PROXY STATEMENT
This Proxy Statement is furnished in connection with
solicitation of the enclosed proxy by Bath National Corporation (the
Company) in connection with the Annual Meeting of Shareholders of the
Company to be held on April 24, 1996.
The principal executive offices of the Company are located at 44
Liberty Street, Bath, New York 14810. The approximate date on which
this proxy statement and the enclosed proxy are being sent to the
shareholders is April 1, 1996.
The close of business on March 31, 1996 has been fixed as the
record date for determination of the shareholders entitled to
notice of, and to vote at, the meeting. On that date there will be
outstanding 682,962 shares of Common Stock, each of which is entitled
to one vote on each matter at the meeting.
The enclosed proxy, if properly completed, signed and returned
prior to the meeting, will be voted at the meeting in accordance with
the choices specified thereon and, if no choices are specified, it
will be voted in favor of the proposals set forth in the notice
attached hereto. A shareholder giving a proxy has the right to
revoke it at any time before it has been voted by (i) giving written
notice to that effect to the Secretary of the Company, (ii) executing
and delivering a proxy bearing a later date which is voted at the
Annual Meeting, or (iii) attending and voting in person at the Annual
Meeting. If a shareholder, present in person or by proxy, abstains
on any matter, the shareholders's shares will not be voted on such
matter. Thus, an abstention from voting on a matter has the same
legal effect as a vote "against" the matter, even though the <PAGE>
<PAGE>
shareholder may interpret such action differently. The Company's by-
laws govern the methods for counting votes and, subject thereto, vest
this responsibility in the inspectors of election appointed to
perform this function.
ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes,
one of which is elected at each Annual Meeting for a term of three
years and until their successors have been elected and qualified.
The terms of Robert H. Cole, Herbert Fort, Patrick Sullivan and
Alan J. Wilcox expire this year and the Board of Directors has
nominated each of them to serve as a director as follows:
Robert H. Cole three years
Herbert Fort three years
Patrick Sullivan three years
Alan J. Wilcox three years
The Board of Directors believes that they will be available and
able to serve as directors, but, if for any reason any of them should
not be, the persons named in the proxy may exercise discretionary
authority to vote for a substitute proposed by the Board of
Directors.
Directors are elected by a plurality of the votes cast by
shareholders entitled to vote in the election. If a shareholder
voting by proxy withholds authority to vote for all or specific
nominee(s), the shareholder's shares will be treated as having been
voted against such nominee(s).
The Board of Directors of the Company has no committees since
the primary source of funds is the Bank and officers of the Company
receive no compensation as such. The Board of Directors of the Bank,
comprising the same individuals as the board of the Company has the <PAGE>
<PAGE>
following committees: an Asset/Liability Management Committee, an
Audit Committee, a Building Committee, a Compliance Committee, an
Electronic Data Processing (EDP) Steering Committee, an Investment
Committee, a Long Range Planning Committee, a Pension Fund Review
Committee, a Salary Committee, and a Trust Committee.
The members of the Asset/Liability Management Committee are:
Laverne H. Billings, Robert H. Cole, Herbert Fort, Edward C. Galpin
and Freeman H. Smith, III. This committee is responsible for
establishing goals with respect to (i) the so-called interest rate
"gap" between earning assets and liabilities and (ii) liquidity, in
each case of Bath National Bank ("Bank") and reviewing performance
against those goals. In 1995 this Committee held four meetings.
The members of the Audit Committee are Theodore P. Capron, Lisle
E. Hopkins and Lawrence C. Howell. This committee is responsible for
evaluating internal and external audits and the independence of the
Company's auditors, compliance with banking laws and
regulations and accounting principles, internal controls and
compliance with certain Bank policies. The committee is also
responsible for recommendations to the Board of Directors in matters
within its jurisdiction, including the Company's choice of external
auditors for the Bank and the results of any audit. In 1995 this
Committee held five meetings.
The members of the Building Committee are Laverne H. Billings,
Theodore P. Capron, Robert H. Cole, Freeman H. Smith, III and Alan J.
Wilcox. This committee, which met five times in 1995, is responsible
for the review of present facilities and renovaations.
<PAGE>
<PAGE>
The members of the Compliance Committee are Laverne H. Billings,
Robert H. Cole, Herbert Fort, Edward C. Galpin and Douglas L. McCabe.
This committee, which held four meetings in 1995, is charged with the
oversight of compliance by the Company and the Bank with applicable
bank holding company and banking laws and regulations.
The members of the EDP Steering Committee are Robert H. Cole,
Herbert Fort, Edward C. Galpin and Lawrence C. Howell. This
Committee, which held one meeting in 1995, reviews developments in
bank electronic data processing, established guidelines for
electronic data processing by the Bank and monitors implementation of
the guidelines.
The members of the Investment Committee are Laverne H. Billings,
Robert H. Cole, Herbert Fort, Edward C. Galpin and Alan J. Wilcox.
This Committee was established in September 1993 to provide
additional oversight of and monitoring of the investment officer and
to review broker-dealers, consultants and quality of the portfolio.
The Committee held four meetings in 1995.
All the directors serve on the Long Range Planning Committee.
This Committee, which held three meetings in 1995, is responsible for
developing long range goals for the Bank.
The members of the Pension Fund Review Committee are Theodore P.
Capron, Robert H. Cole, Herbert Fort, Edward C. Galpin and Patrick
Sullivan. This Committee reviews the performance of the investment
manager of the Company's defined contribution plan and the profit
sharing/401K Plan, and oversees certain aspects of the administration
of the plans. This Committee met once in 1995.
The members of the Salary Committee are Robert H. Cole, Herbert<PAGE>
<PAGE>
Fort, Edward C. Galpin, Constance Manikas, Joseph F. Meade, Jr.,
Patrick Sullivan and Alan J. Wilcox. This Committee, which held one
meeting in 1995, makes recommendations to the Board of Directors with
respect to officer salaries.
The members of the Trust Committee are Robert H. Cole, Constance
Manikas and Joseph F. Meade, Jr. This Committee, which met three
times in 1995, is responsible for oversight of the trust operations
of the Bank.
The Bank also has an Executive Loan Committee and a Loan Review
Committee on which some directors sit with Bank officers. These are
not, however, committees of the Board of Directors.
Directors of the Bank receive a monthly fee of $1,000.
The Bank has a deferred trustee fee plan which provides that
following ten year's continuous service on the Board of Directors,
and after attaining the age of sixty-two, those directors serving on
the Board on June 15, 1989 and who met such criteria after leaving
the Board are entitled to receive $250.00 per month for a period of
five years. The estimated present value of the benefit obligation,
which is included in other liabilities in the Company's 1995
consolidated balance sheet was $143,000. Robert H. Cole, President
of the Company and of the Bank is one of the directors entitled to
receive fees under the foregoing plan.
The Board of Directors of the Company met four times and the
Board of Directors of the Bank met thirteen times during 1995. In
1995 all the directors attended at least 75% of the total
number of meetings of the Board of Directors of the Company, and of
the Bank, and of Board committees on which they served.<PAGE>
<PAGE>
Certain information about the nominees and those directors
whose terms of office will continue after the annual meeting is
set forth below.
<TABLE>
PRINCIPAL OCCUPATION
DIRECTOR TERM AND OTHER DIRECTORSHIPS
NAME AND AGE SINCE EXPIRES HELD IN PUBLIC COMPANIES
<CAPTION>
Nominees:
<S> <C> <C> <C>
Robert H. Cole 1983 1996 President since 1990
(68) Bath National Corp.
Bath National Bank
Partner-Cole, Latham
and Joint, P.C.
Herbert Fort 1983 1996 Retired Bank President
(71) since December 31, 1989
Chairman of the Board
since 1990
Patrick Sullivan 1989 1996 Retired Auto Dealer
(65)
Alan J. Wilcox 1994 1996 President
(41) A H Wilcox & Sons, Inc.
Other Directors:
Edward C. Galpin 1983 1997 Vice President/Treasurer
(49) Bath National Corp
Executive Vice President
Bath National Bank
Lisle E. Hopkins 1983 1997 Secretary since 1994
(80) Retired Dairy Farmer
Lawrence C. Howell 1990 1997 Retired Dairy Farmer
(58)
Freeman H. Smith, III 1992 1997 Director State
(52) Government Relations
Corning, Inc.
Laverne H. Billings 1990 1998 President
(65) R.C. Billings, Inc.
Theodore P. Capron 1985 1998 Retired Bank President
(73) <PAGE>
<PAGE>
Constance Manikas 1993 1998 President
(55) Pecon Company, Inc.
Douglas L. McCabe 1993 1998 Sr. Vice President
(48) Bath National Bank
Joseph F. Meade, Jr. 1983 1998 Retired President
(74) Mercury Aircraft Corp
</TABLE>
Messrs. Cole, Galpin and McCabe, along with Delos S. Billings,
Senior Vice President of the Bank, constitute the executive
officers of the Company and of the Bank.
STOCK OWNERSHIP
The Company does not know of any persons who are the beneficial
owners of more than 5% of its outstanding Common Stock.
<TABLE>
The following table sets forth information, as of March 1, 1996,
with respect to the beneficial ownership of the Company's Common
Stock by (a) each of the directors of the Company, (b) the Company's
Chief Executive Officer and (c) all directors and executive officers
of the Company.
<CAPTION>
Number of Shares Percent
Name of Common Stock of Class
<S> <C> <C>
Laverne H. Billings 4,105 .60
Theodore P. Capron 1,200 .18
Robert H. Cole 16,591 2.43
Herbert Fort 421 .06
Edward C. Galpin 4,542 .66
Lisle E. Hopkins 5,284 .77
Lawrence C. Howell 1,477 .22
Constance Manikas 385 .06
Douglas L. McCabe 1,784 .26
Joseph F. Meade, Jr 5,987 .88
Freeman H. Smith, III 6,000 .88
Patrick Sullivan 4,953 .72
Alan J. Wilcox 350 .05
ALL DIRECTORS AND EXECUTIVE
OFFICERS AS A GROUP (13 PERSONS) 53,079 7.77
</TABLE>
For purposes of the table above, under the rules of the
Securities and Exchange Commission, an individual is considered to<PAGE>
<PAGE>
"beneficially own" any shares of common stock of the Company, (i)
over which he or she exercises sole or shared voting or investment
power, or (ii) of which he or she has the right to acquire beneficial
ownership within sixty days. As used herein, "voting power" is the
power to dispose or direct the disposition of shares. All persons
shown in the table above have sole voting and investment power.
COMPENSATION OF EXECUTIVE OFFICERS
REPORT OF BOARD OF DIRECTORS
The Board of Directors of the Bank establishes the compensation
for executive officers of the Bank. Executive officers of the
Company are not compensated as such. The Board of Directors of the
Company, which comprises the same persons as the Bank Board, reviews
any such compensation.
Principles of Executive Compensation
The Bank's Executive Compensation Policy, which applies to the
CEO and all other executive officers, is intended to align executive
compensation with the long-term interest of Company shareholders. In
applying this policy the Board of Directors (the "Board") has
followed a program to:
Establish salary and annual bonus opportunities
to attract, motivate and retain executive talent
necessary for the long-term success of the Company.
Integrate cash and compensation so as to reward
executives for performance that enhances the
long-term value of the shareholder equity.
Executive Compensation Program
The total compensation program consists of cash based<PAGE>
<PAGE>
compensation. Cash compensation consists of a base salary, with
an opportunity for an annual bonus for the CEO, Executive Vice
President, Senior Vice President-Lending and Senior Vice President-
Mortgages.
The Bank participates in salary surveys both on a regional
and national level to help ensure that the Bank's salary structure
is competitive within the banking industry. The Board determines
salary ranges for key executives. The Board evaluates at least
annually the performance of executive officers and approves any
adjustment in base compensation. The following table shows the
compensation of those executive officers of the Bank who received
aggregate annual salary and bonus in excess of $100,000 in 1995.
<TABLE>
SUMMARY COMPENSATION TABLE
_____________________________________________________________________
ANNUAL COMPENSATION
_____________________________________________________________________
Name and
Principal
Position Year Salary Bonus All Other Compensation <F1>
<CAPTION>
<S> <C> <C> <C> <C>
Robert H. Cole 1995 $160,000 $48,000 $21,194
President 1994 150,000 42,364 21,150
1993 140,000 24,000 21,383
Edward C. Galpin 1995 $100,000 $20,600 $18,161
Executive Vice 1994 94,500 21,182 21,646
President 1993 90,000 12,000 18,974
Douglas McCabe 1995 $ 90,000 $20,600 $14,011
Senior Vice 1994 75,075 21,182 14,591
President
___________________________________________________________________
<FN>
<F1> Represents the Bank's contribution to Mr. Cole's, Mr. Galpin's
and Mr. McCabe's account in the Company's non-contributory
profit sharing plan and defined contribution retirement plan.
The Bank has entered into a severance compensation agreement <PAGE>
<PAGE>
with a number of Bank officers, including Mr. Cole, Mr. Galpin
and Mr. McCabe. In the case of Mr. Cole, the agreement provides
that upon terminating Mr. Cole's employment as a result of or
following any change in control of the Bank, he is entitled as
a severance fee an amount equal to 2.9 times the average of his
annual compensation (excluding bonuses) during the previous five
years of employment. If Mr. Cole's employment had terminated at
the end of 1995 under circumstances requiring payment under the
agreement, he would have been entitled to receive a lump sum of
$412,000. In the case of Mr. Galpin, the agreement provides
that upon terminating Mr. Galpin's employment, as a result of or
following any change in control of the Bank, he is entitled as a
severance fee an amount equal to 2.9 times the average of his
annual compensation (excluding bonuses) during the previous five
years of employment. If Mr. Galpin's employment had terminated
at the end of 1995 under circumstances requiring payment under
the agreement, he would have been entitled to receive a lump sum
of $260,000. In the case of Mr. McCabe, the agreement provides
that upon terminating Mr. McCabe's employment, as a result of or
following any change in control of the Bank, he is entitled as a
severance fee an amount equal to 2.9 times the average of his
annual compensation (excluding bonuses) during the previous five
years of employment. If Mr. McCabe's employment had terminated
at the end of 1995 under circumstances requiring payment under
the agreement, he would have been entitled to receive a lump sum
of $210,000.
</TABLE>
The following graph compares the yearly percentage change in the <PAGE>
<PAGE>
Company's cumulative total shareholder return on its common stock
over the prior five years (assuming reinvestment of dividends at date
of payment into common stock of the Company) with the cumulative
total return of the Russell 2000 stock index and the cumulative total
return of a peer group of financial institutions. The Company
believes that while total shareholder return is a most important
criteria of corporate performance, it is subject to the vagaries of
the market. In addition to the creation of shareholder value, the
Company's executive compensation program is based on operating and
strategic results.
<TABLE>
CUMULATIVE TOTAL RETURN
<CAPTION>
12/90 12/91 12/92 12/93 12/94 12/95
<S> <C> <C> <C> <C> <C> <C> <C>
Bath Natl Bk N Y BATH 100 100 111 148 190 238
PEER GROUP PPEERI 100 62 68 37 41 80
RUSSELL 2000 IR20 100 146 173 206 202 260
NASDAQ BANKS INAB 100 164 239 272 271 404 <PAGE>
</TABLE>
<PAGE>
<TABLE>
RESEARCH DATA GROUP PEER GROUP TOTAL RETURN WORKSHEET
BATH 12/31/90
PEER GROUP
OB5BZBAT % Peer Group
Peer Group Cumulative CUMULATIVE TOTAL RETURN Market Cap
Total Return
(Weighted Average by
Market Value)
<CAPTION>
12/90 12/91 12/92 12/93 12/94 12/95 12/91 12/95
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Peer Group Weighted
Average: 100 62 68 37 41 80 100% 100%
30 14
Union Natl Bk
Westminster Md UBMD 100 53 61
Carrollton Bk
Baltimore Md CLTB 100 102 105 107 152 171
Somerset Tr Co
Pa SOMT 100 122 128
Allegheny Vy
Bancorp Inc AVLY 100 104 116
Wayne Cnty Bk
& Tr Co WYBP 100 104 137
Ventura Cnty
Natl Bancorp VCNB 100 62 68 37 41 80 100% 100%
Orange Natl
Bancorp OGNB 100 200 410
Hamlin Bk & Tr
Co Smthprt Pa HMLN 100 104 124
Elverson Natl
Bk Pa ELVN 100 108 151
</TABLE>
The Bank has extended credit to directors and officers of both
the Company and the Bank since the Company and Bank commenced
business. In the opinion of management, these loans were made in the
ordinary course of business and were made on substantially the same
terms, including interest rates and collateral, as those prevailing
at the time for comparable transactions with other persons and did
not involve more than the normal risk of collectibility or present
other unfavorable features.
Mr. Robert H. Cole, Director and Officer of the Company and the
Bank, is a member of the law firm of Cole, Latham and Joint, P.C. <PAGE>
<PAGE>
The Company and the Bank paid a total of $76,981 to Cole, Latham and
Joint, P.C. for legal services rendered during 1995.
PROPOSED AMENDMENT TO THE CERTIFICATE OF INCORPORATION
The certificate of incorporation of the corporation by an
amendment approved by the shareholders on April 15, 1992, revised
paragraph Fourth of the certificate of incorporation by increasing
the number of common shares from 600,000 to 1,200,000, each with a
par value of $5.00.
There are presently shares of common stock issued totaling
682,962 and unissued shares numbering 517,038. The Board of
Directors deem it advisable to authorize the creation of an
additional 300,000 shares to be used for a stock split, if approved.
These shares may be issued by the Board of Directors without further
shareholder action and shares not needed for the share split will be
available for other corporate purposes.
If the proposed amendment is approved, the additional shares,
when issued, will have the same voting and other rights as the
corporation's presently authorized common stock. The holders of
common stock do not have preemptive rights to subscribe for the
additional shares of common stock.
AMENDMENT TO CERTIFICATE OF INCORPORATION
INCREASING THE NUMBER OF
COMMON SHARES FROM 1,200,000 TO 1,500,000
The certificate of incorporation of the corporation shall be
amended as follows:
"FOURTH: The aggregate number of shares which the corporation shall
have authority to issue is 1,500,000 shares of common stock, each <PAGE>
<PAGE>
with a par value of $5.00 and 300,000 shares of preferred stock, each
with a par value of $5.00."
The remainder of paragraph FOURTH relating to the preferred shares
shall remain as originally adopted.
The Board of Directors recommends a "FOR" vote on this proposal.
PROPOSAL TO EFFECT A TWO-FOR-ONE STOCK SPLIT
The Board of Directors has approved and recommends to the
shareholders that they approve a two-for-one stock split. If
approved by shareholders, the stock split will be accomplished by
Bath National Bank Corporation issuing to each holder of common stock
outstanding as of the close of business on April 24, 1996, one
additional share of common stock for every one share held by the
holder. It will not be necessary for shareholders to surrender
existing stock certificates to Bath National Corporation. Present
shareholders should retain their present certificates since they will
remain valid and will represent the same amount of shares of common
stock. Hence, after the stock distribution is accomplished, there
will be 1,365,924 shares of common stock issued and outstanding.
The Board of Directors believes that a two-for-one common stock
split would tend to enhance public interest in the common stock of
Bath National Corporation and broaden the market for existing shares
because of the lower unit cost.
The relative rights and equity interest of each individual
shareholder will not be effected by the consummation of the split and
it will not effect the par value of the shares of common stock. Bath
National Corporation will be required, however, to transfer to its
books an amount from its surplus account to its stated capital <PAGE>
<PAGE>
account which would double the current stated capital account. It
should also be noted that following the split, brokerage
commissions and transfer taxes upon a purchase or sale of common
stock may be higher, because of the proportionately larger number of
shares involved in any given transaction.
Under current law, the split will not result in a gain or loss
for federal income tax purposes to Bath National Corporation or to
its shareholders and the cost or tax basis of each original share
held by the shareholder before the split will be allocated equally
among the resulting shares held by the shareholder. Also, the
holding period of the additional shares will be measured from the
date of acquisition of the original shares.
While under Bath National Corporation's Certificate of
Incorporation, its By-Laws and applicable law the Board of Directors
is not required to submit the foregoing proposal to a vote of the
shareholders, the Board desires the affirmative vote of a majority of
all outstanding shares of common stock entitled to vote at the annual
meeting of the Bath National Corporation. If the shareholders fail
to approve the foregoing proposal, then Bath National Corporation
will not consummate the two-for-one stock split.
The Board of Directors recommends a "FOR" vote on this proposal.
AUDITORS
The Board of Directors has recommended that Urbach, Kahn &
Werlin PC be appointed as auditors of the Company for 1996. A
representative of that firm will be present at the meeting with the
opportunity to make a statement and will be available to respond to
appropriate questions.<PAGE>
<PAGE>
PROPOSALS OF SHAREHOLDERS
In order to be eligible for inclusion in the Company's proxy
statement and form of proxy for next year's Annual Meeting,
shareholder proposals that action be taken at the meeting must be
received at the Company's principal executive offices by December
18, 1996.
OTHER MATTERS
The Board of Directors of the Company knows of no other matters
to be presented at the meeting. However, if any other matters
properly come before the meeting, the persons named in the enclosed
proxy will vote on such matters in accordance with their best
judgment.
The cost of solicitation of proxies will be borne by the
Company. In addition to solicitation by mail, some officers and
regular employees of the Company may, without extra compensation,
solicit proxies personally or by telephone or telegraph and the
Company will request brokerage houses, nominees, custodians and
fiduciaries to forward proxy materials to beneficial owners and will
reimburse their expenses.
Section 16(a) of the Securities and Exchange Act of 1934
requires that the Company's directors and executive officers, and
persons who own more than ten percent of a registered class of
Company's equity securities, to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in
ownership of Common Stock of the Company. To the Company's
knowledge, based solely on review of copies of reports furnished to
the Company and written representations that no other reports were <PAGE>
<PAGE>
required, during the fiscal year ended December 31, 1995 all Section
16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with.
SHAREHOLDERS MAY RECEIVE A COPY OF THE COMPANY'S ANNUAL REPORT
ON FORM 10-K FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
WITHOUT CHARGE ON REQUEST TO THE SECRETARY, BATH NATIONAL BANK, 44
LIBERTY STREET, BATH, NEW YORK 14810.
March 31, 1996
By Order of the Board of Directors
Patricia H. Crippen
Secretary-Board of Directors<PAGE>
