)
<S> <C> <C> <C>
Interest earned from:
Loans (1) $ 45,897 $ 51,782 $ 61,076
Taxable securities 12,048 8,429 9,634
Non-taxable securities (1) 158 170 348
Federal funds sold and securities
purchased under agreements to resell 2,909 2,570 2,206
Total interest income (1) 61,012 62,951 73,264
Interest expense on:
Savings deposits 11,324 12,203 15,340
Certificates of deposit of $100,000 or more 376 467 835
Other time deposits 7,996 9,395 13,660
Federal funds purchased and securities sold
under agreements to repurchase 920 721 1,376
Other borrowed funds 112 84 100
Total interest expense 20,728 22,870 31,311
Net Interest Income (1) $ 40,284 $ 40,081 $ 41,953
(1) Includes an FTE adjustment based on a 34%
federal income tax rate. $ 160 $ 232 $ 358
</TABLE>
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I. C. Interest Rates
The following Table presents, for the years indicated, the
interest rate earned on average earning assets, on an FTE basis,
and the interest rate paid on average interest bearing
liabilities.
Year Ended December 31,
1994 1993 1992
Rate earned on:
Loans (1) 8.82% 9.03% 9.45%
Taxable securities 4.32 4.06 5.07
Non-taxable securities 5.73 6.90 9.17
Federal funds sold and securities
purchased under agreements to resell 4.00 3.05 3.52
Total 6.98 7.25 8.12
Rate paid on:
Savings deposits 2.32 2.53 3.21
Certificates of deposit of $100,000 or more 3.70 3.62 4.37
Other time deposits 3.99 4.23 5.26
Federal funds purchased and securities sold
under agreements to repurchase 2.76 2.03 2.97
Other borrowed funds 4.12 2.38 2.46
Total 2.82 3.03 3.88
Interest Rate Spread (2) 4.16% 4.22% 4.24%
Net Interest Margin (3) 4.61% 4.62% 4.65%
____________________
(1) For the calculation of rate earned on loans, nonaccrual and
restructured loans are included in the average amounts outstanding.
(2) Interest rate spread is the average rate earned on total earning
assets less the average rate paid for interest bearing liabilities.
(3) Interest rate margin is calculated by dividing net interest income by
total earning assets.
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I. D. Volume and Rate Analysis
The following Table presents an analysis of the effect on net
interest income, on an FTE basis, of volume and rate changes for
1994 as compared with 1993. The effect of changes due to both
volume and rate have been allocated to the change in volume and
change in rate categories in proportion to the relationship of the
absolute dollar amounts of the change in each category.
<TABLE>
<CAPTION>
1994 vs 1993 1993 vs 1992
Due to Changes Due to Changes
Net in Interest Net in Interest
Increase Increase
(Decrease) Volume Rate (Decrease) Volume Rate
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest income from:
Loans $(5,885) $(4,706) $(1,179) $ (9,294) $(6,657) $(2,637)
Taxable securities 3,619 3,047 572 (1,205) 848 (2,053)
Non-taxable securities (12) 19 (31) (178) (104) (74)
Federal funds sold and
securities purchased
under agreements to resell 339 (389) 728 364 687 (323)
Total interest income (1,939) (2,029) 90 (10,313) (5,226) (5,087)
Interest expense on:
Savings deposits (879) 182 (1,061) (3,137) 129 (3,266)
Certificates of deposit
of $100,000 or more (91) (101) 10 (368) (241) (127)
Other time deposits (1,399) (886) (513) (4,265) (1,810) (2,455)
Federal funds purchased
and securities sold
under agreements to
repurchase 199 (45) 244 (655) (280) (375)
Other borrowed funds 28 (23) 51 (16) (13) (3)
Total interest expense (2,142) (873) (1,269) (8,441) (2,215) (6,226)
Net Interest Income $ 203 $(1,156) $ 1,359 $(1,872) $(3,011) $ 1,139
</TABLE>
<PAGE>
II. Securities
The following Table presents the book values of securities for the
years indicated.
<TABLE>
<CAPTION>
December 31,
1994 1993 1992
(In thousands)
<S> <C> <C> <C>
U.S. Treasury and Other
U.S. Government agencies $285,392 $256,380 $180,616
State and municipal 908 1,215 1,765
Other 3,882 797 2,897
Total securities $290,182 $258,392 $185,278
</TABLE>
Held-to-maturity debt securities totalled $286.6 million and had an
estimated market value of $283.0 million at December 31, 1994. Available-
for-sale equity securities at cost were $3.6 million with an estimated
market value of $3.6 million at December 31, 1994.
The following Table presents the relative maturities at book value and
weighted average interest rates of securities at December 31, 1994. Other
securities having a book value of $3.9 million are not included in the
Table. Weighted average rates on tax-exempt obligations have been
computed on an FTE basis assuming a tax rate of 34%. The rates are
calculated by dividing annual interest, net of amortization of premiums
and accretion of discounts, by the book value of the securities at
December 31, 1994.
<TABLE>
<CAPTION>
Within After One But After Five But After
One Year Within Five Years Within Ten Years Ten Years
Amount Rate Amount Rate Amount Rate Amount Rate
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury
and other U.S.
Government
agencies $163,315 4.25% $120,651 6.48% $ 452 10.23% $ 974 9.27%
State and
municipal 383 7.50% 185 9.38% 340 9.59%
Total $163,698 4.26% $120,836 6.48% $ 452 10.23% $ 1,314 9.35%
</TABLE>
<PAGE>
III. A. Loans
The balance of loans outstanding, and the percent for each
category, of loans to total loans at the dates indicated are
shown in the following Tables.
<TABLE>
<CAPTION>
December 31,
1994 1993 1992
Balance % Balance % Balance %
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial and
agricultural $ 58,764 11% $ 55,430 11% $ 80,256 13%
Real estate - commercial 132,321 24 133,837 25 163,594 26
Real estate - construction 3,544 1 3,019 1 5,620 1
Real estate - residential 260,729 48 285,582 54 331,270 53
Installment 85,926 16 46,975 9 43,641 7
Total loans $541,284 100% $524,843 100% $624,381 100%
</TABLE>
December 31,
1991 1990
Balance % Balance %
(Dollars in thousands)
Commercial, financial and
agricultural $104,468 16% $128,760 18%
Real estate - commercial 166,627 26 187,419 27
Real estate - construction 8,598 1 15,695 2
Real estate - residential 320,564 50 304,517 43
Installment 47,277 7 66,861 10
Total loans $647,534 100% $703,252 100%
The Company does not have an automatic renewal policy for maturing loans.
Loans are renewed at the maturity date, at the request of customers, if
deemed to be creditworthy by the Company. Additionally, the Company
reviews such requests in substantially the same manner as applications by
new customers for extensions of credit. The maturity date and interest
terms of renewed loans are based, in part, upon the needs of the
individual customer and the Company's credit review and evaluation of
current and future economic conditions.
<PAGE>
III. B. Maturities and Interest Rate Sensitivity of Loans
The following Table presents the maturities and interest rate
sensitivity, based on original contractual terms, of
loans as of December 31, 1994.
<TABLE>
<CAPTION>
Maturing
After One
Within But Within After
One Year Five Years Five Years Total
(In thousands)
<S> <C> <C> <C> <C>
Commercial, financial and
agricultural $ 32,734 $ 19,368 $ 6,662 $ 58,764
Real estate - commercial 53,929 47,667 30,725 132,321
Real estate - construction 2,188 305 1,051 3,544
Real estate - residential 14,053 58,292 188,384 260,729
Installment 9,084 75,744 1,098 85,926
Total $111,988 $201,376 $227,920 $541,284
Loans with fixed interest rates $ 45,863 $ 95,412 $179,569 $320,844
Loans with variable interest rates 66,125 105,964 48,351 220,440
Total $111,988 $201,376 $227,920 $541,284
</TABLE>
<PAGE>
III. C. Nonperforming Assets
The following Table summarizes nonperforming assets at December
31 for the years presented.
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Nonaccrual loans:
Commercial, financial and
agricultural $ 601 $ 2,167 $ 3,486 $ 7,344 $ 3,570
Real estate - commercial 4,503 3,979 4,407 6,011 8,004
Real estate - construction 476 593 650 648 2,566
Real estate - residential 4,120 6,263 7,547 4,370 4,020
Installment 32 37 301 575 704
Total nonaccrual 9,732 13,039 16,391 18,948 18,864
Past due 90 days or more(accruing) 3,003 2,006 1,770 3,738 3,979
Restructured loans 1,251 1,012 1,628 1,991 4,517
Total nonperforming loans 13,986 16,057 19,789 24,677 27,360
Other real estate owned, net 10,024 9,865 7,287 9,862 9,450
In-substance foreclosures 1,295 3,528 8,569 12,764 12,077
Total other real estate 11,319 13,393 15,856 22,626 21,527
Total nonperforming assets $ 25,305 $ 29,450 $ 35,645 $ 47,303 $ 48,887
Total assets $953,456 $976,719 $967,202 $1,015,061 $1,001,709
APLL (See Page 20) $ 13,191 $ 14,581 $ 16,619 $ 20,012 $ 21,575
APLL/Nonaccrual loans 136% 112% 101% 106% 114%
APLL/Nonperforming loans 94 91 84 81 79
APLL/Nonperforming assets (NPA) 52 50 47 42 44
NPA/Total assets 2.7 3.0 3.7 4.7 4.9
NPA/Total loans plus ORE 4.6 5.5 5.6 7.1 6.7
</TABLE>
Substantially all of the nonaccrual loans at December 31, 1994 were secured.
At December 31, 1994, $9.3 million in commercial and commercial real estate
loans were not 90 days past due, restructured, or on nonaccrual but were
internally rated substandard, defined as inadequately protected by the current
sound worth and paying capacity of the obligor or of the collateral pledged,
if any, with well defined weakness(s) that jeopardize the liquidation of
the debt.
The following information and analysis of unrecorded interest income relates
to loans on nonaccrual and/or restructured loans at December 31 for the
years presented.
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
(In thosuands)
<S> <C> <C> <C> <C> <C>
Nonaccrual loans $ 9,732 $13,039 $16,391 $18,948 $18,864
Restructured loans 1,251 1,012 1,628 1,991 4,517
$10,983 $14,051 $18,019 $20,939 $23,381
Originally contracted interest income
for the year $ 1,209 $ 1,555 $ 1,852 $ 2,654 $ 3,388
Interest income actually recorded (48) (367) (571) (1,001) (1,316)
Difference - unrecorded interest $ 1,161 $ 1,188 $ 1,281 $ 1,653 $ 2,072
</TABLE>
<PAGE>
IV. A. Analysis of Allowance for Possible Loan Losses
The allowance for possible loan losses (the "APLL") is available
for future charge-offs of loans. The provision for possible loan
losses is added to the APLL and is based upon management's estimation
of the amount necessary to maintain the APLL at an adequate level.
Management considers evaluations of individual credits and
concentrations of credit risk, net losses charged to the APLL,
changes in the quality of the loan portfolio, levels of nonaccrual
loans, current economic conditions, changes in the size and character
of the loan risks and other pertinent factors warranting current
recognition. The Company charges all or a portion of a loan against
the APLL when a probability of loss has been established, with
consideration given to such factors as the customer's financial
condition, underlying collateral and guarantees.
The following Table presents a five year analysis of the APLL.
1994 1993 1992 1991 1990
(Dollars in thousands)
Balance at January 1 $14,581 $16,619 $20,012 $21,575 $ 7,438
Provision for possible
loan losses 1,580 4,200 6,800 12,542 37,334
Loan losses:
Commercial, financial
and agricultural (1,101) (1,028) (3,160) (4,564) (8,120)
Real estate-commercial (880) (2,026) (1,564) (6,202) (8,720)
Real estate-construction (100) (202) (431) (1,333)
Real estate-residential (2,741) (4,080) (4,698) (3,073) (2,400)
Installment (511) (777) (1,242) (1,959) (3,647)
Total loan losses (5,333) (8,113) (11,095) (15,798) (24,220)
Loan recoveries:
Commercial, financial
and agricultural 934 775 334 666 188
Real estate-commercial 455 449 152 189
Real estate-construction 278 147 80
Real estate-residential 326 102 14 244 46
Installment 370 402 402 594 709
Total loan recoveries 2,363 1,875 902 1,693 1,023
Net loan losses (2,970) (6,238) (10,193) (14,105) (23,197)
APLL at December 31 $ 13,191 $14,581 $16,619 $20,012 $21,575
Loans at December 31 $541,284 $524,843 $624,381 $647,534 $703,252
Average loans $520,294 $573,561 $646,040 $672,954 $729,145
APLL/Total loans 2.44% 2.78% 2.66% 3.09% 3.07%
Net loan losses/Average
loans .57 1.09 1.58 2.10 3.18
Net loan losses/
Provision 187.97 148.52 149.90 112.46 62.13
Recoveries/Loan losses 44.31 23.11 8.13 10.72 4.22
Provision/Average loans .30 .73 1.05 1.86 5.12
<PAGE>
IV. B. Allocation of the APLL
The APLL is a general reserve available for all categories of
possible loan loss. Allocations of the reserve are based on
estimates and subjective judgments and are not necessarily indicative
of the specific amounts or loan categories in which losses may
ultimately occur. The following Table presents a five year analysis
of the allocations by loan categories. For the percentage of loans
outstanding in each category to total loans, refer to the Table
"Loans" on page 18.
<TABLE>
<CAPTION>
As of December 31,
1994 1993 1992
% of % of % of
Amount Total Amount Total Amount Total
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial and
agricultural $ 835 9.6% $ 1,507 10.3% $ 1,956 11.8%
Real estate-commercial 3,560 23.7 4,073 27.9 6,218 37.4
Real estate-construction 40 .2
Real estate-residential 1,954 14.8 1,742 12.0 5,033 30.3
Installment 1,361 10.3 1,566 10.7 1,045 6.3
Unallocated 5,481 41.6 5,693 39.1 2,327 14.0
$13,191 100.0% $14,581 100.0% $16,619 100.0%
</TABLE>
1991 1990
% of % of
Amount Total Amount Total
(Dollars in thousands)
Commercial, financial and
agricultural $ 4,626 23.1% $ 3,920 18.2%
Real estate-commercial 7,379 36.9 6,096 28.3
Real estate-construction 380 1.8 330 1.5
Real estate-residential 2,417 12.1 1,910 8.9
Installment 934 4.7 989 4.6
Unallocated 4,276 21.4 8,330 38.5
$20,012 100.0% $21,575 100.0%
<PAGE>
V. Deposits
The average daily amount of deposits and rates paid on such
deposits is summarized for the years indicated in the
following Table.
<TABLE>
<CAPTION>
1994 1993 1992
Amount Rate Amount Rate Amount Rate
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Demand deposits $138,676 $131,335 $120,988
Savings deposits 489,080 2.32% 481,521 2.53% 477,460 3.21%
Certificate deposits
of $100,000 or more 10,169 3.70 12,896 3.62 19,073 4.37
Other time deposits 200,306 3.99 222,097 4.23 259,591 5.26
Total $838,231 $847,849 $877,112
</TABLE>
The maturity schedule of time certificates of deposit of $100,000 or more at
December 31, 1994, is as follows (in thousands):
Time Certificates of Deposit
3 months or less $2,345
Over 3 through 6 months 2,375
Over 6 through 12 months 2,887
Over 12 months 1,951
Total $9,558
VI. Return on Equity and Assets and Other Ratios
The ratio of net income to average shareholders' equity
("ROE") and to average total assets ("ROA") and certain other ratios
are presented below for the years indicated.
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
ROE 12.08% 11.27% 11.43%
ROA .90 .67 .55
Dividends declared per share as a percent of
net income per share 19.10 4.44 .00
Average shareholders' equity as a percent of
average total assets 7.47 5.95 4.81
Leverage ratio 7.68 6.78 5.00
Tier 1 risk-based capital ratio 15.94 14.31 9.26
Total risk-based capital ratio 17.21 15.59 10.53
</TABLE>
<PAGE>
VII. Federal Funds Purchased and Securities Sold Under Agreements to
Repurchase
The following Table presents the distribution of federal funds
purchased and securities sold under agreements to repurchase and the
weighted average interest rates thereon at the end of each of the
last three years. Also provided are the maximum amount of these
borrowings and the average amount of these borrowings, as well as
weighted average interest rates for the last three years.
Federal Funds Purchased &
Securities Sold Under
Agreements to Repurchase
Balance at December 31: (Dollars in thousands)
1994 $ 40,888
1993 32,238
1992 36,107
Weighted average interest
rate at December 31:
1994 4.20%
1993 1.75
1992 2.05
Maximum amount outstanding
at any month's end during:
1994 $ 43,534
1993 44,381
1992 59,498
Average amount outstanding
during:
1994 $ 33,346
1993 35,431
1992 46,417
Weighted average interest
rate during:
1994 2.76%
1993 2.03
1992 2.97
<PAGE>
VIII. Trust Data
The following presents information with respect to Trust Investments
and Trust Accounts for which the Bank has both sole and shared
investment responsibility at December 31, 1994.
<TABLE>
<CAPTION>
Market Percentage
Trust Investments Value of Total
(Dollars in thousands)
<S> <C> <C>
Common and preferred stocks $217,586 46%
Bonds, notes and short-term obligations 90,562 19
U.S. Government and agency obligations 95,280 20
State, county and municipal obligations 39,890 9
Nondiscretionary assets(1) 12,737 3
Real estate and real estate mortgages 5,107 1
Miscellaneous assets 5,583 1
Cash (2) 2,407 1
$469,152 100%
</TABLE>
<TABLE>
<CAPTION>
Number of Market Percentage
Trust Accounts Accounts Value of Total
(Dollars in thousands)
<S> <C> <C> <C>
Personal trusts 1,368 $234,069 50%
Employee benefit trusts 209 81,150 17
Agencies 901 151,751 32
Estates, conservatorships and guardians 7 2,182 1
2,485 $469,152 100%
</TABLE>
(1) Assets for which the Bank has shared investment responsibility
(2) Predominantly invested in certificates of deposit
<PAGE>
ITEM 2. PROPERTIES
The Company's headquarters occupies a portion of the Bank's building at
300 Franklin Street, Manchester, New Hampshire, and the Company conducts
its meetings of the Board of Directors at the Bank's Data Services Center
at John Devine Drive, Manchester, New Hampshire.
The Bank owns or leases numerous premises used in the conduct of the
business of the Company. The Company does not own or lease any real
property, other than a branch office in Portsmouth, which is sublet to the
Bank. Additional information on the Bank's properties is set forth in
Note H on page 33 of the Company's 1994 Annual Report to Shareholders,
filed as Exhibit 13, and such information is hereby incorporated by
reference.
ITEM 3. LEGAL PROCEEDINGS
Various actions and proceedings are presently pending to which the Company
and the Bank are parties. All such actions are deemed to be ordinary
routine litigation incidental to the business of the Company and/or the
Bank. Resolution of these matters is not expected to have a material
effect on the consolidated financial statements of the Company.
ITEM 3A. EXECUTIVE OFFICERS OF THE COMPANY
The names, positions, ages and backgrounds of the executive officers of
the Company, as of March 24, 1995 are set forth below. Executive officers
are elected annually by the Board of Directors and hold office until the
following year and until their successors are chosen and qualified, unless
they sooner resign, retire, die, are removed or become disqualified.
There are no family relationships existing between or among any of the
executive officers listed below.
Davis P. Thurber Mr. Thurber became a director of the Bank in
Age 69 1949; President in 1962; and Chairman of the
Board of Directors of the Bank in 1969. He is
also President and Chairman of the Board of
Directors of the Company.
Paul R. Shea Mr. Shea joined the Company in 1980, when he was
Age 62 appointed Assistant to the Chairman. He was
elected Vice President, Corporate Planning in
1982; Senior Vice President, Corporate Planning
and Senior Vice President, Corporate Development
of the Company in 1985; Executive Vice President
in 1987; President and Chief Executive Officer of
the Bank in 1991; and Senior Executive Vice
President of the Company in 1994. He also serves
as a director of the Company and the Bank.
Gregory D. Landroche Mr. Landroche was elected Controller of the
Age 46 Company in 1983; Vice President, Controller of
the Company in 1985; Vice President, Treasurer
of the Company in 1986; Senior Vice President,
Chief Financial Officer and Treasurer of the
Company in 1987; Chief Financial Officer of the
Bank in 1992; and Executive Vice President of the
Company in 1994. Mr. Landroche is a Certified
Public Accountant.
<PAGE>
William D. Biser Mr. Biser was elected Vice President, Auditor of
Age 53 the Company in 1987; and Senior Vice President of
the Company in 1994. Mr. Biser is a Certified
Public Accountant.
Alice L. DeSouza Ms. DeSouza was elected Vice President, Director
Age 50 of Marketing of the Bank in 1981; Vice President,
Marketing Services of the Company in 1985; Senior
Vice President, Planning and Marketing for the
Company in 1987; Senior Vice President, Admini-
stration & Planning of the Company in 1991; and
Executive Vice President, Administration and
Retail Banking of the Bank in 1992.
Robert J. McDonald Mr. McDonald was elected Senior Vice President,
Age 45 Loan Administration of the Company in 1992.
Prior thereto, he was employed by Bank of Boston
Corporation, most recently as a Vice President in
the Financial Institutions Division.
Allen G. Tarbox, Jr. Mr. Tarbox was elected Senior Vice President,
Age 60 Data Services of the Company in 1990 and
Director of Information Systems of the Bank in
1992. Prior thereto, he was President of
Fleet/Norstar Services-NH.
Robert A. Boulay Mr. Boulay was elected Controller of the Company
Age 41 in 1986 and Vice President of the Company in
1988. Mr. Boulay is a Certified Public
Accountant.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURTIY HOLDERS
Not applicable
Part II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
The information required by this item is presented on page 24
of the Company's 1994 Annual Report to Shareholders, filed
as Exhibit 13, and such information is hereby incorporated
by reference.
ITEM 6. SELECTED FINANCIAL DATA
The consolidated "Summary of Selected Financial Data" of the
Company for the five years ended December 31, 1994 appears
on page 23 of the Company's 1994 Annual Report to Shareholders,
filed as Exhibit 13, and such information is hereby incorporated
by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
The information in response to this item is included in Manage-
ment's Financial Review on pages 10 through 24 of the Company's
1994 Annual Report to Shareholders, filed as Exhibit 13, and
such information is hereby incorporated by reference.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data required by this
Item are included as indicated below in the Company's 1994 Annual
Report to Shareholders, filed as Exhibit 13, and such statements
and data are hereby incorporated by reference.
Page of the 1994 Annual
Report to Shareholders
Report of Independent Auditors 25
Consolidated Balance Sheets -
December 31, 1994 and 1993 26
Consolidated Statements of
Income - Years ended
December 31, 1994, 1993 and 1992 27
Consolidated Statements of Changes
in Shareholders' Equity - Years
ended December 31, 1994, 1993 and 1992 28
Consolidated Statements of Cash
Flows - Years ended December
31, 1994, 1993 and 1992 29
Notes to Consolidated Financial
Statements 30 - 40
Five Year Summary of Selected
Financial Data 23
Information on Common Stock and Selected
Quarterly Data 24
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not applicable
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The information which responds to this Item begins, with
respect to directors, on page 3 of the Company's
Proxy Statement for its 1995 Annual Meeting of Shareholders,
filed as Exhibit 99. Information concerning the executive
officers of the Company which responds to this Item is contained
in the response to Item 3A contained in Part I of this Report.
The foregoing information is hereby incorporated by reference.
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The information required in response to this Item begins on
page 9 of the Company's Proxy Statement for its 1995
Annual Meeting of Shareholders, filed as Exhibit 99. The
foregoing information is hereby incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required in response to this Item is contained on
pages 2 and 6 of the Company's Proxy Statement for its 1995
Annual Meeting of Shareholders, filed as Exhibit 99. The
foregoing information is hereby incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required in response to this Item is contained on
pages 2 and 7 of the Company's Proxy Statement for its 1995
Annual Meeting of Shareholders, filed as Exhibit 99. The
foregoing information is hereby incorporated by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) 1. Financial Statements
The financial statements required in response to this Item
are listed in response to Item 8 of this Report and are
incorporated herein by reference.
(a) 2. Financial Statement Schedules
Schedules have been omitted because the information is
either not required, not applicable, or is included in the
financial statements or notes thereto.
(a) 3. Exhibits
(3) (a) By-Laws of the Company as amended through January 23,
1991, incorporated herein by reference to Form 8-K,
filed February 13, 1991, p. 3 and Exhibit I, attached
thereto.
(b) Articles of Agreement of the Company, as amended
through April 17, 1991, incorported herein by
reference to the Company's Form 10-K for the year
ended December 31, 1991 (File No. 0-9517).
(10) (a)* Compensation Deferral Agreement for Paul R. Shea
effective January 1, 1992, incorporated herein by
reference to the Company's Form 10-K for the year
ended December 31, 1991 (File No. 0-9517).
(b)* Compensation Deferral Agreement for Davis P. Thurber
effective January 1, 1993, incorporated herein by
reference to the Company's Form 10-K for the year
ended December 31, 1992 (File No. 0-9517).
<PAGE>
(c)* Merit Performance Plan, continued in effect through
1994, incorporated herein by reference to the
Company's Form 10-K for the year ended December 31,
1988 (File No. 0-9517).
(d) Director Indemnification Agreement (Representative
Form of Agreement), effective January 1, 1988,
incorporated herein by reference to the Company's
Form 10-K for the year ended December 31, 1988
(File No. 0-9517).
(e)* 1988 Incentive Bonus Plan, continued in effect
through 1994, incorporated herein by reference
to the Company's form 10-K for the year ended
December 31, 1988 (File No. 0-9517).
(f)* Change of Control Agreements (Representative Form
of Agreement) for Davis P. Thurber, Paul R. Shea
and Gregory D. Landroche, effective December 21,
1994, on page 31.
(g)* Supplemental executive retirement plan for Davis P.
Thurber, Paul R. Shea and Gregory D. Landroche,
effective August 24, 1994, on page 50.
(h)* 1988 Incentive Bonus Plan, (1995 Approved Pools)
effective January 1, 1995, on page 55.
(i)* Compensation Deferral Agreement, Davis P. Thurber
(Amendment #(2)), effective January 1, 1995, on
page 59.
(j)* Compensation Deferral Agreement, Paul R. Shea
(Amendment #(2)), effective January 1, 1995, on
page 60.
(13) Sections of the Company's 1994 Annual Report to
Shareholders which are incorporated by reference
into this filing, on page 61.
(21) Subsidiary of the Company.
(27) Financial Data Schedule
(99) Notice of 1995 Annual Meeting and Proxy Statement for
the Annual Meeting of Shareholders.
(b) During the fourth quarter of 1994, the Company filed no Reports on
Form 8-K.
* - Management contract or compensatory plan.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Bank of New Hampshire Corporation
By:/s/Davis P. Thurber
Davis P. Thurber, Chairman
Date: March 22, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf
of the Company and in the capacities and on the dates indicated.
Date: Date:
3/21/95 /s/Davis P. Thurber 3/21/95 /s/Gregory D. Landroche
Davis P. Thurber Gregory D. Landroche
President, Chairman Executive Vice President,
and Director Chief Financial Officer &
Treasurer
3/21/95 /s/Paul R. Shea 3/21/95 /s/Robert A. Boulay
Paul R. Shea Robert A. Boulay
Senior Executive Vice Vice President &
President and Director Controller
3/22/95 /s/Robert L. Bailey 3/21/95 /s/Sidney Thurber Cox
Robert L. Bailey Sidney Thurber Cox
Director Director
3/22/95 /s/Robert P. Bass, Jr. 3/22/95 /s/Raymond J. Creteau
Robert P. Bass, Jr. Raymond J. Creteau
Director Director
3/21/95 /s/Arthur E. Comolli 3/22/95 /s/Robert B. Field, Jr.
Arthur E. Comolli Robert B. Field, Jr.
Director Director and Secretary
3/21/95 /s/Raymond G. Cote 3/22/95 /s/Morton E.Goulder
Raymond G. Cote Morton E. Goulder
Director Director
Philip D. Labombarde Joseph G. Sakey
Director Director
3/21/95 /s/Floyd A. Lamb 3/22/95 /s/George R. Walker
Floyd A. Lamb George R. Walker
Director Director
3/22/95 /s/Richard S. West
Daniel R.W. Murdock Richard S. West
Director Director
3/22/95 /s/Constance T. Prudden
Constance T. Prudden
Director
<PAGE>
EXHIBIT (10) (f)
Bank of New Hampshire Corporation
The "Amended and Restated Agreement as to Future Employment" (the so called
Change of Control Agreements) by and between Bank of New Hampshire Corporation
("Company") and ("Executive") follows.
The Executives party to the agreement are:
Davis P. Thurber - Chairman and President
Paul R. Shea - Senior Executive Vice President
Gregory D. Landroche - Executive Vice President
The Change of Control Agreements are identical with respect to the three above
named executive officers. A representative form of agreement follows.
<PAGE>
BANK OF NEW HAMPSHIRE CORPORATION
AMENDED AND RESTATED
AGREEMENT
AS TO
FUTURE EMPLOYMENT
By and Between
Bank of New Hampshire Corporation ("Company")
and
("Executive")
Dated:
December 30, 1994,
for and as of December 21, 1994,
the date of approval by the
Board of Directors of Company.
<PAGE>
Index
1. Certain Definitions 2
(a) The "Effective Date" 2
(b) The "Change of Control Period" 2
2. Change of Control 2
(a) Acquisition 2
(b) Incumbent Board 3
(c) Reorganization, Merger or Consolidation 3
(d) Controlling Group 4
(e) Liquidation or Dissolution 4
3. Employment Period 4
4. Terms of Employment 4
(a) Position and Duties 4
(b) Compensation 5
5. Termination of Employment 7
(a) Death or Disability 7
(b) Cause 7
(c) Good Reason 8
(d) Notice of Termination 9
(e) Date of Termination 9
6. Obligations of the Company upon Termination 10
(a) Good Reason; Other than for Cause,
Death or Disability 10
(b) Death 11
(c) Disability 12
(d) Cause; Other than for Good Reason 12
7. Non-exclusively of Rights 13
8. Full Settlement 13
9. Certain Additional Payment by Company 13
(a) Excise Tax - IRC S 4999 13
(b) Determination of Accounting Firm 14
(c) Notification by Executive 15
(d) Refund by Executive 16
10. Confidential Information 16
11. Successors 17
(a) Non-Assignable as to Executive 17
(b) Binding Effect 17
(c) Assumption by Successor to Company 17
12. Miscellaneous 17
(a) Applicable Law; Jurisdiction 17
(b) Notices and Communication 17
(c) Validity and Enforceablity 18
(d) Withholding of Taxes 18
(e) Waiver 18
(f) Present Employment, Condition of 18
(g) Merger of Understanding 18
(h) Headings and Titles 19
(i) Amendments 19
(j) Counterparts 19
Signatures 19
<PAGE>
BANK OF NEW HAMPSHIRE CORPORATION
Amended and Restated
Agreement
as to
Future Employment
AGREEMENT, made this 30th day of December, 1994, for and as of
December 21, 1994, by and between Bank of New Hampshire
Corporation, a New Hampshire bank holding company, registered
pursuant to the Federal Bank Holding Company Act of 1956, as
amended, with a principal place of business at 300 Franklin
Street, Manchester, New Hampshire 03105, (hereafter, the
"Company"), and Davis P. Thurber, 25 Swart Terrace, of Nashua,
New Hampshire 03060, (hereafter, the "Executive"), and together,
sometimes hereafter referred to as the "Parties."
WHEREAS, the Board of Directors of the Company (the "Board"),
has determined that it is in the best interests of the Company
and its shareholders to assure that the Company will have the
continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control (as
hereafter defined) of the Company. The Board believes it is
imperative to diminish the inevitable distraction of the
Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control, and to
encourage the Executive's full attention and dedication to the
Company currently and in the event of any threatened or pending
Change of Control, and to provide the Executive with compensation
and benefits arrangements upon a Change of Control which ensure
that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other
corporations.
WHEREAS, Company further recognizes that the financial
services industry is currently undergoing structural and
legislative changes, with the expectation of additional changes
in the future, and that such changes would tend to exacerbate the
uncertainties for Executive that a Change of Control might
create;
WHEREAS, if Company should receive proposals, whether invited
or uninvited, from third parties with respect to its future, it
believes it important that Executive be in a position to assess
and advise the Board whether such proposals would be in the best
interests of Company and its shareholders, without being
influenced by the uncertainties of Executive's own employment
situations or circumstances;
WHEREAS, the Board wishes to demonstrate to Executive that
Company is concerned with his welfare and intends to see that
loyal executives are treated fairly; and
WHEREAS, in order to accomplish these objectives, the Board
has caused the Company to enter into this Agreement.
NOW, THEREFORE, in consideration of the premises,
representations and covenants herein contained, and for other and
<PAGE>
valuable consideration, the receipt of which is acknowledged, the
Parties hereto agree as follows:
1. Certain Definitions. (a) The "Effective Date" shall mean
the first date during the Change of Control Period (as defined in
Section 1(b)) on which a Change of Control (as defined in Section
2) occurs. Anything in this Agreement to the contrary
notwithstanding, if a Change of Control occurs and if the
Executive's employment with the Company is terminated prior to
the date on which the Change of Control occurs, and if it is
reasonably demonstrated by the Executive that such termination of
employment (i) was at the request of a third party who has taken
steps reasonably calculated to effect a Change of Control or (ii)
otherwise arose in connection with or anticipation of a Change of
Control, then for all purposes of this Agreement the "Effective
Date" shall mean the date immediately prior to the date of such
termination of employment.
(b) The "Change of Control Period" shall mean the period
commencing on the date hereof and ending on the earlier to occur
of (i) the third anniversary of the date hereof; or (ii) the
first day of the month next following the date the Executive
actually retires ("Retirement Date") under The Retirement Plan
for the Employees of Bank of New Hampshire Corporation and
Affiliates, as adopted by the Company for the benefit of its
employees, including Executive, or any successor or replacement
retirement plan hereafter adopted by the Company at any time, and
from time to time ("Retirement Plan"); provided, however, that
commencing on the date one year after the date hereof, and on
each annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as the
"Renewal Date"), unless previously terminated, the Change of
Control Period shall be automatically extended so as to terminate
three years from such Renewal Date, unless at least 60 days prior
to the Renewal Date the Company shall give notice to the
Executive that the Change of Control Period shall not be so
extended.
2. Change of Control. For the purpose of this Agreement, a
"Change of Control," shall mean:
(a) Acquisition - The acquisition by any individual, entity
or group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) (a "Person"), except to the extent such person, entity, or
"group" presently exists and has been identified, prior to the
date hereof, by the Board in Exchange Act filings, of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (i) the then outstanding
shares of common stock of the Company (the "Outstanding Company
Common Stock") or (ii) the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company
Voting Securities"); provided, however, that for purposes of this
subsection (a), the following acquisitions shall not constitute a
Change of Control: (i) any acquisition directly from the Company,
(ii) any acquisition by the Company, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained
by the Company or any corporation controlled by the Company or
(iv) any acquisition by any corporation pursuant to a transaction
which complies with clauses (i), (ii) and (iii) of subsection (c)
of this Section 2; or
<PAGE>
(b) Incumbent Board - Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any reason
to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to
majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board; or
(c) Reorganization, Merger or Consolidation - Consummation of
a reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of the
Company (a "Business Combination"), in each case, unless,
following such Business Combination, (i) all or substantially all
of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly,
more than 50% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction
owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the outstanding
Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (ii) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit
plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then
outstanding shares of common stock of the corporation resulting
from such Business Combination or the combined voting power of
the then outstanding voting securities of such corporation except
to the extent that such ownership existed prior to the Business
Combination and (iii) at least a majority of the members of the
board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the
time of the execution of the initial agreement, or of the action
of the Board, providing for such Business Combination; or
(d) Controlling Group - Not applicable.
(e) Liquidation or Dissolution - Approval by the
shareholders of the Company of a complete liquidation or
dissolution of the Company.
3. Employment Period. The Company hereby agrees to continue
the Executive in its employ, and the Executive hereby agrees to
remain in the employ of the Company subject to the terms and
conditions of this Agreement, for the period commencing on the
Effective Date and ending on the earlier to occur of (i) the
third anniversary of such date, or (ii) the first day of the
<PAGE>
month coinciding with or next following the Executive's
Retirement Date (the "Employment Period").
4. Terms of Employment. (a) Position and Duties. (i) During
the Employment Period, (A) the Executive's position (including
status, offices, titles and reporting requirements), authority,
duties and responsibilities shall be at least commensurate in all
material respects with the most significant of those held,
exercised and assigned at any time during the 120-day period
immediately preceding the Effective Date and (B) the Executive's
services shall be performed at the location where the Executive
was employed immediately preceding the Effective Date or any
office or location less than 35 miles from such location within
the State of New Hampshire.
(ii) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote reasonable attention and
time during normal business hours to the business and affairs of
the Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive hereunder, to use the
Executive's reasonable best efforts to perform faithfully and
efficiently such responsibilities. During the Employment Period
it shall not be a violation of this Agreement for the Executive
to (A) serve on corporate, civic or charitable boards or
committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal
investments, so long as such activities do not significantly
interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the
extent that any such activities have been conducted by the
Executive prior to the Effective Date, the continued conduct of
such activities (or the conduct of activities similar in nature
and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the
Executive's responsibilities to the Company.
(b) Compensation. (i) Base Salary. During the Employment
Period, the Executive shall receive an annual base salary
("Annual Base Salary"), which shall be paid at a monthly rate, at
least equal to twelve times the highest monthly base salary paid
or payable, including any base salary which has been earned but
deferred, to the Executive by the Company and its affiliated
companies in respect of the twenty-four-months period immediately
preceding the month in which the Effective Date occurs. During
the Employment Period, the Annual Base Salary shall be reviewed
no more than 12 months after the last salary increase awarded to
the Executive prior to the Effective Date and thereafter at least
annually. Any increase in Annual Base Salary shall not serve to
limit or reduce any other obligation to the Executive under this
Agreement. Annual Base Salary shall not be reduced after any such
increase and the term Annual Base Salary as utilized in this
Agreement shall refer to Annual Base Salary as so increased. As
used in this Agreement, the term "affiliated companies" shall
include any company controlled by, controlling or under common
control with the Company.
(ii) Annual Bonus. In addition to Annual Base Salary,
the Executive shall be awarded, for each fiscal year ending
during the Employment Period, an annual bonus (the "Annual
<PAGE>
Bonus") in cash at least equal to the Executive's highest bonus
paid by the Company and/or its affiliates during any of the last
three full fiscal years prior to the Effective Date (annualized
in the event that the Executive was not employed by the Company
for the whole of such fiscal year) (the "Recent Annual Bonus").
Each such Annual Bonus shall be paid no later than the end of the
third month of the fiscal year next following the fiscal year for
which the Annual Bonus is awarded, unless the Executive shall
elect to defer the receipt of such Annual Bonus.
(iii) Incentive, Savings and Retirement Plans. During
the Employment Period, the Executive shall be entitled to
participate in all incentive, savings and retirement plans,
practices, policies and programs applicable generally to other
peer executives of the Company and its affiliated companies, but
in no event shall such plans, practices, policies and programs
provide the Executive with incentive opportunities (measured with
respect to both regular and special incentive opportunities, to
the extent, if any, that such distinction is applicable), savings
opportunities and retirement benefit opportunities, in each case,
less favorable, in the aggregate, than the most favorable of
those provided by the Company and its affiliated companies for
the Executive under such plans, practices, policies and programs
as in effect at any time during the 120-day period immediately
preceding the Effective Date or if more favorable to the
Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its
affiliated companies.
(iv) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's family, as the case
may be, shall be eligible for participation in and shall receive
all benefits under welfare benefit plans, practices, policies and
programs provided by the Company and its affiliated companies
(including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and
travel accident insurance plans and programs) to the extent
applicable generally to other peer executives of the Company and
its affiliated companies, but in no event shall such plans,
practices, policies and programs provide the Executive with
benefits which are less favorable, in the aggregate, than the
most favorable of such plans, practices, policies and programs in
effect for the Executive at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to
the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its
affiliated companies.
(v) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for
all reasonable expenses incurred by the Executive in accordance
with the most favorable policies, practices and procedures of the
Company and its affiliated companies in effect for the Executive
at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(vi) Fringe Benefits. During the Employment Period, the
Executive shall be entitled to fringe benefits, including,
without limitation, tax and financial planning services, payment
of club dues, and, if applicable, use of an automobile and
<PAGE>
payment of related expenses, in accordance with the most
favorable plans, practices, programs and policies of the Company
and its affiliated companies in effect for the Executive at any
time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(vii) Office and Support Staff. During the Employment
Period, the Executive shall be entitled to an office or offices
of a size and with furnishings and other appointments, and to
exclusive personal secretarial and other assistance, at least
equal to the most favorable of the foregoing provided to the
Executive by the Company and its affiliated companies at any time
during the 120-day period immediately preceding the Effective
Date or, if more favorable to the Executive, as provided
generally at any time thereafter with respect to other peer
executives of the Company and its affiliated companies.
(viii) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with
the most favorable plans, policies, programs and practices of the
Company and its affiliated companies as in effect for the
Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and its
affiliated companies.
5. Termination of Employment. (a) Death or Disability. The
Executive's employment shall terminate automatically upon the
Executive's death during the Employment Period. If the Company
determines in good faith that the Disability of the Executive has
occurred during the Employment Period (pursuant to the definition
of Disability set forth below), it may give to the Executive
written notice in accordance with Section 12(b) of this Agreement
of its intention to terminate the Executive's employment. In such
event, the Executive's employment with the Company shall
terminate effective on the 30th day after receipt of such notice
by the Executive (the "Disability Effective Date"), provided
that, within the 30 days after such receipt, the Executive shall
not have returned to full-time performance of the Executive's
duties. For purposes of this Agreement, "Disability" shall mean
the absence of the Executive from the Executive's duties with the
Company on a full-time basis for either (i) 180 consecutive
business days or more, or (ii) a cumulative period of 180 days or
more in any consecutive twelve-months period, as a result of
incapacity due to mental or physical illness which is determined
to be total and permanent by a physician selected by the Company
or its insurers and acceptable to the Executive or the
Executive's legal representative.
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes
of this Agreement, "Cause" shall mean:
(i) the willful and continued failure of the Executive
to perform substantially the Executive's duties with the
Company or one of its affiliates (other than any such failure
resulting from incapacity due to physical or mental illness),
after a written demand for substantial performance is
delivered to the Executive by the Board or the Chief
<PAGE>
Executive officer of the Company which specifically
identifies the manner in which the Board or Chief Executive
officer believes that the Executive has not substantially
performed the Executive's duties and which provides a
reasonable and ample opportunity for the Executive to correct
and/or remediate his alleged failures, and/or deficiencies,
or
(ii) the willful engaging by the Executive in illegal
conduct or gross misconduct which is materially and
demonstrably injurious to the Company.
For purposes of this provision, no act or failure to act, on the
part of the Executive, shall be considered "willful, unless it is
done, or omitted to be done, by the Executive in bad faith or
without reasonable belief that the Executive's action or omission
was in the best interests of the Company. Any act, or failure to
act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief
Executive Officer or a senior officer of the Company or based
upon the advice of counsel for the Company shall be conclusively
presumed to be done, or omitted to be done, by the Executive in
good faith and in the best interests of the Company. The
cessation of employment of the Executive shall not be deemed to
be for Cause unless and until there shall have been delivered to
the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire
membership of the Board at a meeting of the Board called and held
for such purpose (after reasonable notice is provided to the
Executive and the Executive is given an opportunity, together
with counsel, to be heard before the Board), finding that, in the
good faith opinion of the Board, the Executive is guilty of the
conduct described in subparagraph (i) or (ii) above, and
specifying the particulars thereof in detail.
(c) Good Reason. The Executive's employment may be terminated
by the Executive for Good Reason. For purposes of this Agreement,
"Good Reason" shall mean:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position
(including status, offices, titles and reporting
requirements), authority, duties or responsibilities as
contemplated by Section 4(a) of this Agreement, or any other
action by the Company which results in a diminution in such
position, authority, duties or responsibilities, excluding
for this purpose an isolated, insubstantial and inadvertent
action not taken in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the
Executive;
(ii) any failure by the Company to comply with any of
the provisions of Section 4(b) of this Agreement, other than
an isolated, insubstantial and inadvertent failure not
occurring in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the
Executive;
(iii) the Company's requiring the Executive to be based
at any office or location other than as provided in Section
4(a)(i)(B) hereof or the Company's requiring the Executive to
travel on Company business to a substantially greater extent
<PAGE>
than required immediately prior to the Effective Date;
(iv) any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted
by this Agreement;
(v) the election of Executive to opt for retirement
under the Retirement Plan; or
(vi) any failure by the Company to comply with and
satisfy Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith determination
of "Good Reason" made by the Executive shall be conclusive.
Anything in this Agreement to the contrary notwithstanding, a
termination by the Executive for any reason during the 30-day
period immediately following the first anniversary of the
Effective Date shall be deemed to be a termination for Good
Reason for all purposes of this Agreement.
(d) Notice of Termination. Any termination by the Company for
Cause, or by the Executive for Good Reason, shall be communicated
by Notice of Termination to the other party hereto given in
accordance with Section 12(b) of this Agreement. For purposes of
this Agreement, a "Notice of Termination" means a written notice
which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth
in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's employment
under the provision so indicated and (iii) if the Date of
Termination (as defined below) is other than the date of receipt
of such notice, specifies the termination date (which date shall
be not more than thirty days after the giving of such notice).
The failure by the Executive or the Company to set forth in the
Notice of Termination any fact or circumstance which contributes
to a showing of Good Reason or Cause shall not waive any right of
the Executive or the Company, respectively, hereunder or preclude
the Executive or the Company, respectively, from asserting such
fact or circumstance in enforcing the Executive's or the
Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if
the Executive's employment is terminated by the Company for
Cause, or by the Executive for Good Reason, the date of receipt
of the Notice of Termination or any later date specified therein,
as the case may be, (ii) if the Executive's employment is
terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company
notifies the Executive of such termination and (iii) if the
Executive's employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of
the Executive or the Disability Effective Date, as the case may
be.
6. Obligations of the Company upon Termination. (a) Good
Reason; Other Than for Cause, Death or Disability. If, during the
Employment Period, the Company shall terminate the Executive's
employment other than for Cause or Disability or the Executive
shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a lump sum
in cash within 30 days after the Date of Termination the
<PAGE>
aggregate of the following amounts:
A. the sum of (1) the Executive's Annual Base
Salary through the Date of Termination to the extent not
theretofore paid, (2) the product of (x) the higher of
(I) the Recent Annual Bonus and (II) the Annual Bonus
paid or payable, including any bonus or portion thereof
which has been earned but deferred (and annualized for
any fiscal year consisting of less than twelve full
months or during which the Executive was employed for
less than twelve full months), for the most recently
completed fiscal year during the Employment Period, if
any (such higher amount being referred to as the
"Highest Annual Bonus") and (y) a fraction, the
numerator of which is the number of days in the current
fiscal year through the Date of Termination, and the
denominator of which is 365 and (3) any compensation
previously deferred by the Executive (together with any
accrued interest or earnings thereon) and any accrued
vacation pay, in each case to the extent not theretofore
paid (the sum of the amounts described in clauses (1),
(2), and (3) shall be hereinafter referred to as the
"Accrued obligations"); and
B. the amount equal to the product of (1) three and
(2) the sum of (x) the Executive's Annual Base Salary
and (y) the Highest Annual Bonus; and
C. an amount equal to the excess of (a) the
actuarial equivalent of the benefit under the Retirement
Plan (utilizing actuarial assumptions no less favorable
to the Executive than those in effect under the
Retirement Plan immediately prior to the Effective
Date), and any excess or supplemental retirement plan in
which the Executive participates (together, the "SERP")
which the Executive would receive if the Executive's
employment continued for three years after the Date of
Termination assuming for this purpose that all accrued
benefits are fully vested, and, assuming that the
Executive's compensation in each of the three years is
that required by Section 4(b)(i) and Section 4(b)(ii),
over (b) the actuarial equivalent of the Executive's
actual benefit (paid or payable), if any, under the
Retirement Plan and the SERP as of the Date of
Termination;
(ii) for three years after the Executive's Date of
Termination, or such longer period as may be provided by the
terms of the appropriate plan, program, practice or policy,
the Company shall continue benefits to the Executive and/or
the Executive's family at least equal to those which would
have been provided to them in accordance with the plans,
programs, practices and policies described in Section
4(b)(iv) of this Agreement if the Executive's employment had
not been terminated or, if more favorable to the Executive,
as in effect generally at any time thereafter with respect to
other peer executives of the Company and its affiliated
companies and their families, provided, however, that if the
Executive becomes reemployed with another employer and is
eligible to receive medical or other welfare benefits under
another employer provided plan, the medical and other welfare
benefits described herein shall be secondary to those
<PAGE>
provided under such other plan during such applicable period
of eligibility. For purposes of determining eligibility (but
not the time of commencement of benefits) of the Executive
for retiree benefits pursuant to such plans, practices,
programs and policies, the Executive shall be considered to
have remained employed until three years after the Date of
Termination and to have retired on the last day of such
period;
(iii) the Company shall, at its sole expense as
incurred, provide the Executive with outplacement services
the scope and provider of which shall be selected by the
Executive in his sole discretion; and
(iv) to the extent not theretofore paid or provided, the
Company shall timely pay or provide to the Executive any
other amounts or benefits required to be paid or provided or
which the Executive is eligible to receive under any plan,
program, policy or practice or contract or agreement of the
Company and its affiliated companies (such other amounts and
benefits shall be hereinafter referred to as the "Other
Benefits").
(b) Death. If the Executive's employment is terminated by
reason of the Executive's death during the Employment Period,
this Agreement shall terminate without further obligations to the
Executive's legal representatives under this Agreement, other
than for payment of Accrued Obligations and the timely payment or
provision of Other Benefits. Accrued Obligations shall be paid to
the Executive's estate or beneficiary, as applicable, in a lump
sum in cash within 30 days of the Date of Termination. With
respect to the provision of other Benefits, the term Other
Benefits as utilized in this Section 6(b) shall include, without
limitation, and the Executive's estate and/or beneficiaries shall
be entitled to receive, benefits at least equal to the most
favorable benefits provided by the Company and affiliated
companies to the estates and beneficiaries of peer executives of
the Company and such affiliated companies under such plans,
programs, practices and policies relating to death benefits, if
any, as in effect with respect to other peer executives and their
beneficiaries at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the
Executive's estate and/or the Executive's beneficiaries, as in
effect on the date of the Executive's death with respect to other
peer executives of its affiliated companies and their
beneficiaries.
(c) Disability. If the Executive's employment is terminated
by reason of the Executive's Disability during the Employment
Period, this Agreement shall terminate without further
obligations to the Executive, other than for payment of Accrued
Obligations and the timely payment or provision of Other
Benefits. Accrued obligations shall be paid to the Executive in a
lump sum in cash within 30 days of the Date of Termination. With
respect to the provision of other Benefits, the term Other
Benefits as utilized in this Section 6(c) shall include, and the
Executive shall be entitled after the Disability Effective Date
to receive, disability and other benefits at least equal to the
most favorable of those generally provided by the Company and its
affiliated companies to disabled executives and/or their families
in accordance with such plans, programs, practices and policies
relating to disability, if any, as in effect generally with
<PAGE>
respect to other peer executives and their families at any time
during the 120-day period immediately preceding the Effective
Date or, if more favorable to the Executive and/or the
Executive's family, as in effect at any time thereafter generally
with respect to other peer executives of the Company and its
affiliated companies and their families.
(d) Cause; Other Than for Good Reason. If the Executive's
employment shall be terminated for Cause during the Employment
Period, this Agreement shall terminate without further
obligations to the Executive other than the obligation to pay to
the Executive (x) his Annual Base Salary through the Date of
Termination, (y) the amount of any compensation previously
deferred by the Executive, and (z) other Benefits, in each case
to the extent theretofore unpaid. If the Executive voluntarily
terminates employment during the Employment Period, excluding a
termination for Good Reason, this Agreement shall terminate
without further obligations to the Executive, other than for
Accrued obligations and the timely payment or provision of other
Benefits. In such case, all Accrued Obligations shall be paid to
the Executive in a lump sum in cash within 30 days of the Date of
Termination.
7. Non-exclusivity of Rights. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future
participation in any plan, program, policy or practice provided
by the Company or any of its affiliated companies and for which
the Executive may qualify, nor, subject to Section 12(f), shall
anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the
Company or any of its affiliated companies. Amounts which are
vested benefits or which the Executive is otherwise entitled to
receive under any plan, policy, practice or program of or any
contract or agreement with the Company or any of its affiliated
companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program
or contract or agreement except as explicitly modified by this
Agreement.
8. Full Settlement. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform
its obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action
which the Company may have against the Executive or others. In no
event shall the Executive be obligated to seek other employment
or take any other action by way of mitigation of the amounts
payable to the Executive under any of the provisions of this
Agreement and such amounts shall not be reduced whether or not
the Executive obtains other employment. The Company agrees to pay
as incurred, to the full extent permitted by law, all legal fees
and expenses which the Executive may reasonably incur as a result
of any contest (regardless of the outcome thereof) by the
Company, the Executive or others of the validity or
enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a
result of any contest by the Executive about the amount of any
payment pursuant to this Agreement), plus in each case interest
on any delayed payment at the applicable Federal rate provided
for in Section 7872(f)(2)(A) of the Internal Revenue Code of
1986, as amended (the "Code").
9. Certain Additional Payment by Company.
<PAGE>
(a) Excise Tax - IRC T 4999 - Anything in this Agreement to
the contrary notwithstanding and except as set forth below, in
the event it shall be determined that any payment or distribution
by the Company to or for the benefit of the Executive (whether
paid or payable or distributed or distributable pursuant to the
terms of this Agreement or otherwise, but determined without
regard to any additional payments required under this Section 9)
(a "Payment") would be subject to the excise tax imposed by
Section 4999 of the Code or any interest or penalties are
incurred by the Executive with respect to such excise tax (such
excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then
the Executive shall be entitled to receive an additional payment
(a "Gross-Up Payment") in an amount such that after payment by
the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the
Gross-up Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payments.
Notwithstanding the foregoing provisions of this Section 9(a), if
it shall be determined that the Executive is entitled to a Gross-
Up Payment, but that the Executive, after taking into account the
Payments and the Gross-Up Payment, would not receive a net after-
tax benefit of at least $50,000 (taking into account both income
taxes and any Excise Tax) as compared to the net after-tax
proceeds to the Executive resulting from an elimination of the
Gross-Up Payment and a reduction of the Payments, in the
aggregate, to the greatest amount (the "Reduced Amount") such
that the receipt of Payments would not give rise to any Excise
Tax, then no Gross-Up Payment shall be made to the Executive and
the Payments, in the aggregate, shall be reduced to the Reduced
Amount.
(b) Determination of Accounting Firm. Subject to the
provisions of Section 9(c), all determinations required to be
made under this Section 9, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination,
shall be made by Ernst & Young, LLP, or such other certified
public accounting firm as may be designated by the Executive (the
"Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Executive within 15
business days of the receipt of notice from the Executive that
there has been a Payment, or such earlier time as is requested by
the Company. In the event that the Accounting Firm is serving as
accountant or auditor for the individual, entity or group
effecting the Change of Control, the Executive shall appoint
another nationally recognized accounting firm to make the
determinations required hereunder (which accounting firm shall
then be referred to as the Accounting Firm hereunder). All fees
and expenses of the Accounting Firm shall be borne solely by the
Company. Any Gross-Up Payment, as determined pursuant to this
Section 9, shall be paid by the Company to the Executive within
five days of the receipt of the Accounting Firm's determination.
Any determination by the Accounting Firm shall be binding upon
the Company and the Executive. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by
the Company should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the event
<PAGE>
that the Company exhausts its remedies pursuant to Section 9(c)
and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the
Executive.
(c) Notification by Executive. The Executive shall notify
the Company in writing of any claim by the Internal Revenue
Service that, if successful, would require the payment by the
Company of the Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than ten business days after
the Executive is informed in writing of such claim and shall
apprise the Company of the nature of such claim and the date on
which such claim is requested to be paid. The Executive shall not
pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company
(or such shorter period ending on the date that any payment of
taxes with respect to such claim is due). If the Company notifies
the Executive in writing prior to the expiration of such period
that it desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with contesting such
claim as the Company shall reasonably request in writing from
time to time, including, without limitation, accepting legal
representation with respect to such claim by an attorney
reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly
all costs and expenses (including additional interest and
penalties) incurred in connection with such contest and shall
indemnify and hold the Executive harmless, on an after-tax basis,
for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 9(c), the
Company shall control all proceedings taken in connection with
such contest and, at its sole option, may pursue or forgo any and
all administrative appeals, proceedings, hearings and conferences
with the taxing authority in respect of such claim and may, at
its sole option, either direct the Executive to pay the tax
claimed and sue for a refund or contest the claim in any
permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however, that
if the Company directs the Executive to pay such claim and sue
for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax basis,
from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such
<PAGE>
advance or with respect to any imputed income with respect to
such advance; and further provided that any extension of the
statute of limitations relating to payment of taxes for the
taxable year of the Executive with respect to which such
contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control of the
contest shall be limited to issues with respect to which a Gross-
Up Payment would be payable hereunder and the Executive shall be
entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing
authority.
(d) Refund by Executive. If, after the receipt by the
Executive of an amount advanced by the Company pursuant to
Section 9(c), the Executive becomes entitled to receive any
refund with respect to such claim, the Executive shall (subject
to the Company's complying with the requirements of Section 9(c))
promptly pay to the Company the amount of such refund (together
with any interest paid or credited thereon after taxes applicable
thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 9(c), a determination
is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the
Executive in writing of its intent to contest such denial of
refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not
be required to be repaid and the amount of such advance shall
offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.
10. Confidential Information. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to the
Company or any of its affiliated companies, and their respective
businesses, which shall have been obtained by the Executive
during the Executive's employment by the Company or any of its
affiliated companies and which shall not be or become public
knowledge (other than by acts by the Executive or representatives
of the Executive in violation of this Agreement). After
termination of the Executive's employment with the Company, the
Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process,
knowingly communicate or divulge any such secret or confidential
information, knowledge or data to anyone other than the Company
and those designated by it. In no event shall an asserted
violation of the provisions of this Section 10 constitute a basis
for deferring or withholding any amounts otherwise payable to the
Executive under this Agreement.
11. Successors. (a) Non-Assignable as to Executive - This
Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the
Executive otherwise than by will or by assignment to the Trustee
of a revocable intervivos trust ("grantor" type trust) created by
Executive for the benefit of Executive and/or Executive's family,
or the laws of descent and distribution. This Agreement shall
inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) Binding Effect - This Agreement shall inure to the
benefit of and be binding upon the Company and its successors and
assigns.
<PAGE>
(c) Assumption by Successor to Company - The Company will
require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all
of the business and/or assets of the Company to assume expressly
and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if
no such succession had taken place. As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which
assumes and agrees to perform this Agreement by operation of law,
or otherwise.
12. Miscellaneous. (a) Applicable Law; Jurisdiction - This
Agreement shall be governed by and construed in accordance with
the laws of the State of New Hampshire, without reference to
principles of conflict of laws. Disputes which may arise in
connection with this Agreement or any provision thereof shall be
litigated and/or arbitrated within the State of New Hampshire.
The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect. This Agreement may not
be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and
legal representatives.
(b) Notices and Communication - All notices and other
communications hereunder shall be in writing and shall be given
by hand delivery to the other party or by registered or certified
mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
If to the Company:
Bank of New Hampshire Corporation
300 Franklin Street - P.O. Box 600
Manchester, New Hampshire 03105;
cc: Executive Compensation Committee (Board of Directors)
Bank of New Hampshire Corporation
300 Franklin Street - P.O. Box 600
Manchester, New Hampshire 03105
Attention: Committee Chairman
or, to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
(c) Validity and Enforceability - The invalidity or
unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of
this Agreement.
(d) Withholding of Taxes - The Company may withhold from any
amounts payable under this Agreement such Federal, state, local
or foreign taxes as shall be required to be withheld pursuant to
<PAGE>
any applicable law or regulation.
(e) Waiver - The Executive's, or the Company's, failure to
insist upon strict compliance with any provision of this
Agreement or the failure to assert any right the Executive or the
Company may have hereunder, including, without limitation, the
right of the Executive to terminate employment for Good Reason
pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be
deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
(f) Present Employment, Condition of - The Executive and the
Company acknowledge that, except as may otherwise be provided
under any other written agreement between the Executive and the
Company, the employment of the Executive by the Company is "at
will" and, subject to Section 1(a) hereof, prior to the Effective
Date, the Executive's employment and/or this Agreement may be
terminated by either the Executive or the Company at any time
prior to the Effective Date, in which case the Executive shall
have no further rights under this Agreement. From and after the
Effective Date this Agreement shall supersede any other agreement
between the Parties with respect to the subject matter hereof.
(g) Merger of Understanding - This Agreement contains the
entire understanding of the Company and the Executive with
respect to the subject matters hereof.
(h) Headings and Titles - The headings and titles of sections
and subsections of this Agreement are for convenience only and
shall not have any independent legal effect.
(i) Amendments - This Agreement may be amended only by a
written instrument of Amendment signed by each of the Parties.
(j) Counterparts - This Agreement may be executed in multiple
counterparts for retention by the Executive, the Company, and
legal counsel to the Company.
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from its
Board of Directors, the Company has caused these presents to be
executed in its name on its behalf, all as of the day and year
first above written.
WITNESS:
__________________________ ____________________________________
(Executive)
BANK OF NEW HAMPSHIRE CORPORATION
Attest:___________________ By:_________________________________
Secretary Its _____________ Duly authorized
(Company)
<PAGE>
EXHIBIT (10) (g)
BANK OF NEW HAMPSHIRE CORPORATION
EXECUTIVE EXCESS BENEFIT PLAN
THIS PLAN is established this 24th day of August, 1994 by Bank of New
Hampshire, a New Hampshire Corporation with its principal place of business in
Manchester, New Hampshire.
1. Purpose. This Plan is intended to provide certain executives of Bank of
New Hampshire Corporation with payments to replace benefits such executives
would be entitled to pursuant to the terms of the Retirement Plan for the
Employees of Bank of New Hampshire Corporation and Affiliates, but for the
amendments required to be made to such Plan by virtue of certain limitations
on benefits imposed by Sections 401(a)(17) and 415 of the Internal Revenue
Code of 1986, as amended. This Plan is intended to qualify as a plan
maintained primarily for the purpose of providing deferred compensation to a
select group of management and highly compensated employees for purposes of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
2. Definitions.
(a) "Board of Directors" shall mean the Board of Directors of Bank of
New Hampshire Corporation.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Company" shall mean Bank of New Hampshire Corporation, and any
member of a controlled group of corporations of which Bank of New
Hampshire Corporation is a member.
(d) "Employee" shall mean any person employed by the Company.
(e) "Excess Benefit" shall mean the benefit payable to a Participant
under this Plan as determined pursuant to Section 5.
(f) "Excess Preretirement Benefit" shall mean the benefit payable to a
Participant's surviving spouse under this Plan as determined pursuant
to Section 6.
(g) "Participant" shall mean any Employee designated by the Board of
Directors pursuant to Section 3 to participate in this Plan.
(h) "Retirement Plan" shall mean the Retirement Plan for the Employees
of Bank of New Hampshire Corporation and Affiliates.
3. Participation. Employees eligible to participate in this Plan shall be
those Employees of the Company who were participants in the Retirement Plan
and who are designated as Participants in this Plan by the Board of Directors.
4. Administration. This Plan shall be administered by the Executive
Compensation Committee. The Executive Compensation Committee may, but need
not, have one or more members who are also members of the Board of Directors.
The Executive Compensation Committee shall have all discretionary authority
and powers as may be necessary to administer the Plan, including but not
limited to the power to construe and interpret the Plan, decide all questions
of eligibility, and determine the amount, manner and time of distributions of
benefits from the Plan. The Executive Compensation Committee shall have no
power to add to, subtract from, or modify any of the terms of the Plan, but
may interpret and apply any ambiguous or uncertain terms in its discretion,
which interpretations shall be final and binding on all parties. If a
<PAGE>
Participant or surviving spouse shall apply for benefits, and if such
application shall be denied or the award of benefits shall be less than the
claimant believes he or she is entitled to hereunder, the Participant may
request a hearing before the Executive Compensation Committee. After hearing,
the Executive Compensation Committee shall render a decision in writing, and
said decision shall be final and binding on all parties.
5. Excess Benefit. Each Participant in the Plan shall be entitled to an
Excess Benefit which shall be determined at the time that the Participant
elects to commence monthly pension benefits under the Retirement Plan. Such
Excess Benefit shall be an amount equal to the sum of the Excess Compensation
Benefit and the Excess Limitation Benefit each determined as follows:
(a) Excess Compensation Benefit
A lump sum payment equivalent to the actuarial present value of the
excess of (A) over (B) where:
(A) is the normal form (life annuity) of pension benefit which would
have been paid to the Participant under the terms of the Retire-
ment Plan before amendment of the provisions of said Retirement
Plan relating to the maximum compensation permissable under
Section 401(a)(17) of the Code as amended (and without regard to
the limitations under Section 415 of the Code); and
(B) is the normal form (life annuity) of benefit which is actually
payable to the Participant under the terms of the Retirement
Plan (but determined without regard to the limitations under
Section 415 of the Code, if applicable).
(b) Excess Limitation Benefit
A lump sum payment equivalent to the actuarial present value of the
excess of (A) over (B) where:
(A) is the normal form (life annuity) of pension benefit which the
participant would be entitled to under the terms of the Retire-
ment Plan, without application of the limitations imposed by
Section 415 of the Code (but with application of the compensa-
tion limitation under Section 401(a)(17) of the Code), and
(B) is the normal form (life annuity) of benefit which is actually
payable to the Participant under the terms of the Retirement
Plan.
Notwithstanding the forgoing, no benefit shall be payable under this Section
which is the result of duplication in calculating the effect of the
limitations under Section 401(a)(17) and Section 415 of the Code.
In determining the Excess Benefit payable under the Plan, the Participant
shall be granted credited service for the entire period for employment
contemplated by his employment agreement and the compensation payable under
such agreement shall be considered regardless of the Participant's actual
termination of employment, unless such termination is for cause under the
terms of the employment agreement.
6. Excess Preretirement Benefit. In the event that the Participant dies
prior to the commencement of his monthly pension benefits under the Retirement
Plan, the surviving spouse shall be entitled to an Excess Preretirement
Benefit, which Benefit shall be an amount equal to the sum of the Excess
Preretirement Compensation Benefit and the Excess Preretirement Limitation
Benefit, each determined as follows:
(a) Excess Preretirement Compensation Benefit
<PAGE>
A lump sum payment equivalent to the actuarial present value of the
excess of (A) over (B) where:
(A) is the preretirement survivor annuity to which the Participant's
spouse would have been entitled under the Retirement Plan if said
spouse's benefit from the Retirement Plan had been determined
before amendment of the provisions of such Retirement Plan
relating to the maximum compensation formula as necessitated by
amendments to Section 401(a)(17) of the Code, (and without
regard to the limitations under Section 415 of the Code) and
(B) is the preretirement survivor annuity actually paid to the
Participant's spouse under the Retirement Plan (determined
without regard to the limitations under Section 415 of the Code).
(b) Excess Preretirement Limitation Benefit
A lump sum payment equivalent to the actuarial present value of the
excess of (A) over (B) where:
(A) is the preretirement survivor annuity to which the Participant's
spouse would have been entitled under the Retirement Plan if
such had been determined without application of the limitations
imposed by Section 415 of the Code (but with application of the
compensation limitation under Section 401(a)(17) of the Code);
and
(B) is the preretirement survivor annuity actually paid to the
spouse under the terms of the Retirement Plan.
The Excess Preretirement Benefit shall be paid, or commence, as
soon as administratively practicable after the first day of the
calendar year following the calendar year the spouse's preretire-
ment survivor annuity is payable under the Retirement Plan. The
form of payment of the Excess Preretirement Benefit shall be a lump
sum, or equal annual installments over a period not to exceed 5
years at the election of the spouse, subject to the Executive
Compensation Committee's sole discretion to accelerate previously
elected installment payments or convert a lump sum election to the
payment of equal annual installments over a period not to exceed 5
years. Any election by the spouse shall be made prior to the
first day of the calendar year the Excess Preretirement Benefit
is payable as a lump sum payment.
Notwithstanding the foregoing, no benefit shall be payable under
this Section which is the result of duplication in calculating the
effect of the limitations under Section 401(a)(17) and Section 415
of the Code.
No other benefits shall be paid to any beneficiary of any Participant
under this Plan in the event that the Participant dies prior to the
commencement of the monthly pension benefits under the Retirement
Plan.
7. Form and Timing of Payment. The Participant may elect to receive the
payment of his Excess Benefit in the form of a single lump sum cash payment or
in equal annual installments over a period not to exceed 5 years. Any
election of a form of payment shall be made prior to the first day of the
calendar year his benefit is first payable as a lump sum payment.
The payment of the Excess Benefit shall be made or commence as soon as
administratively practicable after the month the Participant is first eligible
<PAGE>
to receive his monthly benefits under the Retirement Plan.
Notwithstanding the forgoing, the Executive Compensation Committee may in its
sole discretion either accelerate the payment of annual installments
previously elected by the Participant, or require that the Excess Benefit be
paid in equal annual installments over a period not in excess of 5 years
regardless of any previous election by the Participant of a lump sum payment.
8. Not Assignable. Neither the Participant nor the spouse may alienate,
transfer or assign any interest in or right to receive any benefits payable
from this Plan, and any attempt to do so shall be null and void.
9. Fund. The Company may (but is not required to) fund all benefits payable
under this Plan by contributions to an irrevocable grantor trust. However,
all funds in any such trust shall be available for satisfaction of claims of
judgment creditors of the Company. The funding of benefits under this Plan
through such an irrevocable grantor trust may be contingent upon the receipt
by the Company of a favorable private letter ruling from the Internal Revenue
Service ruling that the use of such trust to fund this Plan will not result in
adverse tax consequences to Plan Participants. If such a ruling cannot be
obtained or the Company chooses not to request such a ruling, the benefits
under this Plan may be paid from the general assets of the Company.
10. Termination. The Company may terminate this Plan at any time and for
whatever reason it deems appropriate. If the Company terminates the Plan,
each Participant shall be entitled to a lump sum benefit under this Plan equal
to the actuarial present value of the difference between (A) and (B) where
(A) is the normal form (life annuity) of benefit to which the
Participant would be entitled under the Retirement Plan if the
Retirement Plan terminated on the date that this Plan is
terminated, without application of the amendments made to the
Retirement Plan as a result of amendments to Section 401(a)(17)
of the Code,and without application of the limitations imposed
by Section 415 of the Code, and assuming the Participant had
reached the earliest retirement age under the Retirement Plan,
and
(B) is the normal form of benefit which would be paid to the
Participant under the terms of the Retirement Plan assuming the
Participant had reached the earliest retirement age under the
Retirement Plan on the date of termination of this Plan, had
retired, and had begun receiving benefits under the Retirement
Plan as of the date of termination of this Plan.
If at the time of termination of the Plan the Participant has died and the
surviving spouse had not yet begun to receive benefits from the Retirement
Plan, the Excess Preretirement Benefit in the amount determined under Section
6 of this Plan shall be paid to said spouse in the form specified in Section 7
and as soon as administratively practicable after termination of this Plan.
11. Miscellaneous.
(a) Nothing in this Plan shall affect the rights of a Participant to
participate in any other benefit program sponsored by the Company.
(b) Participation in this Plan shall not affect the employment relation-
ship between the parties in any way other than the provision of
payments of Excess Benefits or Excess Preretirement Benefits
pursuant to the terms hereof, and participation in this Plan shall
not limit the right of the Company to terminate any Participant's
employment at whatever time and for whatever reason it deems
appropriate.
<PAGE>
(c) The Company may amend the Plan from time to time in its discretion,
including, without limitation, such amendments as may be necessary
for this arrangement to be and remain in compliance with applicable
provisions of the Code.
(d) This Plan shall be construed and enforced in accordance with the laws
of the State of New Hampshire.
IN WITNESS WHEREOF, Bank of New Hampshire Corporation has caused this Plan to
be executed by the duly authorized officer as of the day and year first above
written.
WITNESS BANK OF NEW HAMPSHIRE CORPORATION
/s/ Anita W. Ball By:/s/ Gregory D. Landroche
Its EVP/CFO
<PAGE>
EXHIBIT (10) (h)
M E M O R A N D U M
TO: Board of Directors - BNHC and BNH
FROM: Executive Compensation Committee
RE: ECC Recommended 1995 Incentive Bonus Plan
DATE: January 25, 1995
------------------------------------------------------------------------------
Attached are the recommended Target and Discretionary Pools' dollar limits for
the 1995 Incentive Bonus Plan and the procedures to be followed for
determining awards to be paid from the Discretionary Pool. Also attached is a
copy of the 1994 limits for your ease of reference and comparison to last
year's awards available pursuant to the Bonus Plan.
As you can see, the approach to awards from the Target and Discretionary Pools
have been left essentially unchanged from 1994 except to reflect an
approximate increase of 15% in the "Target" ROAA with a similar percentage
increase in potential bonus awards.
The Target Pool continues to utilize the Coopers & Lybrand "sliding-scale"
approach in the calculation of amounts available for distribution. And, as in
1994, there will be a minimum level ROAA which must be achieved prior to any
disbursements being made from this pool.
<PAGE>
BANK OF NEW HAMPSHIRE CORPORATION
1995 INCENTIVE PLAN
Target Discretionary Pool
Thurber
Shea
Landroche
SVPs (Corp.) - (A)
EVPs & Above (Bank) - (B)
SVPs (Bank) - (C)
VPs (Corp. and Bank)
$324,300 $162,150
$486,450
(A) (B) (C)
ALD HRA EPC
WDB RSB PED
RJM RBE JTH
AGT CJJ
MWM
REM
DGT
SCW
<PAGE>
BANK OF NEW HAMPSHIRE CORPORATION
Distribution Ranges
Target Bonus
1995
ROAA* Distribution Factor Bonus Dollars
.85% .64 $207,550
.90 (1994 actual) .72 233,500
.95 .81 262,700
1.00 .90 291,900
1.05 (Target) 1.00 324,300
1.10 1.10 356,700
1.15 1.21 392,400
1.20 1.32 428,100
1.25 1.43 463,750
*No award if ROAA is less than .85%
**Budget for 1995 is 1.05%, actual for 1994 was .90%
<PAGE>
BANK OF NEW HAMPSHIRE CORPORATION
1995 Bonus Plan
Discretionary Review Process
Executive
Compensation Committee Chairman President
Chairman President All VPs and above
Corporate Officers
------------------------------------------------------------------------------
Methodology
-- All participants prepare goal memo outlining their individual goals for the
1995 calendar year.
-- Goals are reviewed by the individual's respective senior manager for
quantifiability and consistency with overall bank goals.
-- Departmental/Divisional goals are reviewed and approved by the President.
-- At the end of the year an accomplishment memo is prepared by the individual
which then follows a similar review process to the foregoing.
-- Actual awards are proposed and follow the following review process:
. President reviews EVPs/SVPs/VPs and makes formal recommendations
to Chairman.
. Chairman reviews President and Corporate Officers and makes
recommendations to the Executive Compensation Committee.
. Executive Compensation Committee reviews Chairman and Chairman's
recommendations and makes recommendations to the BOD.
. BOD approval/changes/disapproval
<PAGE>
EXHIBIT (10) (i)
COMPENSATION DEFERRAL AGREEMENT
Davis P. Thurber
Amendment #2 Date: December 22, 1994
With respect to an Agreement dated December 23, 1992 between Bank of New
Hampshire, Bank of New Hampshire Corporation, and Davis P. Thurber, each party
agree to the following changes to Paragraph #3, namely:
A. Base Compensation will be $286,000 Per Annum.
B. The amount of bi-weekly Deferred Compensation will be $2,040.00.
BANK OF NEW HAMPSHIRE
/s/ Maureen Donovan By: /s/ Gregory D. Landroche 12/22/94
Attest Date
Its Chief Financial Officer
Duly Authorized (Bank)
BANK OF NEW HAMPSHIRE CORPORATION
/s/ Maureen Donovan By: /s/ Gregory D. Landroche 12/22/94
Attest Date
Its EVP, Treasurer and CFO
Duly Authorized (Corporation)
/s/ Maureen Donovan /s/ Davis P. Thurber 12/22/94
Witness Davis P. Thurber, Employee Date
<PAGE>
EXHIBIT (10) (j)
COMPENSATION DEFERRAL AGREEMENT
Paul R. Shea
Amendment #2 Date: December 22, 1994
With respect to an Agreement dated December 23, 1991 between Bank of New
Hampshire, Bank of New Hampshire Corporation, and Paul R. Shea, each party
agree to the following changes to Paragraph #3, namely:
A. Base Compensation will be $220,000 Per Annum.
B. Total Deferred Compensation will be $74,300. This amount is to be
divided as separate credits to my IRC 401-K account and the
Compensation Deferral Agreement dated December 23, 1991. Initially,
$65,000 per year to my deferred compensation account and $9,300* per
year to my IRC 401-K account; however, of the total deferred, the
credit to my IRC 401-K account shall be maintained at the maximum
allowed by current regulations.
(*9,300, approximation based on Pre-Tax limits.)
BANK OF NEW HAMPSHIRE
/s/ Maureen Donovan By: /s/ Gregory D. Landroche 12/22/94
Attest Date
Its Chief Financial Officer
Duly Authorized (Bank)
BANK OF NEW HAMPSHIRE CORPORATION
/s/ Maureen Donovan By: /s/ Gregory D. Landroche 12/22/94
Attest Date
Its EVP, Treasurer and CFO
Duly Authorized (Corporation)
/s/ Maureen Donovan /s/ Paul R. Shea 12/22/94
Witness Paul R. Shea, Employee Date
<PAGE>
EXHIBIT (13)
MANAGEMENT'S FINANCIAL REVIEW
GENERAL
Bank of New Hampshire Corporation (the "Company") is a registered bank holding
company incorporated in 1979 under the laws of the State of New Hampshire.
The Company is regulated by the State and the Federal Reserve System and
transacts its business through Bank of New Hampshire (the "Bank"), a state-
chartered, commercial bank organized under the laws of the State of New
Hampshire. The Company conducts its business through 29 offices of the Bank
located throughout the southern, central, seacoast and lakes regions of New
Hampshire, which areas contain approximately 80% of the State's population.
REVIEW OF FINANCIAL STATEMENTS
The following is a discussion and analysis of the Company's consolidated
results of operations and financial condition. In order to understand this
section in context, it should be read in conjunction with the Financial
Statements on pages 23 through 36 and with the Statistical Information
contained in the Company's Annual Report on Form 10-K.
OVERVIEW
CONSOLIDATED INCOME STATEMENT
The Company reported net income of $8.6 million in 1994 compared to net income
of $6.4 million in 1993 and $5.4 million in 1992. Earnings per share in 1994
were $2.12 compared to $1.80 in 1993 and $1.60 in 1992. Return on average
assets was .90% in 1994, .67% in 1993 and .55% in 1992. Return on average
equity was 12.08% in 1994, 11.27% in 1993 and 11.43% in 1992. The principal
reason for the 35% increase in net income for 1994 compared to 1993 and the
18% increase for 1993 compared to 1992 was the significant decrease in credit
costs for both years. The provision for possible loan losses totalled $1.6
million in 1994 compared to $4.2 million in 1993 and $6.8 million in 1992, and
expenses related to Other Real Estate ("ORE") totalled $1.5 million in 1994
compared to $3.3 million in 1993 and $6.3 million in 1992.
CONSOLIDATED BALANCE SHEET
At December 31, 1994, the Company had consolidated assets of $953.5 million,
deposits of $825.9 million and shareholders' equity of $75.2 million. Based
on deposits, the Company is the largest independent bank holding company
headquartered in New Hampshire, and the Bank is the fourth largest bank
operating in the State.
Cash and cash equivalents totalled $94.0 million at December 31, 1994, a
decrease of $72.0 million from year-end 1993. The decrease was the result of
securities purchases, loan growth and decreases in interest bearing deposits.
Management believes this level of liquid assets allows the Company to remain
responsive to external conditions and accomodate anticipated loan growth. See
"Loans" and "Deposits."
Total securities of $290.2 million at December 31, 1994, represented an
increase of $31.8 million, or 12%, from the 1993 balance of $258.4 million.
The movement of funds into securities and loans from cash equivalents provided
a higher yield on the funds and increased interest income.
Total loans were $541.3 million at December 31, 1994, compared with $524.8
million at the end of 1993, an increase of $16.5 million. Management
implemented certain loan growth initiatives in 1994 which contributed to the
increase. See "Loans."
<PAGE>
The following Chart presents the components of the Company's assets as of
December 31, 1994:
Net loans 55.4%
Securities 30.4
Cash and cash equivalents 9.9
Other assets 2.0
Other real estate 1.2
Premises and equipment 1.1
As can be seen in the following Table, the Bank has experienced an overall
decline in total nonperforming assets. Despite this positive trend, the
Company during 1994, continued adhering to a conservative philosophy in
maintaining the allowance for possible loan losses (the "APLL"). At year-end,
the APLL represented 52% coverage of nonperforming assets, 94% coverage of
nonperforming loans and 136% coverage of nonaccrual loans. See "Risk Elements
and Nonperforming Assets."
12/31/94 9/30/94 6/30/94 3/31/94
(In thousands)
Loans past due 90 days or
more $ 3,003 $ 2,041 $ 2,603 $ 4,144
Restructured loans 1,251 1,259 281 602
Nonaccrual loans 9,732 10,911 12,088 13,435
Total nonperforming loans 13,986 14,211 14,972 18,181
Other real estate 11,319 12,525 13,591 12,888
Total nonperforming assets $25,305 $26,736 $28,563 $31,069
The following Graph shows the APLL coverages of nonperforming loans and
nonaccrual loans at December 31 for the years presented:
1994 1993 1992 1991 1990
APLL/Nonperforming loans 94% 91% 84% 81% 79%
APLL/Nonaccrual loans 136% 112% 101% 106% 114%
Interest bearing deposit balances at December 31, 1994 totalled $677.9 million
compared to $716.6 million at year-end 1993, a decrease of $38.7 million, or
5%. The effect of decreases in deposits for 1994 was not material to the
overall liquidity position of the Bank.
Shareholders' equity totalled $75.2 million at December 31, 1994, compared
with $68.2 million at the end of 1993. All capital ratios exceeded the
minimum requirements of current regulations. The increases in both
shareholders' equity and capital ratios in 1994 resulted from the retention of
earnings. See "Capital Resources."
The following Table presents the regulatory capital ratios of the Company at
December 31, 1994 and 1993.
Regulatory
Minimum 1994 1993
Regulatory Capital Ratios:
Leverage ratio 3.00%(1) 7.68% 6.78%
Tier 1 risk-based ratio 4.00 15.94 14.31
Total risk-based ratio 8.00 17.21 15.59
<PAGE>
The following Table presents the regulatory capital ratios of the Bank at
December 31, 1994 and 1993.
Regulatory
Minimum 1994 1993
Regulatory Capital Ratios:
Leverage ratio 3.00%(1) 7.06% 6.09%
Tier 1 risk-based ratio 4.00 14.67 12.88
Total risk-based ratio 8.00 15.94 14.16
(1) Under current regulations, all except the most highly rated institutions
are expected to exceed the minimum regulatory ratio by 100 to 200 basis
points or more.
RESULTS OF OPERATIONS
Net Interest Income
All interest income, yields, rates, interest rate spreads and net interest
margins which follow in this discussion are stated on a fully taxable
equivalent ("FTE") basis using a tax rate of 34%. Net interest income changes
are caused by interest rate movements, changes in the amounts and the mix of
earning assets and interest bearing liabilities, and changes in the amounts of
non-earning assets and non-interest bearing liabilities.
Net interest income was $40.3 million for 1994 compared to $40.1 million for
1993 and $42.0 million for 1992. The increase of $200,000 in 1994 compared to
1993 was the result of lower interest rates paid on deposits, offset by lower
yields on average earning assets. The decrease of $1.9 million in 1993
compared to 1992 was the result of lower yields on average earning assets for
1993, offset somewhat by lower interest rates paid on deposits.
The following Table presents Average Earning Assets, Interest Bearing
Liabilities, Rate Earned on an FTE basis, and Rate Paid along with Interest
Rate Spread and Net Interest Margin for the years indicated.
1994 1993 1992
(Dollars in millions)
Average Earning Assets $874.4 $868.2 $902.4
Average Interest Bearing Liabilities 735.6 755.5 806.6
Average Rate Earned (yield) 6.98% 7.25% 8.12%
Average Rate Paid 2.82 3.03 3.88
Interest Rate Spread 4.16 4.22 4.24
Net Interest Margin 4.61 4.62 4.65
Interest rate spread is the average yield earned on average earning assets
less the average rate paid for average interest bearing liabilities. Net
interest margin is calculated by dividing net interest income by total average
earning assets. Net interest income and margin are affected by the current
interest rate environment, the mix and volume of assets and liabilities, the
level of nonperforming assets, economic, political and other factors.
Consequently, there can be no assurance as to the level of future net interest
income or margins. See "Loans" and "Liquidity and Interest Rate Sensitivity."
Average earning assets totalled $874.4 million, $868.2 million and $902.4
million for 1994, 1993 and 1992, respectively. The average rate earned was
6.98%, 7.25% and 8.12% for 1994, 1993 and 1992, respectively. The effects of
decreases in average rate earned were offset somewhat by lower average
interest rates paid on deposits and borrowings during 1994 and 1993. Rates
paid on deposits and borrowings decreased from 3.88% in 1992 to 3.03% in 1993
and 2.82% in 1994. Average interest bearing liabilities totalled $735.6
<PAGE>
million, $755.5 million and $806.6 million for 1994, 1993 and 1992,
respectively.
During 1994, 1993 and 1992, the effect on net interest income of nonaccrual
and restructured loans was significant. The reduction in interest income as a
result of the effect of these two categories was $1.2 million, $1.2 million in
both 1994 and 1993 and $1.3 million in 1992. Cash payments received on
nonaccrual loans during 1994 totalled $2.3 million and were applied to reduce
the nonaccrual balance. There were no cash payments received on nonaccrual
loans during 1994 which were reported as interest income. For 1994, a taxable
equivalent adjustment of $160,000 was added to net interest income, compared
to $232,000 and $358,000 in 1993 and 1992, respectively.
PROVISION FOR POSSIBLE LOAN LOSSES
In determining an appropriate provision for possible loan losses for any
period, Management evaluates the current financial condition of specific
borrowers, the general economic climate, loan portfolio composition,
concentration of credits, loan loss history, adequacy of collateral, the
trends and amounts of nonaccrual and past due loans, and estimation of future
potential losses and the level of the allowance for possible loan losses. The
aforementioned criteria are monitored by Management regularly. The amount of
the provision for possible loan losses is recommended by Management and is
then reviewed and approved quarterly by the Board based on its assessment of
the size, composition and quality of the loan portfolio and the level of the
allowance for possible loan losses relative to the risks within the loan
portfolio. See "Allowance for Possible Loan Losses" and "Risk Elements and
Nonperforming Assets."
Provisions for possible loan losses totalled $1.6 million for 1994, $4.2
million for 1993 and $6.8 million for 1992. The lower provisions for possible
loan losses resulted from the concurrent decreases in nonperforming assets and
net loan losses. Net loan losses were $3.0 million, $6.2 million and $10.2
million for the years ended December 31, 1994, 1993 and 1992, respectively,
representing .57% , 1.09% and 1.58% of average loans for the respective years.
The following Graph presents the Provision for Possible Loan Losses and Net
Loan Losses for the years indicated:
1994 1993 1992 1991 1990
(In millions)
Provision $1.6 $4.2 $ 6.8 $12.5 $37.3
Net loan losses $3.0 $6.2 $10.2 $14.1 $23.2
Non-Interest Income
Non-interest income was $9.7 million for 1994, $9.8 million for 1993 and $9.2
million for 1992. The decrease of $136,000 in 1994 compared to 1993 resulted
from lower gains on mortgage sales of $922,000 and lower securities gains of
$17,000, mostly offset by higher trust fee income of $581,000 and service
charges on deposit accounts of $130,000. The increase of $668,000, or 7%, in
1993 compared to 1992 resulted from higher gains on mortgage sales of
$112,000, securities gains of $174,000, trust fee income of $305,000, service
charges on deposit accounts of $41,000 and other miscellaneous income of
$36,000.
Gains and losses on sales of mortgages are recognized based upon the
difference between the selling price and the carrying value of the sold loans;
servicing fees are recognized as income when earned. Mortgage sales are on a
non-recourse basis. See "Loans."
<PAGE>
Non-Interest Expense
Total non-interest expense was $35.5 million in 1994, $35.9 million in 1993
and $38.2 million in 1992. In 1994, non-interest expense decreased $396,000
compared to 1993. This decrease was primarily due to lower ORE expense of
$1.7 million and FDIC insurance expense of $341,000, mostly offset by higher
salaries and employee benefits expenses of $658,000 and other miscellaneous
expenses of $1.1 million. The increase in other miscellaneous expenses
includes higher legal and professional fees ($456,000), examination and audit
fees ($162,000), student loan service bureau fees ($155,000), marketing costs
($118,000), telecommunications expense ($129,000) and other miscellaneous
expenses. ORE expense decreased 53%, from the 1993 total of $3.3 million.
Included in ORE expense in 1994 were $237,000 of write-downs to fair value.
This was a decrease of $793,000 from the $1.0 million of fair value write-
downs and provisions for 1993. ORE general carrying costs totalled $1.8
million in 1994, a decrease of $546,000, or 24%, compared to 1993. These
costs consist of foreclosure expenses and real estate taxes, as well as the
expenses associated with maintaining ORE properties. In 1993, non-interest
expense decreased $2.3 million, or 6%, compared to 1992, primarily due to
lower ORE costs. In 1993, ORE expense decreased $3.0 million, or 48%, from
the 1992 total of $6.3 million. Included in ORE expense in 1993 were $680,000
of write-downs to fair value and $350,000 of provisions for possible ORE
losses. This was a decrease of $2.0 million from the $3.0 million of fair
value write-downs and provisions for 1992. ORE general carrying costs
totalled $2.3 million in 1993 compared to $3.5 million in 1992, a $1.2
million, or 34%, decrease. FDIC insurance expense was $2.2 million, $2.5
million and $2.0 million for the years 1994, 1993 and 1992, respectively. The
decrease in 1994 resulted primarily from a decrease in the premium rate
charged on applicable deposits and from lower deposit balances. In 1993, the
decreases in ORE expense ($3.0 million) and occupancy and equipment expenses
($98,000) were offset somewhat by net increases in salaries and employee
benefits ($349,000), FDIC insurance expense ($511,000) and other miscellaneous
expenses ($27,000).
Income Tax Expense
The Company's results of operations in 1994, 1993 and 1992 produced pretax
income of $12.7 million, $9.5 million and $5.8 million, respectively. The
effective tax rate was 32.1 % in 1994, 32.9% in 1993 and 25.2% in 1992.
During 1994, 1993 and 1992, the Company recorded income tax expense of $4.1
million, $3.1 million and $1.5 million, respectively.
In February, 1992, the Financial Accounting Standards Board (the "FASB")
issued SFAS No. 109, "Accounting For Income Taxes." The Company elected to
adopt SFAS 109 effective January 1, 1992. The cumulative effect of adopting
SFAS 109 on years prior to 1992 was an increase of $1.1 million, or $.32 per
share, to the results of operations for 1992.
FINANCIAL CONDITION
Loans
Total loans at December 31, 1994 were $541.3 million, an increase of $16.5
million from the 1993 year-end balance of $524.8 million. The following Table
summarizes the Bank's loan portfolio by major category at December 31, 1994
and 1993. During 1994, intense competition in lending, as evidenced by
aggressive marketing and loan pricing by our competitors, created a very
challenging situation for our lenders. However, loan demand is increasing and
Management anticipates growth in commercial, commercial real estate, and
residential real estate loans during 1995. Installment loans increased by
$39.0 million and totalled $85.9 million at December 31, 1994. This increase
is primarily due to the purchase of $25.2 million in student loans, which are
<PAGE>
scheduled to be sold back during 1995, and to the growth in auto and truck
loans of $15.2 million. At December 31, 1994, residential real estate loans
totalled $260.7 million, or 48%, of the portfolio balance. This balance
consisted of $249.0 million of loans secured by one to four family residential
properties and $11.7 million of loans secured by multi-family residential
properties. The Bank has no foreign loans or energy loans, and had
agricultural loans of only $6,000 at December 31, 1994.
December 31,
1994 1993
Amount % Amount %
(Dollars in thousands)
Commercial, financial and
agricultural $ 58,764 11% $ 55,430 11%
Real estate--commercial 132,321 24 133,837 25
Real estate--construction 3,544 1 3,019 1
Real estate--residential 260,729 48 285,582 54
Installment 85,926 16 46,975 9
Total loans $541,284 100% $524,843 100%
A significant amount of commercial real estate loans have been made to owner
occupied businesses. Even though these loans are collateralized by real
estate, the primary repayment source is cash flow generated by the related
business. The diversification of the commercial real estate loan portfolio
and size of the potential loss exposure are such that a material adverse
impact on future operations of the Company is unlikely. See "Non-Interest
Income."
The Company had no residential mortgage loans held for sale at December 31,
1994 and $2.0 million at December 31, 1993. During 1992, Management
implemented a plan to sell qualified fixed rate residential mortgage loans to
the secondary market. These sales were designed to adjust the mix of the loan
portfolio by reducing the level of fixed rate residential mortgage loans.
Management determined that, as of March 31, 1994, residential mortgages were
at the prescribed level. Fixed rate residential mortgage loans totalling $7.4
million were sold to the secondary market during the 1994 first quarter at a
net gain of $52,000. Mortgage loans totalling $45.7 million were sold during
1993 at a net gain of $974,000 and mortgage loans totalling $44.1 million were
sold during 1992 at a net gain of $862,000. The Bank continues to service the
residential mortgage loans sold, in line with its commitment to maintain close
contact with its customers.
Allowance for Possible Loan Losses (the "APLL")
The APLL is available for future loan losses. The provision for possible loan
losses is added to the APLL. After review and approval by the Board,
Management charges all or a portion of a loan against the APLL when a
probability of loss has been established, with consideration given to such
factors as the prospects for recovery of the principal, the customer's
financial condition, underlying collateral and guarantees. Loans are also
subject to periodic examination by bank regulatory authorities. Each loan on
the internal Asset Quality Report is evaluated periodically to estimate
potential losses. In addition, minimum loss estimates for each category of
classified loans are also provided based on Management's judgment, which
considers past loan loss experience and other factors. General allocations
are based on past loss experience adjusted for recent portfolio growth and
economic trends. The amounts specifically provided for individual loans and
pools of loans from this analysis are considered allocated allowances and are
supplemented by an unallocated amount for possible loan losses. This
<PAGE>
unallocated amount is determined based on judgments regarding risk of error in
the specific allocations, other potential exposure in the loan portfolio,
economic conditions and trends, and other factors. Credit card loans are
charged off at the earlier of notice of bankruptcy, at 150 days past due, or
when otherwise deemed uncollectible. All other installment loans that are 90
to 120 days past due are charged off monthly, unless insured for loss or where
scheduled payments have been resumed. Real estate mortgage loans are written
down to fair value upon the earlier of receipt of a deed of foreclosure, upon
completion of foreclosure proceedings, or upon classification as in-substance
foreclosure. Commercial and other loan charge-offs are based on Management's
ongoing evaluation of nonperforming loans. Recoveries of previously charged-
off loans are added to the APLL.
Net loan losses totalled $3.0 million in 1994, $6.2 million in 1993 and $10.2
million in 1992. A centralized system controls and administers the recovery
effort in the Loan Workout Department. Loan loss recoveries totalled $2.4
million in 1994, $1.9 million in 1993 and $902,000 in 1992. Management is
unable at this time to project the amount and timing of recoveries of
previously charged-off loans in 1995 and thereafter.
The APLL as a percent of nonperforming assets, nonperforming loans, nonaccrual
loans and total loans was 52%, 94%, 136% and 2.4%, respectively, as of
December 31, 1994 compared to 50%, 91%, 112% and 2.8%, respectively, as of
December 31, 1993. Nonperforming assets as a percent of total assets was 2.7%
and 3.0% at December 31, 1994 and 1993, respectively.
<PAGE>
The following Table presents an analysis of the APLL activity for each of the
past three years.
1994 1993 1992
(In thousands)
Balance at January 1 $ 14,581 $ 16,619 $ 20,012
Provision for possible loan losses 1,580 4,200 6,800
Loan losses:
Commercial, financial and
agricultural (1,101) (1,028) (3,160)
Real estate--commercial (880) (2,026) (1,564)
Real estate--construction (100) (202) (431)
Real estate--residential (2,741) (4,080) (4,698)
Installment (511) (777) (1,242)
Total loan losses (5,333) (8,113) (11,095)
Recoveries:
Commercial, fiancial and
agricultural 934 775 334
Real estate--commercial 455 449 152
Real estate--construction 278 147
Real estate--residential 326 102 14
Installment 370 402 402
Total recoveries of loans 2,363 1,875 902
Net loan losses (2,970) (6,238) (10,193)
APLL at December 31 $ 13,191 $ 14,581 $ 16,619
Total loans at December 31 $541,284 $524,843 $624,381
The APLL is a general reserve available for all categories of possible loan
losses. Management has made allocations of its APLL giving consideration to
it's evaluation of risk in the portfolios. Such allocations are based on
estimates and subjective judgments, and are not necessarily indicative of the
specific amounts or loan categories in which losses may ultimately occur. The
following Table presents an analysis of allocations of the APLL by loan
category for the years indicated.
<TABLE>
<CAPTION>
December 31,
1994 1993
% of % of % of % of
Total Total Total Total
Amount APLL Loans Amount APLL Loans
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial and
agricultural $ 835 6% 11% $ 1,507 10% 11%
Real estate--commercial 3,560 27 24 4,073 28 25
Real estate--construction 1 1
Real estate--residential 1,954 15 48 1,742 12 54
Installment 1,361 10 16 1,566 11 9
Unallocated 5,481 42 5,693 39
$13,191 100% 100% $14,581 100% 100%
</TABLE>
<PAGE>
Risk Elements and Nonperforming Assets
Most of the Bank's loans and in-substance foreclosures ("ISF") are
collateralized by real estate in New Hampshire. In addition, substantially
all ORE properties are located in New Hampshire. The ultimate collectibility
of this portion of the loan portfolio and the recovery of this portion of the
carrying amount of ORE are susceptible to changes in the State's market
conditions. Management makes estimates and assumptions that affect these
reported amounts at the balance sheet date and which affect revenues and
expenses for the period. Actual results could differ from those estimates.
Material estimates that are potentially susceptible to change in the near-term
relate to determination of the APLL and the valuation of real estate acquired
in connection with foreclosures or in satisfaction of loans. Management
believes it is prudent in charging off uncollectible portions of problem loans
and writing down the carrying value of ORE, as its policy is to make such
charge-offs and write-downs on a timely basis. Management also believes there
are no adverse concentrations in any loan category. However, changes in
economic conditions may require currently unanticipated additions to the APLL
or reductions in ORE valuations, which would reduce earnings in the period
within which such additions or reductions occur.
The allowance for possible ORE losses was $168,000 and $350,000 at December
31, 1994 and 1993, respectively. These allowances were established to account
for estimated ORE losses on specific properties.
A loan generally is classified as nonaccrual when full collectibility of
principal or interest is doubtful or a loan becomes 90 days past due as to
principal or interest, unless Management determines that the estimated net
realizable value of the collateral is sufficient to cover the principal
balance and accrued interest and the loan is in the process of collection.
When interest accruals are discontinued, unpaid interest accrued in prior
years is charged to the APLL and current year interest is reversed. Payments
received on nonaccrual loans are applied to principal. A loan is classified
as restructured if the original interest rate, repayment terms, or both have
been modified due to the deterioration in the financial condition of the
borrower. Nonperforming loans are generally returned to performing status
when the loan is brought current and has performed in accordance with contract
terms for a reasonable period of time.
At December 31, 1994 and 1993, the nonaccrual loan balance of $9.7 million and
$13.0 million, respectively, consisted of $601,000 and $2.2 million in
commercial loans and $9.1 million and $10.8 million in real estate loans.
At December 31, 1994, loans 90 days past due and still accruing were $3.0
million, compared to $2.0 million at December 31, 1993. A well secured
commercial real estate loan with a balance of $1.0 million was past due 90
days on December 31, 1994 and accounts for most of the increase from the prior
year. Included in this nonperforming loan category at December 31, 1994 and
1993, were loans secured by real estate, which totalled $2.6 million and $1.7
million, respectively, and personal loans to individuals, which were $351,000
and $240,000, respectively.
Although restructured loans have not been material, amounting to $1.3 million
and $1.0 million at December 31, 1994 and 1993, respectively, Management
encourages restructuring when it is likely to benefit the Company and the
customer.
<PAGE>
The following Table summarizes the nonperforming assets at year end for the
years presented.
December 31,
1994 1993
(Dollars in thousands)
Nonaccrual loans:
Commercial, financial and
agricultural $ 601 $ 2,167
Real estate--commercial 4,503 3,979
Real estate--construction 476 593
Real estate--residential 4,120 6,263
Installment 32 37
Total nonaccrual 9,732 38% 13,039 44%
Past due 90 days or more
(accruing) 3,003 12 2,006 7
Restructured loans 1,251 5 1,012 3
Total nonperforming loans 13,986 55 16,057 54
Other real estate, net 10,024 9,865
In-substance foreclosures 1,295 3,528
Total other real estate(ORE) 11,319 45 13,393 46
Total nonperforming assets $ 25,305 100% $ 29,450 100%
The following Table presents the distribution of ORE, before deducting the
allowance for ORE losses, as of December 31, 1994 and 1993.
December 31,
1994 1993
(Dollars In millions)
Commercial $ 7.6 66% $ 7.1 52%
Residential 2.4 21 4.4 32
Construction and land development 1.5 13 2.2 16
Total $11.5 100% $13.7 100%
ORE at December 31, 1994 consisted of 159 properties. The two largest
properties were commercial real estate recorded at $2.4 million and $1.5
million. Management anticipates selling these two properties during 1995 at a
gain. All other ORE properties are each recorded at less than $450,000.
Substantially all residential properties are one to four family, and
construction and land development loans are intended for residential one to
four family homes. ORE at December 31, 1994 was $11.3 million compared to
$13.4 million at December 31, 1993, a $2.1 million, or 16%, decrease. During
1994, additions totalled $5.2 million and sales were $6.1 million. Losses and
other decreases totalled $1.4 million during 1994. During 1993, additions and
sales totalled $7.3 million each and losses and other decreases totalled $2.7
million.
Securities
Securities totalled $290.2 million and $258.4 million at December 31, 1994 and
1993, respectively. The portfolio is comprised primarily of short-term U.S.
Treasury instruments with an overall maturity of twelve months. Federal funds
sold and securities purchased under agreements to resell totalled $28.0
million at December 31, 1994, compared to $105.0 million at year-end 1993.
<PAGE>
Management determines the appropriate classification of debt securities at the
time of purchase and reevaluates such designation as of each balance sheet
date. Debt securities are classified as held-to-maturity when the Company has
the positive intent and ability to hold the securities to maturity. Held-to-
maturity securities are carried at amortized historical cost and totalled
$286.6 million at December 31, 1994.
Debt securities not classified as held-to-maturity or trading, and marketable
equity securities not classified as trading, are classified as available-for-
sale and are carried at fair value. Unrealized holding gains and losses, net
of taxes, on available-for-sale securities are reported as a separate
component of retained earnings. The Company does not have a trading account
and has no derivative financial instruments.
The following Table summarizes the book value of securities for the years
presented.
December 31,
1994 1993
(In thousands)
U.S. Treasury and other U.S.
Government agencies $285,392 $256,380
State and municipal 908 1,215
Other 277 797
Total $286,577 $258,392
Deposits
Interest bearing deposit balances at December 31, 1994 totalled $677.8 million
compared to $716.6 million at year-end 1993, a decrease of $38.8 million, or
5%. The overall decline in total deposits is due to lower interest rates
being paid and a continued emphasis on personal liquidity, as some depositors
chose to move their money into mutual funds. The decrease occurred primarily
in certificates of deposit ($26.4 million) and savings deposits ($8.6
million). The impact of decreases in deposits for 1994 was not material to
the overall liquidity position of the Bank. Demand deposits decreased
$775,000 in 1994 from the 1993 year-end balance of $148.8 million.
Average demand deposits increased, totalling $138.7 million and $131.3 million
for 1994 and 1993, respectively. Average savings deposits increased,
totalling $489.1 million and $481.5 million in 1994 and 1993, respectively.
Average time deposits decreased, totalling $210.5 million for 1994 and $235.0
million for 1993.
The following Table presents actual deposit balances at December 31 for the
years presented.
December 31,
1994 1993
(In thousands)
Demand deposits $148,009 $148,784
NOW accounts 138,031 138,822
Savings deposits 288,646 297,205
Money market accounts 51,359 54,347
Time deposits of $100,000 or more 9,558 11,641
Other time deposits 190,253 214,536
Total deposits $825,856 $865,335
<PAGE>
Short-Term Borrowings
Short-term borrowings include federal funds purchased, securities sold under
agreements to repurchase and all other borrowed funds. Such borrowings
totalled $44.0 million and $35.3 million at December 31, 1994 and 1993,
respectively.
Capital Resources
The Company's two sources of capital are internally generated capital and the
capital markets. Primary reliance is placed on internally generated capital.
The Board of Governors of the Federal Reserve (the "FRB") requires banks and
bank holding companies to maintain capital based on risk-adjusted assets so
that categories of assets with potentially higher credit risk will require
more capital backing than assets with lower risk. In addition, banks and bank
holding companies are required to maintain capital to support, on a risk-
adjusted basis, certain off-balance sheet activities such as loan commitments
and interest rate swaps.
The FRB standards classify capital into two tiers, Tier 1 and Tier 2. Tier 1
capital consists of common shareholders' equity, noncumulative and cumulative
(bank holding companies only) perpetual preferred stock, and minority
interests, less goodwill. Tier 2 capital consists of a portion of the APLL,
perpetual preferred stock (not included in Tier 1), hybrid capital
instruments, term subordinated debt, and intermediate-term preferred stock.
At December 31, 1994, all bank holding companies and banks are required to
meet a minimum ratio of 8% of qualifying total capital to risk-adjusted total
assets with at least 4% Tier 1 capital. Capital that qualifies as Tier 2
capital is limited to 100% of Tier 1 capital. The FRB regulations require a
minimum Tier 1 leverage capital ratio of 3% plus an additional cushion of 100
to 200 basis points or more. Under certain circumstances, the FRB may
establish higher minimum capital ratio requirements than set forth above where
increased regulatory attention is warranted.
The following Table below illustrates the Company's regulatory capital,
regulatory minimum required capital and corresponding capital ratios as of
December 31, 1994.
Minimum
Actual Required
(Dollars in thousands)
Tier 1 Capital $ 73,440 $ 18,435
Tier 2 Capital 5,853
Total Qualifying Capital $ 79,293 $ 36,870
Risk Adjusted Total Assets
(including off-balance sheet
exposures) $460,863
Leverage Ratio 7.68% 3.00%
Tier 1 Risk-Based Capital Ratio 15.94 4.00
Total Risk-Based Capital Ratio 17.21 8.00
As shown in the Table above, the Company's Tier 1 and total risk-based
capital ratios and the leverage capital ratio exceed the current minimum
requirements.
<PAGE>
Liquidity and Interest Rate Sensitivity Management
The primary functions of asset/liability management are to assure adequate
liquidity and maintain an appropriate balance between interest-sensitive
earning assets and interest bearing liabilities. Liquidity management
involves the Bank's ability to meet the cash flow requirements of customers
who may be either depositors wanting to withdraw funds or borrowers needing
assurance that sufficient funds will be available to meet their credit needs.
Interest rate sensitivity management seeks to avoid fluctuating net interest
margins and to enhance consistent growth of net interest income through
periods of changing interest rates.
The Bank's most important liquidity source is liability liquidity, the ability
to raise new funds and to renew maturing liabilities in a variety of markets.
The most important factor in assuring liability liquidity is maintenance of
confidence in the Bank by depositors of funds. Such confidence, in turn, is
based on performance and reputation. The Bank believes that its reputation,
its financial strength and numerous long-term customer relationships, should
enable it to raise funds as needed in many markets. This belief is based upon
an increase in average "core" deposits (i.e., demand deposits and savings
deposits including NOW, passbook and money market accounts) from $612.9
million in 1993 to $627.8 million in 1994. Funds are primarily generated
locally and regionally and the Bank has no brokered deposits. Other types of
assets, such as federal funds sold and securities purchased under agreements
to resell, as well as maturing loans, are supplemental sources of liquidity.
The objective of interest rate sensitivity management is to minimize changes
in net interest income resulting from volatility in interest rates. Interest
rate sensitivity varies with different types of interest earning assets and
interest bearing liabilities. Overnight federal funds on which rates change
daily and loans which are tied to the prime rate differ considerably from
long-term investment securities and fixed rate loans. Similarly, time
deposits over $100,000 and money market accounts are much more interest
sensitive than passbook savings accounts. The shorter term interest rate
sensitivities are key to measuring the interest sensitivity gap, which is
defined as excess interest sensitive earning assets over interest bearing
liabilities.
<PAGE>
The following Table shows the interest sensitivity gaps for four different
time intervals as of December 31, 1994. In the 12-month time frame the Bank
was liability sensitive at December 31, 1994. An increase in the general
level of interest rates would have an unfavorable effect on net interest
income by increasing rates paid on liabilities faster than rates earned on
assets. Conversely, declining rates would have a favorable effect on net
interest income.
<TABLE>
<CAPTION>
0-3 4-12 1-5 Over 5
Months Months Years Years
(In thousands)
<S> <C> <C> <C> <C>
Rate Sensitive Assets:
Loans $150,470 $ 39,001 $156,109 $195,704
Securities 44,670 119,181 120,814 4,578
Federal funds sold and other 28,000
Total 223,140 158,182 276,923 200,282
Rate Sensitive Liabilities:
NOW accounts 138,031
Savings deposits 288,646
Time deposits greater than $100,000 6,588 5,262 1,951
All other time deposits(1) 86,742 79,612 73,626 1,632
Federal funds purchased and other 43,960
Total (2) 563,967 84,874 75,577 1,632
Interest sensitivity gap $(340,827) $ 73,308 $201,346 $198,650
Cumulative interest sensitivity gap $(340,827) $(267,519) $(66,173) $132,477
</TABLE>
(1) Includes Money Market Accounts totalling $51.4 million.
(2) Excludes non-interest bearing deposits.
Inflation
The effects of inflation on financial institutions differ from the effects on
other commercial enterprises since financial institutions make few significant
capital or inventory expenditures, which are directly affected by changing
prices. Because virtually all bank assets and liabilities are monetary in
nature, inflation does not affect a financial institution as much as changes
in interest rates. The general level of inflation does, in fact, underlie the
general level of most interest rates; however, interest rates do not increase
at the rate of inflation as do the prices of goods and services. Rather,
interest rates react more to the changes in the expected rate of inflation and
to changes in government monetary and fiscal policy.
New Accounting Standards
In May, 1993, the FASB issued SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan." This statement will require the Company to introduce
the time value of money into the determination of the portion of the APLL
which relates to impaired, non-consumer loans. The loss component of
impaired, non-consumer loans will be measured by the difference between their
recorded value and fair value. Fair value would be either the present value
of expected future cash flows discounted at the loan's effective interest rate
or the fair value of the collateral, if the loan is collateral dependent, or
the observable market value of the loan. In-substance foreclosures are to be
reported as loans under the new rule unless the lender has taken possession of
the collateral. In October, 1994, the FASB issued SFAS No. 118, "Accounting
by Creditors for Impairment of a Loan-Income Recognition and Disclosures."
This statement simplifies the recognition of income on impaired loans under
SFAS 114, and allows a creditor to use existing methods. SFAS 114 and 118 are
effective in 1995, with adoption required as of the beginning of the year,
although earlier adoption is allowed. The effect of adopting the new rules in
1995 is not expected to have a significant effect on financial position or
results of operations of the Company.
<PAGE>
Summary of Selected Financial Data
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Interest income $ 60,852 $ 62,719 $ 72,906 $ 86,749 $ 92,405
Interest expense 20,728 22,870 31,311 50,003 55,879
Net interest income 40,124 39,849 41,595 36,746 36,526
Provision for possible loan losses 1,580 4,200 6,800 12,542 37,334
Non-interest income 9,688 9,824 9,156 10,189 6,959
Non-interest expense 35,547 35,943 38,171 38,128 37,878
Income taxes (benefit) 4,074 3,138 1,457 (509) (12,213)
Cumulative effect of a change in
accounting principle (1) 1,100
Net income (loss) $ 8,611 $ 6,392 $ 5,423 $ (3,226) $ (19,514)
Total assets $ 953,456 $ 976,719 $ 967,202 $1,015,061 $1,001,709
Total equity $ 75,174 $ 68,242 $ 50,545 $ 44,984 $ 47,952
Per share data:
Income(loss) before cumulative
effect of a change in
accounting principle $ 2.12 $ 1.80 $ 1.28 $ (.95) $ (5.79)
Cumulative effect of a change
in accounting principle (1) .32
Net income (loss) $ 2.12 $ 1.80 $ 1.60 $ (.95) $ (5.79)
Cash dividends declared $ .405 $ .08 $ .00 $ .00 $ .64
Book value $ 18.50 $ 16.78 $ 14.96 $ 13.29 $ 14.17
Ratios:
Net interest margin (FTE) 4.61% 4.62% 4.65% 4.13% 4.29%
Return on average shareholders'
equity (ROE) 12.08 11.27 11.43 (6.99) (30.76)
Return on average assets (ROA) .90 .67 .55 (.33) (2.05)
</TABLE>
(1) The Company elected to adopt SFAS No. 109, "Accounting for Income Taxes,"
effective January 1, 1992 (see footnote K)
Information on Common Stock
Bank of New Hampshire Corporation common stock trades in the over-the-counter
market on the National Association of Securities Dealers Automated Quotation
(Nasdaq) National Market System under the symbol "BNHC." The Table below sets
forth the high and low sales prices for the common stock as reported by
Nasdaq, in addition to the cash dividends declared in each period. As of
February 15, 1994, there were approximately 1,367 holders of record of common
stock.
<TABLE>
<CAPTION>
1994 1993
Fourth Third Second First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C> <C> <C> <C>
High $27.00 $29.00 $28.25 $18.50 $20.50 $19.75 $19.75 $18.25
Low $18.25 $25.25 $16.75 $16.75 $16.00 $15.00 $14.25 $13.25
Cash dividends declared per share $ .125 $ .10 $ .10 $ .08 $ .08 $ .00 $ .00 $ .00
</TABLE>
The Company is authorized by its Articles of Agreement to issue up to 500,000
shares of preferred stock, no par value. No shares of preferred stock
have been issued. The holders of shares of common stock of the Company are
entitled to receive dividends when and as declared by the Board of Directors
out of funds legally available therefore.
<PAGE>
Selected Quarterly Data
In the opinion of Management, all adjustments which include only normal
recurring adjustments necessary to present fairly the results of operations
for each of the following quarterly periods, have been made.
The following is a summary of selected quarterly data of the Company for the
years ended December 31, 1994 and 1993 (In thousands, except per share data):
<TABLE>
<CAPTION>
1994 1993
Fourth Third Second First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income $ 16,381 $ 15,448 $ 14,770 $ 14,253 $ 15,270 $ 15,368 $ 15,787 $ 16,294
Interest expense 5,404 5,227 5,019 5,078 5,477 5,827 5,754 5,812
Net interest income 10,977 10,221 9,751 9,175 9,793 9,541 10,033 10,482
Provision for possible loan losses 400 415 365 400 250 1,050 1,400 1,500
Non-interest income 2,402 2,523 2,379 2,384 2,471 2,384 2,721 2,248
Non-interest expense 8,956 8,969 8,733 8,889 9,592 8,862 9,095 8,394
Income before income taxes 4,023 3,360 3,032 2,270 2,422 2,013 2,259 2,836
Income taxes 1,356 1,130 1,021 567 785 661 747 945
Net income $ 2,667 $ 2,230 $ 2,011 $ 1,703 $ 1,637 $ 1,352 $ 1,512 $ 1,891
Earnings per share $ .66 $ .55 $ .49 $ .42 $ .40 $ .40 $ .45 $ .55
</TABLE>
<PAGE>
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
Board of Directors and Shareholders
Bank of New Hampshire Corporation
We have audited the accompanying consolidated balance sheets of Bank of New
Hampshire Corporation as of December 31, 1994 and 1993, and the related
consolidated statements of income, changes in shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 1994.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of mate-
rial misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant esti-
mates made by management, as well as evaluating the overall financial state-
ment presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to above pres-
ent fairly, in all material respects, the consolidated financial position of
Bank of New Hampshire Corporation as of December 31, 1994 and 1993, and the
consolidated results of its operations and its cash flows for each of the
three years in the period ended December 31, 1994, in conformity with
generally accepted accounting principles.
As discussed in Note C to the consolidated financial statements, the Company
changed its method of accounting for investments in debt and equity securities
in the year ended December 31, 1994. As discussed in Note L to the
consolidated financial statements, the Company changed its method of
accounting for postretirement benefits other than pensions in the year ended
December 31, 1993. As discussed in Note K to the consolidated financial
statements, the Company changed its method of accounting for income taxes in
the year ended December 31, 1992.
(Signature of Ernst & Young LLP appears here)
Manchester, New Hampshire
January 17, 1995
<PAGE>
BANK OF NEW HAMPSHIRE CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31
(Dollars in thousands, except per share amounts) 1994 1993
ASSETS
Cash and due from banks $ 66,037 $ 60,999
Federal funds sold and securities purchased under
agreements to resell 28,000 105,000
Total cash and cash equivalents 94,037 165,999
Securities 290,191 258,392
Mortgages held for sale 1,978
Loans:
Commercial, financial and agricultural 58,764 55,430
Real estate-commercial 132,321 133,837
Real estate-construction 3,544 3,019
Real estate-residential 260,729 285,582
Installment 85,926 46,975
Total loans 541,284 524,843
Less: Allowance for possible loan losses 13,191 14,581
Net loans 528,093 510,262
Premises and equipment 10,226 11,366
Other real estate 11,319 13,393
Other assets 19,590 15,329
Total assets $ 953,456 $ 976,719
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest bearing $ 148,009 $ 148,784
Interest bearing 677,847 716,551
Total deposits 825,856 865,335
Federal funds purchased and securities sold
under agreements to repurchase 40,888 32,238
Other borrowed funds 3,072 3,028
Accrued expenses and other liabilities 8,466 7,876
Total liabilities 878,282 908,477
Shareholders' Equity:
Preferred stock - no par value
Authorized - 500,000 shares; none issued
Common stock - stated value $2.50 per share
Authorized - 6,000,000 shares
Issued - 4,064,103 shares in 1994
and 4,066,943 shares in 1993 10,160 10,167
Surplus 27,288 27,320
Retained earnings 37,726 30,755
Total shareholders' equity 75,174 68,242
Total liabilities and shareholders' equity $ 953,456 $ 976,719
See notes to consolidated financial statements.
<PAGE>
BANK OF NEW HAMPSHIRE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
Year Ended December 31
1994 1993 1992
Interest income:
Interest and fees on loans $ 45,790 $ 51,608 $ 60,836
Interest on securities 12,153 8,541 9,864
Other interest income 2,909 2,570 2,206
Total interest income 60,852 62,719 72,906
Interest expense:
Deposits 19,696 22,065 29,835
Borrowings 1,032 805 1,476
Total interest expense 20,728 22,870 31,311
Net interest income 40,124 39,849 41,595
Provision for possible loan losses 1,580 4,200 6,800
Net interest income after
provision for possible loan losses 38,544 35,649 34,795
Non-interest income:
Trust fees 3,902 3,321 3,016
Service charges on deposit accounts 3,311 3,181 3,140
Gains on sales of mortgages 52 974 862
Securities gains 165 182 8
Other 2,258 2,166 2,130
Total non-interest income 9,688 9,824 9,156
Non-interest expense:
Salaries and employee benefits 18,309 17,651 17,302
Occupancy expense 3,122 3,043 2,896
Equipment expense 1,669 1,839 2,084
ORE expense 1,527 3,268 6,285
FDIC insurance expense 2,183 2,524 2,013
Other 8,737 7,618 7,591
Total non-interest expense 35,547 35,943 38,171
Income before income taxes
and cumulative effect of a
change in accounting principle 12,685 9,530 5,780
Income taxes 4,074 3,138 1,457
Income before cumulative effect
of a change in accounting principle 8,611 6,392 4,323
Cumulative effect on years prior to 1992
of a change in accounting principle 1,100
Net income $ 8,611 $ 6,392 $ 5,423
Average shares outstanding 4,065 3,552 3,382
Per share amounts:
Earnings per share before cumulative
effect of a change in accounting
principle $2.12 $1.80 $1.28
Cumulative effect on years prior
to 1992 of a change in accounting
principle .32
Earnings per share $2.12 $1.80 $ 1.60
Cash dividends declared $.405 $ .08 $ .00
See notes to consolidated financial statements.
<PAGE>
BANK OF NEW HAMPSHIRE CORPORATION
CONSOLIDATED STATEMENTS OF
CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Retained Treausry
Stock Surplus Earnings Stock Total
(In thousands)
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1992 $ 8,756 $17,549 $19,265 $ (586) $44,984
Net income 5,423 5,423
Issuance of common stock
for the stock plan, net
of forfeitures (4) 4
Repurchase and retirement
of common stock (9) (26) (35)
Compensation cost of stock
plans 173 173
Balance at December 31, 1992 8,743 17,700 24,688 (586) 50,545
Net income 6,392 6,392
Issuance of common stock 1,725 9,871 11,596
Cash dividends declared (325) (325)
Retirement of treasury stock (296) (290) 586
Repurchase and retirement of
common stock (5) (24) (29)
Compensation cost of stock
plan 63 63
Balance at December 31, 1993 10,167 27,320 30,755 $ 0 68,242
Net income 8,611 8,611
Adjustment to beginning balance
for change in accounting method
on securities, net of taxes 85 85
Cash dividends declared (1,646) (1,646)
Change in net unrealized gain
on securities available-for-
sale, net of tax (79) (79)
Repurchase and retirement of
common stock (7) (53) (60)
Compensation cost of stock
plan 21 21
Balance at December 31, 1994 $10,160 $27,288 $37,726 $75,174
</TABLE>
See notes to consolidated financial statements.
<PAGE>
BANK OF NEW HAMPSHIRE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31
1994 1993 1992
<S> <C> <C> <C>
Operating Activities:
Net income $ 8,611 $ 6,392 $ 5,423
Adjustments to reconcile net income
to net cash provided by
operating activities:
Provision for possible loan losses 1,580 4,200 6,800
Depreciation, amortization
and accretion 3,028 1,299 (2,678)
Net change in interest receivables
and payables (4,407) 393 (685)
Gain on sales of mortgages (52) (974) (862)
(Gains) losses on other real estate (235) 960 2,788
Securities gains (165) (182) (8)
Deferred tax provision 583 1,306 352
Other tax benefit (cumulative
effect change) (1,100)
Other, net (212) (249) 1,027
Net cash provided by operating
activities 8,731 13,145 11,057
Investing Activities:
Sales of investment securities 1,309
Maturities of held-to-maturity
debt securities 157,791
Maturities of investment securities 217,562 146,512
Purchases of held-to-maturity
debt securities (190,247)
Purchases of investment securities (291,331) (150,034)
Proceeds from sales of mortgages 8,990 46,720 45,037
Proceeds from sales of other real
estate 6,536 7,405 10,145
Net cash (used for) from loans (30,606) 42,175 (38,164)
Purchases of premises and equipment (666) (1,241) (1,029)
Net cash (used for) provided by
investing activities (48,202) 22,599 12,467
Financing Activities:
Net (decrease)increase in demand deposits,
NOW accounts, and savings accounts (13,113) 14,536 25,192
Net decrease in certificates of
deposit (26,366) (18,126) (61,641)
Net increase (decrease) in short-term
borrowings 8,694 (3,981) (15,456)
Cash dividends paid (1,646) (325)
Net proceeds from issuance of
common stock 11,596
Repurchase and retirement of
common stock (60) (29) (35)
Net cash (used for) provided by
financing activities (32,491) 3,671 (51,940)
(Decrease) increase in cash and
cash equivalents (71,962) 39,415 (28,416)
Cash and cash equivalents at January 1 165,999 126,584 155,000
Cash and cash equivalents at
December 31 $ 94,037 $165,999 $126,584
</TABLE>
See notes to consolidated financial statements.
<PAGE>
BANK OF NEW HAMPSHIRE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial reporting and accounting policies of Bank of New Hampshire
Corporation (the "Company") conform to generally accepted accounting principles.
The following is a summary of the significant accounting policies.
Basis of Presentation: The financial statements include the accounts of the
Company and its sole banking subsidiary, Bank of New Hampshire (the "Bank").
All significant intercompany accounts and transactions have been eliminated
in consolidation. The Bank provides banking services in the central, southern,
coastal and lakes regions of New Hampshire.
Securities: Management determines the appropriate classification of debt
securities at the time of purchase and reevaluates such designation as of each
balance sheet date (See Note C). Debt securities are classified as
held-to-maturity when the Company has the positive intent and ability
to hold the securities to maturity. Held-to-maturity securities are stated
at amortized cost.
Debt securities not classified as held-to-maturity or trading, and marketable
equity securities not classified as trading, are classified as
available-for-sale. Available-for-sale securities are stated at fair value,
with the unrealized gains and losses, net of taxes, reported in a separate
component of retained earnings. The Company does not have a trading account
and has no derivative financial instruments. Prior to January 1, 1994, the
Company classified all securities as held for investment and carried them at
amortized cost.
The amortized cost of debt securities classified as held-to-maturity or
available-for-sale is adjusted for amortization of premiums and accretion
of discounts to maturity. Such amortization is included in interest income on
securities. Interest and dividends are included in interest income on
securities. Realized gains and losses, and declines in value judged to be
other-than-temporary, are included in net securities gains (losses). The cost
of securities sold is based on the specific identification method.
Loans: Loans are stated at their principal amount outstanding net of unearned
income, if any, except for mortgages held for sale which are carried at the
lower of aggregate cost or market value. Interest income on loans is accrued
as earned based on the principal amount outstanding.
Loan origination fees and costs are accounted for in accordance with SFAS 91
which requires the deferral of these fees and costs and subsequent
amortization to income over the life of the loan.
The Company places loans on nonaccrual when any portion of the principal or
interest is ninety days past due, unless it is well secured and in the
process of collection, or earlier when concern exists as to the ultimate
collection of principal or interest. When loans are placed on nonaccrual,
the current year related interest receivable is reversed against interest
income of the current period while prior years interest is charged to
the allowance for possible loan losses. Interest payments received on
nonaccrual loans are applied as a reduction of the principal balance
when concern exists as to the ultimate collection of principal; otherwise
such payments are recognized as interest income. Generally, loans are removed
from nonaccrual when they become current as to both principal and interest
and when concern no longer exists as to the collectibility of principal
or interest.
The Company may renegotiate the contractual terms of a loan because of a
deterioration in the financial condition of the borrower. The carrying
value of a restructured loan is reduced by the fair value of any asset or
equity interest received, and by the extent, if any, that future cash receipts
specified by the new terms do not equal the loan balance at the time of
renegotiation. Restructured loans performing in accordance with their new
terms are not included in nonaccrual loans unless concern exists as to the
ultimate collection of principal or interest. Interest, if any, is
recognized in income to yield a level rate of return over the life of the
restructured loan.
In May 1993, the FASB issued SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan," effective for fiscal years beginning after December
14, 1994. The statement requires that impaired loans be measured based
<PAGE>
on the present value of expected future cash flows discounted at the loan's
effective interest rate or, as a practical expedient, the loan's observable
market price or the fair value of the collateral if the loan is collateral
dependent. The Company will apply the new rules starting in the first quarter
of 1995, which are not expected to have a significant effect on the Company's
financial position or results of operations.
Other Real Estate (ORE): Other real estate includes real estate acquired in
satisfaction of a loan and in-substance foreclosures. In-substance
foreclosures are properties in which the borrower has little or no equity in
the collateral, where repayment of the loan is expected only from the operation
or sale of the collateral, and the borrower either effectively abandons
control of the property or retains control of the property but with doubtful
ability to rebuild equity based on current financial condition. Properties
acquired by foreclosure or deed in lieu of foreclosure and properties classified
as in-substance foreclosures are transferred to ORE and recorded at the lower
of cost or fair value based on appraised value at the date actually or
constructively received. Loan losses arising from the acquisition of such
property are charged against the allowance for possible loan losses.
ORE is stated at the lower of cost or fair value. An allowance for possible
ORE losses is maintained for subsequent valuation adjustments on a specific
property basis. Subsequent declines in the value of the property and
net gains or losses on sales of property are included in ORE expense.
SFAS No. 114, "Accounting by Creditors for Impairment of a Loan," which will be
adopted by the Company in the first quarter of 1995, specifies that a
collateral-dependent real estate loan be reported as ORE only if the lender
has taken possession of the collateral. Other collateral-dependent real
estate loans which currently meet the criteria of in-substance foreclosure
would remain in the loan category.
Allowance for and Provision for Possible Loan Losses: The allowance for
possible loan losses is maintained at a level considered adequate by management
to absorb potential losses in the loan portfolio. The allowance is increased
by the provision for possible loan losses charged against income and
recoveries of previously charged off loans. The allowance is decreased as
loans are charged off. A loan loss occurs once a probability of loss has
been determined, with consideration given to such factors as the customer's
financial condition, underlying collateral and guarantees. The provision for
possible loan losses is based upon management's estimate of the amount
necessary to maintain the allowance at an adequate level, considering
an evaluation of the individual credit risks and concentrations of credit
risks, levels of nonaccrual loans, past loan loss experience, current
economic conditions, volume, growth and composition of the loan portfolio,
and other relevant factors.
Premises and Equipment: Premises and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation and amortization
for financial reporting purposes is computed primarily on the straight-line
method over the estimated useful lives of the assets. Accelerated methods
of depreciation and amortization are used for income tax purposes. Leasehold
improvements are amortized over their useful lives or the terms of the
respective leases, whichever is less.
Retirement Plan: The Company has a noncontributory defined benefit retirement
plan covering substantially all employees. The benefits are based on
years of service and the employee's compensation. The Company's funding
policy is to contribute the minimum amount that can be deducted for
federal income tax purposes. Plan assets consist primarily of common stocks,
bonds and U.S. Government obligations.
Income Taxes: The liability method is used in accounting for income taxes.
Under this method, deferred tax assets and liabilities are determined
based on differences between financial reporting and tax basis of assets
and liabilities and are measured using the enacted tax rates and laws that will
be in effect when the differences are expected to reverse.
Earnings Per Share: Earnings per share is computed by dividing net income
by the weighted average number of common shares outstanding during the year.
Cash Flow Information: For purposes of the statements of cash flows, the
Company considers cash and due from banks, federal funds sold, and
securities purchased under agreements to resell as cash and cash equivalents.
Cash paid for interest during the years ended December 31, 1994, 1993 and 1992
was $21.3 million, $22.5 million and $33.1 million, respectively. The Company
made income tax payments of $2.7 million in 1994 and $2.5 million in 1993. The
Company received an income tax refund of $400,000 in 1993 and net income tax
refunds of approximately $437,000 in 1992.
<PAGE>
Reclassifications: Certain amounts in the consolidated statements of income
for 1993 and 1992 have been reclassified to conform with 1994 presentation.
NOTE B-RESTRICTIONS ON CASH AND DUE FROM BANK ACCOUNTS
The Bank is required to maintain average reserve balances with the Federal
Reserve Bank of Boston. The average amount of reserve balances for the year
ended December 31, 1994 was approximately $9.5 million.
NOTE C-SECURITIES
In May 1993, the FASB issued SFAS No. 115, "Accounting for Certain Investments
in Debt and Equity Securities." The Company adopted the provisions of the new
standard for securities held as of or acquired after January 1, 1994.
In accordance with the Statement, prior period financial statements have
not been restated to reflect the change in accounting principle. The opening
balance of shareholders' equity was increased by $85,000 (net of $44,000 in
deferred income taxes) to reflect the net unrealized holding gains on
securities classified as available-for-sale previously carried at amortized
cost.
The following is a summary of held-to-maturity debt securities and available-
for-sale equity securities at December 31, 1994.
<TABLE>
<CAPTION>
Held-to-Maturity Debt Securities
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
(In thousands)
<S> <C> <C> <C> <C>
U.S. Treasury and other U.S.
Government agencies $285,392 $ 26 $ 3,666 $281,752
State and municipal 908 4 15 897
Other debt securities 277 89 366
Total debt securities $286,577 $ 119 $ 3,681 $283,015
Available-for-Sale Equity Securities
Gross Gross Estimated
Unrealized Unrealized Fair
Cost Gains Losses Value
(In thousands)
Equity Securities $ 3,605 $ 33 $ 24 $ 3,614
The amortized cost and estimated market value of investments in debt and equity
securities at December 31, 1993 are as follows:
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
(In thousands)
U.S. Treasury and other U.S.
Government agencies $256,380 $ 306 $ 340 $256,346
State and municipal 1,215 51 1,266
Other debt securities 191 10 181
Total debt securities 257,786 357 350 257,793
Equity securities 606 233 5 834
Total securities $258,392 $ 590 $ 355 $258,627
</TABLE>
<PAGE>
The amortized cost and estimated market value of held-to-maturity debt
securities at December 31, 1994, by contractual maturity, are shown below.
Expected maturities will differ from contractual maturities because the
issuers of the securities may have the right to repay obligations without
prepayment penalties.
Held-to-Maturity Debt Securities:
Estimated
Market
Cost Value
(In thousands)
Due in one year or less $163,698 $161,676
Due after one through five years 121,113 119,565
Due after five years through ten years 452 457
Due after ten years 1,314 1,317
$286,577 $283,015
During 1994, sales of available-for-sale equity securities totalled $255,000.
Gross gains of $165,000 were realized on those sales. The net adjustment
to unrealized holding gains on available-for-sale securities included
as a separate component of retained earnings totalled $79,000 (net of $41,000
in deferred income taxes) in 1994. Proceeds from sales of investments totalled
$1.3 million during 1993. Gross gains of $249,000 and gross losses of $69,000
were realized on those sales. During 1993 and 1992, certain debt securities
were called resulting in gains totalling $2,000 and $8,000, respectively. The
book value of held-to-maturity debt securities pledged to secure U.S.
Government deposits and trust deposits, and for other purposes, amounted
to approximately $108.1 million and $94.3 million at December 31, 1994
and 1993, respectively.
NOTE D-MORTGAGES HELD FOR SALE AND LOAN SALES
Mortgage loans held for sale to the secondary market are carried at the lower of
aggregate cost or market value. Gains and losses on sales of mortgages are
recognized based upon the difference between the selling price and the carrying
value of the related loans sold. Gains on mortgage sales, including unearned
fees, are recorded at the time of funding of the sales. The Bank retains the
servicing for all mortgages sold and servicing fees are recognized as
income when earned. Mortgage sales are on a non-recourse basis. During
1994, 1993 and 1992, $8.9 million, $45.7 million and $44.1 million,
respectively, of mortgages were sold for net gains of $52,000, $974,000 and
$862,000, respectively, excluding unearned fees. Mortgage loans held for
sale totalled $2.0 million at December 31, 1993 and book value equaled market
value.
NOTE E-ALLOWANCE FOR POSSIBLE LOAN LOSSES
An analysis of changes in the allowance for possible loan losses is as follows:
1994 1993 1992
(In thousands)
Balance, January 1 $14,581 $16,619 $20,012
Provision 1,580 4,200 6,800
Loan losses (5,333) (8,113) (11,095)
Recoveries 2,363 1,875 902
Net loan losses (2,970) (6,238) (10,193)
Balance, December 31 $13,191 $14,581 $16,619
NOTE F-NONACCRUAL AND RESTRUCTURED LOANS
Included in loans are loans which, because of the weakened financial position of
the borrower, were placed on nonaccrual or were restructured to provide
for a reduction or deferral of interest or principal payments.
Nonaccrual and restructured loans were as follows at December 31:
1994 1993
(In thousands)
Nonaccrual................ $ 9,732 $13,039
Restructured.............. 1,251 1,012
$10,983 $14,051
<PAGE>
The effect on interest income in 1994, 1993 and 1992 of nonaccrual and
restructured loans is summarized as follows:
1994 1993 1992
(In thousands)
Originally contracted interest
income for the year......... $1,209 $1,555 $1,852
Less interest income actually
recorded for the year....... 48 367 571
Reduction in interest income
for the year............... $1,161 $1,188 $1,281
At December 31, 1994, there were no commitments to advance additional funds on
any of the nonaccrual or restructured loans.
NOTE G-LOANS TO RELATED PARTIES
The Bank has granted loans to the officers and directors of the Company and the
Bank and to their associates. Related party loans are made on substantially
the same terms, including interest rates and collateral, as those prevailing at
the time for comparable transactions with unrelated persons and do not involve
more than normal risk of collectibility. The aggregate dollar amount of these
loans was approximately $6.1 million and $6.8 million at December 31, 1994 and
1993, respectively. During 1994, $1.2 million of new loans were made and
repayments totaled $1.9 million.
NOTE H-PREMISES AND EQUIPMENT AND LEASE COMMITMENTS
Premises and equipment as of December 31, 1994 and 1993 consist of the
following:
1994 1993
(In thousands)
Land and land improvements $ 1,891 $ 1,777
Buildings 12,541 12,306
Leasehold improvements 1,938 1,924
Furniture and equipment 12,116 12,987
28,486 28,994
Less accumulated depre-
ciation and amortization 18,260 17,628
$10,226 $11,366
The Bank occupies certain branch offices under lease contracts which expire
between 1995 and 2008. Several of the leases include options to renew for
periods ranging from five to fifteen years and clauses providing for increased
rentals based on increases in property taxes and other operating expenses.
Rental expense for all leases, excluding property taxes, insurance and certain
maintenance expenses was $627,000, $669,000 and $665,000 for 1994, 1993
and 1992, respectively.
The aggregate minimum lease commitments at December 31, 1994 under
non-cancelable long-term leases are as follows (in thousands):
1995 $ 597
1996 543
1997 460
1998 381
1999 310
Thereafter 1,522
$3,813
<PAGE>
NOTE I-OTHER REAL ESTATE
The following Table summarizes the real estate operations of property held for
sale for the years ended December 31:
1994 1993 1992
(In thousands)
Balance, January 1 $13,743 $16,424 $22,876
ORE additions 5,225 7,327 7,071
ORE losses (437) (1,248) (2,678)
ORE sales (6,064) (7,335) (9,937)
Other, net (980) (1,425) (908)
11,487 13,743 16,424
Allowance for possible ORE losses (168) (350) (568)
Balance, Decmeber 31 $11,319 $13,393 $15,856
An analysis of the changes in the allowance for possible ORE losses is as
follows:
1994 1993 1992
(In thousands)
Balance, January 1 $350 $568 $250
Provision for possible ORE losses 350 564
ORE losses, net (182) (568) (246)
Balance, December 31 $168 $350 $568
The following Table summarizes the components of ORE expense for the years ended
December 31:
1994 1993 1992
(In thousands)
Valuation adjustments:
ORE losses $ 237 $ 680 $ 2,432
Provision for possible ORE losses 350 564
Net gain on ORE sales (472) (70) (208)
(235) 960 2,788
General carrying costs 1,762 2,308 3,497
ORE expense $ 1,527 $ 3,268 $ 6,285
General carrying costs include legal fees, real estate taxes, maintenance,
appraisals, insurance and miscellaneous other costs.
Gross gains and losses and net gain on ORE sales were as follows for the years
ended December 31:
1994 1993 1992
Gross gains on ORE sales $(773) $(550) $(963)
Gross losses on ORE sales 301 480 755
Net gain on ORE sales $(472) $ (70) $(208)
NOTE J-DEPOSITS
The following Table presents the types of deposit balances for the years
listed:
December 31,
1994 1993
(In thousands)
Demand deposits $148,009 $148,784
NOW accounts 138,031 138,822
Savings deposits 288,646 297,205
Money market accounts 51,359 54,347
Time deposits of $100,000 or more 9,558 11,641
Other time deposits 190,253 214,536
Total deposits $825,856 $865,335
<PAGE>
NOTE K-INCOME TAXES
Effective January 1, 1992, the Company changed its method of accounting for
income taxes from the deferred method to the liability method required by SFAS
109, "Accounting for Income Taxes." The cumulative effect of adopting SFAS 109
as of January 1, 1992, was to increase net income by $1.1 million, or
$.32 per share, for the quarter ended March 31, 1992.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. The Company
does not expect to incur a New Hampshire Business Profits Tax ("NHBPT") in the
foreseeable future as a result of income derived from state tax free sources
and tax credits for the New Hampshire Business Enterprise Tax. Therefore,
no deferred income taxes have been recognized for NHBPT purposes.
Significant components of the Company's deferred tax liabilities and assets
are as follows:
December 31,
1994 1993
(In thousands)
Deferred tax liabilities:
Tax over book depreciation $ 546 $ 599
Prepaid assets 344 291
Purchase price accounting adjustment 267 293
Other 43 22
Total deferred tax liabilities 1,200 1,205
Deferred tax assets:
Allowance for possible loan losses 5,245 5,981
Income on nonaccrual loans 535 675
Deferred fee income 404 460
Accrued book expenses 942 766
Other 24 54
Total deferred tax assets 7,150 7,936
Valuation allowance for deferred tax
assets (198)
Deferred tax assets, net of
valuation allowance 7,150 7,738
Net deferred tax assets $5,950 $6,533
Significant components of the provision for income taxes attributable to
continuing operations are as follows:
1994 1993 1992
(In thousands)
Current tax provision:
Federal $3,491 $1,828 $1,105
State 4
Deferred tax provision 583 1,306 352
$4,074 $3,138 $1,457
Income tax expense related to net securities gains was $62,000, $64,000 and
$3,000 for the years ended December 31, 1994, 1993 and 1992, respectively.
SFAS 109 requires a valuation allowance against deferred tax assets if, based
on the weight of available evidence, it is more likely than not that some
or all of the deferred tax assets will not be realized. The Company
believed that some uncertainty existed with respect to future realization and
established a valuation allowance of $550,000 as of January 1, 1992, the
effective date of adoption of SFAS 109. Reported earnings in 1992
reduced this uncertainty and, accordingly, resulted in a reduction in income
tax expense of $352,000 and $198,000 during the years ended December 31, 1992
and 1994, respectively.
<PAGE>
The reconciliation of income taxes attributable to continuing operations
computed at the U.S. federal statutory tax rate to income tax expense is as
follows:
<TABLE>
<CAPTION>
1994 1993 1992
(Dollars in thousands) Amount % Amount % Amount %
<S> <C> <C> <C> <C> <C> <C>
Federal income tax provision
at statutory rate $4,313 34.0% $3,240 34.0% $1,965 34.0%
Effect of:
Tax-exempt income (96) (.7) (139) (1.5) (220) (3.8)
Change in SFAS 109 valuation
allowance (198) (1.6) (352) (6.1)
Other 55 .4 37 .4 64 1.1
$4,074 32.1% $3,138 32.9% $1,457 25.2%
</TABLE>
NOTE L-RETIREMENT PLAN AND OTHER POSTRETIREMENT BENEFITS
Retirement Plan
The Company maintains a noncontributory defined benefit retirement plan covering
substantially all employees. Benefits are based on compensation and years of
service.
The following sets forth the funded status and amounts recognized in the
consolidated balance sheets for the Company's retirement plan:
December 31,
1994 1993
(In thousands)
Projected benefit obligation:
Vested benefits $ 12,770 $ 13,112
Nonvested benefits 250 251
Accumulated benefit obligation 13,020 13,363
Effect of projected future
compensation levels 1,335 2,162
Projected benefit obligation $ 14,355 $ 15,525
Plan assets at fair value $ 12,265 $ 12,391
Projected benefit obligation in
excess of plan assets $ 2,090 $ 3,134
Unrecognized prior service cost (350) (504)
Unrecognized net loss (1,940) (2,720)
Unrecognized net asset,
net of amortization 846 973
Minimum additional liability 89
Net pension liability $ 646 $ 972
A summary of the components of net periodic pension expense follows:
1994 1993 1992
(In thousands)
Service cost - benefits earned during
the year $ 575 $ 556 $ 568
Interest cost on the projected benefit
obligation 1,192 1,190 1,105
Actual return on plan assets 211 (295) (290)
Net amortization and deferral (1,310) (996) (986)
Net periodic pension expense $ 668 $ 455 $ 397
The weighted-average discount rate and rate of increase in future compensation
levels used in determining the actuarial present value of the projected
benefit obligation were 8.5% and 8.0% and 3.0% and 4.0%, respectively, as
of December 31, 1994 and 1993, respectively. The expected long-term rate of
return on plan assets was 9% in 1994 and 10% in 1993 and 1992. The impact of
changes in the discount rate and rate of increase in future compensation
as of December 31, 1994 was to decrease the minimum additional liability by
$89,000 and decrease the net pension liability by $326,000. The year-end
<PAGE>
1994 and 1993 net pension accrued liability of $646,000 and $972,000,
respectively, is included in other liabilities.
Other Post Retirement Benefits
In addition to the Company's retirement plan, the Company sponsors a defined
benefit welfare plan that provides postretirement medical and life insurance
benefits to full-time employees who have worked 10 years and attained age
55 while in service with the Company. The plan is contributory, with
retiree contributions adjusted annually, and contains other cost-sharing
features such as deductibles and coinsurance. The Company's future
contributions will be capped at the 1996 per capita cost. The Company will
continue to credit each retiree based on years of service. Retirees will
bear the cost of any future annual increases above the 1996 cost levels.
In 1993, the Company adopted SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." The effect of adopting the new
rules increased 1994 and 1993 net periodic postretirement benefit cost
by $584,000 and $316,000, respectively, and decreased 1994 and 1993 net
income by $386,000 and $209,000, respectively.
Postretirement benefit costs for 1992, which were recorded on a cash basis,
have not been restated. The Company's policy is to fund the cost of
medical benefits in amounts determined at the discretion of management.
The plan is unfunded at December 31, 1994.
The following Table sets forth the plan's accumulated postretirement benefit
obligation reconciled with the amount shown in the Company's balance sheet:
December 31,
1994 1993
(In thousands)
Accumulated postretirement benefit obligation:
Retirees $2,209 $2,121
Fully eligible plan participants 406 738
Other active plan participants 836 916
$3,451 $3,775
Plan assets $ -0- $ -0-
Accumulated postretirement benefit obligation
in excess of plan assets $3,451 $3,775
Unrecognized net gain (loss) 234 (186)
Unrecognized transition obligation (3,101) (3,273)
Accrued postretirement benefit cost $ 584 $ 316
Net periodic postretirement benefit cost for 1994 and 1993 included the
following components:
1994 1993
(In thousands)
Service cost $ 72 $ 71
Interest cost 272 284
Amortization of transition obligation over 20 years 172 172
Net periodic postretirement benefit cost $ 516 $ 527
The weighted-average annual assumed rate of increase in the per capita cost of
covered benefits (i.e. health care cost trend rate) is 9.5% for 1995 and is
assumed to decrease gradually to 5.5% over eight years and remain at that
level thereafter. The health care cost trend rate assumption has a
significant effect on the amounts reported. For example, increasing the
assumed health care cost trend rate by one percentage point would increase
the accumulated postretirement benefit obligation as of December 31, 1994 by
$235,000 and the aggregate of the service and interest cost components of net
periodic postretirement benefit cost for 1994 by $20,000. The weighted-
average discount rate used in determining the accumulated postretirement
benefit obligation was 8.5% at December 31, 1994 and 8% at December 31, 1993.
<PAGE>
NOTE M-FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
In the normal course of business, the Company is a party to financial
instruments with off-balance sheet risk to meet the financing needs of its
customers. These financial instruments include commitments to extend credit
and standby letters of credit. These financial instruments involve, to varying
degrees, elements of credit risk in excess of the amount recognized in the
balance sheet.
The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
standby letters of credit written is represented by the contractual amount
of those instruments. The Company generally requires collateral to support
such financial instruments in excess of the contractual amount of those
instruments and, therefore, is in a fully secured position. The Company uses
the same credit policies in making commitments and conditional obligations as
it does for on-balance sheet instruments.
The Company has outstanding loan commitments/lines of credit of $121.5 million
and $119.8 million at December 31, 1994 and 1993, respectively, and standby
letters of credit aggregating $10.4 million and $4.0 million at December 31,
1994 and 1993, respectively. The fair values for loan commitments/lines
of credit and for standby letters of credit approximate book values at
December 31, 1994 and 1993.
Loan commitments/lines of credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates. Since many of the
commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements.
The Company evaluates each customer's creditworthiness on a case-by-case
basis. The amount of collateral obtained, if any, is based on management's
credit evaluation of the counterparty.
Standby letters of credit are conditional commitments issued by the Company to
guarantee the performance of a customer to a third party. Those guarantees are
primarily issued to support public and private borrowing arrangements,
including commercial paper, bond financing, and similar transactions.
Letters of credit usually expire within one year of issuance. The credit
risk involved in issuing letters of credit is essentially the same
as that involved in extending loans to customers. The Company holds collateral
supporting those commitments for which collateral is deemed necessary.
NOTE N-CONCENTRATIONS OF CREDIT RISK
Concentrations of credit risk exist when changes in economic, industry or
geographic factors affect groups of counterparties with similar economic
characteristics, whose aggregate credit exposure is significant to the
Company's total credit exposure. The Company originates commercial, real estate
and installment loans to customers throughout the southern, central, coastal
and lakes regions of the state. The Company estimates that most of its
loans are based in New Hampshire with less than 1% of total loans based
out-of-state. There are no other significant concentrations of credit risk.
NOTE O-RESTRICTIONS ON BANK DIVIDENDS, LOANS OR ADVANCES
Federal Reserve regulations restrict the amount the Bank may loan or advance to
the Company, unless such loans are collateralized by specified obligations.
Bank regulatory agencies restrict the amount of dividends which the Bank can
pay to the Company without obtaining prior approval.
At December 31, 1994 approximately $19.7 million of net assets of the Bank were
available for distribution as dividends to the Company and $48.9 million of
net assets were restricted from distribution to the Company.
<PAGE>
NOTE P-CAPITALIZATION
The following Table presents the consolidated capital ratios of the Company at
December 31, 1994 and 1993.
Regulatory
Minimum 1994 1993
Regulatory Capital Ratios:
Leverage ratio 3.00%(1) 7.68% 6.78%
Tier 1 risk-based ratio 4.00 15.94 14.31
Total risk-based ratio 8.00 17.21 15.59
The following Table presents the capital ratios of the Bank at December 31, 1994
and 1993.
Regulatory
Minimum 1994 1993
Regulatory Capital Ratios:
Leverage ratio 3.00%(1) 7.06% 6.09%
Tier 1 risk-based ratio 4.00 14.67 12.88
Total risk-based ratio 8.00 15.94 14.16
____________
(1) Under current regulations, all except the most highly rated institutions
are expected to exceed the minimum regulatory ratio by 100 to 200 basis
points or more.
NOTE Q-INCENTIVE STOCK PLAN
The Company had an Incentive Stock Plan whereby all full-time employees of the
Company received shares of common stock which had an aggregate fair market
value or book value equal to a specified percentage of the employee's base
salary determined as of
specified dates over specified periods. Shares of common stock issued pursuant
to the Stock Plan receive dividends and have voting rights; however, certain
restrictions applied which expired ratably over one-year intervals after the
grant date(s), through June 30, 1994.
Shares issued or forfeited, and retiree vesting and restriction expirations of
the Stock Plan, are as follows:
Year Ended December 31
1994 1993
Shares issued 614
Shares forfeited (408) (791)
Retiree vesting and
restriction expiration (6,042) (6,322)
Restricted shares outstanding
at January 1 6,450 12,949
Restricted shares outstanding
at December 31 -0- 6,450
Deferred compensation expense was amortized on the straight-line method over the
restriction period. For the years ended December 31, 1994, 1993 and 1992,
$21,000, $63,000 and $173,000, respectively, was charged to operations.
NOTE R-LEGAL PROCEEDINGS
Various claims and lawsuits, incidental to the ordinary course of business, are
pending against the Company and the Bank. In the opinion of management, after
consultation with legal counsel, resolution of these matters is not expected to
have a material effect on the consolidated financial statements.
<PAGE>
NOTE S-FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments," requires
disclosure of fair value information about financial instruments, whether or not
recognized in the balance sheet, for which it is practicable to estimate that
value. In cases where quoted market prices are not available, fair values are
based on estimates using present value or other valuation techniques. Those
techniques are significantly affected by the assumptions used, including the
discount rate and estimates of future cash flows. In that regard, the
derived fair value estimates cannot be substantiated by comparison to
independent markets and, in many cases, could not be realized in immediate
settlement of the instrument. SFAS 107 excludes certain financial instruments
and all nonfinancial instruments from its disclosure requirements.
Accordingly, the aggregate fair value amounts presented do not represent
the underlying value of the Company.
The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments:
Cash and Cash Equivalents: The carrying amounts reported in the balance sheet
for cash and short-term instruments approximate those assets' fair values.
Securities: Fair values for securities are based on quoted market prices, where
available. If quoted market prices are not available, fair values are based on
quoted market prices of comparable instruments.
Mortgages Held for Sale: Fair values of mortgages held for sale are based on
quoted bid market prices.
Loans: Fair values are estimated for portfolios of loans with similar financial
characteristics, segregated by type such as commercial, real estate and
installment loans. For variable-rate loans that reprice frequently and with
no significant change in credit risk, fair values are based on carrying values.
The fair values for other
loans are estimated using a discounted cash flow calculation that applies a
discount rate, based upon the loan's terms, structure of interest, credit
quality factors, and prepayment risk inherent in the portfolio, to a
schedule of aggregated expected monthly maturities on loans.
Interest Receivable: The carrying amount of interest receivable approximates
fair value.
Deposits: The fair values disclosed for demand deposits (e.g., interest bearing
NOW accounts and non-interest bearing checking, passbook savings, and
money market accounts) are, by definition, equal to the amount payable on demand
at the reporting date (i.e., their carrying amounts). Fair values for fixed-
rate certificates of deposit are estimated using a discount rate based upon
the certificate's terms, structure of interest and withdrawal risk to
a schedule of aggregated expected monthly maturities on time deposits.
For deposits with no stated maturities, SFAS 107 defines fair value as the
amount payable on demand. SFAS 107 defines the fair value of demand
deposits as the amount payable on demand, and prohibits adjusting fair value
for any value derived from retaining those deposits for an expected future
period of time. That component, commonly referred to as a deposit base
intangible, is estimated to be approximately $41.7 million at December 31, 1994
and is neither considered in the fair value amounts nor is it recorded as
an intangible asset in the balance sheet.
Short-Term Borrowings: The carrying amounts of federal funds purchased,
borrowings under repurchase agreements, and other short-term borrowings
approximate their fair values.
<PAGE>
The following presents carrying value and the fair value of the Company's
financial instruments at:
December 31,
1994 1993
Carrying Fair Carrying Fair
Value Value Value Value
(In thousands)
Financial Assets:
Cash and cash equivalents $ 94,037 $ 94,037 $165,999 $165,999
Securities 290,191 286,629 258,392 258,627
Mortgages held for sale 1,978 1,978
Net loans 528,093 529,782 510,262 511,381
Interest receivable 8,877 8,877 5,059 5,059
Financial Liabilities:
Deposits (with no stated
maturity) 626,045 626,045 639,158 639,158
Time deposits 199,811 193,149 226,177 227,476
Short-term borrowings 43,960 43,960 35,266 35,266
<PAGE>
NOTE T-BANK OF NEW HAMPSHIRE CORPORATION (Parent Company Only)
CONDENSED FINANCIAL STATEMENTS
BALANCE SHEETS
December 31
1994 1993
(In thousands)
Assets
Cash $ 4,317 $ 5,558
Securities 948 606
Taxes due from Bank 76 54
Investment in Bank 69,640 61,998
Other assets 214 52
$75,195 $68,268
Liabilities
Accrued expenses $ 21 $ 26
Total liabilities 21 26
Shareholders' equity 75,174 68,242
$75,195 $68,268
STATEMENTS OF INCOME
Year Ended December 31
1994 1993 1992
(In thousands)
Operating income:
Dividends from Bank $ 1,050
Other income 320 $ 241 $ 57
1,370 241 57
Operating expenses:
Professional fees 185 99 182
Management fee 30 30 30
Other 214 41 103
429 170 315
Income (loss) before income tax bene-
fit and equity in undistributed
net income of Bank 941 71 (258)
Income tax benefit 43 33 74
Income (loss) before equity in
undistributed net income of Bank 984 104 (184)
Equity in undistributed net income
of Bank 7,627 6,288 5,607
Net income $ 8,611 $ 6,392 $ 5,423
<PAGE>
STATEMENTS OF CASH FLOWS
Year Ended December 31
1994 1993 1992
(In thousands)
Operating Activities:
Net income $ 8,611 $ 6,392 $ 5,423
Adjustments to reconcile net income
to net cash provided (used)
by operating activities:
Equity in undistributed net income
of Bank (7,627) (6,288) (5,607)
Securities gains (165) (177)
Other, net (609) 67 445
Net cash provided (used) by
operating activities 210 (6) 261
Investing Activities:
Capital contribution to the Bank (7,500)
Sales of available-for-sale
equity securities 255
Sales of investment securities 654
Purchases of investment securities (230)
Net cash provided (used) by
investing activities 255 (7,076)
Financing Activities:
Net proceeds from the issuance
of common stock 11,596
Cash dividends paid (1,646) (325)
Repurchase and retirement of
common stock (60) (29) (35)
Net cash provided (used) by
financing activities (1,706) 11,242 (35)
(Decrease) increase in cash and cash
equivalents (1,241) 4,160 226
Cash and cash equivalents at
January 1 5,558 1,398 1,172
Cash and cash equivalents at
December 31 $ 4,317 $ 5,558 $ 1,398
<PAGE>
DOCUMENT (21)
SUBSIDIARY OF THE COMPANY
1. Bank of New Hampshire, a wholly-owned subsidary of the Company
(equity ownership 100%). The Bank is the entity resulting
from the merger of four former affiliates of the Company with
and into one former affiliate, Bank of New Hampshire-
Portsmouth, effective as of the close of business, September
30, 1991.
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 66,037
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 28,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 3,614
<INVESTMENTS-CARRYING> 286,577
<INVESTMENTS-MARKET> 283,015
<LOANS> 541,284
<ALLOWANCE> 13,191
<TOTAL-ASSETS> 953,456
<DEPOSITS> 825,856
<SHORT-TERM> 43,960
<LIABILITIES-OTHER> 8,466
<LONG-TERM> 0
<COMMON> 10,160
0
0
<OTHER-SE> 65,014
<TOTAL-LIABILITIES-AND-EQUITY> 953,456
<INTEREST-LOAN> 45,790
<INTEREST-INVEST> 12,153
<INTEREST-OTHER> 2,909
<INTEREST-TOTAL> 60,852
<INTEREST-DEPOSIT> 19,696
<INTEREST-EXPENSE> 20,728
<INTEREST-INCOME-NET> 40,124
<LOAN-LOSSES> 1,580
<SECURITIES-GAINS> 165
<EXPENSE-OTHER> 35,547
<INCOME-PRETAX> 12,685
<INCOME-PRE-EXTRAORDINARY> 12,685
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,611
<EPS-PRIMARY> 2.12
<EPS-DILUTED> 2.12
<YIELD-ACTUAL> 4.61
<LOANS-NON> 9,732
<LOANS-PAST> 3,003
<LOANS-TROUBLED> 1,251
<LOANS-PROBLEM> 9,300
<ALLOWANCE-OPEN> 14,581
<CHARGE-OFFS> 5,333
<RECOVERIES> 2,363
<ALLOWANCE-CLOSE> 13,191
<ALLOWANCE-DOMESTIC> 13,191
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 5,481
</TABLE>
<PAGE>
[LOGO OF BANK OF NEW HAMPSHIRE APPEARS HERE]
BANK OF NEW HAMPSHIRE
CORPORATION
NOTICE OF
1995 ANNUAL MEETING
0F SHAREHOLDERS
AND
PROXY STATEMENT
<PAGE>
[LOGO OF BANK OF NEW HAMPSHIRE APPEARS HERE]
BANK OF NEW HAMPSHIRE CORPORATION
300 FRANKLIN STREET
MANCHESTER, NEW HAMPSHIRE 03105
NOTICE OF 1995 ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of
BANK OF NEW HAMPSHIRE CORPORATION:
The 1995 Annual Meeting of Shareholders of Bank of New Hampshire
Corporation will be held on Wednesday, April 26, 1995, at 11:00 AM, local
time, at the Manchester Country Club, South River Road, Manchester, New
Hampshire, for the following purposes:
1. To fix the number of directors at seventeen;
2. To elect seventeen directors to serve, each for a one year
term and until a successor is elected and qualified;
3. To ratify the re-engagement of Ernst & Young LLP as
independent auditors for the Company for the year ending
December 31, 1995; and
4. To transact such other business properly brought before
the meeting, including matters incident to the conduct of
the meeting.
Shareholders of record at the close of business on March 10, 1995
are entitiled to notice of and to vote at the meeting and at any
adjournment, continuation or postponement thereof.
IMPORTANT -- YOUR PROXY IS ENCLOSED
PLEASE MARK, DATE, SIGN AND RETURN PROMPTLY THE ENCLOSED PROXY IN THE
ACCOMPANYING ENVELOPE REGARDLESS OF THE NUMBER OF SHARES YOU HOLD.
RETURNING THIS PROXY WILL NOT AFFECT YOUR RIGHT TO REVOKE THIS PROXY OR TO
VOTE IN PERSON SHOULD YOU ATTEND THE MEETING.
By Order of the Board of Directors
March 24, 1995 Robert B. Field, Jr.
Secretary
<PAGE>
BANK OF NEW HAMPSHIRE CORPORATION
300 Franklin Street
Manchester, New Hampshire 03105
(603) 624-6600
PROXY STATEMENT
FOR THE
1995 ANNUAL MEETING OF SHAREHOLDERS
The enclosed proxy is solicited by the Board of Directors of Bank of
New Hampshire Corporation (the "Company") for use at the 1995 Annual
Meeting of Shareholders to be held on Wednesday, April 26, 1995, at 11:00
AM, local time, at the Manchester Country Club, South River Road,
Manchester, New Hampshire (the "Meeting"). This Proxy Statement and the
enclosed proxy cards are first mailed to shareholders on or about March
24, 1995. The Company's Board of Directors (the "Board") has fixed the
close of business on March 10, 1995, as the Record Date, for determining
the shareholders entitled to notice of, and to vote at, the Meeting. On
the Record Date 4,064,156 shares of the Company's common stock were
outstanding and entitled to vote. These shares are the only voting
securities of the Company.
The Company will bear the cost of soliciting proxies, including the
cost of reimbursing brokerage houses and other custodians, nominees or
fiduciaries for forwarding proxies and Proxy Statements to their
principals. In addition to solicitation of proxies by mail, certain
officers and employees of the Company may solicit in person or by
telephone without compensation other than reimbursement for their actual
expenses. Valid proxies may be transmitted by any means which results in
or produces a written or printed document or facsimile thereof.
VOTING OF PROXIES
Each share of common stock is entitled to one vote on all proposals
other than the election of directors. The shares represented by proxies
will be voted as instructed on the valid proxies, and, in the absence of
instructions, proxies will be voted in accordance with the recommendations
of the Board. The Board recommends a vote FOR proposals 1. To fix the
number of directors at seventeen; 2. To elect seventeen directors to
serve, each for a one year term; and 3. To ratify the re-engagement of
Ernst & Young LLP, as independent auditors for the Company for the year
ending December 31, 1995. Proxies may be revoked, at any time before they
are voted, by written notice to the Company, by executing a later dated
proxy, or in person at the Meeting.
The presence, in person, or by proxy, of the holders of a majority
of the outstanding shares of common stock entitled to vote at the Meeting,
shall be necessary to constitute a quorum for the transaction of business.
Abstentions and broker non-votes will not be counted as votes cast but
will be considered as present for quorum purposes. If a quorum exists,
the approval of any proposal being submitted to the shareholders for a
vote, other than the election of directors, requires that the votes cast
FOR the proposal exceed the votes cast AGAINST the proposal. If a quorum
does not exist, the Meeting will be adjourned.
<PAGE>
IN THE ELECTION OF DIRECTORS, SHARES OF COMMON STOCK HAVE CUMULATIVE
VOTING RIGHTS. CUMULATIVE VOTING ENABLES EACH SHAREHOLDER TO GIVE ONE
NOMINEE FOR DIRECTOR AS MANY VOTES AS IS EQUAL TO THE TOTAL NUMBER OF
NOMINEES MULTIPLIED BY THE NUMBER OF SHARES VOTED, OR TO DISTRIBUTE SUCH
VOTES ON THE SAME PRINCIPLE AMONG TWO OR MORE NOMINEES. ACCORDINGLY,
SHOULD CUMULATIVE VOTING BE REQUESTED BY ANY SHAREHOLDER AT THE MEETING,
EACH SHARE WILL BE ENTITLED TO SEVENTEEN VOTES ON A CUMULATIVE BASIS IN
VOTING FOR DIRECTORS.
PRINCIPAL SHAREHOLDERS
The following Table lists persons known to the Company to constitute
a group within the meaning of SEC Rule 13d-5(b)(1) of the Securities
Exchange Act of 1934 for the purpose of acting together to vote their
beneficially owned shares.
Shares of Percentage
Name and Address Common Stock Outstanding
Sidney Thurber Cox (1) 173,680 4.27%
241 Clinton Street
Watertown, New York 13601
Davis P. Thurber (1) 167,451 4.12
25 Swart Terrace
Nashua, New Hampshire 03060
Constance T. Prudden (1) 100,037 2.46
1 Button Cove Road
Hingham, Massachusetts 02043
Shelley D. Thurber (3) 40,380 .99
93 Summer Street
Boston, Massachusetts 02110
Steven A. Thurber (2) (3) 38,680 .95
39-A Manchester Street
Nashua, New Hampshire 03060
George Frederick Thurber (3) 47,020 1.16
227 Summit Avenue
Brookline, Massachusetts 02146
Matthew T. Thurber (3) 47,020 1.16
1 Carey Circle
Revere, Massachusetts 02151
Group Total 614,268 15.11%
(1) See "Securities of the Company owned by Directors and Executive
Officers" and related footnotes on page 7.
(2) Mr. Thurber disclaims a beneficial interest in 200 shares held as
custodian and 100 shares held as trustee for his minor child.
(3) Includes 2,200 shares held in the Shirley A. Thurber Trust.
The Company knows of no other person who beneficially owned five
percent or more of the Company's outstanding common stock as of the Record
Date.
<PAGE>
FIXING THE NUMBER OF DIRECTORS
The Company's bylaws provide for a Board of Directors of not less
than five nor more than twenty-five directors. The Board, in accordance
with the general authority to add directors as provided in the Company's
bylaws, may in any calendar year increase the number of directors by no
more than two and appoint qualified persons to fill any vacancies until
the next annual meeting of shareholders. At present, the number of
directors is seventeen. The Board recommends a vote FOR fixing the number
of directors at seventeen for the ensuing year.
ELECTION OF DIRECTORS
The Board has designated as nominees the seventeen individuals
elected as directors at the 1994 Annual Meeting of Shareholders and pre-
sently serving on the Board. All nominees have indicated, in writing,
both their willingness to be nominated and to serve as directors, if
elected. Subject to the removal provisions in the Company's bylaws, each
director will continue in office until the 1996 Annual Meeting of
Shareholders and until a successor is elected and qualified. Shareholders
may instruct the Proxies to vote for all nominees listed, withhold
authority to vote for all nominees listed or withhold authority to vote
for any individual nominee(s) listed. If any shareholder or group of
shareholders, at the Meeting, requests cumulative voting in an attempt to
elect a director who is not a nominee of the Board, the Proxies will vote
to elect as many of the nominees of the Board as in their judgement are
allowed under the provision of cumulative voting. Should any nominee(s)
become unavailable or unwilling to serve, the Proxies will vote to elect
substitute nominee(s) as recommended by the Board. The Board recommends a
vote FOR all nominees listed.
Information About the Board of Directors of the Company
The Board of Directors has the overall responsibility for the
conduct of the business of the Company. Of the present seventeen
directors, fifteen are outside directors and two are executive officers of
the Company.
The following sets forth certain biographical information concerning
the nominees for election as directors. Terms of service as a director of
the Company are stated in a manner which includes service as a director of
a predecessor of the Bank of New Hampshire (the "Bank"), Bank of New
Hampshire, National Association and its predecessors.
Robert L. Bailey, age 73, has been a director since 1985. He has been
retired for three years and prior thereto, he served as President and
Chief Executive Officer of Bank of New Hampshire, National Association.
Mr. Bailey also served as President and Chief Executive Officer of
Strafford National Bank.
Robert P. Bass, Jr., age 71, has been a director since 1960, except for an
eleven year period ending in 1981. He has been retired for three years
and prior thereto he served as director and shareholder of the law firm of
Cleveland, Waters and Bass, P.A. For the past three years he has been of
counsel to said firm, which firm is counsel to the Bank's Trust and
Investment Services Division and performs other legal services for the
Bank. He is also a director of Bird Incorporated.
<PAGE>
Arthur E. Comolli, DMD, age 62, has been a director since 1981. He is a
practitioner of general dentistry. Director Comolli also serves as a
director of the Bank.
Raymond G. Cote, age 65, has been a director since 1982. He has been
retired for four years, and, prior thereto, was President of Harvey Con-
struction Co., Inc. Director Cote also serves as a director of the Bank.
Sidney Thurber Cox, age 72, has been a director since 1979. Mr. Cox has
been retired for more than five years.
Raymond J. Creteau, age 68, has been a director since 1981. He has been
retired for four years, and, prior thereto, was President and General
Manager of Riverside Millwork Co., Inc. Director Creteau also serves as a
director of the Bank.
Robert B. Field, Jr., age 52, has been a director since 1981. He is a
director and member of the law firm of Sheehan Phinney Bass + Green,
Professional Association, which serves as general counsel to the Company
and the Bank. Mr. Field is also Secretary of the Company.
Morton E. Goulder, age 74, has been a director since 1981. He is
President of M.E. Goulder Enterprises, Inc. (personal investments and
business consulting). Mr. Goulder served as a Deputy Assistant Secretary
of Defense. He is a Director of Computer Devices, Inc.
Philip D. Labombarde, age 74, has been a director since 1964. He has been
retired for more than five years. Prior thereto he was Senior Vice
President, The International Paper Box Machine Company.
Floyd A. Lamb, age 74, has been a director since 1981. He has been
retired for more than five years. Prior thereto he was Senior Vice
President, John Hancock Mutual Life Insurance Company and Chief Executive
Officer, John Hancock Advisors, Inc.
Daniel R.W. Murdock, age 82, has been a director since 1962. He has been
retired for more than five years. Prior thereto he was Executive Vice
President of Bank of New Hampshire, National Association.
Constance T. Prudden, age 74, has been a director since 1981. She has
been retired for more than five years. Prior thereto she was Treasurer of
Prudden and Son, Inc.
Joseph G. Sakey, age 69, has been a director since 1981. He has been
retired for two years, and prior thereto was Director of Libraries and
Communications, City of Cambridge, Massachusetts.
Paul R. Shea, age 62, has been a director since 1989. He is Senior
Executive Vice President of the Company. Mr. Shea is also President,
Chief Executive Officer, and a director of the Bank.
Davis P. Thurber, age 69, has been a director since 1949. He is Chairman
of the Board and President of the Company. Mr. Thurber is also Chairman
of the Board of the Bank. He is a director of Pennichuck Corporation and
EnergyNorth, Inc.
George R. Walker, age 80, has been a director since 1961, except for a two
year period ending in 1981. He was Chairman of Concord Group Insurance
Companies, from which position he retired in 1991.
<PAGE>
Richard S. West, age 69, has been a director since 1981. He is Chairman
of the Board of Parker & West Management, Inc., American Syndicate
Advisors, Inc., and West Capital Corp. Mr. West is a registered
investment advisor.
Information Concerning Committees of the Board of Directors
The Board annually appoints four permanent Committees; an Executive
Committee, an Examining (Audit) Committee, an Executive Compensation
Committee and a Nominating Committee. In addition, there is a Special
Committee for Mergers and Acquisitions and for Dividend Policy. With the
exception of Directors Thurber and Shea, no directors serving on such
Committees are executive officers.
The Executive Committee consists of Directors Thurber (Chairman),
Field, Labombarde, Murdock and Shea. The Committee exercises the
authority of the Board, as may be required, between Board meetings except
as limited by resolution of the Board, the bylaws, or general corporate
statutes. The Committee did not meet in 1994.
The Examining (Audit) Committee consists of Directors Murdock
(Chairman), Comolli, Cote, Cox, Lamb and Walker. Its function is to
review the scope of internal auditing, to recommend selection of and to
oversee the performance of the Company's independent auditors, and to
review reports received from or filed with regulatory agencies. The
Committee met on five occasions during 1994.
The Executive Compensation Committee consists of Directors West
(Chairman), Creteau, and Sakey. It performs a general oversight function
in connection with personnel matters including the review and
recommendation of salaries for senior personnel and other compensation
matters. The Committee met on five occasions during 1994.
The Nominating Committee consists of Directors Thurber (Chairman, ex
officio with vote), Bass, Goulder and Prudden. The Committee conducts
studies of the size and composition of the Board and identifies and
recommends persons suitable for service as a director. The Committee met
on one occasion in 1994. See "PROPOSALS AND NOMINATIONS BY SHAREHOLDERS."
The Special Committee for Mergers and Acquisitions consists of
Directors Thurber (Chairman), Field, Labombarde, Murdock and Shea. The
Committee evaluates and recommends the engagement of financial advisors to
the Company and evaluates and oversees the negotiation of merger and
affiliation opportunities. The Committee did not meet in 1994.
The Special Committee for Dividend Policy consists of Directors
Thurber (Chairman), Bailey, Goulder, Lamb and Prudden. The Committee
evaluates and makes recommendations to the Board as to an appropriate
dividend policy for the Company. The Committee met on two occasions and,
as a committee of the whole with the Board on two occasions during 1994.
There were twelve regular meetings, including the Organizational
meeting, of the Board in 1994. All directors attended at least
seventy-five percent of the aggregate number of meetings of the Board and
all Committees of the Board on which they served.
<PAGE>
Compensation Committee Interlock and Insider Participation
The Executive Compensation Committee is composed of Directors West
(Chairman), Creteau, and Sakey, three independent non-employee directors.
The Committee is not aware of any interlocks and/or any reportable insider
participation in compensation decisions during 1994.
Compensation of Directors
Non-employee directors receive an annual retainer of $6,000, plus
$400 for attendance at each Board meeting. Members of the Executive
Committee and the Examining (Audit) Committee receive an annual fee of
$1,200, plus $150 per meeting, and members of the other committees receive
$250 per meeting.
Several directors also serve as directors of the Bank, and receive
$150 per meeting. Bank directors serving on certain Bank committees
receive annual retainers ranging from $1,200 to $3,000. Bank committee
members also receive attendance fees ranging from $150 to $250 per
meeting. Most directors of the Company and the Bank also serve on one of
several Advisory Boards of the Bank and receive $250 per meeting.
Directors may use, on a space available basis, conference space in
the offices of the Bank. Management believes the value of such usage is
de minimus, although an exact value cannot be assigned to such benefit.
Further, all directors are eligible to participate in several group
insurance programs maintained by the Company for the general benefit of
all employees who elect to participate in such programs. Such
participation is at the personal expense of each director.
<PAGE>
Securities of the Company Owned by Directors and Executive Officers
The following Table sets forth the number of shares and percentage
of the Company's common stock beneficially owned by each nominee for
director and all directors and executive officers of the Company as a
group as of the Record Date. Each beneficial owner listed has sole
investment and voting power with respect to the shares indicated unless
otherwise noted.
Shares of Percentage
Nominees Common Stock Outstanding(5)
Robert L. Bailey 17,074 *
Robert P. Bass, Jr.(1) 8,680 *
Arthur E. Comolli 4,530 *
Raymond G. Cote 7,800 *
Sidney Thurber Cox(2) 173,680 4.27%
Raymond J. Creteau 17,380 *
Robert B. Field, Jr.(1) 12,850 *
Morton E. Goulder(1) 62,752 1.54%
Philip D. Labombarde(1) 6,140 *
Floyd A. Lamb 400 *
Daniel R.W. Murdock 12,084 *
Constance T. Prudden(2) 100,037 2.46%
Joseph G. Sakey(1) 5,565 *
Paul R. Shea 4,130 *
Davis P. Thurber(1)(2)(4) 167,451 4.12%
George R. Walker 5,500 *
Richard S. West(1) 16,024 *
All directors and executive officers
as a group (3) 627,900 15.45%
* - Less than 1%
(1) Includes shares owned by a nominee's spouse, minor children,
children or family members living at home, shares to which investment
advice is given, and shares held or owned as a custodian for the benefit
of minors, as to which each beneficial owner disclaims any beneficial
interests as follows:
Director Bass disclaims a beneficial interest in 1,000 shares owned
by his spouse; Director Field disclaims a beneficial interest in 2,550
shares owned by family members (2,200) and the Robert B. Field Revocable
Trust (350); Director Goulder disclaims a beneficial interest in 35,296
shares owned by Goulder Investments, Ltd. (33,240) and the Claire T.
Goulder Revocable Trust (2,056); Director Labombarde disclaims a
beneficial interest in 2,440 shares owned by deGaspe Corporation (2,000)
and by his daughter (440); Director Sakey disclaims a beneficial interest
in 1,168 shares owned by family members; Director Thurber disclaims a
beneficial interest in 5,000 shares owned by his spouse; and Director West
disclaims a beneficial interest in 10,900 shares owned by family members.
(2) Directors Thurber and Prudden are brother and sister, and first
cousins to Director Cox.
(3) Includes 4,690 shares beneficially owned by the following named
executive officers, Mr. Landroche (1,248), Mr. Tarbox (2,570), and Ms.
DeSouza (872), representing less than one percent of common stock
outstanding and entitled to vote. See "Summary Compensation Table".
(4) Includes an interest in 41,113 shares held by the Bank as
<PAGE>
Trustee under testamentary trusts created under the wills of George F.
Thurber, Sr. and Muriel D. Thurber, to be voted in person or by proxy at
the Meeting by Director Prudden.
(5) Computed on the basis of 4,064,156 shares outstanding and
entitled to vote on the Record Date.
Section 16 (a) Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than
ten percent of a registered class of the Company's equity securities
("Insiders"), to file with the SEC initial reports of ownership, and
reports of changes in ownership, of common stock of the Company. Insiders
are required by SEC regulation to furnish the Company with copies of all
such reports they file.
The Company believes that during 1994, based solely on review of the
copies of such reports furnished to the Company and written representation
that no other report was required, all Section 16(a) filing requirements
applicable to its Insiders were met except that one report was filed late
by Director Bass relating to one sale by his wife; one report was filed
late by Director Cote relating to one purchase; and one report was filed
late by Director Goulder relating to one purchase.
Certain Transactions
During 1994 certain directors and officers of the Company and the
Bank, as well as firms and companies with which they are associated, were
customers of the Bank and as such have had ordinary banking transactions,
including loans and loan commitments, with the Bank. Such loans and loan
commitments were made in the ordinary course of business and on
substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with unrelated
parties. In the opinion of management, such loans and loan commitments do
not involve more than the normal risk of collectibility or present other
unfavorable features. The Bank made loans within approved regulatory
limits to other officers and employees at interest rates which are similar
to interest rates charged on comparable loans to unrelated parties.
Director Field, Secretary of the Company, is a member of the law
firm of Sheehan Phinney Bass + Green, Professional Association, which firm
serves as general counsel to the Company and the Bank. Director Bass is
of counsel to the law firm of Cleveland, Waters & Bass, P.A., which firm
is counsel to the Bank's Trust and Investment Services Division and
performs other legal services for the Bank.
<PAGE>
EXECUTIVE COMPENSATION
Executive Compensation Committee Report
Oversight
The Executive Compensation Committee (the "ECC") performs a general
oversight function in connection with executive officer compensation and
personnel matters for both the Company and the Bank, including the review
and recommendation of salaries for senior personnel and other compensation
matters as may be requested by the Board. Following review and approval
by the ECC, all issues pertaining to executive compensation are submitted
to the Board for approval.
The ECC meets as frequently as required, but not less than once each
year, to review and consider the compensation and perquisite
recommendations made by management for all senior executive officers. The
ECC, with the assistance of outside counsultants and the benefit of data
obtained from independent professional publications, has developed and
refined base compensation ranges, as well as incentive and performance
plans.
Compensation Philosophy
The compensation philosophy generally followed by the ECC has been
to develop a program which will attract, motivate, and retain executives
demonstrating outstanding potential and/or ability and which will align
the interests of these executives with the interests of the Company's
shareholders.
Internal Revnue Code Limitation
The SEC has requested that this report address any policy the
Company may have adopted with respect to a recent change in the Internal
Revenue Code, i.e., limiting income tax deductions of public companies for
certain compensation in excess of $1 million paid to any of the executive
officers named in the proxy statement compensation tables. No officer of
the Company received compensation at that level in 1994.
1994 Executive Compensation
The Company has a program that sets base compensation ranges for its
various executive positions which are believed to be competitive in the
labor market within which the Company competes for qualified personnel.
The Company's geographic labor market is defined as the New England states
and New York, with the Company's ranges being compared to similar sized
commercial banks located in those market areas.
The compensation ranges are supplemented by a two-part incentive
program. Awards under the program are based primarily on the performance
of the Company, normally two thirds of the award, with the remainder based
on an evaluation of individual job performance. Determination of the
amount of the Company award for any year is made following the close of
the plan year, on the basis of the ECC's review of data comparing the
Company's performance with a previously established "target" return on
average assets ("ROAA"). For 1994, the Company's "target" ROAA of .90%
was achieved. The amount of the award determined by an evaluation of
individual performance, normally one third, is subjective and is based
upon the extent to which the ECC concludes individual performance goals
for the year were achieved.
<PAGE>
1994 CEO Compensation
In determining compensation for Mr. Thurber, the ECC utilized the
same programs, as noted above, for other executive officers.
Additionally, the ECC considered the record earnings for 1994, attainment
of the "target" ROAA, reduction in non-performing assets, strengthening of
the Company's middle-management organization, and satisfaction of
regulatory commitments undertaken in prior years.
Submitted by:
February 22, 1995 Executive Compensation Committee
Richard S. West, Chairman
Raymond J. Creteau
Joseph G. Sakey
<PAGE>
Executive Compensation Summary Table
The following Summary Compensation Table is included to provide the
shareholders with a concise, comprehensive review of compensation awarded,
earned or accrued, in the reporting period. The Table includes individual
compensation information for the (i) Chief Executive Officer, and (ii) the
four other most highly compensated executive officers, for services
rendered in all capacities for each year in the reporting period ending
December 31, 1994. Except for grants to all participants made pursuant to
a Stock Plan, no stock options or other rights to acquire shares of the
Company have either been awarded or are outstanding as to any executive
officer.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation Compensation
<S> <C> <C> <C> <C> <C>
Name Restricted
and Stock All Other
Principal Awards Compensation
Position Year Salary Bonus (1) (2)
Davis P. Thurber 1994 $261,705 $45,000 $3,885 $176,502
Chairman of the 1993 248,800 30,000 2,220 17,937
Board and 1992 237,600 - 3,227 20,995
President
Paul R. Shea 1994 204,698 37,500 1,864 102,275
Senior Executive 1993 177,500 25,000 1,065 11,949
Vice President 1992 155,000 - 1,511 10,523
Gregory D. Landroche 1994 147,980 22,500 1,680 26,765
Executive Vice 1993 125,000 15,000 960 4,030
President, Chief 1992 110,000 - 1,336 3,748
Financial Officer
and Treasurer
Allen G. Tarbox, Jr. 1994 100,000 10,000 2,231 7,176
Senior Vice 1993 97,500 5,000 1,275 5,503
President, Data 1992 95,000 - - 5,365
Services
Alice L. DeSouza 1994 100,000 13,000 1,208 3,409
Senior Vice 1993 95,000 7,500 690 3,235
President, Admini- 1992 83,000 - 1,151 2,928
stration and Planning
</TABLE>
See Notes to Summary Compensation Table
<PAGE>
Notes to Summary Compensation Table
(1) The Company had a Stock Plan whereby all full-time employees received
restricted shares which had an aggregate fair market value or book value equal
to a specified percentage of the employee's base salary determined as of
specified dates over specified periods. Shares issued pursuant to the Stock
Plan receive dividends and have voting rights. All restrictions expired
on June 30, 1994. On July 1, 1994, Messrs. Thurber, Shea, Landroche and
Tarbox and Ms. DeSouza vested in Stock Plan awards of 148, 71, 64, 85
and 46 shares, respectively.
(2) The Company maintains and contributes to the Savings & Investment
Plan and group term life insurance ("Life Insurance") for its full-time
employees. The Company's matching contribution to the Savings and Investment
Plan and premiums paid for Life Insurance on behalf of the named executive
officers follows:
Savings &
Investment
Plan Life Insurance
Davis P. Thurber 1994 $ - $11,466
1993 4,707 13,230
1992 4,489 16,506
Paul R. Shea 1994 3,080 9,196
1993 2,998 8,951
1992 2,798 7,725
Gregory D. Landroche 1994 2,848 1,999
1993 2,273 1,757
1992 2,199 1,549
Allen G. Tarbox, Jr. 1994 2,000 5,176
1993 1,948 3,555
1992 1,900 3,465
Alice L. DeSouza 1994 2,000 1,409
1993 1,896 1,339
1992 1,658 1,270
The Company also maintains and contributes to a supplemental executive
retirement plan ("SERP"). During 1994, the Company made contributions
to the SERP on behalf of Messrs. Thurber, Shea and Landroche of $165,036,
$89,999 and $21,918, respectively.
<PAGE>
STOCK PERFORMANCE GRAPH
The following line graph compares, for the last five years, the
performance of the Company's common stock to the NASDAQ Market Value Index
and a Peer Group Index, assuming $100 invested in the Company's common stock
and in each index and assuming reinvestment of dividends. The Peer Group
Index is comprised of ten New England bank holding companies with total
assets ranging from $750 million to $1.5 billion.
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG BANK OF NEW HAMPSHIRE, PEER GROUP AND NASDAQ MARKET INDEX
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Fiscal Year Ending
1989 1990 1991 1992 1993 1994
Bank of New Hampshire Corp. 100 36.73 36.73 91.81 127.32 167.37
Peer Group 100 48.39 61.04 120.81 162.66 177.20
NASDAQ Market Index 100 81.12 104.14 105.16 126.14 132.44
</TABLE>
<PAGE>
PENSION PLAN
Executive officers of the Company participate in the Company's Retirement
Plan and, if designated by the Board, in the Company's SERP. The following
table shows the estimated annual lifetime retirement benefits payable from
both plans to the executive officers named in the Summary Compensation Table,
beginning at age 65 or actual retirement, if later.
<TABLE>
<CAPTION>
Pension Plan Table
Average Annual Estimated Annual Retirement
Compensation Benefit With Indicated Years of
at Retirement Credited Service at Retirement
15 Years 20 Years 25 Years 30 Years 35 Years
<C> <C> <C> <C> <C> <C>
$100,000 $ 25,359 $ 33,812 $ 42,265 $ 50,718 $ 59,171
125,000 32,109 42,812 53,515 64,218 74,921
150,000 38,859 51,812 64,765 77,718 90,671
175,000 45,609 60,812 76,015 91,218 106,421
200,000 52,359 69,812 87,265 104,718 122,171
225,000 59,109 78,812 98,515 118,218 137,921
250,000 65,859 87,812 109,765 131,718 153,671
300,000 79,359 105,812 132,265 158,718 185,171
350,000 92,859 123,812 154,765 185,718 216,671
400,000 106,359 141,812 177,265 212,718 248,171
</TABLE>
The amounts in the table have been calculated under the Retirement Plan
and SERP benefit formulas using the years of service and average annual
compensation levels specified in the table without recognizing any offsets
for Social Security benefits or benefit limitations under the Internal
Revenue Code. Average annual compensation, i.e., the average amount included
in the Summary Compensation Table excluding the Savings and Investment Plan
matching contribution and the SERP contribution is determined using the
three consecutive years in the ten years preceding retirement, or earlier
termination of service, in which compensation is the highest.
During the year ending December 31, 1994, none of the executive
officers of the Company received any payments from the Plans. Credited years
of service through January 1, 1995, for each of the named executive officers
of the Company are as follows: Davis P. Thurber-39 years; Paul R. Shea-14
years; Gregory D. Landroche-11 years; Allen G. Tarbox, Jr.-4 years; and
Alice L. DeSouza-13 years.
CHANGE OF CONTROL AGREEMENTS WITH EXECUTIVES
The Company has entered into agreements with three key executives,
Davis P. Thurber, Paul R. Shea and Gregory D. Landroche. The agreements are
intended to reinforce and encourage the continued attention and dedication
of the executives in the face of potentially disturbing and disrupting
uncertainties arising from the possibility of a change in control. A change
of control is defined to include (i) acquisition by an outsider of twenty
percent or more of the outstanding voting common stock of the Company; (ii)
incumbent Board members cease to be a majority of the Board; (iii) the Board
determines that an outside group not presently identified by it exercises
direct or indirect influence on, or control of, management; and (iv)
shareholder approval of a liquidation, dissolution, asset sale, or
reorganization, etc.
The agreements are currently in effect and are subject to automatic
annual extensions of one year each unless notice of intent not to extend has
been given by the Company to the executives or the actual retirement or
employment termination of the executive(s), not arising out of a change
of control, has occurred. In the event of a change of control, the
agreements provide that there will be no adverse change in the executive's
salary, bonus opportunity, benefits, duties, indemnification and location
of employment for a period of three years after the change of control.
If, during such period, the executive's employment is terminated by his
employer other than for cause or disability, or by the executive for
<PAGE>
good reason, the executive shall receive his accrued salary and vacation
pay, pro rata bonus, deferred compensation and a lump sum cash payment equal
to the sum of his highest base salary and recent bonus multiplied by a
factor of three. At the election of the executives, continuation of medical
benefits and group term life insurance coverage for not less than three years
is also available. The executives would be entitled to all other
amounts earned and an actuarial adjustment of eligible retirement benefits.
RE-ENGAGEMENT OF INDEPENDENT AUDITORS
The Board, upon recommendation of the Examining (Audit) Committee,
re-engaged the firm of Ernst & Young LLP to serve as the independent auditors
for the Company for the year ending December 31, 1995. It is expected that
representatives of Ernst & Young LLP will be at the Meeting to respond to
appropriate questions and will have the opportunity to make a statement if
they so desire. The Board recommends a vote FOR ratification of the
re-engagement of Ernst & Young LLP.
OTHER MATTERS
The Board is unaware of any other matters which may be presented for
action at the Meeting. Should any other matters come before the Meeting, the
persons named on the enclosed proxy will have discretionary authority
to vote the shares represented by such proxies in accordance with their best
judgement.
PROPOSALS AND NOMINATIONS BY SHAREHOLDERS
Shareholder proposals, intended to be included in the Proxy Statement
for the 1996 annual meeting, must be received by the Company no later than
November 24, 1995.
The Company's bylaws provide that nominations for election to the Board
may be made by any shareholder of record entitled to vote at the annual
meeting subject to certain requirements. A shareholder who wishes to
recommend an individual for Board membership should direct the recommendation,
in writing, to any member of the Nominating Committee and notice of intent to
make a director nomination, must be received by the President of the
Company not less than ninety days in advance of the Company's annual meeting.
As to the 1996 Annual Meeting of Shareholders, such notice shall be presumed
to be timely if it is received by the President, on, or before, January 23,
1996, and it is prepared in accordance with the provisions of Section 2.2
of the bylaws. A copy of this bylaw provision may be obtained by written
request directed to the President of the Company.
Dated: March 24, 1995 Davis P. Thurber
Chairman of the Board
<PAGE>
1995 ANNUAL MEETING OF SHAREHOLDERS
BNHC LOGO HERE
BANK OF NEW HAMPSHIRE CORPORATION
300 Franklin Street, Manchester, New Hampshire 03101
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints DAVIS P. THURBER, DANIEL R.W. MURDOCK, and
ROBERT B. FIELD, JR., as Proxies, each with the power to appoint his
substitute, and hereby authorizes them to represent and to vote as instructed,
all the shares of common stock of Bank of New Hampshire Corporation held of
record by the undersigned on March 10, 1995, at the 1995 Annual Meeting of
Shareholders to be held on Wednesday, April 26, 1995, at The Manchester
Country Club, South River Road, Manchester, New Hampshire, at 11:00 AM
local time, and at any adjournment, continuation or postponement thereof.
This proxy when properly executed will be voted as instructed herein by the
undersigned shareholder. In the absence of such instructions this proxy
will be voted FOR Item 1; FOR the nominees listed in Item 2, or as selected
by the Proxies in accordance with cumulative voting; and FOR Item 3; all as
are set forth on the reverse and all as are more particularly described in
the accompanying Proxy Statement.
(Continued and to be signed and dated on the reverse side)
-----------------------------------------------------------------------------
FOLD AND DETACH HERE
March 24, 1995
Dear Shareholder:
The 1995 Annual Meeting of Shareholders will be held on Wednesday, April 26,
1995 at 11:00 AM at the Manchester Country Club, Manchester, New Hampshire.
The enclosed notice of meeting and proxy statement describe the business to
be conducted at the meeting. Our Annual Report for 1994 accompanies the notice
of meeting and proxy statement.
Your vote is very important. Please promptly detach, complete and return the
proxy card (above) in the envelope provided.
We hope you will be able to attend the meeting and, we look forward to seeing
you.
Sincerely,
[SIGNATURE OF DPT APPEARS HERE]
Davis P. Thurber
Chairman of the Board and President
<PAGE>
To vote in accordance with the Board of Directors recommendation, just sign
the proxy. No boxes need be checked.
The Board of Directors recommends a vote "FOR" Items 1, 2 and 3.
The Board of Directors recommends a vote "FOR" Items 1, 2 and 3.
I plan to
attend the
meeting.
[ ]
1. Fix the number of directors at seventeen 2. Election of directors
For all
nominees Withhold Authority
listed, except to vote for all
For Against Abstain as noted nominees listed
[ ] [ ] [ ] [ ] [ ]
Nominees: Robert L. Bailey; Robert P. Bass, Jr.; Arthur E. Comolli; Raymond
G. Cote; Sidney Thurber Cox; Raymond J. Creteau; Robert B. Field, Jr.; Morton
E. Goulder; Philip D. Labombarde; Floyd A. Lamb; Daniel R.W. Murdock;
Constance T. Prudden; Joseph G. Sakey; Paul R. Shea; Davis P. Thurber; George
R. Walker; and Richard S. West.
Instruction: To withhold authority to vote for any individual nominee(s),
cross out the nominee's name above.
_____________________________________________________________________________
3. Ratification of the re-engagement of 4. In their discretion, the
Ernst & Young LLP as independent Proxies are authorized to
auditors for the Company. vote upon any other matters
which may properly come
before the Meeting, and at
any adjournment thereof.
For Against Abstain
[ ] [ ] [ ]
Please sign exactly as name appears on proxy. When shares are held by joint
tenants, both should sign, if possible. When signing as an attorney , executor,
administrator, trustee or guardian, please provide full title as such. If
a corporation, please sign in full corporate name by authorized corporate
officer. If a partnership, please sign in partnership name by authorized
person.
Dated__________________________________________, 1995
_______________________________________________
(Signature)
_______________________________________________
(Signature if held jointly)
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOP.
