<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1996 Commission File Number 0-16187
-------------- -------
FWB BANCORPORATION
----------------------------
(Exact name of small business issuer as specified in its charter)
Maryland 52-1332050
------------------- ------------------------------------
(State or other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
1800 Rockville Pike, Rockville, Maryland 20852
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(Address of principal executive offices)
(301) 770-1300
------------------------
(Issuer's telephone number, including area code)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
YES X NO_________
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At April 30, 1996, there were 3,258,833 shares of Common Stock, Par Value
$.10 per share outstanding.
Transitional Small Business Disclosure Format
YES__________ NO X
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<PAGE>
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE
- ------------------------------ ----
<S> <C>
Item 1 - Consolidated Financial Statements
Consolidated Balance Sheets................................. 1
Consolidated Statements of Income (Loss).................... 2
Consolidated Statements of Changes in Stockholders' Equity.. 3
Consolidated Statements of Changes in Cash Flow............. 4
Notes to Consolidated Financial Statements.................. 5
Item 2 - Management's Discussion and Analysis
Financial Condition......................................... 5-10
Results of Operations....................................... 10-13
PART II - OTHER INFORMATION
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Item 1 - Legal Proceedings....................................... 14
Item 6 - Exhibits and Reports on Form 8-K........................ 15
SIGNATURES....................................................... 16
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Consolidated Financial Statements
FWB BANCORPORATION
CONSOLIDATED BALANCE SHEET
(in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
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<S> <C> <C>
ASSETS
Cash and due from banks $1,752 $1,557
Time deposits with banks --- 95
Federal funds sold 486 ---
Investment securities:
Available for sale - at fair value 3,388 3,073
Held to maturity - at amortized cost 4,976 4,953
-------- --------
Total Investment Securities 8,364 8,026
-------- --------
Loans 31,539 29,812
Less allowance for loan losses (870) (748)
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Loans - net 30,669 29,064
-------- --------
Property and equipment 333 351
Foreclosed real estate 1,052 1,052
Accrued interest receivable 330 316
Other assets 218 217
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TOTAL ASSETS $43,204 $40,678
======== ========
LIABILITIES
Non-interest bearing deposits $8,522 $7,948
Interest bearing deposits 28,502 28,722
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Total deposits 37,024 36,670
Advances from the Federal Home Loan Bank 2,200 ---
Federal funds purchased and securities sold under
agreements to repurchase --- 59
Accrued expenses and other liabilities 218 209
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TOTAL LIABILITIES 39,442 36,938
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STOCKHOLDERS' EQUITY
Common stock - $.10 par value, shares authorized
7,500,000; shares outstanding 3,258,833 and
3,258,833, respectively 326 326
Additional paid-in capital 8,476 8,476
Accumulated deficit (4,790) (4,805)
Net unrealized holding loss on investment securities (250) (257)
-------- --------
Total stockholders' equity 3,762 3,740
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $43,204 $40,678
======== ========
</TABLE>
1
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FWB BANCORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(in thousands)
<TABLE>
<CAPTION>
For the Three
Months Ended
March 31,
1996 1995
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<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $772 $705
Interest on investment securities:
U. S. Government, its agencies, and sponsored entities 93 113
Interest on federal funds sold 3 20
----- -----
Total interest income 868 838
----- -----
INTEREST EXPENSE:
Interest on certificates of deposit of $100,000 or more 21 15
Interest on other deposits 239 228
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Total interest expense on deposits 260 243
Interest on Federal Home Loan Bank advances 18 ---
Interest on other borrowed funds 7 2
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Total interest expense 285 245
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NET INTEREST INCOME 583 593
PROVISION (RECOVERY) FOR LOAN LOSSES --- (30)
----- -----
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 583 623
----- -----
NON-INTEREST INCOME:
Service charges on deposit accounts 74 59
Other income 30 47
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Total non-interest income 104 106
----- -----
NON-INTEREST EXPENSE:
Salaries and employee benefits 321 321
Occupancy and equipment expense 131 118
Data processing services 63 47
FDIC insurance 3 23
Insurance 16 10
Legal fees 43 37
Other real estate owned expense 6 34
Other expenses 88 68
----- -----
Total non-interest expense 671 658
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INCOME (LOSS) BEFORE INCOME TAXES 16 71
APPLICABLE INCOME TAX (BENEFIT) 1 ---
----- -----
NET INCOME (LOSS) $15 $71
===== =====
EARNINGS PER COMMON SHARE: $0.02 $0.09
</TABLE>
2
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FWB BANCORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands)
<TABLE>
<CAPTION>
Additional Unrealized Total
Common Paid-In Accumulated Holding (Loss) Stockholders'
Stock Capital (Deficit) on Securities Equity
---------- ---------- ----------- -------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1994 $ 318 $ 8,331 $ (5,081) $ (463) $ 3,105
Net income for the three months
ended March 31, 1995 --- --- 71 --- 71
Issuance of common stock at $2.00 per share 6 112 --- --- 118
Net change in unrealized loss on
investment securities --- --- --- 73 73
---------- ---------- ----------- -------------- -------------
BALANCE AT MARCH 31, 1995 $ 324 $ 8,443 $ (5,010) $ (390) $ 3,367
========== ========== =========== ============== =============
BALANCE AT DECEMBER 31, 1995 $ 326 $ 8,476 $ (4,805) $ (257) $ 3,740
Net income for the three months
ended March 31, 1996 --- --- 15 --- 15
Net change in unrealized loss on
investment securities --- --- --- 7 7
---------- ---------- ----------- -------------- -------------
BALANCE AT MARCH 31, 1996 $ 326 $ 8,476 $ (4,790) $ (250) $ 3,762
========== ========== =========== ============== =============
</TABLE>
3
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FWB BANCORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
For Three Months Ended
March 31,
1996 1995
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $15 $71
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 26 25
Accretion and amortization of securities (3) (3)
Provision for loan losses --- (30)
Other real estate owned - write downs --- 30
Net changes in:
Accrued interest receivable (14) 139
Accounts receivable --- (34)
Other assets (1) 39
Accrued expenses and other liabilities 9 24
Other - net 153 25
-------- --------
Net cash provided by operating activities 185 286
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturity of time deposit 95 ---
Net increase in federal funds sold (486) (2,182)
Purchases of available for sale securities (327) (248)
Purchases of held to maturity securities (500) ---
Proceeds from maturities/principal payments on available for sale securities --- 50
Proceeds from maturities/principal payments on held to maturity securities 500 ---
Proceeds from sale of available for sale securities --- 4,000
Net increase in loans originated (1,759) (2,574)
Purchases of loans --- (107)
Proceeds from sale of participation loans --- 301
Purchases of property and equipment (8) (14)
-------- --------
Net cash used by investing activities (2,485) (774)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 354 1,785
Net decrease in federal funds purchased and
securities sold under agreements to repurchase (59) (1,352)
Net increase in advances from Federal Home
Loan Bank 2,200 ---
Proceeds from issuance of common stock --- 118
-------- --------
Net cash provided by financing activities 2,495 551
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS 195 63
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,557 1,567
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $1,752 $1,630
======== ========
Supplemental disclosures:
Interest payments $283 $228
Income tax payments 1 ---
Noncash investing and financing activities:
Unrealized gain (loss) on investment securities available for sale 17 (390)
</TABLE>
4
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Management is responsible for the financial statements which have been
prepared in accordance with generally accepted accounting principles. The
financial statements contained herein, except for the financial statements
as of December 31, 1995, are unaudited. In management's opinion, the
financial statements present fairly the financial condition of the
Corporation and its subsidiary at March 31, 1995 and March 31, 1996, and
all adjustments necessary to fairly state the results of operations and
financial condition are reflected and that such adjustments are of a normal
recurring nature. The results of operations presented for the three months
ended March 31, 1996 are not necessarily indicative of the results of
operations to be expected for the remainder of the year.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
FINANCIAL CONDITION
FWB Bancorporation's (the "Corporation") total assets at March 31, 1996 of
$43,204,000 reflected an increase of $2,526,000 or 6.21% from December 31,
1995. This increase resulted from increased loan demand which was funded
by a fixed rate advance from the Federal Home Loan Bank of Atlanta in the
amount of $2,200,000 and growth in deposits of $354,000.
5
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The Corporation's Stockholders' Equity of $3,762,000 at March 31, 1996
reflected an increase of $22,000 or .59% from December 31, 1995. The
increase is attributable primarily to earnings from operations of $15,000.
See "Stockholders' Equity of the Corporation" below.
Total loans of the Corporation's wholly owned financial institution
subsidiary, FWB Bank, (the "Bank") at March 31, 1996 of $31,539,000
reflected an increase of $1,727,000 or 5.79% from December 31, 1995. This
increase was primarily from loans to small to medium sized businesses.
Total deposits of the Bank at March 31, 1996 of $37,024,000 reflected an
increase of $354,000 or .97% from December 1995. During the period ending
March 31, 1996, non-interest bearing deposits increased $574,000 or 7.22%
while interest bearing deposits decreased $220,000 or .77%. At March 31,
1996, non-interest bearing deposits are approximately 23% of total
deposits.
Liquidity. The Bank's liquidity position, those assets invested in cash,
---------
federal funds, and obligations of the U.S. Government, its agencies, and
sponsored entities available for sale, totalling $5,626,000, reflected an
increase of $996,000 from December 31, 1995. This increase includes an
increase in federal funds sold of $486,000 and the purchase of $338,000 in
shares of stock of the Federal Home Loan Bank of Atlanta (the "FHLB").
Funds available through the Bank's sources of short term borrowing, asset
maturities, and available-for-sale securities
6
<PAGE>
are considered adequate to meet current needs. However, the Bank continues
to evaluate the asset and liability mix to ensure that adequate liquidity
is maintained.
The Bank's loan to deposit ratio was 84.90% at March 31, 1996 compared to
81.30% at December 31, 1995.
Investment Activity. The Corporation invests in various types of liquid
-------------------
assets, including United States Treasury obligations, securities of federal
government agencies and government sponsored entities, certain certificates
of deposit, federal funds, and other qualifying liquid investments. In
March 1996, one floating rate security matured. A fixed rate callable
security of equal par value, $500,000, was purchased at the same time.
This transaction was the result of an evaluation of short term liquidity
needs and current yields.
Allowance for Loan Losses. The allowance for loan losses at March 31, 1996
--------------------------
was $870,000 or 2.76% of total loans outstanding, compared to $748,000 or
2.51% at December 31, 1995. There were $29,000 in charge-offs including a
$22,000 write down of a non-accrual loan to the current fair value of the
collateral. Recoveries in the quarter ended March 31, 1996 totalled
$154,000. Included in recoveries are proceeds from a prejudgment
attachment of an account pledged as collateral for a loan charged off in a
prior year in the amount of $121,000. Net recoveries in the period ended
March 31, 1996 were 4125,000 compared to net charge-offs of 43,000 in the
period ended March 31, 1995. At March 31, 1996, the allowance for loan
loss was 206.16% of non-performing
7
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loans compared to 160.86% at December 31, 1995. In management's opinion,
the allowance for loan losses as of March 31, 1996 is adequate to cover
potential losses that can be anticipated at this time based on current
risks and knowledge of the portfolio.
Non-performing Loans and Assets. The Bank's non-performing assets
-------------------------------
totalling $1,574,000 consist of restructured loans, other real estate owned
("OREO"), and other assets. The percentage of non-performing assets to
total assets continues to decrease to 3.64% at March 31, 1996 from 3.98% at
December 31, 1995. Management intends to continue its efforts to reduce
non-performing assets through future sales of OREO and other assets and
upgrading of non-performing loans.
Non-performing loans, consisting of loans delinquent 90 days or more and in
non-accrual status, and restructured loans were $422,000 at March 31, 1996
compared to $465,000 at December 31, 1995. This amount consists primarily
of one loan in the amount of $367,000 which has been renegotiated and is
currently performing within its new terms and one non-accrual loan in the
amount of $55,000. The percentage of non-performing loans to total loans
decreased to 1.34% at March 31, 1996 compared to 1.56% at December 31,
1995.
At March 31, 1996, OREO, net of valuation reserve, was $1,052,000, which is
equal to the amount of net OREO at December 31, 1995. This amount includes
five properties. There is a valuation reserve in the amount of $30,000
which was
8
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established in the first quarter of 1995 for one property as a result of an
updated appraisal. This property is currently generating rental income on
a monthly basis. In addition, the lease agreement contains a purchase
option at a price significantly above the Bank's carrying value. It is
management's belief that the property will be sold for the option price at
the end of the lease. Generally, the Bank evaluates the fair value
of each property owned annually. These evaluations may be appraisals or
other market studies. At December 31, 1995, management believes the
carrying amounts for OREO properties approximate fair value. There were no
additions to OREO in the current period.
Non-performing assets also include an asset in the amount of $100,000 which
represents the Bank's contractual interest in sales proceeds from a
property which is owned by an affiliate of the Bank as a result of
foreclosure. A significant portion of this asset was sold as of July 31,
1995. The portion which continues to be held as other assets in the amount
of $100,000 remains available for sale.
Stockholders' Equity. Stockholders' equity of $3,672,000 at March 31, 1996
---------------------
increased $22,000 or .59% from December 31, 1995. The increase in equity
since December 31, 1995 includes year-to-date earnings from operations in
the amount of $15,000. Also included in stockholders' equity at March 31,
1996 is an unrealized holding gain of $17,000 for securities available for
sale compared to an unrealized holding gain of $32,000 at December 31, 1995
and $267,000 of unamortized loss on securities held to maturity compared to
$289,000 at
9
<PAGE>
December 31, 1995. The unamortized loss on securities held to maturity
relates to the transfer of securities from the available for sale portfolio
to the held to maturity portfolio in 1994. This unrealized loss is being
amortized over the remaining life of the securities as an adjustment of
yield.
Capital Adequacy and Regulatory Requirements. At March 31, 1996, the
--------------------------------------------
Bank's ratio of Tier I capital to total average assets equalled 9.18%,
which exceeded the minimum leverage capital ratio of 4% by 5.18%.
At March 31, 1996, the Bank's Tier I capital to risk-weighted assets ratio
was 12.23% which exceeded the minimum required ratio of 4% by 8.23%. The
Bank's total capital to risk-weighted assets ratio at March 31, 1996 was
13.48% which exceeded the minimum required ratio of 8% by 5.48%.
RESULTS OF OPERATIONS
For the three months ended March 31, 1996, the Corporation had net income
of $16,000 before taxes of $1,000 compared to net income from the
corresponding period in 1995 of $71,000 a decrease of $55,000 or 77.46%.
The earnings per share were $0.02 for the three months ended March 31,
1996, compared to $0.09 per share for the corresponding period in 1995.
10
<PAGE>
Net Interest Income. Net interest income is the difference between
-------------------
interest income on earning assets and interest expense on interest bearing
deposits and funds purchased. Net interest income for the three month
period ended March 31, 1996 of $583,000 reflected a decrease of $10,000 or
1.69% compared to the corresponding period in 1995. Interest income for
the three month period ended March 31, 1996 was $868,000, an increase of
$30,000 or 3.58% from the same period in 1995. This increase was primarily
due to an increase in interest and fees on loans of $67,000 at March 31,
1996 compared to March 31, 1995 which resulted primarily from an increase
in average loans outstanding of $2,417,000 at March 31, 1996 compared to
March 31, 1995. Interest income on investment securities for the three
month period ended March 31, 1996 of $93,000 reflected a decrease of
$20,000 or 17.70% compared to the corresponding period in 1995. This
decrease is primarily the result of the repricing of floating rate
securities in the investment portfolio. The earnings on these securities
will continue to be affected by changes in the relationship of long term
and short term rates. Interest expense of $285,000 for the period ended
March 31, 1996 reflected an increase $40,000 or 16.33% from the
corresponding period in 1995. This includes an increase in interest
expense on deposits of $17,000 and an increase of $23,000 in interest
expense on other borrowed funds for the period ended March 31, 1996
compared to the corresponding period of 1995. This is due to an increase
in retail certificates of deposit, an increase in other borrowed funds, and
an overall increase in the cost of funds to the Bank of 40 basis points in
the period ended March 31, 1996 compared to the same period in 1995.
11
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The average yield on interest earning assets for the three month period
ended March 31, 1996, was 8.90% compared to 9.21% for the three months
ended March 31, 1995. The average cost of funds for the three months ended
March 31, 1996, was 3.83% compared to 3.48% for the same period in 1995.
Additionally, the net interest margin was 5.98% for the period ended March
31, 1996 compared to 6.52% for the corresponding period in 1995.
Provision for Loan Losses. There was no provision for loan losses in the
-------------------------
period ended March 31, 1996.
Noninterest Income. Noninterest income for the three month period ended
------------------
March 31, 1996, was $104,000 compared to $106,000 for the three months
ended March 31, 1995, a decrease of $2,000 or 1.89%. This slight decrease
reflects a decrease in non-recurring other income of $17,000, offset by an
increase of $15,000 in service charges on deposit accounts.
Noninterest Expense. Noninterest expense for the period ended March 31,
-------------------
1996 of $671,000 reflected an increase of $13,000 or 1.98% compared to the
corresponding period of 1995. Expense for occupancy and equipment of
$131,000 increased $13,000 or 11% in the period ended March 31, 1996
compared to the corresponding period of 1995 as a result of increase
expenses associated with the relocation of the Germantown branch in the
fourth quarter of
12
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1995. Data processing services expense increased $16,000 or 34% in the
period ended March 31, 1996 compared to the same period of 1995 due to
outsourcing of certain back office functions. In addition, the bank is
taking advantage of advances in technology offered to improve its product
line and service delivery. The Bank's expense for FDIC insurance for the
period ended March 31, 1996 of $3,000 decreased by $20,000 or 86.96%
compared to the same period in 1995. On August 8, 1995, the FDIC voted to
reduce the deposit insurance premium paid by most members of the Bank
Insurance Fund ("BIF") effective June 1, 1995. Therefore, the Bank was
eligible for a refund in the amount of $23,420 which it received in
September 1995. In addition, the Bank's FDIC insurance expense continues
to decrease due to its improved supervisory rating and well-capitalized
position. The Bank's current assessment rate is .03% of deposits. The FDIC
has established a process for raising or lowering all assessment rates for
BIF-insured institutions semi-annually if conditions warrant a change. The
Corporation's expense for other insurance for the period ended March 31,
1996 of $16,000 increased by $6,000 or 60.0% compared to the corresponding
period in 1995 due to increased coverages acquired for general banking
activities resulting from re-evaluation of the Bank's existing coverages
and premiums due to its improved financial condition and results of
operations.
Applicable Income Tax. Net operating loss carryforwards for the first
---------------------
quarter of 1995 offset current tax expense except to the extent of the
effect of the Alternative Minimum Tax. Income tax expense posted in the
period ended March 31, 1996 will be applied to tax liability for 1995.
13
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
The Bank filed suit against two borrowers (the "Borrowers") on January 28,
1992 in the Circuit Court for Montgomery County seeking a judgment of
$421,921.28 for the principal plus interest and late charges owed to the
Bank on the Borrowers' note (the "Note"). In addition, the Bank sought and
received a prejudgment attachment of an account in the name of the
Borrowers held at Shearson Lehman Brothers which was pledged as collateral
for the loan. In May 1992, the Borrowers filed for protection under
Chapter 11 of the United States Bankruptcy Code.
In 1993, the Borrowers filed a complaint against the Bank in the Bankruptcy
case requesting that proceeds of the Shearson Lehman account be turned over
to the Borrowers to fund a bankruptcy plan. The Bank filed a counterclaim
for a declaratory judgment that the Bank has a perfected security interest
in the account and for dismissal of the complaint. (The Borrowers'
complaint for turnover and the Bank's counterclaim may be referred to
collectively as the "Turnover Action".) The Bankruptcy Court granted
summary judgment in favor of the Bank in the Turnover Action, ruling that
the Bank has a perfected security interest in the account. The Bankruptcy
Court also denied motions for reconsideration filed by the Borrowers and
their counsel. The Bankruptcy Court subsequently ruled in favor of the
Bank and in March 1996, the proceeds from the Shearson Lehman account were
received by the Bank. The matter was appealed and subsequently ruled in
favor of the Bank and is currently under appeal again.
14
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ITEM 5 - OTHER INFORMATION
The Corporation and the Bank entered into an employment agreement as of
February 27, 1996 with Mr. Steven K. Colliatie, calling for his continued
employment as President and Chief Executive Officer of the Corporation and the
Bank.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
(10) Material contracts: Employment Agreement Dated as of February 27,
1996, by and between FWB Bancorporation (the "Company"), FWB Bank (the
"Bank"), and Steven K. Colliatie, President and Chief Executive
Officer of the Company and the Bank.
(11) Statement regarding computation of per share earnings: Earnings per
share have been computed based upon 3,258,833 shares, the weighted
average number of shares outstanding during the period ended March 31,
1996.
(27) Financial Data Schedule: Filed herewith.
B. Reports on Form 8-K
Form 8-K filed April 23, 1996 relating to an agreement to acquire certain
assets and assume certain deposit liabilities of First Commonwealth Savings
Bank, FSB.
15
<PAGE>
SIGNATURES
----------
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
FWB BANCORPORATION
(Registrant)
/s/ Steven K. Colliatie
Date: May 13, 1996 _____________________________________
-----------------------
Steven K. Colliatie
President
/s/ Barbara L. Martinez
Date: May 13, 1996 _____________________________________
-----------------------
Barbara L. Martinez
Chief Financial Officer
16
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EXHIBIT 10
EMPLOYMENT AGREEMENT
--------------------
This Agreement, made as of the 27th day of February, 1996 by and between
FWB Bancorporation (the "Company"), a Maryland corporation located at 1800
Rockville Pike, Rockville, Maryland 20852; FWB Bank (the "Bank"), a commercial
bank chartered under the laws of the State of Maryland with its main office also
at such address, and Steven K. Colliatie, residing at 1817 Abbotsford Dr.,
Vienna, Virginia 22182 (the "Employee").
WITNESSETH
----------
WHEREAS, the Company and the Bank each desire to employ the Employee as its
President and Chief Executive officer on the terms and conditions set forth in
this Agreement; and
WHEREAS, the Employee desires to become an employee of the Company and the
Bank upon such terms and conditions;
NOW THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, the Employee, the Company and the Bank each hereby agree as
follows:
1. TERM OF EMPLOYMENT. The Company and the Bank each agree to employ the
------------------
Employee and Employee agrees to remain in the employment of the Company, in
accordance with the terms and provisions of this Agreement, for a three-year
period commencing on the date hereof (the "Effective Date"). On the third
anniversary date of the Effective Date, the Employee's term of employment with
the Bank and the Company shall be extended for an additional three-year period,
provided the Board of Directors of the Bank and the Company, respectively, have
determined by duly adopted resolution that the performance of the Employee has
met the reasonable requirements of the respective Board of Directors and that
this Agreement shall be extended.
2. NATURE OF EMPLOYMENT. Employee shall be employed as President and Chief
--------------------
Executive Officer of the Company and the Bank. In such employment, Employee
shall have the responsibility and authority usual for chief executive officers
of corporations and banks, including responsibility and full authority for the
day-to-day operations and general management of the Company and the Bank and
shall have such other responsibility and authority which, consistent therewith,
are delegated to him by the respective Board of Directors. Such duties shall
include, but not be limited to, making recommendations to the Boards of
Directors of the Company and the Bank concerning the strategies, tactics, and
general operations of the Company and the Bank, promotion of the Company and the
Bank and their services, supervising other employees of the Company and the
Bank, managing the efforts of the Company and the Bank to comply with applicable
laws and regulations, and providing prompt and accurate reports to the Boards of
Directors of the Company and the Bank regarding the affairs and condition of the
Company and the Bank, respectively.
The Company agrees to nominate the Employee as a member of the Board of
Directors of the Company to serve during the term of this Agreement, including
any renewals, and to elect
10-1
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or appoint the Employee as a director of the Bank during such term. The
Employee agrees to accept such nominations, and to serve as a member of the
Boards of Directors of the Company and the Bank. Employee also shall serve on
the Executive Committee and any other committees of the Boards of Directors of
the Company and the Bank except as he and the respective Board of Directors may
agree or as required by law or regulation.
3. COMPENSATION. Employee shall be paid a base salary under this agreement in
------------
the amount of One Hundred Thirty Five Thousand Dollars and No Cents ($135,000)
per year, payable in arrears in equal semi-monthly installments on regular pay
days of the Bank. The base compensation shall be reviewed annually and may be
increased, but not decreased.
4. BONUS. The Employee shall be paid a bonus for each calendar year starting
-----
in 1995 and each year thereafter based upon the Bank's after-tax earnings as
measured by the Return on Assets (ROA) as follows:
4.0% if ROA is .7% to .89%
4.5% if ROA is .9% to .99%
5.0% if ROA is 1.0%
6.0% if ROA is 1.1%
10.0% if ROA is 1.2% or greater
The Bonus Compensation for a calendar year shall be payable to Employee on
the earlier of (i) the date on which the audited annual financial statement for
the year is completed, or (ii) March 15th of the following year. For the
purposes of this Agreement, "ROA" means the Bank's return on average assets
calculated based upon net income and average total assets of the Bank determined
in connection with the preparation of the annual report of the Company. The
bonus will be accrued during the year to which it relates in accordance with
generally accepted accounting principles.
5. EXPENSES. The Employee is hereby authorized to incur customary, ordinary
--------
and reasonable expenses for promoting the business of the Company and the Bank
and improving his professional status, including expenses for entertainment,
professional membership fees, club dues, and costs of attending meetings and
conventions, which the Employee incurs in his capacity as President and Chief
Executive Officer of the Company or the Bank and which are reasonably necessary
for the performance of his duties and responsibilities.
6. CAR ALLOWANCES. Employee will be provided a monthly allowance of Seven
--------------
Hundred Sixty Five Dollars and No Cents ($765.00), at his option to be used for
the lease of an auto of his choice or as a monthly allowance, plus expenses.
7. VACATION. Employee shall be entitled to five (5) weeks of vacation for the
--------
twelve month period beginning May 1, 1996, and for each successive twelve month
period. Vacation time for a twelve month period shall vest on the first day of
the period, i.e.,May 1. Beginning with the Effective Date Employee must take two
(2) weeks consecutively, but cannot take more than two (2) weeks consecutively
without the prior approval of the respective Board of Directors. Unused vacation
will accrue.
10-2
<PAGE>
8. INSURANCE. Employee shall receive and Company shall provide Employees'
---------
family with health insurance, major medical insurance, dental insurance, long
term disability insurance, and life insurance at two and one half times the
Employee Base Salary. The Employee will receive two weeks per year of sick
leave which will be capped at ninety days.
9. STOCK OPTIONS. As soon as practicable and consistent with the provisions
-------------
of the Company's 1994 Incentive Stock Option Plan (the "Plan"), the Company
shall grant to the Employee stock options for the purchase of Fifteen Thousand
shares of common stock of the Company under the Plan. Such options will be
become exercisable one third annually ( i.e. 1/3 upon grant, 1/3 upon the first
anniversary of grant, and the remaining 1/3 on the second anniversary of grant)
at a purchase price per share equal to the Fair Market Value of a share of the
Company's common stock, as defined in the Plan. It is understood that the Fair
Market Value of such stock is expected to be Two Dollars ($2.00) per share. In
addition, if the Banks's return on assets exceeds 1.20% for a year during the
term of this Agreement including any renewal term, then the Company shall grant,
as soon as practicable after the annual audit for any such year is completed,
Non-statutory Options for an additional 5,000 shares of the Company's common
stock under the Plan, exercisable upon grant, at the lower of the Fair Market
Value of such stock at the date of grant or $2.00. Such options will have a term
of ten (10) years in accordance with the Plan.
10. SALE OF SCALEBY. As a result of his efforts on behalf of the Bank in
---------------
connection with the sale of the Scaleby Property, the Employee will be paid a
bonus equal to one percent (1%) of the gross sales price of the Scaleby
property, payable upon the receipt by the Bank of proceeds for the sale of the
remaining 42 acres of land, provided that the amount of such bonus will not
exceed the amount of sales proceeds received by the Bank in excess of the Bank's
book value for such property.
11. TERMINATION, CHANGE IN CONTROL. The Company may terminate this Agreement by
------------------------------
providing the Employee with prior written notice of its decision to terminate
the Agreement and indicating the date on which the termination is effective, as
provided below.
(a) The Board of Directors of the Bank or the Company may, by written
notice to the Employee in the form and manner specified in this paragraph,
immediately terminate his employment with the Bank or the Company, respectively,
at any time, for Just Cause. The Employee shall have no right to receive
compensation or other benefits for any period after termination for Just Cause.
Termination for "Just Cause" shall mean termination because of, in the good
faith determination of the Company's or the Bank's Board of Directors, the
Employee's personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order, or material
breach of any provision of this Agreement. Notwithstanding the foregoing, the
Employee shall not be deemed to have been terminated for Just Cause unless there
shall have been delivered to the Employee a copy of a resolution duly adopted by
the affirmative vote of not less than a majority of the entire membership of the
Board of Directors of the Bank or the Company at a meeting of the Board called
and held for the purpose (after reasonable notice to the Employee and an
opportunity for the Employee to be heard before the Board), finding that in the
good faith opinion of the Board the Employee was guilty of conduct described
above and specifying the particulars thereof.
10-3
<PAGE>
(b) Notwithstanding any provision herein to the contrary, if the
Employee's employment under this Agreement is terminated by the Company or the
Bank (other than by reason of death or disability) without the Employee's prior
written consent and for a reason other than Just Cause, the Company, in full
settlement and discharge of its obligations under this Agreement, shall pay to
the Employee (i) any salary or other compensation to the Employee and
reimbursement for expenses accrued but unpaid as of the date of any termination,
(ii) compensation at his then current salary level for the remaining term of
this Agreement and any renewals, (iii) any accrued vacation and sick time
available but not yet taken, and (iv) an additional amount equal to 2.0 times
his annual salary at the rate in effect immediately prior to the termination of
his employment. Said amounts shall be paid in equal monthly amounts over the
remaining term of the Agreement. In addition, the Option Agreements entered in
connection with the options granted pursuant to Section 9 of this Agreement will
provide that, if the Employee is terminated for any reason other than for Cause,
Death or Disability, as defined in the Plan, the Employee will become
immediately vested in all stock options then outstanding and shall have two (2)
years to exercise any such unexercised options, subject to the limitations upon
exercise of stock options contained in the Plan.
(c) Notwithstanding any other provision of this Agreement to the
contrary, the Employee may voluntarily terminate his employment under this
Agreement within twelve (12) months following a change in control of the Bank or
the Company, and the Employee shall thereupon be entitled to receive the payment
described in paragraph 11(b) of this Agreement, upon the occurrence of any of
the following events, or within ninety (90) days thereafter, which have not been
consented to in advance by the Employee in writing: (i) the requirement that the
Employee move his personal residence, or perform his principal executive
functions, more than thirty-five (35) miles from his primary office as of the
effective date of this Agreement; (ii) a significant reduction in the Employee's
compensation and benefits provided for under this Agreement, taken as a whole,
immediately prior to such change in control; (iii) the assignment to the
Employee of duties and responsibilities substantially inconsistent with those
normally associated with his position described in Section 2; (iv) a failure of
the Employee to be elected or reelected to the Board of Directors of the Bank or
the Company; or (v) a material reduction in the Employee's responsibilities or
authority (including reporting responsibilities) in connection with his
employment with the Bank or the Company.
(d) In no event may the aggregate amount payable under this section in
connection with a change in control of the Company or the Bank equal or exceed
the difference between (i) the product of 2.99 times his "base amount" as
defined in Section 280G(b)(3) of the Code and regulations promulgated
thereunder, and (ii) the sum of any other parachute payments (as defined under
Section 280G(b)(2) of the Code) that the Employee receives on account of a
change in control. The term "control" for purposes of determining whether a
"change in control" has occurred for purposes of this section shall occur after
the Effective Date (w) upon the acquisition by any person of ownership, or power
to vote more than twenty-five percent (25%) of the Bank's or Company's voting
stock, (x) upon acquisition by any person of the control of the election of a
majority of the Bank's or Company's directors, (y) upon the exercise of a
controlling influence over the management or policies of the Bank or the Company
by any person or by persons acting as a group within the meaning of Section
13(d) of the Securities Exchange Act of 1934 (which imposes certain reporting
obligations upon such groups in certain circumstances), or (z) at such time
that, during any period of two (2) consecutive years, individuals who at the
beginning of such period constitute the Board of Directors of the
10-4
<PAGE>
Company or the Bank (in either case, the "Company Board") (the "Continuing
Directors") cease for any reason to constitute at least two-thirds (2/3) of such
board, provided that any individual whose election or nomination for election as
a member of the Company Board was approved by a vote of at least two-thirds
(2/3) of the Continuing Directors then in office shall be considered a
Continuing Director. The term "person" means an individual (other than the
Employee), corporation, partnership, trust, association, joint venture, pool,
syndicate, sole proprietorship, unincorporated organization or any other form of
entity not specifically listed herein.
(e) If the Employee is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Sections 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act ("FDIA") (12
U.S.C. (S)(S) 1818(e)(4) and (g)(1)), all obligations of the Bank under this
Agreement shall terminate, as of the effective date of the order, but vested
rights of the parties shall not be affected. If the Bank is in default (as
defined in Section 3(x)(1) of FDIA), all obligations of the Bank under this
Agreement shall terminate as of the date of default; however, this Paragraph
shall not affect the vested rights of the parties. If a notice served under
Sections 8(e)(3) or (g)(1) of the FDIA (12 U.S.C. (S)(S) 1818(e)(3) and (g)(1))
suspends and/or temporarily prohibits the Employee from participating in the
conduct of the Bank's affairs, the Bank's obligations under this Agreement shall
be suspended as of the date of such service, unless stayed by appropriate
proceedings. If the charges in the notice are dis missed, the Bank may, in its
discretion, (i) pay the Employee all or part of the compensation withheld while
its contract obligations were suspended, and (ii) reinstate (in whole or in
part) any of its obligations which were suspended.
(f) In the event that any dispute arises between the Employee and the Bank
or the Company or the Bank as to the terms or interpretation of this Agreement,
whether instituted by formal legal proceedings or otherwise, including, without
limitation, any action that the Employee takes to enforce the terms of this
Section 11 or to defend against any action taken by the Bank or the Company, the
Employee shall be reimbursed for all costs and expenses, including reasonable
attorneys' fees, arising from such dispute, proceedings or actions up to a
maximum of all such cost and expenses of $75,000, provided, with respect to any
payment made by the Bank, that the Employee shall obtain a final judgement by a
court of competent jurisdiction in favor of the Employee, and further provided
that the Employee shall return any reimbursements made under this paragraph in
connection with a dismissal by the Company or the Bank for Just Cause if the
Company or the Bank shall obtain a final judgement in its favor upholding such
dismissal for Just Cause. Such reimbursement shall be paid within ten (10) days
of Employee's furnishing to the Bank and the Company written evidence, which may
be in the form, among other things, of a cancelled check or receipt, of any
costs or expenses incurred by the Employee. In addition, the Company shall
provide reimbursement of such costs and expenses as it shall agree in a written
agreement of settlement with the Employee or as it shall, by resolution of its
Board of Directors, determine is in the best interest of the Company, but no
such reimbursement may be made by the Bank in the absence of final judgement in
favor of the Employee.
(g) Any payments made to the Employee pursuant to this Agreement are
subject to and conditioned upon their compliance with Section 18(k) of the FDIA
(12 U.S.C. (S) 1828 (k), relating to "golden parachute" and indemnification
payments and certain other benefits) and any regulations promulgated thereunder.
10-5
<PAGE>
12. MODIFICATION. This Agreement cannot be changed, modified or discharged
------------
other than by an agreement in writing signed by both parties. The parties
expressly agree that the obligations of the Bank under this Agreement may be
limited by law and regulations of federal and state banking authorities, and
agree to make such amendments to this Agreement as they may jointly determine,
with the advice of legal counsel, are appropriate to reflect such limits.
13. SURVIVAL AND BENEFIT. Except as otherwise herein expressly provided, this
--------------------
Agreement shall inure to the benefit of and be binding upon the Company and the
Bank, its successors and assigns, including, but not limited to, any corporation
which may acquire all, or substantially all, of the assets or business of the
Company or the Bank or with which the Company or the Bank may be consolidated or
merged. The parties hereto agree that the responsibility for the performance of
Employee's duties hereunder may not be delegated.
14. SEVERABILITY. The invalidity or enforceability of any provision hereof
------------
shall in no way affect the validity or enforceability of any other provision.
15. INTERPRETATION AND JURISDICTION. Except to the extent preempted by Federal
-------------------------------
law, the laws of the State of Maryland shall govern this Agreement in all
respects, whether as to its validity, construction, capacity, performance or
otherwise.
16. HEADINGS. The titles and headings that appear in this Agreement have been
--------
included for purposes of each of reference and shall not be considered in the
interpretation or construction of this Agreement.
17. NOTICES. All notices required by this Agreement shall be in writing and
-------
shall be sent be registered or certified mail to the respective parties at the
addresses shown, unless and until notice is given of a change of address.
To the Company or the Bank:
FWB Bancorporation, Inc.
The FWB Bank
1800 Rockville Pike
Rockville, Maryland 20852
Attn: Joan Schonholtz
Chairman of the Board
To the Employee:
Steven K. Colliatie
1817 Abbotsford Drive
Vienna, Virginia 22182
18. JOINT AND SEVERALLY LIABILITY. To the extent permitted by law, except as
-----------------------------
otherwise provided herein, the Company and the Bank shall be jointly and
severally liable for the payment of all amounts due under this Agreement.
10-6
<PAGE>
19. NO MITIGATION. The Employee shall not be required to mitigate the amount
-------------
of any payment provided for in this Agreement by seeking other employment or
otherwise and no such payment shall be offset or reduced by the amount of any
compensation or benefits provided to the Employee in any subsequent employment.
20. ENTIRE AGREEMENT. This Agreement constitutes the entire Agreement among
----------------
the parties, and there are no other understandings, representations or
warranties, oral or written, relating to the subject matter hereof other than as
expressly provided herein.
10-7
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first hereinabove written.
ATTEST: FWB BANCORPORATION, INC.
Barbara L. Martinez By: /s/ Joan H. Schonholtz
- ------------------------- -------------------------------------
Secretary Its: Chairman of the Board
ATTEST: FWB BANK
Barbara L. Martinez By: /s/ Joan H. Schonholtz
- ------------------------- -------------------------------------
Secretary Its: Chairman of the Board
WITNESS:
Barabara L. Martinez Steven K. Colliatie
- ----------------------------- -----------------------------------------
Employee
10-8
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the Form
10-Q and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,752
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 486
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 3,338
<INVESTMENTS-CARRYING> 4,976
<INVESTMENTS-MARKET> 0<F1>
<LOANS> 31,539
<ALLOWANCE> 870
<TOTAL-ASSETS> 43,204
<DEPOSITS> 37,024
<SHORT-TERM> 2,200
<LIABILITIES-OTHER> 218
<LONG-TERM> 0
0
0
<COMMON> 326
<OTHER-SE> 3,436
<TOTAL-LIABILITIES-AND-EQUITY> 43,204
<INTEREST-LOAN> 772
<INTEREST-INVEST> 93
<INTEREST-OTHER> 3
<INTEREST-TOTAL> 868
<INTEREST-DEPOSIT> 260
<INTEREST-EXPENSE> 285
<INTEREST-INCOME-NET> 583
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 671
<INCOME-PRETAX> 16
<INCOME-PRE-EXTRAORDINARY> 16
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
<YIELD-ACTUAL> 5.98
<LOANS-NON> 55
<LOANS-PAST> 0
<LOANS-TROUBLED> 367
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 748
<CHARGE-OFFS> 29
<RECOVERIES> 154
<ALLOWANCE-CLOSE> 870<F2>
<ALLOWANCE-DOMESTIC> 192
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 678<F3>
<FN>
<F1>Not broken out in QSB.
<F2>Allowance for loan loss at end of period includes an adjustment of interest
recovery posted to the allowance in error.
<F3>All unallocated is for domestic loans.
</FN>
</TABLE>
