SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
XX Filed by the Registrant
Filed by a Party other than the Registrant
Check the appropriate box:
Preliminary Proxy Statement Confidential, For Use of the
Commission Only (as permitted
by Rule 14a-6(e) (2))
XX Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material pursuant to Rule 14a-11(c) or Rule 14a-12
Letchworth Independent Bancshares Corporation
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than Registrant)
Payment of Filing Fee (Check the appropriate box):
XX No fee required.
Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
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applies:
(2) Aggregate number of securities to which transaction
applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:(set forth
the amount on which the filing fee is calculated and
state how it was determined):
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Fee paid previously with preliminary materials:
Check box if any part of the fee as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous
filing for registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
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<PAGE>
LETCHWORTH INDEPENDENT BANCSHARES CORPORATION
50 North Main Street
Castile, New York 14427
(716) 493-2577
Notice of Annual Meeting of Stockholders
to be held on May 8, 1997
TO THE STOCKHOLDERS OF LETCHWORTH INDEPENDENT BANCSHARES
CORPORATION:
PLEASE TAKE NOTICE, that the Annual Meeting of Stockholders
of Letchworth Independent Bancshares Corporation (the "Company")
will be held on May 8, 1997, at 11:00 a.m., at the Batavia Party
House located on Route 5, Stafford, New York, for the following
purposes:
1. To elect two (2) directors of the Company who shall
serve as members of the Board of Directors for a term of three
(3) years;
2. To consider and act upon a proposal to ratify the
selection of Price Waterhouse LLP as independent accountants of
the Company; and
3. To transact such other business as may properly come
before the meeting or any adjournments thereof.
Accompanying this Notice are a Proxy, Proxy Statement, and a
copy of the Company's Annual Report for the year ended December
31, 1996.
Whether or not you expect to be present at the meeting,
please sign and date the Proxy and return it in the enclosed
envelope provided for that purpose. The Proxy may be revoked at
any time prior to the time that it is voted. Only stockholders
of record at the close of business on March 28, 1997, will be
entitled to vote at the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
James W. Fulmer
President and
Chief Executive Officer
Castile, New York
April 4, 1997
<PAGE>
LETCHWORTH INDEPENDENT BANCSHARES CORPORATION
50 North Main Street
Castile, New York 14427
(716) 493-2577
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 8, 1997
This Proxy Statement is furnished by Letchworth
Independent Bancshares Corporation (the "Company") in connection
with the solicitation of proxies on behalf of the Board of
Directors of the Company for use at the Annual Meeting of
Stockholders to be held on May 8, 1997, at 11:00 a.m., at the
Batavia Party House located on Route 5, Stafford, New York, for
the purposes set forth in the Notice of Annual Meeting of
Stockholders and any and all adjournments thereof (the "Annual
Meeting").
The enclosed Proxy is solicited by the Board of
Directors of the Company. All properly executed Proxies received
in time for the Annual Meeting will be voted as specified. If no
instructions are specified on a Proxy, the Proxy will be voted
(i) FOR the election of the persons nominated by the Board of
Directors to serve as directors; and (ii) FOR the approval of
Price Waterhouse LLP as independent accountants of the Company
for the year ending December 31, 1997.
All of the expenses involved in preparing, assembling,
and mailing this Proxy Statement and the material enclosed
herewith will be paid by the Company. The Company may reimburse
banks, brokerage firms, and other custodians, nominees, and
fiduciaries for reasonable expenses incurred by them in sending
proxy material to beneficial owners of stock. This Proxy
Statement and accompanying form of Proxy are being mailed to
stockholders on or about April 4, 1997.
REVOCATION RIGHTS
Anyone who has given a Proxy may revoke it at any time
prior to the voting thereof by signing, dating and delivering a
subsequent Proxy or by delivering written notice to the Secretary
of the Company or by attending the meeting and notifying the
Secretary of his or her intention to vote in person.
VOTING SECURITIES
Only holders of record of common stock of the Company
(the "Common Stock") at the close of business on March 28, 1997
(the "Record Date") will be entitled to vote at the Annual
Meeting. The Common Stock constitutes the only class of
outstanding voting securities issued by the Company. At the
close of business on the Record Date, 943,172 shares of Common
Stock were outstanding and entitled to be voted at the Annual
Meeting. Each share of Common Stock is entitled to one vote with
respect to matters to be voted on at the Annual Meeting.
The presence, in person or by proxy, of at least a
majority of the total number of shares of Common Stock
outstanding and entitled to vote is necessary to constitute a
quorum and in the event there are not sufficient votes, the
Annual Meeting may be adjourned. Directors shall be elected by a
plurality of the eligible votes cast, and the ratification of the
appointment of independent accountants and such other business as
may properly come before the Annual Meeting will be determined by
a majority of the eligible votes cast. Abstentions, in person or
by proxy, shall be counted toward a quorum, but abstentions under
New York law are not deemed to be votes cast and therefore
abstentions have no effect on the outcome of the vote, which
requires either a plurality or majority of the "votes cast,"
depending upon the proposal. Shares held by brokers or nominees
on behalf of beneficial owners are treated like abstentions; the
shares count toward a quorum if the broker or nominee returns the
duly executed Proxy indicating no vote is being cast with respect
to a particular proposal, but there is no effect on the outcome
of the vote on any such matter for which no vote is being cast
because action requires a plurality or majority of "votes cast."
Information as to the name, address and holdings of
each person known by the Company to be the beneficial owner of
more than 5% of the outstanding Common Stock as of March 21,
1997, is set forth below. Except as otherwise indicated in this
Proxy Statement, the Company believes that each person whose
share holdings are listed below has the sole voting and
investment power with respect to such shares.
Amount of
Common Stock Percent of
Name and Address Beneficially Common Stock
Beneficial Owner Owned Outstanding(1)
Charles L. Van Arsdale 76,620 (2) 7.66%
5136 Park Road West
Castile, NY 14427
Letchworth Independent Bancshares 87,949 (3) 8.80%
Corporation Employee Stock
Ownership Plan
50 North Main Street
Castile, New York 14427
______________________
(1) These percentages have been calculated based upon 999,630 shares of
the Company's Common Stock outstanding, which amount includes the
shares of Common Stock that James W. Fulmer and Brenda L. Copeland
have the right to acquire pursuant to the exercise of certain
options granted under the Letchworth Independent Bancshares
Corporation Stock Option Plan of 1990 (the "Option Plan") that are
exercisable within sixty (60) days of the date of this Proxy
Statement, as well as the shares of Common Stock that certain
officers and directors of the Company and the Letchworth Independent
Bancshares Corporation Employee Stock Ownership Plan (the "ESOP")
have the right to acquire by the exercise of certain warrants.
(2) Includes 18,668 shares of Common Stock owned by Mr. Van Arsdale's
wife.
(3) Includes the shares of Common Stock allocated to certain officers
and directors of the Company and The Bank of Castile (the "Bank"),
as well as 15,050 shares of Common Stock that the ESOP has the right
to acquire by the exercise of certain warrants. The participants in
the ESOP have the sole power to vote shares and dispositive powers
for shares which have been allocated to participant accounts. Only
11,113 shares of Common Stock in the ESOP have not been allocated to
participant accounts. See "INFORMATION CONCERNING DIRECTORS AND
OFFICERS - Executive Compensation -- Benefits --- Employee Stock
Ownership Plan."
Officers and directors of the Company, including the Board
of Directors' nominees for election to the Board of Directors of the
Company, as a group, owned 210,240 shares of Common Stock, including
shares subject to stock options that are exercisable within sixty
(60) days of the date of this Proxy Statement (as defined in
footnote (1) above) and shares of Common Stock that certain officers
and directors of the Company and the Bank have the right to acquire
by the exercise of certain warrants, representing approximately
22.0% of the outstanding voting securities of the Company at March
21, 1997.
ELECTION OF DIRECTORS
Proxies returned by stockholders will be voted at the
Annual Meeting, in the absence of contrary indication, in favor of
the election of Charles L. Van Arsdale and James W. Fulmer, as
directors, to hold office for the term set forth below and
thereafter until their respective successors has been duly elected
and qualified, unless a prior vacancy shall occur by reason of the
death, resignation, or removal from office of Mr. Van Arsdale or Mr.
Fulmer. Although management has no reason to believe that either
Mr. Van Arsdale or Mr. Fulmer will be unable to serve as a director,
if that contingency should occur, it is intended that the shares
represented by the Proxies will be voted, in the absence of contrary
indication, for any substitute nominee designated by the Board of
Directors, unless to the extent permitted by law the Board
determines to reduce its size appropriately. Proxies will not be
voted for more than two (2) nominees to the Board of Directors.
Pursuant to the Bylaws of the Company, a maximum of six
(6) individuals may serve on the Board of Directors. The directors
are elected in three (3) classes and in three (3) staggered three-
year terms. In accordance with the Bylaws of the Company, at the
Annual Meeting of Stockholders held on April 26, 1990, the
stockholders of the Company elected five (5) members to the Board of
Directors. One (1) director, James H. Van Arsdale, III, was re-
elected at the Annual Meeting of Stockholders held on May 9, 1996 to
serve until the Annual Meeting of Stockholders in 1999 and until his
successor has been duly elected and qualified. Two (2) other
directors, Stanley J. Harmon and Gunther K. Buerman, were re-elected
at the Annual Meeting of Stockholders held on May 4, 1995 to serve
until the Annual Meeting of Stockholders in 1998 and until their
respective successors have been duly elected and qualified.
As a result, only two (2) directors are to be elected at
the Annual Meeting to serve until the Annual Meeting of Stockholders
in 2000 and until their respective successors are duly elected and
qualified. The election of each of the nominees requires the
affirmative vote of a plurality of all votes cast by the
stockholders entitled to vote in person or by proxy at the Annual
Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE "FOR" THE ELECTION OF THE FOLLOWING NOMINEE
Common Stock Percent
Director of Positions With Owned Bene- of Common
the Company the Company ficially As of Stock
Name Age Since and the Bank March 21,1997(1)Outstanding(2)
Charles L. 73 1981 Director of 76,620(3) 7.66%
Van Arsdale the Company
and the Bank
James W. Fulmer 45 1988 President, Chief 37,941(4) 3.80%
Executive Officer
and Director of
the Company; Chairman
of the Board of
Directors, Chief Executive
Officer and Director
of the Bank
___________________________
(1) All such shares are owned with sole investment and voting power.
(2) These percentages have been calculated based upon 999,630 shares
of the Company's Common Stock outstanding, which amount includes
the shares of Common Stock that certain officers and directors
have the right to acquire pursuant to the exercise of certain
options granted under the Option Plan within sixty (60) days of
the date of this Proxy Statement, as well as shares of Common
Stock that certain officers and directors of the Company and the
ESOP have a right to acquire by the exercise of certain warrants.
(3) Includes 18,668 shares of Common Stock owned by Mr. Van
Arsdale's wife.
(4) Includes 23,576 shares of Common Stock that Mr. Fulmer has the
right to acquire by the exercise of certain stock options granted
under the Option Plan that are exercisable within sixty (60) days
of the date of this Proxy Statement, as well as 2,847 shares of
Common Stock allocated to Mr. Fulmer under the ESOP and 202
shares of Common Stock owned by Mr. Fulmer's wife.
Mr. Charles L. Van Arsdale was the President of the
Company from the date of its incorporation in 1981 until December
31, 1990. In addition, Mr. Van Arsdale was a director of The
Bank of Castile, the Company's wholly-owned subsidiary (the
"Bank"), from 1949 until his retirement in 1996. Prior to 1981,
Mr. Van Arsdale performed various managerial functions for the
Bank and held various executive offices of the Bank. Mr. Van
Arsdale is the brother of Mr. James H. Van Arsdale, III.
Mr. James W. Fulmer has served as the President and
Chief Executive Officer of the Company since January 1, 1991, and
as the Chief Executive Officer of the Bank since January, 1996.
He has served as director of the Bank since 1988. Before joining
the Company as the Executive Vice President in December, 1988,
Mr. Fulmer held various executive positions with Fleet Bank of
New York (formerly known as Security New York State Corporation
and Norstar Bank) for approximately twelve (12) years and with
the Genesee Valley Penny Saver for approximately one year. Mr.
Fulmer served as Vice Chairman of the Board of Directors of the
Bank from 1991 until May 1, 1992, when he assumed the position of
Chairman of the Board of Directors of the Bank. Mr. Fulmer
currently serves as a member of the Board of Directors of the
Cherry Valley Cooperative Insurance Company, St. Jerome's
Hospital, the Genesee County Industrial Development Agency, and
is Treasurer of the Independent Bankers Association of New York
State. He is also the past Chairman of the Executive Committee
for Retail Banking for the New York State Bankers Association and
is a past member of the Board of Directors of the New York State
Bankers Association.
The following table sets forth various information
relating to the members of the Board of Directors who will
continue to serve in such capacity as set forth below:
Common Stock
Owned Bene- Percent
Director of Positions With ficially As of Common
the Company the Company of March 21, Stock
Name Age Since and the Bank 1997(1) Outstanding(2)
Directors with Terms Expiring in 1998:
Gunther K. Buerman 53 1990 Director of the 4,200 (3) .42%
Company
Stanley J. Harmon 76 1981 Secretary and 9,594 1.00%
Director of
the Company
Directors with Terms Expiring in 1999:
James H. 76 1981 Chairman of the 46,283 (4) 4.63%
Van Arsdale, III Board of Directors
and Director of
the Company
(1) All such shares are owned with sole investment and voting power.
(2) This percentage has been calculated based upon 999,630 shares of
the Company's Common Stock outstanding, which amount includes the
shares of Common Stock that certain officers and directors of the
Company have the right to acquire pursuant to the exercise of
certain options granted under the Option Plan within sixty (60)
days of the date of this Proxy Statement, as well as shares of
Common Stock that certain officers and directors of the Company
and the ESOP have a right to acquire by the exercise of certain
warrants.
(3) Includes 600 shares of Common Stock that Mr. Buerman has the
right to acquire by the exercise of certain warrants.
(4) Includes 4,851 shares of Common Stock owned by Mr. Van
Arsdale's wife.
Gunther K. Buerman, Esq. has been a director of the
Company since January 25, 1990. Mr. Buerman has been a partner
in the law firm of Harris Beach & Wilcox, LLP, located in
Rochester, New York, since 1982 and has been the Managing Partner
of the firm since 1984. Harris Beach & Wilcox, LLP serves as
corporate counsel to the Company and the Bank.
Stanley J. Harmon, a retired funeral home director, has
been the Secretary and a director of the Company since 1981. Mr.
Harmon served as a director of the Bank from 1960 until April 30,
1993, when he retired.
Mr. James H. Van Arsdale, III, a director of the
Company since 1981, was named Chairman of the Board of Directors
of the Company in 1981. Prior to that time, Mr. Van Arsdale
performed various managerial functions for the Bank and held
various executive offices of the Bank. He was the Chairman of
the Board of Directors of the Bank until 1992, when he retired.
Mr. Van Arsdale had also been a director of the Bank since 1948.
Mr. Van Arsdale is the brother of Mr. Charles L. Van Arsdale.
During 1996, the Board of Directors of the Company met
seven (7) times. During this period, all directors attended 75%
or more of the total number of meetings of the Board of
Directors. The Board of Directors has formed an Audit Committee
to examine and review the accounting, reporting and financial
practices of the Company. The Committee also reviews the reports
of the Company's independent accountants, and reviews and
approves all non-audit services to be performed by the
independent accountants. The current members of the Audit
Committee are Gunther K. Buerman, Charles L. Van Arsdale and
Stanley J. Harmon. During fiscal 1996, the Audit Committee met
one (1) time. The Board of Directors does not have a Nominating
Committee or Compensation Committee.
INFORMATION CONCERNING DIRECTORS AND OFFICERS
Executive Compensation
The following table shows, for the years ended December
31, 1996, 1995 and 1994, the total cash compensation paid by the
Company and the Bank to executive officers who received total
annual salary and bonus in excess of $100,000 and to the Chief
Executive Officer of the Company.
SUMMARY COMPENSATION TABLE
Annual Compensation
Name and Other Annual
Principal Compensation2
Position Year Salary($)1 Bonus($) ($)
James W. Fulmer 1996 $128,015 $17,500 $8,345
President, CEO 1995 $119,111 $17,500 8,345
& Director of 1994 $105,122 $15,000 $8,345
the Company, and
Chairman of the
Board of the Bank
Brenda L. Copeland 1996 $105,601 $13,000 None
President of 1995 $ 98,775 $13,000 None
the Bank 1994 $ 90,863 $10,000 None
Long Term Compensation
Long Term
Name and Restricted Incentive All Other
Principal Stock Awards Options/ Payout Compensation3
SARs
Position Year $ _ # $ $
James W. Fulmer 1996 None None None $ 7,349
President, CEO 1995 None None None $10,454
& Director of 1994 None None None $ 6,555
the Company, and
Chairman of the
Board of the Bank
Brenda L. Copeland 1996 None None None $6,042
President of 1995 None None None $8,648
the Bank 1994 None None None $5,599
(1) Includes matching contributions under the Company's 401(k)
plan in an amount equal to $3,290.30, $3,050.32, and $2,553.88,
respectively, for James W. Fulmer, and $2,790.00, $2,624.96, and
$2,394.80, respectively, for Ms. Brenda L. Copeland, for the
years ended December 31, 1996, 1995, and 1994, respectively, as
well as director's fees and certain fringe benefits such as
automobiles and group term life insurance.
(2) The amounts disclosed represent the Company's contribution
pursuant to the Executive Supplemental Income Agreements executed
by and between the Company and each of Mr. Fulmer and Ms.
Copeland. See "Executive Compensation - Benefits -- Executive
Supplemental Income Agreements."
(3) The amounts disclosed represent the portion of the Company's
contribution to the Employee Stock Ownership Plan ("ESOP")
allocated to Mr. Fulmer and Ms. Copeland, respectively.
During 1996, all directors of the Company received an
annual retainer of $3,000 in lieu of meeting attendance fees.
During 1996, the directors of the Bank each received an annual
retainer of $7,300 in lieu of meeting attendance fees. During
1996, the Board of Directors of the Bank met thirteen (13) times.
Two (2) of the members of the Board of Directors of the Bank
entered into a certain Deferred Compensation Agreement relating
to all amounts received from the Bank during the period from 1986
until 1990. Under these agreements, all fees earned as a
director during that period are deferred until such director's
death or retirement from the Board of Directors of the Bank.
Payments of the fees so deferred, as well as all earnings on such
deferred amounts, are then paid to such director or his
beneficiary, as the case may be, in one hundred twenty (120)
equal monthly installments. The Bank does not currently intend
to offer such agreements to other members of its Board of
Directors.
In addition, during 1996, one designated director of
the Board of Directors of the Bank received a weekly fee of $100
for his services in connection with the Bank's Loan Committee.
Members of the Examining Committee also receive a quarterly fee
of $100 in lieu of meeting attendance fees.
Employment Contracts
On January 1, 1991, James W. Fulmer began to serve as
the President and Chief Executive Officer of the Company in
accordance with his employment agreement dated September 12,
1989, as amended, effective January 1, 1991. Subsequently, on
May 1, 1992, Mr. Fulmer became the Chairman of the Board of
Directors of the Bank. Pursuant to the terms of the agreement,
as amended, each year the term of Mr. Fulmer's employment
agreement is automatically extended for an additional year so
that the term of the employment agreement is always three (3)
years. In the event that the Company terminates the employment
agreement without cause, the Company is required to pay Mr.
Fulmer, as severance pay, his annual compensation plus all fringe
benefits for a period of three (3) years from the date of such
termination. In addition, in the event of such termination
without cause or the sale, merger, or substantial reorganization
of the Company or the Bank, all of Mr. Fulmer's options to
purchase Common Stock shall become immediately exercisable. See
"INFORMATION CONCERNING DIRECTORS AND OFFICERS - Executive
Compensation -- Benefits --- Stock Option Plan."
Effective January 1, 1991, the Company entered into an
amended employment agreement with Ms. Brenda L. Copeland whereby
Ms. Copeland agreed to serve as the President of the Bank or in
any other capacity that the Board of Directors of the Company or
the Bank may reasonably request. Each year the term of Ms.
Copeland's employment agreement is automatically extended for an
additional year so that the term of the employment agreement is
always three (3) years. In the event that the Company terminates
the employment agreement without cause, the Company is required
to pay Ms. Copeland, as severance pay, her annual compensation
plus all fringe benefits for a period of eighteen (18) months
from the date of such termination. In addition, in the event
that the Company terminates the employment agreement as a result
of a change of "control" of the Company, the Company is required
to pay Ms. Copeland, as severance pay, her annual compensation
plus all fringe benefits for a period of three (3) years from the
date of such termination. For purposes of the employment
agreement, the term "control" is defined as the possession of the
power to elect a majority of the members of the Board of
Directors of the Company through the ownership of voting
securities in the Company.
Benefits
Employee Stock Ownership Plan. In 1986, the Board of
Directors of the Company adopted the Employee Stock Ownership
Plan ("ESOP"), effective as of January 1, 1986. Employees
eligible to participate in the ESOP are all regular full-time
employees on the effective date of adoption of the ESOP, and any
employees hired subsequent to that date who have completed one
year of service, work at least 1,000 hours per year, and have
attained the age of 21 years. Contributions to the ESOP are
discretionary, as determined by the Board of Directors of the
Bank. All funds contributed are received, held, invested and
reinvested by the ESOP trustee. Although the trustee may invest
the funds contributed to the ESOP in such prudent investments as
the trustee deems desirable, substantially all the trust funds
are invested in the Common Stock of the Company.
Each participant is entitled to direct the trustee as
to the exercise of any voting rights attributable to the shares
of Common Stock allocated to such participant and if the trustee
receives no voting instructions, the shares of Common Stock are
not voted. All shares of Common Stock of the ESOP not allocated
to the plan participants is voted by the trustee in its sole
discretion. The ESOP also contains provisions permitting the
ESOP to borrow funds to purchase Common Stock and on June 16,
1986, the ESOP borrowed $500,000 pursuant to a certain loan and
pledge agreement with two (2) unaffiliated banks. The proceeds
of the loan were used to purchase approximately 48,000 newly
issued shares of Common Stock, after giving effect to the 6-for-1
stock split of the Company, with such shares pledged as security
for the payment of principal and interest as provided in the
above-mentioned agreement. All amounts due and owing under this
loan have been satisfied.
In November of 1990, the Company borrowed $185,500 on
behalf of the ESOP pursuant to a loan and pledge agreement with
an unaffiliated bank. The loan proceeds were used to purchase
14,000 shares of the Company's outstanding stock, with such
shares pledged as security for the payment of principal and
interest as provided in said agreement. In November of 1993, the
Company borrowed $301,000 on behalf of the ESOP to purchase
15,050 shares of the Company's Common Stock and 15,050 warrants
to purchase additional shares of Common Stock as part of the
Company's public offering. All amounts due and owing under these
loans were subsequently refinanced with the Bank (with
appropriate collateral granted to the Bank), which in turn,
borrowed the funds from the Federal Home Loan Bank under an
existing accommodation. In 1995, the Company borrowed $140,511
on behalf of the ESOP to purchase 5,500 shares of Common Stock.
Upon an ESOP participant's retirement, disability or
death, as those terms are defined in the ESOP, the participant
shall be fully vested in all amounts allocated to such
participant under the ESOP, as well as such participant's share
in the allocation of all contributions made by the Company during
the "Plan Year" (as that term is defined in the ESOP) in which
such retirement, disability or death occurs. In the event a par
ticipant's service terminates for any reason other than
retirement, disability or death, such participant's account
becomes vested based upon the number of years of "Credited
Service" of such participant (as that term is defined in the
ESOP) in accordance with the following schedule, as amended so as
to comply with the requirements of the Tax Reform Act of 1986, as
amended (the "1986 Act"):
Credited Service Vested Percentage
Less than three years 0%
Three years 30%
Four years 40%
Five years 100%
Contributions to the ESOP amounted to $150,000,
$169,000, and $123,000 for the years ended December 31, 1996,
1995, and 1994, respectively.
Defined Benefit Pension Plan. The Company maintains a
defined benefit pension plan for the benefit of all employees
covered under the Company's prior pension plan and any other
employees with at least six (6) months of service who work at
least 1,000 hours per year and have attained the age of 21 years.
Amounts contributed to the pension plan for each covered employee
by the Company are determined on an actuarial basis. The
discount rate used in determining the actuarial present value of
accumulated benefits was seven percent (7.0%) at December 31,
1996 and December 31, 1995, respectively.
Under the plan, a participant is eligible for the
"Normal Retirement Pension Benefits" upon attainment of age 65
years. Vested employees who terminate before attaining age 65
may elect optional early retirement benefits (at reduced levels).
The following table sets forth the current regular
vesting schedule for participants under the plan, as amended so
as to comply with the requirements of the 1986 Act):
Years of Service Vested Percentage
Less than three years 0%
Three years 20%
Four years 40%
Five years 60%
Six years 80%
Seven years 100%
An employee's "Normal Retirement Pension" benefit under
the plan is an amount (payable monthly in the form of a life only
annuity) equal to the product of 1% of such employee's "Average
Compensation" and such employee's years of "Benefit Accrual
Service" (not to exceed forty (40) years), as those terms are
defined in the plan. The following table sets forth the annual
Normal Retirement Pension benefit at age 65 to an employee
covered by the plan for each of the following Average
Compensation amounts and periods of Benefit Accrual Service with
the Company.
Normal Retirement Pension Benefit
for Years of Benefit Accrual Service
Average
Compensation 15 20 25 30 35 40
Years Years Years Years Years Years
$15,000 $2,250 $3,000 $3,750 $4,500 $5,250 $6,000
$30,000 $4,500 $6,000 $7,500 $9,000 $10,500 $12,000
$45,000 $6,750 $9,000 $11,250 $13,500 $15,750 $18,000
$60,000 $9,000 $12,000 $15,000 $18,000 $21,000 $24,000
$75,000 $11,250 $15,000 $18,750 $22,500 $26,250 $30,000
The pension plan also provides for certain disability
retirement benefits and death benefits as well as optional forms
of payment of benefits which a covered employee may elect. The
benefits provided for under the plan are in addition to and
separate from the benefits available to the participants under
the Social Security Act.
The pension plan was adopted in 1986, to be effective
as of January 1, 1986, the date in which the Company terminated
its former defined benefit pension plan. There were no
contributions made in 1996 or 1995, and a contribution of
approximately $50,000 was made for the year ended December 31,
1994.
401(k) Plan. The Bank maintains a qualified 401(k)
plan, entitled the "Salary Savings Plan of The Bank of Castile,"
to encourage the accumulation of savings for retirement or other
purposes. Employees of the Bank who have attained the age of 20-
1/2 years and work at least 1,000 hours per year are eligible to
join the plan following the completion of six (6) months of
service.
Under the terms of the plan, participants may elect to
contribute from 1% to 6% of their eligible salary and the Bank
contributes an amount equal to 50% of this participant
contribution for employees. Employees may elect to contribute up
to an additional 9% of eligible salary without any matching Bank
contribution.
All amounts contributed into the plan are invested with
the Principal Mutual Life Insurance Company (formerly known as
Bankers Life Company), with its principal office located at 711
High Street, Des Moines, Iowa. Pursuant to the plan,
contributions by and for employees are held in trust by the Bank.
Participants are immediately fully vested in all
contributions to the plan. Withdrawals of contributions are
subject to limitations and except in the event of hardship,
generally not permitted until termination of employment or the
participant's attainment of "Normal Retirement Age", as that term
is defined in the plan. During 1996, the Company contributed a
total of $3,290.30 as a matching contribution for James W.
Fulmer, and $2,790.00 as a matching contribution for Brenda L.
Copeland, which amounts are included in the Summary Compensation
Table set forth on page 6 of this Proxy Statement.
Executive Supplemental Income Agreements. The Bank has
also entered into certain executive supplemental income
agreements which provide for specified deferred compensation
benefits payable to certain highly compensated officers and
members of a select management group of the Bank in the event of
death, disability or retirement. The Board of Directors, in its
sole discretion, determines who is eligible to participate in
this arrangement. Although the Bank is not under any obligation
whatsoever to fund its obligations under the above-mentioned
agreements, the Bank is both the owner and beneficiary of a life
insurance policy on the life of each participant, the proceeds
from which can be used to fund the after-tax cost of the promised
benefits. Charges to income related to these agreements were
approximately $42,500, $37,000, and $8,000 for the years ended
December 31, 1996, 1995, and 1994, respectively.
Under these agreements, a participant who has reached
"Normal Retirement Age," as that term is defined in the
agreements, and has attained twenty (20) continuous years of
service with the Bank (including periods of disability and
authorized leaves of absence) receives an annual amount equal to
the difference between (i) 75% of such officer's average "Annual
Compensation," as that term is defined in the agreements, during
his final five (5) calendar years of employment with the Bank,
and (ii) the sum of all social security benefits paid to such
officer and any amounts paid to such officer under the Company's
defined benefit pension plan. Participants may retire after age
55 with the approval of the Board of Directors and in the event
that there has been a buy-out, merger, or substantial change in
ownership of the Bank, an officer may retire at any time after
attaining the age of 55 years without approval of the Board of
Directors. In either case, the benefits available on early
retirement are equal to the benefits available at "Normal
Retirement Age," actuarially reduced. The agreements also
contain certain provisions for the payment of pre-"Normal
Retirement Age" death benefits.
Stock Option Plan. At the Annual Meeting of
Stockholders of the Company on April 26, 1990, the stockholders
approved the Letchworth Independent Bancshares Corporation Stock
Option Plan of 1990 (the "Option Plan"). The purpose of the
Option Plan is to increase the incentive and to encourage the
continued employment and services of key employees of the Company
and the Bank by facilitating their purchase of a stock interest
in the Company. Management believes that the implementation of
the Option Plan is in the best interests of the Company and its
stockholders since it will enhance the Company's ability to
continue to attract and retain qualified directors, officers and
other key employees.
Under the Option Plan, the Board of Directors may grant
incentive stock options as well as options that do not qualify as
incentive stock options ("non-statutory stock options"). The
Board of Directors determines the individuals to receive grants
and the number of shares to be awarded, subject to certain
federal tax regulations in the case of incentive stock options
granted under the Option Plan. The Option Plan provides that the
exercise price under each incentive stock option shall be no less
than 100% of the "Fair Market Value" (as defined in the Option
Plan) of the Common Stock on the date the option is granted. The
exercise price for each non-statutory stock option granted under
the Option Plan is the price established by the Board of
Directors of the Company, which normally is expected to be no
less than 100% of the "Fair Market Value" (as defined in the
Option Plan) of the Common Stock on the date the option is
granted.
On May 3, 1990, the Company issued options to acquire
81,258 shares of its Common Stock at a purchase price of $15.00
per share, and on July 16, 1996, the Company granted options to
acquire 17,000 shares of Common Stock at a purchase price of
$29.00 per share. During 1996, 25,016 options were exercised
under the Option Plan, including the exercise by Mr. Fulmer and
Ms. Copeland of 10,000 options and 8,400 options, respectively.
Prior to 1996, no options were exercised under the Option Plan.
The following table shows the aggregate number of
options outstanding as of March 17, 1997 for each of James W.
Fulmer and Brenda L. Copeland, and for all executive officers of
the Company as a group.
Number of Options Average Per
Outstanding Share Price*
James W. Fulmer 23,576 $15.00
Brenda L. Copeland 16,782 $15.00
All Executive Officers
as a Group 42,858 $15.82**
* This price represents the "Fair Market Value," as that term is
defined in the Option Plan, of the Common Stock of the Company on
the date that the options were granted.
** This price represents a weighted average of the exercise price of
all of the options currently outstanding to all executive
officers of the Company.
The following table shows the number of options
exercised and the value of "in-the-money" options exercised by
each of James W. Fulmer and Brenda L. Copeland during 1996, as
well as the breakdown between options granted to Mr. Fulmer and
Ms. Copeland that were exercisable and unexercisable as of
December 31, 1996, and the potential value of "in-the-money"
options, both exercisable and unexercisable, as of December 31,
1996. "In-the-money" options are those options where the Fair
Market Value of the Company's Common Stock as of the close of the
fiscal year was in excess of the exercise price established on
the grant date. This value is only realized by the executive
when the option is exercised and will fluctuate with changes in
the price for the Company's Common Stock after the close of the
fiscal year.
No. of Unexercised Value of "In-the-Money"
Shares Options at Unexercised Options
Acquired on Value December 31, 1996 December 31, 1996
Name Exercise Realized* (Exercisable/ (Exercisable/
Unexercisable) Unexercisable)*
James W. Fulmer 10,000 $157,500 13,503 / 10,073 $216,672 / $158,650
Brenda L. Copeland 8,400 $132,300 9,227 / 7,555 $145,325 / $118,991
* Represents the value of "In-the"Money" options exercised
during 1996.
** Assumes that the Bid price of a share of the Company's Common Stock
at December 31, 1996 was $30.75.
No assurances can be given relating to the dilutive effect
that the Option Plan or options granted thereunder may have on the
outstanding Common Stock.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain of the directors and officers of the Company and
the Bank, members of their families and companies or firms with
which they are associated, were customers of and had banking
transactions with the Bank in the ordinary course of business
during 1995. All loans and commitments to loan included in such
transactions 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, in the opinion of
management, did not involve more than a normal risk of collect
ibility or present other unfavorable features. None of such loans
outstanding to directors or officers of the Company, members of
their families or companies or firms with which directors or
officers of the Company are associated were non-performing as of
December 31, 1996. Total loans outstanding to all directors and
executive officers of the Company and the Bank amounted to
$5,647,800 at December 31, 1996.
The law firm of Harris Beach & Wilcox, LLP serves as
corporate counsel to the Company and the Bank. Gunther K. Buerman,
a director of the Company, is the managing partner of Harris Beach
& Wilcox, LLP.
In addition, other than those sales made pursuant to the
Company's initial public offering and the public offering completed
in November, 1993, there have been no sales of Common Stock to the
officers, directors, promoters or other affiliated persons of the
Company during the past five (5) years. All such transactions were
specifically approved in writing by the Board of Directors and were
made on terms no less favorable to the Company than similar
transactions made to other persons unaffiliated with the Company.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP has served as the Company's
independent accountants since June, 1989. Representatives of Price
Waterhouse LLP are expected to be present at the Annual Meeting and
will have an opportunity to make a statement if they desire to do
so. They will also be available to answer questions that may be
asked by stockholders and have been selected by the unanimous vote
of the Board of Directors of the Company to serve as independent
accountants of the Company for the year ending December 31, 1997.
PROPOSALS OF STOCKHOLDERS
Proposals of stockholders of the Company intended to be
presented at the Company's next Annual Meeting of Stockholders must
be received by the President of the Company at the address stated
at the beginning of this Proxy Statement a reasonable time before
Proxies are solicited for the next Annual Meeting of Stockholders
in order for any such proposals to be included in the Company's
Proxy Statement and form of Proxy relating to that meeting. The
Company would expect to hold the next Annual Meeting of
Stockholders in May of 1998 and would therefore expect to commence
solicitation of Proxies for that meeting in early April of 1998.
OTHER MATTERS
The Board of Directors does not intend to bring before
the Annual Meeting any business other than as set forth in this
Proxy Statement and has not been informed that any other business
is to be presented to the Annual Meeting. If any matters other
than those referred to above should properly come before the
meeting, however, it is the intention of the persons named in the
enclosed Proxy to vote such Proxy in accordance with their best
judgment.
Please sign and return promptly the enclosed Proxy in the
envelope provided. The signing of a Proxy will not prevent you
from attending the Annual Meeting and voting in person.
By Order of the Board of Directors
James W. Fulmer
President and Chief Executive
Officer
Castile, New York
April 4, 1997
