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 16, 1997.
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 March 25, 1997.
The close of business on March 25, 1997 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
1,365,801 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 shareholder's shares will not be voted on such
matter. Thus, an abstention from voting on a matter has the same<PAGE>
<PAGE>
legal effect as a vote "against" the matter, even though the
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 Edward C. Galpin, Lisle E. Hopkins, Lawrence C. Howell and
Freeman H. Smith, III expire this year and the Board of Directors has
nominated each of them to serve as a director as follows:
Edward C. Galpin three years
Lisle E. Hopkins three years
Lawrence C. Howell three years
Freeman H. Smith, III 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
received no compensation as such. The Board of Directors of the<PAGE>
<PAGE>
Bank, comprising the same individuals as the board of the Company,
has the 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 1996 this Committee held three 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, 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 1996, this Committee held four
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 did not meet in 1996, is responsible
for the review of facilities and renovations.<PAGE>
<PAGE>
The members of the Compliance Committee are Laverne H. Billings,
Robert H. Cole, Herbert Fort, Edward C. Galpin, Lisle E. Hopkins and
Douglas L. McCabe. This Committee, which held three meetings in
1996, 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 1996, reviews developments in bank electronic
data processing, establishes 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 the monitoring of the investment officer and
to review broker-dealers, consultants and quality of the portfolio.
The Committee held three meetings in 1996.
All of the directors serve on the Long Range Planning Committee.
This Committee, which held three meetings in 1996, one of which was a
day long retreat, 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 1996. <PAGE>
<PAGE>
The members of the Salary Committee are Herbert Fort, Constance
Manikas, Joseph F. Meade, Jr., Patrick Sullivan and Alan J. Wilcox.
This Committee, which held one meeting in 1996, 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 1996, 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 1996
consolidated balance sheet, was $165,000. 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 1996. In 1996, all
of the directors attended at least 75% of the total number of
meetings of the Board of Directors of the Company with the exception
of Mr. Howell, who attended 50% of the meetings, and of the Bank, and<PAGE>
<PAGE>
of Board Committees on which they served.
Certain information about the nominees and those directors whose
terms of officer will continue after the annual meeting is set forth
below.
PRINCIPAL OCCUPATION
DIRECTOR TERM AND OTHER DIRECTORSHIPS
NAME AND AGE SINCE EXPIRES HELD IN PUBLIC COMPANIES
Nominees:
Edward C. Galpin 1983 1997 Vice President/Treasurer
(50) Bath National Corporation
Executive Vice President
Bath National Bank
Lisle E. Hopkins 1983 1997 Secretary since 1994
(81) Retired Dairy Farmer
Lawrence C. Howell 1990 1997 Retired Dairy Farmer
(59)
Freeman H. Smith, III 1992 1997 Director State
(53) Government Relations
Corning, Inc.
Other Directors:
Laverne H. Billings 1990 1998 President
(66) R. C. Billings, Inc.
Theodore P. Capron 1985 1998 Retired Bank President
(74)
Constance Manikas 1993 1998 President
(56) Pecon Company, Inc.
Douglas L. McCabe 1993 1998 Sr. Vice President
(49) Bath National Bank
Joseph F. Meade, Jr. 1983 1998 Retired President
(75) Mercury Aircraft Corp.
Robert H. Cole 1983 1999 President since 1990
(69) Bath National Corporation
Bath National Bank
Partner-Cole, Latham and
Joint, P.C.
Herbert Fort 1983 1999 Retired Bank President
(72) since December 31, 1989<PAGE>
<PAGE>
Chairman of the Board
since 1990
Patrick Sullivan 1989 1999 Retired Auto Dealer
(66)
Alan J. Wilcox 1994 1999 President
(42) A H Wilcox & Sons, Inc.
Messrs. Cole, Galpin and McCabe, along with Delos S. Billings, Senior
Vice President and Ellsworth W. Beckman, Jr., 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 beneficial owners of
more than 5% of its outstanding Common Stock.
The following table sets forth information, as of March 1, 1997, 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.
Number of Share Percent
Name of Common Stock of Class
Laverne H. Billings 8,211 .60
Theodore P. Capron 2,400 .18
Robert H. Cole 30,467 2.23
Herbert Fort 842 .06
Edward C. Galpin 6,924 .51
Lisle E. Hopkins 10,569 .77
Lawrence C. Howell 2,955 .22
Constance Manikas 770 .06
Douglas L. McCabe 2,245 .16
Joseph F. Meade, Jr. 12,000 .88
Freeman H. Smith, III 12,000 .88
Patrick Sullivan 10,006 .73
Alan J. Wilcox 700 .05
ALL DIRECTORS AND EXECUTIVE
OFFICERS AS A GROUP (13 PERSONS) 100,089 7.33%<PAGE>
<PAGE>
For purposes of the table above, under the rules of the Securities
and Exchange Commission, an individual is considered to "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 interests 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.<PAGE>
<PAGE>
Executive Compensation Program
The total compensation program consists of cash based 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 1996.
SUMMARY COMPENSATION TABLE
---------------------------------------------------------------------
ANNUAL COMPENSATION
---------------------------------------------------------------------
Name and
Principal
Position Year Salary Bonus All Other Compensation <F1>
Robert H. Cole 1996 $160,000 $57,500 $20,422
President 1995 160,000 48,000 21,194
1994 150,000 42,365 21,150
Edward C. Galpin 1996 $100,000 $28,700 $21,240
Executive Vice 1995 100,000 20,600 18,161
President 1994 94,500 21,182 21,646
Douglas McCabe 1996 $ 90,000 $28,700 $20,077
Senior Vice 1995 90,000 20,600 14,011
President 1994 75,075 21,240 14,591
---------------------------------------------------------------------
[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 with Mr.
<PAGE>
Galpin and Mr. McCabe.
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 5 times the prior year's compensation
(including bonuses and profit sharing plan contributions).
If Mr. Galpin's employment had terminated at the end of 1996
under circumstances requiring payment under the agreement, he
would have been entitled to receive a lump sum of $695,000.
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 5 times the prior year's compensation
(including bonuses and profit sharing plan contributions). If
Mr. McCabe's employment had terminated at the end of 1996 under
circumstances requiring payment under the agreement, he would
have been entitled to receive a lump sum of $645,000.
The following graph compares the yearly percentage change in the
Company's cumulative total shareholder return on its common stock
over the prior five years (assuming reinvestment of dividends at date
of payment in 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<PAGE>
<PAGE>
strategic results. For members of the Compensation (Salary)
Committee refer to page 5 of this Proxy statement.
Cumulative Total Return
12/91 12/92 12/93 12/94 12/95 12/96
Bath National Bank Bath 100 112 148 190 238 304
RUSSELL 2000 IR20 100 119 141 139 178 207
NASDAQ BANK INAB 100 146 166 165 246 326
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 Cole, Latham and Joint, P.C. The Company
and the Bank paid a total of $63,286.25 to Cole, Latham and Joint,
P.C. for legal services rendered during 1996.
INDEPENDENT AUDITORS
The Board of Directors has recommended that Urbach Kahn & Werlin PC
be appointed as independent auditors of the Company for 1997. A
representative of that firm will be present at the meeting with the<PAGE>
<PAGE>
opportunity to make a statement and will be available to respond to
appropriate questions.
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 16,
1997.
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 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 the 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<PAGE>
<PAGE>
solely on review of copies of reports furnished to the Company and
written representations that no other reports were required, during
the fiscal year ended December 31, 1996 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 25, 1997
By Order of the Board of Directors
Patricia H. Crippen
Secretary-Board of Directors<PAGE>
