FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
for the quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to _____________
Commission file number 0-13423
FNB Rochester Corp.
(Exact name of registrant as specified in its charter)
New York 16-1231984
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
35 State St., Rochester. New York 14614
Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (716) 546-3300
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for 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 ______.
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at May 6, 1998
--------------------------------------------- --------------------------
Common stock, $1.00 par value 3,605,918
<PAGE>
INDEX
Page No.
Part I Financial Information
Condensed consolidated balance sheets -
March 31, 1998 and December 31, 1997 3-4
Condensed consolidated statements of
income for the three months ended
March 31, 1998 and 1997 5
Condensed consolidated statement of changes in
equity for the period ended March 31, 1998 6
Condensed consolidated statements of cash
flows for the three months ended March
31, 1998 and 1997 7-8
Notes to condensed consolidated financial
statements 9-11
Management's discussion and analysis of
financial condition and results of operations 12-16
Part II Other information 17-18
Index of Exhibits 20
<PAGE>
PART I - FINANCIAL INFORMATION
FNB ROCHESTER CORP. AND SUBSIDIARY
Condensed Consolidated Balance Sheets (unaudited)
(In thousands, except per share data)
March 31, December 31,
1998 1997
--------- -----------
Assets
Cash and due from banks $21,378 $17,968
Interest-bearing deposits with other banks 1,077 1,134
Federal funds sold 10,900 12,200
Securities available-for-sale, at fair value 126,583 120,819
Securities held-to-maturity (fair value of
$27,313 in 1998 and $28,323 in 1997) 27,236 28,278
Loans:
Commercial 213,696 201,722
Mortgage 88,484 83,113
Home Equity 24,935 23,516
Consumer 21,656 22,886
------ ------
Total loans 348,771 331,237
Net deferred loan fees 276 283
Allowance for loan losses (5,610) (5,580)
------- -------
Net loans 343,437 325,940
Premises and equipment, net 9,004 8,813
Accrued interest receivable 3,962 3,761
FHLB and FRB stock 2,188 1,655
Other assets 1,904 1,785
----- -----
Total assets $547,669 $522,353
======= =======
(Continued)
<PAGE>
FNB ROCHESTER CORP. AND SUBSIDIARY
Condensed Consolidated Balance Sheets (unaudited), continued
(in thousands except per share data)
March 31, December 31,
1998 1997
--------- ------------
Liabilities and shareholders' equity Deposits:
Demand:
Non-interest bearing $ 70,366 $ 70,831
Interest bearing 66,216 67,852
Savings and money market 92,564 89,224
Certificates of deposit:
Under $100,000 154,884 149,437
$100,000 and over 103,941 92,477
------- ------
Total deposits 487,971 469,821
Securities sold under agreement to repurchase and
short-term borrowings 18,447 14,236
Accrued interest payable and other liabilities 6,126 4,066
Long-term debt 210 210
--- ---
Total liabilities 512,754 488,333
------- -------
Shareholders' equity:
Common stock, $1 par value;
authorized 5,000,000 shares;
issued and outstanding 3,604,339
in 1998 and 3,589,253 in 1997
3,604 3,589
Additional paid in capital 13,436 13,269
Undivided profits 17,110 16,266
Accumulated other comprehensive income 765 896
--- ---
Total shareholders' equity 34,915 34,020
------ ------
Total liabilities and shareholders'
equity $ 547,669 $522,353
======= =======
See accompanying notes to condensed consolidated financial statements
<PAGE>
FNB ROCHESTER CORP. AND SUBSIDIARY
Condensed Consolidated Statements of Income (unaudited)
(In thousands, except for share data)
Three months ended
March 31,
Interest income: 1998 1997
---- ----
Interest and fees on loans:
Commercial $4,706 4,337
Mortgage 1,581 1,357
Home equity 528 469
Consumer 490 497
--- ---
Total interest and fees on loans 7,305 6,660
Federal funds sold and time deposits 129 87
Securities 2,476 1,809
----- -----
Total interest income 9,910 8,556
----- -----
Interest expense:
Savings, checking and money market accounts 850 745
Certificates of deposit 3,484 2,990
Short-term borrowings and other 179 20
--- --
Total interest expense 4,513 3,755
----- -----
Net interest income 5,397 4,801
Provision for loan losses 90 -
--
Net interest income after provision for loan
losses 5,307 4,801
----- -----
Non-interest income:
Service charges on deposit accounts 450 391
Credit card fees 167 193
Loan servicing fees 65 65
Other operating income 224 158
--- ---
Total non-interest income 906 807
--- ---
Non-interest expense:
Salaries and employee benefits 2,533 2,372
Occupancy 921 903
Marketing and public relations 176 137
Office supplies, printing and postage 181 151
Processing fees 258 269
Legal 48 57
Other 462 393
--- ---
Total non-interest expenses 4,579 4,282
----- -----
Income before income taxes 1,634 1,326
Income tax expense 502 424
--- ---
Net income $1,132 $ 902
===== ===
Weighted average shares
outstanding-basic 3,598,779 3,573,536
========= =========
Weighted average shares
outstanding-diluted 3,810,450 3,726,003
========= =========
Net income per common share - basic $ .31 $ .25
=== ===
Net income per common share - diluted $ .30 $ .24
=== ===
See accompanying notes to condensed consolidated financial statements.
<PAGE>
FNB ROCHESTER CORP. AND SUBSIDIARY
Condensed Consolidated Statement of Changes in Equity
Period Ended March 31, 1998
(in thousands)
<TABLE>
<CAPTION>
Accumulated
Additional Other
Common Paid in Undivided Comprehensive
Stock Capital Profits Income Total
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1997 $3,589 $13,269 $16,266 $ 896 $34,020
Comprehensive income
Net income 1,132 1,132
Unrealized loss on securities
available-for-sale, net of
taxes of $87 and net of
reclassification adjustment (131) (131)
---
(see disclosure)
Total comprehensive income 1,001
Common stock cash dividend -
$.08 per share (288) (288)
Option and employee purchase 15 167 182
shares issued
Balance at March 31, 1998 $3,604 $13,436 $17,110 $ 765 $34,915
===== ====== ====== === ======
Disclosure of reclassification amount:
Unrealized holding losses arising during period $ (131)
Less: reclassification adjustment for gains included in net income 0
-
Net unrealized loss on securities $ (131)
===
</TABLE>
<PAGE>
FNB ROCHESTER CORP. AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows (unaudited)
(In thousands)
Three months ended
March 31,
1998 1997
---- ----
Cash flows from operating activities:
Net income $ 1,132 $ 902
Adjustments to reconcile net income to net
cash provided by operating
activities:
Provision for loan losses 90 -
Depreciation and amortization 396 384
Increase in mortgage loans held-for-sale (3,280) (1,978)
Increase in accrued interest receivable (201) (444)
(Increase) decrease in other assets (33) 265
Increase (decrease) in accrued interest
payable and other liabilities 2,131 6,040
----- -----
Net cash provided by operating activities 235 5,169
--- -----
Cash flows from investing activities:
Securities available-for-sale:
Purchase of securities (18,095) (19,380)
Proceeds from maturities 12,114 1,591
Securities held-to-maturity:
Purchase of securities (104) (288)
Proceeds from maturities 1,146 914
Loan origination and principal collection, net (14,307) (2,429)
Capital expenditures, net (587) (153)
Increase in other assets - investing (533) (140)
----- -----
Net cash used by investing activities (20,366) (19,885)
Cash flows from financing activities:
Net increase (decrease) in demand, savings and
money market accounts 1,239 (419)
Certificates of deposit accepted and repaid, net 16,911 24,644
Increase in short-term borrowing and securities
sold under agreement to repurchase 4,211 584
Payment of common stock dividend (359) (179)
Employee common stock purchase and exercise
of options to purchase common stock 182 71
--- --
Net cash provided by financing activities 22,185 24,701
------ ------
Increase (decrease) in cash and cash equivalents 2,053 9,985
Cash and cash equivalents at beginning of year 30,302 21,681
------ ------
Cash and cash equivalents at end of period $ 32,355 $ 31,666
====== ======
The Company paid cash during the three months
ended March 31, 1998 and 1997 as follows:
Interest $ 4,291 $ 3,543
Taxes 301 201
See accompanying notes to condensed consolidated financial statements.
<PAGE>
FNB ROCHESTER CORP. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements (unaudited)
(1) Summary of Significant Accounting Policies
Basis of Presentation
FNB Rochester Corp. (the Company) operates as a bank holding company.
Its only subsidiary is First National Bank of Rochester (the Bank).
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary, the Bank. All material
intercompany accounts and transactions have been eliminated in the
consolidation.
The financial information is prepared in conformity with generally
accepted accounting principles and such principles are applied on a
basis consistent with those reflected in the December 31, 1997 Form
10-K Report of the Company filed with the Securities and Exchange
Commission. The financial information included herein has been
prepared by management without audit by independent certified public
accountants. The information furnished includes all adjustments and
accruals, solely of a normal recurring nature, that are in the opinion
of management necessary for a fair presentation of results for the
interim period ended March 31, 1998. Amounts in prior periods'
financial statements are reclassified whenever necessary to conform
with current presentation.
(2) Allowance for Loan Losses
Changes in the allowance for loan losses for the three months ended March 31,
1998 and 1997 are as follows:
1998 1997
---- ----
Balance at beginning of period $5,580 $5,696
Provisions for loan losses 90 -
Loans charged off (192) (107)
Recoveries on loans previously charged-off 132 83
--- --
Balance at end of period $5,610 $5,672
===== =====
The principal balance of loans not accruing interest totaled $2,077,000
and $1,524,000 at March 31, 1998 and 1997 respectively and $2,100,000
at December 31, 1997.
At March 31, 1998 and 1997, the recorded investment in loans that are
considered to be impaired totaled $1,485,000 and $2,542,000,
respectively. The average recorded investments in impaired loans during
the three months ended March 31, 1998 and 1997 was approximately
$1,116,000 and $2,471,000, respectively. For the three months ended
March 31, 1998 and 1997, the Company recognized $21,000 and 54,000,
respectively, in interest income on the impaired loans during the
period in which they were considered impaired.
(3) Earnings per Common Share
Calculation of Basic Earnings Per Share (Basic EPS) and Diluted
Earnings Per Share (Diluted EPS) is as follows (income in thousands):
<TABLE>
<CAPTION>
Average
Shares Per Share
<S> <C> <C> <C>
For three months ended March 31, 1998
Basic EPS
Net income applicable to common shareholders $1,132 3,604,339 $.31
===
Effect of assumed exercise of stock options - 211,671
- -------
Diluted EPS
Income available to common shareholders and
assumed exercise of stock options $1,132 3,816,010 $.30
===== ========= ===
For three months ended March 31, 1997
Basic EPS
Net income applicable to common shareholders $902 3,573,536 $.25
===
Effect of assumed exercise of stock options - 152,467
- -------
Diluted EPS
Income available to common shareholders and
assumed exercise of stock options $902 3,726,003 $.24
=== ========= ===
</TABLE>
(4) Stock Option Plans
The Company has stock option plans under which options to acquire
325,000 shares of its common stock were available to grant to key
employees and options to acquire 25,000 shares of its common stock
were available to grant to directors. At March 31, 1998, options to
purchase 322,950 shares were held by grantees under the plans. The
range of exercise prices of the options is $5.63 to $18.50 per share
with an average exercise price of $7.84 per share. At March 31, 1998,
options to acquire 296,575 shares were exercisable. The remaining
options become exercisable at various times through January 2000. As
of March 31, 1998 options to acquire 13,500 shares have been
exercised.
(5) Dividends
The Company declared a quarterly $.08 per share dividend on common
stock on March 17, 1998, payable April 30, 1998 to shareholders of
record April 15, 1998. The $.08 per share quarterly dividend declared
in March of 1998 reflects the intention of the Board of Directors to
significantly increase the rate of payment of dividends in comparison
to the $.10 per share semi-annual dividend declared in December 1997.
(6) New Accounting Pronouncements
Effective January 1, 1998 the Company adopted the remaining provisions
of SFAS No. 125, Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities, which relate to the
accounting for securities lending, repurchase agreements, and other
secured financing activities. These provisions, which were delayed for
implementation by SFAS No. 127, are not expected to have a material
impact on the Company. In addition, the Financial Accounting Standards
Board is considering certain amendments and interpretations of SFAS
No. 125 which, if enacted in the future, could affect the accounting
for transactions within their scope.
On January 1, 1998, the Company adopted the provisions of Statement of
Financial Accounting Standards (FASB) No. 130, entitled Reporting
Comprehensive Income. This statement establishes standards for
reporting and display of comprehensive income and its components.
Comprehensive income includes the reported net income of a company
adjusted for items that are currently accounted for as direct entries
to equity, such as the mark to market adjustment on securities
available for sale, foreign currency items and minimum pension
liability adjustments. At the Company, comprehensive income represents
net income plus other comprehensive income, which consists of the net
change in unrealized gains or losses on securities available for sale
for the period. Accumulated other comprehensive income represents the
net unrealized gains or losses on securities available for sale as of
the balance sheet dates.
Comprehensive income for the three-month period ended March 31, 1998
is shown in the consolidated statement of changes in equity.
Comprehensive income for the three-month period ended March 31, 1997
was $347,000.
FASB Statement No. 131 entitled Disclosures about Segments of an
Enterprise and Related Information was issued in June 1997. This
Statement is effective for fiscal years beginning after December 15,
1997. This Statement establishes standards for the way that public
business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report
selected information about operating segments in interim financial
reports issued to shareholders. It also establishes standards for
related disclosures about products, services geographic areas, and
major customers. This Statement may increase the Company's financial
disclosures but will have no impact on operating results.
FASB issued Statement No. 132, Employers' Disclosures about Pensions
and Other Post Retirement Benefits in February 1998. This statement
revises employer's disclosures about pension and other post retirement
benefit plans. It does not change the measurement or recognition of
these plans. The statement is effective for the Company in 1998 and
will not impact the Company's financial position or results of
operations.
<PAGE>
FNB ROCHESTER CORP. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward Looking Statements
Statements included in this Management's Discussion and Analysis of
Financial Condition and Results of Operations and elsewhere in this
document that do not relate to present or historical conditions are
"forward looking statements" within the meaning of that term in Section
27A of the Securities Act of 1933, as amended, and of Section 21F of
the Securities Exchange Act of 1934, as amended. Additional oral or
written forward looking statements may be made by the Company from time
to time, and such statements may be included in documents that are
filed with the Securities Exchange Commission. Such forward looking
statements involve risks and uncertainties which could cause results or
outcomes to differ materially from those expressed in such forward
looking statements. Among the important factors on which such
statements are based are assumptions concerning the business
environment in those counties in New York State where the Bank
operates, changes in interest rates, changes in the banking industry in
general and particularly in the competitive environment in which the
Bank operates, changes in inflation, and assumptions concerning the
year 2000.
The following is management's discussion and analysis of certain
significant factors which have affected the Company's financial
position and operating results during the periods included in the
accompanying condensed consolidated financial statements. Management's
discussion and analysis supplements management's discussion and
analysis for the year ended December 31, 1997 contained in the
Company's Form 10-K for the period then ended and includes certain
known trends, events and uncertainties that are reasonably expected to
have a material effect on the Company's Financial position or operating
results.
Overview
Total assets increased $25 million, or 4.8% in the first three months
of 1998. Loans increased $17.5 million, or 5.3% as compared to December
31, 1997 and deposits increased $18.2 million, or 3.9%. The loan growth
has been primarily in commercial loans and residential mortgages.
Investments in securities available-for-sale increased by $5.8 million,
or 4.8%, over the amount at year end. Deposits increased to $488
million as compared to $469.8 million at December 31, 1997. $11.5
million of the increase was in certificates of deposit of $100,000 or
more. Other deposit increases from December 31, 1997 were $3.3 million
for Savings and Money Market, and $5.4 million for certificates less
than $100,000. Demand and interest checking deposits declined $.4
million and $1.6 million, respectively. Securities sold under agreement
to repurchase and short-term borrowings increased $4.2 million or
29.6%.
Net income for the three-month period ended March 31, 1998 increased
$230,000, or 25.5%, as compared to the same period in 1997. Diluted
income per share increased to $.30, up $.06 in comparison to $.24 for
the three months ended March 31, 1997. The increase is primarily due to
increased net interest income. Net interest income increased $596,000,
or 12.4% as compared to the same period in 1997.
Net Interest Income
Commercial mortgage and residential mortgage lending continue to
provide much of the Company's loan growth. The increase in net
interest income in the three-month period ended March 31, 1998 as
compared to the same period in 1997 is primarily the result of the
increased lending activity and increased securities
available-for-sale, with offsetting interest expense from increased
certificate of deposit volumes. After remaining fairly stable in 1997
the net interest margin has declined from 4.50% for the quarter ended
December 1997 to 4.33% for the quarter ended March 1998. As the
Company continues to meet its growth objectives and increases its
market share much of the deposit growth continues to be in
certificates of deposit. The decline in margin is primarily caused by
the increases in certificates of deposit and increases in lower
yielding assets such as residential mortgage loans and securities
available-for-sale. This along with increasing price competition on
loans and further interest rate declines may mean further decreases in
net interest margin. Increased loan volume resulted in interest and
fees on loans increasing $645,000, or a 9.7% increase for the
three-month period ended March 31, 1998 as compared to the same period
in 1997. Interest and fee income increased $682,000 because of
increased volumes and declined $37,000 due to lower rates.
Average commercial loans increased $16.6 million, or 8.9%, from the
period ended March 31, 1997 to the period ended March 31, 1998. The
increased volume contributed $383,000 to income, which was partially
offset by rate declines that reduced income by $14,000. Average
mortgage loans increased $12.1 million, or 16.5%. The increase in the
mortgage portfolio was primarily made up of fixed rate mortgages with
maturities of 15 years or less. The increase in mortgage interest
income of $224,000 was the result of the increased volume. Average
home equity lines of credit outstanding increased $2.8 million with an
increase in income of $59,000. Other consumer loans showed a small
decline. Average securities increased $42.8 million and income from
those investments increased $667,000, or 36.9%. Because of the
additional deposits generated by our new banking offices, the rate of
loan growth has not kept pace with the deposit growth and to maximize
the earnings on those deposits, management has purchased securities
available-for- sale.
Interest expense increased $758,000, or 20.2%, for the three-month
period ended March 31, 1998 as compared to the period ended March 31,
1997. The net average balance total of savings, interest checking, and
money market categories have shown an increase of $15.4 million, or
11% and the interest expense associated with those deposits increased
$105,000. Average balances for certificates of deposit increased $34.2
million for the three-month period as compared to the first three
months of 1997 and the Bank's deposit growth in certificates of
deposit resulted in $476,000 additional interest expense due to
increased balances and $18,000 because of increased rates.
Provision for Loan Losses
The Bank provides for loan losses by a charge to current operations.
The provision is based upon discretionary adjustments which, in the
opinion of management, are necessary to bring the allowance to an
appropriate level considering the character of the loan portfolio,
current economic conditions, analyses of specific loans, and
historical loss experience. A provision for $90,000 was made for the
period ended March 31, 1998 and no provision was made in the period
ended March 31, 1997.
The Bank had net charge-offs of $60,000 for the three-month period
ended March 31, 1998 as compared to net charge-offs of $25,000 for the
same period in 1997. Net charge-offs (annualized) as a percent of
average loans were .07% and .03% for the three months ended March 31,
1998 and 1997. The ratios of the allowance for possible loan losses as
a percent of period end loans for the comparable periods were 1.61%
and 1.84%, respectively. Non performing assets increased $1,066,000,
or 65.7% to $2,689,000 at March 31, 1998 from $1,623,000 at March 31,
1997. Management undertakes a quarterly analysis to assess the
adequacy of the allowance for possible loan losses taking into account
non-performing and delinquent loans, internally criticized loans,
historical trends, economic factors, and overall credit
administration. Based on this analysis, the allowance is considered
adequate at March 31, 1998 to absorb anticipated losses. Management
believes that the inherent risk in the current portfolio is being
adequately provided for, and because of credit standards that the Bank
has implemented, new loans are expected to be of high quality.
Internally criticized loans increased $7.6 million from $15.2 million
at December 31, 1997 to $22.8 million at March 31, 1998. The increase
was primarily caused by two lending relationships. Both relationships
appear to be adequately collateralized and not considered impaired.
Non-Interest Income and Non-Interest Expense
Non-interest income of $906,000 for the first three months of 1998
represents an increase of $99,000, or 12.3%, from $807,000 for the
comparable period in 1997. The increase was primarily the result of
increases in service charges on deposit accounts.
Non-interest expense was $4,579,000 for the first three months of 1998
as compared to $4,282,000 for the comparable period in 1997, an
increase of $297,000, or 6.9%. The largest components of non-interest
expense for the three-month periods ended March 31, 1997 and 1998 were
salaries, employee benefits and occupancy. Salaries and employee
benefits increased $161,000, or 6.8% and occupancy expense showed
little change. Both Salaries, employee benefits and occupancy expenses
are expected to increase in 1998 as the Bank opens new banking offices
and replaces its core banking system. While operating expenses have
continued to increase, the Company's operating expense as a percent of
average assets is declining. The ratio has declined, the last four
years from 5.18% in 1994 to 3.60% in 1997 and to 3.48% for three-month
period ended March 31, 1998.
Provision for Income Taxes
The provision for income tax was $502,000 for the period ended March
31, 1998 as compared to $424,000 at March 31, 1997. The Company's
effective tax rates for the periods were 31% and 32% for 1998 and 1997
respectively. During both the periods ended March 31, 1998 and 1997
the Company reduced its effective tax rate by recognizing deductible
temporary differences for which a valuation allowance had previously
been established.
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax basis and operating loss and tax credit carry
forwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income for the period that includes the
enactment date.
The realization of deductible temporary differences depends on the
Company having sufficient taxable income within the carry back period
permitted by the tax law to allow for utilization of deductible
amounts. A valuation allowance has been established for the portion of
the Company's net deductible temporary differences which are not
expected to be realized.
Capital Adequacy
Total shareholders' equity was $34,915,000 at March 31, 1998, which
represents an increase of $895,000, or 2.6% from $34,020,000 at
December 31, 1997. Shareholders' equity increased as a result of
$1,132,000 in retained earnings and $182,000 in employee common stock
purchases, offset by dividends of $288,000 and a decrease of $131,000
in the unrealized net holding gain on securities available-for-sale,
net of taxes.
At March 31, 1998, the Company and its banking subsidiary exceeded the
minimum guidelines for Tier 1 and Total Risk-Based Capital of 4% and
8%, respectively. The Company's ratios were 10.07% and 11.32%
respectively, at March 31, 1998. Banking organizations must also
maintain a minimum Tier 1 Leverage Ratio of 3% of assets, while
banking organizations that are not top-rated according to regulators'
"Camels" ratings, must meet leverage ratios of at least 100 basis
points above the 3% standard. The Company's Tier 1 Leverage Ratio at
March 31, 1998 was 6.50%. At 5% the Company would be considered to be
well capitalized.
Liquidity
Liquidity measures the ability to meet maturing obligations and
existing commitments, to withstand fluctuations in deposit levels, to
fund operations, and to provide for customers' credit needs.
Management carefully monitors its liquidity position and seeks to
maintain adequate liquidity to meet its needs. The fundamental source
of liquidity will continue to be deposits. Available sources of asset
liquidity include short-term investments, loan repayments, and
securities held in the available-for-sale portfolio. Additionally, the
Bank has the ability to pledge securities to secure short-term
borrowing. The Bank is a member of the Federal Home Loan Bank which
provides an additional source of funding.
The vast majority of the assets of the Company are held by the Bank.
Dividends and cash advances to the Company from the Bank are subject
to standard bank regulatory constraints. An analysis of projected
expenses and cash flows indicates that the Company has sufficient cash
to meet its anticipated cash obligations through 1998.
Quantitative and Qualitative Disclosures About Market Risk
On a quarterly basis, sensitivity to changes in interest rates is also
measured using a simulation model. The model estimates changes in net
interest income and net income under a variety of possible interest
rate scenarios. By performing these simulations and comparing them to
established policy limits, management has an opportunity to plan for
changes in the asset/liability mix, or to take other steps that may be
necessary to lessen interest rate risk. Based on management's
assumptions built into the simulation model and the current mix of the
Company's assets and liabilities, management's assessment is that
there will not be a material adverse effect on its operating results
or liquidity in the event of reasonably foreseeable changes in
interest rates through 1999. The simulation indicates less than a 1.5%
variance in net interest income with up to 200 basis points increase
or decrease in rates. These simulations are based on numerous
assumptions regarding the timing and extent of repricing
characteristics. Actual results may differ significantly.
Year 2000
The Company is aware that many existing systems and services were
designed and developed without considering the impact of the upcoming
change in the century. If not corrected, many computer applications
could fail or create erroneous results by or at the Year 2000. The
Year 2000 issue affects virtually all companies and organizations.
The Company has been aware of the complexity and magnitude of the Year
2000 (Y2K) issue and since October 1996 has been developing its
strategy to address the data processing and business impacts that are
expected to be encountered. As part of the assessment phase of our
five part process, First National has prioritized its list of
applications and systems to be addressed in the Y2K project. To date,
First National believes that the majority of all systems and services
that may be affected by the Y2K date change have been identified.
First National does not write programs or create its own software,
therefore, it must rely on vendors and software suppliers to provide
appropriate enhancements in a timely manner. As First National
continues to monitor the progress of vendors, it has also begun the
process of creating contingency plans for all applications that do not
meet First National's deadline for compliance.
The validation phase is the most labor intensive and critical phase
and requires a written test plan for each system that will be in use
at the turn of the century. First National has opted not to rely on
vendor or third party certification as acceptable validation. As
vendors provide upgraded software or enhancements, the Bank is
conducting tests in house to determine if the software or enhancements
meet First National's requirements for Y2K readiness. This validation
phase is targeted for completion by December 31, 1998.
Prior to January 1, 2000, First National expects to have tested each
mission critical application. In addition, First National will have
contingency plans in place for each of these applications. The
contingency plans will address key dates such as 12/31/1999, 1/01/2000
and 2/29/2000. Throughout the year 2000, First National will be
conducting a quality review to insure that its systems are functioning
properly.
Management continues to quantify the expenses of resolving Year 2000
problems, including problems relating to its own systems and those
relating to third party customers and vendors, or the materiality of
the effect of such expenses on its results of operations, capital
resources or liquidity. To date management has identified expenses for
years 1998, 1999 and 2000 of approximately $173,000, $259,000 and
$12,000, respectively.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
<TABLE>
<CAPTION>
<S> <C>
Exhibit Incorporation by Reference or page in
sequential numbering where exhibit may be
found:
(3.1) Certificate of Incorporation as Exhibits 4.2-4.5 to Registration Statement
amended, of the Registrant No. 33-7244, filed July 22, 1986
(3.2) Amendment to Certificate of Exhibit 3 to Form 10-Q for period ended
Incorporation of Registrant dated August 6, June 30, 1992
1992
(3.3) By-laws of the Registrant, as Exhibit 3.3 to Annual Report on Form 10-K
amended for the year ended December 31, 1992
(10.1) Residential Mortgage Loan Agreement Page 21
between Stacy C. Campbell and First National
(27) Financial Data Schedule Financial Data Schedule was filed with
the Securities and Exchange Commission.
(b) Reports on Form 8-K:
None
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FNB ROCHESTER CORP.
Date May 12 , 1998 s\s Stacy C. Campbell
------------- ---------------------
Stacy C. Campbell
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer
and Duly Authorized Officer)
<PAGE>
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit Incorporation by Reference or page in
sequential numbering where exhibit may be
found:
<S> <C>
(3.1) Certificate of Incorporation as amended, of Exhibits 4.2-4.5 to Registration Statement
the Registrant. No. 33-7244, filed July 22, 1986
(3.2) Amendment to Certificate of Incorporation Exhibit 3 to Form 10-Q for
period ended of Registrant dated August 6, 1992 June 30, 1992
(3.3) By-laws of the Registrant, as amended. Exhibit 3.3 to Annual Report on Form 10-K
for the year ended December 31, 1992
(10.1) Residential Mortgage Loan Agreement Page 21
between Stacy C. Campbell and First National
(27) Financial Data Schedule Financial Data Schedule was filed with the
Securities and Exchange Commission.
</TABLE>
CONSOLIDATION, EXTENSION AND MODIFICATION
AGREEMENT WORDS USED OFTEN IN THIS DOCUMENT
A) "Agreement." This document, which is dated FEBRUARY 18, 1998, and exhibits
and riders attached to this document will be called the "Agreement".
B) "Borrower." STACY C. CAMPBELL and JUDITH A. CAMPBELL, will be called
"Borrower" and sometimes "I" or "me". Borrower's address is 604 BEACH AVENUE,
ROCHESTER, NEW YORK 14612.
C) "Lender." FIRST NATIONAL BANK OF ROCHESTER will be called "Lender" and
sometimes "Note Holder". Lender is a corporation or association which exists
under the laws of United States of America. Lender's address is 35 State Street,
Rochester, New York 14614.
D) "Mortgages." The mortgages, deeds of trust or other security instruments
identified below and any additional security instruments and related agreements
identified in Exhibit A to this agreement will be called the "Mortgages".
1) The Mortgage given by STACY C. CAMPBELL and JUDITH A. CAMPBELL, and dated MAY
30, 1997 in favor of FIRST NATIONAL BANK OF ROCHESTER securing the original
principal amount of U.S. $166,250.00. This Mortgage is on a Fannie Mae/Freddie
Mac Security Instrument and [was recorded on MAY 30, 1997, in the Office of the
Clerk of the County of MONROE, State of New York, at LIBER 13335 OF MORTGAGES,
PAGE 315. [will be recorded together with this Agreement.] (Strike and complete
as appropriate.] At this date, the unpaid principal balance secured by this
Mortgage is U.S. $165,109.80. (Strike if not applicable.]
2) The mortgage given by STACY C. CAMPBELL and JUDITH A. CAMPBELL and dated
OCTOBER 27, 1997 in favor of NORMANDY CORPORATION securing the original
principal amount of U.S. $100,000.00. This Mortgage was recorded on OCTOBER 31,
1997, in the office of the Clerk of the County of MONROE, State of NEW YORK, at
Liber 13512 of Mortgages, page 294. At this date, the unpaid principal balance
secured by this Mortgage is U.S. $59,890.20
(E) "Note Holder." Lender or anyone who succeeds to Lender's rights under this
Agreement and who is entitled to receive the payments I agree to make under this
Agreement may be called the "Note Holder".
(F) "Notes." The Notes identified below and any additional Notes and related
obligations identified in Exhibit A to this Agreement will be called the
"Notes": (1) The Note secured by the Mortgage identified in Section (D) (1)
above and dated MAY 30, 1997. (2) The Note secured by the Mortgage identified in
Section (D) (2) above and dated OCTOBER 27, 1997. (3) The Note secured by the
Mortgage identified in Section (D) (3) above and dated _________.
(G) "Property." The property which is described in the Mortgage (s) and in
Exhibit B to this Agreement, will be called the "Property". [Strike italics if
not applicable.] The property is located at:
604 BEACH AVENUE, ROCHESTER, NEW YORK 14612
(Street] [city]
MONROE NEW YORK
[County] [State and zip code]
Fannie Mae/Freddie Mac CONSOLIDATION, EXTENSION AND MODIFICATION AGREEMENT -
Single Family Form 3172 7/86
<PAGE>
I. BORROWER'S AGREEMENT ABOUT OBLIGATIONS UNDER THE NOTES AND MORTGAGES
I agree to take over all of the obligations under the Notes and Mortgages as
consolidated and modified by this Agreement as Borrower. This means that I will
keep all of the promises and agreements made in the Notes and Mortgages even if
some other person made those promises and agreements before me. The total unpaid
principal balance of the Notes is U.S. $225,000.00. Of this amount, U.S. $0.00
was advanced to me (or for my account) immediately prior to this consolidation.
II. AGREEMENT TO COMBINE NOTES AND MORTGAGES
By signing this Agreement, Lender and I are combining into one set of rights and
obligations all of the promises and agreements stated in the Notes and Mortgages
including any earlier agreements which combined or extended rights and
obligations under any of the Notes and Mortgages. This means that all of
Lender's rights in the Property are combined so that under the law Lender has
one mortgage and I have one loan obligation which I will pay as provided in this
Agreement.
III. THE CONSOLIDATED NOTE AND THE CONSOLIDATED MORTGAGE
This combining of notes and mortgages is known as "consolidation". The Notes
together will be called the "Consolidated Note". The Mortgages together will be
called the "Consolidated Mortgage". The Consolidated Mortgage secures the
Consolidated Note and is a single lien upon the Property. I have no right of
set-off or counterclaim or defense to the obligations of the Consolidated Note
or the Consolidated Mortgage.
IV. AGREEMENT TO CHANGE TERMS OF THE CONSOLIDATED NOTE
Lender and I agree to change the terms of the Consolidated Note. The new terms
are:
1. Borrower's Promise to Pay Principal and Interest
I promise to pay the principal that has not yet been paid under the Consolidated
Note, plus interest, to the order of Lender. That principal amount is U.S.
$225,000.00. Interest will be charged on unpaid principal as provided in this
Agreement beginning on the date of this Agreement until the full amount of
principal has been paid.
2. Payments
(A) Time and Place of Payments
I will pay principal and interest by making payments each month.
I will make my monthly payments on the first day of each month beginning on
APRIL 1, 1998. I will make these payments every month until I have paid all of
the principal and interest and any other charges that I may owe under this
Agreement and the Consolidated Note. My monthly payments will be applied to
interest before principal. If on MARCH 1, 2028, I still owe amounts under this
Agreement or the Consolidated Note, I will pay those amounts in full on that
date, which is called the "maturity date". I will make my monthly payments at 35
State Street, Rochester, New York 14614 or at place if required by the Note
Holder. Interest Rate I will pay interest at a yearly rate of 7.125%. The
interest rate required by this Section 2(B) is the rate I will pay both before
and after any default described in Section 3 (B) of this Consolidated Note. An
Adjustable Rate Rider is recorded with this Agreement as Exhibit C and is a term
of this Agreement. The interest rate I will pay will change in accordance with
the rider. [Strike italics if not applicable.] (C) Monthly payments Each of my
monthly payments will be in the amount of U.S. $1,515,87. An Adjustable Rate or
Graduated Payment of ________________ Rider is recorded with this Agreement as
Exhibit C and is a term of this Agreement. My monthly payment amount may change
in accordance with that Rider. (Strike italics is not applicable.]
3. Borrower's Failure to Pay as Required
(A) Late Charge for Overdue Payments If the Note Holder has not received the
full amount of any monthly payment by the end of 15 calendar days after the date
it is due, I will pay a late charge to the Note Holder. The amount of the charge
will be 2.0% of my overdue payment of principal and interest. I will pay this
late charge promptly but only once on each late payment.
(B) Default
If I do not pay the full amount of each monthly payment on the date it is due, I
will be in default. I will also be in default if I do not keep my promises and
agreements under this Agreement and the Consolidated Mortgage.
(C) Notice of Default If I am in default, the Note Holder may send me a written
notice telling me that if I do not pay the overdue amount by a certain date, the
Note Holder may require me to pay immediately the full amount of principal which
has not been paid and all the interest that I owe on that amount. That date must
be at least 30 days after the date on which the notice is delivered or mailed to
me.
(D) No Waiver by Note Holder Even if, at a time when I am in default, the Note
Holder does not require me to pay immediately in full as described above, the
Note Holder will still have the right to do so if I am in default at a later
time.
(E) Payment of Note Holder's Costs and Expenses
If the Note Holder has required me to pay immediately in full as described
above, the Note Holder will have the right to be paid back by me for all of its
costs and expenses in enforcing this Note to the extent not prohibited by
applicable law. Those expenses include, for example, reasonable attorneys' fees.
4. Borrower's Right to Prepay
(A) Borrower's Right to Make Prepayments
I have the right to make payments of principal at any time before they are due.
A payment of principal only is known as a "prepayment". When I make a
prepayment, I will tell the Note Holder in writing that I am doing so. I will
make full prepayment or partial prepayments without paying any prepayment
charge. The Note Holder will use all of my prepayments to reduce the amount of
principal that I owe under this Note. If I make a partial prepayment, there will
be no changes in the due dates or in the amount of my monthly payment unless the
Note Holder agrees in writing to those changes.
(B) Cancellation of Other Prepayment Terms
Any terms contained in the Consolidated Note about my right to make prepayments
which do not agree with this Section 4 are canceled by this Agreement. My right
to make prepayments under the Consolidated Note is governed only by the terms
contained in this Section 4.
5. Loan Charges
If a law, which applies to this loan and which set maximum loan charges, is
finally interpreted so that the interest or other loan charges collected or to
be collected in connection with this loan exceed the permitted limits, then: (i)
any such loan charges shall be reduced by the amount necessary to reduce the
charge to the permitted limit; and (ii) any sums already collected from me which
exceeded permitted limits will be refunded to me. The Lender may choose to make
this refund by reducing the principal I owe under this Consolidated Note or by
making a direct payment to me. If a refund reduces principal, the reduction will
be treated as a partial prepayment.
6. Giving of Notices
Any notice that must be give to me under this Consolidated Note will be given as
provided in the Consolidated Mortgage.
7. Waivers
I and any other person who has obligations under this Consolidated Note waive
the rights of presentment and notice of dishonor. "Presentment" means the right
to require the Lender to demand payment of amounts due. "Notice of dishonor"
means the right to require the Lender to give notice to other persons that
amounts due have not been paid.
8. Unchanged Terms of Consolidated Note in Full Effect
All of the terms of the Consolidated Note that are not changed in this Agreement
remain in full effect as if there were stated in this Agreement.
V. AGREEMENT ON TERMS OF THE CONSOLIDATED MORTGAGE
Lender and I agree to change the terms of the Consolidated Mortgage. The new
terms of this Consolidated Mortgage are the security instrument terms that are
set out in Exhibit D to this Agreement. However, the terms of the Consolidated
mortgage prior to this change that are not inconsistent with the security
instrument terms set out in Exhibit D shall also continue in effect.
VI. BORROWER'S INTEREST IN THE PROPERTY
I promise that I am the lawful owner occupying the Property. I promise that I am
a lawful tenant occupying the Property. [Strike inapplicable sentence.)
VII. WRITTEN TERMINATION CHANGE OF THIS AGREEMENT
This Agreement may not be terminated, changed, or amended except by a written
agreement signed by the party whose rights or obligations are being changes by
that agreement.
VIII. OBLIGATIONS OF BORROWERS AND OF PERSONS TAKING OVER BORROWER'S OR LENDER'S
RIGHTS OR OBLIGATIONS
If more than one person signs this Agreement as Borrower, each of us is fully
and personally obligated to keep all of Borrower's promises and obligations
contained in this Agreement. The Note Holder may enforce its rights under this
Agreement against each of us individually or against all of us together. Lender
and I agree that any person who takes over my rights or obligations under this
Agreement will have all of my rights and will be obligated to keep all of my
promises and agreements made in this Agreement. Similarly, any person who takes
over Lender's rights or obligations under this Agreement will have all of
Lender's rights and will be obligated to keep all of Lender's agreements made in
this Agreement. By signing this Agreement, Lender and I agree to all of the
above.
First National Bank of Rochester
(Lender ) s\ STACY C. CAMPBELL (Borrower)
s\ JUDITH A. CAMPBELL (Borrower)
------------- [Space Below This Line for Acknowledgments -----------------
STATE OF NEW YORK, COUNTY OF MONROE, ss.:
On FEBRUARY 18, 1998, before me personally came MELODY ANN PURSEL, to me known,
who by me duly sworn, did depose and that the deponent is the VICE PRESIDENT of
First National Bank of Rochester, the corporation described in the foregoing
Agreement, and (s)he signed his(her) name by order of the Board of the
corporation
s\ Patricia M. Falkoff
---------------------------
PATRICIA M. FALKOFF
Notary Public, State of New York
Qualified in Monroe County
My Commission Expires Feb.13 1999
STATE OF NEW YORK, COUNTY OF MONROE, ss.:
On FEBRUARY 18, 1998, before me personally came STACY C. CAMPBELL and JUDITH A.
CAMPBELL, to me known and known to me to be the individuals described in, and
who executed the foregoing Agreement, and duly acknowledged to me that they
executed the same.
s\ W. Stephen Tierney
-------------------------
W. STEPHEN TIERNEY
Notary Public, State of New York
Oualified in Monroe County
Commission Expires Feb. 28, 1998
<PAGE>
SCHEDULE A
Premises: 604 Beach Avenue Boat Lots 82-89
County Town/City District Sec Block Lot
Monroe Rochester Rochester 047.21 1 31
ALL THAT TRACT OR PARCEL OF LAND situate in the City of Rochester, County of
Monroe and State of New York, known and described as follows: Commencing at a
point on the north line of Beach Avenue as now laid out and forty (40) feet east
from the intersection of said north line with the east line of what was formerly
Oak Street; thence westerly along the north line of Beach Avenue sixty-five (65)
feet to the center of what was formerly Oak Street; thence northerly along said
center line extended northerly to the north line of the "Terrace" as shown on a
map of "Guilford Bluff" filed in Monroe County Clerk's Office in Liber 7 of Maps
at page 12; thence easterly along the north line of said "Terrace" sixty-five
(65) feet more or less; thence southerly to the place of beginning.
Also boat lots numbers 82, 83, 84, 86, 87, 88 and 89 as shown on said map of
"Guilford Bluff
ALL THAT TRACT OR PARCEL OF LAND, situate in the City of Rochester, County of
Monroe, State of New York, known and distinguished as Bath or Boat House Lot
Number Eighty-Five (85) as shown on a map of Guilford Bluff, so called, made by
R. J. Smith, Surveyor, and filed in Monroe County Clerk's Office in Liber 7 of
Maps, at page 12. - 7
Said Bath or Boat House Lot Eighty-Five (85) located on the north side of the
Terrace, on said Guilford Bluff, reference had to said Map, and each lot extends
to a point eight (8) feet from the north line of the Protection Dock, and is ten
(10) feet wide front and rear and about twenty (20) feet
Together with a right of way in common with other parties over a strip of land
twenty feet in width taken from the west end of Lots 58 and 59 of the Guilford
Bluff Tract which was conveyed by Halbert S. Greenleaf and wife to the Village
of Charlotte by Deed dated August 29, 1901 and recorded June 3, 1902 in Monroe
County Clerk's Office in Liber 651 of Deeds at page 429.
Together with all the right, title and interest of said Leo V. Lyons, and
Katharine A. Lyons, his wife, in the strip of land described in an instrument
recorded in said Clerk's Office in Liber 599 of Deeds at page 280, lying north
of Beach Avenue and south of the Bath or Boat House Lots in said tract.
For Conveyancing Only
Together with all right, title and interest of, in and to any streets and roads
abutting the above described premises.
<PAGE>
MORTGAGE
WORDS USED OFTEN IN THIS DOCUMENT
(A) "Security Instrument". This document, which is dated May 30, 1997, will be
called the "Security Instrument".
(B) "Borrower". STACY C. CAMPBELL and JUDITH A. CAMPBELL
sometimes will be called "Borrower" and sometimes simply "I" or "me".
(C) "Lender". First National Bank of Rochester
will be called "Lender". Lender is a corporation or association which exists
under the laws of the United States of America.
Lender's address is 35 State Street, Rochester, New York 14614
(D) "Note". The note signed by Borrower and dated May 30, 1997, will be called
the "Note." The Note shows that I owe Lender ONE HUNDRED SIXTY-SIX THOUSAND TWO
HUNDRED FIFTY and 00/100 Dollars (U.S. $166,250.00) plus interest. I have
promised to pay this debt in monthly payments and to pay the debt in full by
June 1, 2027.
(E) "Property". The property that is described below in the section titled
"Description of the Property", will be called the "Property".
(F) "Sums Secured". The amounts described below in the section titled
"Borrower's Transfer to Lender of Rights in the Property" sometimes will be
called the "Sums Secured".
BORROWER'S TRANSFER TO LENDER OF RIGHTS IN THE PROPERTY I mortgage, grant and
convey the Property to Lender subject to the terms of this Security Instrument.
This means that, by signing this Security Instrument, I am giving Lender those
rights that are stated in this Security Instrument and also those rights that
the law gives to Lenders who hold mortgages on real property. I am giving Lender
these rights to protect Lender from possible losses that might result if I fail
to: (A) Pay all the amounts that I owe Lender as stated in this Note; (B) Pay,
with interest, any amounts that Lender spends under Paragraphs 2 and 7 of this
Security Instrument to protect the value of the Property and Lender's rights in
the Property; and (C) Keep all of my other promises and agreements under this
Security Instrument;
NEW YORK--Single Family-- Fannie Mae/Freddie Mac UNIFORM INSTRUMENT form 3033
10/91 I Item 1930 (9111) (Page 1 of 12 pages)
Initials:_________
DESCRIPTION OF PROPERTY
<PAGE>
I give Lender rights in the Property described in (A) through (G) below:
(A) The Property which is located at 604 Beach Avenue
[Street]
Rochester, New York 14612 This property is in
[City] [Zip Code]
MONROE County. It has the following legal description:
SEE SCHEDULE "A" ATTACHED HERETO AND MADE A PART HEREOF.
Mortgagors covenant that the within described premises is a dwelling or
residence for not more than two families.
(B) All buildings and other improvements that are located on the Property
described in subparagraph (A) of this section;
(C) All rights in other property that I have as owner of the Property described
in subparagraph (A) of this section. These rights are known as "easements and
appurtenances attached to the Property";
(D) All rights that I have in the land which lies in the streets or roads in
front of, or next to, the Property described in subparagraph (A) of this
section;
(E) All fixtures that are now or in the future will be on the Property described
in subparagraph (A) and (B) of this section;
(F) All of the rights and property described in subparagraphs (B) through (E) of
this section that I acquire in the future; and (G) All replacements of or
additions to the Property described in subparagraphs (B) through (F) of this
section.
BORROWERS' RIGHT TO MORTGAGE THE PROPERTY AND BORROWER'S OBLIGATION TO DEFEND
OWNERSHIP OF THE PROPERTY
I promise that: (A) I lawfully own the Property; (B) I have the right to
mortgage, grant and convey the Property to Lender; and (C) there are not
outstanding claims or charges against the Property, except for those which are
of public record.
I give a general warranty of title to Lender. This means that I will be fully
responsible for any losses which Lender suffers because someone other than
myself has some of the rights in the Property which I promise that I have. I
promise that I will defend my ownership of the Property against any claims of
such rights.
PLAIN LANGUAGE SECURITY INSTRUMENT
This Security Instrument contains promises and agreements that are used in real
property security instruments all over the country. It also contains other
promises and agreements that vary, to a limited extent, in different parts of
the country. My promises and agreements are stated in "plain language".
initials: ______ (Page 2 of 11 pages) Form 3033 10/91
<PAGE>
COVENANTS
I promise and I agree with Lender as follows:
1. BORROWER'S PROMISE TO PAY
I will pay to Lender on time principal and interest due under the Note and any
prepayment and late charges due under the Note.
2. MONTHLY PAYMENTS FOR TAXES AND INSURANCE
(A) Borrower's Obligation
I will pay to Lender all amounts necessary to pay for taxes, assessments, water
frontage charges and other similar charges, sewer rents, leasehold payments or
ground rents (if any), hazard or property insurance covering the Property, and
flood insurance (if any). If Lender required mortgage insurance as a condition
of making the loan that I promise to pay under the Note, (i) I also will pay to
Lender all amounts necessary to pay for mortgage insurance, and (ii) if, under
Paragraph 8 below, instead of paying for mortgage insurance I am required to pay
Lender an amount equal to the cost of mortgage insurance, I will pay this amount
to Lender. I will pay all of these amounts to Lender unless Lender tells me, in
writing, that I do not have to do so, or unless the law required otherwise. I
will make these payments on the same day that my monthly payments of principal
and interest are due under the Note.
My payments under this Paragraph 2 will be for the items listed in (i) through
(iv) below, which are called "Escrow Items":
(i) The estimated yearly taxes, assessments, water frontage charges and other
similar charges, and sewer rents on the Property which under the law may be
superior to this Security Instrument as a lien on the Property. Any claim,
demand or charge that is made against Property because an obligation has not
been fulfilled is known as a "lien".
(ii) The estimated yearly leasehold payments or ground rents on the Property (if
any);
(iii) The estimated yearly premium for hazard or property insurance covering the
Property:
(iv) The estimated yearly premium for flood insurance covering the Property (if
any);
(v) The estimated yearly premium for mortgage insurance (if any); and
(vi) The estimated yearly amount I may be required to pay Lender under Paragraph
8 below instead of the payment of the estimated yearly premium for mortgage
insurance (if any).
Lender will estimate from time to time the amount I will have to pay for Escrow
Items by using existing assessments and bills and reasonable estimates of the
amount I will have to pay for Escrow Items in the future, unless the law
requires Lender to use another method for determining the amount I am to pay.
The amounts that I pay to Lender for Escrow Items under this Paragraph 2 will be
called the "Funds". The Funds are pledged as additional security for all Sums
Secured.
The law puts limits on the total amount of Funds Lender can at any time collect
and hold. This total amount cannot be more than the maximum amount a lender for
a "federally related mortgage loan" could require me to place in an "escrow
account" under the federal law called the "Real Estate Settlement Procedures Act
of 1974", as that law may be amended from time to time. If there is another law
that imposes a lower limit on the total amount of Funds Lender can collect and
hold, Lender will be limited to the lower amount.
(B) Lender's Obligation
Lender will keep the Funds in a savings or banking institution which has its
deposits insured by a federal agency, instrumentality, or entity, or in any
Federal Home Loan Bank. If Lender is such a savings or banking institution,
Lender may hold the Funds. Except as described in this Paragraph 2, Lender will
use the Funds to pay the Escrow Items. Lender will give to me, without charge,
an annual accounting of the Funds. That accounting must show all additions to
and deductions from the Funds and the reason for each deduction.
Lender may not charge me for holding or keeping the Funds, for using the Funds
to pay Escrow Items, for making a yearly analysis of my payment of Funds or for
receiving, verifying and totaling assessments and making a yearly analysis of my
payments of Funds or fore receg assessments and bills. However, Lender may
charge me for the services if Lender pays me interest on the Funds and if the
law permits Lender to make such a charge. Lender also may require me to pay a
one-time charge for an independent real estate tax reporting service used by
Lender in connection with my loan, unless the law does not permit Lender to make
such a charge. Lender will not be required to pay me any interest or earnings on
the Funds unless either (i) Lender and I agree in writing, at the time I sign
this Security Instrument, that Lender will pay interest on the Funds; or (ii)
the law requires Lender to pay interest on the Funds.
(C) Adjustments to the Funds
Under the law, there is a limit on the amount of Funds Lender may hold. If the
amount of Funds held by Lender exceeds this limit, then the law requires Lender
to account to me in a special manner for the excess amount of Funds. There will
be an excess amount if, at any time, the amount of Funds which Lender is holding
or keeping is greater than the amount of Funds Lender is allowed to hold under
the law.
If, at any time, Lender has not received enough Funds to make the payments of
Escrow Items when the payments are due, Lender may tell me in writing that an
additional amount is necessary. I will pay to Lender whatever additional amount
is necessary to pay the Escrow Items in full. Lender will determine the number
of monthly payments I have in which to pay that additional amount, but the
number of payments will not be more than twelve.
When I have paid all of the Sums Secured, Lender will promptly refund to me any
Funds that are then being held by Lender. If under Paragraph 21 below, Lender
either acquires or sells the Property, then before the acquisition or sale,
Lender will use any Funds which Lender is holding at the time of the acquisition
or sale to reduce the Sums Secured.
3. APPLICATION OF BORROWER'S PAYMENTS
Unless the law requires otherwise, Lender will apply each of my payments under
the Note and under Paragraphs 1 and 2 above in the following order and for the
following purposes: First, to pay any prepayment charges due under the Note;
Next, to pay amounts due to Lender under Paragraph 2 above; Next, to pay
interest due; Next, to pay principal d late charges due under the Note.
4. BORROWER'S OBLIGATION TO PAY CHARGES, ASSESSMENTS AND CLAIMS
I will pay taxes, assessments, water frontage charges and other similar charges,
sewer rents, and any other charges and fines that may be imposed on the Property
and that may be superior to this Security Instrument. I will also make payments
due under my lease if I am a tenant on the Property and I will pay ground rents
(if any) due on the Property. I will do this either by making the payments to
Lender that are described in Paragraph 2 above or, if I am not required to make
payments under Paragraph 2, by making the payments on time to the person owned
them. (In this Security Instrument, the word "person" means any person,
organization, governmental authority or other party). If I make direct payments,
then promptly after making any of those payments I will give Lender a receipt
which shows that I have done so. If I make payment to Lender under Paragraph 2,
I will give Lender all notices or bills that I receive for the amounts due under
this Paragraph 4.
I will promptly pay or satisfy all liens against the Property that may be
superior to this Security Instrument. However, this Security Instrument does not
require me to satisfy a superior lien if: (A) I agree, in writing, to pay the
obligation which gave rise to the superior lien and Lender approves the way in
which I agree to pay that obligation; or (B) in good faith, I argue or defend
against the superior lien in a lawsuit so that, during the lawsuit , the
superior lien may not be enforced; or (C) I secure from the holder of that other
lien an agreement, approved in writing by Lender, that the lien of this Security
Instrument is superior to the lien held by that person. If Lender determines
that any part of the Property is subject to a superior lien, Lender may give
Borrower a notice identifying the superior lien. Borrower shall pay or satisfy
the superior lien or take one or more of the actions set forth above within 10
days of the
5. BORROWER'S OBLIGATION TO MAINTAIN HAZARD INSURANCE OR PROPERTY INSURANCE
I will obtain hazard or property insurance to cover all buildings and other
improvements that now are or in the future will be located on the Property. The
insurance must cover loss or damage caused by fire, hazards normally covered by
"extended coverage" hazard insurance policies and other hazards for which Lender
requires coverage, including floods and flooding. The insurance must be in the
amounts and for the periods of time required by Lender. I may choose the
insurance company, but my choice is subject to Lender's approval. Lender may not
refuse to approve my choice unless the refusal is reasonable. If I do not
maintain the insurance coverage described above, Lender may obtain insurance
coverage to protect Lender's rights in the property in accordance with paragraph
7 below.
All of the insurance policies and renewals of those policies must include what
is known as a "standard mortgage clause" to protect Lender. The form of all
policies and renewals must be acceptable to Lender. Lender will have the right
to hold the policies and renewals. if Lender requires, I will promptly give
Lender all receipts of paid premiums and renewals notices that I receive.
If there is a loss or damage to the Property, I will promptly notify the
insurance company and Lender. If I do not promptly prove to the insurance
company that the loss or damage occurred, then Lender may do so. The amount paid
by the insurance company is called "proceeds". The proceeds will be used to
repair or to restore the damages Property unless: (A) if is not economically
feasible to make the repairs or to restoration; or (B) the use of the proceeds
for that purpose would lessen the protection given to Lender by this Security
Instrument; or (C) Lender and I have agreed in writing not to use the proceeds
for that purpose. If the repair or restoration is not economically feasible or
if it would lessen Lender's protection under this Security Instrument, then the
proceeds will be used to reduce the amount that I owe to Lender under the Note
and under this Security Instrument. If any of the proceeds remain after the
amount that I owe to Lender has been paid in full, the remaining proceeds will
be paid to me.
If I abandon the Property, or if I do not answer, within 10 days, a notice from
Lender stating that the insurance company has offered to settle a claim, Lender
may collect the proceeds. Lender may use the proceeds to repair or restore the
Property or to pay the Sums Secured. The 3-day period will begin when the notice
is given.
If any proceeds are used to reduce the amount of principal which I owe to Lender
under the Note, that use will not delay the due date or change the amount of any
of my monthly payments under the Note and under Paragraphs 1 and 2 above.
However, Lender and I may agree in writing to those delays or changes.
If Lender acquires the Property under Paragraph 21 below, all of my rights in
the insurance policies will belong to Lender. Also, all of my rights in any
proceeds which are paid because of damage occurred before the property is
acquired by Lender or sold will belong to Lender. However, Lender's rights in
those proceeds will not be greater than the Sums Secured immediately before the
Property is acquired by Lender or sold.
6. BORROWER'S OBLIGATION TO OCCUPY THE PROPERTY, TO MAINTAIN AND PROTECT THE
PROPERTY, AND TO FULFILL ANY LEASE OBLIGATIONS; BORROWER'S LOAN APPLICATION
(A) Borrower's Obligations to Occupy the Property
I will occupy the Property and use the Property as my principal residence within
sixty days after I sign this Security Instrument. I will continue to occupy the
Property and to use the Property as my principal residence for at least one
year. The one-year period will begin when I first occupy the Property. However,
I will not have to occupy the Property and use the Property as my principal
residence within the time frames set forth above if Lender agrees in writing
that I do not have to do so. Lender may not refuse to agree unless the refusal
is reasonable. I also will not have to occupy the Property and use the Property
as my principal residence within the time set forth above if extenuating
circumstances exist which are beyond by control.
(B) Borrower's Obligations to Maintain and Protect the Property]
I will keep the Property in good repair. I will not destroy, damage or harm the
Property, and
I will not allow the Property to deteriorate.
I will be "in default" under this Security Instrument if I fail to keep any
promise or ruling agreement made in this Security Instrument. I also will be in
default under this Security Instrument if any civil or criminal action or
proceeding for "forfeiture" (that is, a legal action or proceeding to require
the Property, or any part of the Property, to be given up) is begun and Lender
determines, in good faith, that this action or proceeding could result in a
court ruling (i) that would require forfeiture of the Property or (ii) that
would materially impair the lien of the Security Instrument or Lender's rights
in the Property. I may correct the default by obtaining a court ruling that
dismisses the legal action or proceeding, if Lender determines, in good faith,
that this court ruling prevents forfeiture of my interests in the Property and
also prevents any material impairment of (i) the lien created by this Security
Instrument or (ii) Lender's rights in the Property. If I correct the default, I
will have the right to have enforcement of this Security Instrument
discontinued, as provided in Paragraph 18 below, even if Lender has required
immediate payment in full.
Borrower's Obligation to Fulfill Any Lease Obligations
If I do not own but am a tenant on the Property, I will fulfill all my
obligations under my lease. I also agree that, if I acquire the fee title to the
Property, my lease interest and the fee title will not merge unless Lender
agrees to the merger in writing.
(D) Borrower's Loan Application
If, during the application process for the loan that I promise to pay under the
Note, I made false or inaccurate statements to Lender about information
important to Lender in determining my eligibility for the loan, Lender will
treat my actions as a default under this Security Instrument. False or
inaccurate statements about information important to the Lender would include a
misrepresentation of my intentions to occupy the Property as a principal
residence. This is just one example of a false or inaccurate statement of
important information. Also, if during the loan application process I failed to
provide Lender with information important to Lender in determining my
eligibility for the loan, Lender will treat this as a default under this
Security Instrument.
7. LENDER'S RIGHT TO PROTECT ITS RIGHTS IN THE PROPERTY
If: (A) I do not keep my promises and agreements made in this Security
Instrument, or (B) someone, including me, brings an legal proceeding that m may
significantly affect Lender's rights in the property (such as a legal proceeding
in bankruptcy, in probate, for condensation or forfeiture, or to enforce laws or
regulations), Lender may do and pay for whatever is necessary to protect the
value of the Property and Lender's rights in the Property. Lender's actions may
include appearing in court, paying reasonable attorneys' fees and entering on
the Property to make repairs. Although Lender may take action under this
Paragraph 7, Lender does not have to do so.
I will pay to Lender any amounts, with interest, which Lender spends under this
Paragraph 7. I will pay those amounts to Lender when Lender sends me a notice
requesting that I do so. I will also pay interest on those amounts at the Note
rate. Interest on each amount will begin on the date that the amount is spent by
Lender. However, Lender and I may agree in writing to terms of payment that are
different from those in this paragraph. This Security Instrument will protect
Lender in case I do not keep this promise to pay those amounts with interest.
8. MORTGAGE INSURANCE
If Lender required mortgage insurance as a condition of making the loan I
promise to pay under the Note, I will pay the premiums for the mortgage
insurance. If, for any reason, the mortgage insurance coverage lapses or ceases
to be in effect, I will pay the premiums for substantially equivalent mortgage
insurance coverage. However, the cost of this mortgage insurance coverage must
be substantially equivalent to the cost to me of the previous mortgage insurance
coverage, and the alternate mortgage insurer must be approved by Lender.
If substantially equivalent mortgage coverage is not available, Lender will
establish a "loss reserve" as a substitute for the mortgage insurance coverage.
I will pay to Lender each month an amount equal to one-twelfth of the yearly
mortgage insurance premium (as of the time the coverage lapsed or ceased to be
in effect). Lender will retain these payments, and will use these payments to
pay for losses that the mortgage insurance would have covered. Lender may choose
to no longer require loss reserve payments, if mortgage insurance coverage again
becomes available and is obtained. The mortgage insurance coverage must be in
the amount and for the period of time required by Lender. The Lender must
approve the insurance company providing coverage.
I will pay the mortgage insurance premiums, or the loss reserve payments, until
the requirement for mortgage insurance ends according to my written agreement
with Lender or according to law. Lender may require me to pay the premiums, or
the loss reserve payments, in the manner described in Paragraph 2 above.
9. LENDER'S RIGHT TO INSPECT THE PROPERTY
Lender, and others authorized by Lender, may enter on and inspect the Property.
They must do so in a reasonable manner and at reasonable times. Before or at the
time an inspection is made, Lender must give me notice stating a reasonable
purpose for the inspection.
Initials: ________ (Page 6 of 11 pages)
10. AGREEMENTS ABOUT CONDEMNATION OF THE PROPERTY
A taking of property by any governmental authority by eminent domain is known as
"condemnation". I give to Lender my right: (A) to proceeds of all awards or
claims for damages resulting from condemnation or other governmental taking of
the Property; and (B) to proceeds from a sale of the Property that is made to
avoid condemnation. All of those proceeds will be paid to Lender.
If all of the Property is taken, the proceeds will be used to reduce the Sums
Secured. If any of the proceeds remain after the amount that I owe to Lender has
been paid in full, the remaining proceeds will be paid to me.
Unless Lender and I agree otherwise in writing, if only a part of the Property
is taken, and the fair market value of the Property immediately before the
taking either is equal to, or greater than, the amount of the Sums Secured
immediately before the taking, the amount that I owe the Lender will be reduced
only by the amount of proceeds multiplied by a fraction; That fraction is as
follows: (A) the total amount of the Sums Secured immediately before the taking,
divided by (B) the fair market value of the Property immediately before the
taking. The remainder of the proceeds will be paid to me.
Unless Lender and I agree otherwise in writing or unless the law requires
otherwise, if only a part of the Property is taken, and the fair market value of
the Property immediately before the taking is less than the amount of the Sums
Secured immediately before the taking, the proceeds will be used to reduce the
Sums Secured.
If I abandon the Property, or is I do not answer, within 30 days, a notice from
Lender stating that a governmental authority has offered to make a payment or to
settle a claim for damages, Lender has the authority to collect the proceeds.
Lender may then use the proceeds to repair or restore the Property or to reduce
the Sums Secured. The 30-day period will begin when the notice is given.
If any proceeds are used to reduce the amount of principal which I owe to Lender
under the Note, that use will not delay the due date or change the amount of any
of my monthly payments under the Note and under Paragraphs 1 and 2 above.
However, Lender and I may agree in writing to those delays or changes.
11. CONTINUATION OF BORROWER'S OBLIGATION AND OF LENDER'S RIGHTS
(A) Borrower's Obligation
Lender may allow a person who takes over my rights and obligations to delay or
to change the amount of the monthly payments of principal and interest due under
the Note or under this Security Instrument. Even if Lender does this, however,
that person and I will both still be fully obligated under the Note and under
this Security Instrument.
Lender may allow those delays or changes for a person who takes over my rights
and obligations, even if Lender is required not to do so. Lender will not be
required to bring a lawsuit against such a person for not fulfilling obligations
under the Note or under this Security Instrument, even if Lender is requested to
do so.
(B) Lender's Rights
Even if Lender does not exercise or enforce any right of Lender under this
Security Instrument or under the law, Lender will still have all those rights
and may exercise and enforce them in the future. Even if Lender obtains
insurance, pays taxes, or pays other claims, charges or liens against the
Property, Lender will have the right under Paragraph 21 below to demand that I
make immediate payment in full of the amount that I owe to Lender under the Note
and under this Security Instrument.
12. OBLIGATIONS OF BORROWER AND OF PERSONS TAKING OVER BORROWER'S RIGHTS OR
OBLIGATIONS
Any person who takes over my rights or obligations under this Security
Instrument will have all of my rights and will be obligated to keep all of my
promises and agreements made in this Security Instrument. Similarly, any person
who takes over Lender's rights or obligations under this Security Instrument
will have all of Lender's rights and will be obligated to keep all of Lender's
agreements made in this Security Instrument.
If more than one person signs this Security Instrument as Borrower, each of us
is fully obligated to keep all of Borrower's promises and obligations contained
in this Security Instrument. Lender may enforce Lender's rights under this
Security Instrument against each of us individually or against all of us
together. This means that any one of us may be required to pay all of the Sums
Secured. However, if one of us does not sign the Note: (A) that person is
signing this Security Instrument only to give that person's rights in the
Property to Lender under the terms of this Security Instrument; and (B) that
person is not personally obligated to pay the Sums Secured; and (C) that person
agrees that Lender may agree with the other Borrowers to delay enforcing any of
Lender's rights or to modify or make any accommodations with regard to the terms
of this Security Instrument or the Note without the person's consent.
Initials: _______ (Page 7 of 11 pages)
13. LOAN CHARGES
If the loan secured by this Security Instrument is subject to a law which sets
maximum loan charges, and that law is finally interpreted so that the interest
or other loan charges collected or to be collected in connection with the loan
exceed permitted limits: (A) any such loan charge shall be reduced by the amount
necessary to reduce the charge to the permitted limit; and (B) any sums already
collected from Borrower which exceeded permitted limits will be refunded to
Borrower. Lender may choose to make this refund by reducing the principal owned
under the Note or by making a direct payment to Borrower. If a refund reduces
principal, the reduction will be treated as a partial prepayment without any
prepayment charge under the Note.
14. NOTICES REQUIRED UNDER THIS SECURITY INSTRUMENT
A notice that must be given tome under this Security Instrument will be given by
delivering it or by mailing it by first class mail unless applicable law
requires use of another method. The notice will be addressed to me at the
address stated in the section above titled "Description of Property". A notice
will be given to me at a different address if I give Lender a notice of my
different address. Any notice that must be given to Lender under this Security
Instrument will be given by mailing it to Lender's address stated in
subparagraph (C) of the section above titled "Words Used Often In This
Document". A notice will be mailed to Lender at a different address if Lender
gives me a notice of a different address. A notice required by this Security
Instrument is given when it is mailed or when it is delivered according to the
requirements of this Paragraph 14 or of applicable law.
15. LAW THAT GOVERNS THIS SECURITY INSTRUMENT
This Security Instrument is governed by federal law and the law that applies in
the place where the property is located. If any terms of this Security
Instrument or of the Note conflicts with the law, all other terms of this
Security Instrument and of the Note will still remain in effect if they can be
given effect without the conflicting term. This means that any terms of this
Security Instrument and of the Note which conflicts with the law can be
separated from the remaining terms, and the remaining terms will still be
enforced.
16. BORROWER'S COPY
I will be given one conformed copy of the Note and of this Security Instrument.
17. AGREEMENTS ABOUT LENDER'S RIGHTS IF THE PROPERTY IS SOLD OR
TRANSFERRED
Lender may require immediate payment in full of ail Sums Secured by this
Security Instrument if all or any part of the Property, or if any right in the
Property, is sold or transferred without Lender's prior written permission.
Lender also may require immediate payment in full if a beneficial interest in
Borrower is sold or transferred and Borrower is not a natural person. However,
Lender shall not require immediate payment in full if this is prohibited by
federal law on the date of this Security Instrument. If Lender requires
immediate payment in full under this Paragraph 17, Lender will give me a notice
which states this requirement. The notice will give me at least 30 days to make
the required payment during that period, Lender may act to enforce its rights
under this Security Instrument without giving me any further notice or demand
for payment.
18. BORROWER'S RIGHT TO HAVE LENDER'S ENFORCEMENT OF THIS SECURITY INSTRUMENT
DISCONTINUED
Even if Lender has required immediate payment in full, I may have the right to
have enforcement of this Security Instrument discontinued. I will have this
right at any time before sale of the Property under any power of sale granted by
this Security Instrument or any time before a judgment has been entered
enforcing this Security Instrument if I meet the following conditions: (A) I pay
to Lender the full amount that then would be due under this Security Instrument
and the note as if immediate payment is full had never been required; and
(B) I correct my failure to keep any of other promises or agreements made in
this Security Instrument; and
(C) I pay all of Lender's reasonable expenses in enforcing this Security
Instrument including, for example, reasonable attorneys's fees; and
(D) I do whatever Lender reasonably requires to assure that Lender's rights in
the Property, Lender's rights under this Security Instrument, and my obligations
under the Note and under this Security Instrument continue unchanged. If I
fulfill all of the conditions of this Paragraph 18, then the Note and this
Security Instrument will remain in full effect as if immediate payment in full
had never been required. However, I will not have the right to have Lender's
enforcement of this Security Instrument discontinued if Lender has required
immediate payment in full under paragraph 17 above.
19. NOTE HOLDER'S RIGHT TO SELL THE NOTE OR AN INTEREST IN THE NOTE; BORROWER'S
RIGHT TO NOTICE OF CHANGE OF LOAN SERVICER
The Note, or an interest in the Note, together with this Security Instrument,
may be sold one or more times. I may not receive any prior notices of these
sales. The entity that collects my monthly payments due under the Note and this
Security Instrument is called the "Loan Servicer". There may be a change of the
Loan Servicer as a result of the sale of the Note; there also may be one or more
changes of the Loan Servicer unrelated to a sale of the Note. The law requires
that I be given written notice of any change of the Loan Servicer. The written
notice must be given in the manner required under Paragraph 14 above and under
applicable law. The notice will state the name and address of the new Loan
Servicer, and also tell me the address to which I should make my payments. The
notice also will contain any other information required by the law.
20. CONTINUATION OF BORROWER'S OBLIGATIONS TO MAINTAIN AND PROTECT THE PROPERTY
The federal laws and the laws of the jurisdiction where the Property is located
that relate to health, safety or environmental protection are called
"Environmental Laws". I will not do anything affecting the Property that
violates Environmental Laws, and I will not allow anyone else to do so.
Environmental Laws classify certain substances considered hazardous for purposes
of this Paragraph 20. These are gasoline, kerosene, other flammable or toxic
petroleum products, toxic pesticides and herbicides, volatile solvents,
materials containing asbestos or formaldehyde, and radioactive materials. The
substances defined as toxic or hazardous by Environmental Laws and the
substances considered hazardous for purposes of this Paragraph 20 are called
"Hazardous Substances".
I will not permit Hazardous Substances to be present on the Property. I will not
use or store Hazardous Substances on the Property, and I will not allow anyone
else to do so. I also will not dispose of Hazardous Substances on the Property,
or release any Hazardous Substance on the Property, and I will not allow anyone
else to do so. However, I may permit the presence on the Property of small
quantities of Hazardous Substances that are generally recognized as appropriate
for normal residential use and maintenance of the Property, and I may use or
store these small quantities on the Property. In addition, unless law requires
removal or other action. the buildings, the improvements and the fixtures on the
Property are permitted to contain asbestos and asbestos-containing materials if
the asbestos and asbestos-containing materials are undisturbed and "non-friable"
(that is, not easily crumbled by hand pressure).
If I know of any investigation, claim, demand, lawsuit or other action by the
government or by a private party involving in the Property and any Hazardous
Substance or Environmental Laws, I will promptly notify the Lender in writing.
If the government notifies me (or I otherwise learn) that it is necessary to
remove a Hazardous Substance affecting the Property or to take other remedial
actions, I will promptly take all necessary remedial actions as required by
Environmental Laws.
21. LENDER'S RIGHTS IF BORROWER FAILS TO KEEP PROMISES AND AGREEMENTS
Except as provided in Paragraph 17 above, if all of the conditions stated in
subparagraphs (A), (B) and (C) of the Paragraph 21 are met, Lender may require
that I pay the entire amount remaining unpaid under the Note and under this
Security Instrument. Lender may do this without making any further demand for
payment. This requirement is called "immediate payment in full".
If Lender requires immediate payment in full, Lender may bring a lawsuit to take
away all of my remaining rights in the Property and have the Property sold. At
this sale Lender or another person may acquire the Property. This is known as
"foreclosure and sale". In any lawsuit for foreclosure and sale, Lender will
have the right to collect all costs and disbursements and additional allowances
allowed by law and will have the right to add all reasonable attorneys' fees to
the amount I owe Lender, which fees shall become part of the Sums Secured.
Lender may require immediate payment in full under this Paragraph 21 only if all
of the following conditions are met:
(A) I fail to keep any promise or agreement made in this Security Instrument,
including the promise to pay when due the Sums Secured.
Initials: _____ (Page 9 of 11 pages)
(B) Lender sends to me, in the manner described in Paragraph 14 above, a notice
that states:
(i) The promise or agreement that I failed to keep;
(ii) The action that I must take to correct that default;
(iii) The date by which I must correct the default. That date must be at least
30 days from the date on which the notice is given;
(iv) That if I do not correct the default by the date stated in the notice,
Lender may require immediate payment in full, and Lender or another person may
acquire the Property by means of foreclosure and sale;
(v) That if I meet the conditions stated in Paragraph 18 above, I will have the
right to have Lender's enforcement of this Security Instrument discontinued and
to have the Note and Security Instrument remain fully effective as if immediate
payment in full had never been required; and (vi) That I have the right in any
lawsuit for foreclosure and sale to argue that I did keep my promises and
agreements under the Note and under this Security Instrument, and to present any
other defense that I may have.
(C) I do not correct the default stated in the notice from Lender by the date
stated in that notice.
22. LENDER'S OBLIGATION TO DISCHARGE THIS SECURITY INSTRUMENT
When Lender has been paid all amounts due under the Note and Under this Security
Instrument, Lender will discharge this Security Instrument by delivering a
certificate stating that this Security Instrument has been satisfied. I will not
be required to pay Lender for the discharge, but I will pay all costs of
recording the discharge in the proper official records.
23. AGREEMENTS ABOUT NEW YORK LIEN LAW
I will receive all amounts lent to me by Lender subject to the trust fund
provisions of Section 13 of the New York Lien Law. This means that if, on the
date this Security Instrument is recorded, construction or other work on any
buildings or other improvements located on the Property has not been completed
for at least four months, I will: (A) hold all amounts which I receive and which
I have a right to receive from Lender under the Note as a "trust fund"; and (B)
use those amounts to pay for that construction or work before I use them for any
other purpose. The fact that I am holding those amounts as a "trust fund" means
that for any building or other improvement located on the Property I have a
special responsibility under the law to use the amount in the manner described
in this Paragraph 23.
24. RIDERS TO THIS SECURITY INSTRUNENT
If one or more riders are signed by Borrower and recorded together with this
Security Instrument, the promises and agreements of each rider are incorporated
as a part of this Security Instrument. [Check applicable box (es)]
X-Adjustable Rate Rider -Condominium Rider -1-4 Family
Rider
- -Graduated Payment Rider -Planned Unit Development Rider -Biweekly Payment
Rider
- -Balloon Rider -Rate Improvement Rider -Second Home
Rider
X Other(s) [Specify -VA Rider X Due-on-Transfer X Mortgage Rider
Schedule "A"
BY SIGNING BELOW, I accept and agree to the promises and agreements contained in
pages 1 through 12 of this Security Instrument and in any rider(s) signed by me
and recorded with it.
s\ Stacy C. Campbell
_______________________| (Seal)
STACY C. CAMPBELL Borrower
Initials: ________ (Page 10 of 11 pages)
s\ Judith A. Campbell (Seal)
________________________
JUDITH A. CAMPBELL Borrower
Initials :________ (Page 11 of 11 pages) Form 3033 10/91
<PAGE>
MORTGAGE RIDER
I further agree with the Lender as follows:
1. RIDER NOT APPLICABLE IF MORTGAGE IS ASSIGNED TO GOVERNMENT AGENCY
That this Rider shall replace those clauses in the Note and in the Mortgage
executed by me which are inconsistent with this Rider unless the Mortgage is
assigned to the Federal Home Loan Mortgage Corporation, the Government National
Mortgage Association or the Federal National Mortgage Association, or any other
federal or state governmental agency, in which event this Rider shall be
inapplicable and unenforceable.
2. REIMBURSEMENT FOR UNPAID INSURANCE PREMIUMS
That I will reimburse the Lender for any premiums paid for insurance by the
Lender after my failure to do so.
3. ADDITIONAL EVENTS CAUSING POSSIBLE IMMEDIATE PAYMENT IN FULL
That the Lender may require Immediate Payment in Full, at the option of the
Lender, a. upon my failure to pay any installment of principal or of interest
for thirty (30) days, or
b. upon my failure to pay any tax, water rates, or assessment for thirty (30)
days after a notice and demand has been mailed or delivered to me by the Lender,
or
c. after my failure to reimburse the Lender for premiums paid for fire or flood
insurance, or
d. after my failure, when requested by the Lender, to furnish a statement of the
amount due on the mortgage and whether I have any offsets or defenses against
the amounts that I owe this Lender under the Note, Mortgage, or this Rider.
4. INTEREST RATE AFTER FORECLOSURE IS BEGUN
That in the event the Lender requires Immediate Payment in Full and then
commences an action to foreclose the Mortgage, I shall pay interest thereafter
at the rate set forth in the Note or at the highest legal rate permitted by law,
whichever is higher.
5. AMOUNT OF "FUNDS" NEEDED AND REPAID ON DEMAND
That I will pay to the Lender at the time I sign this Mortgage a lump sum in the
amount of "Funds" due each month for taxes and insurance times the number of
months that have gone by since the last due date of the taxes or insurance
premiums; that I also agree that any excess amount of "Funds" on deposit that
shall be repaid or credited to me on demand shall be that amount shown as an
excess as of the last annual accounting of the "Funds".
6. ATTORNEY FEES AFTER FORECLOSURE IS BEGUN
That if the Lender commences an auction to foreclose the Mortgage, the Lender
may recover reasonable attorney fees in the amount up to five percent (5%) of
the balance due on the Mortgage, and these fees shall be secured by the
Mortgage.
7. ADDITIONAL EVENTS CAUSING POSSIBLE IMMEDIATE PAYMENT IN FULL AFTER NOTICE
That the Lender may require Immediate Payment in Full, at the option of the
Lender upon thirty (30) days notice to me.,
a. if any structure or fixture on the Property shall be removed, demolished, or
substantially altered;
b. if I shall convey the Property or any part thereof;
c. if I fail to comply with any requirements of federal, state or municipal
authorities (the Lender, however, may comply and add the expense to the mortgage
debt); or
d. if the Property becomes vacant or non-owner occupied.
8. RETENTION OF INSURANCE PROCEEDS
That the Lender may retain proceeds received from an insurance company following
a loss or damage to the Property and may apply them to reduce the mortgage debt,
or, at the Lender's option, it may pay the proceeds, in whole or part, to me for
the repair or replacement of the loss or damage.
9. APPOINTMENT OF A RECEIVER
That the Lender shall be entitled to the appointment of a court-appointed
receiver without notice to me and without regard to whether the Property itself
is adequate security for the mortgage debt.
10. OPTIONAL DISCONTINUANCE OF FORECLOSURE AFTER PAYMENT OF AMOUNT DUE
That in the event the Lender requires Immediate Payment in Full, the Lender may
discontinue any lawsuit brought for foreclosure and sale, but it does not have
to do so. The Lender may elect to continue to judgment despite an offer on my
part to pay the full amount that would have been due (any attempted payment by
me would be returned) and despite my correction of a failure to keep any of my
other promises or agreements made in the Mortgage.
11. LATE CHARGE ON TOTAL MONTHLY PAYMENT
Any late charge owing under the terms of the Note and Mortgage shall be computed
at the rate of two cents ($.02) for each dollar ($1.00) to the total monthly
payment that is overdue.
Date: May 30, 1997
s\ Stacy C. Campbell
________________________
Stacy C. Campbell
s\ Judith A. Campbell
_________________________
Judith A. Campbell
<PAGE>
ADJUSTABLE RATE RIDER
(3 Year Treasury Index-Rate Caps)
THIS ADJUSTABLE RATE RIDER is made this day of May, 1997, and is incorporated
into and shall be deemed to amend and supplement the Mortgage, Deed of Trust or
Security Deed (the "Security Instrument") of the same date given by the
undersigned (the "Borrower") to secure Borrower's Adjustable Rate Note (the
"Note") to First National Bank of Rochester (the "Lender") of the same date and
covering the property described in the Security Instrument and located at:
604 BEACH AVENUE, ROCHESTER, NEW YORK 14614
(Property Address)
THE NOTE CONTAINS PROVISIONS ALLOWING FOR CHANGES IN THE INTEREST RATE AND THE
MONTHLY PAYMENT. THE NOTE LIMITS THE AMOUNT THE BORROWER'S INTEREST RATE CAN
CHANGE AT ANY ONE TIME AND THE MAXIMUM RATE THE BORROWER'S MUST PAY.
ADDITIONAL COVENANTS. In addition to the covenants and agreements made in the
Security Instrument, Borrower and Lender further covenant and agree as follows:
A. INTEREST RATE AND MONTHLY PAYMENT CHANGES
The Note provides for an initial interest rate of 6.875%. The Note provides for
changes in the interest rate and the monthly payments, as follows:
4. INTEREST RATE AND MONTHLY PAYMENT CHANGES
(A) Change Dates
The interest rate I will pay may change on the first day of JUNE, 2000, and on
that day every 36th month thereafter. Each date on which my interest rate could
change is called a "Change Date."
(B) The Index
Beginning with the first Change Date, my interest rate will be based on an
Index. The "Index" is the weekly average yield on United States Treasury
securities adjusted to a constant maturity of 3 years, as made availability by
the Federal Reserve Board. The most recent Index figure available as of the date
45 days before each Change Date is called the "Current Index".
If the Index is no longer available, the Note Holder will choose a new index
that is based upon comparable information. The Note Holder will give me notice
of this choice.
(C) Calculation of Changes
Before each Change Date, the Note Holder will calculate my new interest rate by
adding two and eight hundred seventy five thousandths percentage points (2.875%)
to the Current Index. The Note Holder will then round the result of this
addition to the nearest one-eighth of one percentage point (0.125%). Subject to
the limits stated in Section 4 (D) below, this rounded amount will be my new
interest rate until the next Change Date.
<PAGE>
The Note Holder will then determine the amount of the monthly payment that would
be sufficient to repay the unpaid principal that I am expected to owe at the
Change Date in full on the maturity date at my new interest rate in
substantially equal payments. The result of this calculation will be the new
amount of my monthly payment.
(D) Limits on Interest Rate Changes
The Interest rate I am required to pay at the first Change Date will not be
greater than 8.875% or less than 4.875%. Thereafter, my interest rate will never
be increased or decreased on any single Change Date by more than two percentage
points (2.0%) from the rate of interest I have been paying for the preceding 36
months. My interest rate will never be greater than 11.875%.
(E) Effective Date of Change
My new interest rate will become effective on each Change Date. I will pay the
new amount of my new monthly payment beginning on the first monthly payment date
after the change date until the amount of my monthly payment changes again.
(F) Notice of Changes
The Note Holder will deliver or mail to me a notice of any changes in my
interest rate and the amount of my monthly payment before the effective date of
any change. The notice will include information required by law to be given me
and also the title and telephone number of a person who will answer any
questions I may have regarding the notice.
B. TRANSFER OF THE PROPERTY OR A BENEFICIAL INTEREST IN BORROWER
Uniform Covenant 17 of the Security Instrument is amended to read as follows:
Transfer of the Property or a Beneficial Interest in Borrower. If all or any
part of the Property or any interest in it is sold or transferred (or if a
beneficial interest in Borrower is sold or transferred and Borrower is not a
natural person) without Lender's prior written consent, Lender may, at its
option, require immediate payment in full of all sums secured by this Security
Instrument. However, this option shall not be exercised by Lender if exercise is
prohibited by federal law as of the date of this Security Instrument. Lender
also shall not exercise this option if: (a) Borrower causes to be submitted to
Lender information required by Lender to evaluate the intended transferee as if
a new loan were being made to the transferee; and (b) Lender reasonably
determines that Lender's security will not be impaired by the loan assumption
and that the risk of a breach of any covenant or agreement in this Security
Instrument is acceptable to Lender.
To the extent permitted by applicable law, Lender may charge a reasonable fee as
a condition to Lender's consent to the loan assumption. Lender may also require
the transferee to sign an assumption agreement that is acceptable to Lender and
that obligates the transferee to keep all the promises and agreements made in
the Note and in this Security Instrument unless Lender releases Borrower in
writing.
If Lender exercises the option to require immediate payment in full, Lender
shall give Borrower notice of acceleration. The notice shall provide a period of
not less than 30 days from the date the notice is delivered or mailed within
which Borrower must pay all sums secured by this Security Instrument. If
Borrower fails to pay these sums prior to the expiration of this period, Lender
may invoke any remedies permitted by this Security Instrument without further
notice or demand on Borrower.
BY SIGNING BELOW, Borrower accepts and agrees to the terms and covenants
contained in this Adjustable Rate Rider.
s\ Stacy C. Campbell (Seal)
__________________________
STACY C. CAMPBELL Borrower
s\ Judith A. Campbell (Seal)
__________________________
JUDITH A. CAMPBELL Borrower
MULTISTATE ADJUSTABLE RATE RIDER - 3 YEAR ARM Single Family - Fannie Mae/Freddie
Mac Form 3114
DUE ON TRANSFER RIDER
This rider, is dated May 30, 1997, and is a part of and changes the Mortgage of
same date which I have given to secure my Note of this date (the "Note") to
FIRST NATIONAL BANK OF ROCHESTER (the "Lender") . The Mortgage covers the
property described in the Mortgage and located at:
604 Beach Avenue, Rochester, New York 14612
(Address)
NOTICE: This Rider adds a provision to the Mortgage allowing the Lender to
require repayment of the Note in full upon the sale or transfer of the property.
AMENDED PROMISE.
Lender and I agree that Uniform Promise 17 of the Mortgage is changed to read as
follows:
17. AGREEMENTS ABOUT LENDER'S RIGHTS IF THE PROPERTY IS SOLD OR TRANSFERRED.
Lender may require Immediate Payment in Full, as that phrase is defined in
Paragraph 18 below, if all or any part of the Property, or if any right in the
property, is sold or transferred without Lender's prior written permission.
Lender also may require Immediate Payment in Full is a beneficial interest in
Borrower is sold or transferred and Borrower is not a natural person. However,
Lender shall not require Payment in Full if it is not authorized by Federal Law
to do so.
If Lender chooses to require immediate Payment in Full under this Paragraph 17,
Lender will send me a notice, in the manner described in Paragraph 14 above,
which states this requirement. The notice will give me at least 30 days to make
the required payment. The 30 day grace period will begin on the date the notice
is mailed or delivered. If I do not make the payment during that period, Lender
may bring a lawsuit for "foreclosure and sale" under Paragraph 19 below without
giving me any further notice or demand for payment.
I will continue to be responsible for all of my promises and agreements under
the Note and Mortgage even if I sell or transfer the Property to someone else,
unless the Lender releases me in writing from my promises and agreements.
By signing this Rider, I agree to all of the above.
s| Stacy C. Campbell
______________________
STACY C. CAMPBELL
s\ Judith A. Campbell
_______________________
JUDITH A. CAMPBELL
DUE-ON-TRANSFER RIDER - New York - 1-4 Family 3/83 FNMA/FHLMC Plain Language
<PAGE>
SCHEDULE A
Premises: 604 Beach Avenue Boat Lots 82-89
County Town/City District Sec Block Lot
Monroe Rochester Rochester 047.21 1 31
ALL THAT TRACT OR PARCEL OF LAND situate in the City of Rochester, County of
Monroe and State of New York, known and described as follows: Commencing at a
point on the north line of Beach Avenue as now laid out and forty (40) feet east
from the intersection of said north line with the east line of what was formerly
Oak Street; thence westerly along the north line of Beach Avenue sixty-five (65)
feet to the center of what was formerly Oak Street; thence northerly along said
center line extended northerly to the north line of the "Terrace" as shown on a
map of "Guilford Bluff" filed in Monroe County Clerk's Office in Liber 7 of Maps
at page 12; thence easterly along the north line of said "Terrace" sixty-five
(65) feet more or less; thence southerly to the place of beginning.
Also boat lots numbers 82, 83, 84, 86, 87, 88 and 89 as shown on said map of
"Guilford Bluff
ALL THAT TRACT OR PARCEL OF LAND, situate in the City of Rochester, County of
Monroe, State of New York, known and distinguished as Bath or Boat House Lot
Number Eighty-Five (85) as shown on a map of Guilford Bluff, so called, made by
R. J. Smith, Surveyor, and filed in Monroe County Clerk's Office in Liber 7 of
Maps, at page 12. - 7
Said Bath or Boat House Lot Eighty-Five (85) located on the north side of the
Terrace, on said Guilford Bluff, reference had to said Map, and each lot extends
to a point eight (8) feet from the north line of the Protection Dock, and is ten
(10) feet wide front and rear and about twenty (20) feet
Together with a right of way in common with other parties over a strip of land
twenty feet in width taken from the west end of Lots 58 and 59 of the Guilford
Bluff Tract which was conveyed by Halbert S. Greenleaf and wife to the Village
of Charlotte by Deed dated August 29, 1901 and recorded June 3, 1902 in Monroe
County Clerk's Office in Liber 651 of Deeds at page 429.
Together with all the right, title and interest of said Leo V. Lyons, and
Katharine A. Lyons, his wife, in the strip of land described in an instrument
recorded in said Clerk's Office in Liber 599 of Deeds at page 280, lying north
of Beach Avenue and south of the Bath or Boat House Lots in said tract.
For Conveyancing Only
Together with all right, title and interest of, in and to any streets and roads
abutting the above described premises.
Our policies of title insurance include such buildings and improvements thereon
which by law constitutes real property, unless specifically excepted therein.
Now is the time to determine whether we have examined all of the property and
easements which you desire to be insured: if there are appurtenant easements to
be insured, please request such insurance. In some cases, our rate manual
provides for an additional charge for such insurance.
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-END> MAR-31-1998 MAR-31-1997
<CASH> 21,378 18,194
<INT-BEARING-DEPOSITS> 1,077 1,072
<FED-FUNDS-SOLD> 10,900 13,400
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 126,583 89,374
<INVESTMENTS-CARRYING> 27,236 28,906
<INVESTMENTS-MARKET> 27,313 28,464
<LOANS> 349,047 308,043
<ALLOWANCE> 5,610 5,672
<TOTAL-ASSETS> 547,660 468,986
<DEPOSITS> 487,971 428,996
<SHORT-TERM> 18,447 1,370
<LIABILITIES-OTHER> 6,126 8,761
<LONG-TERM> 210 210
0 0
0 0
<COMMON> 3,604 3,577
<OTHER-SE> 31,311 26,072
<TOTAL-LIABILITIES-AND-EQUITY> 547,669 468,986
<INTEREST-LOAN> 7,305 6,660
<INTEREST-INVEST> 2,476 1,809
<INTEREST-OTHER> 129 87
<INTEREST-TOTAL> 9,910 8,556
<INTEREST-DEPOSIT> 4,334 3,735
<INTEREST-EXPENSE> 4,513 3,755
<INTEREST-INCOME-NET> 5,397 4,801
<LOAN-LOSSES> 90 0
<SECURITIES-GAINS> 0 0
<EXPENSE-OTHER> 4,579 4,282
<INCOME-PRETAX> 1,634 1,326
<INCOME-PRE-EXTRAORDINARY> 1,132 902
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,132 902
<EPS-PRIMARY> 0.31 0.24
<EPS-DILUTED> 0.30 0.24
<YIELD-ACTUAL> 4.33 4.56
<LOANS-NON> 2,077 1,524
<LOANS-PAST> 574 67
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 5,580 5,696
<CHARGE-OFFS> 192 107
<RECOVERIES> 132 83
<ALLOWANCE-CLOSE> 5,610 5,672
<ALLOWANCE-DOMESTIC> 5,610 5,672
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 0 0
</TABLE>
