<PAGE>
Total Number of Pages: _____
Exhibit Index Located on Page: _____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1 TO
FORM S-4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
FULTON FINANCIAL CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania
---------------------------------
(State or other jurisdiction of
incorporation or organization)
6711 23-2195389
- ------------------------- -------------------------
(Primary SIC Code Number) (I.R.S. Employer
Identification Number)
One Penn Square
P.O. Box 4887
Lancaster, Pennsylvania 17604
(717) 291-2411
--------------------------------------------------------------------------
(Address and telephone number of registrant's principal executive offices)
Rufus A. Fulton, Jr., President and Chief Executive Officer
Fulton Financial Corporation
One Penn Square
P.O. Box 4887
Lancaster, Pennsylvania 17604
---------------------------------------------------------
(Name, address and telephone number of agent for service)
Copy To: Copy To:
Paul G. Mattaini, Esquire Douglas P. Faucette,Esquire
Barley, Snyder, Senft & Cohen, LLP Muldoon, Murphy & Faucette
126 East King Street 5101 Wisconsin Avenue, N.W.
Lancaster, PA 17602-2893 Washington, D.C. 20016
(717) 299-5201 (202) 362-0840
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after the effective date of this Registration
Statement.
<PAGE>
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
CROSS REFERENCE SHEET PURSUANT
TO ITEM 501 OF REGULATION S-K
------------------------------
ITEM OF FORM S-4 LOCATION IN PROSPECTUS
- ---------------- ----------------------
1. Forepart of Registration Facing Page of Registration
Statement and Outside Front Statement; Cross Reference Sheet;
Cover Page of Prospectus and Outside Front Cover Page
2. Inside Front and Outside AVAILABLE INFORMATION;
Back Cover Pages of Prospectus TABLE OF CONTENTS
3. Risk Factors, Ratio of Earnings SUMMARY
to Fixed Charges and Other
Information
4. Terms of the Transaction THE FFC/WNB MERGER; INFORMATION
CONCERNING FULTON FINANCIAL
CORPORATION AND DESCRIPTION OF FFC
COMMON STOCK; INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE
5. Pro Forma Financial Information PRO FORMA COMBINED FINANCIAL
INFORMATION
6. Material Contacts with the GENERAL INFORMATION--SPECIAL
Company Being Acquired MEETING OF WNB SHAREHOLDERS--
Interests of Certain Persons in
Matters To Be Acted Upon; THE
FFC/WNB MERGER
7. Additional Information Required Not Applicable
for Reoffering by Persons and
Parties Deemed to be Underwriters
8. Interests of Named Experts and EXPERTS; LEGAL MATTERS
Counsel
9. Disclosure of Commission Position INFORMATION CONCERNING FULTON
on Indemnification for Securities FINANCIAL CORPORATION AND
Act Liabilities DESCRIPTION OF FFC COMMON STOCK
--Indemnification
10. Information with Respect to S-3 INCORPORATION OF CERTAIN
Registrants DOCUMENTS BY REFERENCE; PRO FORMA
COMBINED FINANCIAL INFORMATION;
INFORMATION CONCERNING FULTON
FINANCIAL CORPORATION AND
DESCRIPTION OF FFC COMMON STOCK
11. Incorporation of Certain INCORPORATION OF CERTAIN
Information by Reference DOCUMENTS BY REFERENCE
12. Information with Respect to S-2 Not Applicable
or S-3 Registrants
13. Incorporation of Certain Not Applicable
Information by Reference
<PAGE>
14. Information with Respect to Not Applicable
Registrants Other Than S-3 or
S-2 Registrants
15. Information with Respect to Not Applicable
S-3 Companies
16. Information with Respect to S-2 Not Applicable
or S-3 Companies
17. Information with Respect to COMPARATIVE STOCK PRICES AND
Companies Other Than S-2 or DIVIDENDS AND RELATED SHAREHOLDER
S-3 Companies MATTERS; INFORMATION CONCERNING
THE WOODSTOWN NATIONAL BANK &
TRUST COMPANY
18. Information if Proxies, Consents SUMMARY; GENERAL INFORMATION--
or Authorizations are to be SPECIAL MEETING OF WNB
Solicited SHAREHOLDERS; THE FFC/WNB MERGER;
INFORMATION CONCERNING THE
WOODSTOWN NATIONAL BANK & TRUST
COMPANY; INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE
19. Information if Proxies, Consents Not Applicable
or Authorizations Are Not to be
Solicited or in an Exchange Offer
<PAGE>
December 13, 1996
Dear Shareholder:
You are cordially invited to a Special Meeting of Shareholders (the
"Meeting") of The Woodstown National Bank & Trust Company ("WNB") to be held on
January 22, 1997, at 11:00 a.m., at the Salem County Sportsmen's Club, Inc.,
Route 40, Carney's Point, New Jersey.
At the Meeting, holders of all outstanding shares of Common Stock, par
value $0.22 per share (the "Shares"), of WNB will be asked to consider and vote
upon a proposal to approve the merger (the "Merger") of WNB and a subsidiary of
Fulton Financial Corporation ("FFC"), in accordance with the terms of the Merger
Agreement dated September 30, 1996, as amended as of November 1, 1996, between
WNB and FFC (the "Merger Agreement"). Following the Merger, the resulting bank
will operate as a wholly-owned subsidiary of FFC under the name "The Woodstown
National Bank & Trust Company." Pursuant to the Merger Agreement, each Share
outstanding at the effective date of the Merger will automatically be converted
into the right to receive 1.60 shares of FFC's Common Stock, and cash will be
paid in lieu of fractional shares. Consummation of the Merger is subject to
certain conditions, including the approval of the merger by various regulatory
agencies and approval of the WNB shareholders as described below.
The Board of Directors of WNB has approved and declared the Merger
advisable and recommends that the shareholders of WNB vote in favor of the
Merger Agreement.
It is very important that you be represented at the meeting, regardless of
whether you plan to attend in person. The affirmative vote of two-thirds of the
outstanding shares of WNB Common Stock will be required to approve the Merger
Agreement. Consequently, your failure to vote would have the same effect as a
vote against the Merger. You are therefore urged to execute and return the
enclosed proxy card in the enclosed postage-paid envelope as soon as possible to
ensure your shares will be voted at the Meeting.
Sincerely yours,
Samuel H. Jones, Jr.
Chairman of the Board
<PAGE>
The Woodstown National Bank & Trust Company
One South Main Street
Woodstown, New Jersey 08098
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To be Held January 22, 1997
To the Shareholders of
The Woodstown National Bank & Trust Company:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of The
Woodstown National Bank & Trust Company ("WNB") will be held at The Salem County
Sportsmen's Club, Inc., Route 40, Carney's Point, New Jersey, on January 22,
1997, at 11:00 a.m. local time, for the following purposes:
(1) To consider and vote upon a proposal to approve the merger (the
"Merger") of WNB and a subsidiary of Fulton Financial Corporation ("FFC"), in
accordance with the terms of the Merger Agreement dated September 30, 1996, as
amended as of November 1, 1996, between WNB and FFC (a copy of which, without
exhibits or schedules, is attached to the accompanying Proxy
Statement/Prospectus as Exhibit A). In the Merger, each of the outstanding
shares of Common Stock, par value $0.22 per share (the "Shares"), of WNB will
automatically be converted into the right to receive 1.60 shares of FCC's Common
Stock. Following the Merger, the resulting bank will operate as a wholly-owned
subsidiary of FFC under the name "The Woodstown National Bank & Trust Company."
The Merger is more fully described in the accompanying Proxy Statement; and
(2) To transact such other business as may properly come before the Special
Meeting or any adjournments thereof, including, without limitation, a motion to
adjourn or postpone the Meeting to another time and place for the purpose of
soliciting additional proxies in favor of the Merger Agreement or otherwise .
The Board of Directors has fixed the close of business on December 11,
1996, as the record date for the Special Meeting. Only those persons who are
record holders of WNB Common Stock at such date will be entitled to notice of,
and to vote at, the Special Meeting and any adjournment thereof. The attached
Proxy Statement/Prospectus forms a part of this Notice and is incorporated
herein by reference.
THE AFFIRMATIVE VOTE OF THE HOLDERS OF TWO-THIRDS OF THE OUTSTANDING SHARES
OF COMMON STOCK OF WNB ENTITLED TO VOTE THEREON WILL BE REQUIRED TO ADOPT THE
MERGER AGREEMENT PROVIDING FOR THE MERGER OF WNB WITH A SUBSIDIARY OF FFC.
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, THE BOARD OF DIRECTORS
URGES YOU TO MARK, SIGN, DATE AND RETURN AS SOON AS POSSIBLE THE ENCLOSED PROXY
IN THE ENCLOSED ENVELOPE. GIVING THE PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN
PERSON IF YOU ATTEND THE MEETING.
By order of the Board of Directors
Ralph Homan
Secretary
Woodstown, New Jersey
December 13, 1996
<PAGE>
PROXY STATEMENT/PROSPECTUS
--------------------------
FULTON FINANCIAL CORPORATION
ONE PENN SQUARE
P.O. BOX 4887
LANCASTER, PENNSYLVANIA 17604
(717) 291-2411
----------------------------------
THE WOODSTOWN NATIONAL BANK & TRUST COMPANY
One South Main Street
WOODSTOWN, NEW JERSEY 08098
(609) 769-0040
----------------------------------
This Proxy Statement/Prospectus relates to (i) the Special Meeting of
Shareholders (the "Special Meeting") of The Woodstown National Bank & Trust
Company ("WNB") to be held on January 22, 1997, and (ii) the issuance of up to
2,880,000 shares of the $2.50 par value common stock of Fulton Financial
Corporation ("FFC") to be issued in connection with, and conditioned upon, the
effectiveness of the merger of WNB with a subsidiary of FFC (the "Merger"). The
Merger is described more fully in this Proxy Statement/Prospectus.
----------------------------------
No person has been authorized to give any information or to make any
representation not contained in this Proxy Statement/Prospectus and, if given or
made, such information or representation must not be relied upon as having been
authorized. This Proxy Statement/Prospectus does not constitute an offer to any
person to exchange or sell, or a solicitation from any person of an offer to
exchange or purchase, the securities offered by this Proxy Statement/Prospectus,
or the solicitation of a proxy from any person, in any jurisdiction in which it
is unlawful to make such an offer or solicitation. Neither the delivery of this
Proxy Statement/Prospectus nor any distribution of the securities to which this
Proxy Statement/Prospectus relates shall under any circumstances create any
implication that the information contained herein is correct at any time
subsequent to the date hereof.
----------------------------------
This Proxy Statement/Prospectus does not cover resales of shares of FFC
Common Stock issued to affiliates of WNB in connection with the Merger described
herein. No such person is authorized to make use of this Proxy
Statement/Prospectus in connection with any such resale.
----------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------------------------
THESE SECURITIES OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER
OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION AND ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
----------------------------------
The date of this Proxy Statement/Prospectus is December 13, 1996.
<PAGE>
AVAILABLE INFORMATION
---------------------
FFC is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "1934 Act"), and in accordance therewith FFC files
periodic reports, proxy statements and other information with the Securities and
Exchange Commission (the "SEC"). Such periodic reports, proxy statements and
other information may be inspected and copied at the public reference facilities
maintained by the SEC at Judicial Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and also at the Regional Offices of the SEC located at Seven World
Trade Center, Suite 1300, New York, New York 10048; Curtis Center, 601 Walnut
Street, Suite 1005E, Philadelphia, Pennsylvania 19106; and Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material may be obtained, at prescribed rates, by delivering a request to the
Public Reference Section of the SEC at Judicial Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. In addition, the SEC maintains a web site
(http://www.sec.gov) that contains periodic reports, proxy and information
statements and other information regarding companies which are subject to the
reporting requirements of the 1934 Act. FFC Common Stock is listed on the NASDAQ
Stock Market and material as to FFC can also be inspected at the offices of the
National Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006.
THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONTAIN ALL OF THE INFORMATION SET
FORTH IN THE REGISTRATION STATEMENT AND THE RELATED EXHIBITS THAT FFC HAS FILED
WITH THE SEC (CERTAIN PARTS OF WHICH ARE OMITTED IN ACCORDANCE WITH THE RULES
AND REGULATIONS OF THE SEC), AND TO WHICH REFERENCE IS HEREBY MADE. THIS PROXY
STATEMENT/PROSPECTUS IS PART OF THE REGISTRATION STATEMENT AND SUCH REGISTRATION
STATEMENT, INCLUDING EXHIBITS, CAN BE INSPECTED AND COPIED AT THE PUBLIC
REFERENCE FACILITIES MAINTAINED BY THE SEC LISTED ABOVE. THIS PROXY
STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. FFC WILL PROVIDE WITHOUT CHARGE, UPON THE WRITTEN
OR ORAL REQUEST OF ANY PERSON TO WHOM THIS PROXY STATEMENT/ PROSPECTUS IS
DELIVERED, A COPY OF ANY AND ALL DOCUMENTS (OTHER THAN EXHIBITS TO SUCH
DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO
SUCH DOCUMENTS) WHICH HAVE BEEN INCORPORATED BY REFERENCE HEREIN. SUCH REQUESTS
SHOULD BE DIRECTED TO WILLIAM R. COLMERY, SECRETARY, FULTON FINANCIAL
CORPORATION, ONE PENN SQUARE, P.0. BOX 4887, LANCASTER, PENNSYLVANIA 17604,
TELEPHONE: (717) 291-2852. IN ORDER TO INSURE TIMELY DELIVERY OF SUCH DOCUMENTS,
ANY SUCH REQUEST SHOULD BE MADE BY JANUARY 8, 1997.
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
-----------------------------------------------
The following documents and information are hereby incorporated by
reference into this Proxy Statement/Prospectus:
1. FFC's Annual Report on Form 10-K for the year ended December 31, 1995.
2. FFC's Quarterly Reports on Form 10-Q for the quarters ended March 31,
1996, June 30, 1996 and September 30, 1996.
3. FFC's Current Reports on Form 8-K dated February 29, 1996, April 16,
1996 and October 7, 1996.
All documents filed by FFC pursuant to Sections 13(a), 13(c), 14, or 15(d)
of the 1934 Act after the date of this Proxy Statement/Prospectus and prior to
the Annual Meeting are hereby incorporated by reference into this Proxy
Statement/Prospectus and shall be deemed a part hereof from the date of filing
of each such document. Any statement contained in a document incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Proxy Statement/Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which is also incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Proxy Statement/Prospectus.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
SUMMARY................................................................... 1
- -------
The WNB Special Meeting.............................................. 1
-----------------------
Purpose of the Meeting............................................... 1
----------------------
The Parties.......................................................... 1
-----------
Required Vote........................................................ 2
-------------
Terms of the Merger.................................................. 2
-------------------
Conversion and Exchange of Shares of WNB Common Stock................ 3
-----------------------------------------------------
Reasons for the Merger............................................... 3
----------------------
Opinion of WNB's Financial Advisor................................... 4
----------------------------------
Management and Operations Following the Merger....................... 4
----------------------------------------------
Effective Date....................................................... 5
--------------
Termination of the Merger Agreement.................................. 5
-----------------------------------
Comparison of Shareholder Rights..................................... 5
--------------------------------
Restrictions on Resales by Affiliates................................ 5
-------------------------------------
Federal Income Tax Consequences...................................... 5
-------------------------------
Accounting Treatment................................................. 6
--------------------
Dissenters' Rights................................................... 6
------------------
Limitations on Negotiations; Warrant Granted to FFC.................. 6
---------------------------------------------------
Conditions and Amendments............................................ 7
-------------------------
Comparative Stock Prices............................................. 7
------------------------
Selected Historical and Pro Forma Combined Per Share Data.............. 8
---------------------------------------------------------
Selected Historical Financial Data................................... 14
----------------------------------
GENERAL INFORMATION--SPECIAL MEETING OF WNB SHAREHOLDER................... 19
- -------------------------------------------------------
Introduction......................................................... 19
------------
Date, Time and Place of Special Meeting.............................. 19
---------------------------------------
Shareholders Entitled to Vote........................................ 19
-----------------------------
Purpose of Meeting................................................... 19
------------------
Solicitation of Proxies.............................................. 19
-----------------------
Quorum and Required Vote............................................. 19
------------------------
Revocation and Voting of Proxies..................................... 20
--------------------------------
Shares Outstanding and Principal Holders Thereof..................... 20
------------------------------------------------
Interests of Certain Persons in Matters To Be Acted Upon............. 21
--------------------------------------------------------
Recommendation of the Board of Directors of WNB...................... 22
-----------------------------------------------
THE FFC/WNB MERGER........................................................ 23
- ------------------
General Information.................................................. 23
-------------------
Background of the Merger............................................. 24
------------------------
Reasons for the Merger; Recommendation of WNB Board.................. 25
---------------------------------------------------
Additional Reasons for the Merger.................................... 26
---------------------------------
Opinion of Financial Advisor to The Woodstown National Bank & Trust
-------------------------------------------------------------------
Company......................................................... 28
-------
Discounted Cash Flow Analysis........................................ 32
-----------------------------
Conversion and Exchange of Shares.................................... 34
---------------------------------
Business Pending The Effective Date.................................. 36
-----------------------------------
Conditions, Amendment and Termination................................ 37
-------------------------------------
Effective Date of the Merger......................................... 38
----------------------------
Management and Operations Following the Merger....................... 38
----------------------------------------------
Federal Income Tax Consequences...................................... 39
-------------------------------
Accounting Treatment................................................. 40
--------------------
Rights of Dissenting Shareholders.................................... 41
---------------------------------
Restrictions on Resale of FFC Common Stock Held By Affiliates of
----------------------------------------------------------------
WNB............................................................. 42
---
Warrant Agreement.................................................... 43
-----------------
COMPARATIVE STOCK PRICES AND DIVIDENDS AND RELATED--SHAREHLDER MATTER..... 45
- ---------------------------------------------------------------------
Common Stock of FFC.................................................. 45
-------------------
Common Stock of WNB.................................................. 45
-------------------
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
PRO FORMA COMBINED FINANCIAL INFORMATION.................................. 46
- ----------------------------------------
INFORMATION CONCERNING FULTON FINANCIAL CORPORATION
- ---------------------------------------------------
AND DESCRIPTION OF FFC COMMON STOCK..................................... 59
-----------------------------------
General.............................................................. 59
-------
Loan Policies and Portfolio Quality.................................. 60
-----------------------------------
Legal Proceedings.................................................... 61
-----------------
General Description of FFC Common Stock.............................. 61
---------------------------------------
Dividends............................................................ 61
---------
Dividend Reinvestment Plan........................................... 62
--------------------------
Securities Laws...................................................... 62
---------------
Antitakeover Provisions.............................................. 63
-----------------------
Indemnification...................................................... 64
---------------
Comparison of Shareholder Rights..................................... 64
--------------------------------
INFORMATION CONCERNING THE WOODSTOWN NATIONAL BANK & TRUST COMPANY........ 67
- ------------------------------------------------------------------
Description of Business and Property................................. 67
------------------------------------
WNB Common Stock Market Price and Dividends.......................... 67
-------------------------------------------
Information About Directors and Executive Officers................... 68
--------------------------------------------------
Selected Historical Financial Data................................... 68
----------------------------------
WNB Supplementary Financial Information
---------------------------------------
Financial Statements for the Interim Period Ended
-------------------------------------------------
September 30, 1996............................................... 71
------------------
Management's Discussion and Analysis of Financial Condition
-----------------------------------------------------------
and Results of Operations for the Interim Period Ended
------------------------------------------------------
September 30, 1996............................................. 75
------------------
Merger Activity.................................................. 75
---------------
Results of Operations............................................ 75
---------------------
Net Interest Income.............................................. 75
-------------------
Provision and Allowance for Loan Losses.......................... 76
---------------------------------------
Other Income..................................................... 77
------------
Other Expenses................................................... 77
--------------
Income Taxes..................................................... 77
------------
Net Interest Income.............................................. 78
-------------------
Provision and Allowance for Loan Losses.......................... 79
---------------------------------------
Other Income..................................................... 79
------------
Other Expenses................................................... 79
--------------
Income Taxes..................................................... 79
------------
Financial Condition.............................................. 79
-------------------
Additional Statistical Disclosure................................ 81
---------------------------------
Quarterly Consolidated Results of Operations..................... 85
--------------------------------------------
EXPERTS................................................................... 86
- -------
LEGAL MATTERS............................................................. 86
- -------------
ADDITIONAL INFORMATION.................................................... 86
- ----------------------
OTHER MATTERS............................................................. 86
- -------------
</TABLE>
<TABLE>
<CAPTION>
EXHIBITS
<S> <C>
Exhibit A - Merger Agreement........................................ A-1
Exhibit B - Opinion of McConnell, Budd & Downes..................... B-1
Exhibit C - Warrant Agreement and Warrant........................... C-1
Exhibit D - Statute Relating to Dissenters' Rights.................. D-1
Exhibit E - 1995 and 1994 Annual Reports to Shareholders of The
Woodstown National Bank & Trust Company................ E-1
</TABLE>
ii
<PAGE>
SUMMARY
-------
The following is a summary of certain information set forth in this Proxy
Statement/Prospectus regarding the Merger between WNB and a subsidiary of FFC.
This summary is provided for convenience only and does not set forth completely
all material features of the Merger. This summary should be read in conjunction
with and is qualified in its entirety by the more detailed information which is
set forth elsewhere in this Proxy Statement/Prospectus and the attached Exhibits
or which is incorporated herein by reference.
The WNB Special Meeting
-----------------------
A Special Meeting of the shareholders of WNB will be held on January 22,
1997, at 11:00 a.m., local time, at the Salem County Sportsmen's Club, Inc.,
Route 40, Carney's Point, New Jersey. Only those shareholders of record at the
close of business on December 11, 1996, will be entitled to receive notice of
and to vote at the meeting. As of the record date, there were outstanding
1,800,000 shares of the common stock, par value $0.22 per share, of WNB ("WNB
Common Stock"), each of which is entitled to one vote. See GENERAL INFORMATION--
SPECIAL MEETING OF WNB SHAREHOLDERS.
Purpose of the Meeting
----------------------
The shareholders of WNB will be asked at the Special Meeting to consider
and vote upon a proposal to approve and adopt the Merger Agreement, dated
September 30, 1996, as amended as of November 1, 1996, between FFC and WNB,
under the terms of which (i) FFC will organize a national banking association
("WNB Interim National Bank") as a wholly-owned subsidiary of FFC and cause WNB
Interim National Bank to become a party to the Merger Agreement, (ii) WNB will
be merged with and into WNB Interim National Bank, (iii) WNB Interim National
Bank will survive the Merger and operate as a wholly-owned subsidiary of FFC
after the Merger under the name "The Woodstown National Bank & Trust Company"
(all references to WNB in this Prospectus/Proxy Statement with respect to
matters after the Merger shall be deemed to refer to such resulting bank), and
(iv) all of the outstanding shares of WNB Common Stock, par value $.22 per
share, will be converted into shares of the common stock of FFC, par value $2.50
per share ("FFC Common Stock"). WNB's shareholders will receive cash in lieu of
fractional shares of FFC Common Stock. See THE FFC/WNB MERGER. The Merger
Agreement, dated September 30, 1996, as amended as of November 1, 1996, between
FFC and WNB, without exhibits or schedules (the "Merger Agreement"), is attached
as Exhibit A to this Proxy Statement/Prospectus.
The Parties
-----------
Fulton Financial Corporation: Fulton Financial Corporation ("FFC") is a
----------------------------
Pennsylvania business corporation and a registered bank holding company that
maintains its headquarters in Lancaster, Pennsylvania. As a bank holding
company, FFC engages in a general commercial and retail banking and trust
business, and also in related financial businesses, through its thirteen
directly-held bank and nonbank subsidiaries. FFC's bank subsidiaries currently
operate eighty-five banking offices in Pennsylvania, fifteen banking offices in
Maryland, seven banking offices in Delaware, and seven banking offices in New
Jersey. As of September 30, 1996, FFC had consolidated total assets of
approximately $3.7 billion.
The principal assets of FFC are the following nine wholly-owned bank
subsidiaries, each of which is a bank whose deposits are insured by the Federal
Deposit Insurance Corporation ("FDIC"): (i) Fulton Bank, a Pennsylvania bank
and trust company which is not a member of the Federal Reserve System, (ii)
Farmers Trust Bank, a Pennsylvania bank and trust company which is a member of
the Federal Reserve System, (iii) Swineford National
1
<PAGE>
Bank, a national banking association which is a member of the Federal Reserve
System, (iv) Lafayette Bank, a Pennsylvania bank and trust company which is not
a member of the Federal Reserve System, (v) FNB Bank, National Association, a
national banking association which is a member of the Federal Reserve System,
(vi) Great Valley Savings Bank, a Pennsylvania stock savings bank which is not a
member of the Federal Reserve System, (vii) Hagerstown Trust Company, a Maryland
trust company which is not a member of the Federal Reserve System, (viii)
Delaware National Bank, a national banking association which is a member of the
Federal Reserve System, and (ix) The Bank of Gloucester County, a New Jersey
bank which is not a member of the Federal Reserve System. In addition, FFC has
four wholly-owned nonbank direct subsidiaries: (1) Fulton Financial Realty
Company, which holds title to or leases certain properties on which Fulton Bank
and Farmers Trust Bank maintain branch offices or other facilities, (2) Fulton
Life Insurance Company, which engages in the business of reinsuring credit life,
accident and health insurance that is directly related to extensions of credit
by FFC's bank subsidiaries, (3) Central Pennsylvania Financial Corp., which owns
certain non-banking subsidiaries holding interests in real estate and certain
limited partnership interests in partnerships invested in low and moderate
income housing projects and (4) FFC Management, Inc., which owns certain
securities.
The principal executive offices of FFC are located at One Penn Square, P.O.
Box 4887, Lancaster, Pennsylvania 17604, and FFC's telephone number is
(717) 291-2411.
The Woodstown National Bank & Trust Company: The Woodstown National Bank &
-------------------------------------------
Trust Company ("WNB") is a national banking association that maintains its
headquarters in Woodstown, New Jersey. WNB operates six banking offices in
Salem and Gloucester Counties, New Jersey. WNB is an FDIC-insured bank and is a
member of the Federal Reserve System. As of September 30, 1996, WNB had total
consolidated assets of approximately $255 million, and held total deposits of
approximately $230 million.
Woodstown Investment Company ("WIC") is a Delaware business corporation
which is a wholly-owned subsidiary of WNB.
The principal executive offices of WNB are located at One South Main
Street, Woodstown, New Jersey 08098, and WNB's telephone number is
(609) 769-0040.
Required Vote
-------------
The affirmative vote of shareholders holding at least two-thirds of the
issued and outstanding shares of WNB Common Stock given at a duly convened
meeting of the shareholders of WNB is required in order to approve the Merger
Agreement. As of December 11, 1996, the directors and executive officers of
WNB and their affiliates owned beneficially approximately 46.4 percent of the
outstanding shares of WNB Common Stock. WNB understands that the executive
officers, and all of the directors of WNB who voted for the Merger, who own WNB
Common Stock representing approximately 37.8 percent of the outstanding Shares
of WNB Common Stock, presently intend to vote (in their respective capacities as
shareholders of WNB) their shares of WNB Common Stock in favor of the proposal
to adopt the Merger Agreement. As of December 11, 1996 the directors and
executive officers of FFC and their affiliates did not own any shares of WNB
Common Stock. See GENERAL INFORMATION--SPECIAL MEETING OF WNB SHAREHOLDERS--
Shares Outstanding and Principal Holders Thereof; and INFORMATION CONCERNING THE
WOODSTOWN NATIONAL BANK & TRUST COMPANY.
Terms of the Merger
-------------------
Under the terms of the Merger Agreement: (i) FFC will organize a national
banking association ("WNB Interim National Bank") as a wholly-owned subsidiary
of FFC and cause WNB Interim National Bank to become a party to the Merger
2
<PAGE>
Agreement, (ii) WNB will be merged with and into WNB Interim National Bank,
(iii) WNB Interim National Bank will survive the Merger and operate as a wholly-
owned subsidiary of FFC after the Merger under the name "The Woodstown National
Bank & Trust Company," and (iv) each of the outstanding shares of WNB Common
Stock will be converted into 1.60 shares of the common stock of FFC, par value
$2.50 per share ("FFC Common Stock"). WNB's shareholders will receive cash in
lieu of fractional shares of FFC Common Stock. See THE FFC/WNB MERGER.
Conversion and Exchange of Shares of WNB Common Stock
-----------------------------------------------------
On the effective date of the Merger (the "Effective Date"), which is
expected to occur during the first quarter of 1997, each share of WNB Common
Stock then issued and outstanding will be converted into the right to receive
1.60 shares (the "Conversion Ratio") of FFC Common Stock.
The Conversion Ratio is subject to adjustment in the event of a stock
dividend or similar transaction involving FFC Common Stock prior to the
Effective Date. No fractional shares of FFC Common Stock will be issued in
connection with the Merger. In lieu of the issuance of any fractional share to
which any former WNB shareholder would otherwise be entitled, each such former
shareholder of WNB will receive in cash an amount equal to the fair market value
of his or her fractional interest, which shall be determined by multiplying such
fraction by the Closing Market Price. The Closing Market Price is defined in
the Merger Agreement as the average of the per share closing bid prices for FFC
Common Stock, rounded up to the nearest $.125, for the ten (10) trading days
immediately preceding the date which is two (2) business days before the
Effective Date of the Merger, as reported on the NASDAQ National Market. See
THE FFC/WNB MERGER.
Each former shareholder of WNB will be required to surrender to FFC the
certificates representing WNB Common Stock held by him or her in accordance with
the instructions which will be sent to him or her immediately following the
Effective Date. Upon proper surrender of his or her WNB Common Stock
certificates, each such former shareholder of WNB will be promptly issued a
stock certificate representing the whole number of shares of FFC Common Stock
into which such shareholder's shares of WNB Common Stock shall have been
converted, together with a check in the amount of any cash, without interest, to
which he or she is entitled in lieu of the issuance of a fractional share. FFC
may withhold dividends payable after the Effective Date to any former
shareholder of WNB who has received written instructions from FFC but has not at
that time surrendered his or her WNB Common Stock certificates. Any dividends
so withheld will be paid, without interest, to any such former shareholder of
WNB upon the proper surrender of his or her WNB Common Stock certificates. See
THE FFC/WNB MERGER--Conversion and Exchange of Shares, and the Merger Agreement
attached as Exhibit A to this Proxy Statement/Prospectus. PLEASE DO NOT SEND
ANY STOCK CERTIFICATES AT THIS TIME.
Reasons for the Merger
----------------------
The Boards of Directors of FFC and WNB have determined that the Merger is
in the best interests of both organizations. In the case of FFC, the acquisition
of WNB will enable FFC to expand its operations in New Jersey. FFC considers New
Jersey to be an attractive area for expansion of its business and believes that
the acquisition of WNB will result in a favorable diversification of FFC's
assets and earnings. FFC believes WNB's market is similar to many of the markets
that FFC's subsidiary banks currently serve, i.e., markets with a strong small
business component.
WNB's Board of Directors has concluded that, in the rapidly changing and
increasingly competitive market for financial services, it can compete more
effectively as part of a larger banking organization with more resources and a
wider range of products and services than those which WNB currently offers.
3
<PAGE>
Through the Merger, WNB believes it can expand its resources and its range of
products and services on an accelerated timetable as compared to reliance solely
on internal growth. In general, therefore, one reason WNB is entering into the
Merger is because it believes it can better maximize its shareholders' return
through an affiliation with a larger, more diversified financial institution.
WNB's Board of Directors believes that FFC's greater resources will enable WNB
to remain competitive and to offer expanded services to its customers and the
communities it serves. In particular, WNB believes FFC's strong small business
services will further enhance WNB's reputation in this area.
In addition, the Merger with FFC will increase the liquidity of the stock
held by WNB's shareholders by exchanging it for stock in a larger banking
organization that is listed on the NASDAQ National Market. FFC anticipates that
WNB will retain a strong degree of autonomy which will enable it to preserve its
commitment to community-oriented banking.
In considering the Merger, WNB's Board of Directors considered, among other
things, the financial terms of the Merger, the structure of the transaction, the
historic and financial performance of FFC and the opinion of its financial
advisors as to the fairness of the transaction, from a financial point of view,
to WNB shareholders.
See THE FFC/WNB MERGER--Background of the Merger; Reasons for the Merger;
Recommendations of the WNB Board; and Additional Reasons for the Merger.
Opinion of WNB's Financial Advisor
----------------------------------
WNB engaged McConnell, Budd & Downes, Inc. to act as its financial advisor
for the purpose of evaluating the financial terms of the Merger. McConnell, Budd
& Downes has delivered to WNB's Board of Directors an opinion stating that the
Merger is fair to the shareholders of WNB from a financial point of view. A copy
of McConnell, Budd & Downes' opinion is attached to this Proxy
Statement/Prospectus as Exhibit B and should be read in its entirety with
respect to the assumptions made and the other matters considered by McConnell,
Budd & Downes in rendering its opinion. See THE FFC/WNB MERGER--Opinion of
Financial Advisor.
Management and Operations Following the Merger
----------------------------------------------
Under the terms of the Merger Agreement, WNB will merge with and into WNB
Interim National Bank and WNB Interim National Bank will survive the Merger and
operate as a wholly-owned banking subsidiary of FFC under the name "The
Woodstown National Bank & Trust Company." Following the Merger, the Board of
Directors of FFC will consist of (i) the same persons who are members of the
Board of Directors of FFC immediately before the Merger, each of whom will serve
until his or her successor is elected and has qualified, and (ii) a director of
WNB, designated (subject to reasonable approval by FFC) by vote of WNB's Board
of Directors prior to the Effective Date. Under the terms of the Merger
Agreement, for a period of five years after the Effective Date of the Merger,
the FFC Board of Directors shall nominate such designee for election, and
support his or her election, at each annual meeting of shareholders of FFC at
which such designee's term expires. During such period, if such designee ceases
to serve as a director of FFC, the Board of Directors of WNB shall have the
right to designate one other person to serve as a director of FFC, subject to
the concurrence of FFC as to the person designated.
Immediately following the Merger, the Board of Directors of WNB will
consist of the same persons who are members of the Board of Directors of WNB
immediately before the Merger, each of whom will serve until his or her
successor is elected and has qualified.
4
<PAGE>
Effective Date
--------------
As soon as reasonably practicable after all applicable conditions to the
consummation of the Merger have been met or waived, FFC and WNB will inform the
Office of the Comptroller of the Currency (the "OCC") of the planned
consummation date of the Merger and submit the required documentation for
consummation. FFC and WNB presently intend to consummate the Merger during the
first quarter of 1997, assuming that WNB's shareholders adopt the Merger
Agreement, all required regulatory approvals are obtained, all applicable
waiting periods have expired, and all other conditions have been met or waived
as of the closing of the Merger. See THE FFC/WNB MERGER--Effective Date.
Termination of the Merger Agreement
-----------------------------------
Either FFC or WNB may terminate the Merger Agreement and cancel the Merger
if (i) the other party has committed a material breach of any representation,
warranty or covenant contained in the Merger Agreement and has not cured such
breach within thirty (30) days after receiving written notice thereof, or (ii)
all applicable conditions have not been satisfied by September 30, 1997. FFC and
WNB may also terminate the Merger Agreement and cancel the Merger by mutual
consent in writing. WNB may terminate the Merger Agreement and cancel the Merger
if the Closing Market Price of FFC Common Stock is equal to or less than $12.00.
See THE FFC/WNB MERGER--Conditions, Amendment and Termination.
Comparison of Shareholder Rights
--------------------------------
Upon consummation of the Merger, the shareholders of WNB will become
shareholders of FFC. There are differences between the rights of holders of WNB
Common Stock and FFC Common Stock. These differences arise from (i) differences
between the respective state and federal laws applicable to WNB and FFC, and
(ii) differences between the Articles of Association and Bylaws of WNB and the
Articles of Incorporation and Bylaws of FFC. The material differences between
WNB Common Stock and FFC Common Stock include the following: (i) FFC has
adopted a Shareholder Rights Plan, which provides FFC's shareholders with
certain stock-related rights in the event of a hostile takeover, but may also
have the effect of discouraging such a takeover, while WNB has not adopted any
such plan; and (ii) FFC Common Stock is registered under the 1934 Act and is
traded on the NASDAQ National Market, while WNB Common Stock is not registered
under the 1934 Act and is not actively traded in an organized market. See
INFORMATION CONCERNING FULTON FINANCIAL CORPORATION AND DESCRIPTION OF FFC
COMMON STOCK--Antitakeover Provisions; Comparison of Shareholder Rights.
Restrictions on Resales by Affiliates
-------------------------------------
The resale of shares of FFC Common Stock received in connection with the
Merger by persons who are executive officers, directors or ten percent
shareholders of WNB will be subject to certain restrictions. See THE FFC/WNB
MERGER--Restrictions on Resale of FFC Common Stock Held by Affiliates of WNB.
Federal Income Tax Consequences
-------------------------------
The Merger is structured to qualify as a tax-free reorganization under
Section 368 of the Internal Revenue Code of 1986, as amended. Accordingly, no
taxable gain or loss will be recognized by the shareholders of WNB upon their
receipt of FFC Common Stock in exchange for WNB Common Stock, except to the
extent that any shareholders of WNB receive cash in lieu of the issuance of
fractional shares of FFC Common Stock. An opinion has been provided by Barley,
Snyder, Senft & Cohen, counsel for FFC, confirming these and certain
5
<PAGE>
other federal income tax consequences of the Merger. However, each shareholder
of WNB is urged to consult his or her own tax advisor concerning the particular
tax consequences of the Merger as they affect his or her individual
circumstances. See THE FFC/WNB MERGER--Federal Income Tax Consequences.
Accounting Treatment
--------------------
Consummation of the Merger is subject to the condition that the Merger can
be treated as a pooling-of-interests for financial accounting purposes. FFC
currently intends to exercise its right to cancel the Merger if such condition
could not be satisfied. FFC shall not have the right to terminate the Merger
Agreement, however, if the inability to use "pooling-of-interest" accounting
treatment is due solely to actions by FFC taken after the date of the Merger
Agreement. See THE FFC/WNB MERGER--Accounting Treatment.
Dissenters' Rights
------------------
The shareholders of WNB are entitled to exercise dissenters' rights,
assuming the Merger is consummated, in accordance with the provisions of Section
215(a) of the U.S. Code. FFC has the right to terminate the Merger Agreement if
WNB shareholders exercise dissenters' rights with respect to 10% or more of the
WNB Common Stock. Additionally, the exercise of such rights by holders of an
aggregate of 10% or more of the WNB Common Stock could affect the ability of FFC
to use "pooling-of-interest" accounting treatment. Therefore, each of the
executive officers and directors of WNB has signed an agreement not to exercise
dissenters' rights in connection with the Merger. See THE FFC/WNB MERGER--Rights
of Dissenting Shareholders and Exhibit D -Statute Relating to Dissenters'
Rights.
Limitations on Negotiations; Warrant Granted to FFC
---------------------------------------------------
The Merger Agreement provides that WNB shall not, nor shall it permit any
officer, director, employee, agent, consultant or representative to: (a)
solicit, initiate or encourage any proposal for a merger with or other
acquisition of WNB or WIC, or any material portion of their assets or
properties, with or by any person other than FFC; or (b) cooperate with, or
furnish any non-public information concerning WNB or WIC to, any person in
connection with such a proposal; provided, however, that the WNB Board of
Directors shall be free to take such action as the Board of Directors
determines, in good faith, that in the exercise of its fiduciary duties, after
receipt of a written opinion of outside counsel, is required in the best
interests of WNB and its shareholders.
Simultaneously with the execution of the Merger Agreement, WNB and FFC
entered into a Warrant Agreement, dated September 30, 1996 (the "Warrant
Agreement"), a copy of which is attached hereto as Exhibit C. Pursuant to the
Warrant Agreement, WNB has issued to FFC a warrant (the "Warrant") to purchase
an aggregate of up to 358,200 shares of WNB Common Stock fully paid and non-
assessable shares of WNB Common Stock, representing 19.9% of the issued and
outstanding shares of the WNB Common Stock, at a price per share equal to
$24.00, the price at which WNB Common Stock had recently traded prior to the
date of execution of the Warrant Agreement, subject to adjustment as provided
for in the Warrant Agreement and the Warrant. The Warrant is exercisable only
upon the occurrence of specified events relating generally to the support by WNB
of a proposal to acquire WNB by a party other than FFC, an acquisition by a
third party or group of 25% or more of the outstanding shares of WNB Common
Stock, or the failure of WNB's shareholders to approve the Merger following the
announcement by any party other than FFC of an offer or proposal to acquire 25%
or more of the outstanding shares of WNB Common Stock. To the
6
<PAGE>
knowledge of WNB, no event giving rise to the right to exercise the Warrant has
occurred as of the date of this Proxy Statement/Prospectus. The execution of the
Warrant Agreement was required by FFC as a condition to its execution of the
Merger Agreement, and the effect of the Warrant Agreement is to increase the
likelihood that the Merger will occur by making it more difficult and expensive
for another party to acquire WNB. See THE FFC WNB MERGER--Warrant Agreement.
The foregoing provisions may have the effect of discouraging competing
offers to acquire or merge with WNB.
Conditions and Amendments
-------------------------
Consummation of the Merger is subject to various conditions and
contingencies, including, among others, approval by the shareholders of WNB,
approval by the Federal Reserve Board, approval by the Office of the Comptroller
of the Currency, approval by the New Jersey Department of Banking, notice to the
Maryland State Bank Commissioner, and the absence of an injunction issued by a
court of competent jurisdiction enjoining the performance by FFC or WNB of any
of their obligations under the Merger Agreement.
To the extent permitted by law, the Merger Agreement may be amended at any
time before the Effective Date by a written instrument duly authorized, executed
and delivered by FFC and WNB; provided, however, that any amendment to the
Conversion Ratio shall not take effect until such amendment has been approved,
adopted or ratified by the shareholders of WNB in accordance with applicable
law. See THE FFC/WNB MERGER--Conditions, Amendment and Termination.
Comparative Stock Prices
------------------------
On September 27, 1996, the last trading day before public announcement of
the Merger Agreement, the per share closing bid and asked quotations for FFC
Common Stock were $20.00 and $20.50, respectively, as reported on the NASDAQ
National Market ("NASDAQ"). The pro forma equivalent per share closing bid and
asked quotations for such date, based on an exchange ratio of 1.60 shares of FFC
Common Stock for each share of WNB Common Stock, were $32.00 and $32.80,
respectively.
WNB Common Stock has historically been traded on an extremely limited
basis. Bid quotations are published by Ryan, Beck & Co., Monroe Securities and
F. J. Morrissey. The two most recent trades known to management occurred in
April 1996 and November 1996, both sales for $25 per share. The following table
sets forth bid quotations for the WNB Common Stock as of September 27, 1996
(there were no asked quotations available):
7
<PAGE>
<TABLE>
<CAPTION>
====================================
BID PRICE
09/27/96
====================================
<S> <C>
Ryan, Beck & Co. $26.25
Robert Carmichel
(800) 395-7926
------------------------------------
Monroe Securities $25.00
Helen Rubens
(800) 766-5560
------------------------------------
F. J. Morrissey $21.50
Tom Morrissey
(800) 842-8928
====================================
</TABLE>
The foregoing historical and pro forma equivalent per share market
information is summarized in the following table:
<TABLE>
<CAPTION>
Pro Forma
Historical Equivalent
Price Per Share Price Per Share
--------------- ---------------
<S> <C> <C>
FFC Common Stock
- ----------------
09/27/96 Bid Price $20.00 $32.00/1/
09/27/96 Asked Price $20.50 $32.80
WNB Common Stock
- ----------------
09/27/96 Bid Price/2/ $24.25
09/27/96 Asked Price/3/ $ -
</TABLE>
- ------------------------------------
/1/ Based upon the product of the Conversion Ratio (1.60) and the closing
price of FFC common stock on September 27, 1996 ($20.00).
/2/ Represents an average of the bid prices quoted by the three market makers
for the WNB Common Stock.
/3/ No asked price was available on these dates.
The closing bid and asked quotations on NASDAQ for FFC Common Stock on
December 9, 1996, were $21.00 and $21.75, respectively, per share, and the
closing sale price was $21.375 per share. The most recent sale price known to
management for WNB Common Stock immediately prior to September 30, 1996, was
$25.00 per share. More detailed information concerning comparative stock prices
is set forth elsewhere in this Proxy Statement/Prospectus. See COMPARATIVE
STOCK PRICES AND DIVIDENDS AND RELATED SHAREHOLDER MATTERS.
Selected Historical and Pro Forma Combined Per Share Data
---------------------------------------------------------
The following tables set forth, at the dates and for the periods
indicated, financial information relating to FFC Common Stock and WNB Common
Stock on a per share historical and pro forma combined basis. The pro forma and
equivalent per share information is presented on the
8
<PAGE>
basis of an exchange ratio of 1.60 shares of FFC Common Stock for each share of
WNB Common Stock.
The information set forth in the tables below should be read in conjunction
with the pro forma combined financial information, including the notes thereto,
set forth elsewhere in this Proxy Statement/ Prospectus, the financial
statements of FFC, including the notes thereto, which are incorporated herein by
reference, and the financial statements of WNB, including the notes thereto,
which are set forth elsewhere in this Proxy Statement/Prospectus. See PRO FORMA
COMBINED FINANCIAL INFORMATION; INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE;
INFORMATION CONCERNING THE WOODSTOWN NATIONAL BANK & TRUST COMPANY.
9
<PAGE>
Selected Historical and Pro Forma Combined
Per Share Data (A)
<TABLE>
<CAPTION>
As of and for Nine Months Ended September 30
----------------------------------------------------
FULTON FINANCIAL CORPORATION (FFC)
- ----------------------------------
1996 1995
------------------------
<S> <C> <C>
Historical Per Common Share:
- ----------------------------
Average Shares Outstanding 32,939,454 32,928,042
Book Value $11.36 $10.55
Cash Dividends $0.495 $0.420
Net Income $1.16 $1.08
FFC, WNB Combined Pro Forma Per Common Share:
- ---------------------------------------------
Average Shares Outstanding 35,819,454 35,808,042
Book Value $11.10 $10.32
Cash Dividends $0.482 $0.410
Net Income $1.13 $1.06
- ------------------
</TABLE>
(A) The above combined pro forma per share information is based on average
shares outstanding during the period except for the book value per share
which is based on period end shares outstanding. The number of shares in
each case has been adjusted for stock dividends by each institution through
the period.
10
<PAGE>
Selected Historical and Pro Forma Combined
Per Share Data (A)
<TABLE>
<CAPTION>
FULTON FINANCIAL CORPORATION (FFC)
- ----------------------------------
As of and for the Year Ended December 31
----------------------------------------
1995 1994 1993 1992 1991
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Historical Per Common Share:
- ---------------------------
Average Shares Outstanding 32,918,731 32,693,447 32,387,061 32,030,040 32,246,277
Book Value $10.78 $9.70 $9.18 $8.32 $7.83
Cash Dividends $0.566 $0.501 $0.456 $0.376 $0.351
Income From Operations:
Income Before Cumulative Effect
of Changes in Accounting
Principles $1.44 $1.30 $1.17 $0.86 $0.95
Effect of Changes in Accounting
Principles - - ($0.11) - -
Net Income $1.44 $1.30 $1.06 $0.86 $0.95
FFC, WNB Combined Pro Forma Per Common Share:
- --------------------------------------------
Average Shares Outstanding 35,798,731 35,573,447 35,267,061 34,910,040 35,126,277
Book Value $10.54 $9.49 $8.95 $8.10 $7.61
Cash Dividends $0.554 $0.490 $0.448 $0.373 $0.349
Income From Operations:
Income Before Cumulative Effect
of Changes in Accounting
Principles $1.41 $1.28 $1.16 $0.87 $0.94
Effect of Changes in Accounting
Principles - - ($0.10) - -
Net Income $1.41 $1.28 $1.06 $0.87 $0.94
</TABLE>
(A) The above combined pro forma per share information is based on average
shares outstanding during the period except for the book value per share
which is based on period end shares outstanding. The number of shares in
each case has been adjusted for stock dividends and stock splits by each
institution through the periods.
11
<PAGE>
SELECTED HISTORICAL AND PRO FORMA COMBINED PER SHARE DATA (A)
<TABLE>
<CAPTION>
As of or for the Nine Months Ended September 30
-----------------------------------------------
The Woodstown National Bank & 1996 1995
- ----------------------------- -----------------------------------------------
Trust Company (WNB)
- -------------------
<S> <C> <C>
Historical Per Common Share:
Average Shares Outstanding 1,800,000 1,800,000
Book Value $13.150 $12.21
Cash Dividends $0.540 $0.465
Net Income $1.12 $1.28
WNB, FFC Combined Pro Forma Per
Common Share:
Book Value $17.77 $16.50
Cash Dividends $0.77 $0.66
Net Income $1.81 $1.69
</TABLE>
(A) The above combined pro forma per-share equivalent information is based on
average shares outstanding during the period except for the book value per share
which is based on period end shares outstanding. The number of shares in each
case has been adjusted for stock dividends and stock splits by each institution
through the periods.
12
<PAGE>
SELECTED HISTORICAL AND PRO FORMA COMBINED PER SHARE DATA (A)
<TABLE>
<CAPTION>
For the Years Ended December 31
------------------------------------------------------------
The Woodstown National Bank & Trust Company 1995 1994 1993 1992 1991
- ------------------------------------------- ------------------------------------------------------------
Trust Company (WNB)
- -------------------
<S> <C> <C> <C> <C> <C>
Historical Per Common Share:
Average Shares Outstanding 1,800,000 1,800,000 1,800,000 1,800,000 1,800,000
Book Value $12.56 $11.39 $10.22 $9.11 $8.10
Cash Dividends $0.66 $0.59 $0.57 $0.55 $0.52
Income From Operations:
Income Before Cumulative Effect Of
Changes In Accounting Principles $1.83 $1.75 $1.68 $1.63 $1.33
Effect Of Changes In Accounting Principles - - - ($0.07) -
Net Income $1.83 $1.75 $1.68 $1.56 $1.33
WNB, FFC Combined Pro Forma Per
Common Share:
Book Value $16.87 $15.19 $14.33 $12.95 $12.17
Cash Dividends $0.89 $0.78 $0.72 $0.60 $0.56
Income From Operations:
Income Before Cumulative Effect Of
Changes In Accounting Principles $2.26 $2.05 $1.86 $1.39 $1.50
Effect of Changes in Accounting Principles - - ($0.16) - -
Net Income $2.26 $2.05 $1.70 $1.39 $1.50
</TABLE>
(A) The above combined pro forma per-share equivalent information is based on
average shares outstanding during the period except for the book value per share
which is based on period end shares outstanding. The number of shares in each
case has been adjusted for stock dividends and stock splits by each institution
through the periods.
13
<PAGE>
Selected Historical Financial Data
----------------------------------
The following tables present selected unaudited historical financial data for
FFC and WNB. The following information should be read in conjunction with the
pro forma combined financial information, including the notes thereto, set forth
elsewhere in this Proxy Statement/Prospectus, the financial statements of FFC,
including the notes thereto, which are incorporated herein by reference, and the
financial statements of WNB, including the notes thereto, which are set forth
elsewhere in this Proxy Statement/Prospectus. See PRO FORMA COMBINED FINANCIAL
INFORMATION; INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE; INFORMATION
CONCERNING THE WOODSTOWN NATIONAL BANK & TRUST COMPANY.
14
<PAGE>
Fulton Financial Corporation
Selected Historical Financial Data
(In Thousands)
<TABLE>
<CAPTION>
As of or for the Nine Months Ended September 30
-----------------------------------------------
1996 1995
-----------------------------------------------
<S> <C> <C>
Summary of Operations
- ---------------------
Net interest income $114,859 $107,080
Provision for loan losses 2,794 2,021
-----------------------------------------------
Net interest income after provision
for loan losses 112,065 105,059
Other operating income 23,602 21,271
Other operating expense 81,767 77,214
Income tax expense 15,555 13,446
-----------------------------------------------
Net Income $38,345 $35,670
===============================================
Average Balance Sheet Totals
- ----------------------------
Total assets $3,581,063 $3,355,036
Investment securities and
money market investments 740,107 729,907
Loans and leases
(net of unearned income) 2,578,015 2,369,937
Total deposits 2,961,647 2,803,507
Long-term debt and lease obligations 27,136 30,522
Shareholders' equity 363,854 331,185
Actual Balance at Period End
- ----------------------------
Total assets $3,744,663 $3,472,200
Long-term debt and lease obligations 21,074 35,912
</TABLE>
15
<PAGE>
Fulton Financial Corporation
Selected Historical Financial Data
(In Thousands)
<TABLE>
<CAPTION>
At or for the Year Ended December 31
------------------------------------------------------------------------------
1995 1994 1993 1992 1991
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Summary of Operations
- ---------------------
Net interest income $143,774 $131,930 $120,702 $111,339 $103,247
Provision for loan losses 3,833 2,715 5,676 15,437 6,477
-----------------------------------------------------------------------------
Net interest income after provision
for loan losses 139,941 129,215 115,026 95,902 96,770
Other operating income 29,889 26,397 29,939 25,636 20,532
Other operating expense 104,611 97,508 95,006 87,025 78,677
Income tax expense 17,907 15,587 12,043 7,064 8,006
-----------------------------------------------------------------------------
Income before cumulative effect
of changes in accounting principles 47,312 42,517 37,916 27,449 30,619
Cumulative effect of changes in
accounting principles -- -- (3,457) -- --
-----------------------------------------------------------------------------
Net Income $47,312 $42,517 $34,459 $27,449 $30,619
=============================================================================
Average Balance Sheet Totals
- ----------------------------
Total assets $3,382,052 $3,091,720 $2,884,838 $2,770,438 $2,609,115
Investment securities and
money market investments 733,391 789,359 800,479 690,643 623,912
Loans and leases
(net of unearned income) 2,390,719 2,059,883 1,861,478 1,782,209 1,706,385
Total deposits 2,822,914 2,572,737 2,486,903 2,426,582 2,260,863
Long-term debt and lease obligations 31,643 17,750 11,545 15,636 15,763
Shareholders' equity 335,633 308,273 278,026 260,619 241,138
Actual Balance at Period End
- ----------------------------
Total assets $3,524,568 $3,338,427 $2,954,908 $2,896,010 $2,722,388
Long-term debt and lease obligations 34,689 27,283 13,051 16,764 15,199
</TABLE>
16
<PAGE>
THE WOODSTOWN NATIONAL BANK & TRUST COMPANY
Selected Historical Financial Data
(In Thousands)
<TABLE>
<CAPTION>
As of or for the Nine Months Ended September 30
-----------------------------------------------
1996 1995
-----------------------------------------------
<S> <C> <C>
Summary of Operations
- ---------------------
Net interest income $8,237 $7,084
Provision for loan losses 585 90
-----------------------------------------------
Net interest income after provision
for loan losses 7,652 6,994
Other operating income 997 906
Other operating expense 5,028 4,352
Income tax expense 1,597 1,239
-----------------------------------------------
Net Income $2,024 $2,309
===============================================
Average Balance Sheet Totals
- ----------------------------
Total assets $255,753 $239,261
Investment securities and
money market investments 65,535 61,305
Loans and leases
(net of unearned income) 176,227 166,411
Total deposits 230,965 214,431
Long-term debt and lease obligations - -
Shareholders' equity 23,573 21,199
Actual Balance at Period End
- ----------------------------
Total assets $254,834 $251,595
Long-term debt and lease obligations - -
</TABLE>
17
<PAGE>
THE WOODSTOWN NATIONAL BANK & TRUST COMPANY
Selected Historical Financial Data
(In Thousands)
<TABLE>
<CAPTION>
At or for the Year Ended December 31
---------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Summary of Operations
- ---------------------
Net interest income $9,612 $9,749 $9,138 $8,730 $7,513
Provision for loan losses 90 239 472 676 899
---------------------------------------------------------------------------------------
Net interest income after provision
for loan losses 9,522 9,510 8,666 8,054 6,614
Other operating income 1,376 1,198 1,158 944 808
Other operating expense 5,910 5,923 5,050 4,550 4,391
Income tax expense 1,701 1,632 1,743 1,518 641
---------------------------------------------------------------------------------------
Income before cumulative effect
of changes in accounting principles 3,287 3,153 3,031 2,930 2,390
Cumulative effect of changes in
accounting principles - - - (131) -
---------------------------------------------------------------------------------------
Net Income $3,287 $3,153 $3,031 $2,799 $2,390
=======================================================================================
Average Balance Sheet Totals
- ------------------------------
Total assets $243,109 $220,478 $211,530 $202,772 $198,807
Investment securities and
money market investments 63,538 56,493 56,029 53,495 48,621
Loans and leases
(net of unearned income) 167,748 153,794 146,961 141,453 142,709
Total deposits 218,595 199,946 192,929 185,998 184,103
Long-term debt and lease obligations - - - - -
Shareholders' equity 21,460 19,363 17,549 15,882 13,995
Actual Balance at Period End
- ----------------------------
Total assets $254,593 $229,820 $212,169 $207,659 $199,598
Long-term debt and lease obligations - - - - -
</TABLE>
18
<PAGE>
GENERAL INFORMATION--SPECIAL MEETING OF WNB SHAREHOLDERS
--------------------------------------------------------
Introduction
- ------------
This Proxy Statement/Prospectus is being furnished to the holders of WNB
Common Stock in connection with the solicitation by WNB's Board of Directors of
proxies to be voted at the Special Meeting to be held on January 22, 1997. The
purpose of the meeting is to consider and vote upon a proposal adopted by the
Board of Directors of WNB to approve and adopt the Merger Agreement between FFC
and WNB, the terms of which are described herein.
All information set forth in this Proxy Statement/Prospectus which relates
to FFC has been provided or verified by FFC, and all information which relates
to WNB has been provided or verified by WNB.
Date, Time and Place of Special Meeting
- ---------------------------------------
The Special Meeting of the shareholders of WNB will be held on January 22,
1997, at 11:00 a.m., local time, at The Salem County Sportsmen's Club, Inc.,
Route 40, Carney's Point, New Jersey.
Shareholders Entitled to Vote
- -----------------------------
The Board of Directors of WNB has fixed the close of business on December
11, 1996, as the record date (the "Record Date") for the determination of
holders of WNB Common Stock entitled to receive notice of and to vote at the
Special Meeting.
Purpose of Meeting
- ------------------
The shareholders of WNB will be asked at the Special Meeting to consider and
vote upon: (i) a proposal to approve and adopt the Merger Agreement, and (ii)
such other matters as may properly be brought before the meeting and any
adjournments thereof, including without limitation, a motion to adjourn or
postpone the Meeting to another time and place for the purpose of soliciting
proxies in favor of the Merger Agreement or otherwise.
Solicitation of Proxies
- -----------------------
This Proxy Statement/Prospectus is furnished in connection with the
solicitation of proxies, in the accompanying form, by the Board of Directors of
WNB for use at the Special Meeting and at any adjournments thereof. The
expenses to be incurred in soliciting proxies will be borne by WNB. In addition
to the use of the mails, the directors, officers and employees of WNB may,
without additional compensation, solicit proxies personally or by telephone or
telegram.
Quorum and Required Vote
- ------------------------
Each share of WNB Common Stock is entitled to one vote on all matters
submitted to a vote of the shareholders. The holders of a majority of the
outstanding shares of WNB Common Stock, present either in person or by proxy,
will constitute a quorum for the transaction of business at the Special Meeting.
The judges of election will treat shares of WNB Common Stock represented by a
properly signed and returned proxy as present at the Special Meeting for
purposes of determining a quorum, without regard to whether the proxy is marked
as casting a vote or abstaining. Likewise, the judges of election will treat
shares of WNB Common Stock represented by "broker non-votes" (i.e., shares of
WNB Common Stock held in record name by brokers or
19
<PAGE>
nominees as to which (i) instructions have not been received from the beneficial
owners or persons entitled to vote, (ii) the broker or nominee does not have
discretionary voting power under applicable rules of the National Association of
Securities Dealers, Inc. or the instrument under which it serves in such
capacity, and (iii) over which the record holder has indicated on the proxy card
or otherwise notified WNB that it does not have authority to vote such shares on
that matter) as present for purposes of determining a quorum.
The affirmative vote of shareholders holding at least two-thirds of the
issued and outstanding shares of WNB Common Stock at the Special Meeting is
required in order to approve the Merger Agreement. Consequently, your failure to
vote would have the same effect as a vote against the Merger. Abstentions and
broker non-votes will be counted as shares of WNB Common Stock that are
outstanding, but will not be counted as votes in favor of adoption of the Merger
Agreement. Consequently, abstentions and broker non-votes will have the same
effect as a vote against adoption of the Merger Agreement.
Revocation and Voting of Proxies
- --------------------------------
The execution and return of the enclosed proxy form will not affect a
shareholder's right to attend the Special Meeting and to vote in person. Any
proxy given pursuant to this solicitation may be revoked at any time before the
proxy is voted at the Special Meeting, by (i) delivering notice of revocation or
a later-dated proxy to Ralph Homan, Secretary, The Woodstown National Bank &
Trust Company, One South Main Street, Woodstown, New Jersey 08098, or (ii)
appearing at the meeting and notifying the person in charge thereof that the
shareholder wishes to vote his or her shares of WNB Common Stock in person.
Unless revoked, any proxy given pursuant to this solicitation will be voted at
the Special Meeting in accordance with the instructions thereon of the
shareholder giving the proxy. In the absence of instructions, all proxies will
be voted FOR the proposal to approve the Merger Agreement between WNB and FFC.
Although the Board of Directors knows of no other business to be presented at
the Special Meeting, in the event that any other matters are properly brought
before the meeting and in the absence of instructions to the contrary, any proxy
given pursuant to this solicitation will be voted in accordance with the
recommendations of the management of WNB.
Shares Outstanding and Principal Holders Thereof
- ------------------------------------------------
As of the close of business on December 11, 1996, WNB had outstanding
1,800,000 shares of $0.22 par value per share Common Stock, which shares were
held by 266 holders of record. WNB has no other stock issued or outstanding.
There are 358,200 shares of WNB Common Stock reserved for issuance upon exercise
of the Warrant.
As of December 11, 1996 the directors and executive officers of WNB and
their affiliates owned beneficially a total of 835,486 shares of WNB Common
Stock (representing approximately 46.4 percent of such shares issued and
outstanding). The executive officers and each of the directors who voted for the
Merger intend to vote their shares, representing approximately 37.8 percent of
the outstanding Shares of WNB Common Stock, in favor of the proposal to approve
the Merger Agreement.
To the knowledge of WNB's management, as of December 11, 1996, the following
persons owned of record or beneficially more than five percent of the
outstanding shares of WNB Common Stock:
20
<PAGE>
<TABLE>
===========================================================================
Name Number of Shares Percent
of Beneficial Owner Position Beneficially Owned of Class
------------------- -------- ------------------ --------
===========================================================================
<S> <C> <C> <C>
Samuel H. Jones, Jr. Chairman and 355,047 19.72
Director
===========================================================================
Ethel M. Doble Director 243,900 13.55
- ---------------------------------------------------------------------------
===========================================================================
- ---------------------------------------------------------------------------
Richard O. Erdner President & 154,833 8.66
Director
===========================================================================
</TABLE>
Interests of Certain Persons in Matters To Be Acted Upon
- --------------------------------------------------------
Except as described in this section, the directors and executive officers of
WNB have no substantial interest in the Merger, other than in their capacity as
shareholders of WNB. As shareholders, the directors and executive officers of
WNB will be entitled to receive FFC Common Stock in exchange for their WNB
Common Stock in the same proportion and on the same terms and conditions as all
other shareholders of WNB.
Directors of WNB who are not also executive officers of WNB currently
receive $20,000 annually. Upon completion of the Merger, FFC has agreed for a
period of five years after the Effective Date to continue in office the present
directors of WNB who indicate their desire to serve. Each non-employee director
of WNB shall receive director's fees from WNB of $10,000 annually and shall
continue to receive such other incidental benefits as he or she was receiving
from WNB prior to the Effective Date. Each director of WNB who has reached age
70 as of the Effective Date, or who reaches such age within three years
thereafter, shall be permitted to serve for a period of at least three years
after the Effective Date before becoming subject to FFC's mandatory retirement
rules for directors.
On or promptly after the Effective Date of the Merger, FFC will appoint one
of WNB's current directors (designated, subject to the reasonable approval of
FFC, by vote of WNB's Board of Directors) to its Board of Directors. WNB has
indicated to FFC that such designee will initially be Samuel H. Jones, Jr., a
director of WNB. Such designee will receive the same annual fees and other
benefits (including life insurance benefits) that are provided generally to non-
employee directors of FFC. Non-employee directors of FFC currently receive an
annual fee of $7,500.
FFC has agreed, following the Merger (i) to cause WNB to pay compensation to
each person who was employed by WNB or WIC on or after the Effective Date and
who continues to be employed after the Effective Date, that is at least equal to
the aggregate compensation that such person was receiving from WNB or WIC prior
to the Effective Date, (ii) that WNB shall provide employee benefits to each
such person who is a full-time employee, on and after the Effective Date, that
are substantially equivalent in the aggregate to the employee benefits that such
person was receiving from WNB as a full-time employee prior to the Effective
Date, and (iii) that WNB shall provide employee benefits to each such person who
is a part-time employee, on or after the Effective Date, that are the same as
the employee benefits that are being received at the applicable time by part-
time employees of other banking subsidiaries owned by FFC. In addition, FFC has
agreed to cause WNB to satisfy WNB's obligations under existing WNB employee
benefit plans.
21
<PAGE>
The directors and officers of FFC do not have any special interest in the
Merger (other than in their capacity as shareholders of FFC) and will not
receive any special consideration or compensation in connection with its
consummation.
WNB has adopted The Woodstown National Bank & Trust Company Change of
Control Severance Pay Plan (the "Severance Plan"), which provides for certain
severance benefits to each of five executive officers upon a qualified
termination following a change of control of WNB. The Merger will be considered
a change of control under the Severance Plan. Any covered officer who, within
two years following the date of shareholder approval of the Merger, (a) is
involuntarily terminated (except for termination due to death, disability,
retirement or termination for cause), or (b) voluntarily terminates his or her
employment, within sixty days of having the terms or conditions of his or her
employment changed (as defined in the Severance Plan), shall receive severance
pay amounting to two times his or her base compensation, including bonus, at the
time of the termination. In addition, the officer will receive for two years
medical, pension, life insurance, unused vacation and other similar benefits
comparable to those furnished immediately prior to the termination. It is
anticipated that each of the executive officers will continue to be employed
with WNB following the Merger. However, if each of the executive officers was to
be terminated following the change of control and severance benefits were
triggered, based on current salaries and benefits, the executive officers would
receive severance benefits worth in the aggregate $1,047,493.
Recommendation of the Board of Directors of WNB
- -----------------------------------------------
For the reasons stated in this Proxy Statement/Prospectus, the Board of
Directors of WNB has approved the Merger Agreement and believes the Merger is in
the best interests of the shareholders of WNB. Accordingly, the Board of
Directors recommends that the shareholders vote in favor of the proposal to
approve the Merger Agreement. See THE FCC/WNB MERGER--Background of the Merger,
Reasons for the Merger; Recommendation of the Board of Directors of WNB, and
Additional Reasons for the Merger.
Certain of the directors and officers of WNB have personal interests in the
consummation of the Merger in addition to their interests as shareholders of
WNB. See GENERAL INFORMATION--SPECIAL MEETING OF WNB SHAREHOLDERS--Interests of
Certain Persons in Matters To Be Acted Upon.
22
<PAGE>
THE FFC/WNB MERGER
------------------
General Information
- -------------------
The shareholders of WNB will be asked at the Special Meeting to consider and
vote upon a proposal to approve the Merger Agreement between FFC and WNB. Under
the Merger Agreement: (i) FFC will organize a national banking association
("WNB Interim National Bank") as a wholly-owned subsidiary of FFC and cause WNB
Interim National Bank to become a party to the Merger Agreement, (ii) WNB will
be merged with and into WNB Interim National Bank, (iii) WNB Interim National
Bank will survive the Merger and operate as a wholly-owned subsidiary of FFC
after the Merger under the name "The Woodstown National Bank & Trust Company",
and (iv) all of the outstanding shares of the common stock of WNB, par value
$.22 per share ("WNB Common Stock"), will be converted into shares of the common
stock of FFC, par value $2.50 per share ("FFC Common Stock").
WNB is a national bank with one subsidiary, Woodstown Investment Company
("WIC"). FFC is a Pennsylvania bank holding company. Following the Merger, WNB
will be a wholly-owned subsidiary of FFC without any change in its present
management or board of directors. FFC will be the parent company of WNB, and
will continue to be a registered bank holding company that is regulated by the
Federal Reserve Board.
The precise terms and conditions of the Merger are set forth in the Merger
Agreement, which is attached as Exhibit A to this Proxy Statement/Prospectus and
is incorporated herein by reference. THE DISCUSSION WHICH FOLLOWS IS INTENDED
ONLY AS A SUMMARY OF CERTAIN TERMS OF THE MERGER AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE MERGER AGREEMENT ATTACHED AS
EXHIBIT A TO THIS PROXY STATEMENT/PROSPECTUS.
The Board of Directors of WNB, by a vote of those directors present at its
meeting on September 30, 1996, adopted the following resolutions approving the
Merger Agreement:
Whereas, the Board of Directors of The Woodstown National Bank & Trust
Company believes that the Merger is in the best interests of the shareholders of
The Woodstown National Bank & Trust Company, and recommends that the
shareholders vote for the following resolutions, which will be presented at the
special meeting.
RESOLVED, that the merger of The Woodstown National Bank & Trust Company
with and into WNB Interim National Bank, a subsidiary of Fulton Financial
Corporation, is approved on substantially the terms and conditions set forth in
the Merger Agreement presented to this meeting, subject to approval by bank
supervisory authorities. Following the merger, the resulting bank will operate
as a wholly-owned subsidiary of Fulton Financial Corporation under the name "The
Woodstown National Bank & Trust Company." Pursuant to the Merger Agreement, each
share of common stock of The Woodstown National Bank & Trust Company outstanding
at the effective date of the merger will automatically be converted into the
right to receive 1.60 shares of the common stock of Fulton Financial Corporation
and cash will be paid in lieu of fractional shares.
RESOLVED, that the proper officers of The Woodstown National Bank & Trust
Company are authorized and directed to file the Plan of Merger with the Office
of the Comptroller of the Currency.
RESOLVED, that the proper officers of The Woodstown National Bank & Trust
Company are authorized and directed to take such additional actions and execute
such additional documents on behalf of The Woodstown National Bank &
23
<PAGE>
Trust Company as they shall deem necessary or appropriate to consummate the
Merger, the Merger Agreement, the Plan of Merger, and the transactions
contemplated thereunder.
Background of the Merger
- ------------------------
Beginning in January 1995, WNB began to receive a number of unsolicited
preliminary indications of interests to acquire or enter into a strategic
alliance with WNB. Informal discussions were held with several parties, but
none of these discussions were pursued further. Partially in response to these
indications of interest, as well as the intensifying competition and
consolidation in the banking industry, the Board of Directors of WNB began a
review of the bank's long-term business plan. As part of this process, WNB
hired a consultant to assist in the preparation of a strategic plan and to
assist WNB in improving the liquidity of WNB Common Stock.
In March 1996, WNB was approached by a representative of The Bank of
Gloucester County, which shortly beforehand had been acquired by FFC, regarding
FFC's interest in discussing a strategic alliance with WNB. Shortly thereafter,
members of the WNB Executive Committee and FFC held preliminary discussions
regarding the possibility of entering into a transaction whereby FFC would
acquire WNB, with WNB remaining as a wholly-owned subsidiary of FFC. In April,
upon the advice of WNB's consultant, WNB hired special counsel to advise the WNB
Board of Directors with regard to their legal obligations in the course of its
strategic planning process.
In the Spring of 1996, WNB was approached by two separate local financial
institutions, each seeking to discuss the possibility of entering into a merger-
of-equals transactions. Upon consideration, the WNB Board decided not to pursue
discussions with either institution due to the lack of a premium associated with
mergers-of-equals type transactions. On May 28, 1996, the WNB Executive
Committee once again met with representatives of FFC. At that time FFC
presented a verbal indication of interest to acquire WNB in a stock transaction
valued at approximately two times the book value of WNB Common Stock.
Additionally, WNB would remain as a wholly-owned subsidiary of FFC.
At this point, special counsel advised the WNB Board of Directors to engage
an investment banking firm. On June 20, 1996, WNB engaged the investment banking
firm of McConnell, Budd & Downes ("MB&D"), to assist in developing a strategic
plan for WNB and in evaluating the FFC indication of interest. During the next
several weeks, management of WNB, with the assistance of MB&D, developed a five-
year financial plan for WNB, assuming it remained independent. On August 6,
1996, following a valuation analysis of WNB and an analysis of the FFC
indication of interest by MB&D, and a presentation by special counsel regarding
the fiduciary duties of the board of directors, the WNB Board of Directors
authorized MB&D to (a) conduct a limited market check regarding the FFC
indication of interest by contacting several institutions MB&D had identified as
potentially having an interest in acquiring WNB and (b) meet with FFC to clarify
its interest in WNB.
In mid-August 1996, representatives of MB&D and the WNB Executive Committee
met with representatives of FFC. At such time, FFC confirmed its indication of
interest to acquire WNB in a transaction whereby each share of WNB Common Stock
would be exchanged for 1.462 shares of FFC Common Stock, an exchange valued at
approximately two times the book value of WNB Common Stock. In addition to FFC,
during this time MB&D contacted five other financial institutions it had
identified as having a potential interest in acquiring WNB. Three of the five
financial institutions contacted signed confidentiality agreements and received
preliminary due diligence information regarding WNB. Of these three
institutions, one institution, a regional bank
24
<PAGE>
holding company, provided a written indication of interest to acquire WNB in a
stock transaction. Similar to the FFC indication of interest, WNB would remain
as a wholly-owned subsidiary of the regional bank holding company.
On September 3, 1996, the WNB Board of Directors met to consider the two
indications of interests. Following a detailed presentation and analyses from
MB&D regarding the two indications of interest and a presentation from special
counsel regarding the Board's fiduciary duties, WNB decided to approach FFC and
the regional bank holding company and ask each to submit a final indication of
interest. On September 10, 1996, following the receipt of a revised indication
of interest from both FFC and the regional bank holding company, the WNB Board
of Directors met, with MB&D and special counsel present, to evaluate each
indication of interest. At such time, MB&D made a detailed presentation
regarding each indication of interest. FFC had presented an offer to exchange
each share of WNB Common Stock for 1.6 shares of FFC Common Stock, equating to a
market value on that date of $31.60 for each share of WNB Common Stock. The
regional bank holding company offered to acquire all of the outstanding shares
of WNB Common Stock at an exchange ratio dependent upon the market price of the
regional bank holding company's stock at the time of consummation of the
potential transaction. On the date of WNB's consideration, the regional banking
holding company's indication of interest equated to a market value below that
represented by the FFC offer. WNB would remain as a wholly-owned subsidiary
pursuant to both indications of interest. Following a recommendation from MB&D
and review of its fiduciary duties by special counsel, the WNB Board of
Directors decided to pursue the FFC indication of interest.
During the next several weeks, FFC and WNB conducted due diligence
examinations of each other and continued to negotiate the specific terms and
conditions of a definitive merger agreement. On September 30, 1996, the WNB
Board of Directors, with MB&D and special counsel present, met to consider the
definitive agreement with FFC. Special counsel reviewed the specific terms of
the Merger Agreement, Warrant Agreement and other exhibits and responded to
specific questions of directors. MB&D gave an analysis of the financial terms of
the Merger, as well as a presentation regarding the value of FFC Common Stock.
At such time, MB&D gave an oral opinion that the consideration to be received by
WNB shareholders pursuant to the Merger Agreement was fair from a financial
point of view. Following a lengthy discussion, the WNB Board of Director
determined that acceptance of the FFC offer was in the best interests of holders
of WNB Common Stock and approved the Merger Agreement by a vote of 7-1, with Mr.
Richard Erdner voting against approval. Subsequently, the Merger Agreement and
Warrant Agreement were executed.
Reasons for the Merger; Recommendation of WNB Board
- ---------------------------------------------------
The WNB Board of Directors, with the assistance of outside financial and
legal advisors, has evaluated the financial, legal and market conditions bearing
on the decision to recommend the Merger. The terms of the Merger, including the
price, are a result of arm's length negotiations between representatives of WNB
and FFC. In reaching its determination that the Merger and Warrant Agreements
are fair to, and in the best interests of WNB and holders of WNB Common Stock,
the WNB Board of Directors considered a number of factors, both from a short and
long term perspective, including, without limitation, the following:
(i) the WNB Board of Director's familiarity with and review of WNB's
business, financial condition, results of operations, management, prospects,
including, but not limited to, its potential growth, development, productivity
and profitability, and the business risks associated therewith;
25
<PAGE>
(ii) the current and prospective environment in which WNB operates,
including national and local economic conditions, the competitive environment
for financial institutions generally, the regulatory burden on financial
institutions generally and the trend toward consolidation in the financial
services industry, particularly in WNB's market area;
(iii) information concerning the business, operations, asset quality
and prospects of FFC, including its recent acquisitions and the recent
performance of FFC Common Stock;
(iv) the oral and written presentations, and the oral and written
opinions, of WNB's financial advisor, MB&D, that the consideration was fair to
the holders of WNB Common Stock from a financial point of view;
(v) the WNB Board of Director's belief that the terms of the proposed
Merger Agreement with FFC were attractive in that it would allow WNB
shareholders to receive stock in the Merger, thus permitting shareholders to
defer any tax liability associated with the increase in the value of their stock
as a result of the Merger, and to become shareholders in FFC, a company with
strong operations, management, earnings performance and stock liquidity;
(vi) the structure of the Merger, whereby WNB will be a wholly-owned
subsidiary of FFC and will continue to provide quality service to the community
and customers served by WNB;
(vii) the addition of products and services, as well as greater
resources, which will be afforded WNB customers as a result of the Merger; and
(viii) the alternative strategic courses available to WNB.
THE IMPORTANCE OF THESE FACTORS RELATIVE TO ONE ANOTHER CANNOT PRECISELY BE
DETERMINED OR STATED HEREIN. THE WNB BOARD OF DIRECTORS APPROVED THE MERGER
AGREEMENT AND RECOMMENDS THAT WNB STOCKHOLDERS VOTE FOR APPROVAL OF THE MERGER
AGREEMENT.
Additional Reasons for the Merger
- ---------------------------------
Recent changes in federal and state banking laws and regulations have had a
major impact upon the banking industry in Pennsylvania, New Jersey and
throughout the United States. For example, due to changes in Pennsylvania law
that became effective in March, 1990, Pennsylvania banks may establish banking
offices throughout the state, and bank holding companies located in a number of
other states may acquire Pennsylvania banks. Similarly, New Jersey law permits
statewide branching by New Jersey banks and also permits bank holding companies
located in other states to acquire New Jersey banks under specified conditions.
In response to these and other recent changes, many mergers and consolidations
involving Pennsylvania and New Jersey banks and bank holding companies have
occurred.
WNB and FFC believe that further merger activity within Pennsylvania and New
Jersey is likely to occur in the future, resulting in increased concentration
levels in banking markets within Pennsylvania and New Jersey and other
significant changes in the competitive environment. Mergers between
Pennsylvania and New Jersey banks are currently authorized under federal law as
embodied in the Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994 (the "Riegle-Neal Act"). The Riegle-Neal Act allows adequately capitalized
and managed bank holding companies to acquire banks in any state starting one
year after enactment (September 29, 1995). In addition, the
26
<PAGE>
Reigle-Neal Act allows interstate bank merger transactions beginning June 1,
1997, or on any earlier date that the relevant states pass legislation
authorizing mergers with out-of-state banks.
Both New Jersey and Pennsylvania have enacted laws that permit interstate
bank mergers pursuant to the Reigle-Neal Act. Therefore, New Jersey and
Pennsylvania banks currently are permitted to merge with each other. Through
interstate merger transactions, banks can acquire branches of out-of-state banks
by converting their offices into branches of the resulting bank. Under current
New Jersey and Pennsylvania law, an acquiring bank in an interstate merger may
purchase individual branches (i.e., less than all of the branches) of the
selling bank.
Under the Riegle-Neal Act, banks may also establish and operate a "de novo
branch" in any state that "opts-in" to de novo branching. Pennsylvania has
adopted a law permitting out-of-state banks to open de novo branches in
Pennsylvania, as long as the home state of each such bank would offer reciprocal
de novo branching opportunities to Pennsylvania banks. New Jersey, however,
does not allow out-of-state banks to establish de novo branches within its
borders. Accordingly, interstate branching between New Jersey and Pennsylvania
may currently occur only through interstate merger transactions. The Riegle-
Neal Act permits foreign banks to establish branches, either de novo or by
merger, to the same extent as similarly situated domestic banks. In other
words, a foreign bank may establish and operate interstate branches to the same
extent that the establishment and operation of such branches would be permitted
if the foreign bank were a national bank or state bank. All of the foregoing
changes made by the Reigle-Neal Act are expected to intensify competition in
local, regional and national banking markets.
In addition, recent changes in federal banking laws have significantly
increased the severity and complexity of federal banking regulations, as well as
the costs that banks must incur in complying with those regulations. For
example, pursuant to the Federal Deposit Insurance Corporation Improvement Act
of 1991 ("FDICIA"), the federal banking agencies have established guidelines for
real estate lending by FDIC-insured banks, including maximum loan-to-value
ratios for various types of real estate loans. FDICIA requires each FDIC-
insured bank to comply with a number of administrative standards (including
audit requirements) that are designed to enhance the bank's safety and
soundness. FDICIA also contains "Truth in Savings" provisions that require
extensive disclosures regarding the rates of interest paid and the fees charged
by FDIC-insured banks with respect to their deposit accounts. FDICIA further
provides greatly expanded authority to the federal banking agencies to impose
administrative enforcement sanctions (including cease-and-desist orders, civil
money penalties, and officer removal or suspension orders) against FDIC-insured
banks that fail to maintain adequate capital levels or that engage in unsafe or
unsound banking practices. These changes in federal law have added
significantly to the cost and complexity of operating a bank and have made it
more difficult for smaller independent banks like WNB to compete with large
banking organizations.
From the standpoint of WNB, the Merger presents an attractive opportunity
for WNB to gain access to the managerial expertise and specialized services
offered by FFC, thereby permitting WNB's banking offices to provide a broader
range of services to their customers in the face of increasing competition from
larger financial institutions. FFC will operate WNB, following the proposed
Merger, as a separate subsidiary bank and expects to retain WNB's current
executive officers and directors. While FFC will exercise an oversight role and
provide financial backing, administrative support services and other resources
to WNB, it is expected that WNB, like FFC's other subsidiary banks, will operate
as a semi-autonomous community bank.
27
<PAGE>
Accordingly, it is anticipated, following the Merger, that WNB will continue to
follow substantially the same policies regarding interest rates and other terms
and conditions for its deposits and loans.
FFC believes that WNB is already satisfactorily meeting the banking needs of
the community which it serves. WNB will continue to operate as a community bank
in a market which has experienced considerable consolidation.
However, FFC expects that WNB will be able to expand its banking activities
as a result of the acquisition. WNB will be encouraged to offer such new
products and services as bank-by-phone and debit cards. In addition, FFC expects
that WNB will be able to offer additional cash management services for its
business customers, expand its trust services and indirect automobile lending
programs. WNB will also be able to extend larger commercial loans in its market
area by granting participation interests in such loans to other subsidiary banks
of FFC. Because FFC shares WNB's philosophy of community banking, WNB's offices
will maintain their community orientation after WNB merges with FFC. Thus, the
Merger will enhance the ability of WNB's offices to remain competitive and to
satisfy local customers' financial needs.
The Merger will benefit FFC by establishing a market presence in Salem
County, New Jersey and by increasing FFC's current market presence in Gloucester
County, New Jersey. FFC's acquisition of WNB will represent its second banking
operation in New Jersey. FFC's senior management has selected New Jersey as a
strategic area for expansion of its business and believes that the Merger will
result in a favorable diversification of FFC's banking operations. FFC believes
WNB's market is similar to many of the markets that FFC's subsidiary banks
currently serve, i.e., community-oriented markets with strong potential for
attracting business from consumers and small businesses. In sum, the Merger will
benefit both parties by allowing FFC to achieve a broader geographic
diversification of its operations and by enabling WNB to affiliate with a larger
multi-bank holding company that has a significant presence in central and
northeastern Pennsylvania, western Maryland, southern Delaware and southwestern
New Jersey. The Merger will thereby place WNB in a better position to compete
effectively in the rapidly changing market for financial services.
As described above, the Boards of Directors of FFC and WNB have approved the
terms of the Merger Agreement. The Board of Directors of WNB believes that the
terms of the Merger are fair to and in the best interests of WNB and its
shareholders. WNB's Board of Directors also believes that the Merger will
enhance the ability of WNB's offices to satisfy the financial needs of their
customers and the communities which they serve.
Opinion of Financial Advisor to The Woodstown National Bank & Trust Company
- ---------------------------------------------------------------------------
Since August 2, 1996, McConnell, Budd & Downes, Inc. ("MB&D") has formally
acted as financial advisor to WNB on a contractual basis. MB&D met with WNB's
management and directors six times, beginning in the middle of June 1996, prior
to its formal engagement. The scope of MB&D's assignment encompassed a facet of
WNB's strategic planning process; the evaluation of the options of either
remaining independent or pursuing a possible upstream affiliation with another
banking organization. MB&D advised WNB throughout the process that has led to
the proposed transaction. MB&D was retained by WNB in response to the receipt
of a non-binding expression of interest from another banking entity.
Representatives of MB&D participated in an additional seven meetings with
management and attended eight meetings of the Board of Directors during the
process. MB&D periodically advised WNB of progress made and repeatedly analyzed
WNB's options.
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MB&D was retained based on its qualifications and experience in the
financial analysis of financial institutions and its extensive experience with
merger and acquisition transactions involving financial institutions. MB&D, of
Morristown, New Jersey, is a financial consulting and investment banking firm
specializing in the banking and thrift industries. MB&D is also an NASDAQ
broker-dealer specializing in the securities of banking and thrift entities and
produces equity research for institutional and high net-worth investors in the
securities of financial institutions.
MB&D has delivered its oral opinion as of September 30, 1996 and its written
opinion as of the date of this Proxy Statement, that, subject to the limitations
set forth in the opinions, the Conversion Ratio provided for in the Merger
Agreement is fair to the holders of WNB Common Stock from a financial point of
view.
The full text of the opinion of MB&D dated the date of this Proxy Statement
that sets forth assumptions made, matters considered and limits on the review
undertaken is attached hereto as Exhibit B. WNB's shareholders are urged to
read both this section and the opinion in their entirety. MB&D's opinion is
directed to the Conversion Ratio that will be obtained in the Merger and does
not constitute a recommendation to any holder of WNB Common Stock as to how such
holder should vote at the WNB meeting. The summary of the opinion of MB&D set
forth in this Proxy Statement is qualified in its entirety by reference to the
full text of the opinion itself. The conclusion of the oral opinion of
September 30, 1996 is the same as the conclusion of the opinion that appears in
Exhibit B.
In arriving at its opinion, MB&D (i) reviewed the Merger Agreement, the
Warrant Agreement, and a final draft of this Prospectus/Proxy Statement; (ii)
reviewed publicly available business and financial information related to FFC
and WNB and certain internal financial information and financial projections
prepared for MB&D by the managements of WNB and FFC; (iii) held discussions with
members of the senior management and WNB's Board concerning the past and current
results of operations of WNB, its current financial condition and management's
opinion of the banks's future prospects; (iv) held discussions with members of
the senior management of FFC concerning the past and current results of
operations of FFC, its current financial condition and management's opinion of
FFC's future prospects; (v) reviewed the specific acquisition analysis models
employed by MB&D to evaluate potential business combinations of banking
companies; (vi) considered certain financial and stock market data of FFC
(including historical reported price and trading volume) and compared that
information with similar information for other publicly held bank holding
companies; (vii) considered the results of the market check conducted; (viii)
reviewed a number of other recently announced transactions involving the
acquisition of banking institutions; (ix) performed such other studies and
analyses as MB&D considered appropriate under the circumstances associated with
this particular transaction. No limitations were imposed by the WNB Board upon
MB&D with respect to the investigations made or procedures followed by MB&D in
rendering its opinion.
MB&D's opinion takes into account its assessment of general economic, market
and financial conditions, its experience in other transactions, as well as its
experience in securities valuation and its knowledge of the banking and thrift
industry generally. For purposes of reaching its opinion, MB&D has assumed and
relied upon the accuracy and completeness of information provided to it by WNB
and FFC, and does not assume any responsibility for the independent verification
of such information or any independent valuation or appraisal of any of the
assets or liabilities of either WNB or FFC. With respect to the financial
projections reviewed by MB&D in the course of rendering its opinion, MB&D has
assumed that such projections have been
29
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reasonably prepared on a basis reflecting the best currently available estimates
and judgments of the managements of each of WNB and FFC as to the most likely
future performance of their respective companies. Finally, MB&D has not been
furnished with any independent appraisals of the assets or liabilities of either
WNB or FFC.
The following is a summary of the analyses employed by MB&D in connection
with rendering its written opinion. Given that it is a summary, it does not
purport to be a complete and comprehensive description of all the analyses
performed, or an enumeration of all the matters considered by MB&D in arriving
at its opinion. The preparation of a fairness opinion is a complicated process,
involving a determination as to the most appropriate and relevant methods of
financial analysis and the application of those methods to the particular
circumstances. Therefore, such an opinion is not readily susceptible to a
summary description. In arriving at its fairness opinion, MB&D did not attribute
any particular weight to any one specific analysis or factor considered by it
and made qualitative as well as quantitative judgments as to the significance of
each analysis and factor. Therefore, MB&D believes that its analysis must be
considered as a whole and believes that attributing undue weight to any single
analysis or factor considered could create a misleading or incomplete view of
the process leading to the formation of its opinion. In its analysis, MB&D has
made certain assumptions with respect to banking industry performance, general
business and economic conditions and other factors, many of which are beyond the
control of management of either WNB or FFC.
Estimates that comprise a part of MB&D's analysis are not necessarily
indicative of actual value or predictive of future results or values. Estimates
of values referenced in any such analysis are not intended to be appraisals and
may not reflect the price at which the companies or their securities may
actually be sold.
The following is a summary of the analyses completed by MB&D in connection
with rendering and reaffirming its opinion.
Analysis of the Anticipated Transaction and the Exchange Ratio:
- --------------------------------------------------------------
The consideration of the Conversion Ratio, valued at the closing price of
FFC common stock, $20.375, on the day prior to the announcement of the Merger
Agreement (September 27, 1996), as well as the 30-day average closing price of
FFC common stock, $19.694, on the thirty trading days prior to the announcement
of the Merger Agreement, represents the following transaction values and
multiples:
. Transaction Value:
$32.60 per share of WNB Common Stock based upon the FFC closing price on
September 27, 1996 with an aggregate transaction value of $58,680,000.00.
$31.51 based upon the 30-day average closing price for FFC Common Stock for
the period ended September 27, 1996 with an aggregate transaction value of
$56,718,000.00.
. Multiple of Earnings:
Based upon the September 27, 1996 FFC Common Stock single day closing
---------------------------------------------------------------------
price:
-----
17.81 times reported earnings for the fiscal year ended December 31, 1995.
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14.89 times reported earnings for the trailing 12 months, excluding certain
merger related expenses, ending September 30, 1996. 15.52 times WNB's
budgeted earnings for the fiscal year ending December 31, 1996.
Based upon the 30-day average closing price for FFC Common Stock for the
------------------------------------------------------------------------
Period ending September 27, 1996
--------------------------------
17.22 times reported earnings for the fiscal year ended December 31, 1995.
14.39 times reported earnings for the trailing 12 months, excluding certain
merger related expenses, ending September 30, 1996. 15.00 times WNB's
budgeted earnings for the fiscal year ending December 31, 1996.
. Multiple of Book Value:
Based upon the September 27, 1996 FFC Common Stock single day closing
---------------------------------------------------------------------
price:
-----
2.41 times tangible book value as of September 30, 1996.
Based upon the 30-day average closing price for FFC Common Stock for the
------------------------------------------------------------------------
period ending September 27, 1996
--------------------------------
2.33 times tangible book value as of September 30, 1996.
. Specific Acquisition Analysis:
MB&D employs a number of proprietary analysis models to examine
hypothetical transactions involving banking and/or thrift companies. The models
use forecast earnings data, selected current period balance sheet and income
statement data, current market and trading information and a number of
assumptions as to interest rates for borrowed funds, opportunity costs of funds,
discount rates, dividend streams, effective tax rates and transaction structures
(the alternative or combinative uses of common equity, cash, debt or other
securities to fund a transaction). The models distinguish between purchase and
pooling accounting treatments and inquire into the likely economic feasibility
of a given hypothetical transaction, at a given price level or specified
exchange rate and employing a specified transaction structure. The models also
permit an examination of the capital adequacy of the pro forma institution.
In connection with the agreement, MB&D evaluated the Conversion Ratio in a
pooling transaction where the consideration to be received by WNB shareholders
is FFC Common Stock. Due to the relative size of the interested parties, the
proposed merger would have virtually no effect on FFC's future results. On the
basis of the financial projections of the respective managements, the relatively
small amount of nominal earnings dilution will be outweighed by the anticipated
positive effects of combining the two institutions. The positive effects are
comprised of both earning enhancements and efficiencies. MB&D anticipates that
the transaction will become accretive to the projected future stand-alone
earnings per share of FFC.
Discussions with Other Hypothetical Merger Partners:
- ---------------------------------------------------
As part of its assignment, MB&D was directed by WNB's Board of Directors to
analyze other hypothetical merger partners. Using publicly available
information and without contacting any other banking institution, MB&D analyzed
hypothetical transactions with 18 institutions that it believed would
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conceivably have had an interest in WNB. As part of the analysis, MB&D reviewed
deal structure, pricing capabilities, projected pro-forma results and
compatibility of franchises. For proposed pooling transactions, MB&D evaluated
the market value and liquidity of the hypothetical acquiror's common stock,
anticipated dividend income, and capital adequacy. MB&D presented its findings
to the WNB's board for consideration, and recommended that WNB approach five
institutions in addition to FFC. Three of the five contacted institutions
signed confidentiality agreements and were provided with due diligence
materials. Each institution, including FFC, was asked to render a non binding
indication of interest. This process resulted in WNB's board receiving two
indications of interest, FFC's and one additional institution. WNB's Board,
after consulting with MB&D, determined that the FFC indication was superior to
the other indication received by WNB.
Discounted Cash Flow Analysis
- -----------------------------
As part of its assignment, MB&D, in conjunction with senior management and
the board, analytically developed alternative strategic plans for WNB. The plan
encompassed a five year period. Different strategies concerning growth, level of
service, costs, asset quality, margins, interest rates and competition were
implemented into an overall plan for WNB. Three distinct scenarios were
developed. Each scenario yielded distinct performance characteristics. The
scenario that yielded the highest performance during the planning period was
inserted into a Discounted Cash Flow model that has been developed by MB&D.
Discounted cash flow analyses permit the conceptual examination of the present
discounted values of potential future results employing selected assumptions and
discount rates.
The following assumptions and projections are a summary of the analyzed
business plan and the discounted cash flow model utilized.
1. On a per share basis, a control sale is possible currently at a P/E
ratio (using estimated 1996 earnings) of 15.52 times or $32.60 in FFC Common
Stock.
2. WNB's rate of growth for assets will average 6.51% per annum for the
five year period.
3. WNB's average return on assets over the five year period will be 1.37%.
Average return on assets for the final fiscal year of the planning period is
projected to be 1.40%.
4. WNB's dividend payout ratio is projected to average 36.52% throughout
the period.
5. A discount rate of 12% was applied to all cash flows.
The last variable needed to project a present value per share is a terminal
Price/Earnings multiple. MB&D employed hypothetical terminal control trans-
action P/E multiples ranging from 14 times to 16 times. It is MB&D's opinion
that the P/E multiple for a transaction in 2000, the last year of the
planning period, would likely fall within this range. The resulting present
values fell within a range of $24.67 (P/E multiple of 14) to $27.76 (P/E
multiple of 16).
It is important to note that the discount factors embody both the concept
of a riskless time value of money and risk factors that reflect the uncertainty
of the forecast cash flows and terminal price/earnings multiples. Use of higher
discount rates would result in lower discounted present values.
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Conversely, use of lower discount rates would result in higher discounted
present values.
The assumptions employed and the viability of maintaining such high levels
of performance were then discussed with both WNB's management and the board.
Within this context, both external and internal factors were discussed.
Consideration was given to the present health and future prospects of the
banking environment within the State of New Jersey. Also, MB&D advised the WNB
board that although discounted cash flow analysis is a widely used valuation
methodology, it relies on numerous assumptions, including discount rates,
terminal values, earnings and asset growth, as well as dividend payout ratios.
. Analysis of Other Comparable Transactions:
MB&D has reviewed twenty-one publicly announced transactions involving a
commercial bank as the target in the State of New Jersey and the New York
metropolitan area. These transactions were announced between January of 1995
and September of 1996.
MB&D is reluctant to place undue emphasis on "comparable analysis" as a
valuation methodology due to what it considers to be inherent limitations of the
application of the results to specific cases. We have observed that such
analysis as employed by some industry participants and financial advisors often
fails to adequately take into consideration such factors as: material
differences in the underlying capitalization of the institutions which are being
acquired; difference in the historic earnings (or loss) patterns recorded by the
compared institutions which can depict a very different trend than might be
implied by examining only recent financial results; failure to exclude non-
recurring profit or loss items from the last twelve months earnings streams of
target companies, which can distort apparent earnings multiples; differences in
the form or forms of consideration used to complete the transaction; differences
between the planned method of accounting for the completed transaction and such
factors as the relative population demographics of the acquired entities markets
as compared or contrasted to such factors for the markets in which comparables
are doing business. Comparables analysis also rarely seems to take into
consideration the degree of facilities overlap between the acquiror's market and
that of the target or the absence of such overlap and the resulting cost savings
differentials between two otherwise apparently comparable transactions. MB&D
consequently believes that comparables analysis is problematic at best.
Nevertheless, in September of 1996, MB&D reviewed the publicly available
information concerning the sample of transactions described above. Within this
universe the average (mean) multiple of book value paid by the acquiror was 2.19
times and the maximum multiple paid was 2.94 times, while the minimum multiple
was 1.46 times. These statistics can be compared to a multiple of 2.41 (using
September 27, 1996 FFC Common Stock single day closing price) which can be
derived for the pending transaction. With respect to trailing 12 months
earnings multiples for this same data sample, the average P/E multiple paid was
18.10 times and the maximum multiple was 32.50 times, while the minimum multiple
was 8.63 times. These statistics can be compared to a multiple of 14.89 which
can be derived for the pending transaction (WNB's trailing .2 minimum earnings
excludes certain merger related expenses).
. Compensation of MB&D:
Pursuant to a letter agreement with WNB dated August 2, 1996, MB&D has
received a fee of $10,000.00 to render financial advisory and investment banking
services to WNB. MB&D received an additional fee of $100,000.00
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pursuant to a letter agreement dated September 20, 1996. Under this agreement
MB&D provided specific strategic planning and financial modeling for WNB as a
part of its strategic plan development, with analysis of both the plan
objectives and the tactical option under consideration. In a third letter
agreement dated September 19, 1996, WNB stipulates that upon the execution of a
definitive agreement WNB will pay MB&D a fee in the amount of $100,000.00. In
addition, WNB will pay to MB&D a fee of $150,000.00 promptly after the mailing
of this Proxy Statement containing MB&D's Fairness Opinion. Finally, WNB will
pay an additional cash fee to MB&D equivalent to 0.65% (65 basis points)
multiplied by the fair market value of the consideration received by the
shareholders of WNB at the time of closing of the transaction. This final fee
will be reduced by the amount of $250,000.00 already actually paid to MB&D in
conjunction with the transaction under the September 19, 1996 agreement
(excluding reimbursements).
In each of the three letter agreements, WNB has agreed to reimburse MB&D
for its reasonable out-of-pocket expenses incurred. WNB also has agreed to
indemnify MB&D and its directors, officers and employees against certain losses,
claims, damages and liabilities relating to or arising out of MB&D's engagement,
including liabilities under the federal securities laws.
MB&D has filed a written consent with the SEC relating to the inclusion of
its fairness opinion and the references to such opinion and to MB&D in the
Registration Statement in which this Proxy Statement/Prospectus is included. In
giving such consent, MB&D did not admit that it comes within the category of
persons whose consent is required under Section 7 of the Securities Act of 1993,
as amended, or the rules and regulations thereunder.
Conversion and Exchange of Shares
- ---------------------------------
On the Effective Date of the Merger, each share of WNB Common Stock then
issued and outstanding will automatically be converted into and become the right
to receive 1.60 shares (subject to adjustment for stock dividends, stock splits
and similar transactions) of FFC Common Stock.
No fractional shares of FFC Common Stock will be issued in connection with
the Merger. In lieu of the issuance of any fractional share to which he or she
would otherwise be entitled, each former shareholder of WNB will receive cash in
an amount equal to the fair market value of his or her fractional interest,
determined by multiplying such fractional interest by the Closing Market Price
of FFC Common Stock.
The Closing Market Price is defined in the Merger Agreement as the average
of the average of the per share closing bid prices for FFC Common Stock, rounded
up to the nearest $.125, for the ten (10) trading days immediately preceding the
date which is two (2) business days before the Effective Date (the "Price
Determination Period"), as reported on the NASDAQ National Market. If NASDAQ
fails to report a closing bid price for FFC Common Stock for any trading day
during the Price Determination Period, the closing bid prices for that day shall
be equal to the average of the closing bid prices and the average of the closing
asked prices as quoted by F.J. Morrissey & Company, Inc. and by Ryan, Beck &
Co., or if these two firms are not then making a market in FFC Common Stock, by
two brokerage firms who are then making a market in FFC Common Stock to be
selected by FFC and approved by WNB.
Following the Effective Date, WNB shareholders will exchange their WNB
Common Stock certificates for FFC Common Stock certificates in accordance with
the procedures described below in this section. FFC and WNB anticipate that the
Effective Date will occur during the first quarter of 1997, assuming no
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<PAGE>
difficulties are encountered in obtaining the required regulatory approvals and
all other conditions to closing are satisfied without unexpected delay.
Following the Effective Date, each former shareholder of WNB will be
obliged to surrender to FFC the WNB Common Stock certificates held by him or
her. Detailed instructions concerning the procedure for surrendering WNB Common
Stock certificates will be sent by FFC to each former shareholder of WNB on or
promptly after the Effective Date. Upon proper surrender of his or her WNB
Common Stock certificates, each former shareholder of WNB will be issued a stock
certificate representing the number of whole shares of FFC Common Stock into
which his or her shares of WNB Common Stock have been converted, together with a
check in the amount of any cash, without interest, to which he or she is
entitled in lieu of the issuance of any fractional share of FFC Common Stock.
SHAREHOLDERS OF WNB SHOULD NOT SURRENDER THEIR WNB COMMON STOCK CERTIFICATES FOR
EXCHANGE UNTIL THEY RECEIVE WRITTEN INSTRUCTIONS TO DO SO FROM FFC. PLEASE DO
NOT SEND ANY STOCK CERTIFICATES AT THIS TIME.
Following the Effective Date, and until properly surrendered, each WNB
Common Stock certificate will be deemed for all corporate purposes to represent
the number of whole shares of FFC Common Stock which the holder would be
entitled to receive upon its surrender, except that FFC may withhold dividends
payable after the Effective Date to any former shareholder of WNB who has
received written instructions from FFC but has not at that time surrendered his
or her WNB Common Stock certificates. Any dividends so withheld will be paid,
without interest, to any such former shareholder of WNB upon the proper
surrender of his or her WNB Common Stock certificates.
All WNB Common Stock certificates must be surrendered to FFC within two
years after the Effective Date. In the event that any former shareholder of WNB
does not properly surrender his or her WNB Common Stock certificates within that
time, the shares of FFC Common Stock that would otherwise have been issued to
him or her may, at the option of FFC, be sold and the net proceeds of such sale,
together with the cash (if any) to which he or she is entitled in lieu of the
issuance of a fractional share and any previously accrued and unpaid dividends,
will be held in a non-interest bearing account for his or her benefit. From and
after any such sale, the sole right of such former shareholder of WNB will be
the right to collect such net proceeds, cash and accumulated dividends. Subject
to all applicable laws of escheat, such net proceeds, cash and accumulated
dividends will be paid to such former shareholder of WNB, without interest, upon
proper surrender of his or her WNB Common Stock certificates.
In the event that a former WNB shareholder is unable to surrender his or
her WNB Common Stock certificates due to loss or mutilation thereof, he or she
may make a constructive surrender by following procedures comparable to those
customarily followed by FFC in issuing replacement certificates to FFC
shareholders whose FFC Common Stock certificates have been lost or mutilated.
Instructions for making a constructive surrender of lost or mutilated WNB Common
Stock certificates will be included in the written instructions to be sent by
FFC to former WNB shareholders after the effective date of the Merger.
THE FOREGOING DISCUSSION RELATING TO THE CONVERSION AND EXCHANGE OF WNB
COMMON STOCK IS ONLY A SUMMARY WHICH IS PROVIDED FOR CONVENIENCE. THE FOREGOING
DISCUSSION SHOULD BE READ IN CONJUNCTION WITH, AND IS QUALIFIED IN ITS ENTIRETY
BY, THE TERMS OF ARTICLE II OF THE MERGER AGREEMENT.
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Business Pending The Effective Date
- -----------------------------------
Pursuant to the Merger Agreement, WNB and WIC are required, pending the
Effective Date, to conduct their respective businesses in the usual, regular and
ordinary manner and consistent with past practice. WNB and WIC are also
required to use their best efforts to preserve their present business
organizations, retain the services of their present officers and employees, and
maintain existing relationships with persons having business dealings with them.
In general, WNB and WIC may not take any action outside the ordinary course of
business without the prior written consent of FFC.
Pending the Effective Date, WNB is not permitted to declare or pay a cash
dividend on the WNB Common Stock; provided, however, that WNB may declare and
pay a dividend of up to $.21 per share of WNB Common Stock on (i) December 15,
1996; (ii) March 15, 1997, provided that the Effective Date does not occur (or
is not expected to occur) on or before the record date for the dividend on the
FFC Common Stock scheduled to be paid on April 15, 1997; (iii) June 15, 1997,
provided that the Effective Date does not occur (or is not expected to occur) on
or before the record date for the dividend on the FFC Common Stock scheduled to
be paid on July 15, 1997; and (iv) September 15, 1997, provided that the
Effective Date does not occur (or is not expected to occur) on or before the
record date for the dividend on the FFC Common Stock scheduled to be paid on
October 15, 1997 (it being the intent of FFC and WNB that WNB be permitted to
pay a dividend on the WNB Common Stock on the dates indicated in subsections
(ii), (iii) and (iv) above only if the shareholders of WNB, upon becoming
shareholders of FFC, would not be entitled to receive a dividend on the FFC
Common Stock on the payment dates indicated in such subsections).
WNB has agreed that, pending the Effective Date, it shall and shall cause
WIC to (i) use all reasonable efforts to carry on their respective businesses
in, and only in, the ordinary course of business; (ii) to the extent consistent
with prudent business judgment, use all reasonable efforts to preserve their
present business organizations, to retain the services of their present officers
and employees, and to maintain their relationships with customers, suppliers and
others having business dealings with WNB or WIC; (iii) maintain all of their
structures, equipment and other real property and tangible personal property in
good repair, order and condition, except for ordinary wear and tear and damage
by unavoidable casualty; (iv) use all reasonable efforts to preserve or collect
all material claims and causes of action belonging to WNB or WIC; (v) keep in
full force and effect all insurance policies now carried by WNB or WIC; (vi)
perform in all material respects each of their obligations under all material
contracts to which WNB or WIC is a party or by which either of them may be bound
or which relate to or affect its properties, assets and business; (vii) maintain
their books of account and other records in the ordinary course of business;
(viii) comply in all material respects with all statutes, laws, ordinances,
rules and regulations, decrees, orders, consent agreements, memoranda of
understanding and other federal, state, and local governmental directives
applicable to WNB or WIC and to the conduct of their businesses; (ix) not amend
WNB's or WIC's Articles of Association, Certificate of Incorporation or Bylaws;
(x) not enter into or assume any material contract, incur any material liability
or obligation, or make any material commitment, except in the ordinary course of
business; (xi) except as permitted by subparagraph (xxiii) below, not make any
material acquisition or disposition of any properties or assets or subject any
of their properties or assets to any material lien, claim, charge, or
encumbrance of any kind whatsoever; (xii) not take or permit to be taken any
action which would constitute a breach of any representation, warranty or
covenant set forth in the Merger Agreement; (xiii) except as permitted in
Section 5.11 herein, not declare, set aside or pay any dividend or make any
other distribution in respect of WNB Common Stock; (xiv) not authorize,
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<PAGE>
purchase, redeem, issue or sell (or grant options or rights to purchase or sell)
any shares of WNB Common Stock or any other equity or debt securities of WNB;
(xv) not increase the rate of compensation of, pay a bonus or severance
compensation to, establish or amend any WNB benefit plan for, or enter into or
amend any employment obligation with, any officer, director, employee or
consultant of WNB or WIC, except that WNB and WIC may grant reasonable salary
increases and bonuses to their officers and employees in the ordinary course of
business to the extent consistent with their past practice; (xvi) not enter into
any related party transaction except in the ordinary course of business
consistent with past practice; (xvii) in determining the additions to loan loss
reserves and the loan write-offs, writedowns and other adjustments that
reasonably should be made by WNB with respect to its fiscal year ending December
31, 1996, WNB and WIC shall consult with FFC and shall act in accordance with
generally accepted accounting principles and WNB's and WIC's customary business
practices; (xviii) file with appropriate federal, state, local and other
governmental agencies all tax returns and other material reports required to be
filed, pay in full or make adequate provisions for the payment of all taxes,
interest, penalties, assessments or deficiencies shown to be due on tax returns
or by any taxing authorities and report all information on such returns
truthfully, accurately and completely; (xix) not renew any existing contract for
services, goods, equipment or the like or enter into, amend in any material
respect or terminate any contract or agreement (including without limitation any
settlement agreement with respect to litigation) that is or may reasonably be
expected to have a material adverse effect on WNB and WIC except in the ordinary
course of business consistent with past practice; (xx) except with respect to
existing plans related to the Mantua Township Branch, not make any capital
expenditures other than in the ordinary course of business or as necessary to
maintain existing assets in good repair; (xxi) not make application for the
opening or closing of any, or open or close any, branches or automated banking
facility; (xxii) not make any equity investment or commitment to make such an
investment in real estate or in any real estate development project, other than
in connection with foreclosures, settlements in lieu of foreclosure or
troubled loan or debt restructuring in the ordinary course of business
consistent with customary banking practice; (xxiii) not make purchases of
securities for its investment portfolio without prior consultation with FFC; or
(xxiv) not take any other action similar to the foregoing which would have the
effect of frustrating the purposes of the Merger Agreement or the Merger or
cause the Merger not to qualify for pooling-of-interests accounting treatment or
as a tax-free reorganization under Section 368 of the Internal Revenue Code.
WNB has purchased and sold participation interests in commercial loans with
FFC's existing subsidiary in New Jersey, The Bank of Gloucester County. WNB has
also begun to work with another FFC subsidiary, Fulton Bank, to expand its
indirect automobile lending program. Other than these relationships, there have
been no material contracts or other transactions between WNB or WIC and FFC
since the execution of the Merger Agreement, nor have there been any material
contracts, arrangements, relationships or transactions between WNB or WIC and
FFC during the past five years.
Conditions, Amendment and Termination
- -------------------------------------
The obligations of FFC and WNB to consummate the Merger are subject to
the following conditions and contingencies set forth in the Merger Agreement:
(i) approval of the Merger by the shareholders of WNB, (ii) approval of the
Merger by the Federal Reserve Board, (iii) approval of the Merger by the Office
of the Comptroller of the Currency ("OCC"), (iv) approval of the Merger by the
New Jersey Department of Banking, (v) the absence of an injunction issued by a
court of competent jurisdiction enjoining the performance by FFC or WNB of any
of their obligations under the Merger Agreement, (vi) the
37
<PAGE>
receipt of a favorable opinion of counsel with respect to certain federal income
tax consequences relating to the Merger, which are discussed below under THE
FFC/WNB MERGER--Federal Income Tax Consequences, (vii) the continuing accuracy
in all material respects of the representations, warranties and covenants made
by FFC and WNB in the Merger Agreement, (viii) the receipt by FFC of
satisfactory agreements from shareholders of WNB who are affiliates of WNB or
FFC regarding certain actions which could affect pooling-of-interests accounting
for the Merger, (ix) the receipt of opinions from counsel for WNB and counsel
for FCC regarding certain legal matters, (x) effectiveness of a registration
statement relating to the FFC Common Stock with the SEC and listing of such FFC
Common Stock on NASDAQ; (xi) confirmation by FFC and its accountants that the
Merger can be accounted for as a pooling-of-interests for financial reporting
purposes, and (xii) the delivery of certificates at the closing by officers of
FFC and WNB confirming satisfaction of the foregoing conditions.
To the extent permitted by law, the Merger Agreement may be amended by
mutual consent and any term or condition thereof may be waived by the party
entitled to its benefit at any time before the Effective Date, whether before or
after the approval of the Merger Agreement by WNB's shareholders and without
seeking further shareholder approval; provided, however, that the ratio at which
shares of WNB Common Stock will be converted into shares of FFC Common Stock may
not be waived or amended until such amendment has been approved, adopted or
ratified by the shareholders of WNB in accordance with applicable law.
The Merger Agreement may be terminated at any time prior to the Effective
Date by the mutual written consent of FFC and WNB. In addition, the Merger
Agreement may be terminated unilaterally by either FFC or WNB if (A) any
condition to the Merger has not been satisfied by September 30, 1997, or (B) the
other party has committed a material breach of any representation, warranty or
covenant contained in the Merger Agreement and has not cured such breach within
thirty (30) days after receiving written notice thereof. In addition, WNB may
terminate the Merger Agreement if the Closing Market Price of FFC Common Stock
is equal to or less than $12.00.
Effective Date of the Merger
- ----------------------------
The Merger will become effective on the date approved by the OCC pursuant
to the Plan of Merger and the National Bank Act. FFC and WNB presently intend to
consummate the Merger during the first quarter of 1997, assuming that the Merger
has been approved by WNB's shareholders, all required regulatory approvals have
been obtained, and all other conditions to closing have been satisfied or waived
by that time. The Merger Agreement provides that the closing of the Merger shall
be held within thirty (30) days after the receipt of all required regulatory
approvals and the expiration of all applicable waiting periods. See THE FFC/WNB
MERGER--Conditions, Amendment and Termination.
Management and Operations Following the Merger
- ----------------------------------------------
On the Effective Date, WNB will merge with and into WNB Interim National
Bank, a newly created wholly-owned subsidiary of FFC. WNB Interim National Bank
will survive the Merger and operate as a wholly-owned subsidiary of FFC after
the Merger under the name "The Woodstown National Bank & Trust Company," and the
shareholders of WNB will become shareholders of FFC.
The Merger Agreement provides that, for a period of five (5) years after
38
<PAGE>
the Effective Date, FFC shall (subject to the right of FFC to terminate its
obligations as a result of regulatory considerations, safe and sound banking
practices or the exercise of their fiduciary duties by FFC's directors) (i)
preserve the business structure of WNB as a national banking association; (ii)
preserve the present name of WNB; and (iii) continue in office the present
directors of WNB who indicate their desire to serve (the "WNB Continuing
Directors"), provided, that (A) each non-employee WNB Continuing Director shall
--------
receive director's fees from WNB of $10,000 per director annually and shall
continue to receive such other incidental benefits as he or she was receiving
from WNB prior to the Effective Date (such benefits being previously disclosed
to FFC), and (B) each WNB Continuing Director who has reached the age of 70 as
of the Effective Date, or who reaches such age within three (3) years
thereafter, shall be permitted to serve for a period of three (3) years after
the Effective Date before becoming subject to FFC's mandatory retirement rules
for directors. WNB Director Joseph E. Colson is the only WNB director over the
age of 70. Notwithstanding anything in the Merger Agreement to the contrary,
the WNB Continuing Directors, in their exercise of their fiduciary duty as to
the best interests of WNB and FFC, may, by a majority vote of such directors,
modify or waive any or all of the foregoing provisions.
FFC has agreed, following the Merger, to cause WNB to satisfy its
employment obligations with persons who are officers and employees of WNB or WIC
as of the Effective Date. FFC has also agreed to cause WNB to satisfy its
obligations under WNB's existing employee benefit plans.
WNB has adopted The Woodstown National Bank & Trust Company Change of
Control Severance Pay Plan, which provides for certain severance benefits to
Ralph Homan, Sandra K. Battle, F. Steven Meddick, Sr., Charles W. Sutton, Sr.
and Donald C. Ulzheimer upon a qualified termination following a change of
control of WNB. The Merger will be considered a change of control under the
Severance Plan. Any covered officer who, at any time within two years following
the date of shareholder approval of the Merger, (A) is involuntarily terminated,
except for termination due to death, disability, retirement or termination for
cause, or (B) voluntarily terminates his or her employment, within sixty days of
having the terms or conditions of his or her employment changed (defined as (i)
reassignment to a lower grade; (ii) a reduction in salary; (iii) a reduction in
eligibility to participate in employee benefit or other compensation plans; (iv)
a change in or limitation of duties or powers; (v) a relocation of regular
assigned work place by more than twenty-five additional miles from residence;
(vi) removal of the officer from or failure to reelect him or her to the
position held immediately prior to the change of control or (vii) a reduction in
the officer's benefit plans which exist immediately prior to the change of
control) shall receive severance pay amounting to two times his or her base
compensation, including bonus, at the time of the termination. Such amount shall
be paid in weekly installments for a period of two years. In addition, the
officer will receive for two years medical, pension, life insurance, unused
vacation and other similar benefits comparable to those furnished immediately
prior to the termination. It is anticipated that each of the executive officers
will continue to be employed with WNB following the Merger. However, if each of
the executive officers was to be terminated following the change of control and
severance benefits were triggered, based on current salaries and benefits the
executive officers would receive severance benefits in the aggregate of
$1,047,493.
Federal Income Tax Consequences
- -------------------------------
Pursuant to the Merger Agreement, an opinion has been provided to WNB and
FFC by Barley, Snyder, Senft & Cohen, LLP, counsel for FFC, which states that,
for federal income tax purposes:
39
<PAGE>
1. The Merger will constitute a reorganization within the meaning of
Section 368(a)(1)(A) and (a)(2)(D) of the Internal Revenue Code of 1986, as
amended;
2. No gain or loss will be recognized by FFC, WNB Interim National Bank or
WNB by reason of the Merger;
3. The bases of the assets of WNB immediately after the Merger will be the
same as the bases of such assets immediately prior to the Merger;
4. The holding period of the assets of WNB immediately after the Merger
will include the period during which such assets were held by WNB prior to the
Merger;
5. A holder of WNB Common Stock who receives shares of FFC Common Stock in
exchange for his or her WNB Common Stock pursuant to the Merger (including
fractional shares of FFC Common Stock deemed issued as described below) will not
recognize any gain or loss upon the exchange;
6. A holder of WNB Common Stock who receives cash in lieu of a fractional
share of FFC Common Stock will be treated as if he or she received a fractional
share of FFC Common Stock pursuant to the Merger and FFC then redeemed such
fractional share for the cash. The holder of WNB Common Stock will recognize
capital gain or loss on the constructive redemption of the fractional share in
an amount equal to the difference between the cash received and the adjusted
basis of the fractional share;
7. The tax basis of the shares of FFC Common Stock to be received by WNB
shareholders pursuant to the Merger Agreement will be the same as the basis of
the shares of WNB Common Stock surrendered in exchange therefor decreased by the
amount of cash received and increased by the amount of any gain recognized on
the exchange; and
8. The holding period of the shares of FFC Common Stock to be received by
the shareholders of WNB will include the period during which they held the
shares of WNB Common Stock surrendered, provided the shares of WNB Common Stock
are held as a capital asset on the date of the exchange.
THE FOREGOING IS INTENDED ONLY AS A GENERAL SUMMARY OF CERTAIN FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER UNDER PRESENT LAW. EACH SHAREHOLDER OF WNB
IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR CONCERNING THE PARTICULAR TAX
CONSEQUENCES OF THE MERGER AS THEY AFFECT HIS OR HER INDIVIDUAL CIRCUMSTANCES,
INCLUDING THE IMPACT OF ANY APPLICABLE ESTATE, GIFT, STATE, LOCAL, FOREIGN OR
OTHER TAX.
Accounting Treatment
- --------------------
The Merger Agreement contemplates that the Merger will be treated as a
pooling-of-interests for financial accounting purposes. If FFC would be required
to purchase more than ten percent of the outstanding shares of WNB Common Stock
for cash or if other conditions arise which would prevent the Merger from being
treated as a pooling-of-interests for financial accounting purposes, FFC has the
right to terminate the Merger Agreement and to cancel the Merger; provided,
however, that FFC shall have no right to terminate the Merger Agreement if the
inability to use pooling-of-interest accounting treatment is due solely to
actions by FFC taken after the date of the Merger Agreement. FFC presently
intends to exercise its right of termination if the Merger could not be treated
as a pooling-of-interests for financial accounting purposes.
40
<PAGE>
Although it has no intention of doing so, FFC could choose to waive its
right of termination and go forward with the proposed merger even if the merger
could not be treated as a pooling of interests for financial accounting
purposes. In that event, the following would occur: (i) the merger between WNB
and a subsidiary of FFC would be treated as a purchase transaction under
financial accounting principles; (ii) FFC would file a post-effective amendment,
presenting revised financial disclosures and updated information, to the
registration statement of which this Proxy Statement/Prospectus is a part; and
(iii) WNB's management would resolicit proxies from WNB's shareholders.
Rights of Dissenting Shareholders
- ---------------------------------
In accordance with the provisions of Section 215(a) of Title 12, United
States Code (12 U.S.C. (S) 215(a)), any shareholder of WNB who wishes to
exercise dissenter's rights with respect to the proposed merger must either (i)
vote against the proposed merger, or (ii) file a written notice, prior to or at
the special meeting of shareholders convened to vote on the proposed merger,
stating that he or she dissents from the Plan of Merger, which written notice
should be addressed to The Woodstown National Bank & Trust Company, One South
Main Street, Woodstown, New Jersey 08098. In addition, any shareholder of WNB
wishing to exercise dissenter's rights must make a written request for payment
to FFC, accompanied by the surrender of his or her WNB Common Stock
certificates, at any time before thirty days after the effective date of the
merger, which written request and surrender should be sent to William R.
Colmery, Secretary, Fulton Financial Corporation, One Penn Square, P. O. Box
4887, Lancaster, Pennsylvania 17604. Any dissenting shareholder who fails to
follow the procedures specified in this paragraph will lose his or her
dissenter's rights under the foregoing provisions.
Any dissenting shareholder who does comply with the procedures described in
the preceding paragraph (a "Qualified Dissenting Shareholder") will be entitled,
following the effective date of the merger, to receive in cash the value of the
shares of WNB Common Stock held by him or her, determined as of the day on which
the special meeting of WNB's shareholders was held to authorize the merger. The
value of any shares of WNB Common Stock held by a Qualified Dissenting
Shareholder will be determined by an appraisal committee of three persons. One
member of the appraisal committee will be chosen by a majority vote of the
Qualified Dissenting Shareholders, one member will be chosen by the Board of
Directors of FFC, and the third member will be selected by the two members so
chosen. The valuation of the shares may be agreed upon by any two members of the
appraisal committee.
If the appraisal committee's valuation is not satisfactory to any Qualified
Dissenting Shareholder, such Shareholder may, within five days after receiving
notice of such valuation, appeal to the Comptroller of the Currency
(Comptroller), who will make a binding and final reappraisal as to the value of
the shares held by such Shareholder. If within ninety days from the effective
date of the merger, (i) one or more appraisal committee members have not been
selected for any reason, or (ii) the appraisal committee has been unable to
agree, by a vote of two or more members, on the value of the shares held by
Qualified Dissenting Shareholders, the Comptroller, upon the written request of
any interested party, will make a binding and final appraisal of the value of
such shares. The expenses of the Comptroller in making a reappraisal or
appraisal will be paid by FFC.
FFC will pay to the Qualified Dissenting Shareholders the value of the
shares ascertained. The shares of FFC Common Stock which would have been
delivered to Qualified Dissenting Shareholders had they not requested payment
will be sold by FFC at an advertised public auction, and FFC shall have the
41
<PAGE>
right to purchase such shares at the auction, if it is the highest bidder, for
the purpose of reselling such shares within thirty days thereafter to any person
and at a price, not less than par value, as FFC's Board of Directors may
determine. If the shares are sold at public auction at a price greater than the
amount paid to the Qualified Dissenting Shareholders, the excess shall be paid
to the Qualified Dissenting Shareholders.
THE FOREGOING DISCUSSION IS ONLY A SUMMARY OF THE RIGHTS AND OBLIGATIONS OF
A DISSENTING SHAREHOLDER AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
PROVISIONS OF SECTION 215(a) OF TITLE 12, UNITED STATES CODE, WHICH ARE
REPRODUCED AND SET FORTH IN FULL IN EXHIBIT D TO THIS PROSPECTUS/PROXY
STATEMENT.
FAILURE TO FOLLOW THE PROCEDURES SET FORTH IN 12 U.S.C. (S) 215(a)
GOVERNING THE EXERCISE OF DISSENTERS' RIGHTS WILL RESULT IN THE LOSS OF SUCH
RIGHTS. SHAREHOLDERS MAY WISH TO CONSULT LEGAL COUNSEL IF THEY ARE CONSIDERING A
POSSIBLE EXERCISE OF DISSENTERS' RIGHTS.
Pursuant to the Merger Agreement, FFC has the right to terminate such
Agreement and to cancel the proposed merger if WNB shareholders exercise
dissenters' rights with respect to 10% or more shares of WNB Common Stock. FFC
negotiated for this right of termination in order to limit the amount of cash
that would be paid to WNB shareholders in connection with the proposed merger
and to provide greater assurance that the merger would be treated as a pooling-
of-interests for financial accounting purposes. Additionally, the exercise of
such right by the holders of an aggregate of 10% or more of the Common Stock
could affect the ability of FFC to use "pooling-of-interest" accounting
treatment. Therefore, each of the executive officers and directors of WNB have
signed an agreement not to exercise dissenters' rights in connection with the
Merger. FFC could waive this right of termination but has no present intention
to do so. See THE FFC/WNB MERGER--Conditions, Amendment and Termination, and THE
FFC/WNB MERGER--Accounting Treatment.
Restrictions on Resale of FFC Common Stock Held By Affiliates of WNB
- ----------------------------- --------------------------------------
The shares of FFC Common Stock to be issued upon consummation of the Merger
have been registered with the Securities and Exchange Commission (the "SEC")
under the Securities Act of 1933 (the "1933 Act") and, following the Merger, may
be freely resold or otherwise transferred by all former shareholders of WNB,
except those former shareholders who are deemed to be "affiliates" of WNB within
the meaning of SEC Rules 144 and 145. In general terms, any person who is an
executive officer, director or ten percent shareholder of WNB at the time of the
Special Meeting may be deemed to be an affiliate of WNB for purposes of SEC
Rules 144 and 145.
FFC Common Stock received by persons who are deemed to be affiliates of WNB
may be resold only: (i) in compliance with the provisions of SEC Rule 145(d),
(ii) in compliance with the provisions of another applicable exemption from the
registration requirements of the 1933 Act, or (iii) pursuant to an effective
registration statement filed with the SEC. In very general terms, SEC Rule
145(d) would permit an affiliate of WNB to sell shares of FFC Common Stock
received by him or her in connection with the Merger in ordinary brokerage
transactions, subject to certain limitations on the number of shares of FFC
Common Stock which may be sold during any consecutive three-month period.
Notwithstanding the foregoing, an affiliate of WNB (as a general rule and
subject to an exception in the case of certain de minimis sales) may not sell
-- -------
any shares of FFC Common Stock received by him or her in exchange for his or her
shares of WNB Common Stock until after the publication of financial results
covering at least thirty days of post-Merger combined operations of FFC.
42
<PAGE>
Under the terms of the Merger Agreement, each person who may be deemed to
be an affiliate of WNB is required, prior to the closing of the Merger, to
deliver to FFC an agreement, in form and substance satisfactory to FFC,
acknowledging and agreeing to abide by the limitations imposed by the 1933 Act
and the rules of the SEC thereunder regarding the sale or other disposition of
the shares of FFC Common Stock to be received by him or her pursuant to the
Merger.
Warrant Agreement
- -----------------
Simultaneously with the execution of the Merger Agreement, WNB and FFC
executed a Warrant Agreement, dated September 30, 1996 (the "Warrant
Agreement"). A copy of the Warrant Agreement is attached as Exhibit C to this
Proxy Statement. The following description of the Warrant Agreement does not
purport to be complete and is qualified in its entirety by reference to the
Warrant Agreement, which is incorporated herein in its entirety.
Pursuant to the Warrant Agreement, WNB issued to FFC a warrant (the
"Warrant") to purchase from WNB up to 358,200 fully paid and non-assessable
shares of WNB Common Stock at a price per share equal to $24.00, subject to
adjustment as provided for in the Warrant Agreement (such exercise price, as so
adjusted, is referred to herein as the "Exercise Price"). The execution of the
Warrant Agreement was required by FFC as a condition to its execution of the
Merger Agreement, and the effect of the Warrant Agreement is to increase the
likelihood that the Merger will occur by making it more difficult and expensive
for another party to acquire WNB.
The Warrant may be exercised in whole or in part at any time or from time
to time on or after the occurrence of an Exercise Event (as defined below) until
termination of the Warrant Agreement. So long as the Warrant is owned by FFC, it
may be exercised for no more than the number of shares of WNB Common Stock equal
to 358,200 (subject to adjustment as described below) less the number of shares
of WNB Common Stock at the time owned by FFC.
FFC may not sell, assign, transfer or exercise the Warrant, in whole or in
part, without the prior written consent of WNB, except upon or after the
occurrence of any of the following events (each of which constitutes an Exercise
Event): (i) a knowing breach by WNB of any representation, warranty or covenant
set forth in the Merger Agreement which would permit FFC to terminate the Merger
Agreement; (ii) the failure of WNB's shareholders to approve the Merger
Agreement at a meeting called for such purpose if, at the time of such meeting,
there has been an announcement by any person other than FFC of an offer or
proposal to acquire 25% or more of the outstanding shares of WNB Common Stock
(before giving effect to any exercise of the Warrant), or to acquire, merge or
consolidate with WNB, or to purchase all or substantially all of WNB's assets;
(iii) the acquisition by any person of beneficial ownership of 25% or more of
the outstanding shares of WNB Common Stock (before giving effect to any exercise
of the Warrant); (iv) any person other than FFC shall have commenced a tender or
exchange offer, or shall have filed an application with an appropriate bank
regulatory authority with respect to a publicly announced offer, to purchase or
acquire securities of WNB such that, upon consummation of such offer, such
person would have beneficial ownership of 25% or more of the outstanding shares
of WNB Common Stock (before giving effect to any exercise of the Warrant); (v)
WNB shall have entered into an agreement, letter of intent or other
understanding with any person other than FFC providing for such person (A) to
acquire, merge, consolidate or enter into a statutory share exchange with WNB or
to purchase all or substantially all of WNB's assets, or (B) to negotiate with
WNB with respect to any of the events or transactions mentioned in the preceding
clause (A); or (vi) termination or attempted termination of the
43
<PAGE>
Merger Agreement by WNB under Section 5.7 thereof (relating to the exercise by
the directors of WNB of their fiduciary duty).
The Warrant may be exercised by presentation and surrender thereof to WNB
at its principal office accompanied by (i) a written notice of exercise, (ii)
payment of the Exercise Price for the number of shares of WNB Common Stock
specified in such notice, and (iii) a certificate of the holder of the Warrant
(the Holder) specifying the event or events which have occurred and which
entitle the Holder to exercise the Warrant. Upon such presentation and
surrender, WNB shall issue promptly to the Holder the number of shares of WNB
Common Stock to which the Holder is entitled. If the Warrant is exercised in
part, WNB will, upon surrender of the Warrant for cancellation, execute and
deliver a new Warrant entitling the Holder to purchase the balance of the shares
of WNB Common Stock issuable thereunder.
Generally, in the event of any change in the outstanding shares of WNB's
Common Stock by reason of a stock dividend, stock split or stock
reclassification, the number and kind of shares or securities subject to the
Warrant and the Exercise Price shall be appropriately and equitably adjusted so
that the Holder shall receive upon exercise of the Warrant the number and class
of shares or other securities or property that the Holder would have received in
respect of the shares of WNB Common Stock that could have been purchased upon
exercise of the Warrant if the Warrant could have been and had been exercised
immediately prior to such event. If, at any time after the Warrant may be
exercised or sold by FFC, WNB has received a written request from FFC, WNB shall
prepare, file and keep effective and current a registration statement under the
Securities Act of 1933, as amended, covering the Warrant and/or the shares of
WNB Common Stock issued or issuable upon exercise of the Warrant. All expenses
incurred by WNB in complying with such registration requirements will be paid by
WNB. FFC will pay all expenses incurred by FFC in connection with such
registration requirements, including fees and disbursements of its counsel and
accountants, underwriting discounts and commissions, and transfer taxes payable
by FFC.
The Warrant and the rights conferred thereby will terminate (i) upon the
Effective Date, (ii) upon a valid termination of the Merger Agreement prior to
the occurrence of an Exercise Event, or (iii) to the extent the Warrant has not
previously been exercised, sixty (60) days after the occurrence of an Exercise
Event.
44
<PAGE>
COMPARATIVE STOCK PRICES AND DIVIDENDS
--------------------------------------
AND RELATED SHAREHOLDER MATTERS
--------------------------------------
Common Stock of FFC
- -------------------
FFC Common Stock is traded in the over-the-counter market and is listed on
the NASDAQ National Market ("NASDAQ") under the symbol "FULT." The following
table sets forth, for the periods indicated, the high and low closing sale price
for FFC Common Stock as reported on NASDAQ and cash dividends paid per share.
<TABLE>
<CAPTION>
Cash Dividends
1995 High Low Paid Per Share
- ---- ---- --- --------------
<S> <C> <C> <C>
First Quarter $16.95 $15.70 0.132
Second Quarter $17.50 $16.32 0.142
Third Quarter $18.30 $16.14 0.146
Fourth Quarter $20.68 $17.73 0.146
1996
- ----
First Quarter $20.23 $18.41 0.155
Second Quarter $20.75 $18.75 0.170
Third Quarter $20.75 $18.63 0.170
</TABLE>
On September 27, 1996, the last trading day before public announcement of
the Merger Agreement, the high and low quotations for FFC Common Stock were
$20.50 and $20.00, respectively, and the closing sale price was $20.38 per
share, as reported on NASDAQ. On December 9, 1996, the closing bid and asked
quotations for FFC Common Stock as reported on NASDAQ were $21.00 and $21.75,
respectively, per share, and the closing sale price was $21.375 per share. As of
September 30, 1996, FFC Common Stock was held by 11,245 holders of record.
FFC has in the past paid regular quarterly cash dividends to its
shareholders on or about the 15th day of January, April, July and October of
each year.
Common Stock of WNB
- -------------------
WNB's Common Stock is traded in the over-the-counter market. Trading
activity historically has been extremely limited. For example, two most recent
trades known to management occurred in April 1996 and November 1996. There has
never been an organized public trading market for WNB's outstanding Common
Stock. Bid quotations are published by Ryan, Beck & Co., Monroe Securities and
F. J. Morrissey. Additionally, prior to this year the WNB Trust Department has
held an annual auction for the sale of three hundred (300) shares of WNB Common
Stock in the parking lot of WNB's headquarters. The terms of the auction sale
provided for each successful bidder to obtain twenty-five share lots along with
the option to purchase an additional twenty-five shares. Historically, every
successful bidder has exercised the option to purchase additional shares. The
most recent auction was held on September 17, 1995, and the average sales prices
were greater than four times the book value of WNB Common Stock. The Board of
Directors believes the prices at these ceremonial auction sales are not
representative of the actual value of the stock due to the informal nature of
these auctions and the de minimus amounts of common stock sold.
The table below reports the cash dividends paid per share during the
periods indicated. Due to the extremely limited and private nature of sales
45
<PAGE>
of WNB Common Stock, WNB management was unable to compile meaningful data
regarding the historical number of shares traded and the price range for such
shares.
<TABLE>
<CAPTION>
Cash Dividends
Paid Per Share
--------------
<S> <C>
1995
----
First Quarter $0.155
Second Quarter 0.155
Third Quarter 0.155
Fourth Quarter 0.195
1996
----
First Quarter 0.18
Second Quarter 0.18
Third Quarter 0.18
</TABLE>
The last sale of WNB Common Stock known to management occurred on December 9,
1996 at $25.00 per share. As of the close of business on December 11, 1996,
WNB's Common Stock was held by approximately 266 holders of record. WNB's
ability to declare or pay cash dividends prior to the Effective Date of the
Merger is limited by the Merger Agreement. See THE FFC/WNB MERGER -- Business
Pending the Effective Date.
PRO FORMA COMBINED FINANCIAL INFORMATION
----------------------------------------
The unaudited pro forma combined condensed balance sheet and the unaudited pro
forma combined condensed statements of income of FFC set forth below give
effect, using the pooling-of-interests method of accounting, to the proposed
acquisition of WNB (based upon an exchange ratio of 1.60 shares of FFC Common
Stock for each share of WNB Common Stock). The unaudited pro forma combined
condensed financial statements are presented as though the Merger between FFC
and WNB had occurred on September 30, 1996.
The unaudited pro forma financial information, including the notes thereto set
forth below, is not necessarily indicative of the financial condition or results
of operations of FFC as they would have been had the proposed acquisition of WNB
occurred during the periods presented or as they may be in the future. The
unaudited pro forma financial information set forth below should be read in
conjunction with the financial statements of FFC, including the notes thereto,
which are incorporated herein by reference, and the financial statements of WNB,
including the notes thereto, which are set forth elsewhere in this Proxy
Statement/Prospectus. See INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE; THE
WOODSTOWN NATIONAL BANK & TRUST COMPANY--INDEX TO FINANCIAL STATEMENTS AND
SUPPLEMENTARY FINANCIAL INFORMATION.
46
<PAGE>
Fulton Financial Corporation
Pro Forma Combined Balance Sheet (Unaudited)
September 30, 1996
(Dollars in Thousands)
--------------------------------------------
<TABLE>
<CAPTION>
Fulton
Financial The Woodstown National Pro Forma
Corporation Bank & Trust Company Adjustments Combined
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Cash and Due from Banks $ 190,897 $ 11,579 $0 $ 202,476
Interest Bearing Deposits 2,056 18 2,074
Federal Funds Sold and Securities
Under Agreements to Resell -- 3,590 3,590
Mortgage Loans Held for Sale 510 749 1,259
Investment Securities:
Securities Held to Maturity 415,349 40,744 456,093
Securities Available for
Sale 321,046 12,622 333,668
Loans 2,708,702 180,352 2,889,054
Less: Allowance for Loan
Losses (40,519) (2,581) (43,100)
Unearned Income (7,280) (716) (7,996)
----------------------------------------------------------------------
Net Loans 2,660,903 177,055 0 2,837,958
----------------------------------------------------------------------
Premises and Equipment 51,037 4,925 55,962
Accrued Interest Receivable 24,198 1,619 25,817
Other Assets 78,667 1,933 80,600
----------------------------------------------------------------------
TOTAL ASSETS $3,744,663 $254,834 $0 $3,999,497
======================================================================
Liabilities
Deposits:
Non-Interest Bearing $474,541 $43,360 $517,901
Interest Bearing 2,579,110 186,374 2,765,484
----------------------------------------------------------------------
Total Deposits 3,053,651 229,734 0 3,283,385
----------------------------------------------------------------------
Short-Term Borrowings:
Federal Funds Purchased and
Securities Sold Under
Agreements to Repurchase 225,173 -- 225,173
Demand Notes of U.S.
Treasury 5,000 -- 5,000
----------------------------------------------------------------------
Total Short-Term Borrowings 230,173 -- 0 230,173
----------------------------------------------------------------------
Accrued Interest Payable 24,330 710 25,040
Other Liabilities 40,935 726 41,661
Long-Term Debt 21,074 -- 21,074
----------------------------------------------------------------------
Total Liabilities 3,370,163 231,170 0 3,601,333
----------------------------------------------------------------------
</TABLE>
47
<PAGE>
Fulton Financial Corporation
Pro Forma Combined Balance Sheet (Unaudited)
September 30, 1996
(Dollars in Thousands)
--------------------------------------------
<TABLE>
<CAPTION>
Fulton
Financial The Woodstown National Pro Forma
Corporation Bank & Trust Company Adjustments Combined
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shareholders' Equity
Common Stock 82,465 400 6,800 (A) 89,665
Capital Surplus 220,977 1,200 (1,200) (A) 220,977
Retained Earnings 64,428 22,054 (5,600) (A) 80,882
Less: Treasury Stock (99) (99)
Net Unrealized Holding Gain
on Securities 6,729 10 0 6,739
----------------------------------------------------------------------
Total Shareholders' Equity 374,500 23,664 0 398,164
----------------------------------------------------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $3,744,663 $254,834 $0 $3,999,497
======================================================================
</TABLE>
- ------------------
Notes to Pro Forma Combined Balance Sheets:
(A) These Adjustments to the capital accounts reflect the issuance of FFC Common
Stock, $2.50 par value per share, for 100% of the WNB Common Stock, $.22 par
value per share, issued and outstanding. An exchange ratio of 1.60 shares of
FFC Common Stock for each share of WNB's Common Stock was utilized in this
illustration.
48
<PAGE>
Fulton Financial Corporation
Pro Forma Combined Balance Sheet (Unaudited)
December 31, 1995
(Dollars in Thousands)
--------------------------------------------
<TABLE>
<CAPTION>
Fulton
Financial The Woodstown National Pro Forma
Corporation Bank & Trust Company Adjustments Combined
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Cash and Due from Banks $ 152,143 $ 9,941 $0 $ 162,084
Interest Bearing Deposits 4,425 18 4,443
Federal Funds Sold and Securities
Under Agreements to Resell - 10,310 10,310
Mortgage Loans Held for Sale 613 534 1,147
Investment Securities:
Securities Held to Maturity 503,926 52,686 556,612
Securities Available for Sale 256,380 2,221 258,601
Loans 2,502,033 174,462 2,676,495
Less: Allowance for Loan Losses (38,272) (2,185) (40,457)
Unearned Income (8,711) (606) (9,317)
----------------------------------------------------------------------
Net Loans 2,455,050 171,671 0 2,626,721
----------------------------------------------------------------------
Premises and Equipment 47,606 3,700 51,306
Accrued Interest Receivable 25,275 1,745 27,020
Other Assets 79,150 1,767 80,917
----------------------------------------------------------------------
TOTAL ASSETS $3,524,568 $254,593 $0 $3,779,161
=====================================================================
Liabilities
Deposits:
Non-Interest Bearing $ 427,384 $ 37,566 $ 464,950
Interest Bearing 2,487,885 193,523 2,681,408
----------------------------------------------------------------------
TOTAL DEPOSITS 2,915,269 231,089 0 $3,146,358
----------------------------------------------------------------------
Short-Term Borrowings:
Federal Funds Purchased and
Securities Sold Under
Agreements to Repurchase 126,372 - 126,372
Demand Notes of U.S. Treasury 5,058 - 5,058
----------------------------------------------------------------------
TOTAL SHORT-TERM BORROWINGS 131,430 - 0 131,430
----------------------------------------------------------------------
Accrued Interest Payable 19,357 735 20,092
Other Liabilities 69,809 167 69,976
Long-Term Debt 34,689 - 34,689
----------------------------------------------------------------------
TOTAL LIABILITIES 3,170,554 231,991 0 3,402,545
</TABLE>
49
<PAGE>
Fulton Financial Corporation
Pro Forma Combined Balance Sheet (Unaudited)
December 31, 1995
(Dollars in Thousands)
--------------------------------------------
<TABLE>
<CAPTION>
Fulton
Financial The Woodstown National Pro Forma
Corporation Bank & Trust Company Adjustments Combined
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shareholders' Equity
Common Stock 74,907 400 6,800 (A) 82,107
Capital Surplus 174,023 1,200 (1,200) (A) 174,023
Retained Earnings 98,746 21,002 (5,600) (A) 114,148
Less: Treasury Stock (2,188) - (2,188)
Net Unrealized Holding Gain 8,526 - 8,526
on Securities
----------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 354,014 22,602 0 376,616
----------------------------------------------------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $3,524,568 $254,593 $0 3,779,161
======================================================================
</TABLE>
- -------------
Notes to Pro Forma Combined Balance Sheet:
(A) These Adjustments to the capital accounts reflect the issuance of FFC
Common Stock, $2.50 par value per share, for 100% of the WNB Common Stock,
$.22 par value per share, issued and outstanding. An exchange ratio of
1.60 shares of FFC Common Stock for each share of WNB's Common Stock was
utilized in this illustration.
50
<PAGE>
Fulton Financial Corporation
Pro Forma Combined Balance Sheet (Unaudited)
December 31, 1994
(Dollars in Thousands)
<TABLE>
<CAPTION>
Fulton The Woodstown National
Financial Bank & Trust Company Pro Forma
Corporation Adjustments Combined
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Cash and Due from Banks $ 156,705 $ 8,545 $ 0 $ 165,250
Interest Bearing Deposits 2,539 17 2,556
Federal Funds Sold and Securities
Under Agreements to Resell 13,675 5,400 19,075
Mortgage Loans Held for Sale 650 - 650
Investment Securities:
Securities Held to Maturity 515,063 48,259 563,322
Securities Available for Sale 195,207 2,075 197,282
Loans 2,356,292 161,749 2,518,058
Less: Allowance for Loan Losses (37,279) (2,386) (39,665)
Unearned Income (10,952) (570) (11,522)
-------------------------------------------------------------------------------
Net Loans 2,308,061 158,793 0 2,466,871
-------------------------------------------------------------------------------
Premises and Equipment 45,527 3,740 49,267
Accrued Interest Receivable 21,774 1,483 23,257
Other Assets 79,226 1,508 80,717
-------------------------------------------------------------------------------
TOTAL ASSETS $3,338,427 $229,820 $0 $3,568,247
===============================================================================
Liabilities
Deposits:
Non-Interest Bearing $ 382,053 $ 38,479 $ 420,522
Interest Bearing 2,356,844 165,084 2,521,928
-------------------------------------------------------------------------------
TOTAL DEPOSITS 2,738,897 203,563 0 2,942,450
-------------------------------------------------------------------------------
Short-Term Borrowings:
Federal Funds Purchased and
Securities Sold Under
Agreements to Repurchase 191,523 - 191,523
Demand Notes of U.S. Treasury 5,000 - 5,000
Other Short-Term Debt - 5,000 5,000
-------------------------------------------------------------------------------
TOTAL SHORT-TERM 196,523 5,000 0 201,523
BORROWINGS
-------------------------------------------------------------------------------
Accrued Interest Payable 13,017 543 13,564
Other Liabilities 43,099 211 43,316
Long-Term Debt 27,283 - 27,283
-------------------------------------------------------------------------------
TOTAL LIABILITIES 3,018,819 209,317 0 3,228,136
===============================================================================
</TABLE>
51
<PAGE>
Fulton Financial Corporation
Pro Forma Combined Balance Sheet (Unaudited)
December 31, 1994
(Dollars in Thousands)
--------------------------------------------
<TABLE>
<CAPTION>
Fulton The Woodstown National
Financial Bank & Trust Company Pro Forma
Corporation Adjustments Combined
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shareholders' Equity
Common Stock $ 69,072 $ 400 6,800 (A) $ 76,272
Capital Surplus 139,012 1,200 (1,200) (A) 139,012
Retained Earnings 115,462 18,903 (5,600) (A) 128,765
Less: Treasury Stock (4,474) (4,474)
Net Unrealized Holding Gain
on Securities 536 0 536
-------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 319,608 20,503 0 340,111
-------------------------------------------------------------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $3,338,427 $229,820 $0 $ 3,568,247
===============================================================================
</TABLE>
- -----------------
Notes to Pro Forma Combined Balance Sheets:
(A) These adjustments to the capital accounts reflect the issuance of FFC
Common Stock, $2.50 par value per share, for 100% of the WNB Common Stock,
$.22 par value per share, issued and outstanding. An exchange ratio of
1.60 shares of FFC Common Stock for each share of WNB's Common Stock was
utilized in this illustration.
52
<PAGE>
Fulton Financial Corporation
Pro Forma Combined Condensed Statement of Income (Unaudited)
For the Nine Months Ended September 30, 1996
(Dollars in Thousands)
-----------------------------------------------------------
<TABLE>
<CAPTION>
Fulton The Woodstown National Pro Forma
Financial Bank & Trust Company Adjustments Combined
Corporation
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest Income
Loans, Including Fees $ 166,716 $ 11,776 $ 178,492
Investment Securities:
Taxable 28,138 2,272 30,410
Tax-Exempt 2,527 145 2,672
Dividends 1,491 47 1,538
Federal Funds Sold and
Repurchase Agreements 154 385 539
Interest-Bearing Deposits
in Other Banks 124 - 124
-------------------------------------------------------------------------------
TOTAL INTEREST INCOME 199,150 14,625 0 213,775
Interest Expense
Deposits 77,132 6,387 83,519
Short-Term Borrowings 5,825 1 5,826
Long-Term Debt 1,334 - 1,334
-------------------------------------------------------------------------------
TOTAL INTEREST EXPENSE 84,291 6,388 0 90,679
-------------------------------------------------------------------------------
NET INTEREST INCOME 114,859 8,237 123,096
Provision for Loan Losses 2,794 585 3,379
-------------------------------------------------------------------------------
Net Interest Income After Provision
for Loan Losses 112,065 7,652 0 119,717
Other Income
Trust Department 5,744 58 5,802
Service Charges on Deposit
Accounts 9,424 653 10,077
Other Service Charges and
Fees 5,599 270 5,869
Gain on Sale of Mortgage
Loans 699 16 715
Investment Securities Gains 2,136 - 2,136
-------------------------------------------------------------------------------
TOTAL OTHER INCOME 23,602 997 0 24,599
-------------------------------------------------------------------------------
Other Expenses
Salaries and Employee Benefits 41,997 2,495 44,492
Net Occupancy Expense 8,562 316 8,878
Equipment Expense 4,405 354 4,759
FDIC Assessment Expense 3,240 2 3,242
Special Services 4,836 - 4,836
Other 18,727 1,861 20,588
-------------------------------------------------------------------------------
TOTAL OTHER EXPENSES 81,767 5,028 0 86,795
-------------------------------------------------------------------------------
Income Before Income Taxes 53,900 3,621 0 57,521
Income Taxes 15,555 1,597 17,152
-------------------------------------------------------------------------------
NET INCOME $38,345 $2,024 $0 $40,369
===============================================================================
Per Share Data:
Net Income $1.16 $1.12 $1.13
Cash Dividends $0.495 $0.540 $0.482
Weighted Average Shares Outstanding 32,939,454 1,800,000 35,819,454
</TABLE>
53
<PAGE>
Fulton Financial Corporation
Pro Forma Combined Condensed Statement of Income (Unaudited)
For the Nine Months Ended September 30, 1995
(Dollars in Thousands)
------------------------------------------------------------
<TABLE>
<CAPTION>
Fulton The Woodstown National Pro Forma
Financial Bank & Trust Company Adjustments Combined
Corporation
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest Income
Loans, Including Fees $156,316 $10,849 $167,165
Investment Securities:
Taxable 23,307 1,781 25,088
Tax-Exempt 3,730 263 3,993
Dividends 1,492 57 1,549
Federal Funds Sold and Repurchase
Agreements 1,540 436 1,976
Interest-Bearing Deposits
in Other Banks 195 - 195
--------------------------------------------------------------------------------
TOTAL INTEREST INCOME 186,580 13,386 0 199,966
Interest Expense
Deposits 73,245 6,186 79,431
Short-Term Borrowings 4,751 116 4,867
Long-Term Debt 1,504 - 1,504
--------------------------------------------------------------------------------
TOTAL INTEREST EXPENSE 79,500 6,302 0 85,802
--------------------------------------------------------------------------------
NET INTEREST INCOME 107,080 7,084 114,164
Provision for Loan Losses 2,021 90 2,111
--------------------------------------------------------------------------------
Net Interest Income After Provision 105,059 6,994 0 112,053
for Loan Losses
Other Income
Trust Department 5,568 54 5,622
Service Charges on Deposit
Accounts 7,835 579 8,414
Other Service Charges and Fees 5,648 260 5,908
Gain on Sale of Mortgage Loans 811 13 824
Investment Securities Gains 1,409 - 1,409
--------------------------------------------------------------------------------
TOTAL OTHER INCOME 21,271 906 0 22,177
--------------------------------------------------------------------------------
Other Expenses
Salaries and Employee Benefits 40,226 2,179 42,405
Net Occupancy Expense 8,036 308 8,344
Equipment Expense 4,555 350 4,905
FDIC Assessment Expense 3,071 216 3,287
Special Services 4,223 - 4,223
Other 17,103 1,299 18,402
--------------------------------------------------------------------------------
TOTAL OTHER EXPENSES 77,214 4,352 0 81,566
--------------------------------------------------------------------------------
Income Before Income Taxes 49,116 3,548 0 52,664
Income Taxes 13,446 1,239 14,685
--------------------------------------------------------------------------------
NET INCOME $35,670 $2,309 $0 $37,979
================================================================================
Per Share Data:
Net Income $1.08 $1.28 $1.06
Cash Dividends $0.420 $0.465 $0.410
Weighted Average Shares Outstanding 32,928,042 1,800,000 35,808,042
</TABLE>
54
<PAGE>
Fulton Financial Corporation
Pro Forma Combined Condensed Statement of Income (Unaudited)
Year Ended December 31, 1995
(Dollars in Thousands)
------------------------------------------------------------
<TABLE>
<CAPTION>
Fulton The Woodstown National
Financial Bank & Trust Company Pro Forma
Corporation Adjustments Combined
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest Income
Loans, Including Fees $210,562 $14,551 $225,113
Investment Securities:
Taxable 32,233 2,494 34,727
Tax-Exempt 4,843 310 5,153
Dividends 1,976 74 2,050
Federal Funds Sold and Repurchase
Agreements 1,783 686 2,469
Interest-Bearing Deposits
in Other Banks 272 - 272
-------------------------------------------------------------------------------------
TOTAL INTEREST INCOME 251,669 18,115 0 269,784
Interest Expense
Deposits 99,523 8,387 107,910
Short-Term Borrowings 6,291 116 6,407
Long-Term Debt 2,081 - 2,081
-------------------------------------------------------------------------------------
TOTAL INTEREST EXPENSE 107,895 8,503 0 116,398
-------------------------------------------------------------------------------------
NET INTEREST INCOME 143,774 9,612 153,386
Provision for Loan Losses 3,833 90 3,923
-------------------------------------------------------------------------------------
Net Interest Income After Provision
for Loan Losses 139,941 9,522 0 149,463
Other Income
Trust Department 7,334 101 7,435
Service Charges on Deposit
Accounts 10,648 792 11,440
Other Service Charges and Fees 7,628 452 8,080
Gain on Sale of Mortgage Loans 1,074 31 1,105
Investment Securities Gains 3,205 - 3,205
-------------------------------------------------------------------------------------
TOTAL OTHER INCOME 29,889 1,376 0 31,265
-------------------------------------------------------------------------------------
Other Expenses
Salaries and Employee Benefits 54,753 2,970 57,723
Net Occupancy Expenses 9,683 406 10,089
Equipment Expense 5,636 396 6,032
FDIC Assessment Expense 3,541 237 3,778
Special Services 5,727 - 5,727
Other 25,271 1,901 27,172
-------------------------------------------------------------------------------------
TOTAL OTHER EXPENSES 104,611 5,910 0 110,521
-------------------------------------------------------------------------------------
Income Before Income Taxes 65,219 4,988 0 70,207
Income Taxes 17,907 1,701 19,608
-------------------------------------------------------------------------------------
NET INCOME $ 47,312 $ 3,287 $0 $ 50,599
=====================================================================================
Per Share Data:
Net Income $1.44 $1.83 $1.41
Cash Dividends $0.566 $0.66 $0.554
Weighted Average Shares Outstanding 32,918,731 1,800,000 35,798,731
</TABLE>
55
<PAGE>
Fulton Financial Corporation
Pro Forma Combined Condensed Statement of Income (Unaudited)
Year Ended December 31, 1994
(Dollars in Thousands)
------------------------------------------------------------
<TABLE>
<CAPTION>
Fulton The Woodstown National Pro Forma
Financial Bank & Trust Company Adjustments Combined
Corporation
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest Income
Loans, Including Fees $169,894 $13,043 $182,937
Investment Securities:
Taxable 32,707 1,645 34,352
Tax-Exempt 5,588 543 6,131
Dividends 1,398 72 1,470
Federal Funds Sold and Repurchase
Agreements 793 268 1,061
Interest-Bearing Deposits
in Other Banks 170 - 170
-------------------------------------------------------------------------------------
TOTAL INTEREST INCOME 210,550 15,571 0 226,121
Interest Expense
Deposits 72,216 5,816 78,032
Short-Term Borrowings 5,288 6 5,294
Long-Term Debt 1,116 - 1,116
-------------------------------------------------------------------------------------
TOTAL INTEREST EXPENSE 78,620 5,822 0 84,442
-------------------------------------------------------------------------------------
NET INTEREST INCOME 131,930 9,749 141,679
Provision for Loan Losses 2,715 239 2,954
-------------------------------------------------------------------------------------
Net Interest Income After Provision
for Loan Losses 129,215 9,510 0 138,725
Other Income
Trust Department 6,944 119 7,063
Service Charges on Deposit
Accounts 10,042 689 10,731
Other Service Charges and
Fees 6,089 390 6,479
Gain on Sale of Mortgage
Loans 1,189 - - 1,189
Investment Securities Gains 2,133 - 2,133
-------------------------------------------------------------------------------------
TOTAL OTHER INCOME 26,397 1,198 0 27,595
-------------------------------------------------------------------------------------
Other Expenses
Salaries and Employee Benefits 50,533 2,939 53,472
Net Occupancy Expense 7,663 418 8,081
Equipment Expense 5,480 378 5,858
FDIC Assessment Expense 5,760 446 6,206
Special Services 5,025 - 5,025
Other 23,047 1,742 24,789
-------------------------------------------------------------------------------------
TOTAL OTHER EXPENSES 97,508 5,923 0 103,431
-------------------------------------------------------------------------------------
Income Before Income Taxes 58,104 4,785 0 62,889
Income Taxes 15,587 1,632 17,219
-------------------------------------------------------------------------------------
NET INCOME $ 42,517 $ 3,153 $0 $ 45,670
=====================================================================================
Per Share Data:
Net Income $1.30 $1.75 $1.28
Cash Dividends $0.501 $0.587 $0.490
Weighted Average Shares Outstanding 32,693,447 1,800,000 35,573,447
</TABLE>
56
<PAGE>
Fulton Financial Corporation
Pro Forma Combined Condensed Statement of Income (Unaudited)
Year Ended December 31, 1993
(Dollars in Thousands)
------------------------------------------------------------
<TABLE>
<CAPTION>
Fulton The Woodstown National Pro Forma
Financial Bank & Trust Company Adjustments Combined
Corporation
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest Income
Loans, Including Fees $155,704 $13,153 $168,857
Investment Securities:
Taxable 31,793 1,035 32,828
Tax-Exempt 6,893 768 7,661
Dividends 1,304 86 1,390
Federal Funds Sold and Repurchase
Agreements 1,910 336 2,246
Interest-Bearing Deposits
in Other Banks 597 - 597
-------------------------------------------------------------------------------------
TOTAL INTEREST INCOME 198,201 15,378 0 213,579
Interest Expense
Deposits 74,997 6,240 81,237
Short-Term Borrowings 1,612 - 1,612
Long-Term Debt 890 - 890
-------------------------------------------------------------------------------------
TOTAL INTEREST EXPENSE 77,499 6,240 0 83,739
-------------------------------------------------------------------------------------
NET INTEREST INCOME 120,702 9,138 129,840
Provision for Loan Losses 5,676 472 6,148
-------------------------------------------------------------------------------------
Net Interest Income After Provision
for Loan Losses 115,026 8,666 0 123,692
Other Income
Trust Department 6,812 99 6,911
Service Charges on Deposit
Accounts 10,014 598 10,612
Other Service Charges and
Fees 6,090 461 6,551
Gain on Sale of Mortgage
Loans 4,265 - 4,265
Investment Securities Gains 2,758 - 2,758
-------------------------------------------------------------------------------------
TOTAL OTHER INCOME 29,939 1,158 0 31,097
-------------------------------------------------------------------------------------
Other Expenses
Salaries and Employee
Benefits 47,721 2,564 50,285
Net Occupancy Expense 7,920 298 8,218
Equipment Expense 5,293 286 5,579
FDIC Assessment Expense 5,733 456 6,189
Special Services 5,253 - 5,253
Other 23,086 1,446 24,532
-------------------------------------------------------------------------------------
TOTAL OTHER EXPENSES 95,006 5,050 0 100,056
-------------------------------------------------------------------------------------
Income Before Income Taxes and
Cumulative Effect of Changes in
Accounting Principles 49,959 4,774 0 54,733
Income Taxes 12,043 1,743 13,786
-------------------------------------------------------------------------------------
Income Before Cumulative Effect of
Changes in Accounting Principles 37,916 3,031 0 40,947
Cumulative Effect of Changes
in Accounting Principles (3,457) - (3,457)
-------------------------------------------------------------------------------------
NET INCOME $ 34,459 $ 3,031 $0 $ 37,490
=====================================================================================
</TABLE>
57
<PAGE>
Fulton Financial Corporation
Pro Forma Combined Condensed Statement of Income (Unaudited)
Year Ended December 31, 1993
(Dollars in Thousands)
------------------------------------------------------------
<TABLE>
<CAPTION>
Fulton The Woodstown National Pro Forma
Financial Bank & Trust Company Adjustments Combined
Corporation
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share Data:
Income Before Cumulative
Effect of Changes in Accounting
Principles $1.17 $1.68 $1.16
Cumulative Effect of Changes in
Accounting Principles ($0.11) - ($0.10)
NET INCOME $1.06 $1.68 $1.06
Cash Dividends $0.456 $0.567 $0.448
Weighted Average Shares
Outstanding 32,387,061 1,800,000 35,267,061
</TABLE>
58
<PAGE>
INFORMATION CONCERNING FULTON FINANCIAL CORPORATION
---------------------------------------------------
AND DESCRIPTION OF FFC COMMON STOCK
-----------------------------------
General
- -------
FFC is a Pennsylvania business corporation and a registered bank holding
company with its headquarters in Lancaster, Pennsylvania. As a bank holding
company, FFC engages in a general commercial and retail banking and trust
business, and also in related financial businesses, through its bank and nonbank
subsidiaries. FFC's subsidiary banks currently operate eighty-five banking
offices in Pennsylvania, fifteen banking offices in Maryland, seven banking
offices in Delaware, and seven banking offices in New Jersey. As of September
30, 1996, FFC had consolidated total assets of approximately $3.7 billion.
The principal assets of FFC are the following nine wholly-owned bank
subsidiaries, each of which is insured by the FDIC: (i) Fulton Bank ("Fulton"),
a Pennsylvania bank and trust company which is not a member of the Federal
Reserve System, (ii) Farmers Trust Bank ("Farmers Trust"), a Pennsylvania bank
and trust company which is a member of the Federal Reserve System, (iii)
Swineford National Bank ("Swineford"), a national banking association which is a
member of the Federal Reserve System, (iv) Lafayette Bank ("Lafayette"), a
Pennsylvania bank and trust company which is not a member of the Federal Reserve
System, (v) FNB Bank, National Association ("FNB"), a national banking
association which is a member of the Federal Reserve System, (vi) Great Valley
Savings Bank ("Great Valley"), a Pennsylvania-chartered savings bank which is
not a member of the Federal Reserve System, (vii) Hagerstown Trust Company
("Hagerstown"), a Maryland trust company which is not a member of the Federal
Reserve System, (viii) Delaware National Bank ("Delaware National"), a national
banking association which is a member of the Federal Reserve System, and (ix)
The Bank of Gloucester County ("Gloucester"), a New Jersey bank which is not a
member of the Federal Reserve System.
In addition, FFC has the following wholly-owned direct nonbank
subsidiaries: (i) Fulton Financial Realty Company, which holds title to or
leases certain properties on which Fulton and Farmers Trust maintain branch
offices or other facilities; (ii) Fulton Life Insurance Company, which engages
in the business of reinsuring credit life, accident and health insurance that is
directly related to extensions of credit by certain of FFC's bank subsidiaries;
and (iii) Central Pennsylvania Financial Corp., which owns certain non-banking
subsidiaries holding interests in real estate and (iv) FFC Management, Inc.,
which owns certain securities.
As a registered bank holding company, FFC is subject to regulation under
the federal Bank Holding Company Act of 1956, as amended, and the rules adopted
by the Board of Governors of the Federal Reserve System ("Federal Reserve
Board") thereunder. Under applicable Federal Reserve Board policies, a bank
holding company such as FFC is expected to act as a source of financial strength
for each of its subsidiary banks and to commit resources to support each
subsidiary bank in circumstances when it might not do so absent such a policy.
Any capital loans made by a bank holding company to any of its subsidiary banks
would be subordinate in right of payment to the claims of depositors and certain
other creditors of such subsidiary banks.
FFC has a resignation policy for directors of FFC and its subsidiaries.
Under this policy, a director is required to tender his or her resignation upon
reaching the age of seventy. However, under the Merger Agreement, FFC has agreed
that each director of WNB who has reached age seventy as of the Effective Date,
or who reaches such age within three years thereafter, shall
59
<PAGE>
be permitted to serve for a period of three years after the Effective Date
before becoming subject to this policy.
The principal executive offices of FFC are located at One Penn Square,
P.0. Box 4887, Lancaster, Pennsylvania 17604, and its telephone number is (717)
291-2411.
Loan Policies and Portfolio Quality
- -----------------------------------
FFC, through its bank subsidiaries, grants loans and makes other credit
facilities available to the general public. These extensions of credit are
structured to meet the varying needs of business, individual, and institutional
customers and include mortgages, lines of credit, term loans, leases and letters
of credit. This activity serves as a major source of revenue for FFC. However,
it also exposes FFC to potential losses upon borrower default. In order to
minimize the occurrence of loss, FFC's bank subsidiaries follow strict loan
underwriting and risk assessment policies. These policies emphasize the
financial strength and cash flow of the borrower rather than collateral value.
Although collateral continues to play an important part in lending decisions, it
is not a substitute for a borrower's underlying ability to pay. FFC's bank
subsidiaries confine their lending to customers who live, or which are based, in
their respective market areas. By geographically restricting the lending
activities of each bank subsidiary, their respective staffs can become more
knowledgeable about local market conditions and can thereby make better credit
risk assessments and, therefore, more prudent lending decisions. This superior
knowledge of local economic conditions, when combined with prudent underwriting
standards, offsets and often surmounts the potential risks arising from a
geographic concentration of credits. Management believes that FFC's loan
customer base is reasonably diversified, because FFC's subsidiary banks are
located in and do business within a broad spectrum of local communities and
regional economies located in central and northeastern Pennsylvania, western
Maryland, and southern Delaware, and southwestern New Jersey.
To counteract any problems with credit quality which do arise, FFC
maintains a proactive loan review function. This function, in combination with
the lending staff, attempts to identify deteriorating loans before they reach a
critical stage. This loan review policy not only protects FFC and its
subsidiaries from realizing greater loan losses but also, in many cases, assists
the borrower as well. Due to their underwriting criteria, FFC and its bank
subsidiaries have not made a determination to limit the availability of credit
to any segment of their customer base due to changes in general economic
conditions. FFC and its bank subsidiaries do take these conditions into
consideration when assessing individual credit risk, but each loan request is
evaluated individually.
Prudent lending practices cannot completely insulate a financial
institution from adverse economic trends. The economic recession experienced
during the early 1990's in the market areas served by FFC caused a slight
deterioration in the quality of the loan portfolios of FFC's banking
subsidiaries. In addition, FFC acquired approximately $5.0 million in
non-performing assets as part of its acquisition of Central Pennsylvania
Financial Corp. in 1994. The total non-performing assets of FFC totalled $22.2
million, or 0.59% of total assets, at September 30, 1996, and $22.5 million, or
0.64% of total assets, at December 31, 1995. Additionally, FFC and its bank
subsidiaries have certain loans on which payments are presently current, but
where the borrowers are currently experiencing considerable financial
difficulties. Loans under this classification totaled $23.7 million at September
30, 1996.
60
<PAGE>
As of September 30, 1996, FFC's allowance for loan losses was $40.5
million and equalled 206% of total non-performing loans and 183% of
non-performing assets. FFC believes that this allowance is adequate to absorb
any losses inherent in FFC's balance sheet.
Legal Proceedings
- -----------------
From time to time FFC and its subsidiaries are involved in routine
litigation matters that are incidental to the businesses carried on by such
entities. None of these matters is expected to have a material effect on FFC's
financial condition or operating results.
General Description of FFC Common Stock
- ---------------------------------------
The authorized capital of FFC consists exclusively of 100 million shares
of Common Stock, par value $2.50 per share, and 10 million shares of preferred
stock without par value. As of September 30, 1996, there were issued and
outstanding 32,980,497 shares of FFC Common Stock, which shares were held by
11,245 owners of record, and there were 868,136 shares issuable upon the
exercise of options. No shares of preferred stock have been issued by FFC. FFC
Common Stock is listed for quotation on the over-the-counter NASDAQ National
Market under the symbol "FULT."
The holders of FFC Common Stock are entitled to one vote per share on
all matters submitted to a vote of the shareholders and may not cumulate their
votes for the election of directors. Each share of FFC Common Stock is entitled
to participate on an equal pro rata basis in dividends and other distributions.
The holders of FFC Common Stock do not have preemptive rights to subscribe for
additional shares that may be issued by FFC, and no share is entitled in any
manner to any preference over any other share. The shares of FFC Common Stock to
be issued to the shareholders of WNB pursuant to the Merger will be fully paid
and non-assessable and the holders thereof will not be subject to call or
assessment under Pennsylvania law. Fulton Bank serves as the transfer agent for
FFC.
Dividends
- ---------
The holders of FFC Common Stock are entitled to receive dividends when,
as and if declared by the Board of Directors out of funds legally available
therefor. FFC has in the past paid quarterly cash dividends to its shareholders
on or about the 15th day of January, April, July and October of each year.
The ability of FFC to pay dividends to its shareholders is dependent
primarily upon the earnings and financial condition of Fulton, Farmers Trust,
Swineford, Lafayette, FNB, Great Valley, Hagerstown, Delaware National and
Gloucester. Funds for the payment of dividends on FFC Common Stock are expected
for the foreseeable future to be obtained primarily from dividends paid to FFC
by these nine bank subsidiaries, and by WNB if the Merger is consummated, which
dividends are subject to certain statutory limitations.
Under applicable state and federal laws, the dividends that may be paid
by the bank subsidiaries of FFC without prior regulatory approval are subject to
certain prescribed limitations. As state banks chartered under the Pennsylvania
Banking Code of 1965, as amended, Fulton, Farmers Trust, Lafayette and Great
Valley may pay dividends only out of accumulated net earnings and may not
declare or pay any dividend requiring a reduction of the statutorily required
surplus of the institution. In the case of national banks such as Swineford, FNB
and Delaware National, the approval of the Office of the Comptroller of the
Currency ("OCC") is required under federal law if
61
<PAGE>
the total of all dividends declared during any calendar year would exceed the
net profits (as defined) of the bank for the year, combined with its retained
net profits (as defined) for the two preceding calendar years. As a commercial
bank organized under the laws of the state of Maryland, Hagerstown may only
declare a cash dividend from its undivided profits or (with the prior approval
of the Maryland Bank Commissioner) from its surplus in excess of 100% of its
required capital stock, in each case after providing for due or accrued
expenses, losses, interest and taxes. In addition, if Hagerstown's surplus
becomes less than 100% of its required capital stock, Hagerstown may not declare
or pay any cash dividends that exceed 90% of its net earnings until its surplus
becomes 100% of its required capital stock. As a New Jersey bank, Gloucester may
not declare or pay any dividend which would impair its capital stock or reduce
its surplus to a level of less than 50% of its capital stock or if the surplus
is currently less than 50% of the capital stock, the payment of such dividends
would not reduce the surplus of the bank. In addition to the foregoing statutory
restrictions on dividends, the Pennsylvania Department of Banking (with respect
to all Pennsylvania state-chartered banks), the FDIC (with respect to
Pennsylvania state-chartered banks that are not members of the Federal Reserve
System, such as Fulton, Lafayette and Great Valley), the FRB (with respect to
Pennsylvania state-chartered banks that are members of the Federal Reserve
System, such as Farmers Trust), and the OCC (with respect to national banks such
as Swineford, FNB and Delaware National), also have adopted minimum capital
standards and have broad authority to prohibit a bank from engaging in unsafe or
unsound banking practices. The payment of a dividend by a bank could, depending
upon the financial condition of the bank involved and other factors, be deemed
to impair its capital or to be such an unsafe or unsound practice.
Under the restrictions set forth above, the aggregate amount available
for the payment of dividends by the nine bank subsidiaries of FFC was
approximately $19 million as of September 30, 1996.
Dividend Reinvestment Plan
- --------------------------
The holders of FFC Common Stock may elect to participate in the Fulton
Financial Corporation Dividend Reinvestment Plan (the "Dividend Reinvestment
Plan"), which is a plan administered by Fulton as the Plan Agent. Under the
Dividend Reinvestment Plan, dividends payable to participating shareholders are
paid to the Plan Agent and are used to purchase, on behalf of the participating
shareholders, additional shares of FFC Common Stock. Participating shareholders
may make additional voluntary cash payments, which are also used by the Plan
Agent to purchase, on behalf of such shareholders, additional shares of FFC
Common Stock. Shares of FFC Common Stock held for the account of participating
shareholders are voted by the Plan Agent in accordance with the instructions of
each participating shareholder as set forth in his or her proxy.
Securities Laws
- ---------------
FFC, as a business corporation, is subject to the registration and
prospectus delivery requirements of the 1933 Act and is also subject to similar
requirements under state securities laws. FFC Common Stock is registered with
the SEC under Section 12(g) of the 1934 Act, and FFC is subject to the periodic
reporting, proxy solicitation and insider trading requirements of the 1934 Act.
The executive officers, directors and ten percent shareholders of FFC are
subject to certain restrictions affecting their right to sell shares of FFC
Common Stock owned beneficially by them. Specifically, each such person is
subject to the beneficial ownership reporting requirements and to the
short-swing profit recapture provisions of Section 16 of the 1934 Act and may
sell shares of FFC Common Stock only: (i)
62
<PAGE>
in compliance with the provisions of SEC Rule 144, (ii) in compliance with the
provisions of another applicable exemption from the registration requirements of
the 1933 Act, or (iii) pursuant to an effective registration statement filed
with the SEC under the 1933 Act.
Antitakeover Provisions
- -----------------------
The Articles of Incorporation and Bylaws of FFC include certain
provisions which may be considered to be "antitakeover" in nature, because they
may have the effect of discouraging or making more difficult the acquisition of
control over FFC by means of a hostile tender offer, exchange offer, proxy
contest or similar transaction. These provisions are intended to protect the
shareholders of FFC (including the present shareholders of WNB, who will become
shareholders of FFC following the Merger) by providing a measure of assurance
that FFC's shareholders will be treated fairly in the event of an unsolicited
takeover bid and by preventing a successful takeover bidder from exercising its
voting control to the detriment of the other shareholders. However, the
antitakeover provisions set forth in the Articles of Incorporation and Bylaws of
FFC, taken as a whole, may discourage a hostile tender offer, exchange offer,
proxy solicitation or similar transaction relating to FFC Common Stock. To the
extent that these provisions actually discourage such a transaction, holders of
FFC Common Stock may not have an opportunity to dispose of part or all of their
stock at a higher price than that prevailing in the market. In addition, these
provisions make it more difficult to remove, and thereby may serve to entrench,
incumbent directors and officers of FFC, even if their removal would be regarded
by some shareholders as desirable.
The provisions in the Articles of Incorporation of FFC which may be
considered to be "antitakeover" in nature include the following: (i) a provision
that provides for substantial amounts of authorized but unissued capital stock,
including a class of preferred stock whose rights and privileges may be
determined prior to issuance by FFC's Board of Directors, (ii) a provision that
does not permit shareholders to cumulate their votes for the election of
directors, (iii) a provision that requires a greater than majority shareholder
vote in order to approve certain business combinations and other extraordinary
corporate transactions, (iv) a provision that establishes criteria to be applied
by the Board of Directors in evaluating an acquisition proposal, (v) a provision
that requires a greater than majority shareholder vote in order for the
shareholders to remove a director from office without cause, (vi) a provision
that prohibits the taking of any action by the shareholders without a meeting
and eliminates the right of shareholders to call a annual meeting, (vii) a
provision that limits the right of the shareholders to amend the Bylaws, and
(viii) a provision that requires, under certain circumstances, a greater than
majority shareholder vote in order to amend the Articles of Incorporation.
The provisions of the Bylaws of FFC which may be considered to be
"antitakeover" in nature include the following: (i) a provision that limits the
permissible number of directors, (ii) a provision that establishes a Board of
Directors divided into three classes, with members of each class elected for a
three-year term that is staggered with the terms of the members of the other two
classes, and (iii) a provision that requires advance written notice as a
precondition to the nomination of any person for election to the Board of
Directors, other than in the case of nominations made by existing management.
As a Pennsylvania business corporation and a corporation registered
under the Securities Exchange Act of 1934, FFC is subject to, and may take
advantage of the protections of, the antitakeover provisions of the Pennsylvania
Business Corporation Law of 1988, as amended ("BCL"). These antitakeover
63
<PAGE>
provisions, which are designed to discourage the acquisition of control over a
targeted Pennsylvania business corporation, include: (i) a provision whereby the
directors of the corporation, in determining what is in the best interests of
the corporation, may consider factors other than the economic interests of the
shareholders, such as the effect of any action upon other constituencies,
including employees, suppliers, customers, creditors and the community in which
the corporation is located; (ii) a provision that permits shareholders to demand
that a controlling person pay to them the fair value of their shares in cash
upon a change in control; (iii) a provision that restricts certain business
combinations unless there is prior approval by the directors or a supermajority
of the shareholders; (iv) a provision permitting a corporation to adopt a
shareholders rights plan; (v) a provision denying the right to vote to a person
who acquires a specified percentage of stock ownership ("control shares") unless
those voting rights are restored by a vote of disinterested shareholders; and
(vi) a provision requiring a person who acquires control shares to disgorge to
the corporation all profits from the sale of equity securities within eighteen
months thereafter. Corporations may elect to "opt out" of any or all of these
antitakeover provisions of the BCL. FFC has not elected to opt out of any of the
protections provided by the antitakeover statutes.
On June 20, 1989, FFC adopted a Shareholder Rights Plan (the "Rights
Plan"). The Rights Plan is intended to discourage unfair or financially
inadequate takeover proposals and abusive takeover practices and to encourage
third parties who may in the future be interested in acquiring FFC to negotiate
with FFC's Board of Directors. The Rights Plan may have the effect of
discouraging or making more difficult the acquisition of FFC by means of a
hostile tender offer, exchange offer or similar transaction. The Rights Plan is
similar to shareholder rights plans which have been adopted by many other bank
holding companies and business corporations and contains "flip-in" and
"flip-over" provisions which are typically included in plans of this kind. Each
share of FFC Common Stock to be issued in connection with the Merger will be
accompanied by one right issued pursuant to the terms of the Rights Plan, which
right will initially, and until it becomes exercisable, trade with and be
represented by the FFC Common Stock certificates to be received by the
shareholders of WNB.
The management of FFC does not presently contemplate recommending to the
shareholders the adoption of any additional antitakeover provisions.
Indemnification
- ---------------
The Bylaws of FFC provide for indemnification of its directors,
officers, employees and agents to the fullest extent permitted under the laws of
the Commonwealth of Pennsylvania, provided that the person seeking
indemnification acted in good faith, in a manner he or she reasonably believed
to be in the best interests of FFC, and without willful misconduct or
recklessness. FFC has purchased insurance to indemnify its directors, officers,
employees and agents under certain circumstances.
Insofar as indemnification for liabilities arising under the 1933 Act
may be permitted to directors, officers or persons controlling FFC pursuant to
the foregoing provisions of FFC's Bylaws, FFC has been informed that, in the
opinion of the SEC, such indemnification is against public policy as expressed
in the 1933 Act and is therefore unenforceable.
Comparison of Shareholder Rights
- --------------------------------
Upon consummation of the Merger, the shareholders of WNB will become
shareholders of FFC. There are differences between the rights of holders of
64
<PAGE>
WNB Common Stock and FFC Common Stock. These differences arise out of (i)
differences between the Articles of Association and Bylaws of WNB and the
Articles of Incorporation and Bylaws of FFC, and (ii) differences between the
respective state and regulatory laws applicable to WNB and FFC. The most
significant differences are: (1) FFC has adopted a Shareholder Rights Plan,
which provides FFC's shareholders with certain stock-related rights in the event
of a hostile takeover but may have the effect of discouraging such a takeover
(see the section above entitled "Antitakeover Provisions"), while WNB has not
adopted any such plan; (2) FFC's Articles of Incorporation authorize the
issuance of shares of preferred stock with such rights and privileges as may be
determined by FFC's Board of Directors (although FFC currently has no plans to
issue preferred stock), while WNB's Articles of Association do not authorize the
issuance of any class of preferred stock; and (3) FFC Common Stock is registered
under the 1934 Act and traded on the NASDAQ National Market, while WNB Common
Stock is not registered or actively traded.
The Articles of Incorporation and Bylaws of FFC also include a number of
other provisions which are intended to protect the shareholders of FFC
(including the present shareholders of WNB, who will become shareholders of FFC
following the Merger) from abusive takeover practices and inadequate takeover
proposals, but which may be considered to be "antitakeover" in nature and may
serve to entrench the current management of FFC. See INFORMATION CONCERNING
FULTON FINANCIAL CORPORATION AND DESCRIPTION OF FFC COMMON STOCK--Antitakeover
Provisions.
The material differences between WNB Common Stock and FFC Common Stock
and the rights of their respective holders are summarized in the following
table:
65
<PAGE>
<TABLE>
<CAPTION>
=========================================================================================================================
WNB FFC
- -------------------------------------------------------------------------------------------------------------------------
Title Common Stock, $0.22 par value Common Stock, $2.50 par
per share value per share
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Shares Authorized 10,000,000 100,000,000
- -------------------------------------------------------------------------------------------------------------------------
Shares Issued & Outstanding 1,800,000 32,980,497
- -------------------------------------------------------------------------------------------------------------------------
Preemptive Rights No No
- -------------------------------------------------------------------------------------------------------------------------
Classification of Board of No Board of Directors
Directors divided into 3 classes
with 3 year terms; one-
third of directors
elected each year
- -------------------------------------------------------------------------------------------------------------------------
Voting: Election of Directors Cumulative Non-cumulative
- -------------------------------------------------------------------------------------------------------------------------
Voting: Other Matters One vote for each share owned of One vote for each share
record owned of record
- -------------------------------------------------------------------------------------------------------------------------
Shareholder Rights Plan None Yes
- -------------------------------------------------------------------------------------------------------------------------
Dissenters' Rights Yes Not generally available,
except by resolution of
the Board of Directors
- -------------------------------------------------------------------------------------------------------------------------
Dividend Reinvestment Plan None Open market plan
administered by Fulton
Bank as Plan Agent
- -------------------------------------------------------------------------------------------------------------------------
Market Over-the-counter market Listed for quotation on
NASDAQ National Market
- -------------------------------------------------------------------------------------------------------------------------
Registered under 1934 Act No Yes
- -------------------------------------------------------------------------------------------------------------------------
Limitation of Liability of No Yes
Directors for Monetary Damages
- -------------------------------------------------------------------------------------------------------------------------
Indemnification of Directors, Yes Yes
Officers and Employees
- -------------------------------------------------------------------------------------------------------------------------
Authorized Class of Preferred No Yes, which can be issued
Stock under terms and
conditions to be
determined by the Board
of Directors
- -------------------------------------------------------------------------------------------------------------------------
Control Share Statute No Yes
- -------------------------------------------------------------------------------------------------------------------------
Business Combination Statute No Yes
- -------------------------------------------------------------------------------------------------------------------------
Right of Shareholders to call Yes No
a Special Meeting
- -------------------------------------------------------------------------------------------------------------------------
Shareholder Inspection Rights Yes General
- -------------------------------------------------------------------------------------------------------------------------
Right of Shareholders to act No No
by Written Consent
=========================================================================================================================
</TABLE>
66
<PAGE>
INFORMATION CONCERNING THE WOODSTOWN NATIONAL BANK & TRUST COMPANY
------------------------------------------------------------------
Description of Business and Property
- ------------------------------------
WNB is a national banking association which was organized in 1920. WNB
is engaged in a general banking business, including commercial and retail
banking operations, in Salem and Gloucester Counties, New Jersey. WNB currently
conducts its business through six banking offices located in Salem and
Gloucester Counties, New Jersey, consisting of its main office and five branch
locations. At September 30, 1996, WNB had total deposits of approximately $230
million, total assets of approximately $255 million, Shareholders equity of $24
million, total net loans of approximately $177 million and employed 81 persons
on a full-time basis and 32 persons on a part-time basis.
The broad range of retail and commercial banking services which WNB
offers include checking accounts, savings programs, money-market accounts,
certificates of deposit, safe deposit facilities, consumer loans programs,
revolving lines of credit, overdraft checking and extended banking hours. These
services are primarily provided to consumers and small- to mid-sized companies
within the Bank's market area. WNB focuses its lending services on commercial,
consumer and real estate lending to local borrowers. WNB attempts to establish a
total borrowing relationship with its customers, which may typically include a
commercial real estate loan, a business line of credit for working capital
needs, a mortgage loan for the borrower's residence, a consumer loan or a
revolving personal credit line.
WNB's service area consists of Salem and Gloucester Counties, New
Jersey, with the larger part of its activities concentrated in Salem County. WNB
encounters vigorous competition for market share in the communities it serves
from bank holding companies, other community banks, thrift institutions and
other non-bank financial organizations. WNB competes with banking and financial
branching systems, some from out of state, which are substantially larger and
have greater financial resources than WNB. There are approximately forty-five
banks, savings and loan and credit union locations, including WNB, in the
general market area serviced by WNB. The largest of these institutions had
assets of over $139 billion and the smallest had assets of less than $100
million.
In addition to banks and other financial institutions, WNB competes for
deposits with various investment and depositary funds offered by non-banking
firms in the securities industry. There is also competition from major
retail-oriented firms who offer financial services similar to traditional
services through commercial banks without being subject to the same degree of
regulation.
WNB Common Stock Market Price and Dividends
- -------------------------------------------
WNB Common Stock has historically been traded on an extremely limited
basis. Bid quotations are published by Ryan, Beck & Co., Monroe Securities
and F. J. Morrissey. The two most recent trades known to management occurred
in April 1996 and November 1996, both sales for $25 per share.
The Merger Agreement restricts the ability of WNB to declare or pay cash
dividends. However, the Merger Agreement permits WNB to declare and pay a
dividend of up to $0.21 per share of WNB Common Stock on (i) December 15, 1996;
(ii) March 15, 1997, provided that the Effective Date does not occur (or is not
expected to occur) on or before the record date for the dividend on FFC Common
Stock scheduled to be paid on April 15, 1997; (iii) June 15, 1997, provided that
the Effective Date does not occur (or is not expected to occur) on or before the
record date for the dividend on the FFC Common Stock
67
<PAGE>
scheduled to be paid on July 15, 1997; and (iv) September 15, 1997, provided
that the Effective Date does not occur (or is not expected to occur) on or
before the record date for the dividend on the FFC Common Stock scheduled to be
paid on October 15, 1997 (it being the intent of FFC and WNB that WNB be
permitted to pay a dividend on the WNB Common Stock on the dates indicated in
subsections (ii), (iii) and (iv) above only if the shareholders of WNB, upon
becoming shareholders of FFC, would not be entitled to receive a dividend on the
FFC Common Stock on the payment dates indicated in such subsections). See THE
FFC/WNB MERGER -- Business Pending the Effective Date.
Information About Directors and Executive Officers
- --------------------------------------------------
Certain information concerning shares of WNB Common Stock owned
beneficially by each director of WNB and by all directors and executive officers
of WNB as a group, as of December 11, 1996, is set forth below:
<TABLE>
<CAPTION>
=============================================================================================================================
SHARES OF WNB COMMON STOCK PERCENT
BENEFICIALLY OWNED, DIRECTLY OF SHARES
NAME OF DIRECTOR AND INDIRECTLY, AS OF 12/11/96 OUTSTANDING
=============================================================================================================================
<S> <C> <C>
Joseph E. Colson 31,689 1.76
- -----------------------------------------------------------------------------------------------------------------------------
Ethel M. Doble 243,900 13.55
- -----------------------------------------------------------------------------------------------------------------------------
Richard O. Erdner 154,833 8.60
- -----------------------------------------------------------------------------------------------------------------------------
James D. Hargrave 20,882 1.16
- -----------------------------------------------------------------------------------------------------------------------------
Ralph Homan 1,801 *
- -----------------------------------------------------------------------------------------------------------------------------
Samuel H. Jones, Jr. 355,047 19.72
- -----------------------------------------------------------------------------------------------------------------------------
Thomas Lail 4,500 *
- -----------------------------------------------------------------------------------------------------------------------------
Ross Levitsky 4,500 *
- -----------------------------------------------------------------------------------------------------------------------------
Robert R. McHarness 12,034 *
- -----------------------------------------------------------------------------------------------------------------------------
All Directors and Executive 835,486 46.42
Officers as a group
- -----------------------------------------------------------------------------------------------------------------------------
* Less than one percent.
=============================================================================================================================
</TABLE>
Selected Historical Financial Data
- ----------------------------------
The following table sets forth certain selected historical financial
data for WNB for each of the five years in the period ended December 31, 1995,
and for the nine-month periods ended September 30, 1996 and September 30, 1995.
The table should be read in conjunction with the financial statements, footnotes
and other financial information included in this Proxy Statement/Prospectus. See
THE WOODSTOWN NATIONAL BANK & TRUST COMPANY--INDEX TO FINANCIAL STATEMENTS; AND
WNB SUPPLEMENTARY FINANCIAL INFORMATION.
68
<PAGE>
THE WOODSTOWN NATIONAL BANK & TRUST COMPANY
Selected Historical Financial Data
(In Thousands)
<TABLE>
<CAPTION>
As of or for the Nine Months Ended September 30
-----------------------------------------------
1996 1995
--------------------------------------------
Summary of Operations
- ---------------------
<S> <C> <C>
Net interest income $8,237 $7,084
Provision for loan losses 585 90
--------------------------------------------
Net interest income after provision
for loan losses 7,652 6,994
Other operating income 997 906
Other operating expense 5,028 4,352
Income tax expense 1,597 1,239
--------------------------------------------
Net Income $2,024 $2,309
============================================
Average Balance Sheet Totals
- ----------------------------
Total assets $255,753 $239,261
Investment securities and
money market investments 65,535 61,305
Loans and leases
(net of unearned income) 176,227 166,411
Total deposits 230,965 214,431
Long-term debt and lease obligations - -
Shareholders' equity 23,573 21,199
Actual Balance at Period End
- ----------------------------
Total assets $254,834 $251,595
Long-term debt and lease obligations - -
</TABLE>
69
<PAGE>
THE WOODSTOWN NATIONAL BANK & TRUST COMPANY
Selected Historical Financial Data
(In Thousands)
<TABLE>
<CAPTION>
As of or for the Year Ended December 31
--------------------------------------------------------------------------------
1995 1994 1993 1992 1991
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Summary of Operations
- ---------------------
Net interest income $9,612 $9,749 $9,138 $8,730 $7,513
Provision for loan losses 90 239 472 676 899
---------------------------------------------------------------------------------
Net interest income after provision
for loan losses 9,522 9,510 8,666 8,054 6,614
Other operating income 1,376 1,198 1,158 944 808
Other operating expense 5,910 5,923 5,050 4,550 4,391
Income tax expense 1,701 1,632 1,743 1,518 641
---------------------------------------------------------------------------------
Income before cumulative effect
of changes in accounting principles 3,287 3,153 3,031 2,930 2,390
Cumulative effects of changes in
accounting principles - - - (131) -
---------------------------------------------------------------------------------
Net Income $3,287 $3,153 $3,031 $2,799 $2,390
=================================================================================
Average Balance Sheet Totals
- ----------------------------
Total assets $243,109 $220,478 $211,530 $202,772 $198,807
Investment securities and
money market investments 63,538 56,493 56,029 53,495 48,621
Loans and leases
(net of unearned income) 167,748 153,794 146,961 141,453 142,709
Total deposits 218,595 199,946 192,929 185,998 184,103
Long-term debt and lease obligation - - - - -
Shareholders' equity 21,460 19,363 17,549 15,882 13,995
Actual Balance at Period End
- ----------------------------
Total assets $254,593 $229,820 $212,169 $207,659 $199,598
Long-term debt and lease obligations - - - - -
</TABLE>
70
<PAGE>
WNB Supplementary Financial Information
- ---------------------------------------
Financial Statements for the Interim Period Ended September 30, 1996
- --------------------------------------------------------------------
The following sets forth financial statements, and the notes thereto,
for WNB at and for the interim period ended September 30, 1996:
THE WOODSTOWN NATIONAL BANK AND TRUST COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CONDITION
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1996 1995
-------------- -------------
<S> <C> <C>
Cash and due from Banks $ 11,579 $ 9,941
Interest-bearing deposits with other banks 18 18
Federal funds sold and securities purchased under
agreements to resell 3,590 10,310
Mortgage loans held for sale 749 534
Investment securities:
Held to maturity (Fair value - $40,365 in 1996 and
$53,040 in 1995) 40,744 52,686
Available for sale 12,622 2,221
Loans 180,352 174,462
Less: Allowance for loan losses (2,581) (2,185)
Unearned income (716) (606)
------------- -----------
Net loans 177,055 171,671
------------- -----------
Premises and equipment 4,925 3,700
Accrued interest receivable 1,619 1,745
Other assets 1,933 1,767
------------- -----------
Total Assets $ 254,834 $ 254,593
============= ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing $ 43,360 $ 37,566
Interest-bearing 186,374 193,523
------------- -----------
Total Deposits 229,734 231,089
------------- -----------
Accrued interest payable 710 735
Other liabilities 726 167
------------- -----------
Total Liabilities 231,170 231,991
------------- -----------
Shareholders' Equity:
Common Stock, $.22 par value; 10,000,000 shares
authorized; 1,800,000 shares issued and outstanding 400 400
Capital surplus 1,200 1,200
Retained earnings 22,054 21,002
Net unrealized holding gain on securities 10 -
------------ -----------
Total Shareholders' Equity 23,664 22,602
------------ -----------
Total Liabilities and Shareholders' Equity $ 254,834 $ 254,593
============ ===========
See Notes to Consolidated Financial Statements
</TABLE>
71
<PAGE>
THE WOODSTOWN NATIONAL BANK AND TRUST COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest income:
Loans, including fees $ 3,935 $ 3,722 $ 11,776 $ 10,849
Investment securities:
Taxable 762 646 2,272 1,781
Tax-exempt 55 74 145 263
Dividends 18 19 47 57
Federal funds sold 94 220 385 436
---------------- ---------------- ---------------- ---------------
Total interest income 4,864 4,681 14,625 13,386
Interest expense
Deposits 2,115 2,285 6,387 6,186
Short-term borrowings 1 - 1 116
---------------- ---------------- ---------------- ---------------
Total interest expense 2,116 2,285 6,388 6,302
Net interest income 2,748 2,396 8,237 7,084
Provision for loan losses 495 30 585 90
--------------- ---------------- ---------------- ---------------
Net interest income after provision 2,253 2,366 7,652 6,994
Other income:
Trust department 25 16 58 54
Service charges on deposit accounts 224 201 653 579
Other service charges and fees 81 144 270 260
Gain on sale of mortgage loans 2 8 16 13
--------------- ---------------- ---------------- ---------------
332 369 997 906
Other expenses
Salaries and employee benefits 840 693 2,495 2,179
Net occupancy expenses 111 105 316 308
Equipment expenses 118 112 354 350
FDIC assessment expense - (11) 2 216
Other 959 417 1,861 1,299
--------------- ---------------- ---------------- ---------------
2,028 1,316 5,028 4,352
Income before income taxes 557 1,419 3,621 3,548
Income tax provision 487 519 1,597 1,239
--------------- ---------------- ---------------- ---------------
Net Income $ 70 $ 900 $ 2,024 $ 2,309
=============== ================ ================ ===============
Per share data:
Net income $ 0.04 $ 0.50 $ 1.12 $ 1.28
=============== ================ ================ ===============
Cash dividends $ 0.180 $ 0.155 $ 0.540 $ 0.465
=============== ================ ================ ===============
Weighted average shares outstanding 1,800,000 1,800,000 1,800,000 1,800,000
=============== ================ ================ ===============
</TABLE>
See Notes to Consolidated Financial Statements
72
<PAGE>
THE WOODSTOWN NATIONAL BANK AND TRUST COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------------------------------
1996 1995
---- ----
<S> <C> <C>
Cash Flows from Operating Activities
Net income $ 2,024 $ 2,309
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating Activities:
Provision for loan losses 585 90
Depreciation and amortization of premises and equipment 294 286
Net amortization of investment security premiums 86 81
Increase in mortgage loans held for sale (215) (311)
Amortization of intangible assets 52 52
Decrease in accrued interest receivable 126 163
Decrease (increase) in other assets 857 (391)
Increase in other liabilities 559 15
(Decrease) increase in accrued interest payable (25) 213
---------------------- ----------------------
Total adjustments 2,319 198
---------------------- ----------------------
Net cash provided by operating activities 4,343 2,507
---------------------- ----------------------
Cash Flows from Investing Activities:
Proceeds from maturities of securities held to maturity 17,742 18,946
Purchases of securities held to maturity (7,030) (20,796)
Purchase of other securities (10,401) (184)
Net increase in loans (5,890) (8,944)
Purchase of premises and equipment (1,519) (169)
----------------------- -----------------------
Net cash used in investing activities (7,098) (11,147)
----------------------- -----------------------
Cash Flows from Financing Activities:
Net increase in noninterest-bearing deposits 5,794 101
Net (decrease) increase in interest-bearing deposits (7,149) 24,974
(Decrease) increase in borrowed funds - (5,000)
Dividends paid (972) (837)
----------------------- -----------------------
Net cash (used in) provided by financing activities (2,327) 19,238
----------------------- ----------------------
Net (Decrease) Increase in Cash and Cash Equivalents (5,082) 10,598
Cash and Cash Equivalents at Beginning of Period 20,269 13,962
----------------------- ----------------------
Cash and Cash Equivalents at End of Period $ 15,187 $ 24,560
======================= ======================
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ 6,413 $ 6,089
======================= =======================
Income taxes $ 1,685 $ 1,144
======================= =======================
</TABLE>
See Notes to Consolidated Financial Statements
73
<PAGE>
THE WOODSTOWN NATIONAL BANK & TRUST COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the information
and notes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and nine month periods ended
September 30, 1996 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1996.
Note B - Acquisition
On September 30, 1996 WNB signed a definitive agreement with FFC pursuant
to which each of the outstanding shares of WNB's Common Stock will be exchanged
for 1.6 shares of FFC Common Stock. FFC is a multi-bank holding company with
approximately $3.7 billion in total assets as of September 30, 1996. The
acquisition of WNB by FFC is conditioned upon the approval of WNB's shareholders
and regulatory authorities.
74
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
- --------------------------------------------------------------------------
Operations for the Interim Period Ended September 20,
- -----------------------------------------------------
Merger Activity
- ---------------
On September 30, 1996, WNB entered into a merger agreement with FFC, under
which the shareholders of WNB would receive 1.6 shares of FFC Common Stock for
each of the 1.8 million shares of WNB's Common Stock. The acquisition is subject
to approval by bank regulatory authorities and WNB's shareholders.
FFC is headquartered in Lancaster, Pennsylvania and operates as a
multi-bank holding company in Pennsylvania, New Jersey, Maryland and Delaware.
As of September 30, 1996, FFC had approximately $3.7 billion in assets.
Results of Operations
- ---------------------
Three Months Ended September 30, 1996 versus Three Months Ended September 30,
- -----------------------------------------------------------------------------
1995
- ----
WNB's net income for the third quarter of 1996 decreased $830,000, or
92.2%, in comparison to net income for the same quarter in 1995. For the third
quarter, return on average assets (ROA) was 0.11% in 1996 and 1.45% in 1995.
Return on average equity (ROE) during the third quarter was 1.17% in 1996 and
14.60% in 1995.
The decrease in net income and the decrease in ROA and ROE reflect the
impact of charges associated with WNB's pending merger with FFC and an increase
in the provision for loan losses.
Net Interest Income
- -------------------
Net interest income increased $352,000, or 14.7%, during the third quarter
of 1996 compared to 1995. The increase was primarily the result of an increase
in WNB's net interest margin (4.54% in 1996 and 4.05% in 1995). The following
tables summarize the components of the increase in net interest income in
average interest-earning assets and interest-bearing liabilities and the
interest rates thereon. All dollar amounts are in thousands.
75
<PAGE>
Summary Of Net Interest Income
- ------------------------------
<TABLE>
<CAPTION>
Three Months Ended
September 30 Change
----------------------------------- ------------------------------------
1996 1995 Dollar Percent
---- ---- ------ -------
<S> <C> <C> <C> <C>
Interest Income $ 4,864 $ 4,681 $ 183 3.9%
Interest Expense 2,116 2,285 (169) (7.4%)
----------------- ---------------- ---------------- ----------------
Net Interest Income $ 2,748 $ 2,396 $ 352 14.7%
================= ================ ================
</TABLE>
Summary of Average Balances and Interest Rates
- ----------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
September 30
----------------------------------------------
1996 1995 % Change
---- ---- --------
<S> <C> <C>
Average interest-earning assets $ 242,230 $ 236,890 2.3%
Yield on earning assets 8.03% 7.90% 1.6%
Average interest-bearing liabilities $ 192,769 $ 188,612 2.2%
Cost of interest-bearing liabilities 4.39% 4.85% (9.5%)
</TABLE>
The 49 basis point increase in net interest margin was primarily a
result of rates on liabilities decreasing 9.5% while rates on assets increased
1.6%. The 3.9% increase in interest income was due to an increase in average
interest-earning assets of 2.3% and an increase of 1.6% in the yield on earning
assets. Loans were responsible for the increase in average interest-earning
asset growth between the periods, increasing $9.1 million, while fed funds sold
and investment securities decreased $3.8 million.
The decrease in interest expense was the result of a 46 basis point
decline in rates, offset by a 2.2% increase in average interest-bearing
liabilities.
Provision and Allowance for Loan Losses
- ---------------------------------------
The provision for loan losses for the quarter ended September 30, 1996
was $495,000 compared to $30,000 for the same period in 1995. The allowance for
loan losses as a percentage of gross loans (net of unearned income) was 1.44% at
September 30, 1996 and 1.25% at December 31, 1995. The increase in the provision
was due to two significant factors. First, WNB has historically sought to
maintain an allowance ratio in the range of 1.5% of loans outstanding. Higher
than normal charge-offs over the past two years, as certain problem assets were
worked out, resulted in a decrease in this ratio to 1.25%. Although
non-performing assets have declined proportionately, management believes it is
prudent to re-establish a higher allowance ratio. Secondly, WNB has adopted more
conservative criteria in the evaluation of its loan portfolio.
76
<PAGE>
As the following table shows, WNB's non-performing assets have improved since
December 31, 1995:
<TABLE>
<CAPTION>
September 30, December 31
(Dollars in thousands) 1996 1995
--------------------- ------------------
<S> <C> <C>
Nonaccrual loans $ 2,032 $ 2,528
Loans 90 days past due and accruing 420 391
Other real estate owned 461 225
--------------------- ------------------
Total non-performing assets $ 2,913 $ 3,144
===================== ==================
Non-performing assets/Total assets 1.14% 1.23%
Non-performing assets/Gross loans 1.62% 1.80
</TABLE>
Other Income
- ------------
Other income for the quarter ended September 30, 1996 was $332,000. This
result was a decrease of $37,000, or 10%, less than the comparable period in
1995. A decrease of $63,000 in other service charges and fees was partially
off-set by increases in trust fees and fees earned on deposit accounts.
Other Expenses
- --------------
Total other expenses for the third quarter of 1996 increased $712,000,
or 54.1%, to $2.0 million from $1.3 million in the comparable period in 1995.
The most significant increase in other expenses were other expense items
relating to the merger that were expensed in the third quarter of 1996. These
expenses amounted to approximately $500,000.
Income Taxes
- ------------
Income tax expense for the quarter was $487,000, as compared to $519,000
for the comparable period in 1995. This $32,000, or 6.2%, decrease was due
mainly to lower pre-tax income.
77
<PAGE>
Nine Months Ended September 30, 1996 Versus Nine Months Ended September 30,
- ---------------------------------------------------------------------------
1995
- ----
WNB's net income for the first nine months of 1996 decreased $285,000,
or 12.3%, in comparison to the net income for the same period in 1995. ROA for
the period was 1.06% versus 1.29% in 1995, while ROE was 11.45% compared to
14.52% in 1995. The decrease in year-to-date earnings is a result of increases
in the provision for possible loan losses, other expenses and income tax
provision, partially off-set by increases in net interest income and other
income.
Net Interest Income
- -------------------
Net interest income increased $1.2 million, or 16.3%, during the first
nine months of 1996.
The increase was primarily the result of a strengthening of the net
interest margin (4.54% in 1996 versus 4.15% in 1995) coupled with growth in
WNB's balance sheet. The following tables summarize the components of this
increase as well as the changes in average interest-earning assets and
interest-bearing liabilities and the average interest rates thereon. All dollar
amounts are in thousands.
Summary of Net Interest Income:
- -------------------------------
<TABLE>
<CAPTION>
Nine Months Ended
September 30 Change
--------------------------------- --------------------------------
1996 1995 Dollar Percent
---- ---- ------ -------
<S> <C> <C> <C> <C>
Interest Income $14,625 $13,386 $1,239 9.3%
Interest Expense 6,388 6,302 86 1.4%
-------- ------- ------
Net Interest Income $8,237 $7,084 $1,153 16.3%
======== ======= ======
</TABLE>
Summary of Average Balances and Interest Rates
- ----------------------------------------------
<TABLE>
<CAPTION>
Nine Months Ended
September 30
---------------------------------------------------------
1996 1995 % Change
---- ---- --------
<S> <C> <C> <C>
Average interest-earning assets $ 241,762 $ 227,716 6.2%
Yield on earning asset 8.07% 7.84% 2.9%
Average interest-bearing $ 193,729 $ 181,144 6.9%
liabilities 4.40% 4.64% (5.2%)
Cost of interest-bearing
liabilities
</TABLE>
As the tables show, growth in interest income is due to a combination of
asset growth and a higher rate of return on earning assets. Interest expense
grew 1.4% greater in 1996 than 1995 as a 6.9% increase in interest-bearing
78
<PAGE>
liabilities was off-set by a 5.2% reduction in the cost of interest-bearing
liabilities.
Provision and Allowance for Loan Losses
- ---------------------------------------
The provision for loan losses for the nine months ended September 30,
1996 was $585,000 compared to $90,000 for the same period of 1995. As discussed
in the quarterly comparison, the increase in the provision is a result of
management's desire to increase the allowance ratio as a percentage of total
loans.
Other Income
- ------------
Other income for the nine months ended September 30, 1996 was $997,000,
which is an increase of $91,000, or 10.0%, over the comparable period in 1995.
Service charges on deposit accounts increased $74,000, or 12.8%, in the
first nine months of 1996 as compared to the first nine months of 1995. This
increase reflects the growth in WNB's deposits as well as changes in the fee
structure.
Other Expenses
- --------------
Total other expenses for the nine months of 1996 increased $676,000, or
15.5%, to $5.0 million from $4.4 million in the comparable period from 1995. The
overall increase however was reduced by a reduction in the FDIC assessment
expense which was $2,000 in 1996 compared to $216,000 for the same period in
1995.
Other expenses were $1.9 million, compared to $1.3 million for the same
period in 1995. This $560,000, or 43.1%, increase is primarily the result of
costs associated with pending merger activity.
Income Taxes
- ------------
Income tax expense for the nine months ended September 30, 1996 was $1.6
million as compared to $1.2 million for the comparable period in 1995. This
$358,000 million, or 33%, increase was due to higher pre-tax income, a reduction
in WNB's tax-free investments and an increase in non-deductible expenses.
Financial Condition
- -------------------
At September 30, 1996, WNB had assets of $254.8 million, an increase of
$0.2 million, or 0.1%, over December 31, 1995. While overall growth of WNB's
assets were minimal, net loans increased $5.4 million, or 3.1% over December 31,
1995. This increase was funded by a decrease of $6.7 million, or 65.0%, in fed
funds sold.
Total deposits of WNB at September 30, 1996 were $229.7 million, a
decrease of $1.4 million, or 0.6%, compared to December 31, 1995. Non- interest
bearing deposits increased $5.8 million, or 15.4%, to $43.4 million compared to
$37.6 million at December 31, 1995 and interest-bearing deposits decreased $7.2
million, or 3.7% to $186.3 million compared to $193.5 million at December 31,
1995.
79
<PAGE>
Shareholders' equity of WNB has continued to grow during 1996,
increasing 4.7% to $23.7 million. Growth in equity is primarily a result of net
income, net of dividends paid to shareholders.
WNB must meet certain risk-based capital standards established by bank
regulatory authorities. These capital standards relate a bank's capital to the
risk profile of its assets and commitments and provides a basis for which all
banks are evaluated in terms of capital adequacy. The risk-based capital
standards require all banks to have Tier 1 risk-based capital of at least 4% and
total risk-based capital, including Tier 1 risk-based capital, of at least 8% of
risk-adjusted assets. Tier 1 risk-based capital for WNB includes common stock,
capital surplus and retained earnings, reduced by unamortized premiums paid in
the acquisition of deposits. WNB's total risk-based capital ratio includes Tier
1 risk-based capital and a portion of the allowance for credit losses.
WNB is also subject to a "leverage capital" requirement, which compares
capital (using the definition of Tier 1 capital) to total balance sheet assets
and is intended to supplement the risk-based capital ratios in measuring capital
adequacy. The minimum acceptable leverage capital ratio is 3.0% for institutions
which are highly rated in terms of safety and soundness and which are not
experiencing or anticipating any significant growth. Other institutions are
expected to maintain capital levels at least one or two percent above the
minimum.
As of September 30, 1996, WNB's capital ratios exceeded all of the
minimum ratios as set forth above.
80
<PAGE>
Additional Statistical Disclosure
- ---------------------------------
The following tables present certain additional statistical disclosure regarding
WNB's loan portfolio as of the dates indicated.
Types of Loans. The amounts of WNB's gross loans outstanding by type as of
the dates indicated were as follows:
<TABLE>
<CAPTION>
December 31,
1995 1994 1993 1992 1991
(In thousands)
<S> <C> <C> <C> <C> <C>
Commercial, financial
and agricultural $ 15,853 $ 13,161 $ 13,099 $ 11,480 $ 11,255
Real estate - construction 3,914 3,185 1,300 2,298 2,302
Real estate - mortgage 142,940 135,166 128,379 117,790 117,670
Consumer 11,755 10,237 8,556 11,905 13,965
Leasing and other 0 0 0 0 0
-----------------------------------------------------------------------
$174,462 $161,749 $151,334 $149,473 $145,192
=======================================================================
</TABLE>
Maturity and Sensitivities of Loans to Changes in Interest Rates. The
-----------------------------------------------------------------
following table sets forth the amount of loans, by maturity as of December 31,
1995, with floating or adjustable interest rates and with predetermined interest
rates:
<TABLE>
<CAPTION>
Due 1 year Due after 1 year Due after
or less thru 5 years 5 years Total
------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
Floating rate $31,465 $ 26,355 - $ 57,820
Fixed rate 38,367 49,429 29,390 117,186
-------------------------------------------------------------------------------------
Total loans $69,832 $ 75,784 $29,390 $175,006
=====================================================================================
</TABLE>
81
<PAGE>
Non-Accrual, Past Due and Restructured Loans. The following table
--------------------------------------------
presents information concerning the aggregate amount of nonaccrual, past due and
restructured loans and other non-performing assets as of the dates indicated:
<TABLE>
<CAPTION>
December 31
-------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
-------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Nonaccrual loans (1) (2) (3) $ 2,528 $ 3,461 $ 2,540 $ 2,624 $ 983
Accruing loans past due 90 days 391 634 881 1,135 2,087
or more (3)
Other real estate 225 209 474 333 398
-------------------------------------------------------------------------------------
$ 3,144 $ 4,304 $ 3,895 $ 4,092 $ 3,468
=====================================================================================
</TABLE>
(1) Includes impaired loans as defined by Statement of Financial Accounting
Standards No. 114 of approximately $1.2 million at December 31, 1995.
(2) As of December 31, 1995, the gross interest income that would have been
recorded during 1995 if nonaccrual loans had been current in accordance
with their original terms was approximately $393,000.
(3) Accrual of interest income is generally discontinued when a loan becomes
90 days past due as to principal and interest. When interest accruals
are discontinued, interest credited to income in the current year is
reversed and interest accrued in any prior year is charged to the
allowance for loan losses. Nonaccrual loans are restored to accrual
status when all delinquent principal and interest becomes current or the
loan is considered secured and in the process of collection. Certain
loans, primarily residential mortgages, that are determined to be
sufficiently collateralized may continue to accrue interest after
reaching 90 days past due.
82
<PAGE>
Summary of Loan Loss Experience. An analysis of WNB's loan loss
-------------------------------
experience as of the dates indicated is as follows:
<TABLE>
<CAPTION>
Year Ended December 31
------------------------------------------------------------------------
1995 1994 1993 1992 1991
------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Amount of loans and leases
outstanding at end of
period $174,462 $161,749 $151,334 $149,473 $145,192
=================================================================================
Daily average amount of loans
and leases 167,748 153,794 146,961 141,453 142,709
=================================================================================
Balance of allowance for loan
losses at beginning of period 2,386 2,296 1,893 1,500 1,000
Loans charged-off:
Commercial, financial and
agricultural 0 0 0 131 62
Real estate - construction 0 0 0 0 0
Real estate - mortgage 373 128 41 51 55
Consumer 89 98 187 176 311
Leasing and other 0 0 0 0 0
---------------------------------------------------------------------------------
Total loans charged-off 462 226 228 358 428
=================================================================================
Recoveries of loans previously
charged-off:
Commercial, financial and
agricultural 0 10 4 0 0
Real estate - construction 0 0 0 0 0
Real estate - mortgage 57 6 14 7 0
Consumer 114 61 141 68 29
Leasing and other 0 0 0 0 0
---------------------------------------------------------------------------------
Total recoveries 171 77 159 75 29
=================================================================================
Net loans charged-off 291 149 69 283 399
Additions to allowance
charged to operations 90 239 472 676 899
---------------------------------------------------------------------------------
Balance at end of period $2,185 $2,386 $2,296 $1,893 $1,500
=================================================================================
Ratio of net charge-offs during
period to average loans
outstanding 0.17 0.10 0.05 0.20 0.28
Ratio of reserve to loans
outstanding at end of period 1.25 1.48 1.52 1.27 1.03
</TABLE>
83
<PAGE>
Allocation of Allowance for Possible Loan Losses. The allowance for loan
------------------------------------------------
losses of WNB was allocated as follows as of the dates indicated:
<TABLE>
<CAPTION>
================================================================================
1995 1994 1993
Percent of Percent of Percent of
loans in each loans in each loans in each
category to category to category to
Allowance total loans Allowance total loans Allowance total loans
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial & $ 21 9.1% $30 8.2% $269 8.7%
agricultural
Real estate - construction & 1,382 84.2 1,557 85.5 1,291 85.7
mortgages
Consumer, leasing & other 155 6.7 148 6.3 214 5.6
Unallocated 627 N/A 651 N/A 522 N/A
--------------------------------------------------------------------------------
$2,185 100% $2,386 100% $2,296 100%
================================================================================
<CAPTION>
=================================================
1992 1991
Percent of Percent of
loans in each loans in each
category to category to
Allowance total loans Allowance total loans
-------------------------------------------------
<S> <C> <C> <C> <C>
Commercial, financial & $336 8.0% $558 7.8%
agricultural
Real estate - construction & 1,131 83.7 794 82.6
mortgages
Consumer, leasing & other 368 8.3 119 9.6
Unallocated 58 N/A 29 N/A
-------------------------------------------------
$1,893 100% $1,500 100%
=================================================
</TABLE>
WNB allocates the allowance for possible loan losses in a number of components:
(1) specific accounts, (2) a percentage of criticized and classified loans based
on historical experience (excluding those subject to specific allocation under
(1)), (3) concentration levels, as well as (4) the effect the current economy
has on various portfolio's and (5) growth of loan portfolio components. As of
December 31, 1995, WNB allocated $511,000 based on historical averages: $9,000
commercial, $103,000 consumer, and $399,000 mortgage. The allocation was
$384,000 for specific accounts, $41,000 for criticized loans, and $369,000 for
classified loans. The allocation for concentrations and economic and growth
factors was $253,000.
84
<PAGE>
Quarterly Consolidated Results of Operations
--------------------------------------------
The following table sets forth certain quarterly financial data for
WNB for the periods indicated:
THE WOODSTOWN NATIONAL BANK AND TRUST COMPANY
QUARTERLY CONSOLIDATED RESULTS OF OPERATIONS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------------------------------------
March 31 June 30 Sept. 30 Dec. 31
--------------------------------------------------------------
<S> <C> <C> <C> <C>
For the Year 1995
Interest income $ 4,241 $ 4,464 $ 4,681 $ 4,729
Interest expense 1,903 2,114 2,285 2,201
--------------------------------------------------------------
Net interest income 2,338 2,350 2,396 2,528
Provision for loan losses 30 30 30 --
Other income 243 294 369 470
Other expenses 1,507 1,529 1,316 1,558
--------------------------------------------------------------
Income before taxes 1,044 1,085 1,419 1,440
Income tax expense 356 364 519 462
--------------------------------------------------------------
Net income $ 688 $ 721 $ 900 $ 978
==============================================================
Per-share data:
Net income $ 0.38 $ 0.40 $ 0.50 $ 0.54
==============================================================
Cash dividends $ 0.155 $ 0.155 $ 0.155 $ 0.195
==============================================================
For the Year 1994
Interest income $ 3,721 $ 3,804 $ 3,933 $ 4,113
Interest expense 1,388 1,430 1,483 1,521
-------------------------------------------------------------
Net interest income 2,333 2,374 2,450 2,592
Provision for loan losses 139 50 20 30
Other income 167 205 286 540
Other expenses 1,323 1,374 1,513 1,713
-------------------------------------------------------------
Income before taxes 1,038 1,155 1,203 1,389
Income tax expense 382 435 485 330
-------------------------------------------------------------
Net income $ 656 $ 720 $ 718 $ 1,059
=============================================================
Per-share data:
Net income $ 0.36 $ 0.40 $ 0.40 $ 0.59
=============================================================
Cash dividends $ 0.143 $ 0.143 $ 0.145 $ 0.155
=============================================================
</TABLE>
85
<PAGE>
EXPERTS
-------
The financial statements of FFC as of December 31, 1995 and 1994 and for
the three years ended December 31, 1995, which are included in FFC's Annual
Report on Form 10-K for the year ended December 31, 1995 and are incorporated by
reference in this Proxy Statement/Prospectus have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their reports with
respect thereto, and are included herein in reliance upon the authority of said
firm as experts in giving said reports.
The consolidated financial statements of WNB as of December 31, 1995 and
1994 and for each of the three years in the period ended December 31, 1995,
which are included in WNB's 1995 and 1994 Annual Reports to shareholders have
been audited by Petroni & Associates, independent certified public accountants,
as indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in accounting and auditing.
LEGAL MATTERS
-------------
The legality of the shares of FFC Common Stock to be issued in connection
with the Merger and certain other legal matters relating to the Merger will be
passed upon by the law firm of Barley, Snyder, Senft & Cohen, LLP, located in
Harrisburg, Lancaster and York, Pennsylvania, which is acting as counsel for
FFC. John O. Shirk is a partner in the firm and is a member of the Board of
Directors of FFC. As of November 15, 1996, the partners and associates of
Barley, Snyder, Senft & Cohen owned beneficially and in the aggregate
approximately 24,721 shares of FFC Common Stock.
The law firm of Muldoon, Murphy & Faucette, located in Washington, D.C.,
has acted as counsel to WNB in connection with the Merger.
ADDITIONAL INFORMATION
----------------------
FFC has filed with the SEC a Registration Statement (No. 333-17329) with
respect to the shares of FFC Common Stock to be issued in connection with the
Merger. The Registration Statement contains certain additional information which
has been omitted from this Proxy Statement/Prospectus in accordance with the
rules and regulations of the SEC and may be examined at the offices of the SEC
at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of the
Registration Statement may be obtained from the SEC upon payment of the
prescribed fee.
OTHER MATTERS
-------------
The Board of Directors of WNB knows of no other matters other than those
discussed in this Proxy Statement/Prospectus which will be presented at the
Special Meeting. However, if any other matters are properly brought before the
Special Meeting or any postponement or adjournment thereof, any proxy given
pursuant to this solicitation will be voted in accordance with the
recommendations of the Board of Directors of WNB.
86
<PAGE>
EXHIBIT A
MERGER AGREEMENT
----------------
<PAGE>
MERGER AGREEMENT
BY AND BETWEEN
THE WOODSTOWN NATIONAL BANK & TRUST COMPANY
AND
FULTON FINANCIAL CORPORATION
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I PLAN OF MERGER....................................................... 1
Section 1.1 Plan of Merger................................................. 1
ARTICLE II CONVERSION OF SHARES AND
EXCHANGE OF STOCK CERTIFICATES....................................... 1
Section 2.1 Conversion of Shares........................................... 1
(a) General........................................................ 1
(b) Antidilution Provision......................................... 1
(c) No Fractional Shares........................................... 2
(d) Closing Market Price........................................... 2
Section 2.2 Exchange of Stock Certificates................................. 2
(a) Exchange Agent................................................. 2
(b) Surrender of Certificates...................................... 2
(c) Dividend Withholding........................................... 2
(d) Failure to Surrender Certificates.............................. 3
(e) Expenses....................................................... 3
Section 2.3 Reservations of Shares......................................... 3
Section 2.4 Taking Necessary Actions....................................... 3
Section 2.5 Press Releases................................................. 3
ARTICLE III REPRESENTATIONS AND WARRANTIES OF WNB................................ 3
Section 3.1 Authority...................................................... 4
Section 3.2 Subsidiaries................................................... 4
Section 3.3 Organization and Standing...................................... 4
Section 3.4 Capitalization................................................. 4
Section 3.5 Charter, Bylaws and Minute Books............................... 4
Section 3.6 Financial Statements........................................... 4
Section 3.7 Absence of Undisclosed Liabilities............................. 5
Section 3.8 Absence of Changes............................................. 5
Section 3.9 Dividends, Distributions and Stock Purchases................... 5
Section 3.10 Taxes......................................................... 5
Section 3.11 Title to and Condition of Assets.............................. 6
Section 3.12 Contracts..................................................... 6
Section 3.13 Litigation and Governmental Directives........................ 6
Section 3.14 Compliance with Laws; Governmental Authorizations............. 7
Section 3.15 Insurance..................................................... 7
Section 3.16 Financial Institutions Bonds.................................. 7
Section 3.17 Labor Relations and Employment Agreements..................... 7
Section 3.18 Employee Benefit Plans........................................ 7
Section 3.19 Related Party Transactions.................................... 8
Section 3.20 No Finder..................................................... 8
Section 3.21 Complete and Accurate Disclosure.............................. 8
Section 3.22 Environmental Matters......................................... 8
Section 3.23 Proxy Statement/Prospectus.................................... 9
Section 3.24 SEC Filings................................................... 9
Section 3.25 Reports....................................................... 9
Section 3.26 Loan Portfolio of the WNB..................................... 10
Section 3.27 Investment Portfolio.......................................... 10
Section 3.28 Regulatory Examinations....................................... 10
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF FFC................................ 10
Section 4.1 Authority...................................................... 10
Section 4.2 Organization and Standing...................................... 11
Section 4.3 Capitalization................................................. 11
Section 4.4 Articles of Incorporation and Bylaws........................... 11
Section 4.5 Subsidiaries................................................... 11
Section 4.6 Financial Statements........................................... 11
Section 4.7 Absence of Undisclosed Liabilities............................. 12
Section 4.8 Absence of Changes............................................. 12
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Section 4.9 Litigation and Governmental Directives......................... 12
Section 4.10 Compliance with Laws; Governmental Authorizations............. 12
Section 4.11 Complete and Accurate Disclosure.............................. 12
Section 4.12 Labor Relations............................................... 13
Section 4.13 Employee Benefits Plans....................................... 13
Section 4.14 Environmental Matters......................................... 13
Section 4.15 SEC Filings................................................... 13
Section 4.16 Proxy Statement/Prospectus.................................... 14
Section 4.17 Accounting Treatment.......................................... 14
ARTICLE V COVENANTS OF WNB..................................................... 14
Section 5.1 Conduct of Business............................................ 14
Section 5.2 Best Efforts................................................... 15
Section 5.3 Access to Properties and Records............................... 15
Section 5.4 Subsequent Financial Statements................................ 16
Section 5.5 Update Schedules............................................... 16
Section 5.6 Notice......................................................... 16
Section 5.7 Other Proposals................................................ 16
Section 5.8 Affiliate Letters.............................................. 16
Section 5.9 No Purchases or Sales of FFC Common Stock
During Price Determination Period.............................. 16
Section 5.10 Accounting Treatment.......................................... 17
Section 5.11 Dividends..................................................... 17
Section 5.12 Employment Obligations........................................ 17
ARTICLE VI COVENANTS OF FFC..................................................... 17
Section 6.1 Best Efforts................................................... 17
(a) Applications for Regulatory Approval........................... 17
(b) Registration Statement......................................... 17
(c) State Securities Laws.......................................... 18
(d) Stock Listing.................................................. 18
(e) WNB Interim Bank............................................... 18
(f) Accounting Treatment........................................... 18
Section 6.2 Access to Properties and Records............................... 18
Section 6.3 Subsequent Financial Statements................................ 18
Section 6.4 Update Schedule................................................ 18
Section 6.5 Notice......................................................... 18
Section 6.6 Employment Arrangements........................................ 19
Section 6.7 No Purchase or Sales of FFC Common Stock
During Price Determination Period.............................. 19
Section 6.8 Appointment of FFC Director.................................... 19
Section 6.9 Continuation of WNB's Structure, Name and Directors............ 19
ARTICLE VII CONDITIONS PRECEDENT................................................. 20
Section 7.1 Common Conditions.............................................. 20
(a) Stockholder Approval........................................... 20
(b) Regulatory Approvals........................................... 20
(c) Stock Listing.................................................. 20
(d) Tax Opinion.................................................... 20
(e) Registration Statement......................................... 21
(f) No Suits....................................................... 21
Section 7.2 Conditions Precedent to Obligations of FFC.................... 21
(a) Accuracy of Representations and Warranties..................... 21
(b) Covenants Performed............................................ 22
(c) Opinion of Counsel for WNB..................................... 22
(d) Affiliate Agreements........................................... 22
(e) Financial Confirmation......................................... 22
(f) Accountants' Letter............................................ 22
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
(g) Accounting Treatment.......................................... 23
(h) Federal and State Securities and Antitrust Laws............... 23
(i) Dissenting Shareholders....................................... 23
(j) Environmental Matters......................................... 23
(k) Closing Documents............................................. 23
Section 7.3 Conditions Precedent to the Obligations of WNB................ 23
(a) Accuracy of Representations and Warranties.................... 24
(b) Covenants Performed........................................... 24
(c) Opinion of Counsel for FFC.................................... 24
(d) Fairness Opinion.............................................. 24
(e) Financial Confirmation........................................ 24
(f) Closing Documents............................................. 24
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER............................. 25
Section 8.1 Termination................................................... 25
(a) Mutual Consent................................................ 25
(b) Unilateral Action by FFC...................................... 25
(c) Unilateral Action By WNB...................................... 25
Section 8.2 Effect of Termination......................................... 25
(a) Effect........................................................ 25
(b) Limited Liability............................................. 25
(c) Confidentiality............................................... 25
Section 8.3 Amendment..................................................... 26
Section 8.4 Waiver........................................................ 26
ARTICLE IX RIGHTS OF DISSENTING SHAREHOLDERS OF WNB............................ 26
Section 9.1 Rights of Dissenting Shareholders of WNB...................... 26
ARTICLE X CLOSING AND EFFECTIVE DATE.......................................... 26
Section 10.1 Closing...................................................... 26
Section 10.2 Effective Date............................................... 26
ARTICLE XI NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES....................... 26
Section 11.1 No Survival.................................................. 26
ARTICLE XII GENERAL PROVISIONS.................................................. 26
Section 12.1 Expenses..................................................... 26
Section 12.2 Other Mergers and Acquisitions............................... 27
Section 12.3 Notices...................................................... 27
Section 12.4 Counterparts................................................. 27
Section 12.5 Governing Law................................................ 27
Section 12.6 Parties in Interest.......................................... 28
Section 12.7 Entire Agreement............................................. 28
</TABLE>
-iii-
<PAGE>
INDEX OF SCHEDULES
------------------
Schedule 3.7 Undisclosed Liabilities
------------
Schedule 3.8 Changes
------------
Schedule 3.9 Dividends, Distributions and Stock Purchases
------------
Schedule 3.10 Taxes
-------------
Schedule 3.11 Title to and Condition of Assets
-------------
Schedule 3.12 Contracts
-------------
Schedule 3.13 Litigations and Governmental Directives
-------------
Schedule 3.14 Compliance with Laws; Governmental
-------------
Authorizations
Schedule 3.15 Insurance
-------------
Schedule 3.16 Financial Institution Bonds
-------------
Schedule 3.17 Labor Relations and Employment Agreements
-------------
Schedule 3.18 Employee Benefit Plans
-------------
Schedule 3.19 Related Party Transactions
-------------
Schedule 3.20 Finders
-------------
Schedule 3.22 Environmental Matters
-------------
Schedule 3.26 Loan Portfolio
-------------
Schedule 3.27 Investment Portfolio
-------------
Schedule 4.5 Subsidiaries
------------
Schedule 4.7 Undisclosed Liabilities
------------
Schedule 4.9 Litigation and Governmental Directives
------------
Schedule 4.10 Compliance with Laws; Governmental
-------------
Authorizations
Schedule 4.14 Environmental Matters
-------------
<PAGE>
INDEX OF EXHIBITS
-----------------
Exhibit A Form of Warrant Agreement
---------
Exhibit B Form of Warrant
---------
Exhibit C Form of Plan of Merger
---------
Exhibit D Form of Opinion of WNB's Counsel
---------
Exhibit E Form of Opinion of FFC's Counsel
---------
<PAGE>
MERGER AGREEMENT
----------------
Merger Agreement made as of the 30th day of September, 1996, as amended
and restated as of November 1, 1996, by and between FULTON FINANCIAL
CORPORATION, a Pennsylvania business corporation having its administrative
headquarters at One Penn Square, P. O. Box 4887, Lancaster, Pennsylvania 17604
("FFC"), and THE WOODSTOWN NATIONAL BANK & TRUST COMPANY, a national banking
association having its administrative headquarters at One South Main Street,
Woodstown, New Jersey, 08098 ("WNB").
BACKGROUND:
-----------
FFC is a Pennsylvania bank holding company. WNB is a national banking
association. FFC wishes to acquire WNB, and WNB wishes to be acquired by FFC.
Subject to the terms and conditions of this Agreement, the foregoing transaction
will be accomplished by means of a merger (the "Merger") in which (i) FFC will
organize a national banking association "(WNB Interim Bank") as a wholly-owned
subsidiary of FFC and cause WNB Interim Bank to become a party to this
Agreement, (ii) WNB will be merged with and into WNB Interim Bank, (iii) WNB
Interim Bank will survive the Merger and operate as a wholly-owned subsidiary of
FFC under the name "The Woodstown National Bank & Trust Company", and (iv) all
of the outstanding shares of the common stock of WNB, par value $.22 per share
("WNB Common Stock"), will be converted into shares of the common stock of FFC,
par value $2.50 per share ("FFC Common Stock"). Any reference to WNB after the
merger of WNB with and into WNB Interim Bank shall mean the surviving entity of
said merger. Simultaneously with the execution of this Agreement, the parties
are entering into a Warrant Agreement of even date herewith in the form of
Exhibit A attached hereto (the "Warrant Agreement"), which provides for the
- ---------
delivery by WNB of a warrant in the form of Exhibit B attached hereto (the
---------
"Warrant") entitling FFC to purchase shares of the WNB Common Stock in certain
circumstances.
WITNESSETH:
-----------
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and intending to be legally bound, the parties hereby agree as follows:
ARTICLE I
PLAN OF MERGER
--------------
Section 1.1 Plan of Merger. Subject to the terms and conditions of this
----------- --------------
Agreement, WNB shall merge with and into WNB Interim Bank in accordance with the
Plan of Merger in the form of Exhibit C attached hereto.
---------
ARTICLE II
CONVERSION OF SHARES AND
EXCHANGE OF STOCK CERTIFICATES
------------------------------
Section 2.1 Conversion of Shares. On the Effective Date (as defined in
----------- --------------------
Section 10.2 herein) the shares of WNB Common Stock then outstanding shall be
converted into shares of FFC Common Stock, as follows:
(a) General: Subject to the provisions of Sections 2.1(b) and
-------
2.1(c) herein, each share of WNB Common Stock issued and outstanding immediately
before the Effective Date shall, on the Effective Date, be converted into and
become, without any action on the part of the holder thereof, 1.60 (such number,
as it may be adjusted under Section 2.1(b) herein, the "Conversion Ratio")
shares of FFC Common Stock.
(b) Antidilution Provision: In the event that FFC shall at any
----------------------
time before the Effective Date: (i) issue a dividend in shares of FFC Common
Stock, (ii) combine the outstanding shares of FFC Common Stock into a smaller
number of
<PAGE>
shares, or (iii) subdivide the outstanding shares of FFC Common Stock into a
greater number of shares, then the Conversion Ratio shall be proportionately
adjusted (calculated to three decimal places), so that each WNB stockholder
shall receive on the Effective Date, in exchange for his shares of WNB Common
Stock, the number of shares of FFC Common Stock as would then have been owned by
him if the Effective Date had occurred before the record date of such event (for
example, if FFC were to declare a ten percent (10%) stock dividend after the
date of this Agreement and if the record date for that stock dividend were to
occur before the Effective Date, the Conversion Ratio would be adjusted from
1.60 shares to 1.76 shares).
(c) No Fractional Shares: No fractional shares of FFC Common
--------------------
Stock shall be issued in connection with the Merger. In lieu of the issuance of
any fractional share to which he would otherwise be entitled, each former
stockholder of WNB shall receive in cash an amount equal to the fair market
value of his fractional interest, which fair market value shall be determined by
multiplying such fraction by the Closing Market Price (as defined in Section
2.1(d) herein).
(d) Closing Market Price: For purposes of this Agreement, the
--------------------
Closing Market Price shall be the average of the average of the per share
closing bid prices for FFC Common Stock, rounded up to the nearest $.125, for
the ten (10) trading days immediately preceding the date which is two (2)
business days before the Effective Date, as reported on the National Market
System of the National Association of Securities Dealers Automated Quotation
System (NASDAQ), the foregoing period of ten (10) trading days being hereinafter
sometimes referred to as the "Price Determination Period." (For example, if
March 31, 1997 were to be the Effective Date, then the Price Determination
Period would be March 17, 18, 19, 20, 21, 24, 25, 26, 27 and 28, 1997.) In the
event that NASDAQ shall fail to report a closing bid price for FFC Common Stock
for any trading day during the Price Determination Period, the closing bid
prices for that day shall be equal to the average of the closing bid prices and
the average of the closing asked prices as quoted: (i) by F. J. Morrissey &
Company, Inc. and by Ryan, Beck & Co.; or, (ii) in the event that both of these
firms are not then making a market in FFC Common Stock, by two brokerage firms
then making a market in FFC Common Stock to be selected by FFC and approved by
WNB.
Section 2.2 Exchange of Stock Certificates. WNB Common Stock
------------------------------------------
certificates shall be exchanged for FFC Common Stock certificates in accordance
with the following procedures:
(a) Exchange Agent: The transfer agent of FFC shall act as
--------------
exchange agent (the "Exchange Agent") to receive WNB Common Stock certificates
from the holders thereof and to exchange such stock certificates for FFC Common
Stock certificates and (if applicable) to pay cash for fractional shares of WNB
Common Stock pursuant to Section 2.1(c) herein. The Exchange Agent shall, within
five business days after the Effective Date, mail to each former stockholder of
WNB a notice specifying the procedures to be followed in surrendering such
stockholder's WNB Common Stock certificates.
(b) Surrender of Certificates: As promptly as possible after
-------------------------
receipt of the Exchange Agent's notice, each former stockholder of WNB shall
surrender his WNB Common Stock certificates to the Exchange Agent; provided,
--------
that if any former stockholder of WNB shall be unable to surrender his WNB
Common Stock certificates due to loss or mutilation thereof, he may make a
constructive surrender by following procedures comparable to those customarily
used by FFC for issuing replacement certificates to FFC shareholders whose FFC
Common Stock certificates have been lost or mutilated. Within 10 business days
following the receipt of a proper actual or constructive surrender of WNB Common
Stock certificates from a former WNB stockholder, the Exchange Agent shall issue
to such stockholder, in exchange therefor, an FFC Common Stock certificate
representing the whole number of shares of FFC Common Stock into which such
stockholder's shares of WNB Common Stock have been converted in accordance with
-2-
<PAGE>
this Article II, together with a check in the amount of any cash to which such
stockholder is entitled, pursuant to Section 2.1(c) herein, in lieu of the
issuance of a fractional share.
(c) Dividend Withholding: Dividends, if any, payable by FFC
--------------------
after the Effective Date to any former stockholder of WNB who has not prior to
the payment date surrendered his WNB Common Stock certificates may, at the
option of FFC, be withheld. Any dividends so withheld shall be paid, without
interest, to such former stockholder of WNB upon proper surrender of his WNB
Common Stock certificates.
(d) Failure to Surrender Certificates: All WNB Common Stock
---------------------------------
certificates must be surrendered to the Exchange Agent within two (2) years
after the Effective Date. In the event that any former stockholder of WNB shall
not have properly surrendered his WNB Common Stock certificates within two (2)
years after the Effective Date, the shares of FFC Common Stock that would
otherwise have been issued to him may, at the option of FFC, be sold and the net
proceeds of such sale, together with the cash (if any) to which he is entitled
in lieu of the issuance of a fractional share and any previously accrued
dividends, shall be held by the Exchange Agent in a noninterest bearing account
for his benefit. From and after any such sale, the sole right of such former
stockholder of WNB shall be the right to collect such net proceeds, cash and
accumulated dividends. Subject to all applicable laws of escheat, such net
proceeds, cash and accumulated dividends shall be paid to such former
stockholder of WNB, without interest, upon proper surrender of his WNB Common
Stock certificates.
(e) Expenses: All costs and expenses associated with the
--------
foregoing surrender and exchange procedure shall be borne by FFC.
Section 2.3 Reservation of Shares. FFC agrees that (i) prior to the
----------- ---------------------
Effective Date it will take appropriate action to reserve a sufficient number of
authorized but unissued shares of FFC Common Stock to be issued in accordance
with this Agreement, and (ii) on the Effective Date, FFC will issue shares of
FFC Common Stock to the extent set forth in, and in accordance with, this
Agreement.
Section 2.4 Taking Necessary Action. FFC and WNB shall take all such
----------- -----------------------
actions as may be reasonably necessary or appropriate in order to effectuate the
transactions contemplated hereby including, without limitation, providing
information necessary for preparation of any filings needed to obtain the
regulatory approvals required to consummate the Merger. In case at any time
after the Effective Date any further action is necessary or desirable to carry
out the purposes of this Agreement and to vest FFC with full title to all
properties, assets, rights, approvals, immunities and franchises of WNB, the
officers and directors of WNB, at the expense of FFC, shall take all such
necessary action.
Section 2.5 Press Releases. FFC and WNB agree that all press releases
----------- --------------
or other public communications relating to this Agreement or the transactions
contemplated hereby will require consultation among FFC and WNB, unless counsel
has advised any such party that such release or other public communication must
immediately be issued and the issuing party has not been able, despite its good
faith efforts, to effect such consultation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF WNB
------------------------------
WNB represents and warrants to FFC, as of the date of this Agreement and
as of the date of the Closing (as defined in Section 10.1 herein), as follows:
-3-
<PAGE>
Section 3.1 Authority. The execution and delivery of this Agreement,
----------- ---------
the Warrant Agreement and the Warrant and the performance of the transactions
contemplated herein and therein have been authorized by the Board of Directors
of WNB and, except for the approval of this Agreement by its stockholders, WNB
has taken all corporate action necessary on its part to authorize this
Agreement, the Warrant Agreement and the Warrant and the performance of the
transactions contemplated herein and therein. This Agreement, the Warrant
Agreement and the Warrant have been duly executed and delivered by WNB and,
assuming due authorization, execution and delivery by FFC, constitute valid and
binding obligations of WNB. The execution, delivery and performance of this
Agreement, the Warrant Agreement and the Warrant will not constitute a violation
or breach of or default under (i) the Articles of Association or Bylaws of WNB,
(ii) the Certificate of Incorporation or Bylaws of Woodstown Investment Company
("WIC"), (iii) any statute, rule, regulation, order, decree or directive of any
governmental authority or court applicable to WNB or WIC, or (iv) any agreement,
contract, memorandum of understanding, indenture or other instrument to which
WNB or WIC is a party or by which WNB, or WIC or any of their properties are
bound.
Section 3.2 Subsidiaries. WIC is a direct wholly-owned subsidiary of
------------------------
WNB. Except for WIC, WNB owns no subsidiaries, directly or indirectly.
Section 3.3 Organization and Standing. WNB is a bank that is duly
----------- -------------------------
organized, validly existing and in good standing under the laws of the United
States. WNB is an insured bank under the provisions of the Federal Deposit
Insurance Act, as amended (the "FDI Act"), and is a member of the Federal
Reserve System. WNB has full power and lawful authority to own and hold its
properties and to carry on its business as presently conducted. WIC is a
business corporation that is duly organized, validly existing and in good
standing of the laws of the State of Delaware. WIC has full power and lawful
authority to own and hold its properties and to carry on its business as
presently conducted.
Section 3.4 Capitalization. The authorized capital of WNB consists
----------- --------------
exclusively of 10,000,000 shares of WNB Common Stock, of which 1,800,000 shares
are validly issued, outstanding, fully paid and non-assessable, and no shares
are held as treasury shares. In addition, 358,200 shares of (or approximately
19.9% of the outstanding), WNB Common Stock are reserved for issuance upon
exercise of the Warrant. Except for the Warrant, there are no outstanding
obligations, options or rights of any kind entitling other persons to acquire
shares of WNB Common Stock and there are no outstanding securities or other
instruments of any kind that are convertible into shares of WNB Common Stock.
WIC consists exclusively of 1,000 shares of common stock, par value $1.00 per
share (the "WIC Common Stock"), of which 1,000 shares are validly issued,
outstanding, fully paid and non-assessable, and no shares are held as treasury
shares. All outstanding shares of WIC Common Stock are owned beneficially and of
record by WNB. There are no outstanding obligations, options or rights of any
kind entitling other persons to acquire shares of WIC Common Stock, and there
are no outstanding securities or instruments of any kind that are convertible
into shares of WIC Common Stock.
Section 3.5 Charter, Bylaws and Minute Books. The copies of the
----------- --------------------------------
Articles of Association, Certificate of Incorporation and Bylaws of WNB and WIC
that have been delivered to FFC are true, correct and complete. Except as
previously disclosed to FFC in writing, the minute books of WNB and WIC that
have been made available to FFC for inspection are true, correct and complete in
all respects and accurately record the actions taken by the Boards of Directors
and stockholders of WNB and WIC at the meetings documented in such minutes.
Section 3.6 Financial Statements. WNB and WIC have delivered to FFC the
----------- --------------------
following financial statements: (i) Consolidated Statements of Condition for WNB
at December 31, 1995 and 1994 and Consolidated Statements of Income,
Consolidated Statements of Changes in Shareholders' Equity, and Consolidated
Statements of Cash Flows of WNB for the years ended December 31, 1995 and 1994
certified by
-4-
<PAGE>
Petroni & Associates, and set forth in the 1995 Annual Report to WNB's
stockholders; and (ii) a Consolidated Statement of Condition of WNB at June 30,
1996 and Consolidated Statements of Income, Consolidated Statements of Changes
in Shareholders' Equity and Consolidated Statements of Cash Flows of WNB for the
six-month period ended June 30, 1996, (the aforementioned Consolidated Statement
of Condition as of June 30, 1996 being hereinafter referred to as the "WNB
Balance Sheet"). Each of the foregoing financial statements fairly present the
consolidated financial condition, assets and liabilities, and results of
operations of WNB and WIC at their respective dates and for the respective
periods then ended and has been prepared in accordance with generally accepted
accounting principles consistently applied, except as otherwise noted in a
footnote thereto and subject, in the case of the interim financial statements
contained in WNB's above-mentioned Quarterly Report, to normal recurring year-
end adjustments, which are not material in any case or in the aggregate.
Section 3.7 Absence of Undisclosed Liabilities. Except as disclosed in
----------- ----------------------------------
Schedule 3.7, or as reflected, noted or adequately reserved against in the WNB
- ------------
Balance Sheet, as at June 30, 1996, WNB had no consolidated liabilities (whether
accrued, absolute, contingent or otherwise) which were required to be reflected,
noted or reserved against in the WNB Balance Sheet under generally accepted
accounting principles or which were in any case or in the aggregate material.
Except as disclosed in Schedule 3.7, WNB and WIC have not incurred, since
------------
June 30, 1996, any such liability, other than liabilities of the same nature as
those set forth in the WNB Balance Sheet, all of which have been reasonably
incurred in the Ordinary Course of Business. For purposes of this Agreement, the
term "Ordinary Course of Business" shall mean the ordinary course of business
consistent with WNB's and WIC's customary business practices.
Section 3.8 Absence of Changes. Since June 30, 1996, WNB and WIC have
----------- ------------------
conducted their businesses in the Ordinary Course of Business and, except as
disclosed in Schedule 3.8, neither WNB nor WIC have undergone any changes in its
------------
condition (financial or otherwise), assets, liabilities, business or operations,
other than changes in the Ordinary Course of Business, which have not been, in
the aggregate, materially adverse as to WNB and WIC.
Section 3.9 Dividends, Distributions and Stock Purchases. Except as
----------- --------------------------------------------
disclosed in Schedule 3.9, since January 1, 1996, WNB has not declared, set
------------
aside, made or paid any dividend or other distribution in respect of the WNB
Common Stock, or purchased, issued or sold any shares of WNB Common Stock or WIC
Common Stock.
Section 3.10 Taxes. WNB and WIC have filed all federal, state, county,
------------ -----
municipal and foreign tax returns, reports and declarations which are required
to be filed by them or either of them as of June 30, 1996. Except as disclosed
in Schedule 3.10: (i) WNB has paid all taxes, penalties and interest which have
-------------
become due pursuant thereto or which became due pursuant to federal, state,
county, municipal or foreign tax laws applicable to the periods covered by the
foregoing tax returns, (ii) neither WNB nor WIC have received any notice of
deficiency or assessment of additional taxes, and no tax audits are in process;
and (iii) the Internal Revenue Service (the "IRS") has not commenced or given
notice of an intention to commence any examination or audit of the federal
income tax returns of WNB for any year through and including the year ended
December 31, 1995. Except as disclosed in Schedule 3.10, neither WNB nor WIC
-------------
have granted any waiver of any statute of limitations or otherwise agreed to any
extension of a period for the assessment of any federal, state, county,
municipal or foreign income tax. Except as disclosed in Schedule 3.10, the
-------------
accruals and reserves reflected in the WNB Balance Sheet are adequate to cover
all taxes (including interest and penalties, if any, thereon) that are payable
or accrued as a result of WNB's consolidated operations for all periods prior to
the date of such Balance Sheet.
-5-
<PAGE>
Section 3.11 Title to and Condition of Assets. Except as disclosed in
------------ --------------------------------
Schedule 3.11; WNB and WIC have good and marketable title to all consolidated
- -------------
real and personal properties and assets reflected in the WNB Balance Sheet or
acquired subsequent to June 30, 1996 (other than property and assets disposed of
in the Ordinary Course of Business), free and clear of all liens or encumbrances
of any kind whatsoever; provided, however, that the representations and
-------- -------
warranties contained in this sentence do not cover liens or encumbrances that:
(i) are reflected in the WNB Balance Sheet or in Schedule 3.11; (ii) represent
-------------
liens of current taxes not yet due or which, if due, may be paid without
penalty, or which are being contested in good faith by appropriate proceedings;
and (iii) represent such imperfections of title, liens, encumbrances, zoning
requirements and easements, if any, as are not substantial in character, amount
or extent and do not materially detract from the value, or interfere with the
present or proposed use, of the properties and assets subject thereto. The
structures and other improvements to real estate, furniture, fixtures and
equipment reflected in the WNB Balance Sheet or acquired subsequent to June 30,
1996: (A) are in good operating condition and repair (ordinary wear and tear
excepted), and (B) comply in all material respects with all applicable laws,
ordinances and regulations, including without limitation all building codes,
zoning ordinances and other similar laws, except where any noncompliance would
not materially detract from the value, or interfere with the present or proposed
use, of such structures, improvements, furniture, fixtures and equipment. WNB
and WIC own or has the right to use all real and personal properties and assets
that are material to the conduct of their respective businesses as presently
conducted.
Section 3.12 Contracts. Each written or oral contract entered into by
------------ ---------
WNB or WIC (other than contracts with customers reasonably entered into by WNB
or WIC in the Ordinary Course of Business) which involves aggregate payments or
receipts in excess of $100,000 per year, including without limitation every
employment contract, employee benefit plan, agreement, lease, license,
indenture, mortgage and other commitment to which WNB or WIC is a party or by
which either WNB, WIC or any of their properties may be bound (collectively
referred to herein as "Material Contracts") is identified in Schedule 3.12.
-------------
Except as disclosed in Schedule 3.12, all Material Contracts are valid and in
-------------
full force and effect, and all parties thereto have in all material respects
performed all obligations required to be performed by them to date and are not
in default in any material respect. Schedule 3.12 identifies all Material
-------------
Contracts which require the consent or approval of third parties to the
execution and delivery of this Agreement or to the consummation of the
transactions contemplated herein.
Section 3.13 Litigation and Governmental Directives. Except as
------------ --------------------------------------
disclosed in Schedule 3.13, (i) there is no litigation, investigation or
-------------
proceeding pending, or to the knowledge of WNB threatened, that involves WNB,
WIC or any of their properties and that, if determined adversely, would
materially and adversely affect the condition (financial or otherwise), assets,
liabilities, business, operations or future prospects of WNB or WIC; (ii) there
are no outstanding orders, writs, injunctions, judgments, decrees, regulations,
directives, consent agreements or memoranda of understanding issued by any
federal, state or local court or governmental authority or arbitration tribunal
issued against or with the consent of WNB or WIC that materially and adversely
affect the condition (financial or otherwise), assets, liabilities, business,
operations or future prospects of WNB, WIC or that in any manner restrict the
right of WNB or WIC to carry on their businesses as presently conducted taken as
a whole; and (iii) neither WNB nor WIC is aware of any fact or condition
presently existing that might give rise to any litigation, investigation or
proceeding which, if determined adversely to WNB or WIC , would materially and
adversely affect the consolidated condition (financial or otherwise), assets,
liabilities, business, operations or future prospects of WNB or WIC or would
restrict in any manner the right of WNB or WIC to carry on their businesses as
presently conducted taken as a whole. All litigation (except for bankruptcy
proceedings in which WNB or WIC have filed proofs of claim) in which WNB or WIC
is involved as a plaintiff (other than routine collection and
-6-
<PAGE>
foreclosure suits initiated in the Ordinary Course of Business in which the
amount sought to be recovered is less than $25,000) is identified in Schedule
--------
3.13.
- ----
Section 3.14 Compliance with Laws; Governmental Authorizations. Except
------------ -------------------------------------------------
as disclosed in Schedule 3.14 or where noncompliance would not have a material
-------------
and adverse effect upon the condition (financial or otherwise), assets,
liabilities, business, operations or future prospects of WNB or WIC: (i) WNB and
WIC are in compliance with all statutes, laws, ordinances, rules, regulations,
judgments, orders, decrees, directives, consent agreements, memoranda of
understanding, permits, concessions, grants, franchises, licenses, and other
governmental authorizations or approvals applicable to WNB and WIC or to any of
their properties; and (ii) all permits, concessions, grants, franchises,
licenses and other governmental authorizations and approvals necessary for the
conduct of the business of WNB or WIC as presently conducted have been duly
obtained and are in full force and effect, and there are no proceedings pending
or threatened which may result in the revocation, cancellation, suspension or
materially adverse modification of any thereof.
Section 3.15 Insurance. All policies of insurance relating to WNB's and
------------ ---------
WIC's operations (except for title insurance policies), including without
limitation all financial institutions bonds, held by or on behalf of WNB or WIC
are listed in Schedule 3.15. All such policies of insurance are in full force
-------------
and effect, and no notices of cancellation have been received in connection
therewith.
Section 3.16 Financial Institutions Bonds. Since January, 1989, WNB has
------------ ----------------------------
continuously maintained in full force and effect one or more financial
institutions bonds listed in Schedule 3.16 insuring WNB against acts of
-------------
dishonesty by each of its employees. No claim has been made under any such bond
and WNB is not aware of any fact or condition presently existing which might
form the basis of a claim under any such bond. WNB has no reason to believe that
its present financial institutions bond or bonds will not be renewed by its
carrier on substantially the same terms as those now in effect.
Section 3.17 Labor Relations and Employment Agreements. Neither WNB nor
------------ -----------------------------------------
WIC is a party to or bound by any collective bargaining agreement. WNB and WIC
enjoy good working relationships with their employees, and there are no labor
disputes pending, or to the knowledge of WNB or WIC threatened, that might
materially and adversely affect the condition (financial or otherwise), assets,
liabilities, business or operations of WNB or WIC. Except as disclosed in
Schedule 3.17, neither WNB nor WIC has employment contract, severance agreement,
- -------------
deferred compensation agreement, consulting agreement or similar obligation (an
"Employment Obligation") with any director, officer, employee, agent or
consultant, and all such persons are serving at the will and pleasure of WNB or
WIC, as the case may be. Except as disclosed in Schedule 3.17, as of the
-------------
Effective Date (as defined in Section 10.2 herein), neither WNB nor WIC will
have any liability for employee termination rights arising out of any Employment
Obligation.
Section 3.18 Employee Benefit Plans. All employee benefit plans,
------------ ----------------------
contracts or arrangements to which WNB or WIC is a party or by which WNB or WIC
is bound, including without limitation all pension, retirement, deferred
compensation, incentive, bonus, profit sharing, stock purchase, stock option,
life insurance, death or survivor's benefit, health insurance, sickness,
disability, medical, surgical, hospital, severance, layoff or vacation plans,
contracts or arrangements, are identified in Schedule 3.18. WNB's retirement
-------------
savings plan, a contributory defined contribution plan (the "WNB 401(k) Plan")
is exempt from tax under Sections 401 and 501 of the Internal Revenue Code of
1986, as amended (the "Code"), has been maintained and operated in material
compliance with all applicable provisions of the Code and the Employee
Retirement Income Security Act
-7-
<PAGE>
of 1974, as amended ("ERISA"). No "prohibited transaction" (as such term is
defined in the Code or in ERISA) has occurred in respect of the WNB 401(k) Plan
or any other employee benefit plan, including, without limitation, WNB's
nonqualified deferred compensation plan, nonqualified salary continuation
agreement and severance pay plan (all "employee benefit pension plans" and all
"employee welfare benefit plans", as those terms are defined in ERISA, of WNB
and WIC being collectively referred to herein as "WNB Benefit Plans" and
individually as a "WNB Benefit Plan"), to which WNB or WIC is a party or by
which WNB or WIC is bound. There have been no material breaches of fiduciary
duty by any fiduciary under or with respect to the WNB 401(k) Plan or any other
WNB Benefit Plan, and no claim is pending or threatened with respect to any WNB
Benefit Plan other than claims for benefits made in the Ordinary Course of
Business. Neither WNB nor WIC has incurred any material liability for any tax
imposed by Section 4975 of the Code or for any penalty imposed by the Code or by
ERISA with respect to the WNB 401(k) Plan or any other WNB Benefit Plan. There
has not been any audit of any WNB Benefit Plan by the Department of Labor, the
IRS or the PBGC since January 1, 1989.
Section 3.19 Related Party Transactions. Except as disclosed in
------------ --------------------------
Schedule 3.19, neither WNB nor WIC has any contract, extension of credit,
- -------------
business arrangement or other relationship of any kind with any of the following
persons: (i) any executive officer or director (including any person who has
served in such capacity since January 1, 1994) of WNB or WIC; (ii) any
stockholder owning five percent (5%) or more of the outstanding WNB Common
Stock; and (iii) any "associate" (as defined in Rule 405 of the SEC) of the
foregoing persons or any business in which any of the foregoing persons is an
officer, director, employee or five percent (5%) or greater equity owner. Each
such contract or extension of credit disclosed in Schedule 3.19, except as
-------------
otherwise specifically described therein, has been made in the Ordinary Course
of Business on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable arms' length
transactions with other persons that do not involve more than a normal risk of
collectability or present other unfavorable features.
Section 3.20 No Finder. Except as disclosed in Schedule 3.20, neither
------------ --------- -------------
WNB nor WIC has paid or become obligated to pay any fee or commission of any
kind whatsoever to any broker, finder, advisor or other intermediary for, on
account of or in connection with the transactions contemplated in this
Agreement.
Section 3.21 Complete and Accurate Disclosure. Neither this Agreement
------------ --------------------------------
(insofar as it relates to WNB, WIC, WNB Common Stock, WIC Common Stock, and the
involvement of WNB in the transactions contemplated hereby) nor any financial
statement, schedule (including without limitation its Schedules to this
Agreement), certificate, or other statement or document delivered by WNB or WIC
to FFC in connection herewith contains any statement which, at the time and in
light of the circumstances under which it is made, is false or misleading with
respect to any material fact or omits to state any material fact necessary to
make the statements contained herein or therein not false or misleading. In
particular, without limiting the generality of the foregoing sentence, the
information provided and the representations made by WNB and WIC to FFC in
connection with the Registration Statement (as defined in Section 6.1(b)
herein), both at the time such information and representations are provided and
made and at the time of the Closing, will be true and accurate in all material
respects and will not contain any false or misleading statement with respect to
any material fact or omit to state any material fact required to be stated
therein or necessary in order (i) to make the statements made therein not false
or misleading, or (ii) to correct any statement contained in an earlier
communication with respect to such information or representations which has
become false or misleading.
Section 3.22 Environmental Matters. Except as disclosed in
------------ ---------------------
Schedule 3.22, neither WNB nor WIC has knowledge that any environmental
- -------------
contaminant, pollutant,
-8-
<PAGE>
toxic or hazardous waste or other similar substance has been generated, used,
stored, processed, disposed of or discharged onto any of the real estate now or
previously owned or acquired (including without limitation any real estate
acquired by means of foreclosure or exercise of any other creditor's right) or
leased by WNB or WIC. In particular, without limiting the generality of the
foregoing sentence, except as disclosed in Schedule 3.22, neither WNB nor WIC
-------------
has any knowledge that: (i) any materials containing asbestos have been used
or incorporated in any building or other structure or improvement located on any
of the real estate now or previously owned or acquired (including without
limitation any real estate acquired by means of foreclosure or exercise of any
other creditor's right) or leased by WNB or WIC; (ii) any electrical
transformers, fluorescent light fixtures with ballasts or other equipment
containing PCB's are or have been located on any of the real estate now or
previously owned or acquired (including without limitation any real estate
acquired by means of foreclosure or exercise of any other creditor's right) or
leased by WNB or WIC; or (iii) any underground storage tanks for the storage of
gasoline, petroleum products or other toxic or hazardous wastes or similar
substances are or have ever been located on any of the real estate now or
previously owned or acquired (including without limitation any real estate
acquired by means of foreclosure or exercise of any other creditor's right) or
leased by WNB or WIC.
Section 3.23 Proxy Statement/Prospectus. At the time the Proxy
------------ --------------------------
Statement/Prospectus (as defined in Section 6.1(b) herein) is mailed to the
stockholders of WNB and at all times subsequent to such mailing, up to and
including the Effective Date, the Proxy Statement/Prospectus (including any pre-
and post-effective amendments and supplements thereto), with respect to all
information relating to WNB, WIC, WNB Common Stock, WIC Common Stock and all
actions taken and statements made by WNB and WIC in connection with the
transactions contemplated herein (except for information provided by FFC to WNB)
will: (i) comply in all material respects with applicable provisions of the
Securities Act of 1933, as amended (the "1933 Act"), and the Securities Exchange
Act of 1934, as amended (the "1934 Act"), and the applicable rules and
regulations of the Securities and Exchange Commission (the "SEC") or the Office
of the Comptroller of the Currency ("the OCC") thereunder; and (ii) not contain
any statement which, at the time and in light of the circumstances under which
it is made, is false or misleading with respect to any material fact, or omits
to state any material fact that is required to be stated therein or necessary in
order (A) to make the statements therein not false or misleading, or (B) to
correct any statement in an earlier communication with respect to the Proxy
Statement/Prospectus which has become false or misleading.
Section 3.24 SEC Filings. No registration statement, offering circular,
------------ -----------
proxy statement, schedule or report filed and not withdrawn, since December 31,
1993, by WNB with the SEC or the OCC under the 1933 Act or the 1934 Act, on the
date of effectiveness (in the case of any registration statement or offering
circular) or on the date of filing (in the case of any report or schedule) or on
the date of mailing (in the case of any proxy statement), contained any untrue
statement of a material fact or omitted to state any material fact required to
be stated therein or necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading.
Section 3.25 Reports. WNB and WIC have filed all material reports,
------------ -------
registrations and statements that are required to be filed with the OCC, Federal
Reserve Board, the Federal Deposit Insurance Corporation (the "FDIC"), the New
Jersey Department of Banking and any other applicable federal, state or local
governmental or regulatory authorities and such reports, registrations and
statements referred to in this Section 3.25 were, as of their respective dates,
in compliance in all material respects with all of the statutes, rules and
regulations enforced or promulgated by the governmental or regulatory authority
with which they were filed; provided, however, that the failure to file any such
report, registration, or statement or the failure of any report, registration or
-9-
<PAGE>
statement to comply with the applicable regulatory standard shall not be cleared
to be breach of the foregoing representation unless such failure has or may have
a material adverse impact on WNB or WIC on a consolidated basis. WNB has
furnished FFC with, or made available to FFC, copies of all such filings made in
the last three fiscal years and in the period from January 1, 1996 through the
date of this Agreement. The WNB Common Stock is traded in the over-the-counter
market.
Section 3.26 Loan Portfolio of WNB.
------------ ---------------------
(a) Attached hereto as Schedule 3.26 is a list of (w) all
-------------
outstanding commercial relationships, i.e. commercial loans, commercial loan
commitments and commercial letters of credit, of WNB with an aggregate principal
amount in excess of $500,000, (x) all loans of WNB classified by WNB or any
regulatory authority as "Substandard," "Doubtful" or "Loss," (y) all commercial
and mortgage loans of WNB classified as "non-accrual," and (z) all commercial
loans of WNB classified as "in substance foreclosed."
(b) WNB has adequately reserved for or charged off loans in
accordance with applicable regulatory requirements and WNB's reserve for loan
losses is adequate in all material respects.
Section 3.27 Investment Portfolio. Attached hereto as Schedule 3.27 is a
------------ -------------------- -------------
list of all securities held by WNB and WIC for investment, showing the principal
amount, book value and market value of each security as of a recent date, and of
all short-term investments held by it as of June 30, 1996. These securities are
free and clear of all liens, pledges and encumbrances, except as shown on
Schedule 3.27.
- -------------
Section 3.28 Regulatory Examinations.
------------ -----------------------
(a) Within the past five years, except for normal examinations
conducted by a regulatory agency in the regular course of the business of WNB or
WIC, no regulatory agency has initiated any proceeding or investigation into the
business or operations of WNB. Neither WNB nor WIC has received objection from
any regulatory agency to WNB's or WIC's response to any violation, criticism or
exception with respect to any report or statement relating to any examinations
of WNB and WIC which would have a materially adverse effect on WNB.
(b) Neither WNB nor WIC will be required to divest any assets
currently held by it or discontinue any activity currently conducted as a result
of the Federal Deposit Insurance Corporation Improvement Act of 1991, any
regulations promulgated thereunder, or otherwise which would have a materially
adverse effect on WNB and WIC on a consolidated basis.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF FFC
-------------------------------------
FFC represents and warrants to WNB, as of the date of this Agreement and as
of the date of the Closing, as follows:
Section 4.1 Authority. The execution and delivery of this Agreement and
----------- ---------
the consummation of the transactions contemplated herein have been authorized by
the Board of Directors of FFC, and no other corporate action on the part of FFC
is necessary to authorize this Agreement or the consummation by FFC of the
transactions contemplated herein. This Agreement has been duly executed and
delivered by FFC and, assuming due authorization, execution and delivery by WNB,
constitutes a valid and binding obligation of FFC. The execution, delivery and
consummation of this Agreement will not constitute a violation or breach of or
default under the Articles of Incorporation or Bylaws of FFC or any statute,
-10-
<PAGE>
rule, regulation, order, decree, directive, agreement, indenture or other
instrument to which FFC is a party or by which FFC or any of its properties are
bound.
Section 4.2 Organization and Standing. FFC is a business corporation that
----------- -------------------------
is duly organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania. FFC is a registered bank holding company under the
Bank Holding Company Act of 1956, as amended (the "BHC Act"), and has full power
and lawful authority to own and hold its properties and to carry on its present
business.
Section 4.3 Capitalization. The authorized capital of FFC consists
----------- --------------
exclusively of 100,000,000 shares of FFC Common Stock and 10,000,000 shares of
preferred stock without par value (the "FFC Preferred Stock"). There are
validly issued 32,985,637 shares of FFC Common Stock as of the date of this
Agreement, of which 32,980,497 shares are outstanding, fully paid and non-
assessable and 5,140 shares are held as treasury shares. No shares of FFC
Preferred Stock have been issued as of the date of this Agreement, and FFC has
no present intention to issue any shares of FFC Preferred Stock. As of the date
of this Agreement, there are no outstanding obligations, options or rights of
any kind entitling other persons to acquire shares of FFC Common Stock or shares
of FFC Preferred Stock and there are no outstanding securities or other
instruments of any kind convertible into shares of FFC Common Stock or into
shares of FFC Preferred Stock, except as follows: (i) 868,141 shares of FFC
Common Stock are issuable upon the exercise of outstanding stock options granted
under the FFC Incentive Stock Option Plan and the FFC Employee Stock Purchase
Plan and (ii) there are outstanding 32,980,497 Rights representing the right
under certain circumstances to purchase shares of FFC Common Stock pursuant to
the terms of a Rights Agreement, dated June 20, 1989, entered into between FFC
and Fulton Bank and (iii) shares of FFC Common Stock reserved from time to time
for issuance pursuant to FFC's Employee Stock Purchase and Dividend Reinvestment
Plans.
Section 4.4 Articles of Incorporation and Bylaws. The copies of the
----------- ------------------------------------
Articles of Incorporation, as amended, and of the Bylaws, as amended, of FFC
that have been delivered to WNB are true, correct and complete.
Section 4.5 Subsidiaries. Schedule 4.5 contains a list of all subsidiaries
----------- ------------ ------------
("Subsidiaries") which FFC owns, directly or indirectly. Except as otherwise
disclosed on Schedule 4.5: (i) FFC owns, directly or indirectly, all of the
------------
outstanding shares of capital stock of each Subsidiary, and (ii) as of the date
of this Agreement: (A) there are no outstanding obligations, options or rights
of any kind entitling persons (other than FFC or any Subsidiary) to acquire
shares of capital stock of any Subsidiary, and (B) there are no outstanding
securities or other instruments of any kind held by persons (other than FFC or
any Subsidiary) that are convertible into shares of capital stock of any
Subsidiary. Each Subsidiary is duly organized, validly existing and in good
standing under the laws of the jurisdiction pursuant to which it is
incorporated. Each Subsidiary has full power and lawful authority to own and
hold its properties and to carry on its business as presently conducted. Each
Subsidiary which is a banking institution is an insured bank under the
provisions of the FDI Act.
Section 4.6 Financial Statements. FFC has delivered to WNB the following
----------- --------------------
financial statements: (i) Consolidated Balance Sheets, Consolidated Statements
of Income, Consolidated Statements of Shareholders' Equity, and Consolidated
Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993,
certified by Arthur Andersen LLP and set forth in the Annual Report to the
shareholders of FFC for the year ended December 31, 1995; and (ii) Consolidated
Balance Sheets as of June 30, 1996 and December 31, 1995, Consolidated
Statements of Income for the three-month and six-month periods ended June 30,
1996 and Consolidated Statements of Cash Flows for the six months ended June 30,
1996 and 1995,as filed with the SEC in a Quarterly Report on Form 10-Q (the
Consolidated
-11-
<PAGE>
Balance Sheet as of June 30, 1996 being hereinafter referred to as the "FFC
Balance Sheet"). Each of the foregoing financial statements fairly presents the
consolidated financial position, assets, liabilities and results of operations
of FFC at their respective dates and for the respective periods then ended and
has been prepared in accordance with generally accepted accounting principles
consistently applied, except as otherwise noted in a footnote thereto and
subject, in the case of the interim financial statements contained in FFC's
above-mentioned Quarterly Report, to normal recurring year-end adjustments,
which are not material in any case or in the aggregate.
Section 4.7 Absence of Undisclosed Liabilities. Except as disclosed in
----------- ----------------------------------
Schedule 4.7 or as reflected, noted or adequately reserved against in the FFC
- ------------
Balance Sheet, at June 30, 1996 FFC had no material liabilities (whether
accrued, absolute, contingent or otherwise) which are required to be reflected,
noted or reserved against therein under generally accepted accounting principles
or which are in any case or in the aggregate material. Except as described in
Schedule 4.7, since June 30, 1996 FFC has not incurred any such liability other
- ------------
than liabilities of the same nature as those set forth in the FFC Balance Sheet,
all of which have been reasonably incurred in the ordinary course of business.
Section 4.8 Absence of Changes. Since June 30, 1996, there has not been
----------- ------------------
any material and adverse change in the condition (financial or otherwise),
assets, liabilities, business, operations or future prospects of FFC.
Section 4.9 Litigation and Governmental Directives. Except as disclosed in
----------- --------------------------------------
Schedule 4.9: (i) there is no litigation, investigation or proceeding pending,
- ------------
or to the knowledge of FFC threatened, that involves FFC or its properties and
that, if determined adversely to FFC, would materially and adversely affect the
condition (financial or otherwise), assets, liabilities, business, operations or
future prospects of FFC; (ii) there are no outstanding orders, writs,
injunctions, judgments, decrees, regulations, directives, consent agreements or
memoranda of understanding issued by any federal, state or local court or
governmental authority or of any arbitration tribunal against FFC which
materially and adversely affect the condition (financial or otherwise), assets,
liabilities, business, operations or future prospects of FFC or restrict in any
manner the right of FFC to carry on its business as presently conducted; and
(iii) FFC is not aware of any fact or condition presently existing that might
give rise to any litigation, investigation or proceeding which, if determined
adversely to FFC, would materially and adversely affect the condition (financial
or otherwise), assets, liabilities, business, operations or future prospects of
FFC or restrict in any manner the right of FFC to carry on its business as
presently conducted.
Section 4.10 Compliance with Laws; Governmental Authorizations. Except as
------------ -------------------------------------------------
disclosed in Schedule 4.10 or where noncompliance would not have a material and
-------------
adverse effect upon the condition (financial or otherwise), assets, liabilities,
business, operations or future prospects of FFC: (i) FFC and each of its
Subsidiaries are in compliance with all statutes, laws, ordinances, rules,
regulations, judgments, orders, decrees, directives, consent agreements,
memoranda of understanding, permits, concessions, grants, franchises, licenses,
and other governmental authorizations or approvals applicable to their
respective operations and properties; and (ii) all permits, concessions, grants,
franchises, licenses and other governmental authorizations and approvals
necessary for the conduct of the respective businesses of FFC and each of its
Subsidiaries as presently conducted have been duly obtained and are in full
force and effect, and there are not proceedings pending or threatened which may
result in the revocation, cancellation, suspension or materially adverse
modification of any thereof.
Section 4.11 Complete and Accurate Disclosure. Neither this Agreement
------------ --------------------------------
(insofar as it relates to FFC, FFC Common Stock, and the involvement of FFC in
the transactions contemplated hereby) nor any financial statement, schedule
-12-
<PAGE>
(including, without limitation, its Schedules to this Agreement), certificate or
other statement or document delivered by FFC to WNB in connection herewith
contains any statement which, at the time and under the circumstances under
which it is made, is false or misleading with respect to any material fact or
omits to state any material fact necessary to make the statements contained
herein or therein not false or misleading. In particular, without limiting the
generality of the foregoing sentence, the information provided and the
representations made by FFC to WNB in connection with the Registration Statement
(as defined in Section 6.1(b)), both at the time such information and
representations are provided and made and at the time of the Closing, will be
true and accurate in all material respects and will not contain any false or
misleading statement with respect to any material fact or omit to state any
material fact required to be stated therein or necessary in order (i) to make
the statements made not false or misleading, or (ii) to correct any statement
contained in an earlier communication with respect to such information or
representations which has become false or misleading.
Section 4.12 Labor Relations. Neither FFC nor any of its Subsidiaries is a
------------ ---------------
party to or bound by any collective bargaining agreement. FFC and each of its
Subsidiaries enjoy good working relationships with their employees, and there
are no labor disputes pending, or to the knowledge of FFC or any Subsidiary
threatened, that might materially and adversely affect the condition (financial
or otherwise), assets, liabilities, business or operations of FFC.
Section 4.13 Employee Benefits Plans. FFC's contributory profit-sharings
------------ -----------------------
plan, defined benefits pension plan and 401(k) plan (hereinafter collectively
referred to as the "FFC Pension Plans") are exempt from tax under Sections 401
and 501 of the Code, have been maintained and operated in compliance with all
applicable provisions of the Code and ERISA, are not subject to any accumulated
funding deficiency within the meaning of ERISA and the regulations promulgated
thereunder, and do not have any outstanding liability to the PBGC. No
"prohibited transaction" or "reportable event" (as such terms are defined in the
Code or ERISA) has occurred with respect to the FFC Pension Plans or any other
FFC employee benefit plan (each hereinafter called an "FFC Benefit Plan").
There have been no breaches of fiduciary duty by any fiduciary under or with
respect to the FFC Pension Plans or any other FFC Benefit Plan. FFC has not
incurred any liability for any tax imposed by Section 4975 of the Code or for
any penalty imposed by the Code or by ERISA with respect to the FFC Pension
Plans or any other FFC Benefit Plan.
Section 4.14 Environmental Matters. Except as disclosed in Schedule 4.14
------------ --------------------- -------------
or as reflected, noted or adequately reserved against in the FFC Balance Sheet,
FFC has no knowledge of any material liability relating to any environmental
contaminant, pollutant, toxic or hazardous waste or other similar substance that
has been used, generated, stored, processed, disposed of or discharged onto any
of the real estate now or previously owned or acquired (including without
limitation real estate acquired by means of foreclosure or other exercise of any
creditor's right) or leased by FFC and which is required to be reflected, noted
or adequately reserved against in FFC's consolidated financial statements under
generally accepted accounting principles.
Section 4.15 SEC Filings. No registration statement, offering circular,
------------ -----------
proxy statement, schedule or report filed and not withdrawn, since December 31,
1991, by FFC with the SEC under the 1933 Act or the 1934 Act, on the date of
effectiveness (in the case of any registration statement or offering circular)
or on the date of filing (in the case of any report or schedule) or on the date
of mailing (in the case of any proxy statement), contained any untrue statement
of a material fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
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<PAGE>
Section 4.16 Proxy Statement/Prospectus. At the time the Proxy
------------ --------------------------
Statement/Prospectus (as defined in Section 6.1(b)) is mailed to the
stockholders of WNB and at all times subsequent to such mailing, up to and
including the Effective Date, the Proxy Statement/Prospectus (including any pre-
and post-effective amendments and supplements thereto), with respect to all
information relating to FFC,
FFC Common Stock, and actions taken and statements made by FFC in
connection with the transactions contemplated herein (other than information
provided by WNB to FFC), will: (i) comply in all material respects with
applicable provisions of the 1933 Act and 1934 Act and the pertinent rules and
regulations thereunder; and (ii) not contain any statement which, at the time
and in light of the circumstances under which it is made, is false or misleading
with respect to any material fact, or omits to state any material fact that is
required to be stated therein or necessary in order (A) to make the statements
therein not false or misleading, or (B) to correct any statement in an earlier
communication with respect to the Proxy Statement/Prospectus which has become
false or misleading.
Section 4.17 Accounting Treatment. To the best of FFC's knowledge after
------------ --------------------
reasonable investigation and consultation with its advisors, the Merger will
qualify for pooling-of-interests accounting treatment.
ARTICLE V
COVENANTS OF WNB
----------------
From the date of this Agreement until the Effective Date, WNB covenants and
agrees to, and shall cause WIC to do the following:
Section 5.1 Conduct of Business. Except as otherwise consented to by FFC
----------- -------------------
in writing, which consent will not be unreasonably withheld, WNB and WIC shall:
(i) use all reasonable efforts to carry on their respective businesses in, and
only in, the Ordinary Course of Business; (ii) to the extent consistent with
prudent business judgment, use all reasonable efforts to preserve their present
business organizations, to retain the services of their present officers and
employees, and to maintain their relationships with customers, suppliers and
others having business dealings with WNB or WIC; (iii) maintain all of their
structures, equipment and other real property and tangible personal property in
good repair, order and condition, except for ordinary wear and tear and damage
by unavoidable casualty; (iv) use all reasonable efforts to preserve or collect
all material claims and causes of action belonging to WNB or WIC; (v) keep in
full force and effect all insurance policies now carried by WNB or WIC; (vi)
perform in all material respects each of their obligations under all Material
Contracts (as defined in Section 3.12 herein) to which WNB or WIC is a party or
by which either of them may be bound or which relate to or affect its
properties, assets and business; (vii) maintain their books of account and other
records in the Ordinary Course of Business; (viii) comply in all material
respects with all statutes, laws, ordinances, rules and regulations, decrees,
orders, consent agreements, memoranda of understanding and other federal, state,
and local governmental directives applicable to WNB or WIC and to the conduct of
their businesses; (ix) not amend WNB's or WIC's Articles of Association,
Certificate of Incorporation or Bylaws; (x) not enter into or assume any
Material Contract, incur any material liability or obligation, or make any
material commitment, except in the Ordinary Course of Business; (xi) except as
permitted in subparagraph (xxiii) below, not make any material acquisition or
disposition of any properties or assets or subject any of their properties or
assets to any material lien, claim, charge, or encumbrance of any kind
whatsoever; (xii) not take or permit to be taken any action which would
constitute a breach of any representation, warranty or covenant set forth in
this Agreement; (xiii) except as permitted in Section 5.11 herein, not declare,
set aside or pay any dividend or make any other distribution in respect of WNB
Common Stock; (xiv) not authorize, purchase, redeem, issue or sell (or grant
options or rights to purchase or sell) any shares of WNB Common
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<PAGE>
Stock or any other equity or debt securities of WNB; (xv) not increase the rate
of compensation of, pay a bonus or severance compensation to, establish or amend
any WNB Benefit Plan (as defined in Section 3.18 herein) for, or enter into or
amend any Employment Obligation (as defined in Section 3.17 herein) with, any
officer, director, employee or consultant of WNB or WIC, except that WNB and WIC
may grant reasonable salary increases and bonuses to their officers and
employees in the Ordinary Course of Business to the extent consistent with their
past practice; (xvi) not enter into any related party transaction of the kind
contemplated in Section 3.19 herein except in the Ordinary Course of Business
consistent with past practice (as disclosed on Schedule 3.19); (xvii) in
determining the additions to loan loss reserves and the loan write-offs,
writedowns and other adjustments that reasonably should be made by WNB with
respect to its fiscal year ending December 31, 1996, WNB and WIC shall consult
with FFC and shall act in accordance with generally accepted accounting
principles and WNB's and WIC's customary business practices; (xviii) file with
appropriate federal, state, local and other governmental agencies all tax
returns and other material reports required to be filed, pay in full or make
adequate provisions for the payment of all taxes, interest, penalties,
assessments or deficiencies shown to be due on tax returns or by any taxing
authorities and report all information on such returns truthfully, accurately
and completely; (xix) not renew any existing contract for services, goods,
equipment or the like or enter into, amend in any material respect or terminate
any contract or agreement (including without limitation any settlement agreement
with respect to litigation) that is or may reasonably be expected to have a
material adverse effect on WNB and WIC except in the Ordinary Course of Business
consistent with past practice (provided that FFC shall not unreasonably withhold
its consent to such transactions); (xx) except with respect to existing plans
related to the Mantua Township Branch, not make any capital expenditures other
than in the Ordinary Course of Business or as necessary to maintain existing
assets in good repair; (xxi) not make application for the opening or closing of
any, or open or close any, branches or automated banking facility; (xxii) not
make any equity investment or commitment to make such an investment in real
estate or in any real estate development project, other than in connection with
foreclosures, settlements in lieu of foreclosure or troubled loan or debt
restructuring in the Ordinary Course of Business consistent with customary
banking practice; (xxiii) not make purchases of securities for its investment
portfolio without prior consultation with FFC; or (xxiv) not take any other
action similar to the foregoing which would have the effect of frustrating the
purposes of this Agreement or the Merger or cause the Merger not to qualify for
pooling-of-interests accounting treatment or as a tax-free reorganization under
Section 368 of the Code.
Section 5.2 Best Efforts. WNB and WIC shall cooperate with FFC and shall
----------- ------------
use its best efforts to do or cause to be done all things necessary or
appropriate on its part in order to fulfill the conditions precedent set forth
in Article VII of this Agreement and to consummate this Agreement. In
particular, without limiting the generality of the foregoing sentence, WNB and
WIC shall: (i) cooperate with FFC in the preparation of all required
applications for regulatory approval of the transactions contemplated by this
Agreement and in the preparation of the Registration Statement (as defined in
Section 6.1(b)); (ii) call a meeting of its stockholders and take, in good
faith, all actions which are necessary or appropriate on its part in order to
secure the approval of this Agreement by its stockholders at that meeting; and
(iii) cooperate with FFC in making WNB's and WIC's employees reasonably
available for training by FFC at WNB's facilities prior to the Effective Date,
to the extent that such training is deemed reasonably necessary by FFC to ensure
that WNB's facilities will be properly operated in accordance with FFC's
policies after the Merger.
Section 5.3 Access to Properties and Records. WNB and WIC shall give to
----------- --------------------------------
FFC and its authorized employees and representatives (including without
limitation its counsel, accountants, economic and environmental consultants and
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<PAGE>
other designated representatives) such access during normal business hours to
all properties, books, contracts, documents and records of WNB and WIC as FFC
may reasonably request, subject to the obligation of FFC and its authorized
employees and representatives to maintain the confidentiality of all nonpublic
information concerning WNB and WIC obtained by reason of such access and subject
to applicable law.
Section 5.4 Subsequent Financial Statements. Between the date of signing
----------- -------------------------------
of this Agreement and the Effective Date, WNB and WIC shall promptly prepare and
deliver to FFC as soon as practicable all internal monthly and quarterly
financial statements, all quarterly and annual reports to stockholders and all
reports to regulatory authorities prepared by or for WNB or WIC (which
additional financial statements and reports are hereinafter collectively
referred to as the "Additional WNB Financial Statements"). The representations
and warranties set forth in Sections 3.6, 3.7 and 3.8 shall apply to the
Additional WNB Financial Statements.
Section 5.5 Update Schedules. WNB and WIC shall promptly disclose to FFC
----------- ----------------
in writing any change, addition, deletion or other modification to the
information set forth in its Schedules hereto.
Section 5.6 Notice. WNB and WIC shall promptly notify FFC in writing of
----------- ------
any actions, claims, investigations, proceedings or other developments which, if
pending or in existence on the date of this Agreement, would have been required
to be disclosed to FFC in order to ensure the accuracy of the representations
and warranties set forth in this Agreement or which otherwise could materially
and adversely affect the condition (financial or otherwise), assets,
liabilities, business operations or future prospects of WNB or WIC or restrict
in any manner their respective abilities to carry on its business as presently
conducted.
Section 5.7 Other Proposals. WNB and WIC shall not, nor shall they permit
----------- ---------------
any of their officers, directors, employees, agents, consultants or other
representatives to: (i) solicit, initiate or encourage any proposal for a merger
or other acquisition of WNB or WIC, or any material portion of their properties
or assets, with or by any person other than FFC, or (ii) cooperate with, or
furnish any nonpublic information concerning WNB or WIC to, any person in
connection with such a proposal (an "Acquisition Proposal"); provided, however,
that the obligations of WNB or WIC and their directors and other representatives
under this Section 5.7 are subject to the limitation that the Board of Directors
shall be free to take such action as the Board of Directors determines, in good
faith, that in the exercise of its fiduciary duties, after receipt of a written
opinion of outside counsel to that effect. WNB will notify FFC immediately if
any discussions or negotiations are sought to be initiated, any inquiry or
proposal is made, or any such information is requested, with respect to an
Acquisition Proposal or potential Acquisition Proposal or if any Acquisition
Proposal is received or indicated to be forthcoming.
Section 5.8 Affiliate Letters. WNB shall deliver or cause to be delivered
----------- -----------------
to FFC, at or before the Closing, a letter from each of the executive officers
and directors of WNB (and shall use its best efforts to obtain and deliver such
a letter from each stockholder of WNB) who may be deemed to be an "affiliate"
(as that term is defined for purposes of Rules 145 and 405 promulgated by the
SEC under the 1933 Act) of WNB, in form and substance satisfactory to FFC, under
the terms of which each such officer, director or stockholder acknowledges and
agrees to abide by all limitations imposed by the 1933 Act and by all rules,
regulations and releases promulgated thereunder by the SEC with respect to the
sale or other disposition of the shares of FFC Common Stock to be received by
such person pursuant to this Agreement.
Section 5.9 No Purchases or Sales of FFC Common Stock During Price
----------- ------------------------------------------------------
Determination Period. WNB and WIC shall not, and shall ensure that their
- --------------------
executive officers and directors do not, and shall use their best efforts to
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<PAGE>
ensure that each stockholder of WNB who may be deemed an "affiliate" (as defined
in SEC Rules 145 and 405) of WNB does not, purchase or sell on NASDAQ, or submit
a bid to purchase or an offer to sell on NASDAQ, directly or indirectly, any
shares of FFC Common Stock or any options, rights or other securities
convertible into shares of FFC Common Stock during the Price Determination
Period.
Section 5.10 Accounting Treatment. WNB acknowledges that FFC presently
------------ --------------------
intends to treat the business combination contemplated by this Agreement as a
"pooling-of-interests" for financial reporting purposes. WNB shall not take
(and shall use its best efforts not to permit any of the directors, officers,
employees, stockholders, agents, consultants or other representatives of WNB or
WIC to take) any action that would preclude FFC from treating such business
combination as a "pooling-of-interests" for financial reporting purposes.
Section 5.11 Dividends. WNB shall not declare or pay a cash dividend on the
------------ ---------
WNB Common Stock; provided, however, that WNB may declare and pay a dividend of
up to $.21 per share of WNB Common Stock on (i) December 15, 1996; (ii) March
15, 1997, provided that the Effective Date does not occur (or is not expected to
occur) on or before the record date for the dividend on the FFC Common Stock
scheduled to be paid on April 15, 1997; (iii) June 15, 1997, provided that the
Effective Date does not occur (or is not expected to occur) on or before the
record date for the dividend on the FFC Common Stock scheduled to be paid on
July 15, 1997; and (iv) September 15, 1997, provided that the Effective Date
does not occur (or is not expected to occur) on or before the record date for
the dividend on the FFC Common Stock scheduled to be paid on October 15, 1997
(it being the intent of FFC and WNB that WNB be permitted to pay a dividend on
the WNB Common Stock on the dates indicated in subsections (ii), (iii) and (iv)
above only if the shareholders of WNB, upon becoming shareholders of FFC, would
not be entitled to receive a dividend on the FFC Common Stock on the payment
dates indicated in such subsections).
Section 5.12 Employment Obligations. Prior to the Effective Date, without
------------ ----------------------
the prior written consent of FFC, WNB shall not modify the terms of the
Employment Obligations (as defined in Section 3.17) and neither WNB nor WIC
shall create any new Employment Obligation.
ARTICLE VI
COVENANTS OF FFC
----------------
From the date of this Agreement until the Effective Date, or until such
later date as may be expressly stipulated in any Section of this Article VI, FFC
covenants and agrees to do the following:
Section 6.1 Best Efforts. FFC shall cooperate with WNB and shall use its
----------- ------------
best efforts to do or cause to be done all things necessary or appropriate on
its part in order to fulfill the conditions precedent set forth in Article VII
of this Agreement and to consummate this Agreement. In particular, without
limiting the generality of the foregoing sentence, FFC agrees to do the
following:
(a) Applications for Regulatory Approval: FFC shall promptly prepare
------------------------------------
and file, with the cooperation and assistance of (and after review by) WNB and
its counsel and accountants, all required applications for regulatory approval
of the transactions contemplated by this Agreement, including without limitation
an application for approval under the BHC Act, the National Bank Act, the New
Jersey Banking Act of 1948, as amended, and the Pennsylvania Banking Code of
1965, as amended, as required;
(b) Registration Statement: FFC shall promptly prepare, with the
----------------------
cooperation and assistance of (and after review by) WNB and its counsel and
accountants, and file with the SEC and the OCC a registration statement (the
"Registration Statement") and a proxy statement and prospectus which is prepared
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<PAGE>
as a part thereof (the "Proxy Statement/Prospectus") for the purpose of
registering the shares of FFC Common Stock to be issued to shareholders of WNB,
and the soliciting the proxies of WNB's shareholders in favor of the Merger,
under the provisions of this Agreement. FFC may rely upon all information
provided to it by WNB and WIC in this connection and FFC shall not be liable for
any untrue statement of a material fact or any omission to state a material fact
in the Registration Statement, or in the Proxy Statements/Prospectus, if such
statement is made by FFC in reliance upon any information provided to FFC by WNB
or WIC or by any of their officers, agents or representatives;
(c) State Securities Laws: FFC, with the cooperation and assistance of
---------------------
WNB and its counsel and accountants, shall promptly take all such actions as may
be necessary or appropriate in order to comply with all applicable securities
laws of any state having jurisdiction over the transactions contemplated by this
Agreement;
(d) Stock Listing: FFC, with the cooperation and assistance of WNB and
-------------
its counsel and accountants, shall promptly take all such actions as may be
necessary or appropriate in order to list the shares of FFC Common Stock to be
issued in the Merger on NASDAQ; and
(e) WNB Interim Bank. FFC shall organize WNB Interim Bank and cause WNB
----------------
Interim Bank to be a party to this Agreement.
(f) Accounting Treatment. FFC shall take no action which would have the
--------------------
effect of causing the Merger not to qualify for pooling-of-interests accounting
treatment.
Section 6.2 Access to Properties and Records. FFC shall give to WNB and to
----------- --------------------------------
its authorized employees and representatives (including without limitation WNB's
counsel, accountants, economic and environmental consultants and other
designated representatives) such access during normal business hours to all
properties, books, contracts, documents and records of FFC as WNB may reasonably
request, subject to the obligation of WNB and its authorized employees and
representatives to maintain the confidentiality of all nonpublic information
concerning FFC obtained by reason of such access.
Section 6.3 Subsequent Financial Statements. Between the date of signing of
----------- -------------------------------
this Agreement and the Effective Date, FFC shall promptly prepare and deliver to
WNB as soon as practicable each Quarterly Report to FFC's shareholders and any
Annual Report to FFC's shareholders normally prepared by FFC. The
representations and warranties set forth in Sections 4.5, 4.6 and 4.7 herein
shall apply to the financial statements (hereinafter collectively referred to as
the "Additional FFC Financial Statements") set forth in the foregoing Quarterly
Reports and any Annual Report to FFC's shareholders.
Section 6.4 Update Schedule. FFC shall promptly disclose to WNB in writing
----------- ---------------
any change, addition, deletion or other modification to the information set
forth in its Schedule to this Agreement.
Section 6.5 Notice. FFC shall promptly notify WNB in writing of any actions,
----------- ------
claims, investigations or other developments which, if pending or in existence
on the date of this Agreement, would have been required to be disclosed to WNB
in order to ensure the accuracy of the representations and warranties set forth
in this Agreement or which otherwise could materially and adversely affect the
condition (financial or otherwise), assets, liabilities, business, operations or
future prospects of FFC or restrict in any manner the right of FFC to carry on
its business as presently conducted.
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<PAGE>
Section 6.6 Employment Arrangements.
----------- -----------------------
(a) From and after the Effective Date, FFC shall cause WNB: (i) to
satisfy each of the Employment Obligations (as defined in Section 3.17 herein),
and (ii) to satisfy WNB's obligations under the WNB Benefit Plans.
(b) On and after the Effective Date for a period of at least five (5)
years, FFC shall cause WNB to (i) pay compensation to each person who was
employed by WNB or WIC as of the Effective Date and who continues to be employed
by WNB on or after the Effective Date, that is at least equal to the aggregate
compensation that such person was receiving from WNB or WIC prior to the
Effective Date, (ii) WNB shall provide employee benefits, including under the
WNB Benefit Plans, to each such person who is a full-time employee, on and after
the Effective Date, that are substantially equivalent in the aggregate to the
employee benefits that such person was receiving as a full-time employee from
WNB prior to the Effective Date, and (iii) WNB shall provide employee benefits
to each such person who is a part-time employee, on or after the Effective Date,
that are the same as the employee benefits that are being received at the
applicable time by part-time employees of other banking Subsidiaries owned by
FFC.
Section 6.7 No Purchase or Sales of FFC Common Stock During Price
----------- -----------------------------------------------------
Determination Period. Neither FFC nor any Subsidiary of FFC, nor any executive
- --------------------
officer or director of FFC or any Subsidiary of FFC, nor any shareholder of FFC
who may be deemed to be an "affiliate" (as that term is defined for purposes of
Rules 145 and 405 promulgated by the SEC under the 1933 Act) of FFC, shall
purchase or sell on NASDAQ, or submit a bid to purchase or an offer to sell on
NASDAQ, directly or indirectly, any shares of FFC Common Stock or any options,
rights or other securities convertible into shares of FFC Common Stock during
the Price Determination Period; provided, however, that FFC may purchase shares
-------- -------
of FFC Common Stock in the ordinary course of business during the Price
Determination Period pursuant to FFC's Benefit Plans or FFC's dividend
reinvestment plan.
Section 6.8 Appointment of FFC Director. FFC shall, on or promptly after
----------- ---------------------------
the Effective Date, appoint to FFC's Board of Directors one of WNB's current
directors (designated, subject to the reasonable approval of FFC, by vote of
WNB's Board of Directors prior to the Effective Date) to serve as a director of
FFC. During the five-year period after the Effective Date, the FFC Board of
Directors shall nominate such designee for election, and support his election,
at each annual meeting of shareholders of FFC at which such designee's term
expires. During such period, in the event such designee shall cease to serve as
a director of FFC, the Board of Directors of WNB shall have the right to
designate one other person then serving on as a director of WNB to serve as a
director of FFC (subject to the concurrence of FFC as to the person designated).
Section 6.9 Continuation of WNB's Structure, Name and Directors. For a
----------- ---------------------------------------------------
period of five (5) years after the Effective Date, FFC shall (subject to the
right of FFC to terminate its obligations under this Section 6.9 as a result of
regulatory considerations, safe and sound banking practices or the exercise of
their fiduciary duties by FFC's directors) (i) preserve the business structure
of WNB as a national banking association;; (ii) preserve the present name of
WNB; and (iii) continue in office the present directors of WNB who indicate
their desire to serve (the "WNB Continuing Directors"), provided, that (A) each
--------
non-employee WNB Continuing Director shall continue to receive director's fees
from WNB of $10,000 per director annually and shall continue to receive such
other incidental benefits as he was receiving from WNB prior to the Effective
Date (such benefits being previously disclosed to FFC), and (B) each WNB
Continuing Director who has reached the age of 70 as of the Effective Date, or
who reaches such age within three (3) years thereafter, shall be permitted to
serve for a period of three (3) years after the Effective Date before becoming
subject to FFC's mandatory retirement rules for directors. Notwithstanding
anything herein to the contrary,
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<PAGE>
the WNB Continuing Directors, in their exercise of their fiduciary duty as to
the best interests of WNB and FFC, may, by a majority vote of such directors,
modify or waive any or all of the foregoing provisions in this Section 6.9.
ARTICLE VII
CONDITIONS PRECEDENT
--------------------
Section 7.1 Common Conditions. The obligations of the parties to
----------- -----------------
consummate this Agreement shall be subject to the satisfaction of each of the
following common conditions prior to or as of the Closing, except to the extent
that any such condition shall have been waived in accordance with the provisions
of Section 8.4 herein:
(a) Stockholder Approval: This Agreement shall have been duly
--------------------
authorized, approved and adopted by the stockholders of WNB.
(b) Regulatory Approvals: The approval of each federal and state
--------------------
regulatory authority having jurisdiction over the transactions contemplated by
this Agreement, including without limitation, the Federal Reserve Board, the
OCC, the New Jersey Department of Banking, the Pennsylvania Department of
Banking and the Maryland Bank Commissioner, shall have been obtained and all
applicable waiting and notice periods shall have expired, subject to no terms or
conditions which would (i) require or could reasonably be expected to require
(A) any divestiture by FFC of a portion of the business of FFC, or any
subsidiary of FFC or (B) any divestiture by WNB or WIC of a portion of their
businesses which FFC in its good faith judgment believes will have a significant
adverse impact on the business or prospects of WNB or WIC, as the case may be,
or (ii) impose any condition upon FFC, or any of its subsidiaries, which in
FFC's good faith judgment (x) would be materially burdensome to FFC and its
subsidiaries taken as a whole, (y) would significantly increase the costs
incurred or that will be incurred by FFC as a result of consummating the Merger
or (z) would prevent FFC from obtaining any material benefit contemplated by it
to be attained as a result of the Merger.
(c) Stock Listing. The shares of FFC Common Stock to be issued in the
-------------
Merger shall have been authorized for listing on NASDAQ.
(d) Tax Opinion. Each of FFC and WNB shall have received an opinion
-----------
of FFC's counsel, Barley, Snyder, Senft & Cohen, LLP, reasonably acceptable to
FFC and WNB, addressed to FFC and WNB, with respect to federal tax laws or
regulations, to the effect that:
(1) The Merger will constitute a reorganization within the meaning of
Section 368(a)(1)(A) and (a)(2)(D) of the Code;
(2) No gain or loss will be recognized by FFC, WNB Interim Bank or
WNB by reason of the Merger;
(3) The bases of the assets of WNB immediately after the Merger will
be the same as the bases of such assets immediately prior to the Merger;
(4) The holding period of the assets of WNB immediately after the
Merger will include the period during which such assets were held by WNB prior
the Merger;
(5) A holder of WNB Common Stock who receives shares of FFC Common
Stock in exchange for his WNB Common Stock pursuant to the reorganization
(including fractional shares of FFC Common Stock deemed issued as described
below) will not recognize any gain or loss upon the exchange;
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<PAGE>
(6) A holder of WNB Common Stock who receives cash in lieu of a
fractional share of FFC Common Stock will be treated as if he received a
fractional share of FFC Common Stock pursuant to the reorganization and FFC
then redeemed such fractional share for the cash. The holder of WNB Common
Stock will recognize capital gain or loss on the constructive redemption of the
fractional share in an amount equal to the difference between the cash received
and the adjusted basis of the fractional share;
(7) The tax basis of the FFC Common Stock to be received by the
shareholders of WNB pursuant to the terms of this Agreement will be equal to
the tax basis of the WNB Common Stock surrendered in exchange therefor,
decreased by the amount of cash received and increased by the amount of any
gain (and by the amount of any dividend income) recognized on the exchange; and
(8) The holding period of the shares of FFC Common Stock to be
received by the shareholders of WNB will include the period during which they
held the shares of WNB Common Stock surrendered, provided the shares of WNB
Common Stock are held as a capital asset on the date of the exchange.
(e) Registration Statement: The Registration Statement (as defined in
----------------------
Section 6.1(b), including any amendments thereto) shall have been declared
effective by the SEC; the Proxy Statement/Prospectus shall have received
regulatory clearance from the OCC, the information contained in the Registration
Statement and the Proxy Statement/Prospectus shall be true, complete and correct
in all material respects as of the date of mailing of the Proxy
Statement/Prospectus (as defined in Section 6.1(b)) to the shareholders of WNB;
regulatory clearance for the offering contemplated by the Registration Statement
(the "Offering") shall have been received from each federal and state regulatory
authority having jurisdiction over the Offering; and no stop order shall have
been issued and no proceedings shall have been instituted or threatened by any
federal or state regulatory authority to suspend or terminate the effectiveness
of the Registration Statement or the Offering.
(f) No Suits: No action, suit or proceeding shall be pending or
--------
threatened before any federal, state or local court or governmental authority or
before any arbitration tribunal which seeks to modify, enjoin or prohibit or
otherwise adversely and materially affect the transactions contemplated by this
Agreement; provided, however, that if FFC agrees to defend and indemnify WNB
-------- -------
and their respective officers and directors with regard to any such action, suit
or proceeding pending or threatened against them or any of them, then such
pending or threatened action, suit or proceeding shall not be deemed to
constitute the failure of a condition precedent to the obligation of WNB to
consummate this Agreement.
Section 7.2 Conditions Precedent to Obligations of FFC. The obligations
----------- ------------------------------------------
of FFC to consummate this Agreement shall be subject to the satisfaction of each
of the following conditions prior to or as of the Closing, except to the extent
that any such condition shall have been waived by FFC in accordance with the
provisions of Section 8.4 herein:
(a) Accuracy of Representations and Warranties: All of the
------------------------------------------
representations and warranties of WNB as set forth in this Agreement, all of
the information contained in the Schedules hereto and all WNB Closing Documents
(as defined in Section 7.2(i)) shall be true and correct in all material
respects as of the Closing as if made on such date (or on the date to which it
relates in the case of any representation or warranty which expressly relates
to an earlier date); provided, that, without limiting the generality of the
--------
foregoing clause, a "material" deviation from the accuracy of WNB's
representations and warranties shall be deemed to exist for purposes of this
Section 7.2(a) if, as of the Closing, FFC shall have discovered information not
previously disclosed in WNB's Schedules or in the WNB Balance Sheet indicating
that WNB or WIC has incurred or
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<PAGE>
will incur costs, expenses, losses and/or liabilities which would have a
material impact on WNB's financial condition or operating results.
(b) Covenants Performed: WNB shall have performed or complied in all
-------------------
material respects with each of the covenants required by this Agreement to be
performed or complied with by it.
(c) Opinion of Counsel for WNB: FFC shall have received an opinion,
--------------------------
dated the Effective Date, from Muldoon, Murphy & Faucette, counsel to WNB, in
substantially the form of Exhibit D hereto. In rendering any such opinion,
---------
such counsel may require and, to the extent they deem necessary or appropriate
may rely upon, opinions of other counsel and upon representations made in
certificates of officers of WNB, FFC, affiliates of the foregoing, and others.
(d) Affiliate Agreements. Shareholders of WNB who are or will be
--------------------
affiliates of WNB or FFC for the purposes of Accounting Series Release No. 135
and the 1933 Act shall have entered into agreements with FFC, in form and
substance satisfactory to FFC, reasonably necessary to assure (i) the ability of
FFC to use pooling-of-interests accounting for the Merger; and (ii) compliance
with Rule 145 under the 1933 Act.
(e) Financial Confirmation: FFC (together with its accountants, if the
----------------------
advice of such accountants is deemed necessary or desirable by FFC) shall have
established to its reasonable satisfaction that the WNB Balance Sheet fairly
presents the financial condition, assets and liabilities of WNB as at June 30,
1996, and that, since December 31, 1995, there has not been any material and
adverse change in the condition (financial or otherwise), assets, liabilities,
business, operations or future prospects of WNB. In particular, without limiting
the generality of the foregoing sentence, the Additional WNB Financial
Statements (as defined in Section 5.4) shall indicate that the consolidated
financial condition, assets, liabilities and results of operations of WNB as of
the respective dates reported therein do not vary adversely in any material
respect from the consolidated financial condition, assets, liabilities and
results of operations presented in the WNB Balance Sheet. For purposes of this
Section 7.2(f), the terms "material and adverse change" and "vary adversely in
any material respect" shall mean any change or changes that would result, in a
material adverse effect upon (A) the condition (financial or otherwise), assets,
liabilities, business, operations or future prospects of WNB, or (B) the ability
of WNB to consummate the transactions contemplated by this Agreement; it being
understood that such definition shall not include: (i) a change with respect to,
or effect on, the WNB resulting from a change in law, rule, regulation,
generally accepted accounting principles or regulatory accounting principles,
(ii) a change with respect to, or effect on, WNB resulting from expenses (such
as legal, accounting and investment bankers' fees) incurred in connection with
this Agreement or the transactions contemplated hereby which are substantially
consistent with the estimates thereof provided to FFC; or (iii) a change with
respect to, or effect on, the WNB resulting from any other matter affecting
depository institutions generally including, without limitation, changes in
general economic conditions and changes in prevailing interest and deposit
rates.
(f) Accountants' Letter. At its option, FFC shall have received a
-------------------
"comfort" letter from the independent certified public accountants for WNB,
dated (i) the effective date of the Registration Statement and (ii) the
effective date, in each case substantially to the effect that:
(1) it is a firm of independent public accounts with respect to WNB
and its subsidiaries within the meaning of the 1933 Act and the rules and
regulations of the SEC thereunder;
(2) in its opinion the audited financial statements of WNB examined
by it and included in the Registration Statement comply as to form in all
material respects with the applicable requirements of the 1933 Act and the
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<PAGE>
applicable published rules and regulations of the SEC thereunder with respect
to registration statements on the form employed; and
(3) on the basis of specified procedures (which do not constitute an
examination in accordance with generally accepted audit standards), consisting
of a reading of the unaudited financial statements, if any, of WNB included in
such Registration Statement and of the latest available unaudited financial
statements of WNB, inquiries of officers responsible for financial and
accounting matters of WNB and a reading of the minutes of meetings of
shareholders and the Board of Directors of WNB, nothing has come to its
attention which causes it to believe: (i) that the financial statements, if any,
of WNB included in such Registration Statement do not comply in all material
respects with the applicable accounting requirements of the 1933 Act and the
published rules and regulations thereunder; and (ii) that any such unaudited
financial information set forth in such Registration Statement has been derived,
are not fairly presented in conformity with generally accepted accounting
principles applied on a basis consistent with that of the audited financial
statements.
(g) Accounting Treatment: FFC and its accountants shall have
--------------------
established to their satisfaction that, as of the Closing, the transactions
contemplated by this Agreement can be accounted for as a "pooling-of-interests"
for financial reporting purposes; provided, however, that FFC shall have no
right to terminate this Agreement pursuant to this Section 7.2(g) if the
inability to use "pooling of interest" accounting treatment is due solely to
actions by FFC taken after the date of this Agreement.
(h) Federal and State Securities and Antitrust Laws: FFC and its
-----------------------------------------------
counsel shall have determined to their satisfaction that, as of the Closing, all
applicable securities and antitrust laws of the federal government and of any
state government having jurisdiction over the transactions contemplated by this
Agreement shall have been complied with.
(i) Dissenting Shareholders: Dissenters' rights shall have been
-----------------------
exercised with respect to less than 10% of the outstanding shares of WNB Common
Stock.
(j) Environmental Matters: No environmental problem of the kind
---------------------
contemplated in Section 3.22 and not disclosed in Schedule 3.22 shall have been
-------------
discovered which would, or which potentially could, materially and adversely
affect the condition (financial or otherwise), assets, liabilities, business,
operations or future prospects of WNB, provided, that for purposes of
--------
determining the materiality of an undisclosed environmental problem or
problems, the definition of "material" shall be governed by the proviso to
Section 7.2(a) of this Agreement.
(k) Closing Documents: WNB shall have delivered to FFC: (i) a
-----------------
certificate signed by WNB's President and Chief Executive Officer and by its
Secretary verifying that, to the best of their knowledge after reasonable
investigation, all of the representations and warranties of WNB set forth in
this Agreement are true and correct in all material respects as of the Closing
and that WNB has performed in all material respects each of the covenants
required to be performed by it under this Agreement; (ii) all consents and
authorizations of landlords and other persons that are necessary to permit this
Agreement to be consummated without violation of any lease or other agreement to
which WNB is a party or by which they or any of its properties are bound; and
(iii) such other certificates and documents as FFC and its counsel may
reasonably request (all of the foregoing certificates and other documents being
herein referred to as the "WNB Closing Documents").
Section 7.3 Conditions Precedent to the Obligations of WNB. The
----------- ----------------------------------------------
obligation of WNB to consummate this Agreement shall be subject to the
satisfaction of each of the following conditions prior to or as of the Closing,
except to the extent
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<PAGE>
that any such condition shall have been waived by WNB in accordance with the
provisions of Section 8.4 herein:
(a) Accuracy of Representations and Warranties: All of the
------------------------------------------
representations and warranties of FFC as set forth in this Agreement, all of the
information contained in its Schedules and all FFC Closing Documents (as defined
in Section 7.3(e) of this Agreement) shall be true and correct in all material
respects as of the Closing as if made on such date (or on the date to which it
relates in the case of any representation or warranty which expressly relates to
an earlier date).
(b) Covenants Performed: FFC shall have performed or complied in all
-------------------
material respects with each of the covenants required by this Agreement to
be performed or complied with by FFC.
(c) Opinion of Counsel for FFC: WNB shall have received an opinion
--------------------------
from Barley, Snyder, Senft & Cohen, LLP, counsel to FFC, dated the Effective
Date, in substantially the form of Exhibit E hereto. In rendering any such
---------
opinion, such counsel may require and, to the extent they deem necessary or
appropriate may rely upon, opinions of other counsel and upon representations
made in certificates of officers of FFC, WNB, affiliates of the foregoing, and
others.
(d) Fairness Opinion: WNB shall have obtained from McConnell, Budd
----------------
& Downes, or from another independent financial advisor selected by the Board of
Directors of WNB, an opinion dated within five (5) days of the Proxy
Statement/Prospectus to be furnished to the shareholders of WNB stating that the
terms of the acquisition contemplated by this Agreement are fair to the
shareholders of WNB from a financial point of view.
(e) Financial Confirmation: WNB (together with its accountants, if
----------------------
the advice of such accountants is deemed necessary or desirable by WNB) shall
have established to its reasonable satisfaction that the FFC Balance Sheet
fairly presents the financial condition, assets and liabilities of FFC as at
June 30, 1996, and that, since December 31, 1995, there has not been any
material and adverse change in the condition (financial or otherwise), assets,
liabilities, business, operations or future prospects of FFC. In particular,
without limiting the generality of the foregoing sentence, the Additional FFC
Financial Statements shall indicate that the financial condition, assets,
liabilities and results of operations of FFC as of the respective dates reported
therein do not vary adversely in any material respect from the financial
condition, assets, liabilities and results of operations presented in the FFC
Balance Sheet. For purposes of this Section 7.3(g), the terms "material and
adverse change" and "vary adversely in any material respect" shall mean any
change or changes that would result, in the aggregate, in a reduction of more
than five percent (5%) in FFC's consolidated total shareholders' equity between
June 30, 1996 or December 31, 1995, as the case may be, and any later date up to
and including the Effective Date, as determined in accordance with generally
accepted accounting principles consistently applied.
(f) Closing Documents: FFC shall have delivered to WNB: (i) a
-----------------
certificate signed by FFC's President and Chief Executive Officer and by its
Secretary verifying that, to the best of their knowledge after reasonable
investigation, all of the representations and warranties of FFC set forth in
this Agreement are true and correct in all material respects as of the Closing
and that FFC has performed in all material respects each of the covenants
required to be performed by FFC; and (ii) such other certificates and documents
as WNB and its counsel may reasonably request (all of the foregoing certificates
and documents being herein referred to as the "FFC Closing Documents").
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<PAGE>
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
Section 8.1 Termination. This Agreement may be terminated at any time
----------- -----------
before the Effective Date (whether before or after the authorization, approval
and adoption of this Agreement by the stockholders of WNB) as follows:
(a) Mutual Consent: This Agreement may be terminated by mutual
--------------
consent of the parties upon the affirmative vote of a majority of each of the
Boards of Directors of WNB and FFC, followed by written notices given to the
other party.
(b) Unilateral Action by FFC: This Agreement may be terminated
------------------------
unilaterally by the affirmative vote of the Board of Directors of FFC, followed
by written notice given to WNB, if: (i) there has been a material breach by
WNB of any representation, warranty or covenant set forth in this Agreement
which breach results in a material and adverse change as to WNB (as such
standard is set forth in Section 7.2(c) herein) and such breach has not been
cured within thirty (30) days after written notice of such breach has been
given by FFC to WNB; or (ii) any condition precedent to FFC's obligations as
set forth in Article VII of this Agreement remains unsatisfied, through no
fault of FFC, on September 30, 1997.
(c) Unilateral Action By WNB: This Agreement may be terminated
------------------------
unilaterally by the affirmative vote of a majority of the Board of Directors of
WNB, followed by written notice given to FFC, if: (i) there has been a
material breach by FFC of any representation, warranty or covenant set forth in
this Agreement and such breach has not been cured within thirty (30) days after
written notice of such breach has been given by WNB to FFC; (ii) any condition
precedent to WNB's obligations as set forth in Article VII of this Agreement
remains unsatisfied, through no fault of WNB, on September 30, 1997; or (iii)
the Closing Market Price is equal to or less than $12.00.
Section 8.2 Effect of Termination.
----------- ---------------------
(a) Effect. In the event of a permitted termination of this
------
Agreement under Section 8.1 herein shall become null and void and the
transactions contemplated herein shall thereupon be abandoned, except that the
provisions relating to limited liability and confidentiality set forth in
Sections 8.2(b) and 8.2(c) herein shall survive such termination.
(b) Limited Liability. The termination of this Agreement in
-----------------
accordance with the terms of Section 8.1 herein shall create no liability on
the part of either party, or on the part of either party's directors, officers,
shareholders, agents or representatives, except that if this Agreement is
terminated by FFC by reason of a material breach by WNB, or if this Agreement
is terminated by WNB by reason of a material breach by FFC, and such breach
involves an intentional, willful or grossly negligent misrepresentation or
breach of covenant, the breaching party shall be liable to the nonbreaching
party for all costs and expenses reasonably incurred by the nonbreaching party
in connection with the preparation, execution and attempted consummation of
this Agreement, including the fees of its counsel, accountants, consultants and
other advisors and representatives.
(c) Confidentiality. In the event of a permitted termination of
---------------
this Agreement under Section 8.1 herein, neither FFC nor WNB shall use or
disclose to any other person any confidential information obtained by it during
the course of its investigation of the other party or parties, except as may be
necessary in order to establish the liability of the other party or parties for
breach as contemplated under Section 8.2(b) herein.
-25-
<PAGE>
Section 8.3 Amendment. To the extent permitted by law, this Agreement
----------- ---------
may be amended at any time before the Effective Date (whether before or after
the authorization, approval and adoption of this Agreement by the stockholders
of WNB), but only by a written instrument duly authorized, executed and
delivered by FFC and by WNB; provided, however, that (i) any amendment to the
-------- -------
provisions of Section 2.1 herein relating to the consideration to be received
by the former stockholders of WNB in exchange for their shares of WNB Common
Stock shall not take effect until such amendment has been approved, adopted or
ratified by the stockholders of WNB in accordance with applicable law and (ii)
WNB Interim Bank shall be permitted to join as a party to this Agreement upon
its formation without execution of such joinder by FFC or WNB.
Section 8.4 Waiver. Any term or condition of this Agreement may be
----------- ------
waived, to the extent permitted by applicable federal and state law, by the
party or parties entitled to the benefit thereof at any time before the
Effective Date (whether before or after the authorization, approval and
adoption of this Agreement by the stockholders of WNB) by a written instrument
duly authorized, executed and delivered by such party or parties.
ARTICLE IX
RIGHTS OF DISSENTING SHAREHOLDERS OF WNB
----------------------------------------
Section 9.1 Rights of Dissenting Shareholders of WNB. The stockholders
----------- ----------------------------------------
of WNB shall be entitled to and may exercise dissenters' rights if and to the
extent they are entitled to do so under the provisions of 12 U.S.C (S)215a(b),
(c) and (d).
ARTICLE X
CLOSING AND EFFECTIVE DATE
--------------------------
Section 10.1 Closing. Provided that all conditions precedent set forth
------------ -------
in Article VII of this Agreement shall have been satisfied or shall have been
waived in accordance with Section 8.4 of this Agreement, the parties shall hold
a closing (the "Closing") at the offices of FFC at One Penn Square, Lancaster,
Pennsylvania, within thirty (30) days after the receipt of all required
regulatory approvals and after the expiration of all applicable waiting periods
on a date to be agreed upon by the parties, at which time the parties shall
deliver the WNB Closing Documents, the FFC Closing Documents, the opinions of
counsel required by Sections 7.1(c), 7.2(c) and 7.3(c) herein, and such other
documents and instruments as may be necessary or appropriate to effectuate the
purposes of this Agreement.
Section 10.2 Effective Date. The merger of WNB with and into FFC shall
------------ --------------
become effective and this Agreement shall be consummated on the date (the
"Effective Date") approved by the OCC pursuant to the Plan of Merger and the
National Bank Act.
ARTICLE XI
NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES
---------------------------------------------
Section 11.1 No Survival. The representations and warranties of WNB and
------------ -----------
of FFC set forth in this Agreement shall expire and be terminated on the
Effective Date by consummation of this Agreement, and no such representation or
warranty shall thereafter survive.
ARTICLE XII
GENERAL PROVISIONS
------------------
Section 12.1 Expenses. Except as provided in Section 8.2(b) herein, each
------------ --------
party shall pay its own expenses incurred in connection with this Agreement and
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<PAGE>
the consummation of the transactions contemplated herein. For purposes of this
Section 12.1 herein, the cost of printing the Proxy Statement/Prospectus shall
be deemed to be an expense of FFC.
Section 12.2 Other Mergers and Acquisitions. Subject to the right of WNB
------------ ------------------------------
to refuse to consummate this Agreement pursuant to Section 8.1(c) herein by
reason of a material breach by FFC of the warranty and representation set forth
in Section 4.7 herein, nothing set forth in this Agreement shall be construed:
(i) to preclude FFC from acquiring, or to limit in any way the right of FFC to
acquire, prior to or following the Effective Date, the stock or assets of any
other financial services institution or other corporation or entity, whether by
issuance or exchange of FFC Common Stock or otherwise; (ii) to preclude FFC
from issuing, or to limit in any way the right of FFC to issue, prior to or
following the Effective Date, FFC Common Stock, FFC Preferred Stock or any
other equity or debt securities; or (iii) to preclude FFC from taking, or to
limit in any way the right of FFC to take, any other action not expressly and
specifically prohibited by the terms of this Agreement.
Section 12.3 Notices. All notices, claims, requests, demands and other
------------ -------
communications which are required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been duly delivered if
delivered in person, transmitted by telegraph or facsimile machine (but only if
receipt is acknowledged in writing), or mailed by registered or certified mail,
return receipt requested, as follows:
(a) If to FFC, to:
Rufus A. Fulton, Jr., President
and Chief Executive Officer
Fulton Financial Corporation
One Penn Square
P.O. Box 4887
Lancaster, Pennsylvania 17604
With a copy to:
Paul G. Mattaini, Esq.
Barley, Snyder, Senft & Cohen, LLP
126 East King Street
Lancaster, PA 17602
(b) If to WNB, to:
Ralph Homan, Chief Executive Officer
The Woodstown National Bank & Trust Company
One South Main Street,
Woodstown, New Jersey 08098
With a copy to:
Joseph G. Passaic, Jr., Esq.
Muldoon, Murphy & Faucette
501 Wisconsin Avenue, N.W.
Washington, DC 20016
Section 12.4 Counterparts. This Agreement may be executed simultaneously
------------ ------------
in several counterparts, each of which shall be deemed an original, but all
such counterparts together shall be deemed to be one and the same instrument.
Section 12.5 Governing Law. This Agreement shall be deemed to have been
------------ -------------
made in, and shall be governed by and construed in accordance with the
substantive laws of, the Commonwealth of Pennsylvania.
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<PAGE>
Section 12.6 Parties in Interest. This Agreement shall be binding upon
------------ -------------------
and inure to the benefit of the parties hereto and their respective successors,
assigns and legal representatives; provided, however, that neither party may
-------- -------
assign its rights or delegate its duties under this Agreement without the prior
written consent of the other party.
Section 12.7 Entire Agreement. This Agreement, together with the Warrant
------------ ----------------
Agreement and the Warrant being executed by the parties on the date hereof,
sets forth the entire understanding and agreement of the parties hereto and
supersedes any and all prior agreements, arrangements and understandings,
whether oral or written, relating to the subject matter hereof and thereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers all as of the day and year first above
written.
FULTON FINANCIAL CORPORATION
By: /s/ Rufus A. Fulton, Jr.
------------------------------------------
Rufus A. Fulton, Jr., President
and Chief Executive Officer
Attest: /s/ William R. Colmery
--------------------------------------
William R. Colmery, Secretary
THE WOODSTOWN NATIONAL BANK &
TRUST COMPANY
By: /s/ Ralph Homan
------------------------------------------
Ralph Homan, Chief Executive Officer
Attest: /s/ F. Steven Meddick
--------------------------------------
F. Steven Meddick, Acting Secretary
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<PAGE>
EXHIBIT B
OPINION OF McCONNELL, BUDD & DOWNES
-----------------------------------
December 13, 1996
The Board of Directors
Woodstown National Bank & Trust Company
1 South Main Street
Woodstown, NJ 08098-0248
Members of the Board:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the outstanding shares of common stock, par value $0.22
per share (the "WNB Common Stock") of Woodstown National Bank & Trust Company
("WNB), of the consideration to be received for each issued and outstanding
share of the WNB Common Stock in the merger (the "Merger") of WNB with and into
Fulton Financial Corporation ("FFC") pursuant to the Merger Agreement dated
September 30, 1996, as amended as of November 1, 1996 (the "Agreement"), between
FFC and WNB. As is more specifically set forth in the Agreement, pursuant to the
Merger, each issued and outstanding share of WNB Common Stock will be converted
into the right to receive 1.60 shares of FFC Common Stock.
McConnell, Budd & Downes, Inc., as part of its investment banking business,
is regularly engaged in the valuation of bank holding companies, banks, thrift
holding companies and thrifts and their securities in connection with mergers
and acquisitions, negotiated underwritings, competitive biddings, market making
as a NASD market marker, secondary distributions of listed securities, private
placements and valuations for corporate, estate and other purposes. We have
acted as financial advisor to WNB on a contractual basis since August 2, 1996.
Advice and assistance to WNB in connection with the process and negotiations
leading up to the Merger with FFC were part of the contractual relationship and
involved our attendance at numerous meetings with management and eight separate
meetings of the Board of Directors. In the course of our role as financial
advisor to WNB in conjunction with the Merger we have received fees for our
services and will receive additional fees contingent on certain occurrences.
While the payment of all or a significant portion of fees related to financial
advisory services provided in connection with arm's-length mergers and other
business combination transactions upon consummation of such transactions, as is
the case with the Merger, might be viewed as giving such financial advisors a
financial interest in the successful completion of such transactions, such
compensation arrangements are standard and customary for transactions of the
size and type of the Merger. We will receive a fee for rendering this opinion.
In the ordinary course of our business, we may from time to time trade the
equity securities of WNB or FFC for our own account, for the accounts of our
customers and for the accounts of individual employees of McConnell, Budd &
Downes, Inc. Accordingly we may from time to time hold a long or short position
in the equity securities of WNB or FFC. McConnell, Budd & Downes, Inc. also
covers WNB and FFC in certain of its equity research products.
In arriving at our opinion, we have reviewed publicly available business,
financial and shareholder information relating to WNB and its subsidiaries and
certain publicly available financial information relating to FFC. We have also
made a detailed review of the Agreement. In addition, we have reviewed certain
other information, including internal reports and documents from both WNB and
FCC and certain management-prepared financial information provided to
<PAGE>
us by both WNB and FFC. We have also met with and had discussions with members
of the senior management of both WNB and FFC to discuss their past and current
business operations, current financial condition and future prospects. In
addition, we have reviewed the quarterly releases announcing the results for
both WNB and FFC for the interim periods ended March 31, 1996, June 30, 1996,
and September 30, 1996. We have reviewed and studied the historical stock
prices and trading volumes of the common stock of both WNB and FFC as well as
the terms and material conditions of a number of recent acquisition transactions
involving publicly traded banking institutions which we deem to be comparable to
the proposed acquisition of WNB by FFC. We have also conducted such other
studies, analyses and investigations as we deem appropriate under the
circumstances surrounding the proposed transaction.
In the course of our review and analysis we have relied upon and assumed,
without independent verification, the accuracy and completeness of the
financial information provided to us by WNB and FFC or otherwise publicly
obtainable. In reaching our opinion, we have not performed or obtained from any
other source, any independent appraisals of the assets of WNB or FFC. We have
also relied on the management of both WNB and FFC as to the reasonableness of
various financial and operating forecasts and of the assumptions on which they
are based, which were provided to us for use in our analyses.
In the course of rendering this opinion, which is being rendered prior to
the receipt of certain required regulatory approvals necessary before
consummation of the Merger, we assume that no conditions will be imposed by any
regulatory agency in connection with its approval of the Merger that will have a
material adverse effect on the amount or form of consideration or on the results
of operations, the financial condition or the prospects of FFC.
Based upon and subject to the foregoing, it is our opinion, that as of the
date of this letter, the consideration to be received of 1.60 shares of FFC
Common Stock pursuant to the Merger is fair to the holders of WNB Common Stock,
$0.22 par value, from a financial point of view.
Very truly yours,
McConnell, Budd & Downes, Inc.
<PAGE>
EXHIBIT C
WARRANT AGREEMENT AND WARRANT
-----------------------------
<PAGE>
WARRANT AGREEMENT
-----------------
THIS WARRANT AGREEMENT is made September 30, 1996 by and between Fulton
Financial Corporation, a Pennsylvania business corporation ("FFC") and The
Woodstown National Bank & Trust Company, a national banking association ("WNB").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, FFC and WNB are, simultaneously with the execution of this
Agreement, entering into a Merger Agreement dated as of the date hereof (the
"Merger Agreement"); and
WHEREAS, as a condition to FFC's entry into the Merger Agreement and in
consideration of such entry, WNB has agreed to issue to FFC, on the terms and
conditions set forth herein, a warrant entitling FFC to purchase up to an
aggregate of 358,200 shares of WNB's common stock, par value $.22 per share (the
"Common Stock");
NOW, THEREFORE, in consideration of the execution of the Merger Agreement
and the premises herein contained, and intending to be legally bound, FFC and
WNB agree as follows:
1. Issuance of Warrant. Concurrently with the execution of the Merger
-------------------
Agreement and this Agreement, WNB shall issue to FFC a warrant in the form
attached as Exhibit A hereto (the "Warrant", which term as used herein shall
include any warrant or warrants issued upon transfer or exchange of the original
Warrant) to purchase up to 358,200 shares of Common Stock, subject to adjustment
as provided in this Agreement and in the Warrant. The Warrant shall be
exercisable at a purchase price of $24.00 per share, subject to adjustment as
provided in this Agreement and the Warrant (the "Exercise Price"). So long as
the Warrant is outstanding and unexercised, WNB shall at all times maintain and
reserve, free from preemptive rights, such number of authorized but unissued
shares of Common Stock as may be necessary so that the Warrant may be exercised,
without any additional authorization of Common Stock, after giving effect to all
other options, warrants, convertible securities and other rights to acquire
shares of Common Stock. WNB represents and warrants that it has duly authorized
the execution and delivery of the Warrant and this Agreement and the issuance of
Common Stock upon exercise of the Warrant. WNB covenants that the shares of
Common Stock issuable upon exercise of the Warrant shall be, when so issued,
duly authorized, validly issued, fully paid and nonassessable and subject to no
preemptive rights. The Warrant and the shares of Common Stock to be issued upon
exercise of the Warrant are hereinafter collectively referred to, from time to
time, as the "Securities." So long as the Warrant is owned by FFC, the Warrant
will in no event be exercised for more than that number of shares of Common
Stock equal to 358,200 (subject to adjustment as provided in this Agreement and
in the Warrant) less the number of shares of Common Stock at the time owned by
FFC.
2. Assignment, Transfer, or Exercise of Warrant. FFC will not sell,
--------------------------------------------
assign, transfer or exercise the Warrant, in whole or in part, without the prior
written consent of WNB except upon or after the occurrence of any of the
following: (i) a knowing breach of any representation, warranty, or covenant
set forth in the Merger Agreement by WNB which would permit a termination of the
Merger Agreement by FFC pursuant to Section 8.1(b)(i) thereof; (ii) the failure
of WNB's shareholders to approve the Merger Agreement at a meeting called for
such purpose if at the time of such meeting there has been an announcement by
any Person (other than FFC) of an offer or proposal to acquire 25% or more of
the Common Stock (before giving effect to any exercise of the Warrant), or to
acquire, merge or consolidate with WNB, or to purchase all or substantially all
of WNB's assets; (iii) the acquisition by any Person of Beneficial Ownership of
25% or more of the Common Stock (before giving effect to any exercise of the
Warrant); (iv) any Person (other than FFC) shall have
<PAGE>
commenced a tender or exchange offer, or shall have filed an application with an
appropriate bank regulatory authority with respect to a publicly announced
offer, to purchase or acquire securities of WNB such that, upon consummation of
such offer, such Person would have Beneficial Ownership of 25% or more of the
Common Stock (before giving effect to any exercise of the Warrant); (v) WNB
shall have entered into an agreement, letter of intent, or other understanding
with any Person (other than FFC) providing for such Person (A) to acquire,
merge, consolidate or enter into a statutory share exchange with WNB or to
purchase all or substantially all of WNB's assets, or (B) to negotiate with WNB
with respect to any of the events or transactions mentioned in the preceding
clause (A) or (vi) termination, or attempted termination, of the Merger
Agreement by WNB under Section 5.7 of the Merger Agreement. As used in this
Paragraph 2, the terms "Beneficial Ownership" and "Person" shall have the
respective meanings set forth in Paragraph 7(f) herein.
3. Registration Rights, Etc.. If, at any time after the Warrant may be
-------------------------
exercised or sold, WNB shall receive a written request therefor from FFC, WNB
shall prepare, file and keep effective and current a shelf registration
statement (the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act") and provide or file such documentation as may be
required by the Office of the Comptroller of the Currency (the "OCC") or other
governmental entity or agency (any such other governmental filing hereinafter
referred to as the "Governmental Filing"), covering, or in connection with, the
Warrant and/or the Common Stock issued or issuable upon exercise of the Warrant.
WNB shall use its best efforts to cause the Registration Statement to become
effective and remain current. Without the prior written consent of FFC, neither
WNB nor any other holder of securities of WNB may include such securities in the
Registration Statement.
4. Duties of WNB upon Registration, or Governmental Filing. If and
-------------------------------------------------------
whenever WNB is required by the provisions of Paragraph 3 of this Agreement to
effect the registration of any of the Securities under the Securities Act or to
take any other action, WNB shall:
(a) prepare and file with the Securities and Exchange Commission (the
"SEC"), the OCC, or other governmental entity or agency such amendments to
the Registration Statement and supplements to the prospectus contained
therein or the Governmental Filing as may be necessary to keep the
Registration Statement or Governmental Filing effective, current, and
accurate;
(b) in the case of a registration of any securities under the
Securities Act, furnish to FFC and to the underwriters of the Securities
being registered such reasonable number of copies of the Registration
Statement, the preliminary prospectus and final prospectus contained
therein, and such other documents as FFC or such underwriters may
reasonably request in order to facilitate the public offering of the
Securities;
(c) in the case of a registration of any securities under the
Securities Act, use its best efforts to register or qualify the Securities
covered by the Registration Statement under the state securities or blue
sky laws of such jurisdictions as FFC or such underwriters may reasonably
request;
(d) notify FFC, promptly after WNB shall receive notice thereof, of
the time when the Registration Statement or the Governmenal Filing has
become effective or any supplement or amendment to any prospectus forming a
part of the Registration Statement or the Governmental Filing has been
filed;
-2-
<PAGE>
(e) notify FFC promptly of any request by the SEC, the OCC, or other
governmental entity or agency for the amending or supplementing of (i) the
Registration Statement or the prospectus contained therein; or (ii) the
Governmental Filing, or for additional information;
(f) prepare and file with the SEC, the OCC, or other governmental
entity or agency promptly upon the request of FFC, any amendments or
supplements to the Registration Statement or the prospectus contained
therein or to the Governmental Filing which, in the opinion of counsel for
FFC, are required under the Securities Act or the rules and regulations
promulgated by the SEC thereunder in connection with the public offering of
the Securities or by any other law or regulation;
(g) prepare and promptly file with the SEC the OCC, or other
governmental entity or agency such amendments of or supplements to (i) the
Registration Statement or the prospectus contained therein; or (ii) the
Governmental filing as may be necessary to correct any statements or
omissions if, at the time when a prospectus or Governmental Filing relating
to such Securities is required to be delivered under the Securities Act or
other law or regulation, any event shall have occurred as the result of
which such prospectus Governmental Filing as then in effect would include
an untrue statement of a material fact or would omit to state any material
fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading;
(h) advise FFC, promptly after WNB shall receive notice or obtain
knowledge of the issuance of any stop order by the SEC suspending the
effectiveness of the Registration Statement or of any action by the OCC or
other governmental entity or agency preventing the exercise of any right or
obligation hereunder or that may be exercised in connection herewith, or
the initiation or threatening of any proceeding for such purpose, and
promptly use its best efforts to prevent such action or to obtain its
withdrawal if such action should be taken; and
(i) at the request of FFC, furnish on the date or dates provided for
in the underwriting agreement: (i) an opinion or opinions of counsel for
WNB for the purposes of such registration or Governmental Filing, addressed
to the underwriters and to FFC, covering such matters as such underwriters
and FFC may reasonably request and as are customarily covered by issuer's
counsel at that time; and (ii) a letter or letters from the independent
certified public accountants for WNB, addressed to the underwriters and to
FFC, covering such matters as such underwriters or FFC may reasonably
request, in which letters such accountants shall state (without limiting
the generality of the foregoing) that they are independent certified public
accountants within the meaning of the Securities Act and that, in the
opinion of such accountants, the financial statements and other financial
data of WNB included in the Registration Statement or Governmental Filing
or any amendment or supplement thereto comply in all material respects with
the applicable accounting requirements of the Securities Act or such other
law or regulation as may be at issue.
5. Expenses of Registration. With respect to the registration or
------------------------
Governmental Filing requested pursuant to Paragraph 3 of this Agreement, (a) WNB
shall bear all registration, filing and NASD fees, printing and engraving
expenses, fees and disbursements of its counsel and accountants and all legal
fees and disbursements and other expenses of WNB to comply with state securities
or blue sky laws of any jurisdictions in which the Securities to be offered are
to be registered or qualified; and (b) FFC shall bear all fees and disbursements
of its counsel and accountants, underwriting discounts and commissions, transfer
taxes for FFC and any other expenses incurred by FFC.
-3-
<PAGE>
6. Indemnification. In connection with any Registration Statement or
---------------
Governmental Filing or any amendment or supplement thereto:
(a) WNB shall indemnify and hold harmless FFC, any underwriter (as
defined in the Securities Act) for FFC, and each person, if any, who
controls FFC or such underwriter (within the meaning of the Securities Act)
from and against any and all loss, damage, liability, cost or expense to
which FFC or any such underwriter or controlling person may become subject
under the Securities Act or otherwise, insofar as such loss, damage,
liability, cost or expense arises out of or is caused by any untrue
statement or alleged untrue statement of any material fact contained in (i)
the Registration Statement, any prospectus or preliminary prospectus
contained therein; or (ii) any Governmental Filing, or any amendment or
supplement to the foregoing, or arises out of or is based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading; provided,
--------
however, that WNB will not be liable in any such case to the extent that
-------
any such loss, damage, liability, cost or expense arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission so made in conformity with information furnished by FFC, such
underwriter or such controlling person in writing specifically for use in
the preparation thereof.
(b) FFC shall indemnify and hold harmless WNB, any underwriter (as
defined in the Securities Act), and each person, if any, who controls WNB
or such underwriter (within the meaning of the Securities Act) from and
against any and all loss, damage, liability, cost or expense to which WNB
or any such underwriter or controlling person may become subject under the
Securities Act or otherwise, insofar as such loss, damage, liability, cost
or expense arises out of or is caused by any untrue or alleged untrue
statement of any material fact contained in (i) the Registration Statement,
any prospectus or preliminary prospectus contained therein; or (ii) any
Governmental Filing, or any amendment or supplement to the foregoing, or
arises out of or is based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances in
which they were made, not misleading, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was so made in reliance upon and in conformity
with written information furnished by FFC specifically for use in the
preparation thereof.
(c) Promptly after receipt by any party which is entitled to be
indemnified, pursuant to the provisions of subparagraph (a) or (b) of this
Paragraph 6, of any claim in writing or of notice of the commencement of
any action involving the subject matter of the foregoing indemnity
provisions, such indemnified party shall, if a claim in respect thereof is
to be made against the indemnifying party pursuant to the provisions of
subparagraph (a) or (b) of this Paragraph 6, promptly notify the
indemnifying party of the receipt of such claim or notice of the
commencement of such action, but the omission to so notify the indemnifying
party will not relieve it from any liability which it may otherwise have to
any indemnified party hereunder. In case any such action is brought
against any indemnified party and it notifies the indemnifying party of the
commencement thereof, the indemnifying party shall have the right to
participate in and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party; provided, however, that if
-------- -------
the defendants in any
-4-
<PAGE>
action include both the indemnified party or parties and the indemnifying
party and there is a conflict of interest which would prevent counsel for
the indemnifying party from also representing any indemnified party, such
indemnified party shall have the right to select separate counsel to
participate in the defense of such indemnified party. After notice from
the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable to
such indemnified party, pursuant to the provisions of subparagraph (a) or
(b) of this Paragraph 6, for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense thereof,
other than reasonable costs of investigation, unless (i) such indemnified
party shall have employed separate counsel in accordance with the
provisions of the preceding sentence, (ii) the indemnifying party shall not
have employed counsel satisfactory to the indemnified party to represent
the indemnified party within a reasonable time after the notice of the
commencement of the action, or (iii) the indemnifying party has authorized
the employment of counsel for the indemnified party at the expense of the
indemnifying party.
(d) If recovery is not available under the foregoing indemnification
provisions, for any reason other than as specified therein, any party
entitled to indemnification by the terms thereof shall be entitled to
obtain contribution with respect to its liabilities and expenses, except to
the extent that contribution is not permitted under Section 11(f) of the
Securities Act or such other law or regulation as may be applicable. In
determining the amount of contribution to which the respective parties are
entitled there shall be considered the parties' relative knowledge and
access to information concerning the matter with respect to which the claim
was asserted, the opportunity to correct and/or prevent any statement or
omission, and any other equitable considerations appropriate under the
circumstances. FFC and WNB agree that it would not be equitable if the
amount of such contribution were determined by pro rata or per capita
allocation even if the underwriters and FFC as a group were considered a
single entity for such purpose.
7. Redemption and Repurchase Rights.
--------------------------------
(a) From and after the date on which any event described in Paragraph
2 of this Agreement occurs, the Holder as defined in the Warrant (which
shall include a former Holder), who has exercised the Warrant in whole or
in part shall have the right to require WNB to redeem some or all of the
shares of Common Stock for which the Warrant was exercised at a redemption
price per share (the "Redemption Price") equal to the highest of: (i) the
Exercise Price, (ii) the highest price paid or agreed to be paid for any
share of Common Stock by an Acquiring Person (as defined below) during the
one year period immediately preceding the date of redemption, and (iii) in
the event of a sale of all or substantially all of WNB's assets: (x) the
sum of the price paid in such sale for such assets and the current market
value of the remaining assets of WNB as determined by a recognized
investment banking firm selected by such Holder, divided by (y) the number
of shares of Common Stock then outstanding. If the price paid consists in
whole or in part of securities or assets other than cash, the value of such
securities or assets shall be their then current market value as determined
by a recognized investment banking firm selected by the Holder.
(b) From and after the date on which any event described in Paragraph
2 of this Agreement occurs, the Holder as defined in the Warrant (which
shall include a former Holder), shall have the right to
-5-
<PAGE>
require WNB to repurchase all or any portion of the Warrant at a price (the
"Warrant Repurchase Price") equal to the product obtained by multiplying:
(i) the number of shares of Common Stock represented by the portion of the
Warrant that the Holder is requiring WNB to repurchase, times (ii) the
excess of the Redemption Price over the Exercise Price.
(c) The Holder's right, pursuant to this Paragraph 7, to require WNB
to repurchase a portion or all of the Warrant, and/or to require WNB to
redeem some or all of the shares of Common Stock for which the Warrant was
exercised, shall expire on the close of business on the 60th day following
the occurrence of any event described in Paragraph 2.
(d) The Holder may exercise its right, pursuant to this Paragraph 7,
to require WNB to repurchase all or a portion of the Warrant, and/or to
require WNB to redeem some or all of the shares of Common Stock for which
the Warrant was exercised, by surrendering for such purpose to WNB, at its
principal office within the time period specified in the preceding
subparagraph, the Warrant and/or a certificate or certificates representing
the number of shares to be redeemed accompanied by a written notice stating
that it elects to require WNB to repurchase the Warrant or a portion
thereof and/or to redeem all or a specified number of such shares in
accordance with the provisions of this Paragraph 7. As promptly as
practicable, and in any event within five business days after the surrender
of the Warrant and/or such certificates and the receipt of such notice
relating thereto, WNB shall deliver or cause to be delivered to the Holder:
(i) the applicable Redemption Price (in immediately available funds) for
the shares of Common Stock which it is not then prohibited under applicable
law or regulation from redeeming, and/or (ii) the applicable Warrant
Repurchase Price, and/or (iii) if the Holder has given WNB notice that less
than the whole Warrant is to be repurchased and/or less than the full
number of shares of Common Stock evidenced by the surrendered certificate
or certificates are to be redeemed, a new certificate or certificates, of
like tenor, for the number of shares of Common Stock evidenced by such
surrendered certificate or certificates less the number shares of Common
Stock redeemed and/or a new Warrant reflecting the fact that only a portion
of the Warrant was repurchased.
(e) To the extent that WNB is prohibited under applicable law or
regulation, or as a result of administrative or judicial action, from
repurchasing the Warrant and/or redeeming the Common Stock as to which the
Holder has given notice of repurchase and/or redemption, WNB shall
immediately so notify the Holder and thereafter deliver or cause to be
delivered, from time to time to the Holder, the portion of the Warrant
Repurchase Price and/or the Redemption Price which it is no longer
prohibited from delivering, within five business days after the date on
which WNB is no longer so prohibited; provided, however, that to the extent
-------- -------
that WNB is at the time and after the expiration of 25 months, so
prohibited from delivering the Warrant Repurchase Price and/or the
Redemption Price, in full (and WNB hereby undertakes to use its best
efforts to obtain all required regulatory and legal approvals as promptly
as practicable), WNB shall deliver to the Holder a new Warrant (expiring
one year after delivery) evidencing the right of the Holder to purchase
that number of shares of Common Stock representing the portion of the
Warrant which WNB is then so prohibited from repurchasing, and/or WNB shall
deliver to the Holder a certificate for the shares of Common Stock which
WNB is then so prohibited from redeeming, and WNB shall have no further
obligation to repurchase such new Warrant or redeem such Common Stock; and
---
provided further, that upon receipt of such notice and until five days
-------- -------
thereafter the Holder may revoke its notice of repurchase of the Warrant
and/or redemption of Common Stock by written notice to WNB at its principal
office stating that the Holder elects to
-6-
<PAGE>
revoke its election to exercise its right to require WNB to repurchase the
Warrant and/or redeem the Common Stock, whereupon WNB will promptly
redeliver to the Holder the Warrant and/or the certificates representing
shares of Common Stock surrendered to WNB for purposes of such repurchase
and/or redemption, and WNB shall have no further obligation to repurchase
such Warrant and/or redeem such Common Stock.
(f) As used in this Agreement the following terms have the meanings
indicated:
(1) "Acquiring Person" shall mean any "Person" (hereinafter
defined) who or which is the "Beneficial Owner" (hereinafter defined)
of 25% or more of the Common Stock;
(2) A "Person" shall mean any individual, firm, corporation or
other entity and shall also include any syndicate or group deemed to
be a "Person" by operation of Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended;
(3) A Person shall be a "Beneficial Owner", and shall have
"Beneficial Ownership", of all securities:
(i) which such Person or any of its Affiliates (as
hereinafter defined) beneficially owns, directly or indirectly;
and
(ii) which such Person or any of its Affiliates or
Associates has (1) the right to acquire (whether such right is
exercisable immediately or only after the passage of time or
otherwise) pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange
rights, warrants or options, or otherwise, or (2) the right to
vote pursuant to any proxy, power of attorney, voting trust,
agreement, arrangement or understanding; and
(4) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the regulations
promulgated by the SEC under the Securities and Exchange Act of 1934,
as amended.
8. Remedies. Without limiting the foregoing or any remedies available to
--------
FFC, it is specifically acknowledged that FFC would not have an adequate remedy
at law for any breach of this Warrant Agreement and shall be entitled to
specific performance of WNB's obligations under, and injunctive relief against
any actual or threatened violation of the obligations of any Person subject to,
this Agreement.
9. Miscellaneous.
-------------
(a) The representations, warranties, and covenants of WNB set forth
in the Merger Agreement are hereby incorporated by reference in and made a
part of this Agreement, as if set forth in full herein.
(b) This Agreement, the Warrant and the Merger Agreement set forth
the entire understanding and agreement of the parties hereto and supersede
any and all prior agreements, arrangements and understandings, whether
written or oral, relating to the subject matter hereof and thereof. No
amendment, supplement, modification, waiver, or termination of this
Agreement shall be valid and binding unless executed in writing by both
parties.
-7-
<PAGE>
(c) This Agreement shall be deemed to have been made in, and shall be
governed by and interpreted in accordance with the substantive laws of, the
Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized officers as of the day and year first above
written.
FULTON FINANCIAL CORPORATION
By:
--------------------------------
Rufus A. Fulton, Jr., President
and Chief Executive Officer
Attest:
----------------------------
William R. Colmery, Secretary
THE WOODSTOWN NATIONAL BANK
& TRUST COMPANY
By:
-------------------------------
Ralph Homan, President
Attest:
---------------------------
____________, Secretary
-8-
<PAGE>
WARRANT
to Purchase up to 358,200 Shares of the
Common Stock, Par Value $.22 Per Share,
of
THE WOODSTOWN NATIONAL BANK & TRUST COMPANY
This is to certify that, for value received, Fulton Financial Corporation
("FFC") or any permitted transferee (FFC or such transferee being hereinafter
called the "Holder") is entitled to purchase, subject to the provisions of this
Warrant, from The Woodstown National Bank & Trust Company, a national banking
association ("WNB"), at any time on or after the date hereof, an aggregate of up
to 358,200 fully paid and non-assessable shares of common stock, par value $.22
per share (the "Common Stock"), of WNB at a price per share equal to $24.00,
subject to adjustment as herein provided (the "Exercise Price").
1. Exercise of Warrant. Subject to the provisions hereof and the
-------------------
limitations set forth in Paragraph 2 of a Warrant Agreement of even date
herewith by and between FFC and WNB (the "Warrant Agreement"), which Warrant
Agreement was entered into simultaneously with a Merger Agreement of even date
herewith between FFC and WNB (the "Merger Agreement"), this Warrant may be
exercised in whole or in part at any time or from time to time on or after the
date hereof. This Warrant shall be exercised by presentation and surrender
hereof to WNB at the principal office of WNB, accompanied by (i) a written
notice of exercise, (ii) payment to WNB, for the account of WNB, of the Exercise
Price for the number of shares of Common Stock specified in such notice, and
(iii) a certificate of the Holder specifying the event or events which have
occurred and entitle the Holder to exercise this Warrant. The Exercise Price
for the number of shares of Common Stock specified in the notice shall be
payable in immediately available funds.
Upon such presentation and surrender, WNB shall issue promptly (and within
one business day if requested by the Holder) to the Holder or its assignee,
transferee or designee the number of shares of Common Stock to which the Holder
is entitled hereunder. WNB covenants and warrants that such shares of Common
Stock, when so issued, will be duly authorized, validly issued, fully paid and
non-assessable, and free and clear of all liens and encumbrances.
If this Warrant should be exercised in part only, WNB shall, upon surrender
of this Warrant for cancellation, execute and deliver a new Warrant evidencing
the rights of the Holder thereof to purchase the balance of the shares of Common
Stock issuable hereunder. Upon receipt by WNB of this Warrant, in proper form
for exercise, the Holder shall be deemed to be the holder of record of the
shares of Common Stock issuable upon such exercise, notwithstanding that the
stock transfer books of WNB may then be closed or that certificates representing
such shares of Common Stock shall not then be actually delivered to the Holder.
WNB shall pay all expenses, and any and all United States federal, state and
local taxes and other charges, that may be payable in connection with the
preparation, issue and delivery of stock certificates pursuant to this Paragraph
1 in the name of the Holder or its assignee, transferee or designee.
2. Reservation of Shares; Preservation of Rights of Holder.
-------------------------------------------------------
WNB shall at all times, while this Warrant is outstanding and unexercised,
maintain and reserve, free from preemptive rights, such number of authorized but
unissued shares of Common Stock as may be necessary so that this Warrant may be
exercised without any additional authorization of Common Stock after giving
effect to all other options, warrants, convertible securities and other rights
to acquire shares of Common Stock at the time outstanding. WNB further agrees
that (i) it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets,
<PAGE>
or by any other voluntary act or omission, avoid or seek to avoid the observance
or performance of any of the covenants, stipulations or conditions to be
observed or performed hereunder or under the Warrant Agreement by WNB, (ii) it
will promptly take all action (including (A) complying with all premerger
notification, reporting and waiting period requirements specified in 15 U.S.C.
(S)18a and the regulations promulgated thereunder and (B) in the event that,
under the Bank Holding Company Act of 1956, as amended, the Change in Bank
Control Act of 1978, as amended, or the National Bank Act, prior approval of the
Board of Governors of the Federal Reserve System (the "Board") or the Office of
the Comptroller of the Currency (the "OCC") is necessary before this Warrant may
be exercised, cooperating fully with the Holder in preparing any and all such
applications and providing such information to the Board or the OCC as the Board
or the OCC may require) in order to permit the Holder to exercise this Warrant
and WNB duly and effectively to issue shares of its Common Stock hereunder, and
(iii) it will promptly take all action necessary to protect the rights of the
Holder against dilution as provided herein.
3. Fractional Shares. WNB shall not be required to issue fractional
-----------------
shares of Common Stock upon exercise of this Warrant but shall pay for any
fractional shares in cash or by certified or official bank check at the Exercise
Price.
4. Exchange or Loss of Warrant. This Warrant is exchangeable, without
---------------------------
expense, at the option of the Holder, upon presentation and surrender hereof at
the principal office of WNB for other warrants of different denominations
entitling the Holder to purchase in the aggregate the same number of shares of
Common Stock issuable hereunder. The term "Warrant" as used herein includes any
warrants for which this Warrant may be exchanged. Upon receipt by WNB of
evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of this Warrant, and (in the case of loss, theft or destruction) of
reasonably satisfactory indemnification, and upon surrender and cancellation of
this Warrant, if mutilated, WNB will execute and deliver a new Warrant of like
tenor and date.
5. Repurchase. (A) From and after the date on which any event described
----------
in Paragraph 2 of the Warrant Agreement occurs, the Holder shall have the right
to require WNB to repurchase all or any portion of this Warrant at the Warrant
Repurchase Price (as defined in Paragraph 7(b) of the Warrant Agreement). The
Holder's right to require WNB to repurchase this Warrant under this Paragraph 5
shall expire at the close of business on the 60th day following the occurrence
of any event described in Paragraph 2 of the Warrant Agreement.
(B) The Holder of this Warrant may exercise its right to require WNB to
repurchase this Warrant or a portion thereof pursuant to this Paragraph 5 by
surrendering for such purpose to WNB, at its principal office, within the 60 day
period specified above, this Warrant accompanied by a written notice stating
that the Holder elects to require WNB to repurchase this Warrant or a portion
thereof in accordance with the provisions of this Paragraph 5. As promptly as
practicable, and in any event within five business days after the surrender of
this Warrant and the receipt of such notice relating thereto, WNB shall deliver
or cause to be delivered to the Holder the Warrant Repurchase Price in
immediately available funds therefor or the portion thereof which it is not then
prohibited under applicable law and regulation from delivering to the Holder.
(C) To the extent that WNB is prohibited under applicable law or
regulation, or as a result of administrative or judicial action, from
repurchasing the Warrant, WNB shall immediately so notify the Holder and
thereafter deliver or cause to be delivered, from time to time to the Holder,
the portion of the Warrant Repurchase Price which it is no longer prohibited
from delivering, within five business days after the date on which WNB is no
longer so prohibited; provided, however, that to the extent that WNB is at the
-------- -------
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<PAGE>
time and after the expiration of 25 months so prohibited from delivering the
Warrant Repurchase Price in full (and WNB hereby undertakes to use its best
efforts to obtain all required regulatory and legal approvals as promptly as
practicable), WNB shall deliver to the Holder a new Warrant (expiring one year
after delivery) evidencing the right of the Holder to purchase that number of
shares of Common Stock representing the portion of the Warrant which WNB is then
so prohibited from repurchasing, and WNB shall have no further obligation to
repurchase such new Warrant; and provided further, that upon receipt of such
--- -------- -------
notice and until five days thereafter the Holder may revoke its notice of
repurchase of the Warrant by written notice to WNB at its principal office
stating that the Holder elects to revoke its election to exercise its right to
require WNB to repurchase the Warrant, whereupon WNB will promptly redeliver to
the Holder the Warrant surrendered to WNB for purposes of such repurchase and
WNB shall have no further obligation to repurchase such Warrant.
6. Adjustment. The number of shares of Common Stock issuable upon the
----------
exercise of this Warrant and the Exercise Price shall be subject to adjustment
from time to time as provided in this Paragraph 6.
(A) Stock Dividends, etc.
---------------------
(1) Stock Dividends. In case WNB shall pay or make a dividend
---------------
or other distribution on any class of capital stock of WNB in Common Stock, the
number of shares of Common Stock issuable upon exercise of this Warrant shall be
increased by multiplying such number of shares by a fraction of which the
denominator shall be the number of shares of Common Stock outstanding at the
close of business on the day immediately preceding the date of such distribution
and the numerator shall be the sum of such number of shares and the total number
of shares of Common Stock constituting such dividend or other distribution, such
increase to become effective immediately after the opening of business on the
day following such distribution.
(2) Subdivisions. In case outstanding shares of Common Stock
------------
shall be subdivided into a greater number of shares of Common Stock, the number
of shares of Common Stock issuable upon exercise of this Warrant at the opening
of business on the day following the day upon which such subdivision becomes
effective shall be proportionately increased, and, conversely, in case
outstanding shares of Common Stock shall each be combined into a smaller number
of shares of Common Stock, the number of shares of Common Stock issuable upon
exercise of this Warrant at the opening of business on the day following the day
upon which such combination becomes effective shall be proportionately
decreased, such increase or decrease, as the case may be, to become effective
immediately after the opening of business on the day following the date upon
which such subdivision or combination becomes effective.
(3) Reclassifications. The reclassification of Common Stock into
-----------------
securities (other than Common Stock) and/or cash and/or other consideration
shall be deemed to involve a subdivision or combination, as the case may be, of
the number of shares of Common Stock outstanding immediately prior to such
reclassification into the number or amount of securities and/or cash and/or
other consideration outstanding immediately thereafter and the effective date of
such reclassification shall be deemed to be "the day upon which such subdivision
becomes effective," or "the day upon which such combination becomes effective,"
as the case may be, within the meaning of clause (2) above.
(4) Optional Adjustments. WNB may make such increases in the
--------------------
number of shares of Common Stock issuable upon exercise of this Warrant, in
addition to those required by this subparagraph (A), as shall be determined by
its Board of Directors to be advisable in order to avoid taxation so far as
practicable of any dividend of stock or stock rights or any event treated as
such for federal income tax purposes to the recipients.
-3-
<PAGE>
(5) Adjustment to Exercise Price. Whenever the number of shares
----------------------------
of Common Stock issuable upon exercise of this Warrant is adjusted as provided
in this Paragraph 6(A), the Exercise Price shall be adjusted by a fraction in
which the numerator is equal to the number of shares of Common Stock issuable
prior to the adjustment and the denominator is equal to the number of shares of
Common Stock issuable after the adjustment.
(B) Certain Sales of Common Stock.
-----------------------------
(1) Adjustment to Shares Issuable. If and whenever WNB sells
-----------------------------
or otherwise issues (other than under circumstances in which Paragraph 6(A)
applies) any shares of Common Stock, the number of shares of Common Stock
issuable upon exercise of this Warrant shall be increased by multiplying such
number of shares by a fraction, the denominator of which shall be the number of
shares of Common Stock outstanding at the close of business on the day
immediately preceding the date of such sale or issuance and the numerator of
which shall be the sum of such number of shares and the total number of shares
constituting such sale or other issuance, such increase to become effective
immediately after the opening of business on the day following such sale or
issuance.
(2) Adjustment to Exercise Price. If and whenever WNB sells or
----------------------------
otherwise issues any shares of Common Stock (excluding any stock dividend or
other issuance not for consideration to which Paragraph 6(A) applies) for a
consideration per share which is less than the Exercise Price at the time of
such sale or other issuance, then in each such case the Exercise Price shall be
forthwith changed (but only if a reduction would result) to the price
(calculated to the nearest cent) determined by dividing: (i) an amount equal to
the sum of (aa) the number of shares of Common Stock outstanding immediately
prior to such issue or sale, multiplied by the then effective Exercise Price,
plus (bb) the total consideration, if any, received and deemed received by WNB
upon such issue or sale, by (ii) the total number of shares of Common Stock
outstanding immediately after such issue or sale.
(C) Definition. For purposes of this Paragraph 6, the term "Common
----------
Stock" shall include (1) any shares of WNB of any class or series which has no
preference or priority in the payment of dividends or in the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding up
of WNB and which is not subject to redemption by WNB, and (2) any rights or
options to subscribe for or to purchase shares of Common Stock or any stock or
securities convertible into or exchangeable for shares of Common Stock (such
convertible or exchangeable stock or securities being hereinafter called
"Convertible Securities"), whether or not such rights or options or the right to
convert or exchange any such Convertible Securities are immediately exercisable.
For purposes of any adjustments made under Paragraph 6(A) or 6(B) as a result of
the distribution, sale or other issuance of rights or options or Convertible
Securities, the number of Shares of Common Stock outstanding after or as a
result of the occurrence of events described in Paragraph 6(A)(1) or 6(B)(1)
shall be calculated by assuming that all such rights, options or Convertible
Securities have been exercised for the maximum number of shares issuable
thereunder.
7. Notice. (A) Whenever the number of shares of Common Stock for which
------
this Warrant is exercisable is adjusted as provided in Paragraph 6, WNB shall
promptly compute such adjustment and mail to the Holder a certificate, signed by
the principal financial officer of WNB, setting forth the number of shares of
Common Stock for which this Warrant is exercisable as a result of such
adjustment having become effective.
(B) Upon the occurrence of any event which results in the Holder
having the right to require WNB to repurchase this Warrant, as provided in
Paragraph 5, WNB shall promptly notify the Holder of such event; and WNB shall
promptly compute the Warrant Repurchase Price and furnish to the Holder a
-4-
<PAGE>
certificate, signed by the principal financial officer of WNB, setting forth the
Warrant Repurchase Price and the basis and computation thereof.
8. Rights of the Holder. (A) Without limiting the foregoing or any
--------------------
remedies available to the Holder, it is specifically acknowledged that the
Holder would not have an adequate remedy at law for any breach of the provisions
of this Warrant and shall be entitled to specific performance of WNB's
obligations under, and injunctive relief against any actual or threatened
violation of the obligations of any Person (as defined in Paragraph 7 of the
Warrant Agreement) subject to, this Warrant.
(B) The Holder shall not, by virtue of its status as Holder, be
entitled to any rights of a shareholder in WNB.
9. Termination. This Warrant and the rights conferred hereby shall
-----------
terminate (i) upon the Effective Date of the merger provided for in the Merger
Agreement, (ii) upon a valid termination of the Merger Agreement prior to the
occurrence of an event described in Paragraph 2 of the Warrant Agreement, or
(iii) to the extent this Warrant has not previously been exercised, 60 days
after the occurrence of an event described in Paragraph 2 of the Warrant
Agreement.
10. Governing Law. This Warrant shall be deemed to have been delivered
-------------
in, and shall be governed by and interpreted in accordance with the substantive
laws of, the Commonwealth of Pennsylvania.
Dated: September 30, 1996
THE WOODSTOWN NATIONAL BANK
& TRUST COMPANY
By:
--------------------------------------
- -------------- Ralph Homan, President
Attest:
----------------------------------
- -------------- , Secretary
------------------
RLG/288672.1
-5-
<PAGE>
EXHIBIT D
STATUTE RELATING TO DISSENTERS' RIGHTS
--------------------------------------
(12 U.S.C. (S) 215a)
(b) Dissenting shareholders
If a merger shall be voted for at the called meetings by the necessary
majorities of the shareholders of each association or State bank participating
in the plan of merger, and thereafter the merger shall be approved by the
Comptroller, any shareholder of any association or State bank to be merged into
the receiving association who has voted against such merger at the meeting of
the association or bank of which he is a stockholder, or has given notice in
writing at or prior to such meeting to the presiding officer that he dissents
from the plan of merger, shall be entitled to receive the value of the shares so
held by him when such merger shall be approved by the Comptroller upon written
request made to the receiving association at any time before thirty days after
the date of consummation of the merger, accompanied by the surrender of his
stock certificates.
(c) Valuation of shares
The value of the shares of any dissenting shareholder shall be ascertained,
as of the effective date of the merger, by an appraisal made by a committee of
three persons, composed of (1) one selected by the vote of the holders of the
majority of the stock, the owners of which are entitled to payment in cash;
(2) one selected by the directors of the receiving association; and (3) one
selected by the two so selected. The valuation agreed upon by any two of the
three appraisers shall govern. If the value so fixed shall not be satisfactory
to any dissenting shareholder who has requested payment, that shareholder may,
within five days after being notified of the appraised value of his shares,
appeal to the Comptroller, who shall cause a reappraisal to be made which shall
be final and binding as to the value of the shares of the appellant.
(d) Application to shareholders of merging associations: appraisal by
Comptroller; expenses of receiving association; sale and resale of shares;
State appraisal and merger law
If, within ninety days from the date of consummation of the merger, for any
reason one or more of the appraisers is not selected as herein provided, or the
appraisers fail to determine the value of such shares, the Comptroller shall
upon written request of any interested party cause an appraisal to be made which
shall be final and binding on all parties. The expenses of the Comptroller in
making the reappraisal or the appraisal, as the case may be, shall be paid by
the receiving association. The value of the shares ascertained shall be
promptly paid to the dissenting shareholders by the receiving association. The
shares of stock of the receiving association which would have been delivered to
such dissenting shareholders had they not requested payment shall be sold by the
receiving association at an advertised public auction, and the receiving
association shall have the right to purchase any of such shares at such public
auction, if it is the highest bidder therefor, for the purpose of reselling such
shares within thirty days thereafter to such person or persons and at such price
not less than par as its board of directors by resolution may determine. If the
shares are sold at public auction at a price greater than the amount paid to the
dissenting shareholders, the excess in such sale price shall be paid to such
dissenting shareholders. The appraisal of such shares of stock in any State
bank shall be determined in the manner prescribed by the law of the State in
such cases, rather than as provided in this section, if such provision is made
in the State law; and no such merger shall be in contravention of the law of the
State under which such bank is incorporated. The provisions of this subsection
shall apply only to shareholders of (and stock owned by them in) a bank or
association being merged into the receiving association.
<PAGE>
EXHIBIT E
1995 AND 1994 ANNUAL REPORT TO SHAREHOLDERS OF
THE WOODSTOWN NATIONAL BANK & TRUST COMPANY
-------------------------------------------
<PAGE>
EXHIBIT E
---------
A N N U A L R E P O R T
[ART WORK APPEARS HERE]
[LOGO OF WOODSTOWN NATIONAL BANK AND TRUST COMPANY APPEARS HERE]
<PAGE>
The landscape of banking is ever changing, as
evidenced by the number of consolidations
of regional and super-regional banks
this past year. We have a sense
of comfort knowing that
our customers always
have access to
decision makers.
[ARTWORK APPEARS HERE]
C O N T E N T S
President's Message............................................................4
Management's Discussion and Analysis..........................................12
Selected Consolidated Financial Data..........................................18
Independent Auditor's Report..................................................19
Consolidated Financial Statements.............................................20
Notes to Consolidated Financial Statements....................................24
<PAGE>
RELATIONSHIP BANKING
- --------------------------------------------------------------------------------
[ART APPEARS HERE]
Profile The Woodstown National Bank and Trust Company is committed to creating
value for its shareholders, customers and employees. The company focuses on
relationship banking and takes pride being the friendliest, independently owned
and operated hometown bank in the region. Woodstown National offers a wide
variety of banking services. By offering customers a compelling value, based on
superior pricing and service, and by delivering our products in a faster,
friendlier and more personal manner, Woodstown National has charted a course of
managed, profitable growth. We have consistently outperformed the majority of
our peers. While we do not purport to be everything to everyone, our roots run
deep and throughout the communities we serve. Small business owners and
individuals alike appreciate being called by name and having quick access to
decision makers. At Woodstown National we make sure that the personal touch is
always a part of the relationship we have with our customers. Woodstown
National, while possessing leading edge technology and products, understands
that it's a friendly smile and firm handshake that creates a relationship that
lasts a lifetime.
[ART APPEARS HERE] [GRAPHIC APPEARS HERE]
1
<PAGE>
STATISTICAL SUMMARY
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Percent Change
(dollars in thousands, except per share data) 1995 1994 For The Year
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE YEAR
EARNINGS
Net interest income after provision
for credit losses $ 9,522 $ 9,510 0.1
Other income 1,376 1,198 14.9
Operating expenses 5,910 5,923 (0.2)
Income before income tax expense 4,988 4,785 4.2
Net income 3,287 3,153 4.2
PER SHARE
Earnings $ 1.83 $ 1.75 4.6
Dividends paid 0.66 0.59 12.5
Book value 12.56 11.39 10.3
FINANCIAL RATIOS
Net interest margin 4.15% 4.63%
Return on average assets 1.35% 1.43%
Return on average equity 15.32% 16.28%
AT YEAR END
Investment securities $ 53,658 $ 49,230 9.0
Loans (net) 172,205 158,793 8.4
Total assets 254,593 229,820 10.8
Total deposits 231,089 203,563 13.5
Shareholders' equity 22,602 20,503 10.2
LOAN PERFORMANCE
Loans past due and accruing $ 4,619 $ 2,795 65.3
Loans on non-accrual 2,528 3,461 (27.0)
Delinquency rate 4.10% 3.88% 5.7
Allowance coverage of non-performing loans 86.43% 68.94% 25.4
</TABLE>
- ---
2
- ---
<PAGE>
[BAR GRAPH TOTAL ASSETS (in millions) APPEARS HERE]
[BAR GRAPH SHAREHOLDERS' EQUITY (in millions) APPEARS HERE]
[BAR GRAPH EARNINGS PER SHARE APPEARS HERE]
- --------------------------------------------------------------------------------
SIGNIFICANT ACCOMPLISHMENTS
EARNINGS Increased for the fourth consecutive year to $3.29 million
or $1.83 per share.
BALANCE SHEET Set yet another record year-end high of $254.6 million
supported by a healthy capital base of $22.6 million.
LOAN GROWTH Experienced the largest annual growth since 1990, reaching
$172.2 million in net loans at year-end.
DEPOSIT GROWTH Increased deposits for the 22nd consecutive year, with this
year's increase of $27.5 million representing the single
largest annual increase in the Bank's history.
INDUSTRY RANKING The Bank's return on assets of 1.35% is significantly above
the national peer group of 1.19%.
CAPITAL STRENGTH Woodstown National has maintained a 5 star rating from Bauer
Financial Services, supporting the fact that we are one of
the strongest financial institutions in the nation.
---
3
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<PAGE>
President's Message
- --------------------------------------------------------------------------------
"Providing quality service and meeting the needs of our customers has always
been a key ingredient to the success of our Bank"
TO OUR SHAREHOLDERS:
It is with pleasure that I report to you another year of strong operating
results. While much of the region and economy was chugging along and taking a
wait and see attitude in 1995, The Woodstown National Bank and Trust Company was
forging ahead. The Bank set record levels in earnings, dividends paid, assets,
deposits and shareholders' equity. The strength of our operations fosters
public confidence, affording us the opportunity to attract new customers and to
grow your bank in a profitable, well managed manner.
Providing quality service and meeting the needs of our customers has always been
a key ingredient to the success of our Bank and 1995 was no exception. The Bank
had a highly successful deposit gathering campaign in June, which coincided with
the 75th anniversary of the opening of our first branch facility on June 28,
1920. "Advantage 55", a package of products and services designed for
individuals age 55 and over was introduced to the public in April and has been
accepted favorably. For the second consecutive year we have expanded our retail
banking hours for our customers' convenience. As you can see from just these few
highlights, Woodstown National is serious about meeting the needs of our
customers.
Woodstown National's financial condition continued to strengthen in 1995.
Helped by a reduction in the FDIC insurance premium assessment, which the
banking industry felt was long overdue, net income increased for the fourth
consecutive year. The following, highlight some of the other financial
accomplishments made by the Bank in 1995:
- ---
4
- ---
<PAGE>
* Assets: Total assets increased 10.8% to $254.6 million. This represents the
22nd consecutive year in which assets have increased. The increase was funded
by a $27.5 million increase in deposits, a $2.1 million increase in
shareholders' equity, less a $5 million reduction in borrowed funds.
* Loans: Loans increased $13.4 million or 8.4% to $172.2 million. This year's
increase was shared by almost all lending products of the Bank, from
residential and commercial real estate loans to business and consumer
lending.
* Asset Quality: Non-accrual loans and loans past due 90 days or more and still
earning, represented 1.71% of net loans outstanding as of December 31, 1995,
substantially down from 2.58% at December 31, 1994. Management continually
assesses the quality of its assets. Maintaining a high quality of assets has
always been one of the Bank's priorities. Management and the Board feel that
the Bank's loan loss reserve at December 31, 1995 is adequate.
* Deposits: This year's deposit growth represented the largest annual increase
in the Bank's history. Deposits stood at $231.1 million at year-end,
representing a 13.5% or $27.5 million increase over 1994 year-end balance of
$203.6 million. Deposit balances were up at all six branch locations and the
number of accounts increased 5% over December 31, 1994 totals.
* Net Income: Net income increased 4.25% to $3.29 million, compared to $3.15
million in 1994. While we fell just short of last year's record net interest
income, record earnings were achieved in 1995 by reducing total operating
expenses and the provision for credit losses and increasing other income.
* Dividends: For the 24th consecutive year the Bank has increased the dividend
paid to shareholders. Dividends declared and paid increased 12.5% from $.587
per share in 1994 to $.66
---
5
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<PAGE>
per share in 1995. Total dividends declared and paid in 1995 amounted to
$1.188 million compared to $1.056 million declared and paid in 1994.
* Capital: Capital increased $2.1 million to an all time high of $22.6 million.
This represents a 10.2% increase over total capital of $20.5 million at
December 31, 1994. We are quite pleased that capital levels continue to
increase significantly while at the same time increasing the dividend to net
income payout ratio from 33.5% in 1994 to 36.1% in 1995.
[PICTURE OF DIRECTORS APPEARS HERE]
Directors (l to r) top row: Richard O. Erdner, Ross Levitsky,
James D. Hargrave, Samuel H. Jones, Jr., bottom row:
Robert R. McHarness, Joseph E. Colson, Thomas Lail,
J. Michael Galvin, Jr.
The Woodstown National Bank and Trust Company believes firmly in a commitment to
excellence. We will always attempt to hire the most qualified individuals to
meet staffing needs. We seek individuals who possess excellent people skills,
whether on the front line or in the back office, that understand the importance
of being attentive and responsive to our customer's needs. We will always
strive to explore and choose the most profitable lines of business to create
more value for you our shareholder. And we will always go the extra mile to
make sure that we meet our customer's expectations. At Woodstown National,
excellence is not a buzz word, it's the manner in which we choose to do business
daily.
- ---
6
- ---
<PAGE>
Our Bank family was deeply saddened by the recent passing of our Chairman,
Robert B. Doble, Sr. Bob, began his tenure on the Board in 1972. His energy and
enthusiasm for Woodstown National will be sorely missed.
For all of us at Woodstown National, we thank you for the support you have shown
us by being a shareholder of our Bank. We pledge our best efforts in serving
you well in the many years to come while still remaining your "friendly,
independent, hometown, bank."
Sincerely,
/s/ Richard O. Erdner
Richard O. Erdner
President
---
7
---
<PAGE>
"We've built this company by building relationships. Our customers
appreciate being called by name."
Through good times and bad, for over seventy-five years, Woodstown National has
been serving the financial needs of the areas businesses and individuals alike.
Over the years, many of the region's community banks have been gobbled up by
regional and super-regional institutions and have lost their identity. During
that same period of time several of these larger banks have come into the area,
only to close their doors and leave town. Nobody knows this market better than
we do. We have had a long standing commitment to serve the financial needs of
the region. Whether it's having access to cash 24 hours a day at one of our
conveniently located ATM's, structuring a bridge loan to get from one settlement
to the next or establishing a living trust to provide for those you cherish the
most, Woodstown National is here for you and is here to stay.
RETAIL BANKING
[PICTURE APPEARS HERE]
(l to r) Charles W. Sutton - Business Development Officer,
Ralph Homan - Chief Executive Officer,
F. Steven Meddick, Sr. - Chief Financial Officer
One of the cornerstones of our operation is having a branch network which is
easily accessible, with convenient hours. With branch locations in six
communities in Salem and Southern Gloucester counties our presence is felt in
much of the southwestern corner of the State. Our branch managers are
experienced bankers who understand all aspects of banking and can structure a
solution to any financial situation.
Woodstown National offers a wide variety of banking services. Our deposit
products are extensive and when put in combination, can meet the needs of any
individual or business in our market place. We have been a long time member of
the MAC system, giving our customers instant access to cash
- ---
8
- ---
<PAGE>
[PICTURE APPEARS HERE]
Branch managers (l to r) Lura Conner, Laura Boger, Ann McFadden,
Mary Johnson, Penny Duffield, Margaret Massey
nationwide, as well as, the ability to make purchases at any participating point
of sale (POS) merchant. We underwrite and originate our own VISA and
MASTERCARD credit cards, allowing us to give our customers very competitive
terms. As a direct access member of the Federal Reserve System we provide
national and international wire transfer capability, as well as, ACH deposits
and withdrawals. These are just a few of the products and services we have to
offer. Our customer service representatives are trained professionals armed
with all the products and services necessary to make a banking relationship with
us, one to last a lifetime.
SMALL BUSINESS SPECIALIST
We have established a reputation within the business community as a small
business specialist. Working side by side with so many small businessmen and
women over the years has given us a firm understanding of what it takes to run
their companies. With that knowledge we have designed a unique package of
banking services aimed specifically at serving the financial needs of small
businesses in the region.
Choosing a bank is one of the most important decisions a small business will
make. No matter how small or complex a financial problem may seem, Woodstown
National can help. We look for ways to
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9
---
<PAGE>
[PICTURE APPEARS HERE]
Donald W. Davis - Trust Officer, Dana L. Pratta - Branch Administrator
make loans to small businesses. Our loan specialists understand their
marketplace and have the skills to help small businesses succeed and grow.
Since loan decisions are made locally, our small business clients have their
loans quickly.
TRUST SERVICES
The Woodstown National Bank and Trust Company has been offering trust services
for over 70 years. There are a variety of ways in which we can represent a
client. These include among others, acting in the capacity of custodian,
investment manager, trustee and/or executor.
There are numerous benefits which come standard with all of our trust services.
We take the necessary steps to protect against the physical loss of our clients
securities. We are constantly in touch with our investment managers to insure
the timely and proper execution of all security transactions. Our systems
provide for the rapid collection and reinvestment of income, which is crucial in
our philosophy of creating the most value possible for our clients. We also
feel that it is just as critical that our customers have an accurate picture of
what has transpired in their accounts. We provide this through accurate record
keeping and the timely submission of understandable account statements and year-
end tax information.
Our asset management services have been enhanced through the use of Asset
Allocation-Portfolios. These are investment portfolios specifically structured
to meet the financial objectives of our trust clients. For our institutional
clients we offer cash management services in the form of a fully collateralized
cash sweep program. The Collateralized Cash Manager is a daily cash sweep
program that takes uninvested funds and puts them to work without jeopardizing
the liquidity that is so important to daily operations.
- ----
10
- ----
<PAGE>
With our track record, years of experience and products, we feel we are uniquely
qualified to meet all the trust service requirements of our community.
[PICTURE APPEARS HERE]
Sandra Kay Battle - Loan Officer, Donald C.Ulzheimer - Loan Officer
LENDING
Woodstown National Bank prides itself in offering its customers many types of
loans. Both fixed rate Fannie Mae and ARM (Adjustable Rate Mortgages) are
offered for the acquisition or refinance of 1-4 single family homes. All
mortgages, whether sold or not, are always serviced by the Bank and not by an
outside service agent.
The Bank has developed a niche in lending to builders and developers in the
Salem and Gloucester County areas. In addition, we have become very proficient
in lending to all types and sizes of businesses to meet their real estate,
equipment and working capital needs.
On the consumer side of the portfolio we offer a variety of installment products
such as automobile, personal and home improvement loans. More recently, the Bank
has offered credit cards to both individuals and local retail merchants.
----
11
----
<PAGE>
- ------------
MANAGEMENT'S
DISCUSSION
AND ANALYSIS
OF FINANCIAL
CONDITION
AND
RESULTS OF
OPERATIONS
- ------------
Management's discussion and analysis of the Bank's financial condition and
results of its operations analyzes various components of its consolidated
balance sheet and income statement. This section should be read in conjunction
with the Bank's consolidated financial statements and accompanying notes.
1995 OVERVIEW
The first 3 months of 1995 saw deposit rates rise significantly only to subside
and in some cases finish lower by the end of the year. The reason for the
escalation in rates during the first quarter was twofold. The local marketplace
had not kept pace with the rapid increase in rates of alternative investments
for depositors in 1994 and had to hurriedly increase rates in the last half of
1994 and first quarter of 1995 to stem the outflow of deposit funds. That in
combination with a rather robust appetite for loan demand, brought on by some of
the lowest rates in decades for borrowers, made it necessary to retain core
deposits, which were more cost effective than other funding sources.
The Federal Reserve Board, while very active in raising the discount rate in
1994 as a tool to regulate the economy, raised it a half of one percent in
February 1995 to 5.25%, where it remained at year-end. The entire treasury
yield curve was between 5% and 6% for maturities of 3 months to 30 years at
December 31, 1995. At December 31, 1994, a 3 year treasury note was trading at
nearly 8% compared to 5.25% at December 31, 1995. The plummeting of treasury
note rates in 1995 made bank rates much more attractive and provided the fuel
necessary to set record levels in deposit growth at the Bank.
At year-end 1995 total assets were $254.6 million of which $172.2 million, or
68% were in net loans and $53.9 million or 21% were in investment securities to
be held to maturity and short term money market instruments. In 1995 net loans
increased $13.4 million while investment securities to be held to maturity and
short term money market instruments increased $4.6 million. With
- ----
12
- ----
<PAGE>
respect to liabilities, deposits increased $27.5 million or 13.5% over the prior
year with all the increase coming in time deposit categories. The Bank which is
predominantly a seller of funds had no borrowed funds at December 31, 1995,
compared to $5.0 million at the end of 1994.
AVERAGE BALANCES
The table below sets forth balance sheet items on a daily average basis for the
years ended December 31, 1995, 1994 and 1993 and presents the daily average
interest rates earned on assets and the daily average interest rates paid on
liabilities for such periods.
<TABLE>
<CAPTION>
WOODSTOWN NATIONAL BANK & SUBSIDIARY
AVERAGE BALANCES AND NET INTEREST INCOME
Years Ended December 31,
------------------------------------------------------------------------------------------------------
1995 1994 1993
------------------------------------------------------------------------------------------------------
Average Average Average Average Average Average
(dollars in thousands) Balance Interest Yld/Rate Balance Interest Yld/Rate Balance Interest Yld/Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest earning assets:
Loans (1) $167,748 $14,551 8.67% $153,794 $13,043 8.48% $146,961 $13,153 8.95%
Securities to be held to
maturity (2) 50,784 2,754 5.42% 47,806 2,149 4.50% 42,502 1,764 4.15%
Other (3) 12,754 810 6.35% 8,687 379 4.36% 13,527 461 3.41%
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest earning
assets $231,286 $18,115 7.83% $210,287 $15,571 7.40% $202,990 $15,378 7.58%
- ------------------------------------------------------------------------------------------------------------------------------------
Interest bearing
liabilities:
Deposits:
Savings, money market,
NOW deposits $ 83,960 $ 2,912 3.47% $ 80,163 $ 2,195 2.74% $ 72,195 $ 2,848 3.94%
Time certificates of deposit
$100 & over 24,791 1,419 5.72% 20,959 936 4.47% 22,830 1,116 4.89%
Other time deposits (4) 73,587 4,056 5.51% 64,532 2,685 4.16% 67,767 2,276 3.36%
- ------------------------------------------------------------------------------------------------------------------------------------
182,338 8,387 4.60% 165,654 5,816 3.51% 162,792 6,240 3.83%
Borrowed funds 1,888 116 6.14% 110 6 5.45%
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest bearing
liabilities 184,226 8,503 4.62% 165,764 5,822 3.51% 162,792 6,240 3.83%
Non-interest bearing funds 47,060 44,523 40,198
- ------------------------------------------------------------------------------------------------------------------------------------
Total sources to fund
earning assets $231,286 $ 8,503 3.68% $210,287 $ 5,822 2.77% $202,990 $ 6,240 3.07%
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income and
margin $ 9,612 4.15% $ 9,749 4.63% $ 9,138 4.51%
====================================================================================================================================
Other Balances:
Cash & due from banks $ 7,430 $ 6,380 $ 5,353
Other assets 6,603 6,152 5,200
Total assets 243,109 220,478 211,530
Non-interest bearing demand
deposits 36,257 34,292 30,137
Other liabilities 1,166 1,059 1,052
Shareholders' equity 21,460 19,363 17,549
</TABLE>
(1) Average balance is net before taking into account the allowance for credit
losses and includes loans on non-accrual.
(2) Includes treasury notes and bills, municipal securities, callable debentures
and mortgage-backed securities.
(3) Includes principally fed funds sold, Federal Home Loan Bank stock and a
money market mutual fund.
(4) Includes time certificates of deposit less than $100 and IRA deposits.
----
13
----
<PAGE>
During 1995 average interest earning assets totaled $231.3 million, an increase
of $21 million or 10% over 1994. The rise in average interest earning assets
occurred as a result of average loans increasing $14 million, average securities
to be held to maturity increasing $3 million and average other interest-earning
assets increasing $4 million compared to their respective average balances in
the prior year. Total average interest bearing liabilities increased $18.5
million or 11.1% over 1994. The increase was shared by all deposit categories
as well as borrowed funds. Average saving, money market and NOW deposits
increased $3.8 million or 4.7% over the preceding year. Average time
certificates of deposit of $100 thousand and over experienced a $3.8 million or
18.3% increase over average balances for 1994 and other time deposits showed the
largest gain increasing $9.1 million or 14% over 1994 average balances. Average
borrowed funds increased from $110 thousand in 1994 to $1.9 million in 1995. The
increase in outstanding average balances of certificates of deposit and other
time deposits reverses a trend which the Bank had experienced over the past
several years when rates were generally falling. Certificates of deposit and
other time deposits started to increase by the end of 1994 as certificate of
deposit rates began to increase in the later part of the third quarter and
throughout the fourth quarter of that year. The momentum carried into 1995 as
evidenced by average monthly certificate of deposit balances increasing $16.9
million in December 1995 compared to December 1994.
NET INTEREST INCOME
AND NET INTEREST MARGIN
Net interest income for 1995 was $9.6 million, a decrease of $0.1 million or
1.0% compared to 1994. Interest income increased to $18.1 million in 1995 from
$15.6 million in 1994, a change of $2.5 million or 16%. The substantial
increase in interest income was due to a combination of both volume and rate.
Average interest earning assets increased $21 million and the weighted average
yield on earning assets increased 43 basis points from 1994 to 1995. Loans
carried on non-accrual status had the effect of decreasing interest income on
loans by (in thousands) $393 in 1995, $431 in 1994 and $355 in 1993. Interest
expense for 1995 increased $2.7 million to $8.5 million from $5.8 million in
1994 or 46.6%. The cost of average interest bearing liabilities was 4.62%, an
increase of 111 basis points from 3.51% in 1994. This is opposite from the
reduction which was experienced from 1993 to 1994, when the weighted average
cost of interest bearing liabilities decreased 32 basis points. The net
interest margin (defined as net interest income as a percentage of average
earning assets) was 4.15% in 1995 down from 4.63% in 1994 and 4.51% in 1993.
NON-INTEREST INCOME
For 1995, non-interest income totaled $1.38 million, an increase of $180
thousand or 16.7% from $1.2 million in 1994. Income from fiduciary (trust)
activities decreased $18 thousand or 15% to $101 thousand in 1995. Other
miscellaneous service charges and fees decreased $36 thousand from the prior
year to $118 thousand. Service charges on deposit accounts increased $103
thousand or 15% to $792 thousand in 1995 compared to $689 thousand in 1994 and
other income increased $129 thousand or 55% to $365 thousand in 1995 compared to
$236 thousand in 1994. The majority of the increase in deposit account service
charges is attributable to a $45 thousand increase in the collection of
overdraft charges from the preceding year as well as a $20 thousand increase in
fees generated from automated teller machine usage and a $28 thousand increase
in additional checking account fees, as a result of increasing the number of
demand deposit accounts during the year. The $129 thousand increase in other
income was primarily the result of $24 thousand increase in third party credit
card fees and a $92 thousand increase in miscellaneous income.
- ----
14
- ----
<PAGE>
NON-INTEREST EXPENSE
Non-interest expense totaled $5.9 million for 1995 remaining unchanged from
1994. Salaries and employee benefits increased $31 thousand or 1.05% for the
current period, compared to the prior year. Occupancy and equipment expense
stayed the same and stood at $0.8 million for both years ended December 31,
1995 and 1994. Other operating expense of $2.14 million for 1995 was down $50
thousand from 1994's other operating expense of $2.19 million. A reduction of
$208 thousand in the FDIC insurance premium assessment, as well as, an $88
thousand decrease in loss on sale of loans, when combined with a net increase of
$246 thousand in the balance of other operating expenses resulted in the $50
thousand decrease in other operating expense.
INCOME TAXES
During 1995 the Bank expensed $1.7 million in combined federal and state income
taxes on pre-tax income of $4.99 million compared to $1.63 million of tax
expense in 1994 on pre-tax income of $4.78 million. The Bank's effective income
tax rates were 34.09% and 34.12% for the years ended December 31, 1995 and 1994,
respectively.
RETURN ON AVERAGE ASSETS
AND AVERAGE EQUITY
Two industry measures of a bank's performance are its return on average assets
(ROAA) and return on average equity (ROAE). ROAA measures net income in relation
to average assets and indicates the bank's ability to employ its resources
profitably. For 1995 and 1994 the Bank's ROAA was 1.35% and 1.43% respectively,
compared to banks nationwide with assets of $100-300 million which had on
average, ROAA of 1.19% in 1995 and 1.12% in 1994. ROAE is determined by dividing
net income by average shareholders' equity and indicates how effectively a bank
can generate profits on the capital invested and accumulated by its
shareholders. For 1995, the Bank's ROAE was 15.32% compared to 16.28% in 1994.
LOAN PORTFOLIO
The table below summarizes the Bank's loan portfolio as of December 31, for
years 1995 through 1993.
<TABLE>
<CAPTION>
December 31,
----------------------------------
(in thousands) 1995 1994 1993
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Mortgages
Residential $ 92,195 $ 85,654 $ 84,807
Residential construction 2,663 3,149 1,377
Commercial 51,317 48,274 42,350
Agricultural 2,233 1,191 1,161
-------------------------------
148,408 138,268 129,695
-------------------------------
Other secured and unsecured
Commercial 14,652 12,090 11,782
Agricultural 1,071 1,071 1,317
Consumer 10,259 9,750 8,167
-------------------------------
25,982 22,911 21,266
-------------------------------
Total loans $174,390 $161,179 $150,961
===============================
Loans on non-accrual $ 2,528 $ 3,461 $ 2,540
Other real estate 225 209 474
-------------------------------
Total non-performing assets $ 2,753 $ 3,670 $ 3,014
===============================
Non-performing assets
as a percent of total assets 1.08% 1.60% 1.42%
-------------------------------
</TABLE>
The Bank has traditionally been an active provider of real estate loans to
credit worthy borrowers in its primary trade area. At December 31, 1995, 85.1%
of the loan portfolio was secured by real estate compared to 85.8% and 85.9% at
December 31, 1994 and 1993, respectively. During 1995, loans before the effect
of the allowance for possible credit losses, increased $13.2 million or 8.20%
compared to increasing $10.2 million or 6.77% in 1994. Residential mortgage
lending lead the way in 1995 accounting for nearly half of the loan portfolio's
increase at $6.5 million from $85.7 million at December 31, 1994 to $92.2
million at December 31, 1995 or 7.58%. Lending on commercial real estate had
been the primary contributor in the loan portfolio's increase in the prior year
increasing $5.9 million in 1994.
----
15
----
<PAGE>
NON-PERFORMING LOANS AND ASSETS
Non-performing assets (non-performing loans and other real estate) at December
31, 1995 were $2.75 million or 1.08% of total assets compared to $3.67 million
or 1.60% of total assets at December 31, 1994. Total non-accrual loans at
December 31, 1995 were $2.53 million compared to $3.46 million a year ago. The
Bank generally places a loan on non-accrual status and ceases to accrue interest
when loan payment performance is deemed unsatisfactory or when management
becomes aware of an event that may cause an impairment in the future repayment
of a loan. Generally, loans 90 days or more delinquent are placed on non-
accrual status, unless the loan is both well secured and in the process of
collection. At December 31, 1995, loans past due 90 days or more and still
accruing amounted to $391 thousand down from $634 thousand at December 31, 1994.
Other real estate (ORE) at December 31, 1995 totaled $225 thousand compared to
$209 thousand a year ago. The ORE total of $225 thousand consist of one single
family residence, owned by the Bank. The property has been written down to its
net realizable value. Management does not anticipate any material loss based on
the current fair value of the property.
ALLOWANCE FOR CREDIT LOSSES
The following table presents, for the periods indicated,an analysis of the
allowance for credit losses and other related data.
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------
(in thousands) 1995 1994 1993
- -----------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of period $2,386 $2,296 $1,893
Provisions charged
to operating expenses 90 239 472
--------------------------
2,476 2,535 2,365
--------------------------
Recoveries of loans
previously charged off:
Consumer 114 61 144
Commercial 10 1
Real estate 57 6 14
--------------------------
171 77 159
--------------------------
Loans charged-off:
Consumer 89 98 190
Commercial
Real estate 373 128 38
--------------------------
Total charged-off 462 226 228
--------------------------
Net charge-offs (291) (149) (69)
--------------------------
Balance at end of period $2,185 $2,386 $2,296
==========================
Net charge-offs as a percentage
of average loans outstanding 0.17% 0.10% 0.05%
--------------------------
Allowance for credit losses as a
percentage of year-end loans 1.25% 1.48% 1.52%
--------------------------
Allowance coverage
of non-performing loans 86.43% 68.94% 90.39%
--------------------------
</TABLE>
The allowance for credit losses is a reserve established through charges to
earnings in the form of a provision for credit losses. Management has
established an allowance for credit loss which it believes is adequate for
estimated losses in its portfolio and contingent liabilities (primarily
outstanding and unused loan commitments). Management evaluates the adequacy of
the allowance quarterly and reviews its findings with the Board of Directors.
Changes to
- ----
16
- ----
<PAGE>
the provision, if required, are made at that time for the up-coming quarter.
Charge-offs occur when loans are deemed to be uncollectible. At December 31,
1995, the allowance totaled $2.19 million or 1.25% of total loans and provided
coverage of 86% of non-performing loans.
INVESTMENT SECURITIES
The Bank's investment securities portfolio increased $4.43 million or 9% to
$53.66 million during the year. All securities purchased are designated as
securities to be held to maturity. The Bank does not purchase securities to
trade nor has it made investment security purchases that would be available for
sale. Management and the Board regularly review the Bank's investment strategy
and may at some future date adopt policies to purchase securities that could be
traded, as well as, purchase securities that would be available for sale.
DEPOSITS
Total deposits of the Bank increased $27.5 million or 13.52% to $231.1 million
compared to deposit growth of $10.5 million or 5.46% in the previous year. The
Bank is a deposit driven financial institution that looks to attract and retain
core deposits as its basis for stable growth and profitability. Core deposits
are all deposits other than certificates of deposit in excess of $100 thousand.
At December 31, 1995 core deposits represented 88.8% of total deposits compared
to 90.5% at December 31, 1994.
SHAREHOLDERS' EQUITY
At December 31, 1995, shareholders' equity totaled $22.6 million, up $2.1
million or 10.24% over shareholders' equity of $20.5 million at December 31,
1994. The increase was attributable to retained earnings increasing $3.29
million from 1995 net income and decreasing $1.19 million from dividends
declared and paid in the current year. Shareholders' equity as a percent of
total assets at December 31, 1995 and December 31, 1994 was 8.88% and 8.92%,
respectively. The banking industry must meet certain risk-based capital
standards established by bank regulatory authorities. These capital standards
relate a bank's capital to the risk profile of its assets and commitments and
provides a basis for which all banks are evaluated in terms of capital adequacy.
The risk-based capital standards require all banks to have Tier 1 risk-based
capital of at least 4% and total risk-based capital, including Tier 1 risk-based
capital, of at least 8% of risk-adjusted assets. Tier 1 risk-based capital for
the Bank includes common stock , capital surplus and retained earnings, reduced
by unamortized premiums paid in the acquisition of deposits. The Bank's total
risk-based capital, used in computing the total risk-based capital ratio,
includes Tier 1 risk-based capital and a portion of the allowance for credit
losses. The Bank's Tier 1 risk-based capital ratio at December 31, 1995 was
14.85% and its total risk-based capital ratio was 16.11%. These ratios define
Woodstown National as a "well capitalized" bank.
----
17
----
<PAGE>
- ------------
SELECTED
CONSOLIDATED
FINANCIAL
DATA
- ------------
<TABLE>
<CAPTION>
WOODSTOWN NATIONAL BANK & SUBSIDIARY
(in thousands except per share data) Years Ended December 31,
-----------------------------------------------------------------
1995 1994 1993 1992 1991
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net interest income $ 9,612 $ 9,749 $ 9,138 $ 8,730 $ 7,513
Provision for credit losses 90 239 472 676 899
Non-interest income 1,376 1,198 1,158 944 808
Non-interest expense 5,910 5,923 5,050 4,550 4,391
Income before income taxes 4,988 4,785 4,774 4,448 3,031
Effect of accounting change (131)
Net income 3,287 3,153 3,031 2,799 2,390
BALANCE SHEET DATA:
Total assets $254,593 $229,820 $212,169 $207,659 $199,598
Loans (net) 172,205 158,793 148,665 141,141 143,047
Securities held for investment 53,658 49,230 46,600 40,425 32,958
Federal funds sold 10,310 5,400 3,045 13,465 10,205
Deposits 231,089 203,563 193,016 190,387 183,850
Borrowed funds 5,000
Shareholders' equity 22,602 20,503 18,406 16,395 14,586
PER SHARE DATA:
Net income $ 1.83 $ 1.75 $ 1.68 $ 1.56 $ 1.33
Cash dividends 0.66 0.59 0.57 0.55 0.52
Book value 12.56 11.39 10.22 9.11 8.10
SELECTED RATIOS:
Performance
Return on average assets 1.35% 1.43% 1.43% 1.38% 1.20%
Return on average equity 15.32 16.28 17.27 17.62 17.24
Net interest margin 4.15 4.63 4.51 4.48 3.94
Liquidity and Capital
Average loans to average
deposits 76.74 76.92 76.17 76.05 77.51
Dividend payout 36.14 33.49 33.65 35.37 39.41
Total risk-based capital 16.11 15.56 15.42 14.24 13.97
Leverage 8.73 8.72 8.68 7.97 7.25
Asset Quality
Non-performing loans
to year-end loans 1.45 2.15 1.68 1.83 0.68
Non-performing assets
to year-end assets 1.08 1.60 1.42 1.42 0.69
Allowance for credit losses
to year-end loans 1.25 1.48 1.52 1.32 1.04
Allowance for credit losses
to non-performing loans 86.43 68.94 90.39 72.14 152.59
</TABLE>
- ----
18
- ----
<PAGE>
- --------------------------------------------------------------- INDEPENDENT
AUDITOR'S
[LETTERHEAD OF PETRONI & ASSOCIATES APPEARS HERE] REPORT
INDEPENDENT AUDITOR'S REPORT
----------------------------
The Board of Directors and Shareholders
The Woodstown National Bank and Trust Company
P.O. Box 248
Woodstown, NJ 08098
I have audited the accompanying consolidated statements of
condition of The Woodstown National Bank and Trust Company
and Subsidiary as of December 31, 1995 and 1994, and the
related consolidated statements of income, changes in
shareholders' equity, and cash flows for the years then
ended. These financial statements are the responsibility
of the Bank's management. My responsibility is to express
an opinion on these financial statements based on my audits.
I conducted my audits in accordance with generally accepted
auditing standards. Those standards require that I plan and
perform the audits to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. I believe that my audits provide a
reasonable basis for my opinion.
In my opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of The
Woodstown National Bank and Trust Company and Subsidiary as of December 31, 1995
and 1994, and the results of their operations and their cash flows for each of
the years then ended, in conformity with generally accepted accounting
principles.
Respectfully submitted,
PETRONI & ASSOCIATES
/s/ Nick L. Petroni
Nick L. Petroni
Certified Public Accountant
January 12, 1996
- ---------------------------------------------------------------
----
19
----
<PAGE>
- ------------
CONSOLIDATED
FINANCIAL
STATEMENTS
- ------------
<TABLE>
<CAPTION>
THE WOODSTOWN NATIONAL BANK AND TRUST COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CONDITION
DECEMBER 31, 1995 AND 1994
(Thousands)
ASSETS 1995 1994
---- ----
<S> <C> <C>
Cash and due from banks $ 9,959 $ 8,562
Money market mutual fund 1,249 1,104
Federal funds sold 10,310 5,400
------ -----
Total cash and cash equivalents 21,518 15,066
Investment securities:
Held to maturity (market value of $53,040
in 1995 and $47,034 in 1994) 52,686 48,260
Other (market value of $972 in 1995 and $970 in 1994) 972 970
Loans, net of allowance for credit losses
of $2,185 in 1995 and $2,386 in 1994 172,205 158,793
Accrued interest receivable 1,745 1,483
Properties and equipment, net 3,700 3,740
Other assets 1,767 1,508
------- -------
Total assets $254,593 $229,820
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Demand deposits $ 37,566 $ 38,479
Savings, money market, and NOW deposits 90,047 79,978
Time certificates of deposit $100 and over 25,946 19,373
Other time deposits 77,530 65,733
------- -------
Total deposits 231,089 203,563
Other borrowed funds 5,000
Accrued interest payable 735 543
Accrued expenses and other liabilities 167 211
------- -------
Total liabilities 231,991 209,317
------- -------
SHAREHOLDERS' EQUITY:
Common stock, $.22 par value; 10,000 shares authorized;
1,800 shares issued and outstanding 400 400
Additional paid-in capital 1,200 1,200
Retained earnings 21,002 18,903
------- -------
Total shareholders' equity 22,602 20,503
------- -------
Total liabilities and shareholders' equity $254,593 $229,820
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
- ----
20
- ----
<PAGE>
THE WOODSTOWN NATIONAL BANK AND TRUST COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Years Ended DECEMBER 31, 1995 AND 1994
(Thousands, except per share amounts)
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $14,551 $13,043
Interest on securities to be held to maturity 2,754 2,149
Interest on federal funds sold 686 268
Other 124 111
------- -------
Total interest income 18,115 15,571
------- -------
INTEREST EXPENSE:
Interest on deposits 8,387 5,816
Interest on other borrowed funds 116 6
------- -------
Total interest expense 8,503 5,822
------- -------
Net interest income 9,612 9,749
Provision for credit losses 90 239
------- -------
Net interest income after provision for credit
losses 9,522 9,510
------- -------
OTHER INCOME:
Income from fiduciary activities 101 119
Service charges on deposit accounts 792 689
Other service charges and fees 118 154
Other income 365 236
------- -------
Total other income 1,376 1,198
------- -------
OPERATING EXPENSES:
Salaries and employee benefits 2,970 2,939
Occupancy and equipment expense 802 796
Other operating expense 2,138 2,188
------- -------
Total operating expenses 5,910 5,923
------- -------
Income before income tax expense 4,988 4,785
Income tax expense 1,701 1,632
------- -------
NET INCOME $ 3,287 $ 3,153
======= =======
Net income per share of common stock $1.83 $1.75
======= =======
Average shares outstanding 1,800 1,800
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
----
21
----
<PAGE>
THE WOODSTOWN NATIONAL BANK AND TRUST COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995 AND 1994
(Thousands)
<TABLE>
<CAPTION>
Additional Total
Common Paid-In Retained Shareholders'
Stock Capital Earnings Equity
------- ---------- -------- ------------
<S> <C> <C> <C> <C>
Balance at December 31, 1993 $400 $1,200 $16,806 $18,406
Net income for 1994 3,153 3,153
Cash dividends paid - $.587 per
share (1,056) (1,056)
------ ------- ------- -------
Balance at December 31, 1994 400 1,200 18,903 20,503
Net income for 1995 3,287 3,287
Cash dividends paid - $.66 per
share (1,188) (1,188)
------ ------- ------- -------
Balance at December 31, 1995 $400 $1,200 $21,002 $22,602
====== ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
- ----
22
- ----
<PAGE>
THE WOODSTOWN NATIONAL BANK AND TRUST COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1994
(Thousands)
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,287 $ 3,153
------- -------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 378 361
Amortization and accretion, net 62 139
Provision for credit losses 90 239
Deferred income taxes (172) 91
(Increase) decrease in interest receivable (262) (223)
(Increase) decrease in other assets 54 (475)
(Increase) decrease in prepaid expense 5 (99)
Increase in interest payable 192 38
Increase in deferred income 17 42
Decrease in accrued expenses and other
liabilities (44) (30)
Purchase of investment real estate (125)
------- -------
Total adjustments 195 83
------- -------
Net cash provided by operating activities 3,482 3,236
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of securities to be
held to maturity 23,833 25,604
Purchases of securities to be held to maturity (28,321) (28,346)
Purchase of other restricted securities (2) (37)
Net increase in loans (13,540) (10,133)
Purchases of properties and equipment (338) (980)
------- -------
Net cash used in investing activities (18,368) (13,892)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in non-interest bearing demand,
savings, NOW, and money market deposit accounts 9,156 11,623
Net increase (decrease) in time deposits 18,370 (1,076)
Net increase (decrease) in borrowed funds (5,000) 5,000
Dividends paid (1,188) (1,056)
------- -------
Net cash provided by financing activities 21,338 14,491
------- -------
Net increase (decrease) in cash and equivalents 6,452 3,835
Cash and cash equivalents, January 1 15,066 11,231
------- -------
Cash and cash equivalents, December 31 $ 21,518 $ 15,066
======= =======
Interest paid $ 8,310 $ 5,784
======= =======
Income taxes paid $ 1,896 $ 1,591
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
----
23
----
<PAGE>
- -------------
THE WOODSTOWN
NATIONAL BANK
AND TRUST
COMPANY AND
SUBSIDIARY
NOTES TO
CONSOLIDATED
FINANCIAL
STATEMENTS
- -------------
NOTE 1: SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of The Woodstown National Bank and Trust
Company and Subsidiary conform to generally accepted accounting principles and
to general practices in the banking industry. The more significant of the
principles used in preparing the financial statements are briefly described
below.
PRINCIPLES OF CONSOLIDATION: The accompanying consolidated financial statements
include the accounts of The Woodstown National Bank and Trust Company and its
wholly owned subsidiary Woodstown Investment Company, Inc. All significant
inter-company balances and transactions have been eliminated in consolidation.
NATURE OF OPERATIONS: The Woodstown National Bank and Trust Company operates
under a national bank charter and provides full banking services, including
trust services. As a national bank, the Bank is subject to regulation of the
Office of the Comptroller of the Currency and the Federal Deposit Insurance
Corporation. The area served by The Woodstown National Bank and Trust Company is
the south western region of New Jersey and services are provided at 6 branches
located in Salem and Gloucester Counties.
ESTIMATES: The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS: For purpose of presentation in the Statement of Cash
Flows, the Bank considers cash and cash equivalents to include cash on hand,
amounts due from banks, investments in money market mutual funds and federal
funds sold, since their maturities are generally one business day.
INVESTMENTS IN SECURITIES:
SECURITIES TO BE HELD TO MATURITY: Bonds, notes and debentures for which the
Bank has the positive ability and intent to hold to maturity are reported at
cost adjusted for amortization of premiums and accretion of discounts which are
recognized in interest income using the interest method over the period to
maturity. Securities reported in the held to maturity category include U. S.
Treasury Notes, U. S. Government and agencies, and municipal obligations.
Other securities include stock in the Federal Reserve Bank and the Federal Home
Loan Bank.
LOANS HELD FOR SALE: Mortgage loans originated and intended for sale in the
secondary market are carried at the lower of cost or estimated market value in
the aggregate. Net unrealized losses are recognized through a valuation
allowance by charges to income.
LOANS: Loans receivable that management has the intent and ability to hold for
the foreseeable future or until maturity or pay-off are reported at their
outstanding principal adjusted for any charge-offs, net of unearned discount,
allowance for credit losses, and unearned loan fees. Unearned discounts on
discounted loans are recognized as income over the term of the loans using a
method that approximates the interest method. For all other loans, interest is
accrued daily on the outstanding balances.
Loan origination fees are deferred and amortized as an adjustment of the yield
on the related loans.
Loans are generally placed on non-accrual status when a loan is specifically
determined to be impaired or when principal or interest is delinquent for 90
days or more. Any unpaid interest previously accrued on those loans is reversed
from income. Interest income generally is not recognized on specific impaired
loans unless the likelihood of further loss is remote. Interest payments
received on such loans are applied as a reduction of the loan principal balance.
Interest income on other non-accrual loans is recognized only to the extent of
interest payments received.
ALLOWANCE FOR CREDIT LOSSES: The allowance is maintained at a level which, in
management's judgment, is adequate to absorb probable losses inherent in the
loan portfolio. The amount of the allowance is based on management's evaluation
of the collectibility of the loan portfolio, including the nature of the
portfolio, credit concentrations, trends in historical loss experience, specific
impaired loans, and economic conditions. The allowance is increased by
provisions for loan losses and recoveries on loans previously charged off and
reduced by charge-offs of loans deemed uncollectible.
FORECLOSED REAL ESTATE: Real estate, acquired through partial or total
satisfaction of loans, is carried at the lower of cost or fair market value less
costs to sell at the date of foreclosure. At the date of acquisition, losses
are charged to the allowance for loan losses. Subsequent write downs are
charged to expense in the period they are incurred.
PROPERTIES AND EQUIPMENT: Depreciation is provided over the estimated useful
lives of the respective assets computed by the straight-line method. Land is
carried at cost. Bank premises, furniture and equipment are recorded at cost
less accumulated depreciation. Expenditures for maintenance and repairs are
charged to operations, and the expenditures for major replacements and
betterments are added to the property and equipment accounts. The cost and
accumulated depreciation of the property and equipment retired or sold are
eliminated from the property accounts at the time of retirement or sale and the
resulting gain or loss is reflected in current operations.
OTHER ASSETS: A core deposit premium intangible acquired during 1994 is being
amortized on the straight line basis over seven years. The carrying amount
included in other assets at December 31, 1995 and 1994 (in thousands) is $390
and $460, respectively, and amortization expense for 1995 and 1994 amounted to
$70 and $29, respectively.
INCOME TAXES: Income taxes are provided for the tax effects of the transactions
reported in the financial statements and consist of taxes currently due plus
deferred taxes related primarily to differences between the basis of the
allowance for credit losses, accumulated depreciation, and deferred loan fees.
The deferred tax assets and liabilities represent the future tax return
consequences of those differences, which will either be taxable or deductible
when the assets and liabilities are recovered or settled as prescribed in SFAS
No. 109, Accounting for Income Taxes. As changes in tax laws or rates are
enacted, deferred tax assets and liabilities are adjusted through the provision
for income taxes.
EMPLOYEE BENEFITS: The Bank has a 401(k) retirement savings plan, covering
substantially all employees. To be eligible, an employee must be 21 years of
age and have completed one participation year of service. Eligible employees may
elect to defer from 1% to 16% of compensation. The Bank is required to make a
contribution equal to 100% of the first 6% of employee contributions.
A nonqualified deferred compensation plan was adopted for key employees.
Eligible employees elect to reduce irrevocably his or her compensation not yet
earned for the following calendar year.
A nonqualified salary continuation agreement was also adopted for the benefit of
key employees. The Board of Directors, at its discretion, may make annual
contributions of 1.1 percent of annual pretax profits to fund the plan.
The Bank had elected a partial self-funding of employee medical insurance. The
Bank could have paid (in thousands) the first $10 for each employee and family
member covered with a group maximum
- ----
24
- ----
<PAGE>
of approximately $325. Costs in excess of this amount were covered by an excess
loss reinsurance contract. During 1994, the self-funding plan was terminated.
Management does not anticipate any loss contingency as a result of this
termination.
The Board entered into a contract with certain employees for a severance pay
plan. There is no obligation by the Bank for any payments under this plan
unless certain events occur as defined in the plan agreement. No liability has
been recorded as a result of this contract.
NET INCOME PER SHARE OF COMMON STOCK: Net income per share of common stock is
calculated on the weighted average number of shares outstanding during the
period after giving retroactive effect of stock dividends and stock splits.
During 1994, the shareholders approved a 3 for 1 stock split increasing the
number of shares issued and outstanding from (in thousands) 600 to 1,800. The
average number of shares outstanding have been retroactively restated for all
periods presented to reflect this change.
FAIR VALUE OF FINANCIAL INSTRUMENTS: The following methods and assumptions were
used to estimate the fair value of financial instruments:
. CASH AND SHORT-TERM INSTRUMENTS: For those short-term instruments, the
carrying amount is a reasonable estimate of fair value.
. SECURITIES TO BE HELD TO MATURITY: Fair values are based on quoted market
prices or dealer quotes. If a quoted market price is not available, fair value
is estimated using quoted market prices for similar securities. It is the
Bank's policy to hold investments until maturity.
. OTHER SECURITIES: The carrying values of restricted equity securities
approximate fair values.
. LOANS RECEIVABLE: Fair value of homogeneous categories of residential
mortgages and consumer loans is estimated by discounting future cash flows
using the current rates at which similar loans would be made to borrowers with
similar credit ratings and for the same remaining maturities.
. DEPOSIT LIABILITIES: Fair value of demand deposits, savings accounts, and NOW
accounts is defined as the amount payable on demand at the reporting date. The
fair value for certificates of deposit is estimated using a discounted cash
flow calculation that applies interest rates currently being offered on
certificates to a schedule of aggregated contractual maturities on such time
deposits.
. SHORT-TERM BORROWINGS: The carrying amounts of federal funds purchased,
borrowings under repurchase agreements, and other short-term borrowings
maturing within 90 days approximate their fair values.
. ACCRUED INTEREST: The carrying amounts of accrued interest approximate their
fair values.
TRUST DEPARTMENT: Property (other than cash deposits) held by the Bank in a
fiduciary or agency capacity for its customers is not included in the
accompanying consolidated statement of condition, since such amounts are not
assets of the Bank. Trust fees are recorded by the Bank on the accrual basis.
ADVERTISING COSTS: The Bank charges expenditures for advertising costs to income
as incurred. Advertising expense amounted to (in thousands) $153 and $143
during 1995 and 1994, respectively.
OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS: In the ordinary course of business the
Bank has entered into off balance sheet financial instruments consisting of
commitments to extend credit, commitments under credit card arrangements and
standby letters of credit. Such financial instruments are recorded in the
financial statements when they are funded or related fees are incurred or
received.
NOTE 2: INVESTMENT SECURITIES
Investment securities are carried at amortized cost. The amortized cost and
estimated market value of the investment securities are as follows (in
thousands):
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Market Value
--------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Securities to be
held to maturity:
December 31, 1995
U.S. treasuries $38,839 $ 416 $ 6 $39,249
U.S. government
agencies securities 3,508 22 3,530
Mortgage-backed
securities 5,721 76 5,645
State and municipal
obligations 4,618 1 3 4,616
------- ------ ------ -------
52,686 439 85 53,040
Other securities 972 972
------- ------ ------ -------
Total investment
securities $53,658 $ 439 $ 85 $54,012
======= ====== ====== =======
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Market Value
--------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Securities to be
held to maturity:
December 31, 1994
U. S. treasuries $30,749 $ 13 $ 1,122 $29,640
Morgage-backed
securities 6,373 604 5,769
State and municipal
obligations 11,138 2 119 11,021
------- ------ ------ -------
48,260 15 1,845 46,430
Other securities 970 970
------- ------ ------ -------
Total investment
securities $49,230 $ 15 $ 1,845 $47,400
======= ====== ======= =======
</TABLE>
The amortized cost and estimated market value of debt securities at December 31,
1995 and 1994, by contractual maturity, follow. Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
1995 1994
-------------------------- --------------------------
Amortized Estimated Amortized Estimated
Cost Market Value Cost Market Value
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Due in one year
or less $21,404 $21,500 $21,674 $21,474
Due after one year
through five years 30,482 30,740 19,313 18,891
Due from five to
ten years 800 800 7,273 6,669
------- ------ ------- -------
52,686 53,040 48,260 47,034
Federal Reserve Bank
stock 48 48 48 48
Federal Home Loan
Bank-NY stock 924 924 922 922
------- ------ ------- -------
$53,658 $54,012 $49,230 $48,004
======= ====== ======= =======
</TABLE>
The Bank did not realize any gains or losses on securities for December 31, 1995
and 1994.
----
25
----
<PAGE>
Investment securities with a carrying value of $29,548 and $16,510 at December
31, 1995 and 1994,respectively, were pledged to secure public deposits, qualify
for fiduciary powers and for other purposes required or permitted by law.
Approximate market value of pledged securities at December 31, 1995 and 1994
was $29,687 and $16,221, respectively.
NOTE 3: LOANS
Major classifications of loans in the consolidated balance sheet at December 31
are summarized as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Residential real estate $ 90,228 $ 86,046
Commercial real estate 53,862 49,608
Agricultural 2,082 1,071
Commercial 13,771 12,090
Real estate construction 3,914 3,185
Consumer loans 11,139 9,767
-------- -------
174,996 161,767
Net deferred loan fees (606) (588)
Allowance for credit losses (2,185) (2,386)
-------- --------
Loans, net $172,205 $158,793
======== ========
An analysis of the change in the allowance for credit losses follows:
1995 1994
----- ------
Balance January 1 $ 2,386 $ 2,296
Provision for credit losses 90 239
Credits charged off (462) (226)
Recoveries 171 77
-------- --------
Balance December 31 $ 2,185 $ 2,386
======== ========
</TABLE>
Loans past due 90 days or more and still earning totaled $391 and $634 at
December 31, 1995 and 1994, respectively. Non-accruing loans (principally
real estate loans) totaled $2,528 and $3,461 at December 31, 1995 and 1994,
respectively, which had the effect of reducing income $393 and $431, and
earnings per common share $.22 and $.24, respectively.
Impairment of loans having recorded investments of $1,237 and $1,882 at December
31, 1995 and 1994, respectively, has been recognized in conformity with FASB
Statement No. 114 as amended by FASB Statement No. 118. The average recorded
investment in impaired loans during 1995 and 1994 was $1,577 and $1,886,
respectively. The total allowance for loan losses related to these loans was
$384 at December 31, 1995 and $650 at December 31, 1994. Loans having carrying
values of $356 and $113 were transferred to foreclosed real estate in 1995 and
1994, respectively.
NOTE 4: LOAN SERVICING
The Bank has retained servicing rights in certain mortgage loans sold to the
Federal National Mortgage Association (Fannie Mae). These loans are not
included in the accompanying consolidated balance sheets. The unpaid principal
balances of those loans totaled (in thousands) $6,978 and $4,116 at December 31,
1995 and 1994, respectively.
NOTE 5: PROPERTIES AND EQUIPMENT
Components of properties and equipment at December 31 were as follows (in
thousands):
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Land $ 409 $ 304
Bank premises 3,280 3,295
Equipment, furniture and fixtures 2,248 2,190
Construction in process 191
------ ------
Total cost 6,128 5,789
Less: Accumulated depreciation 2,428 2,049
------ ------
Net book value $3,700 $3,740
====== ======
</TABLE>
During 1995, the Bank acquired for a contract sales price of $100, in an arms-
length transaction, land adjacent to one of its branch banks from an
organization whose principals included a Director of the bank. This transaction
is included under land in the above schedule of components of properties and
equipment at December 31, 1995.
Depreciation expense amounted to $378 in 1995 and $361 in 1994.
NOTE 6: FORECLOSED REAL ESTATE
The balance of other real estate owned acquired through foreclosure in
settlement of loans is included in other assets and totaled at December 31, 1995
and 1994 (in thousands) $225 and $209, respectively. Loss on foreclosed real
estate includes net expense of $13 and $28 in 1995 and 1994, respectively.
NOTE 7: DEPOSITS
The following is a maturity distribution of time deposits in denomination of (in
thousands) $100 or more at December 31 :
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Three months or less $ 7,397 $7,142
Over three months through twelve months 11,050 8,028
Over one year through five years 7,499 4,203
------- -------
$25,946 $19,373
======= =======
</TABLE>
NOTE 8: SHORT-TERM BORROWINGS
A line of credit in the amount of (in thousands) $11,491 was established April
25, 1995 with the Federal Home Loan Bank of NY and expires in one year. This
credit line is subject to the terms and conditions of the Bank's overnight
advance program as detailed in the following paragraph. Pricing of the credit
line may fluctuate during the year based on existing market conditions and
demand for credit.
The Bank had no outstanding advances at December 31, 1995, and outstanding
advances of $5,000 at December 31, 1994. Advances matured January 30, 1995
and carried an interest rate of 6.15%. A security interest in certain
collateral with a carrying value at least equal to advances has been made in
accordance with the terms of the advances, collateral pledge, and security
agreement entered into with FHLB-NY. Federal Home Loan Bank stock required to
be held by the Bank had a carrying amount of $924 and $922 at December 31, 1995
and 1994, respectively.
- ----
26
- ----
<PAGE>
NOTE 9: INCOME TAXES
The consolidated provision for income taxes for 1995 and 1994 consisted of the
following at December 31, (in thousands):
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Current tax expense
Federal $1,628 $1,337
State 245 204
------- -------
Total current 1,873 1,541
------- -------
Deferred taxes
Federal ( 135) 68
State ( 37) 23
------- -------
Total deferred ( 172) 91
------- -------
Net tax expense $1,701 $1,632
======= =======
</TABLE>
The provision for federal and state income taxes differs from that computed by
applying the federal and state statutory rates to income before income tax
expense, as indicated in the following analysis:
<TABLE>
<CAPTION>
1995 1994
-------------------------- -------------------------
Amount Percentage Amount Percentage
-------- ------------- -------- ------------
<S> <C> <C> <C> <C>
Expected tax provision
at the statutory rate $ 2,145 43.000 $ 2,057 43.000
Effect of tax-exempt
income ( 85) (1.707) ( 156) (3.261)
Income of subsidiary-
federal taxable ( 236) (4.736) ( 181) (3.783)
Other net ( 123) (2.463) ( 88) (1.839)
-------- -------- -------- --------
$1,701 34.094 $ 1,632 34.117
======== ======== ======== ========
</TABLE>
Deferred tax liabilities have been provided for taxable temporary differences
related to depreciation. Deferred tax assets have been provided for deductible
temporary differences related to the allowance for credit losses and deferred
loan origination fees. The deferred tax asset valuation allowance relates to
the allowance for credit losses which management believes will not be realized
due to the disparity between the regulatory required provision and the Bank's
experience of the actual amounts charged to the allowance.
The net deferred tax assets included in other assets in the accompanying
consolidated statements of condition include the following components at
December 31,:
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Federal and State
Deferred tax liabilities $ (163) $ (159)
Deferred tax assets 1,397 1,273
Deferred tax assets valuation allowance (442) (494)
------- -------
Net deferred tax assets $ 792 $ 620
======= =======
</TABLE>
NOTE 10: TRANSACTIONS WITH RELATED PARTIES
The Bank has had, and may be expected to have in the future, banking
transactions in the ordinary course of business with directors, principal
officers, their immediate families, and affiliated companies in which they are
principal stockholders (commonly referred to as related parties), on the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with others. Total loans and commitments to these
persons and firms was (in thousands) $4,910 and $4,207 at December 31, 1995 and
1994, respectively.
The Bank entered into a participation loan agreement with a Director of the
Bank. The participation sold constituted an assignment, without recourse to the
Bank, of an undivided 41.2% interest in the Bank's right, title and interest in
the outstanding loan. The outstanding participation loan balance at December
31, 1995 and 1994 amounted to $569 and $601, respectively. Also see Note 5:
Properties and Equipment for additional information regarding related party
transactions.
NOTE 11: RETIREMENT PLANS
The Bank charged pension expense (in thousands) $117 and $108 for contributions
to the 401(k) retirement savings plan in 1995 and 1994, respectively, and none
and $8 in 1995 and 1994, respectively, to the key employees salary continuation
retirement plan.
NOTE 12: CONTINGENT LIABILITIES AND COMMITMENTS
The Bank's consolidated financial statements do not reflect various commitments
and contingent liabilities which arise in the normal course of business and
which involve elements of credit risk, interest-rate risk and liquidity risk.
These commitments and contingent liabilities are described in Note 8: Short-
Term Borrowings and Note 16: Financial Instruments. The Bank and its subsidiary
are parties to litigation and claims arising in the normal course of business.
Management, after consultation with legal counsel, believes that the
liabilities, if any, arising from such litigation and claims will not be
material to the consolidated financial position.
NOTE 13: REGULATORY MATTERS
The Bank, as a National Bank, is subject to the dividend restrictions set forth
by the Comptroller of the Currency. Under such restrictions, the Bank may not,
without the prior approval of the Comptroller of the Currency, declare dividends
in excess of the sum of the current year's earnings (as defined) plus the
retained earnings (as defined) from the prior two years. The dividends that the
Bank could have declared without the approval of the Comptroller of the
Currency, amounted to approximately (in thousands) $7,395 in 1995 and $6,973 in
1994. The Bank is also required to maintain minimum amounts of capital to total
"risk weighted" assets as defined by the banking regulators. At December 31,
1995 and 1994, the Bank was required to have minimum Tier I and Total Capital
ratios of 4% and 8%, respectively. The Bank's actual ratios at those dates were
14.85% and 16.11% for 1995 and 14.30% and 15.56% for 1994, respectively. In
addition, the Bank maintained a leverage capital ratio of 8.73% and 8.72% at
December 31, 1995 and 1994, respectively, which exceeded the minimum required by
regulation.
NOTE 14: CONCENTRATIONS OF CREDIT RISK
Management attempts to manage interest rate risk through various asset/liability
management techniques designed to match maturities of assets and liabilities.
Loan policies and administration are designed to provide assurance that loans
will only be granted to creditworthy borrowers, although credit losses are
expected to occur because of subjective factors and factors beyond the control
of the
----
27
----
<PAGE>
Bank. The concentrations of credit by type of loan are set forth in Note 3.
In addition, the Bank is a community bank and, as such, is mandated by the
Community Reinvestment Act and other regulations to conduct most of its lending
activities within the geographic area where it is located. As a result, the
Bank and its borrowers may be especially vulnerable to the consequences of
changes in the local economy.
At December 31, 1995, the Bank's cash included two correspondent bank checking
accounts aggregating (in thousands) $2,011 in excess of the Federal Deposit
Insurance Corporation limit of $100 per institution.
NOTE 15: FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Bank is a party to financial instruments with off-balance-sheet risk in the
normal course of business to meet the financing needs of its customers and to
reduce its own exposure to fluctuations in interest rates. These financial
instruments include commitments to extend credit and standby letters of credit
and financial guarantees. Those instruments involve, to varying degrees,
elements of credit risk in excess of the amount recognized in the statement of
financial position. The contract or notional amounts of those instruments
reflect the extent of the Bank's involvement in particular classes of financial
instruments.
The Bank's exposure to credit loss in the event of nonperformance by the other
party to the financial instrument for commitments to extend credit, standby
letters of credit, and financial guarantees written is represented by the
contractual notional amount of those instruments. The Bank uses the same credit
policies in making commitments and conditional obligations as it does for on-
balance-sheet instruments.
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Bank evaluates each customer's credit
worthiness on a case-by-case basis. The amount of collateral obtained, if it is
deemed necessary by the Bank upon extension of credit, is based on management's
credit evaluation of the counter party. Collateral held varies but may include
accounts receivable, inventory, property, plant and equipment, and income-
producing commercial properties.
Standby letters of credit and financial guarantees written are conditional
commitments issued by the Bank 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. Most guarantees extend for one year. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities to customers. The Bank holds collateral supporting
those commitments for which collateral is deemed necessary. The extent of
collateral held for those commitments at December 31, 1995, varies from 0% to
100%; the average amount collateralized was 61.4%.
The Bank has not been required to perform on any financial guarantees during the
past two years. The Bank has not incurred any losses on its commitments in
either 1995 or 1994.
A summary of the Bank's commitments at December 31, 1995 is as follows:
<TABLE>
<CAPTION>
Contract or
Notional Amounts
----------------
<S> <C>
Commitments to extend credit $27,483
Credit card arrangements 924
Standby letters of credit 1,839
-------
Total commitments $30,246
=======
</TABLE>
NOTE 16: FAIR VALUES OF FINANCIAL INSTRUMENTS
FINANCIAL INSTRUMENTS:
The estimated fair values of the Bank's financial instruments at December 31,
are as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
------------------ -------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ------ --------- ------
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash
equivalents $ 21,518 $ 21,518 $ 15,066 $ 15,066
Securities to be
held to maturity 52,686 53,040 48,260 47,034
Other securities 972 972 970 970
Adjustable residential
real estate loans 91,990 95,894 88,068 88,227
Fixed rate
real estate loans 17,258 18,094 15,952 14,765
Consumer
installment loans 16,240 16,294 15,944 15,867
Commercial and
other loans 48,902 48,902 41,215 41,215
Allowance for
credit losses (2,185) (2,185) (2,386) (2,386)
Accrued interest
receivable 1,744 1,744 1,483 1,483
Financial liabilities:
Deposits 231,089 230,694 203,563 203,768
Accrued interest
payable 735 735 543 543
Short-term borrowings 5,000 5,000
</TABLE>
It is not practical to estimate the market values of commercial and certain
other loans that are carried at amounts due from borrowers, reduced by
appropriate allowances for collectibility. There are no quoted market prices
for loans of these types and the Bank does not have available resources to
estimate fair values based on estimated cash flows of the individual loans. The
approximate average effective interest rate for these loans was 9.52% and 8.94%
at December 31, 1995 and 1994, respectively. Maturities range from on demand to
23 years at December 31, 1995.
NOTE 17: RECLASSIFICATIONS
Certain items have been reclassified for 1994 to conform with the 1995
presentation. Such reclassifications had no effect on net earnings or
shareholders' equity as previously reported.
- ----
28
- ----
<PAGE>
HEADQUARTERS
The Woodstown National Bank
and Trust Company
1 South Main Street
Woodstown, NJ 08098-0248
ANNUAL
SHAREHOLDERS' MEETING
Woodstown National's annual
shareholders' meeting will be held
on Tuesday, April 16, 1996 at 11:00 a.m.
at the Salem County Sportmen's Club,
Carneys Point, New Jersey
DIRECTORS
Joseph E. Colson
Insurance Broker
*Richard O. Erdner, President
President
Erdner Bros., Inc.
J. Michael Galvin, Jr.
President & CEO
The Memorial Hospital
of Salem County, Inc.
James D. Hargrave
CPA
Samuel H. Jones, Jr., SVP
President/Owner
SJ Transportation Co.
Thomas Lail
Real Estate Developer
Ross Levitsky
Attorney
Robert R. McHarness, CPA
Director
Farmers Mutual Insurance Co.
In Memoriam
Robert B. Doble Sr., Chairman
OFFICERS
Ralph Homan, SVP
Chief Executive Officer
Sandra Kay Battle, SVP
Cashier/Loan Officer
F. Steven Meddick, Sr., SVP
Chief Financial Officer
Charles W. Sutton, SVP
Marketing/Business Development Director
Donald C. Ulzheimer, SVP
Loan Officer
Lura M. Conner, VP
Branch Manager
Donald W. Davis, VP
Trust Officer
Helen H. Sickler, VP
Investment Officer
Carole R. Battle, AVP
Loan Officer
Laura L. Boger, AVP
Branch Manager
Penny M. Duffield, AVP
Branch Manager
Sharon H. Eastlack, AVP
Asst. Trust Officer
Christina Humphreys, AVP
CRA/Loan Officer
Mary H.A. Johnson, AVP
Branch Manager
Ann M. McFadden, AVP
Branch Manager
Margaret A. Massey, AVP
Branch Manager
Lois H. Nelson, AVP
Operations Manager
Dana L. Pratta, AVP
Branch Administrator
Brian K. Timberman, AVP
Loan Officer
David A. Wagner, AVP
General Auditor
Ruth A. Williams, AVP
Data Processing Manager
BANKING FACILITIES
MAIN OFFICE
1 South Main Street
Woodstown, NJ 08098
Phone (609) 769-0040
Fax (609) 769-2395
ALLOWAY
48 South Greenwich Street
Alloway, NJ 08001
Phone (609) 935-5300
Fax (609) 935-5527
SHARPTOWN
837 Route 40
Pilesgrove, NJ 08098
Phone (609) 769-3300
Fax (609) 769-2225
SWEDESBORO
278 Kings Highway
Swedesboro, NJ 08085
Phone (609) 467-0505
Fax (609) 467-1930
MANNINGTON
125 Salem-Woodstown Rd.
Salem, NJ 08079
Phone (609) 935-6200
Fax (609) 935-6116
BECKETT
22 Village Center Drive
Swedesboro, NJ 08085
Phone (609) 467-3400
Fax (609) 467-5587
BANK BY PHONE
1-800-899-6639
BANKING HOURS
MONDAY & TUESDAY
Lobby 9-3
Drive-in 8:30-4
WEDNESDAY
Lobby 9-3
Drive-in 8:30-5
THURSDAY
Lobby 9-6
Drive-in 8:30-6
FRIDAY
Lobby 9-7
Drive-in 8:30-7
SATURDAY
Lobby 9-11
Drive-in 8:30-11
<PAGE>
1994 Annual Report
75 Years
OF SERVICE
1920-1994
Woodstown
National Bank
AND TRUST COMPANY
<PAGE>
MISSION
The Mission of The Woodstown National Bank & Trust Company is
to be a progressive, quality driven, independent, community bank.
Over time our community may change as we look for opportunities
to grow and expand; but it shall always be our purpose and mission
to remain an independent entity.
We will strive to provide consistent profits and growth.
We will strive to maximize shareholders return and value.
We will take advantage of the strong reputation which the Bank has
established, through safety of deposits and a strong capital base.
We will be motivated by the needs
of our customers and
our community.
[ARTWORK APPEARS HERE]
CONTENTS
President's Message 2
Management's Discussion and Analysis 6
Selected Consolidated Financial Data 10
Independent Auditor's Report 11
Consolidated Financial Statements 12
Notes to Consolidated Financial Statements 16
<PAGE>
COMMITMENT
Opening its doors for business in 1920, The Woodstown National Bank and
Trust Company has always been committed to serving the banking needs of the
region. From its beginnings of renting storefront space in the Woodstown Opera
House to its current branch network serving Salem and southern Gloucester
Counties, Woodstown National has been a strong and dependable partner in its
role as financial intermediary by facilitating both investment opportunity and
capital access in the area.
Pictured below is an early morning sunrise emerging over one of our area's
greatest natural resources; the Mannington Marsh. We are extremely fortunate to
have this treasure in our backyard for all to enjoy. It's quiet strength and
natural beauty is symbolic of so much of the region in which we live, work and
play.
Much like a new day dawning over the Mannington Marsh, Woodstown National stands
poised and ready to meet the area's financial needs of the day. From its modest
beginnings to its current financial strength Woodstown National has answered the
banking needs of its customers for 75 years. We have the products and services
for business and consumer alike and the technology to meet the future banking
needs of the region. Those of us at Woodstown National stand ready to serve you.
[PICTURE APPEARS HERE]
1
<PAGE>
PRESIDENT'S MESSAGE
TO OUR SHAREHOLDERS:
A YEAR OF GROWTH
It is with pleasure and pride that I report to you the results of the Bank's
operations for 1994. A year which was punctuated by the word "growth". Growth
not only in the dollar amount of assets, deposits and loans but in the number of
branches and employees of the Bank. Growth not only in capital, net income and
the number of shares outstanding but in the book value per share and the
dividend pay-out as well. Growth not only in the number of deposit and loan
accounts but also growth in our community outreach program by increasing the
number of business development calls made by directors and officers. The Bank
embarked on a mission of planned growth in 1994 and met or surpassed most of its
goals and objectives.
FINANCIAL STRENGTH
The financial condition of the Bank continued to strengthen in 1994. The
acquisition of the Beckett branch and the opening of the Mannington branch
fueled the Banks asset growth and accounted for nearly all of its deposit
growth. In addition, 1994 saw record earnings and increased capital as well as a
three for one stock split. During 1994 Woodstown National achieved the
following financial results:
. Assets: Total assets increased 8% to $229.8 million. This represented a
year-end record high in assets and was funded by a $10.5 million increase
in deposits, borrowed funds of $5.0 million and a healthy increase of
$2.1 million in retained earnings.
. Loans: Loans increased $10.1 million or 6.8% to $158.8 million. The
residential refinancing frenzy of 1993 waned in 1994. Most of the loan
increase in the current year was attributable to commercial real estate
and business lending, as those in business felt relatively comfortable
with the low rate of inflation, borrowing terms and the prospects for new
and continuing business.
. Asset Quality: Non-accrual loans and loans past due 90 days or more and
still earning represented 2.58% of net loans outstanding as of December
31, 1994, up from 2.30% at December 31, 1993. Maintaining a high quality
of assets is one of the Bank's priorities. Management and the Board feel
that the Bank's loan loss reserve at December 31, 1994 is adequate.
. Deposits: The Bank's deposits surpassed the $200 million plateau and
stood at $203.6 million at year-end, representing a 5% or $10.5 million
increase over the prior year-end balance. Woodstown National has
strengthened its retail franchise as evidenced by our branch expansion
and the increase in our core deposits.
. Net Income: Net income increased 4% to a record $3.15 million. The
increase in earnings was due in part to the Bank realizing its greatest
net interest margin ever of $9.7 million.
. Net Income Per Share: The annual report this year reflects the three for
one stock split approved in July. The number of shares currently
outstanding are 1.8 million. All per share data is based on 1.8 million
shares issued and outstanding. Net income per share increased to $1.75
per share from $1.68 per share in the prior year.
. Dividends: For the 23rd consecutive year the Bank has increased the
dividend paid to shareholders. Dividends declared and paid increased 3.5%
from $.567 per share in 1993 to $.587 per share in 1994. Total dividends
paid-out in 1994 amounted to $1.056 million compared to $1.020 million
paid-out in 1993.
. Capital: One of the Bank's best defenses against adverse interest rate
risk and credit risk is the strength of its capital base. We are quite
pleased that capital reached an all time high of $20.5 million,
representing an 11% increase over the prior year-end balance, while
achieving a dividend to net income payout ratio of 33.5%.
2
<PAGE>
BRANCHING OUT
Woodstown National increased its branch network this year by putting two new
retail banking facilities on-line. The Mannington branch that opened in January
was joined in July by our Beckett location. At year-end there were 2600 new
deposit accounts at these branch sites totaling $12.9 million. Each facility has
been equipped with an automated teller machine to provide additional banking
convenience to the communities they serve. We look forward to forging long
lasting relationships in these areas and becoming a partner with local residents
and businesses in helping them to meet all of their financial needs.
VISION
The Board has adopted a Mission Statement that is highlighted on the inside
cover of this report. The Statement contains our vision of what The Woodstown
National Bank and Trust Company should be today and for many years to come. A
company that will always look for ways to increase and strengthen your
shareholder value by looking for opportunities to grow, while simultaneously
attaining consistent profits and strengthening our capital base. A company which
is attentive and listens to our customers needs and provides the quality in
service which they have come to expect. And a company that is independent and
deeply rooted in its community; committed to being a partner with the region
well into the future. We are pleased with the growth and direction the Bank has
taken and look forward to the challenges and opportunities that lie ahead. With
dedicated efforts of the board, management and staff, and your continued
support, our vision of maintaining Woodstown National as your friendly
independent hometown bank will always be a reality.
Very truly yours,
/s/ Richard O. Erdner
Richard O. Erdner
President
[PHOTO APPEARS HERE]
Board of Directors
1. Richard O. Erdner 5. Joseph E. Colson
2. Thomas Lail 6. James D. Hargrave
3. Robert R. McHarness 7. Robert B. Doble, Sr.
4. J. Michael Galvin, Jr. 8. Harry Levitsky
9. Samuel H. Jones, Jr.
3
<PAGE>
SERVICE
Beginning in 1920 The Woodstown National Bank and Trust Company made a
commitment to serve the financial needs of the region. Twenty-five years later,
after surviving the great depression and with our nation still in the midst of
war, assets had just surpassed two million dollars, and Woodstown National was
still serving the communities financial needs with pride.
We thought that with this being our 75th anniversary we would share with you
some thoughts the Bank expressed some 50 years ago in the 25th anniversary issue
of it's annual report. While we may have said things differently today the
sentiment still holds true.
"...it is with satisfaction and pride we inform (you) that your bank is today
strong and respected ...we have made many friends who have remained loyal to us,
and recollections of their kindness and interest in our behalf fill our
anniversary thoughts ...we face the years ahead knowing that this bank is strong
...it is our desire to be of increasing usefulness to you in a banking or trust
manner in the years ahead..."
While we firmly believe that we should never lose sight of our past, we just as
firmly believe that our success lies in our preparation for the future.
Today, some 75 years after our beginnings, the Bank continues to take pride in
serving the area's credit and investment needs. We have taken significant steps
this year in expanding the Bank's branch network, giving us the opportunity to
offer our financial services to thousands of potential customers, both retail
and business. Having the products and services as well as the technology and
staff to meet the regions banking needs bodes well for the Bank's continued
growth and profitability for many more anniversaries to come.
[PHOTO APPEARS HERE]
4
<PAGE>
GROWTH
The Bank further strengthened it's commitment to the region with the
opening of two new branch locations in 1994. The expansion effort greatly
increased the Bank's trade area.
[PHOTO APPEARS HERE]
Mannington
[PHOTO APPEARS HERE]
Bringing two new branch facilities on line in 1994 was one of the Bank's primary
objectives. Both the Mannington and Beckett branch locations had successful
grand opening celebrations, with Mannington opening it's doors for business in
January and Beckett in August.
The Grand Opening of Mannington (l to r) Charles Sutton, Harry Levitsky, Ralph
Homan, Richard Erdner, Mayor Donald Asay, Robert Doble, Sam Jones and Magaret
Massey
Mannington will provide the Bank with coverage in the western portion of Salem
County. Beckett will give the Bank access to Logan Township, a community with
over 5,000 residents and the Pureland Industrial Park, one of the largest
industrial complexes of its type in the northeast sector of the nation.
[PHOTO APPEARS HERE]
Beckett
5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Management's discussion and analysis of the Bank's financial condition and
results of its operations analyzes various components of its consolidated
balance sheet and income statement. This section should be read in conjunction
with the Bank's consolidated financial statements and accompanying notes.
1994 OVERVIEW
Interest rates at the beginning of the year hit 20 year lows for many financial
instruments, however, by year-end, rates had risen significantly. The rise in
rates followed the impetus set by the Federal Reserve Bank which increased the
discount rate (the rate at which they charge member banks to borrow) three times
during the course of the year from 3.00% to 4.75%, an increase of almost 60%.
The Bank's local market did not feel pressure to increase deposit rates until
the fourth quarter. A combination of rising asset rates throughout the year and
stable deposit rates for much of the year contributed to a $9.75 million net
interest margin; the largest in the Bank's history.
At year-end 1994 total assets were $229.8 million of which $158.8 million, or
69% were in loans and $55.7 million or 24% were in investment securities to be
held to maturity and short term money market instruments. In 1994 loans
increased $10.1 million while investment securities to be held to maturity and
short term money market instruments increased $4.0 million. With respect to
liabilities, deposits increased $10.5 million or 5% over the prior year with all
the increase coming in core categories. The Bank which is predominantly a
seller of funds had borrowed funds of $5.0 million at year-end 1994, compared to
no borrowings at the end of 1993.
AVERAGE BALANCES
The table below sets forth balance sheet items on a daily average basis for the
years ended December 31, 1994, 1993 and 1992 and presents the daily average
interest rates earned on assets and the daily average interest rates paid on
liabilities for such periods.
WOODSTOWN NATIONAL BANK & SUBSIDIARY
AVERAGE BALANCES AND NET INTEREST INCOME
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------------------------------------------------------------
1994 1993 1992
------------------------------------------------------------------------------------------------------
Average Average Average Average Average Average
(dollars in thousands) Balance Interest Yld/Rate Balance Interest Yld/Rate Balance Interest Yld/Rate
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest earning assets:
Loans (1) $153,794 $13,043 8.48% $146,961 $ 13,153 8.95% $141,453 $14,144 10.00%
Securities to be held to
maturity (2) 47,806 2,149 4.50% 42,502 1,764 4.15% 34,897 1,823 5.22%
Other (3) 8,687 379 4.36% 13,527 461 3.41% 18,598 681 3.66%
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest earning assets $210,287 $15,571 7.40% $202,990 $ 15,378 7.58% $194,948 $16,648 8.54%
- -----------------------------------------------------------------------------------------------------------------------------------
Interest bearing liabilities:
Deposits:
Savings, money market,
NOW deposits $ 80,163 $ 2,195 2.74% $ 72,195 $ 2,848 3.94% $ 57,908 $ 2,984 5.15%
Time certificates of
deposit $100 & over 20,959 936 4.47% 22,830 1,116 4.89% 26,272 1,477 5.62%
Other time deposits (4) 64,532 2,685 4.16% 67,767 2,276 3.36% 75,350 3,455 4.59%
- -----------------------------------------------------------------------------------------------------------------------------------
165,654 5,816 3.51% 162,792 6,240 3.83% 159,530 7,916 4.96%
Borrowed funds 110 6 5.45% 0 0 34 2 5.88%
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest bearing
liabilities 165,764 5,822 3.51% 162,792 6,240 3.83% 159,564 7,918 4.96%
Non-interest bearing funds 44,523 40,198 35,384
- -----------------------------------------------------------------------------------------------------------------------------------
Total sources to fund
earning assets $210,287 $ 5,822 2.77% $202,990 $ 6,240 3.07% $194,948 $ 7,918 4.06%
- -----------------------------------------------------------------------------------------------------------------------------------
Net interest income and margin $ 9,749 4.63% $ 9,138 4.50% $ 8,730 4.48%
===================================================================================================================================
Other Balances:
Cash & due from banks $ 6,380 $ 5,353 $ 4,864
Other assets 6,152 5,200 4,657
Total assets 220,478 211,530 202,772
Non-interest bearing
demand deposits 34,292 30,137 26,468
Other liabilities 1,059 1,052 858
Shareholder's equity 19,363 17,549 15,882
</TABLE>
(1) Average balance is net before taking into account the allowance for credit
loss and includes loans on non-accrual.
(2) Includes treasury notes and bills, municipal securities and mortgage-backed
securities.
(3) Includes principally fed funds sold, Federal Home Loan Bank stock and a
money market mutual fund.
(4) Includes time certificates of deposit less than $100 and IRA deposits.
6
<PAGE>
During 1994 average interest earning assets totaled $210.3 million, an increase
of $7.3 million or 3.5% over 1993. The net rise in average interest earning
assets occurred as a result of average loans increasing $6.8 million and average
securities to be held to maturity increasing $5.3 million and average other
interest-earning assets decreasing $4.8 million compared to their respective
average balances in the prior year. Total average interest bearing liabilities
increased a modest $3.0 million or 1.8% over 1993. An $8.0 million or 11%
increase in average saving, money market and NOW deposits and a $0.1 million
increase in average borrowed funds was offset by a $5.1 million or 5.6% decrease
in total average time deposits, compared to the prior year. The decline in
outstanding average balances of certificates of deposits and other time deposits
and the increase in saving, money market and NOW accounts reflects a trend which
the Bank has experienced over the past several years as rates have generally
fallen. This trend however, started to reverse by the end of 1994 as certificate
of deposit rates began to increase in the later part of the third quarter and
throughout the fourth quarter.
NET INTEREST INCOME AND NET INTEREST MARGIN
Net interest income for 1994 was $9.7 million, an increase of $0.6 million or
6.7% over 1993. Interest income increased to $15.6 million from $15.4 million or
1.3%. The effect of a decrease in the yield of the loan portfolio was almost
entirely offset by an increase in the portfolio's volume, which had a net effect
of decreasing interest income on loans by $0.1 million or 0.8%. Loans carried on
non-accrual status had the effect of decreasing interest income on loans by (in
thousands) $431 in 1994, $355 in 1993 and $190 in 1992.
Interest expense for 1994 decreased $0.4 million to $5.8 million from $6.2
million, or 6.7%. The cost of average interest bearing liabilities was 3.51%; a
decline of 32 basis points from 3.83% for 1993. This is a much smaller
reduction than was experienced in the prior year when the cost of average
interest bearing liabilities decreased 113 basis points from 1992 to 1993. The
net interest margin (defined as net interest income as a percentage of average
earning assets) was 4.63% in 1994 up from 4.50% in 1993 and 4.48% in 1992.
NON-INTEREST INCOME
For 1994, non-interest income totaled $1.2 million, an increase of $40 thousand
or 3.45% from $1.16 million in 1993.Income from fiduciary (trust) activities
increased $20 thousand or 20% to $119 thousand in 1994. Other miscellaneous
service charges and fees increased $19 thousand from the prior year to $154
thousand.
Service charges on deposit accounts increased $91 thousand or 15% to $689
thousand and other income decreased $90 thousand or 28% to $236 thousand in
1994. The increase in deposit account service charges is attributable to
increasing the number of branch locations and automated teller machines. The
decrease in other income is primarily a result of recouping less prior period
interest and expenses on delinquent loans and loans in foreclosure in 1994 than
in 1993.
NON-INTEREST EXPENSE
Non-interest expense totaled $5.9 million for 1994, an increase of $873
thousand, or 17% over 1993. Most of the increase is a result of the Bank's
branch expansion efforts in 1994. Salary and employee benefit expenses of $2.94
million for 1994 was $375 thousand or 14.6% higher than 1993. This increase was
mainly due to additional staffing, primarily in branch operations, wage
increases and increases in medical insurance cost. Occupancy and equipment
expense increased $212 thousand, or 36% from $584 thousand in 1993 to $796
thousand in 1994. Most of this increase resulted from increasing the number of
branch sites from four in 1993 to six in 1994. Other operating expense totaled
$2.19 million for the current year, an increase of $290 thousand over the prior
year. Contributing to the increase in other operating expense in 1994 was an
increase of $82 thousand in losses realized on the disposition of assets;
primarily loans sold, a $58 thousand increase in advertising and promotional
expense, due to branch expansion, a $34 thousand increase in supplies and a $28
thousand increase in telephone cost resulting from adding 2 branches and
providing 800 telephone service for the entire year of 1994 compared to only
offering this service during the later part of 1993.
INCOME TAXES
During 1994 the Bank expensed $1.63 million in combined federal and state income
taxes on pre-tax income of $4.78 million compared to $1.74 million of tax
expense in 1993 on pre-tax income of $4.77 million. The Bank's effective income
tax rates were 34.11% and 36.50% for the years ended December 31, 1994 and 1993
respectively.
RETURN ON AVERAGE ASSETS AND AVERAGE EQUITY
Two industry measures of a banks performance are its return on average assets
(ROA) and return on average equity (ROE). ROA measures net income in relation to
average assets and indicates the banks ability to employ its resources
profitably. For 1994 and 1993 the Bank's ROA was 1.43%, compared to banks
nationwide with assets of $100-300 million which had on average, ROA's of 1.12%
in 1994 and 1.17% in 1993. ROE is determined by dividing net income by average
shareholders' equity and indicates how effectively a bank can generate profits
on the capital invested and accumulated by its shareholders. For 1994, the
Bank's ROE was 16.28% compared to 17.27% in 1993.
7
<PAGE>
LOAN PORTFOLIO
The table below summarizes the Bank's loan portfolio as of December 31, for
years 1994 through 1992.
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
(in thousands) 1994 1993 1992
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Mortgages
Residential $ 85,654 $ 84,807 $ 85,356
Residential construction 3,149 1,377 2,271
Commercial 48,274 42,350 31,395
Agricultural 1,191 1,161 1,091
-------------------------------
138,268 129,695 120,113
-------------------------------
Other secured and unsecured
Commercial 12,090 11,782 10,472
Agricultural 1,071 1,317 1,008
Consumer 9,750 8,167 11,441
-------------------------------
22,911 21,266 22,921
-------------------------------
Total loans 161,179 150,961 143,034
===============================
Loans on non-accrual 3,461 2,540 2,624
Other real estate 209 474 333
-------------------------------
Total non-performing assets $ 3,670 $ 3,014 $ 2,957
===============================
Non-performing assets
as a percent of total assets 1.60% 1.42% 1.42%
-------------------------------
</TABLE>
The Bank has traditionally been an active provider of real estate loans to
credit worthy borrowers in its primary trade area. At December 31, 1994, 85.8%
of the loan portfolio was secured by real estate compared to 85.9% and 84.0% at
December 31, 1993 and 1992 respectively.
During 1994, loans before the effect of the allowance for possible credit
losses, increased $10.2 million or 6.77% compared to increasing $7.9 million or
5.54% in 1993. Lending on commercial real estate has been the primary
contributor in the loan portfolio's increase over the past two years increasing
$5.9 million or 14% in 1994 and $10.9 million or 35% in 1993.
NON-PERFORMING LOANS AND ASSETS
Non-performing assets (non-performing loans and other real estate) at December
31, 1994 were $3.67 million or 1.60% of total assets compared to $3.01 million
or 1.42% of total assets at December 31, 1993. Total non-accrual loans at
December 31, 1994 were $3.46 million compared to $2.54 million a year ago. The
Bank generally places a loan on non-accrual status and ceases to accrue interest
when loan payment performance is deemed unsatisfactory or when management
becomes aware of an event that may cause an impairment in the future repayment
of a loan. Generally, loans 90 days or more delinquent are placed on non-accrual
status, unless the loan is both well secured and in the process of collection.
At December 31, 1994 loans past due 90 days or more and still accruing amounted
to $634 thousand down from $881 thousand at December 31, 1993.
Other real estate (ORE) at December 31, 1994 totaled $209 thousand compared to
$474 thousand a year ago. The ORE total of $209 thousand consist of four
parcels of property, two of which, totaling $137 thousand, are owned by the
Bank. These properties have been written down to net realizable value. The other
$72 thousand of ORE are in-substance foreclosures. In-substance foreclosure is
an accounting treatment for troubled real estate loans where the collateral is
considered to be substantially foreclosed on when the borrower has little or no
equity in the collateral, sources of repayment depend on the operation or sale
of the collateral, and the borrower has abandoned control of the collateral.
When the Bank identifies a property as in-substance fore-closure, a current
appraisal is obtained. Differences between the fair market value and carrying
value, if any, are charged to the allowance for credit losses. As of December
31, 1994, in-substance foreclosures consisted of two parcels of property.
Management does not anticipate any material loss based on the current fair value
of the properties.
ALLOWANCE FOR CREDIT LOSSES
The allowance for credit losses is a reserve established through charges to
earnings in the form of a provision for credit losses. Management has
established an allowance for credit loss which it believes is adequate for
estimated losses in its loan portfolio and contingent liabilities (primarily
outstanding and unused loan commitments). Management evaluates the adequacy of
the allowance quarterly and reviews its findings with the Board of Directors.
Changes to the provision, if required, are made at that time for the up-coming
quarter. Charge-offs occur when loans are deemed to be uncollectible. At
December 31, 1994 the allowance totaled $2.39 million or 1.48% of total loans
and provided coverage of 69% of non-performing loans.
[ARTWORK APPEARS HERE]
8
<PAGE>
The following table presents, for the periods indicated, an analysis of the
allowance for credit losses and other related data.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------
(in thousands) 1994 1993 1992
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of period $2,296 $1,893 $1,500
Provisions charged
to operating expenses 239 472 676
------------------------------
2,535 2,365 2,176
Recoveries of loans
previously charged off:
Consumer 61 144 68
Commercial 10 1 0
Real Estate 6 14 7
------------------------------
Total recoveries 77 159 75
------------------------------
Loans charged-off:
Consumer 98 190 176
Commercial 0 0 131
Real Estate 128 38 51
------------------------------
Total charged-off 226 228 358
------------------------------
Net charge-offs (149) (69) (283)
------------------------------
Balance at end of period $2,386 $2,296 $1,893
==============================
Net charge-offs as a percentage
of average loans outstanding O.10% 0.05% 0.20%
------------------------------
Allowance for credit losses as a
percentage of year-end loans 1.48% 1.52% 1.32%
------------------------------
Allowance coverage
of non-performing loans 68.94% 90.39% 72.14%
------------------------------
</TABLE>
INVESTMENT SECURITIES
The Bank's investment securities portfolio increased $2.63 million or 5.64% to
$49.23 million during the year. All securities purchased are designated as
securities to be held to maturity. The Bank does not purchase securities to
trade nor has it made investment security purchases that would be available for
sale. Management and the Board regularly review the Bank's investment strategy
and may at some future date adopt policies to purchase securities that could be
traded as well as purchase securities that would be available for sale.
DEPOSITS
Total deposits of the Bank increased $10.5 million or 5.46% to $203.56 million
compared to deposit growth of $2.6 million or 1.38% in the previous year. Most
of the deposit growth in 1994 came in accounts that are relatively liquid for
the depositor. Demand deposit accounts increased $4.64 million or 13.7% over
1993 year-end balances, and savings, money market checking and NOW checking
accounts in total, increased $6.98 million or 9.56% compared to December 31,
1993.
The Bank is a deposit driven financial institution that looks to attract and
retain core deposits as its basis for stable growth and profitability. Core
deposits are all deposits other than certificates of deposit in excess of $100
thousand. At December 31, 1994 core deposits represented 90.5% of total deposits
compared to 88.8% at December 31, 1993.
SHAREHOLDERS' EQUITY
At December 31, 1994 shareholders' equity totaled $20.5 million, up $2.1 million
or 11.39% over shareholders' equity of $18.4 million at December 31, 1993. The
increase was attributable to retained earnings increasing $3.15 million from
1994 net income and decreasing $1.06 million from dividends declared and paid in
the current year. Shareholders' equity as a percent of total assets at December
31,1994 and December 31, 1993 was 8.92% and 8.68% respectively.
The banking industry must meet certain risk-based capital standards established
by bank regulatory authorities. These capital standards relate a bank's capital
to the risk profile of its assets and commitments and provide a basis for which
all banks are evaluated in terms of capital adequacy. The risk-based capital
standards require all banks to have Tier 1 risk-based capital of at least 4% and
total risk-based capital, including Tier 1 risk-based capital, of at least 8% of
risk-adjusted assets. Tier 1 risk-based capital for the Bank includes common
stock, capital surplus and retained earnings reduced by unamortized premiums
paid in the acquisition of deposits. The Bank's total risk-based capital, used
in computing the total risk-based capital ratio, includes Tier 1 risk-based
capital and a portion of the allowance for credit losses. The Bank's Tier 1
risk-based capital ratio at December 31, 1994 was 14.30% and its total risk-
based capital ratio was 15.56%. These ratio's define Woodstown National as a
"well capitalized" bank.
[ARTWORK APPEARS HERE]
9
<PAGE>
<TABLE>
<CAPTION>
WOODSTOWN NATIONAL BANK & SUBSIDIARY
SELECTED FINANCIAL DATA Years Ended December 31,
-------------------------------------------------------------
(in thousands except per share data) 1994 1993 1992 1991 1990
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Net interest income $ 9,749 $ 9,138 $ 8,730 $ 7,513 $ 6,700
Provision for credit losses 239 472 676 899 629
Non -interest income 1,198 1,158 944 808 690
Non -interest expense 5,923 5,050 4,550 4,391 3,335
Income before income taxes 4,785 4,774 4,448 3,031 3,426
Effect of accounting change 0 0 (131) 0 0
Net income 3,153 3,031 2,799 2,390 2,418
Balance Sheet Data:
Total assets $229,820 $212,169 $207,659 $199,598 $187,224
Loans (net) 158,793 148,665 141,141 143,047 138,392
Securities held for investment 49,230 46,600 40,425 32,958 33,497
Federal funds sold 5,400 3,045 13,465 10,205 5,015
Deposits 203,563 193,016 190,387 183,850 172,897
Borrowed funds 5,000 0 0 0 0
Shareholders' equity 20,503 18,406 16,395 14,586 13,138
Per Share Data:
Net income $ 1.75 $ 1.68 $ 1.56 $ 1.33 $ 1.34
Cash dividends 0.59 0.57 0.55 0.52 0.52
Book value 11.39 10.22 9.11 8.10 7.30
Selected Ratios:
Performance
Return on average assets 1.43% 1.43% 1.38% 1.20% 1.36%
Return on average equity 16.28 17.27 17.62 17.24 19.51
Net interest margin 4.63 4.50 4.48 3.94 3.94
Liquidity and Capital
Average loans to average deposits 76.92 76.17 76.05 77.51 79.24
Dividend payout 33.49 33.65 35.37 39.41 38.46
Total risk-based capital 15.56 15.42 14.24 13.97 12.22
Leverage 8.72 8.68 7.97 7.25 7.16
Asset Quality
Non-performing loans to year-end loans 2.15 1.68 1.83 0.68 0.64
Non-performing assets to year-end assets 1.60 1.42 1.42 0.69 0.60
Allowance for credit losses to year-end loans 1.48 1.52 1.32 1.04 0.72
Allowance for credit losses to non-performing loans 68.94 90.39 72.14 152.59 111.36
</TABLE>
10
<PAGE>
- --------------------------------------------------------------------------------
[LETTERHEAD OF NICK L. PETRONI, CPA APPEARS HERE]
INDEPENDENT AUDITOR'S REPORT
----------------------------
January 20, 1995
The Board of Directors and Shareholders
The Woodstown National Bank and Trust Company
P. O. Box 248
Woodstown, NJ 08098
Gentlemen:
I have audited the accompanying consolidated statements of condition of The
Woodstown National Bank and Trust Company and Subsidiary as of December 31, 1994
and 1993, and the related consolidated statements of income, changes in
shareholders' equity, and cash flows for the years then ended. These financial
statements are the responsibility of the Bank's management. My responsibility is
to express an opinion on these financial statements based on my audits.
I conducted my audits in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audits provide a reasonable basis for my opinion.
In my opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of The
Woodstown National Bank and Trust Company and Subsidiary at December 31, 1994
and 1993, and the results of their operations and their cash flows for each of
the years then ended, in conformity with generally accepted accounting
principles.
Respectfully submitted,
/s/ Nick L. Petroni
Nick L. Petroni
Certified Public Accountant
- --------------------------------------------------------------------------------
11
<PAGE>
THE WOODSTOWN NATIONAL BANK AND TRUST COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CONDITION
DECEMBER 31, 1994 AND 1993
(Thousands)
<TABLE>
<CAPTION>
ASSETS 1994 1993
-------- --------
<S> <C> <C>
Cash and due from banks $ 8,562 $ 6,078
Money market mutual fund 1,104 2,108
Federal funds sold 5,400 3,045
-------- --------
Total cash and cash equivalents 15,066 11,231
Securities to be held to maturity 49,230 46,600
Loans, net of allowance for credit losses
of $2,386 in 1994 and $2,296 in 1993 158,793 148,665
Properties and equipment 3,740 3,122
Accrued interest receivable 1,483 1,260
Other assets 1,508 1,291
-------- --------
Total assets $229,820 $212,169
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Demand deposits $ 38,479 $ 33,840
Savings, money market, and NOW deposits 79,978 72,994
Time certificates of deposit $100 and over 19,373 21,531
Other time deposits 65,733 64,651
-------- --------
Total deposits 203,563 193,016
Other borrowed funds 5,000
Accrued interest payable 543 505
Accrued expenses and other liabilities 211 242
-------- --------
Total liabilities 209,317 193,763
-------- --------
Shareholders' equity:
Common stock, $.22 par value; 10,000 shares
authorized; 1,800 shares issued and outstanding 400 400
Capital surplus 1,200 1,200
Retained earnings 18,903 16,806
-------- --------
Total shareholders' equity 20,503 18,406
-------- --------
Total liabilities and shareholders' equity $229,820 $212,169
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
12
<PAGE>
THE WOODSTOWN NATIONAL BANK AND TRUST COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Thousands, except per share amounts)
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Interest income:
Interest and fees on loans $13,043 $13,153
Interest on securities to be held to maturity 2,149 1,764
Interest on federal funds sold 268 336
Interest - other 111 125
------ ------
Total interest income 15,571 15,378
------ ------
Interest expense:
Interest on deposits 5,816 6,240
Interest on other borrowed funds 6
------ ------
Total interest expense 5,822 6,240
------ ------
Net interest income 9,749 9,138
Provision for credit losses 239 472
------ ------
Net interest income after provision for credit losses 9,510 8,666
------ ------
Other income:
Income from fiduciary activities 119 99
Service charges on deposit accounts 689 598
Other service charges and fees 154 135
Other income 236 326
------ ------
Total other income 1,198 1,158
------ ------
Operating expenses:
Salaries and employee benefits 2,939 2,564
Occupancy and equipment expense 796 584
Other operating expense 2,188 1,902
------ ------
Total operating expenses 5,923 5,050
------ ------
Income before income tax expense 4,785 4,774
Income tax expense 1,632 1,743
------ ------
Net income $ 3,153 $ 3,031
====== ======
Net income per share of common stock $ 1.75 $ 1.68
====== ======
Average shares outstanding 1,800 1,800
====== ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
13
<PAGE>
THE WOODSTOWN NATIONAL BANK AND TRUST COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1994 AND 1993
(Thousands)
<TABLE>
<CAPTION>
Total
Common Capital Retained Shareholders'
Stock Surplus Earnings Equity
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Balance at December 31, 1992 $ 400 $1,200 $14,795 $16,395
Net Income for 1993 3,031 3,031
Cash dividends paid - $.567 per share (1,020) (1,020)
------------ ------------ ------------ ------------
Balance at December 31, 1993 400 1,200 16,806 18,406
Net Income for 1994 3,153 3,153
Cash dividends paid - $.587 per share (1,056) (1,056)
------------ ------------ ------------ ------------
Balance at December 31, 1994 $ 400 $1,200 $18,903 $20,503
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
14
<PAGE>
THE WOODSTOWN NATIONAL BANK AND TRUST COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994 AND 1993
(Thousands)
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,153 $ 3,031
-------- --------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 361 294
Amortization and accretion, net 139 390
Provision for credit losses 239 472
Deferred income taxes 91 (213)
Net loss on disposal of fixed assets 18
(Increase) decrease in interest receivable (223) 87
(Increase) decrease in other assets (475)
(Increase) decrease in prepaid expense (99) 28
(Decrease) increase interest payable 38 (168)
(Decrease) increase in deferred income 42 103
(Decrease) increase in accrued expenses and other liabilities (30) 32
-------- --------
Total adjustments 83 1,043
-------- --------
Net cash provided by operating activities 3,236 4,074
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of securities to be held to maturity 25,604 26,853
Purchases of securities to be held to maturity (28,383) (33,417)
Net increase in loans (10,133) (8,157)
Purchases of properties and equipment (980) (892)
---------- ----------
Net cash used in investing activities (13,892) (15,613)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in non-interest bearing demand, savings, NOW, and money market deposit accounts 11,623 11,814
Net decrease in time deposits (1,076) (9,186)
Net increase in borrowed funds 5,000
Dividends paid (1,056) (1,020)
---------- ----------
Net cash provided by financing activities 14,491 1,608
---------- ----------
Net increase (decrease) in cash and cash equivalents 3,835 (9,931)
Cash and cash equivalents, January 1 11,231 21,162
---------- ----------
Cash and cash equivalents, December 31 $ 15,066 $ 11,231
========== ==========
Interest paid $ 5,784 $ 6,407
========== ==========
Income taxes paid $ 1,591 $ 1,958
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
15
<PAGE>
THE WOODSTOWN NATIONAL BANK AND TRUST COMPANY AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
NOTE 1: SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION:
The accompanying consolidated financial statements include the accounts of The
Woodstown National Bank and Trust Company and its wholly owned subsidiary
Woodstown Investment Company, Inc. All significant intercompany balances and
transactions have been eliminated.
ACCOUNTING BASIS:
The accounting policies of The Woodstown National Bank and Trust Company conform
to generally accepted accounting principles and to general practices in the
banking industry. The Bank is on the accrual basis of accounting.
INVESTMENTS IN SECURITIES:
Securities to be held to maturity:
Bonds, notes and debentures for which the Bank has the positive ability and
intent to hold to maturity are reported at cost adjusted for amortization of
premiums and accretion of discounts which are recognized in interest income
using the interest method over the period to maturity.
LOANS:
Loans are stated at face value, net of unearned discount, allowance for credit
losses, and unearned loan fees. Unearned discounts on discounted loans are
recognized as income over the term of the loans using a method that approximates
the interest method. For all other loans, interest is accrued daily on the
outstanding balances.
Loan origination fees are capitalized and recognized as an adjustment of the
yield on the related loan.
Loans are generally placed on nonaccrual when principal or interest is
delinquent for 90 days or more. Any unpaid interest previously accrued on those
loans is reversed from income, and thereafter interest is recognized only to the
extent of payments received.
ALLOWANCE FOR CREDIT LOSSES:
The allowance is maintained at a level which, in management's judgment, is
adequate to absorb probable losses inherent in the loan portfolio. The amount
of the allowance is based on management's evaluation of the collectibility of
the loan portfolio, including the nature of the portfolio, credit
concentrations, trends in historical loss experience, specific impaired loans,
and economic conditions. The allowance is increased by provisions for loan
losses and recoveries on loans previously charged off and reduced by charge-offs
of loans deemed uncollectible.
PROPERTIES AND EQUIPMENT:
Depreciation is provided over the estimated useful lives of the respective
assets.All premises and equipment are recorded at cost less accumulated
depreciation.
OTHER ASSETS:
A core deposit premium intangible acquired during 1994 is being amortized on the
straight line basis over seven years. The carrying amount included in other
assets at December 31, 1994 (in thousands) is $460 and amortization expense for
1994 amounted to $29.
INCOME TAXES:
Income taxes are provided for the tax effects of the transactions reported in
the financial statements and consist of taxes currently due plus deferred taxes
related primarily to differences between the basis of the allowance for credit
losses, accumulated depreciation, and deferred loan fees. The deferred tax
assets and liabilities represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled as prescribed in SFAS No. 109, Accountinq
for Income Taxes. As changes in tax laws or rates are enacted, deferred tax
assets and liabilities are adjusted through the provision for income taxes.
EMPLOYEE BENEFITS:
The Bank has a 401(k) retirement savings plan, established during 1991, covering
substantially all employees. To be eligible, an employee must be 21 years of age
and have completed one participation year of service.
Eligible employees may elect to defer from 1% to 16% of compensation. The Bank
is required to make a contribution equal to 100% of the first 6% of employee
contributions.
A nonqualified deferred compensation plan was adopted, effective December 31,
1993, for key executives. Eligible executives may elect to reduce irrevocably
his or her compensation not yet earned for the following calendar year.
A nonqualified salary continuation agreement was also adopted effective December
31, 1993 for the benefit of key executives. The Board of Directors, at its
discretion, may make annual contributions of 1.1 percent of annual pretax
profits to fund the plan.
The Bank has elected a partial self-funding of employee medical insurance. For
1993, the Bank will pay (in thousands) the first $10 for each employee and
family member covered with a group maximum of approximately $325. Costs in
excess of this amount are covered by an excess loss reinsurance contract. During
1994, the self-funding plan was terminated. Management does not anticipate any
loss contingency as a result of this termination.
CASH AND CASH EQUIVALENTS:
The Bank considers cash and cash equivalents to include cash on hand, amounts
due from banks, investments in money market mutual funds and federal funds sold,
since their original maturities are less than three months for the purposes of
the statements of cash flows.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
The following methods and assumptions were used to estimate the fair value of
financial instruments:
16
<PAGE>
Cash and Short-Term Investments: For those short-term instruments, the carrying
amount is a reasonable estimate of fair value.
Securities to be Held to Maturity: Fair values are based on quoted market prices
or dealer quotes. If a quoted market price is not available, fair value is
estimated using quoted market prices for similar securities. It is the Bank's
policy to hold investments until maturity.
Loans Receivable: Fair value of homogeneous categories of residential mortgages
and consumer loans is estimated by discounting future cash flows using the
current rates at which similar loans would be made to borrowers with similar
credit ratings and for the same remaining maturities.
Deposit Liabilities: Fair value of demand deposits, savings accounts, and NOW
accounts is defined as the amount payable on demand at the reporting date. The
fair value for certificates of deposit is estimated using a discounted cash flow
calculation that applies interest rates currently being offered on certificates
to a schedule of aggregated contractual maturities on such time deposits.
Short-term borrowings: The carrying amounts of federal funds purchased,
borrowings under repurchase agreements, and other short-term borrowings maturing
within 90 days approximate their fair values.
Accrued interest: The carrying amounts of accrued interest approximate their
fair values.
EARNINGS PER SHARE:
Net income per share of common stock is calculated on the weighted average
number of shares outstanding during the period after giving retroactive effect
of stock dividends and stock splits. During 1994, the shareholders approved a 3
for 1 stock split increasing the number of shares issued and outstanding from
(in thousands) 600 to 1,800. The average number of shares outstanding have been
retroactively restated for all periods presented to reflect this change.
NOTE 2: INVESTMENT SECURITIES
Investment securities are carried at amortized cost. The amortized cost and
estimated market value of the investment securities are as follows (in
thousands):
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Market Value
--------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Securities to be held to maturity:
December 31, 1994
U. S. government and federal agencies $37,122 $ 13 $ 1,122 $36,013
State and municipal securities 11,138 2 119 11,021
Other securities 970 970
--------- ---------- ---------- ------------
$49,230 $ 15 $ 1,241 $48,004
========= ========== ========== ============
</TABLE>
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Market Value
--------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
December 31, 1993
U.S. government and federal agencies $26,858 $ 67 $ 46 $26,879
State and municipal securities 18,809 48 20 18,837
Other securities 933 933
--------- ---------- ---------- ------------
$46,600 $115 $ 66 $46,649
========= ========== ========== ============
</TABLE>
The amortized cost and estimated market value of debt securities at December 31,
1994 and 1993, by contractual maturity, follow. Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
The maturities of investment securities at December 31 were as follows:
<TABLE>
<CAPTION>
1994 1993
-------------------------- --------------------------
Amortized Estimated Amortized Estimated
Cost Market Value Cost Market Value
--------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Due in one year or less $21,674 $21,474 $19,846 $19,920
Due after one year through five years 19,313 18,891 17,812 17,826
Due from five to ten years 7,273 6,669 8,009 7,970
Federal Reserve Bank stock 48 48 48 48
Federal Home Loan Bank-NY stock 922 922 885 885
--------- ------------ --------- ------------
$49,230 $48,004 $46,600 $46,649
========= ============ ========= ============
</TABLE>
The Bank did not realize any gains or losses on securities for December 31, 1994
and 1993.
Investment securities with a carrying value of $16,510 and $15,079 at December
31, 1994 and 1993, were pledged to secure public deposits, qualify for fiduciary
powers and for other purposes required by law. Approximate market value of
pledged securities at December 31, 1994 was $16,221.
NOTE 3: LOANS
Major classifications of loans in the consolidated balance sheet at December 31
are summarized as follows (in thousands):
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Residential real estate $ 85,654 $ 84,807
Commercial real estate 49,465 43,511
Agricultural 1,071 1,317
Commercial 12,090 11,782
Real estate construction 3,149 1,377
Consumer loans 9,750 8,167
-------- --------
161,179 150,961
Less: Allowance for credit losses 2,386 2,296
-------- --------
Loans, net $158,793 $148,665
======== ========
</TABLE>
17
<PAGE>
Loans past due 90 days or more and still earning totaled $634 and $881 at
December 31, 1994 and 1993 respectively. Non-accruing loans (principally real
estate loans) totaled $3,461 and $2,540 at December 31, 1994 and 1993,
respectively, which had the effect of reducing income $431 and $355, and
earnings per common share $.24 and $.20 respectively.
An analysis of the change in the allowance for credit losses follows:
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Balance January 1, $2,296 $1,893
Provision for credit losses 239 472
Credits charged off (226) (228)
Recoveries 77 159
------ ------
Balance December 31, $2,386 $2,296
====== ======
</TABLE>
NOTE 4: LOAN SERVICING
The Bank has retained servicing rights in certain mortgage loans sold to the
Federal National Mortgage Association (Fannie Mae). These loans totaled (in
thousands)$4,116 at December 31, 1994.
NOTE 5: PROPERTIES AND EQUIPMENT
Components of properties and equipment at December 31 were as follows (in
thousands):
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Land $ 304 $ 144
Bank premises 3,295 2,789
Equipment, furniture & fixtures 2,190 1,874
------ ------
Total cost 5,789 4,807
Less: Accumulated depreciation 2,049 1,685
------ ------
Net book value $3,740 $3,122
====== ======
</TABLE>
Depreciation expense amounted to $361 in 1994 and $294 in 1993. Capitalized
interest costs on branch construction amounted to $5 in 1993.
NOTE 6: FORECLOSED REAL ESTATE
The balance of other real estate owned acquired through foreclosure or in-
substance foreclosure in settlement of loans is included in other assets and
totaled at December 31, 1994 and 1993 (in thousands) $209 and $474 respectively.
At the time of foreclosure, foreclosed real estate is recorded at the lower of
the Bank's cost or the fair value, less estimated costs to sell, which becomes
the property's new basis. Any write-downs based on the asset's fair value at
date of acquisition are charged to the allowance for loan losses. Costs incurred
in maintaining foreclosed real estate and subsequent write-downs to reflect
declines in the fair value of the property are included in income (loss) on
other real estate owned.
NOTE 7: DEPOSITS
The following is a maturity distribution of time deposits in denominations of
(in thousands) $100 or more at December 31:
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Three months or less $ 7,142 $7,100
Over three months
through twelve months 8,028 8,732
Over one year
through five years 4,203 5,699
------- -------
$19,373 $21,531
======= =======
</TABLE>
NOTE 8: SHORT-TERM BORROWINGS
The Bank had outstanding advances from the Federal Home Loan Bank of New York
(FHLB-NY) at December 31, 1994 of (in thousands) $5,000. Advances mature January
30, 1995 and carry an interest rate of 6.15%. A security interest in certain
collateral with a carrying value at least equal to advances has been made in
accordance with the terms of the Advances, Collateral Pledge, and Security
Agreement entered into with FHLB-NY. Federal Home Loan Bank stock required to be
held by the Bank had a carrying amount of $922 and $885 at December 31, 1994 and
1993 respectively.
NOTE 9: INCOME TAXES
The consolidated provision for income taxes for 1994 and 1993 consists of the
following at December 31, (in thousands):
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Components
of income tax expense:
Currently paid or payable:
Federal $ 1,337 $ 1,585
State 204 371
Deferred income taxes 91 (213)
------- -------
$ 1,632 $ 1,743
======= =======
</TABLE>
The provision for federal and state income taxes differs from that computed by
applying the federal and state statutory rates to income before income tax
expense, as indicated in the following analysis:
<TABLE>
<CAPTION>
1994 1993
------------------- -------------------
Amount Percentage Amount Percentage
------- ---------- ------- ----------
<S> <C> <C> <C> <C>
Expected tax provision
at the statutory rate $ 2,057 43.000 $ 2,071 43.375
Effect of tax-exempt income (156) (3.261) (221) (4.629)
Income of subsidiary
- federal taxable (181) (3.783) (157) (3.289)
Other, net (88) (1.839) 50 1.047
------- -------- ------- -------
$ 1,632 34.117 $ 1,743 36.504
</TABLE>
Deferred tax liabilities have been provided for taxable temporary differences
related to accumulated depreciation.
18
<PAGE>
Deferred tax assets have been provided for deductible temporary differences
related to the allowance for credit losses and deferred loan origination fees.
The deferred tax asset valuation allowance relates to the allowance for credit
losses which management believes will not be realized due to the disparity
between the regulatory required provision and the Bank's experience of the
actual amounts charged to the allowance. The net deferred tax assets in the
accompanying consolidated statements of financial condition include the
following components at December 31,:
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
FEDERAL AND STATE
Deferred tax liabilities $ (159) $ (123)
Deferred tax assets 1,273 1,133
Deferred tax assets
valuation allowance (494) (300)
------ -------
Net deferred tax assets $ 620 $ 710
====== =======
</TABLE>
NOTE 10: TRANSACTIONS
WITH DIRECTORS AND OFFICERS
The Bank has had, and may be expected to have in the future, banking
transactions in the ordinary course of business with directors, principal
officers, their immediate families, and affiliated companies in which they are
principal stockholders (commonly referred to as related parties), on the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with others. Total loans and commitments to these
persons and firms was (in thousands) $4,207 and $2,237 at December 31, 1994 and
1993 respectively.
On December 27, 1990, the Bank entered into a participation loan agreement with
a Director of the Bank. The participation sold constituted an assignment,
without recourse to the Bank, of an undivided 41.2% interest in the Bank's
right, title and interest in the outstanding loan.
NOTE 11: RETIREMENT PLANS
The Bank expensed (in thousands) $108 and $92 for contributions to the 401(k)
retirement savings plan in 1994 and 1993, respectively, and $8 and $84 in 1994
and 1993, respectively, to the key employees salary continuation retirement
plan.
NOTE 12: CONTINGENT LIABILITIES AND COMMITMENTS
The Bank's consolidated financial statements do not reflect various commitments
and contingent liabilities which arise in the normal course of business and
which involve elements of credit risk, interest-rate risk and liquidity risk.
These commitments and contingent liabilities are described in Note 16: Financial
Instruments.
The Bank and its subsidiary are parties to litigation and claims arising in the
normal course of business. Management, after consultation with legal counsel,
believes that the liabilities, if any, arising from such litigation and claims
will not be material to the consolidated financial position.
NOTE 13: REGULATORY MATTERS
The Bank, as a National Bank, is subject to the dividend restrictions set forth
by the Comptroller of the Currency. Under such restrictions, the Bank may not,
without the prior approval of the Comptroller of the Currency, declare dividends
in excess of the sum of the current year's earnings (as defined) plus the
retained earnings (as defined) from the prior two years. The dividends that the
Bank could have declared without the approval of the Comptroller of the
Currency, amounted to approximately (in thousands) $6,973 in 1994 and $6,288 in
1993.
The Bank is also required to maintain minimum amounts of capital to total "risk
weighted" assets as defined by the banking regulators. At December 31, 1994, the
Bank was required to have minimum Tier 1 and total capital ratios of 4 percent
and 8 percent respectively. The Bank's actual ratios at that date were 14.30
percent and 15.56 percent respectively.
In addition, the Bank maintained a leverage ratio of 8.72 percent which exceeded
the minimum required by the banking regulators.
NOTE 14: CONCENTRATIONS OF CREDIT
Management attempts to manage interest rate risk through various asset/liability
management techniques designed to match maturities of assets and liabilities.
Loan policies and administration are designed to provide assurance that loans
will only be granted to creditworthy borrowers, although credit losses are
expected to occur because of subjective factors and factors beyond the control
of the Bank. The concentrations of credit by type of loan are set forth in Note
3. In addition, the Bank is a community bank and, as such, is mandated by the
Community Reinvestment Act and other regulations to conduct most of its lending
activities within the geographic area where it is located. As a result, the Bank
and its borrowers may be especially vulnerable to the consequences of changes in
the local economy.
NOTE 15: TRUST DEPARTMENT
Property (other than cash deposits) held by the Bank in fiduciary or agency
capacity for its customers is not included in the accompanying statement of
condition, since such items are not assets of the Bank.
19
<PAGE>
NOTE 16: FINANCIAL INSTRUMENTS
Financial Instruments:
The estimated fair values of the Bank's financial instruments are as follows (in
thousands):
<TABLE>
<CAPTION>
1994 1993
------------------- -------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents $ 15,066 $ 15,066 $ 11,231 $ 11,231
Securities to be held to maturity 49,230 48,004 46,599 46,648
Adjustable residential real estate
loans 88,068 88,227 102,569 103,592
Fixed rate real estate loans 15,952 14,765 10,144 10,566
Consumer installment loans 15,944 15,867
Commercial and other loans 41,215 41,215 38,248 38,248
Allowance for credit losses (2,386) (2,386) (2,296) (2,296)
Accrued interest receivable 1,483 1,483 1,260 1,260
Financial liabilities:
Deposits 203,553 203,768 193,016 192,906
Accrued interest payable 543 543 505 505
Short-term borrowings 5,000 5,000
</TABLE>
It is not practical to estimate the market values of commercial and certain
other loans that are carried at amounts due from borrowers, reduced by
appropriate allowances for collectibility. There are no quoted market prices for
loans of these types and the Bank does not have available resources to estimate
fair values based on estimated cash flows of the individual loans. The
approximate average effective interest rate for these loans was 8.94% at
December 31, 1994. Maturities range from on demand to 24 years.
The Bank is a party to financial instruments with off-balance-sheet risk in the
normal course of business to meet the financing needs of its customers and to
reduce its own exposure to fluctuations in interest rates. These financial
instruments include commitments to extend credit, and, standby letters of credit
and financial guarantees. Those instruments involve, to varying degrees,
elements of credit risk in excess of the amount recognized in the statement of
financial position. The contract or notional amounts of those instruments
reflect the extent of the Bank's involvement in particular classes of financial
instruments.
The Bank's exposure to credit loss in the event of non-performance by the other
party to the financial instrument for commitments to extend credit, standby
letters of credit, and financial guarantees written is represented by the
contractual notional amount of those instruments. The Bank uses the same credit
policies in making commitments and conditional obligations as it does for on-
balance-sheet instruments.
Unless noted otherwise, the Bank does not require collateral or other security
to support financial instruments with credit risk.
Commitments to Extend Credit and Financial Guarantees: At December 31, 1994, the
Bank was exposed to credit risk on commitments to extend credit having contract
amounts of $27,419 and standby letters of credit and financial guarantees
written of $2,520.
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Bank evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained, if
it is deemed necessary by the Bank upon extension of credit, is based on
management's credit evaluation of the counterparty. Collateral held varies but
may include accounts receivable, inventory, property, plant and equipment, and
income-producing commercial properties.
Standby letters of credit and financial guarantees written are conditional
commitments issued by the Bank 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. Most guarantees extend for one year. The credit risk involved in
issuing letters of credit is essentially the same as that involved in extending
loan facilities to customers. The Bank holds collateral supporting those
commitments for which collateral is deemed necessary. The extent of collateral
held for those commitments at December 31, 1994, varies from 0% to 100%; the
average amount collateralized is 61.4%.
The Bank has not been required to perform on any financial guarantees during the
past two years. The Bank has not incurred any losses on its commitments in
either 1994 or 1993.
A summary of the Bank's commitments at December 31 is as follows:
<TABLE>
<CAPTION>
Notional Amount
----------------
1994 1993
------- -------
<S> <C> <C>
Commitments to extend credit $27,017 $22,354
Credit card arrangements 402 31
Standby letters of credit 2,520 2,067
------- -------
Total commitments $29,939 $24,452
======= =======
</TABLE>
20
<PAGE>
HEADQUARTERS
The Woodstown National Bank
and Trust Company
1 South Main Street
Woodstown, NJ 08098-0248
ANNUAL
SHAREHOLDERS' MEETING
Woodstown Nationals annual
shareholders' meeting will be held
on Tuesday, April 4, 1995 at 11:00 a.m.
at the Bank's corporate headquarters
DIRECTORS
Joseph E. Colson
Insurance Broker
Robert B. Doble, Sr., Chairman
Real Estate Broker
Chairman
D & N Machine Co.
Richard O. Erdner, President
President
Erdner Bros, Inc.
J. Michael Galvin, Jr.
President & CEO
The Memorial Hospital
of Salem County, Inc.
James D. Hargrave
CPA
Samuel H. Jones, Jr.
President/Owner
SJ Transportation Co.
Thomas Lail
Real Estate Developer
Harry Levitsky, SVP
Retired
Robert R. McHarness, CPA
Director
Farmers Mutual Insurance Co.
OFFICERS
Ralph Homan, SVP
Chief Operating Officer
Sandra Kay Battle, SVP
Cashier/Loan Officer
F. Steven Meddick, Sr., SVP
Controller
Charles W. Sutton, SVP
Marketing/Business Development Director
Donald C. Ulzheimer, SVP
Loan Officer
Lura M. Conner, VP
Branch Manager
Donald W. Davis, VP
Trust Officer
Helen H. Sickler, VP
Investment Officer
Carole R. Battle, AVP
Loan Officer
Laura L. Boger, AVP
Branch Manager
Penny M. Duffield, AVP
Branch Manager
Sharon H. Eastlack, AVP
Asst. Trust Officer
Christina Humphreys, AVP
CRA/Loan Officer
Mary H.A. Johnson, AVP
Branch Manager
Ann M. McFadden, AVP
Branch Manager
Margaret A. Massey, AVP
Branch Manager
Lois H. Nelson, AVP
Operations Manager
Dana L. Pratta, AVP
Branch Administrator
Brian K. Timberman, AVP
Loan Officer
David A. Wagner, AVP
General Auditor
Ruth A. Williams, AVP
Data Processing Manager
BANKING FACILITIES
MAIN OFFICE
1 South Main Street
Woodstown, NJ 08098
Phone (800) 899-6639
Fax (609) 769-2395
ALLOWAY
48 S. Greenwich St.
Alloway, NJ 08001
Phone (609) 935-5300
Fax (609) 935 - 5527
SHARPTOWN
Kings Hwy & US Rt 40
Woodstown, NJ 08098
Phone (609) 769-3300
Fax (609) 769-2225
SWEDESBORO
278 Kings Highway
Swedesboro, NJ 08085
Phone (609) 467-0505
Fax (609) 467-1930
MANNINGTON
125 Salem-Woodstown Rd.
Salem, NJ 08079
Phone (609) 935-6200
Fax (609) 935-6116
BECKETT
22 Village Center Drive
Swedesboro, NJ 08085
Phone (609) 467-3400
Fax (609) 467-5587
BANKING HOURS
MONDAY & TUESDAY
Lobby 9-3
Drive-in 9-4
WEDNESDAY
Lobby 9-3
Drive-in 9-5
THURSDAY
Lobby 9-6
Drive-in 9-6
FRIDAY
Lobby 9-7
Drive-in 9-7
SATURDAY
Lobby 9-11
Drive-in 9-11
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
-----------------------------------------
Subchapter D of Chapter 17 of the Pennsylvania Business Corporation Law of
1988, as amended (BCL), 15 Pa. C.S. (S)(S) 1741-50, provides that a business
corporation shall have the power under certain circumstances to indemnify its
directors, officers, employees and agents against certain expenses incurred by
them in connection with any threatened, pending or completed action, suit or
proceeding. A copy of Subchapter D of Chapter 17 of the BCL is attached as
Exhibit 99(d) to this Registration Statement.
Article V of the Bylaws of Fulton Financial Corporation provides for the
indemnification of its directors, officers, employees and agents in accordance
with, and to the maximum extent permitted by, the provisions of Subchapter D of
Chapter 17 of the BCL. Article V of the Bylaws of Fulton Financial Corporation,
as set forth in Exhibit 3(b) to this Registration Statement, is hereby
incorporated by reference in response to this Item 20.
Fulton Financial Corporation has purchased insurance to indemnify its
directors, officers, employees and agents under certain circumstances.
For disclosure concerning the position of the Securities and Exchange
Commission on indemnification for liabilities arising under the Securities Act
of 1933, see the Section in the Proxy Statement/Prospectus (which is included in
Part I of this Registration Statement) entitled INFORMATION CONCERNING FULTON
FINANCIAL CORPORATION AND DESCRIPTION OF FFC COMMON STOCK -- Indemnification.
Item 21. Exhibits and Financial Statement Schedules.
------------------------------------------
(a) Exhibits:
--------
Number Title
------ -----
2 Merger Agreement dated September 30, 1996, as amended
as of November 1, 1996, between Fulton Financial
Corporation and The Woodstown National Bank & Trust
Company -- Furnished as Exhibit A to the Proxy
Statement/Prospectus which is included in Part I of
this Registration Statement.
3(a) Articles of Incorporation of Fulton Financial
Corporation -- Incorporated by reference to Exhibit
(a)(i) of the Fulton Financial Corporation Quarterly
Report on Form 10-Q for the Quarter Ended June 30,
1987
<PAGE>
Number Title
- ------ -----
3(b) Bylaws of Fulton financial Corporation -- Incorporated by
reference to Exhibit (a)(i) of the Fulton Financial Corporation
Quarterly Report on Form 10-Q for the Quarter Ended June 30, 1989
4 Rights Agreement dated June 20, 1989, between Fulton Financial
Corporation and Fulton Bank -- Incorporated by reference to
Exhibit 1 of the Fulton Financial Corporation Current Report on
Form 8-K dated June 21, 1989
5 Opinion of Barley, Snyder, Senft & Cohen, LLP re: legality
8 Opinion of Barley, Snyder, Senft & Cohen, LLP re: tax matters
13 Annual Report on Form 10-K of Fulton Financial Corporation for
the Year Ending December 31, 1995 -- Incorporated by reference in
the Proxy Statement/Prospectus which is included in part I of
this Registration Statement
21 Subsidiaries of Fulton Financial Corporation
23(a) Consent of Barley, Snyder, Senft & Cohen, LLP
23(b) Consent of Arthur Andersen LLP
23(c) Consent of Muldoon, Murphy & Faucette
23(d) Consent of Petroni & Associates
23(e) Consent of McConnell, Budd & Downes
24 Power of Attorney
99(a) Form of Proxy
99(b) Letter to Shareholders of The Woodstown National Bank & Trust
Company
99(c) Notice of Special Meeting of Shareholders of The Woodstown
National Bank & Trust Company
99(d) Statute Relating to Indemnification
(b) Financial Statement Schedules:
-----------------------------
None required.
(c) Opinion of Financial Advisor:
----------------------------
Furnished as Exhibit B to the Proxy Statement/Prospectus which is included
in Part I of this Registration Statement.
<PAGE>
Item 22. Undertakings.
------------
(a)
1. The undersigned registrant hereby undertakes as follows:
(A) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement: (i) to include
any prospectus required by Section 10 (a) (3) of the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement;
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
Provided, however, the paragraphs (1) (A) (i) and (1) (A) (ii) above
do not apply if the registration statement is on Form S-3, Form S-8 or Form F-3,
and the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or Section 15 (d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(B) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(C) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
2. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15 (d) of the
Securities Exchange Act of 1934) (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
3. The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of
<PAGE>
a prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
The registrant undertakes that every prospectus (i) that is filed pursuant
to the preceding paragraph, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to the
registration statement and will not be used until such amendment is effective,
and that, for purposes of determining any liability under the Securities Act of
1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(c) The undersigned registrant hereby undertakes to supplement by means of
a post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amendment to registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Lancaster,
Commonwealth of Pennsylvania on December 12, 1996.
FULTON FINANCIAL CORPORATION
Attest: /s/William R. Colmery By: /s/Rufus A. Fulton, Jr.
------------------------- ---------------------------------
William R. Colmery, Rufus A. Fulton, Jr., President
Secretary and Chief Executive Officer
(Corporate Seal)
Pursuant to the requirements of the Securities Act of 1933, this amendment
to registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Capacity Date
--------- -------- ----
*/s/Jeffrey G. Albertson Director December 12, 1996
--------------------------
(Jeffrey G. Albertson)
*/s/James R. Argires Director December 12, 1996
--------------------------
(James R. Argires)
*/s/Donald M. Bowman, Jr. Director December 12, 1996
--------------------------
(Donald M. Bowman, Jr.)
Director
--------------------------
(Thomas D. Caldwell, Jr.)
Vice President December 12, 1996
/s/Beth Ann L. Chivinski and Controller
-------------------------- (Principal Accounting
(Beth Ann L. Chivinski) Officer)
*/s/Harold D. Chubb Director December 12, 1996
--------------------------
(Harold D. Chubb)
*/s/William H. Clark, Jr. Director December 12, 1996
--------------------------
(William H. Clark, Jr.)
<PAGE>
Signature Capacity Date
--------- -------- ----
*/s/ Frederick B. Fichthorn Director December 12, 1996
-----------------------------
(Frederick B. Fichthorn)
*/s/ Patrick J. Freer Director December 12, 1996
-----------------------------
(Patrick J. Freer)
/s/ Rufus A. Fulton, Jr. President, Chief December 12, 1996
----------------------------- Executive Officer and
(Rufus A. Fulton, Jr.) Director
(Principal Executive
Officer)
*/s/ Eugene H. Gardner Director December 12, 1996
-----------------------------
(Eugene H. Gardner)
*/s/ Robert D. Garner Chairman of the Board December 12, 1996
----------------------------- and Director
(Robert D. Garner)
*/s/ Daniel M. Heisey Director December 12, 1996
-----------------------------
(Daniel M. Heisey)
*/s/ J. Robert Hess Director December 12, 1996
-----------------------------
(J. Robert Hess)
*/s/ Carolyn R. Holleran Director December 12, 1996
-----------------------------
(Carolyn R. Holleran)
*/s/ Clyde W. Horst Director December 12, 1996
-----------------------------
(Clyde W. Horst)
*/s/ Bernard J. Metz, Sr. Director December 12, 1996
-----------------------------
(Bernard J. Metz, Sr.)
Executive Vice December 12, 1996
/s/ Charles J. Nugent President and Chief
---------------------------- Financial Officer
(Charles J. Nugent) (Principal Financial
Officer)
*/s/ Arthur M. Peters, Jr. Director December 12, 1996
------------------------------
(Arthur M. Peters, Jr.)
<PAGE>
Signature Capacity Date
--------- -------- ----
*/s/ Stuart H. Raub, Jr. Director December 12, 1996
-----------------------------
(Stuart H. Raub, Jr.)
*/s/ Donald E. Ruhl Director December 12, 1996
-----------------------------
(Donald E. Ruhl)
*/s/ William E. Rusling Director December 12, 1996
-----------------------------
(William E. Rusling)
*/s/ Mary Ann Russell Director December 12, 1996
-----------------------------
(Mary Ann Russell)
*/s/ John O. Shirk Director December 12, 1996
-----------------------------
(John O. Shirk)
Executive Vice
/s/ R. Scott Smith President December 12, 1996
-----------------------------
(R. Scott Smith)
*/s/ James K. Sperry Executive Vice December 12, 1996
----------------------------- President and
(James K. Sperry) Director
*/s/ Kenneth G. Stoudt Director December 12, 1996
-----------------------------
(Kenneth G. Stoudt)
* By:/s/ William R. Colmery Attorney-in-Fact December 12, 1996
-------------------------
(William R. Colmery)
<PAGE>
EXHIBIT INDEX
Required Exhibits
-----------------
Number Title
- ------ -----
2 Merger Agreement dated September 30,
1996, as amended as of November 1,
1996, between Fulton Financial
Corporation and The Woodstown National
Bank & Trust Company -- Furnished as
Exhibit A to the Proxy
Statement/Prospectus which is included
in Part I of this Registration
Statement
3(a) Articles of Incorporation of Fulton
Financial Corporation -- Incorporated
by reference to Exhibit (a)(i) of the
Fulton Financial Corporation Quarterly
Report on Form 10-Q for the Quarter
Ended June 30, 1987
3(b) Bylaws of Fulton Financial Corporation
-- Incorporated by reference to Exhibit
(a)(i) of the Fulton Financial
Corporation Quarterly Report on Form
10-Q for the Quarter Ended June 30,
1989
4 Rights Agreement dated June 20, 1989,
between Fulton Financial Corporation
and Fulton Bank -- Incorporated by
reference to Exhibit 1 for the Fulton
Financial Corporation Current Report on
Form 8-K dated June 21, 1989
5 Opinion of Barley, Snyder, Senft &
Cohen, LLP re: legality
8 Opinion of Barley, Snyder, Senft &
Cohen, LLP re: tax matters
13 Annual Report on Form 10-K for Fulton
Financial Corporation for the Year
Ending December 31, 1995 --
Incorporated by reference in the Proxy
Statement/Prospectus which is included
in Part I of this Registration
Statement
21 Subsidiaries of Fulton Financial
Corporation
<PAGE>
Number Title
- ------ -----
23(a) Consent of Barley, Snyder, Senft & Cohen, LLP
23(b) Consent of Arthur Andersen LLP
23(c) Consent of Muldoon, Murphy & Faucette
23(d) Consent of Petroni & Associates
23(e) Consent of McConnell, Budd & Downes
24 Power of Attorney
99(a) Form of Proxy
99(b) Letter to Shareholders of The Woodstown National Bank & Trust
Company
99(c) Notice of Special Meeting of Shareholders of the Woodstown
National Bank & Trust Company
99(d) Statute Relating to Indemnification
<PAGE>
EXHIBIT 5
OPINION OF BARLEY, SNYDER, SENFT & COHEN, LLP RE: LEGALITY
----------------------------------------------------------
Paul G. Mattaini
Direct Dail Number (717) 399-3519
December 5, 1996
Fulton Financial Corporation The Woodstown National Bank &
One Penn Square Trust Comapny
P.O. Box 4887 One South Main Street
Lancaster, PA 17604 Woodstown, NJ 08098
Re: Merger of Fulton Financial Corporation
and The Woodstown National Bank & Trust Company
-----------------------------------------------
Dear Ladies and Gentlemen:
We have acted as counsel to Fulton Financial Corporation ("FFC") in
connection with the registration under the Securities Act of 1933, as amended,
by means of a registration statement on Form S-4 (the "Registration Statement"),
of 2,880,000 shares of the $2.50 par value common stock of FFC, which is the
maximum number of shares to be issued pursuant to the terms of the Merger
Agreement dated September 30, 1996, as amended as of December 1, 1996 (the
"Merger Agreement"), entered into between FFC and The Woodstown National Bank &
Trust Company ("WNB").
The following transactions will occur upon consummation of the Merger
Agreement: (i) FFC will organize a national banking association ("WNB Interim
National Bank") as a wholly-owned subsidiary of FFC, (ii) WNB will be merged
with and into WNB Interim National Bank (the "Merger"), (iii) WNB Interim
National Bank will survive the Merger and operate as a wholly-owned subsidiary
of FFC after the Merger under the name "The Woodstown National Bank & Trust
Company," and (iv) each issued and outstanding share of the $0.22 par value
common stock of WNB (the
<PAGE>
"WNB Common Stock") will be converted into 1.60 shares of the $2.50 par value
common stock of FFC (the "FFC Common Stock").
This Opinion Letter is provided pursuant to the requirements of Item
601(b)(5)(i) of Regulation S-K of the Securities and Exchange Commission for
inclusion as an exhibit to the Registration Statement.
This Opinion Letter is governed by, and shall be interpreted in accordance
with, the Legal Opinion Accord (the "Accord") of the American Bar Association's
Section of Business Law (1991), as supplemented or modified by the Pennsylvania
Third-Party Legal Opinion Supplement (the "Pennsylvania Supplement") of the
Pennsylvania Bar Association's Section of Corporation, Banking & Business Law
(1992). As a consequence , this Opinion Letter is subject to a number of
qualifications, exceptions, definitions, limitations on coverage and other
limitations, all as more particularly described in the Accord and the
Pennsylvania Supplement, and this Opinion Letter shall be read in conjunction
therewith. The Law covered by the opinions expressed herein is limited to the
federal law of the United States of America and the law of the Commonwealth of
Pennsylvania.
Except as otherwise indicated herein, capitalized terms used in this
Opinion Letter are defined and set forth in the Merger Agreement, the Accord or
the Pennsylvania Supplement. Our opinions herein are subject to the following
conditions and assumptions, in addition to those set forth in the Accord and the
Pennsylvania Supplement:
(1) All of the shares of WNB Common Stock that are issued and outstanding
at the time of the Merger will be duly authorized, validly issued,
fully paid and nonassessable;
(2) All conditions precedent to the obligations of FFC and WNB as set forth
in the Merger Agreement will have been satisfied at the time of the
Merger;
(3) All covenants required to be performed by FFC and WNB on or before the
date of consummation of the Merger, as set
<PAGE>
forth in the Merger Agreement, will have been performed by them as of
such date; and
(4) The shares of FFC Common Stock will be issued, and the Merger will be
consummated, in strict accordance with the terms of the Merger
Agreement and the statutory laws of the United States of America, the
Commonwealth of Pennsylvania and the State of New Jersey.
Based upon and subject to the foregoing, we are of the opinion that the
shares of FFC Common Stock to be issued in connection with the Merger have been
duly authorized and, when issued, will be legally issued, fully paid and
nonassessable.
Very truly yours,
BARLEY, SNYDER, SENFT & COHEN, LLP
By: /s/ Paul G. Mattaini
-----------------------------
Paul G. Mattaini, Esquire
<PAGE>
EXHIBIT 8
OPINION OF BARLEY, SNYDER, SENFT & COHEN, LLP RE: TAX MATTERS
-------------------------------------------------------------
December 5, 1996
The Woodstown National Bank Fulton Financial Corporation
& Trust Company One Penn Square
One South Main Street Lancaster, PA 17602
Woodstown, NJ 08098
Re: Fulton Financial Corporation/The Woodstown National Bank & Trust
----------------------------------------------------------------
Company
- -------
Gentlemen:
We have acted as counsel to Fulton Financial Corporation ("FFC")
connection with the Merger Agreement dated September 30, 1996, as amended (the
"Merger Agreement"), entered into between FFC and The Woodstown National Bank &
Trust Company ("WNB").
The following transactions will occur pursuant to the Merger Agreement:
i. FFC will organize a national banking association ("WNB Interim
Bank") as a wholly-owned subsidiary of FFC and cause WNB Interim
Bank to become a party to the Merger Agreement;
ii. WNB will be merged with and into WNB Interim Bank (the
"Merger");
iii. WNB Interim Bank will survive the Merger and will operate as a
wholly-owned subsidiary of FFC under the name "The Woodstown
National Bank & Trust Company"; and
iv. each issued and outstanding share of the common stock of, par
value $.22 per share (the WNB Common Stock"), will be converted
into 1.6 shares of the common stock of FFC, par value $2.50 per
share (the "FFC Common Stock").
You have requested our opinion as to certain federal income tax
consequences of the transactions contemplated by the Merger Agreement, and this
opinion is rendered pursuant to the provisions of Section 7.1(d) of Article VII
of the Merger Agreement.
<PAGE>
This Opinion Letter is governed by, and shall be interpreted in accordance
with, the Legal Opinion Accord (the "Accord") of the American Bar Association's
Section of Business Law (1991), as supplemented or modified by the Pennsylvania
Third-Party Legal Opinion Supplement (the "Pennsylvania Supplement") of the
Pennsylvania Bar Association's Section of Corporation, Banking and Business Law
(1992). As a consequence, this Opinion Letter is subject to a number of
qualifications, exceptions, definitions, limitations on coverage and other
limitations, all as more particularly described in the Accord and the
Pennsylvania Supplement, and this Opinion Letter shall be read in conjunction
therewith. The Law covered by the opinions expressed herein is limited to the
federal law of the United States of America.
Except as otherwise indicated herein, capitalized terms used in this
Opinion Letter are defined and set forth in the Merger Agreement, the Accord or
the Pennsylvania Supplement. Our opinions herein are subject to the following
conditions and assumptions, in addition to those set forth in the Accord and the
Pennsylvania Supplement:
(A) All of the shares of WNB Common Stock that are issued and outstanding
at the time of the Merger will be duly authorized, validly issued,
fully paid and nonassessable.
(B) All conditions precedent to the obligations of FFC, Interim Bank and
WNB as set forth in the Merger Agreement will have been satisfied at
the time of the Merger.
(C) All covenants required to be performed by FFC, Interim Bank and WNB on
or before the date of consummation of the Merger, as set forth in the
Merger Agreement, will have been performed by them as of such date.
(D) The transaction contemplated by the Merger Agreement, including
without limitation the Merger and the issuance of shares of FFC Common
Stock to the stockholders of WNB, will be accomplished in strict
accordance with the terms of the Merger Agreement and The National
Bank Act, as amended.
(E) The fair market value of the FFC Common Stock and other consideration
received by each WNB shareholder will be approximately equal to the
fair market value of the WNB Common Stock surrendered in the exchange.
(F) Upon consummation of the Merger, the former stockholder of WNB will
own, in the aggregate, FFC Common Stock equal in value to at least 50
percent of the value of all of the formerly outstanding WNB Common
Stock as of the date of the Merger.
(G) There is no plan or intention on the part of the stockholders of WNB
to sell or otherwise dispose of the FFC Common Stock to be received
pursuant to the Merger Agreement that would reduce the ownership of
FFC Common Stock by former stockholders of WNB to a number of shares
of FFC Common Stock having, in the aggregate, a value of less then 50
percent of the value of all of WNB Common Stock outstanding
immediately prior to the Merger. For purposes of this assumption,
shares of WNB Common Stock exchanged for cash or other property,
surrendered by dissenters, or exchanged for cash in lieu of fractional
shares of FFC Common Stock will be treated as outstanding WNB Common
Stock on the date of the transaction. Moreover, shares of FFC Common
Stock and shares of stock held by WNB shareholders and otherwise sold,
redeemed, or
<PAGE>
disposed of prior or subsequent to the transaction will be considered in
making this assumption.
(H) New Co will acquire at least ninety percent (90%) of the fair market
value of the net assets and at least seventy percent (70%) of the fair
market value of the gross assets held by Woodstown immediately prior to
the Merger. For this purpose, amounts paid by Woodstown to dissenters,
amounts paid by Woodstown to shareholders who receive cash or other
property, assets of Woodstown used to pay its reorganization expenses,
and all redemptions and distributions (except for regular, normal
dividends) made by Woodstown immediately preceding the Merger will be
considered as assets of Woodstown held immediately prior to Merger.
(I) There is no plan or intention on the part of FFC to reacquire any of the
shares of FFC Common Stock issued pursuant to the provisions of the
Merger Agreement.
(J) There is no plan or intention on the part of FFC or Interim Bank to sell
or otherwise dispose of any of the assets of WNB acquired in the Merger,
except for the dispositions made in the ordinary course of business.
(K) The liabilities of WNB assumed by Interim Bank and the liabilities to
which the assets of WNB are subject were incurred by WNB in the ordinary
course of WNB's business.
(L) The historic business of WNB following the Merger will be continued by
Interim Bank.
(M) FFC, Interim Bank, WNB and stockholders of WNB will pay their respective
expenses, if any, incurred in connection with the transactions.
(N) There is no intercorporate indebtedness existing between FFC and WNB or
Interim Bank and WNB that was issued or acquired or that will be settled
at a discount; and
(O) The fair market value of the assets of WNB transferred to Interim Bank
will equal or exceed the sum of the liabilities assumed by Interim Bank
and FFC and plus the amount of liabilities, if any, to which the
transferred assets are subject.
Based upon and subject to the foregoing, we are of the opinion that:
(1) the Merger will constitute a reorganization within the meaning of
Sections 368(a)(1)(A) and 368(a)(2)(D) of the Internal Revenue code of
1986 as amended (the "Code");
(2) No gain or loss will be recognized by WNB, FFC or Interim Bank by
reason of the Merger;
(3) The bases of the assets of WNB in the hands of Interim Bank will be the
same as the bases of such assets in the hands of WNB immediately prior
to the Merger;
(4) The holding period of the assets of WNB in the hands of Interim Bank
will include the period during which such assets were held by WNB prior
the Merger;
<PAGE>
(5) No gain or loss will be recognized by the WNB shareholders on the exchange
of shares of WNB Common Stock solely for shares of FFC Common Stock
(including fractional shares); income, gain or loss will be recognized,
however, to each such shareholder upon the receipt of cash by such
shareholders on the exchange. The receipt of cash by WNB shareholders will
have the effect of treating the shareholder as having received solely
shares of FFC Common Stock in the reorganization exchange and then having
received a cash payment from FFC in a hypothetical redemption of that
number of shares of FFC Common Stock equal in value to such cash payment.
The WNB shareholder who receives cash will therefore recognize capital
gain or loss on the constructive redemption of such shares in an amount
equal to the difference between the cash received and the adjusted basis
in such shares;
(6) The basis in the shares of FFC Common Stock to be received by WNB
shareholders will be the same as the basis in the shares of WNB's Common
Stock surrendered in the reorganization exchange, decreased by the amount
of cash received and increased by the amount of any gain (and by the
amount of any dividend income) recognized on the exchange; and
(7) The holding period of the shares of FFC Common Stock to be received by the
shareholders of WNB will include the period during which they held the
shares of WNB Common Stock surrendered, provided the shares of WNB Common
Stock are held as a capital asset on the date of the exchange.
Very truly yours,
BARLEY, SNYDER, SENFT & COHEN, LLP
By: /s/ Paul G. Mattaini
-------------------------------
Paul G. Mattaini
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF FULTON FINANCIAL CORPORATION
--------------------------------------------
Name of Subsidiary Organized Under the Laws of
- ------------------ ---------------------------
Fulton Bank Pennsylvania
Farmers Trust Bank Pennsylvania
Swineford National Bank United States
Lafayette Bank Pennsylvania
FNB Bank, National Association United States
Great Valley Savings Bank Pennsylvania
Hagerstown Trust Company Maryland
Delaware National Bank United States
The Bank of Gloucester County New Jersey
Fulton Financial Realty Company Pennsylvania
Fulton Life Insurance Company Pennsylvania
Central Pennsylvania Financial Corp. Pennsylvania
FFC Management, Inc. Delaware
<PAGE>
EXHIBIT 23(a)
CONSENT OF BARLEY, SNYDER, SENFT & COHEN, LLP
---------------------------------------------
We hereby consent to the use in this registration statement of the
opinions filed as Exhibit 5 and Exhibit 8 hereto and to the references to this
firm under the caption "Legal Matters" in the related prospectus.
Lancaster, Pennsylvania BARLEY, SNYDER, SENFT & COHEN, LLP
December 5, 1996 By: /s/ Paul G. Mattaini
Paul G. Mattaini, Esquire --------------------------------
<PAGE>
EXHIBIT 23 (b)
CONSENT OF ARTHUR ANDERSEN LLP
------------------------------
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our report dated January 26,
1996, (except Note N for which the date is February 29, 1996) included in Fulton
Financial Corporation's Form 10-K for the year ended December 31, 1995 and to
all references to our firm included in this registration statement.
Lancaster, Pennsylvania /s/ ARTHUR ANDERSEN LLP
December 12, 1996
<PAGE>
EXHIBIT 23 (c)
CONSENT OF MULDOON MURPHY & FAUCETTE
------------------------------------
We hereby consent to the references to this firm under the caption
"Legal Matters" in the related prospectus.
Washington, D.C. MULDOON MURPHY & FAUCETTE
December 5, 1996 By: /s/ Muldoon Murphy & Faucette
-------------------------------------
<PAGE>
EXHIBIT 23 (d)
CONSENT OF PETRONI & ASSOCIATES
-------------------------------
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our reports dated January 12,
1996 and January 20, 1995 included in The Woodstown National Bank and Trust
Company's Annual Reports for the years ended December 31, 1995 and 1994 and to
all references to our Firm included in this registration statement.
PETRONI & ASSOCIATES
By: Nick L. Petroni, CPA
Glassboro, NJ
November 25, 1996
<PAGE>
EXHIBIT 23(e)
CONSENT OF McCONNELL, BUDD & DOWNES
-----------------------------------
We hereby consent to the inclusion of the Opinion of McConnell, Budd &
Downes, Inc. dated December 13, 1996 as an Annex to the Proxy Statement
-----
/Prospectus filed as part of the Form S-4 Registration Statement (Registration
No. 333-17329) of Fulton Financial Corporation and to the references to our firm
as Financial Advisor to Woodstown National Bank & Trust Company in the text of
said Proxy Statement/Prospectus. In giving such consent, we do not thereby admit
that we come within the category of persons whose consent is required under
Section 7 of the Securities Act of 1933 or the rules and regulations of the
Securities and Exchange Commission.
December 5, 1996
McConnell, Budd & Downes, Inc.
By: /s/ David A. Budd
---------------------------------------
David A. Budd
Managing Director
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
-----------------
The undersigned officers and directors of Fulton Financial Corporation
hereby constitute and appoint Rufus A. Fulton, Jr., Charles J. Nugent and
William R. Colmery, or each of them singly, the true and lawful agents and
attorneys-in-fact of the undersigned with full power and authority to sign for
the undersigned and in their respective names, in any and all capacities, any
and all amendments (including post-effective amendments) to this Registration
Statement and generally to take all such steps as may be necessary or
appropriate to enable Fulton Financial Corporation to comply with the provisions
of the Securities Act of 1933, as amended, and all requirements of the
Securities and Exchange Commission related thereto, hereby ratifying and
confirming all acts taken by such agents and attorneys-in-fact, as herein
authorized.
Signature Capacity Date
--------- -------- ----
/s/Jeffrey G. Albertson Director October 15, 1996
- --------------------------
(Jeffrey G. Albertson)
/s/James R. Argires Director October 15, 1996
- --------------------------
(James R. Argires)
/s/Donald M. Bowman, Jr. Director October 15, 1996
- --------------------------
(Donald M. Bowman, Jr.)
Director
- --------------------------
(Thomas D. Caldwell, Jr.)
Vice President October 15, 1996
/s/Beth Ann L. Chivinski and Controller
- -------------------------- (Principal Accounting
(Beth Ann L. Chivinski) Officer)
/s/Harold D. Chubb Director October 15, 1996
- --------------------------
(Harold D. Chubb)
/s/William H. Clark, Jr. Director October 15, 1996
- --------------------------
(William H. Clark, Jr.)
<PAGE>
Signature Capacity Date
--------- -------- ----
/s/ Frederick B. Fichthorn
- ----------------------------- Director October 15, 1996
(Frederick B. Fichthorn)
/s/ Patrick J. Freer
- ----------------------------- Director October 15, 1996
(Patrick J. Freer)
President, Chief
/s/ Rufus A. Fulton, Jr. Executive Officer and
- ----------------------------- Director October 15, 1996
(Rufus A. Fulton, Jr.) (Principal Executive
Officer)
/s/ Eugene H. Gardner
- ----------------------------- Director October 15, 1996
(Eugene H. Gardner)
Chairman of the Board
/s/ Robert D. Garner and Director October 15, 1996
- -----------------------------
(Robert D. Garner)
/s/ Daniel M. Heisey
- ----------------------------- Director October 15, 1996
(Daniel M. Heisey)
/s/ J. Robert Hess
- ----------------------------- Director October 15, 1996
(J. Robert Hess)
/s/ Carolyn R. Holleran
- ----------------------------- Director October 15, 1996
(Carolyn R. Holleran)
/s/ Clyde W. Horst
- ----------------------------- Director October 15, 1996
(Clyde W. Horst)
/s/ Bernard J. Metz, Sr.
- ----------------------------- Director October 15, 1996
(Bernard J. Metz, Sr.)
Executive Vice
/s/ Charles J. Nugent President and Chief
- ----------------------------- Financial Officer October 15, 1996
(Charles J. Nugent) (Principal Financial
Officer)
/s/ Arthur M. Peters, Jr.
- ----------------------------- Director October 15, 1996
(Arthur M. Peters, Jr.)
<PAGE>
Signature Capacity Date
--------- -------- ----
/s/ Stuart H. Raub, Jr. Director October 15, 1996
- ------------------------------
(Stuart H. Raub, Jr.)
/s/ Donald E. Ruhl Director October 15, 1996
- ------------------------------
(Donald E. Ruhl)
/s/ William E. Rusling Director October 15, 1996
- ------------------------------
(William E. Rusling)
/s/ Mary Ann Russell Director October 15, 1996
- ------------------------------
(Mary Ann Russell)
/s/ John O. Shirk Director October 15, 1996
- ------------------------------
(John O. Shirk)
Executive Vice
/s/ R. Scott Smith President October 15, 1996
- ------------------------------
(R. Scott Smith)
/s/ James K. Sperry Executive Vice October 15, 1996
- ------------------------------ President and
(James K. Sperry) Director
/s/ Kenneth G. Stoudt Director October 15, 1996
- ------------------------------
(Kenneth G. Stoudt)
<PAGE>
EXHIBIT 99(a)
FORM OF PROXY
-------------
REVOCABLE PROXY
THE WOODSTOWN NATIONAL BANK & TRUST COMPANY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SPECIAL MEETING OF SHAREHOLDERS
January 22, 1997
THE UNDERSIGNED hereby constitutes and appoints C. Courtney Seabrook,
Harriet J. Colson and Perez H. Collins, and and of them, as lawful attorneys and
proxies of the undersigned, with full power of substitution, to represent and
vote, as directed below, all of the shares of Common Stock of The Woodstown
National Bank & Trust Company ("WNB") held of record by the undersigned at the
close of business on December 11, 1996, at the Special Meeting of the
Shareholders of WNB to be held on January 22, 1997, at 11:00 a.m. at The Salem
County Sportsmen's Club, Inc., Route 40, Carney's Point, New Jersey, or at any
adjournment or postponement thereof, with all of the powers the undersigned
would possess if personally present, as follows:
(1) PROPOSAL to approve, adopt, ratify and confirm the Merger Agreement,
dated September 30, 1996, as amended as of November 1, 1996, between
Fulton Financial Corporation and WNB providing, among other things,
for the merger of WNB with and into a subsidiary of Fulton Financial
Corporation and for the automatic conversion of each share of WNB
Common Stock into 1.60 shares of Common Stock of Fulton Financial
Corporation.
[_] FOR [_] AGAINST [_] ABSTAIN
(2) In their discretion as to any other matter properly before the
meeting, including, without limitation, a motion to adjourn or
postpone the meeting to another time and place for the purpose of
soliciting additional proxies in favor of the Merger Agreement or
otherwise.
[_] FOR [_] AGAINST [_] ABSTAIN
This proxy is revocable and will be voted as directed, but if no
instructions are specified, this proxy will be voted for each of the proposals
listed. If any other business is presented at the Special Meeting, this proxy
will be voted by those named in this proxy in their best judgment. At the
<PAGE>
present time, the Board of Directors knows of no other business to be presented
at the Special Meeting.
The undersigned acknowledges receipt of the Notice of Special Meeting of
Shareholders and the Proxy Statement/Prospectus of WNB dated December 13, 1996,
and hereby revoke(s) all other proxies heretofore given by the undersigned in
connection with this meeting.
Date:
-------------------------------
------------------------------------
Signature
------------------------------------
Signature
Please sign exactly as your name appears hereon. If
stock is jointly held, each joint owner should
sign. If signing for a corporation or a
partnership, or as attorney or fiduciary, indicate
your full title. If more than one fiduciary is
involved, all should sign.
<PAGE>
EXHIBIT 99(b)
[THE WOODSTOWN NATIONAL BANK & TRUST COMPANY LETTERHEAD]
December 13, 1996
Dear Shareholder,
You are cordially invited to a Special Meeting of Shareholders
(the "Meeting") of The Woodstown National Bank & Trust Company ("WNB") to be
held on January 22, 1997, at 11:00 a.m. at the Salem County Sportsmen's Club,
Inc., Route 40, Carney's Point, New Jersey.
At the Meeting, holders of all outstanding shares of Common Stock, par
value $0.22 per share (the "Shares"), of WNB will be asked to consider and vote
upon a proposal to approve the merger (the "Merger") of WNB and a subsidiary of
Fulton Financial Corporation ("FFC") in accordance with the terms of the Merger
Agreement dated September 30, 1996, as amended as of November 1, 1996, between
WNB and FFC (the "Merger Agreement"). Following the Merger, the resulting bank
will operate as a wholly-owned subsidiary of FFC under the name "The Woodstown
National Bank & Trust Company." Pursuant to the Merger Agreement, each Share
outstanding at the effective date of the Merger will automatically be converted
into the right to receive 1.60 shares of FFC's Common Stock,and cash will be
paid in lieu of fractional shares. Consummation of the Merger is subject to
certain conditions, including the approval of the Merger by various regulatory
agencies and approval of the WNB shareholders as described below.
The Board of Directors of WNB has approved and declared the Merger
advisable and recommends that the shareholders of WNB vote in favor of the
Merger Agreement.
It is very important that your shares be represented at the Meeting,
regardless of whether you plan to attend in person. The affirmative vote of
two-thirds of the outstanding shares of WNB Common Stock will be required to
approve the Merger Agreement. Consequently, your failure to vote would have the
same effect as a vote against the Merger. You are, therefore, urged to execute
and return the enclosed proxy card in the enclosed postage-paid envelope as soon
as possible to ensure your shares will be voted at the Meeting.
Sincerely yours,
Samuel H. Jones, Jr.
Chairman of the Board
<PAGE>
EXHIBIT 99(c)
The Woodstown National Bank & Trust Company
One South Main Street
Woodstown, New Jersey 08098
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To be Held January 22, 1997
To the Shareholders of
The Woodstown National Bank & Trust Company:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of The
Woodstown National Bank & Trust Company ("WNB") will be held at The Salem
County Sportmen's Club, Inc., Route 40, Carney's Point, New Jersey, on
January 22, 1997, at 11:00 a.m. local time, for the following purposes:
(1) To consider and vote upon a proposal to approve the merger (the
"Merger") of WNB and a subsidiary of Fulton Financial Corporation ("FFC"),
in accordance with the terms of the Merger Agreement dated September 30,
1996, as amended as of November 1, 1996, between WNB and FFC (a copy of
which, without exhibits or schedules, is attached to the accompanying Proxy
Statement/Prospectus as Exhibit A). In the Merger, each of the outstanding
shares of Common Stock, par value $0.22 per share (the "Shares"), of WNB
will automatically be converted into the right to receive 1.60 shares of
FCC's Common Stock. Following the Merger, the resulting bank will operate
as a wholly-owned subsidiary of FFC under the name "The Woodstown National
Bank & Trust Company." The Merger is more fully described in the
accompanying Proxy Statement; and
(2) To transact such other business as may properly come before the
Special Meeting or any adjournments thereof, including, without limitation,
a motion to adjourn or postpone the Meeting to another time and place for
the place for the purpose of soliciting additional proxies in favor of the
Merger Agreement or otherwise.
The Board of Directors has fixed the close of business on December 11,
1996, as the record date for the Special Meeting. Only those persons who are
record holders of WNB Common Stock at such date will be entitled to notice of,
and to vote at, the Special Meeting and any adjournment thereof. The attached
Proxy Statement/ Prospectus forms a part of this Notice and is incorporated
herein by reference.
THE AFFIRMATIVE VOTE OF THE HOLDERS TWO-THIRDS OF THE OUTSTANDING SHARES OF
COMMON STOCK OF WNB ENTITLED TO VOTE THEREON WILL BE REQUIRED TO ADOPT THE
MERGER AGREEMENT PROVIDING FOR THE MERGER OF WNB WITH A SUBSIDIARY OF FFC.
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, THE BOARD OF DIRECTORS
URGES YOU TO MARK, SIGN, DATE AND RETURN AS SOON AS POSSIBLE THE ENCLOSED PROXY
IN THE ENCLOSED ENVELOPE. GIVING THE PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE
IN PERSON IF YOU ATTEND THE MEETING.
By order of the Board of Directors
Woodstown, New Jersey
December 13, 1996
Ralph Homan
Secretary
<PAGE>
EXHIBIT 99(d)
STATUTE RELATING TO INDEMNIFICATION
-----------------------------------
<PAGE>
Subchapter D of Chapter 17 of the Pennsylvania
Business Corporation Law of 1998
Indemnification
---------------
(S) 1741. Third-party actions
Unless otherwise restricted in its bylaws, a business corporation shall
have power to indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation), by reason of the fact that he is or was
a representative of the corporation, or is or was serving at the request of the
corporation as a representative of another domestic or foreign corporation for
profit or not-for-profit, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with the
action or proceeding if he acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the corporation and,
with respect to any criminal proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action or proceeding by judgment,
order, settlement or conviction or upon a plea of nolo contendere or its
equivalent shall not of itself create a presumption that the person did not act
in good faith and in a manner that he reasonably believed to be in, or not
opposed to, the best interests of the corporation and with respect to any
criminal proceeding, had reasonable cause to believe that his conduct was
unlawful.
(S) 1742. Derivative and corporate actions
Unless otherwise restricted in its bylaws, a business corporation shall
have power to indemnify any person who was or is a party, or is threatened to be
made a party, to any threatened, pending or completed action by or in the right
of the corporation to procure a judgment in its favor by reason of the fact that
he is or was a representative of the corporation or is or was serving at the
request of the corporation as a representative of another domestic or foreign
corporation for profit or not-for-profit, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of the
action if he acted in good faith and in a manner he reasonably believed to be
in, or not opposed to, the best interests of the corporation. Indemnification
shall not be made under this section in respect of any claim, issue or matter as
to which the person has been adjudged to be liable to the corporation unless and
only to the extent that the court of common pleas of the judicial district
embracing the county in which the registered office of the corporation is
located or the court in which the action was brought determines upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, the person is fairly and reasonably entitled to indemnity for the
expenses that the court of common pleas or other court deems proper.
(S) 1743. Mandatory indemnification
To the extent that a representative of a business corporation has been
successful on the merits or otherwise in defense of any action or proceeding
referred to in section 1741 (relating to third-party actions) or 1742 (relating
to derivative and corporate actions) or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorney
fees) actually and reasonably incurred by him in connection therewith.
Page 2
<PAGE>
(S) 1744. Procedure for effecting indemnification
Unless ordered by a court, any indemnification under section 1741
(relating to third-party actions) or 1742 (relating to derivative and corporate
actions) shall be made by the business corporation only as authorized in the
specific case upon a determination that indemnification of the representative is
proper in the circumstances because he has met the applicable standard of
conduct set forth in those sections. The determination shall be made:
(1) by the board of directors by a majority vote of a quorum
consisting of directors who were not parties to the action or proceeding;
(2) if such a quorum is not obtainable or if obtainable and a majority
vote of a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion; or
(3) by the shareholders.
(S) 1745. Advancing expenses
Expenses (including attorneys' fees) incurred in defending any action
or proceeding referred to in this subchapter may be paid by a business
corporation in advance of the final disposition of the action or proceeding upon
receipt of an undertaking by or on behalf of the representative to repay the
amount if it is ultimately determined that he is not entitled to be indemnified
by the corporation as authorized in this subchapter or otherwise.
(S) 1746. Supplementary coverage
(a) General rule. The indemnification and advancement of expenses
provided by, or granted pursuant to, the other sections of this subchapter shall
not be deemed exclusive of any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under any bylaw,
agreement, vote of shareholders or disinterested directors or otherwise, both as
to action in his official capacity and as to action in another capacity while
holding that office. Section 1728 (relating to interested directors or officers;
quorum) and, in the case of a registered corporation, section 2538 (relating to
approval of transactions with interested shareholders) shall be applicable to
any bylaw, contract or transaction authorized by the directors under this
section. A corporation may create a fund of any nature, which may, but need not
be, under the control of a trustee, or otherwise secure or insure in any manner
its indemnification obligations, whether arising under or pursuant to this
section or otherwise.
(b) When indemnification is not to be made. Indemnification pursuant
to subsection (a) shall not be made in any case where the act or failure to act
giving rise to the claim for indemnification is determined by a court to have
constituted willful misconduct or recklessness. The articles may not provide for
indemnification in the case of willful misconduct or recklessness.
(c) Grounds. Indemnification pursuant to subsection (a) under any
bylaw, agreement, vote of shareholders or directors or otherwise may be granted
for any action taken and may be made whether or not the corporation would have
the power to indemnify the person under any other provision of the law except
as provided in this section and whether or not the indemnified liability arises
or arose from any threatened, pending or completed action by or in the right of
the corporation. Such indemnification is declared to be consistent with the
public policy of this Commonwealth.
(S) 1747. Power to purchase insurance
Unless otherwise restricted in its bylaws, a business corporation shall
have power to purchase and maintain insurance on behalf of any person who is or
was a representative of the corporation or is or was serving at the request
<PAGE>
of the corporation as a representative of another domestic or foreign
corporation for profit or not-for-profit, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against that liability under
the provisions of this subchapter. Such insurance is declared to be consistent
with the public policy of this Commonwealth.
(S) 1748. Application to surviving or new corporation
For the purpose of this subchapter, references to "the corporation"
include all constituent corporations absorbed in a consolidation, merger or
division, as well as the surviving or new corporations surviving or resulting
therefrom, so that any person who is or was a representative of the constituent,
surviving or new corporation, or is or was serving at the request of the
constituent, surviving or new corporation as a representative of another
domestic or foreign corporation for profit or not-for-profit, partnership, joint
venture,trust or other enterprise, shall stand in the same position under the
provisions of this subchapter with respect to the surviving or new corporation
as he would if he had served the surviving or new corporation in the same
capacity.
(S) 1749. Application to employee benefit plans
For purposes of this subchapter:
(1) References to "other enterprises" shall include employee benefit
plans and references to "serving at the request of the corporation" shall
include any service as a representative of the business corporation that imposes
duties on, or involves services by, the representative with respect to an
employee benefit plan, its participants or beneficiaries.
(2) Excise taxes assessed on a person with respect to an employee
benefit plan pursuant to applicable law shall be deemed "fines."
(3) Action with respect to an employee benefit plan taken or omitted in
good faith by a representative of the corporation in a manner he reasonably
believed to be in the interest of the participants and beneficiaries of the plan
shall be deemed to be action in a manner that is not opposed to the best
interests of the corporation.
(S) 1750. Duration and extent of coverage
The indemnification and advancement of expenses provided by, or granted
pursuant to, this subchapter shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a representative of the
corporation and shall inure to the benefit of the heirs and personal
representative of that person.
