<TABLE>
INTERCHANGE FINANCIAL SERVICES CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)
<CAPTION>
MARCH 31, December 31,
1997 1996
------------- -----------
<S> <C> <C>
ASSETS
Cash and due from banks .................................................... $ 27,555 $ 24,322
Federal funds sold ......................................................... 13,900 --
-------- --------
Total cash and cash equivalents ............................................ 41,455 24,322
-------- --------
Investment securities at amortized cost (approximate
market value of $46,383 and $63,619) .................................. 46,574 63,376
-------- --------
Securities available for sale at estimated market value
(amortized cost of $56,578 and $54,871) ............................... 56,606 55,252
-------- --------
Loans ...................................................................... 356,650 351,793
Less: Allowance for loan losses ........................................... 3,965 3,653
-------- --------
Net loans .................................................................. 352,685 348,140
-------- --------
Premises and equipment, net ................................................ 5,504 5,151
Foreclosed real estate ..................................................... 282 610
Accrued interest receivable and other assets ............................... 7,870 7,838
-------- --------
TOTAL ASSETS ............................................................... $510,976 $504,689
======== ========
LIABILITIES
Deposits
Noninterest bearing ................................................... $ 77,428 $ 76,340
Interest bearing ...................................................... 360,710 353,673
-------- --------
Total deposits ............................................................. 438,138 430,013
Securities sold under agreements to repurchase ............................. 11,700 11,050
Short-term borrowings ...................................................... -- 5,200
Accrued interest payable and other liabilities ............................. 5,418 4,082
Long-term borrowings. ...................................................... 9,958 9,983
-------- --------
TOTAL LIABILITIES .......................................................... 465,214 460,328
-------- --------
COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS' EQUITY
Common stock ............................................................... 4,762 4,733
Capital surplus ............................................................ 15,233 14,931
Retained earnings .......................................................... 25,908 24,429
Unrealized gain - securities available for sale, net of taxes .............. 22 268
-------- --------
45,925 44,361
Less: Treasury Stock (5,422 common shares) ............................... 163 --
-------- --------
Total stockholders' equity ............................................ 45,762 44,361
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ................................. $510,976 $504,689
======== ========
- --------------------------------------------------------------------------------
See notes to consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
INTERCHANGE FINANCIAL SERVICES CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(in thousands except per share data)
<CAPTION>
Three months ended
March 31,
--------------------
1997 1996
---- ----
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans .......................................... $7,812 $7,066
Interest on federal funds sold ...................................... 34 228
Interest and dividends on securities
Taxable interest income ....................................... 1,702 1,861
Interest income exempt from federal income taxes .............. 15 14
Dividends ..................................................... 53 38
------ ------
TOTAL INTEREST INCOME ............................................... 9,616 9,207
------ ------
INTEREST EXPENSE
Interest on deposits ................................................ 3,292 3,598
Interest on short-term borrowings ................................... 197 150
Interest on long-term borrowings .................................... 149 --
------ ------
TOTAL INTEREST EXPENSE .............................................. 3,638 3,748
------ ------
NET INTEREST INCOME ................................................. 5,978 5,459
Provision for loan losses ........................................... 610 250
------ ------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES .................................................... 5,368 5,209
------ ------
NONINTEREST INCOME
Service fees on deposit accounts .................................... 428 369
Net gain on sale of loans ........................................... 1,067 --
Net gain on sale of securities available for sale ................... -- 235
Accretion of discount in connection with acquisition ................ -- 190
Other ............................................................... 212 426
------ ------
TOTAL NONINTEREST INCOME ............................................ 1,707 1,220
------ ------
NONINTEREST EXPENSES
Salaries and benefits ............................................... 2,011 1,902
Net occupancy ....................................................... 486 545
Furniture and equipment ............................................. 168 178
Advertising and promotion ........................................... 152 158
Other ............................................................... 1,098 1,166
------ ------
TOTAL NONINTEREST EXPENSES .......................................... 3,915 3,949
------ ------
Income before income taxes ......................................... 3,160 2,480
Income taxes ........................................................ 1,106 868
------ ------
NET INCOME .......................................................... $2,054 $1,612
====== ======
NET INCOME PER COMMON SHARE ......................................... $ 0.48 $ 0.38
====== ======
- --------------------------------------------------------------------------------
See notes to consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
INTERCHANGE STATE BANK
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands)
<CAPTION>
Unrealized
Gain/(Loss)
on
Securities
Common Capital Retained Available Treasury
Stock Surplus Earnings for Sale Stock Total
----- ------- -------- -------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996 ............................... $4,495 $12,110 $22,990 $ 646 $ -- $40,241
Net income ............................................... 1,612 1,612
Dividends on common stock at $0.117 per share (1) ........ (500) (500)
5% common stock dividend ................................. 225 2,678 (2,903) --
Issued 7,498 shares of common stock in connection
with incentive plan .................................. 13 148 161
Increase in market valuation-securities available for
sale, net of taxes ................................... 63 63
-------- -------- -------- -------- --------- --------
Balance at March 31, 1996 ................................ 4,733 14,936 21,199 709 -- 41,577
Net Income ............................................... 4,807 4,807
Dividends on common stock at $0.487 per share (1) ........ (1,577) (1,577)
Fractional shares of 5% common stock dividend ............ (5) (5)
Decrease in market valuation-securities available for
sale, net of taxes ................................... (441) (441)
-------- -------- -------- -------- --------- --------
Balance at December 31, 1996 ............................. 4,733 14,931 24,429 268 -- 44,361
Net income ............................................... 2,054 2,054
Dividends on common stock at $0.135 per share (1) ........ (575) (575)
Issued 5,701 shares of common stock in connection
with incentive plans ................................. 9 159 168
Exercise of 12,086 option shares ......................... 20 143 163
Retirement of 5,422 shares in exchange for option shares . (163) (163)
Decrease in market valuation - securities available
for sale, net of taxes ............................... (246) (246)
-------- -------- -------- -------- --------- --------
Balance at March 31, 1997 ................................ $4,762 $15,233 $25,908 $ 22 $ (163) $45,762
======== ======== ======== ======== ========= ========
- --------------------------------------------------------------------------------
(1) Adjusted for the effects of the 3 for 2 stock split to be issued on April 17, 1997 to shareholders of record on March 20, 1997.
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
INTERCHANGE FINANCIAL SERVICES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<CAPTION>
For the Three Months Ended
--------------------------
March 31,
--------------------------
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ..................................................................................... $ 2,054 $ 1,612
Non-cash items included in earnings
Depreciation and amortization of fixed assets ............................................. 227 254
Amortization of securities premiums ....................................................... 202 285
Accretion of securities discounts ......................................................... (17) (12)
Amortization of premiums in connection with acquisition ................................... 111 111
Accretion of discount in connection with acquisition ...................................... -- (190)
Provision for loan losses ................................................................. 610 250
Net gain on sale of securities available for sale ......................................... -- (235)
Net gain on sale of loans ................................................................ (1,067) --
Net gain on sale of foreclosed real estate ................................................ (3) (17)
Decrease in carrying value of loans available for sale .................................... 26 23
(Increase) decrease in operating assets
Net origination of loans available for sale ............................................... 6 (119)
Accrued interest receivable ............................................................... 364 408
Other ..................................................................................... (367) 374
Increase in operating liabilities
Accrued interest payable .................................................................. 67 107
Other ..................................................................................... 1,269 592
-------- --------
CASH PROVIDED BY OPERATING ACTIVITIES .......................................................... 3,482 3,443
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from (payments for)
Net (originations) repayment of loans ..................................................... (10,065) (4,378)
Purchase of loans ......................................................................... -- (870)
Sale of loans ............................................................................. 5,945 --
Purchase of securities available for sale ................................................. (1,985) (8,087)
Maturities of securities available for sale ............................................... 221 195
Sale of securities available for sale ..................................................... -- 38,349
Sale of foreclosed real estate ............................................................ 329 78
Purchase of investment securities ......................................................... -- (4,563)
Maturities of investment securities ....................................................... 16,672 6,000
Net payments on foreclosed real estate .................................................... 2 7
Purchase of fixed assets .................................................................. (624) (135)
Sale of fixed assets ...................................................................... 13 --
-------- --------
CASH PROVIDED BY INVESTING ACTIVITIES .......................................................... 10,508 26,596
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from (payments for)
Deposits more (less) than withdrawals ..................................................... 8,125 (3,214)
Securities sold under agreements to repurchase ............................................ 1,650 5,778
Other borrowings .......................................................................... (5,225) (4,200)
Retirement of securities sold under agreement to repurchase ............................... (1,000) (1,250)
Dividends ................................................................................. (575) (500)
Common stock issued ....................................................................... 168 161
Exercise of option shares ................................................................. 163 --
Treasury stock ............................................................................ (163) --
-------- --------
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES ............................................... 3,143 (3,225)
-------- --------
INCREASE IN CASH AND CASH EQUIVALENTS .......................................................... 17,133 26,814
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR ................................................... 24,322 25,151
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD ....................................................... $ 41,455 $ 51,965
======== ========
Supplemental disclosure of cash flow information:
Cash paid for:
Interest ............................................................................. $ 3,571 $ 3,641
Income taxes ......................................................................... 110 208
Supplemental disclosure of non-cash investing activities:
Loans transferred to foreclosed real estate .......................................... $ -- $ 179
Decrease (increase) - market valuation of securities available for sale .............. 353 (102)
Amortization of valuation allowance-securities transferred from
available to sale to held to maturity .............................................. 2 4
- --------------------------------------------------------------------------------
See notes to consolidated financial statements
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
1. FINANCIAL STATEMENTS
The consolidated financial statements should be read in conjunction
with the financial statements and schedules as presented in the Annual Report on
Form 10-K of Interchange Financial Services Corporation (the "Company") for the
year ended December 31, 1996.
Consolidated financial data for the three months ended March 31, 1997
and 1996, are unaudited but reflect all adjustments consisting of only normal
recurring adjustments which are, in the opinion of management, considered
necessary for a fair presentation of the financial condition and results of
operations for the interim periods. Results for interim periods are not
necessarily indicative of results to be expected for any other period or the
full year.
2. LEGAL PROCEEDINGS
The Company is a party to routine litigation involving various aspects
of its business, none of which, in the opinion of management and its legal
counsel, is expected to have a material adverse impact on the consolidated
financial condition, results of operations or liquidity of the Company.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion is an analysis of the consolidated financial
condition and results of operations of the Company for the three months ended
March 31, 1997 and 1996, and should be read in conjunction with the consolidated
financial statements and notes thereto included in Item 1 hereof.
RESULTS OF OPERATIONS
EARNINGS SUMMARY
For the first quarter of 1997, the Company reported net income of $2.1
million or $0.48 per share, as compared with $1.6 million or $0.38 per share for
the comparable 1996 period, an increase of $442 thousand or $0.10 per share. The
growth in earnings was a product of a strong net interest margin that had a
positive influence on net interest income and increased noninterest income.
Net interest income increased $519 thousand or 9.5% largely because of
a $16.5 million increase in interest earning assets and an improved net interest
margin. The greatest growth in interest earning assets occurred in loans;
specifically commercial loans which generally carry higher yields. For the first
quarter of 1997, loans on average increased $42.5 million or 13.7% as compared
to the same period a year ago. The loan growth was internally generated. Such
assets were funded mostly with demand and savings deposits which typically carry
lower yields, thereby having a positive effect on the net interest margin. The
net interest margin for the first quarter 1997 was 5.11% as compared to 4.84%
for the prior year.
Noninterest income increased $487 or 39.9% for the first quarter of
1997, as compared to the same period in 1996. The increase was the result of a
$1.1 million gain from the sale of two commercial mortgage loans with a book
value of $4.8 million. These loans were part of a commercial loan package
acquired in 1994 at a discount. The sale was consummated based upon management's
assessment of the risk associated with such loans as they neared their maturity.
However, the benefit resulting from the gain was partly offset by $621 thousand
in gains and discount accretion that was realized in the first quarter of 1996
and did not reoccur in 1997. The gain was also partly offset by an increase in
the provision for loan losses described below.
NONPERFORMING ASSETS
Nonperforming assets, consisting of nonaccrual loans, restructured
loans and foreclosed real estate, decreased $2.9 million from $5.8 million at
March 31, 1996, to $2.9 million at March 31, 1997. The decrease in nonperforming
assets is partly attributable to the sale of $1.4 million in nonperforming loans
in the third quarter of 1996. During the past 12 months, $1.1 million of real
estate owned was sold and further contributed to the decrease. For the first
quarter 1997, nonperforming assets decreased $529 thousand from $3.4 million for
the quarter ended December 31, 1996. The ratio of nonperforming assets to total
loans and foreclosed real estate decreased from 1.8% at March 31, 1996, to .8%
at March 31, 1997. The ratio at March 31, 1997, decreased by .2% as compared to
1.0% at December 31, 1996.
PROVISION FOR LOAN LOSSES AND LOAN LOSS EXPERIENCE
The provision for loan losses represents management's determination of
the amount necessary to bring the allowance for loan losses to a level that
management considers adequate to reflect the risk of future losses inherent in
the Company's loan portfolio. In its evaluation of the adequacy of the allowance
for loan losses, management considers past loan loss experience, changes in the
composition of performing and nonperforming loans, the condition of borrowers
facing financial pressure, the relationship of the current level of the
allowance to the credit portfolio and to nonperforming loans and existing
economic conditions. However, the process of determining the adequacy of the
allowance is necessarily judgmental and subject to changes in external
conditions. Accordingly, there can be no assurance that existing levels of the
allowance will ultimately prove adequate to cover actual loan losses.
The allowance for loan losses was $4.0 million at March 31, 1997, and
$3.7 million at December 31, 1996, representing 143.7% and 130.0% of
nonperforming loans at those dates, respectively. In the first quarter of 1997,
the Bank's provision for loan losses was $610 thousand, an increase of $360
thousand from the same period a year ago. The increase in the provision for loan
losses was necessitated based upon certain changes in the characteristics of the
Bank's loan portfolio. The Bank's lending focus and growth continue to be
largely in its commercial and commercial mortgage loan portfolio. As a result,
the Bank has modified its method of computing the allowance for loan losses to
capture the potential increase in inherent credit risk associated with the
increased concentration in commercial and commercial mortgage loans.
<PAGE>
<TABLE>
SECURITIES
Investment securities and securities available for sale consist of the
following: (in thousands)
<CAPTION>
March 31, 1997
------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
INVESTMENT SECURITIES
OBLIGATIONS OF U.S. TREASURY ................................. $ 30,396 $ 46 $ 17 $ 30,425
OBLIGATIONS OF U.S. AGENCIES ................................. 11,069 -- 104 10,965
OBLIGATIONS OF STATE AND POLITICAL SUBDIVISION ............... 180 -- 9 171
OTHER DEBT SECURITIES ........................................ 4,929 -- 107 4,822
-------- -------- -------- --------
46,574 46 237 46,383
-------- -------- -------- --------
SECURITIES AVAILABLE FOR SALE
OBLIGATIONS OF U.S. TREASURY ................................. 33,581 311 444 33,448
OBLIGATIONS OF U.S. AGENCIES ................................. 17,199 -- 241 16,958
OTHER DEBT SECURITIES ........................................ 1,886 -- 10 1,876
EQUITY SECURITIES ............................................ 3,912 412 -- 4,324
-------- -------- -------- --------
56,578 723 695 56,606
-------- -------- -------- --------
TOTAL SECURITIES ........................................ $103,152 $ 769 $ 932 $102,989
======== ======== ======== ========
December 31, 1996
------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---- ----- ------ -----
Investment securities
Obligations of U.S. Treasury ................................. $ 43,517 $ 248 -- $ 43,765
Obligations of U.S. agencies ................................. 11,077 74 $ 22 11,129
Obligations of states & political subdivisions ............... 3,581 1 9 3,573
Other debt securities ........................................ 5,201 -- 49 5,152
-------- -------- -------- --------
63,376 323 80 63,619
-------- -------- -------- --------
Securities available for sale
Obligations of U.S. Treasury ................................. 31,640 453 246 31,847
Obligations of U.S. agencies ................................. 17,321 124 12 17,433
Other debt securities ........................................ 1,998 11 -- 2,009
Equity securities ............................................ 3,912 51 -- 3,963
-------- -------- -------- --------
54,871 639 258 55,252
-------- -------- -------- --------
Total securities ........................................ $118,247 $ 962 $ 338 $118,871
======== ======== ======== ========
</TABLE>
<PAGE>
<TABLE>
At March 31, 1997, the contractual maturities of investment securities and securities available
for sale are as follows: (in thousands)
<CAPTION>
SECURITIES
INVESTMENT SECURITIES AVAILABLE FOR SALE
--------------------------- ----------------------
AMORTIZED MARKET AMORTIZED MARKET
COST VALUE COST VALUE
--------------------------- ----------------------
<S> <C> <C> <C> <C>
WITHIN 1 YEAR .......................................... $18,163 $18,193 -- --
AFTER 1 BUT WITHIN 5 YEARS ............................. 18,346 18,277 $37,526 $37,358
AFTER 5 BUT WITHIN 10 YEARS ............................ 4,182 4,157 7,665 7,515
AFTER 10 YEARS ......................................... 5,883 5,756 7,475 7,409
EQUITY SECURITIES ...................................... -- -- 3,912 4,324
------- ------- ------- -------
TOTAL .......................... $46,574 $46,383 $56,578 $56,606
======= ======= ======= =======
</TABLE>
<TABLE>
CAPITAL ADEQUACY
The Company's and the Bank's capital amounts and ratios are as follows: (dollars in thousands)
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
---------------- ----------------- -----------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
AS OF MARCH 31, 1997:
TOTAL CAPITAL (TO RISK WEIGHTED ASSETS):
THE COMPANY ..................................... $48,740 14.76% $26,411 8.00% N/A N/A
THE BANK ........................................ 47,402 14.42 26,304 8.00 $32,880 10.00%
TIER 1 CAPITAL (TO RISK WEIGHTED ASSETS):
THE COMPANY ..................................... 44,775 13.56 13,205 4.00 N/A N/A
THE BANK ........................................ 43,437 13.21 13,152 4.00 19,728 6.00
TIER 1 CAPITAL (TO AVERAGE ASSETS):
THE COMPANY ..................................... 44,775 8.94 15,032 3.00 N/A N/A
THE BANK ........................................ 43,437 8.69 14,991 3.00 24,985 5.00
As of December 31, 1996:
Total Capital (to Risk Weighted Assets):
The Company ..................................... $46,720 14.42% $25,918 8.00% N/A N/A
The Bank ........................................ 45,391 14.07 25,813 8.00 $32,266 10.00%
Tier 1 Capital (to Risk Weighted Assets):
The Company ..................................... 43,067 13.29 12,959 4.00 N/A N/A
The Bank ........................................ 41,738 12.94 12,906 4.00 19,359 6.00
Tier 1 Capital (to Average Assets):
The Company ..................................... 43,067 8.66 14,925 3.00 N/A N/A
The Bank ........................................ 41,738 8.39 14,925 3.00 24,875 5.00
</TABLE>
<PAGE>
LIQUIDITY
Liquidity is the ability to provide sufficient resources to meet all
financial obligations and finance prospective business opportunities. Liquidity
levels over any given period of time are a product of the Company's operating,
financing and investing activities. The extent of such activities are often
shaped by such external factors as competition for deposits and demand for
loans.
Financing for the Company's loans and investments is derived primarily
from deposits, along with interest and principal payments on loans and
investments. At March 31, 1997, total deposits amounted to $438.1 million, an
increase of $8.1 million or 1.9% from December 31, 1996. The Company continues
to supplement the more traditional funding sources with borrowings from the
Federal Home Loan Bank of New York ("FHLB") and with securities sold under
agreements to repurchase ("REPOS"). At March 31, 1997, advances from the FHLB
and REPOS amounted to $10.0 million and $11.7 million, respectively, as compared
to $15.2 million and $11.1 million, respectively, at December 31, 1996.
In the first quarter of 1997, loan production continued to be the
Company's principal investing activity. Net loans at March 31, 1997 amounted to
$352.7 million, compared to $348.1 million at the end of 1996, an increase of
$4.6 million or 1.32%.
The Company's most liquid assets are cash and due from banks and
federal funds sold. At March 31, 1997, the total of such assets amounted to
$41.5 million or 8.1% of total assets, compared to $24.3 million or 4.8% of
total assets at year-end 1996.
Another significant liquidity source is the Company's
available-for-sale ("AFS") securities. At March 31, 1997, AFS securities
amounted to $56.6 million or 54.9% of total securities. compared to $55.3
million or 46.6% of total securities at year-end 1996.
In addition to the aforementioned sources of liquidity, the Company has
available various other sources of liquidity, including federal funds purchased
from other banks and the Federal Reserve discount window. The Bank also has a
$49.1 million line of credit available through its membership in the Federal
Home Loan Bank of New York.
Management believes that the Company's sources of funds are sufficient
to meet its funding requirements.
<PAGE>
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to Form 10-K filed for the year ended December 31,
1996.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are furnished herewith:
EXHIBIT NO.
10
(a) Change in Control Agreement for Anthony Labozzetta
dated January 2, 1997
(b) Separation Agreement for Robert N. Harris dated January
2, 1997
11 Statement Re: Computation of Per Share Earnings
(b) Form 8-K filed January 22, 1997 announcing the retirement of
Robert N. Harris and the promotion to Senior Vice President and
Treasurer of Anthony Labozzetta.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned thereunto duly authorized.
INTERCHANGE FINANCIAL SERVICES CORPORATION
by: /S/ANTHONY LABOZZETTA
Anthony Labozzetta
Senior Vice President & Treasurer
January 1, 1997
Mr. Anthony Labozzetta
144 Summit Street
Englewood, NJ 07631
Dear Mr. Labozzetta:
Interchange Financial Services Corporation, a New Jersey Bank Holding Company
(the "Company"), considers the maintenance of a sound and vital executive team
to be essential to protecting and enhancing the best interests of the Company
and its stockholders. In this connection, the Company recognizes that the
possibility of a change in control presently exists and may exist in the future,
and that such possibility, and the uncertainty and questions which it may raise
among management, may result in the departure or distraction of executives to
the detriment of the Company and its stockholders. Accordingly, the Board of
Directors of the Company (the "Board") has determined that appropriate steps
should be taken to reinforce and encourage the continued attention and
dedication of members of the Company's executive team.
This letter agreement sets forth the severance benefits which the Company agrees
will be provided to you in the event your employment with the Company is
terminated subsequent to a "change in control of the Company" (as defined in
Section 2 hereof) under the circumstances described below.
1. COMPANY'S RIGHT TO TERMINATE
During the term of this Agreement, you agree that you will not
voluntarily leave the employ of the Company except as may be permitted
hereunder, and will continue to perform your regular duties as Senior
Vice President and Treasurer of the Company. Notwithstanding the
foregoing, the Company may terminate your employment at any time,
subject to providing the benefits hereinafter specified in accordance
with the terms hereof.
2. CHANGE IN CONTROL
No benefits shall be payable hereunder unless there shall have been a
change in control of the Company, as set forth below, and your
employment by the Company shall thereafter have been terminated in
accordance with Section 3 below. For purposes of this Agreement, a
"change in control of the Company" shall mean, unless the Board
otherwise directs resolution approved by unanimous vote of the entire
membership thereof adopted prior thereto, a change in control of a
nature that would be required to be reported in response to Item 5(f)
of Schedule 14A of Regulation 14A promulgated under the Securities
Exchange Act of 1934, as amended ("Exchange Act"); provided that,
without limitation, such a change in control shall be deemed to have
occurred if (i) any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of securities of the Company representing more than 25% control of the
combined voting power of the Company's then outstanding securities; or
(ii) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board cease for any reason to
constitute at least a majority thereof unless the election, or the
nomination for election by the Company's stockholders, of each new
director was approved by a vote of at least two-thirds of the directors
then still in office who were directors at the beginning of the period.
3. TERMINATION FOLLOWING CHANGE IN CONTROL
If any of the events described in Section 2 hereof constituting a
change in control of the Company shall have occurred, you shall be
entitled to the benefits provided in Section 4 hereof upon your
subsequent termination, so long as such termination occurs within two
(2) years after a change in control of the Company, unless such
termination is (A) because of your death or Retirement, (B) by the
Company for Cause or Disability or (c) by you other than for Good
Reason.
(i) Disability; Retirement
(A) Termination by the Company of your employment based
on "Disability" shall mean termination because of
your absence from your duties with the Company on a
full-time basis for 130 consecutive business days, as
a result of your incapacity due to physical or mental
illness, unless within thirty (30) days after Notice
of Termination (as hereinafter defined) is given
following such absence, you shall have returned to
the full time performance of your duties; or
(B) Termination by the Company or you of your employment
based on "Retirement" shall mean your voluntary
termination in accordance with the Company's
retirement policy, including early retirement,
generally applicable to its salaried employees.
(ii) Cause
Termination by the Company of your employment for Cause
shall mean your termination on account of:
(A) Your willful commission of an act that causes or is
reasonably likely to cause substantial damage to the
Company;
(B) Your commission of an act of fraud in the performance
of your duties on behalf of the Company;
(C) Your conviction for commission of a felony or other
crime punishable by confinement for a period in excess
of one (1) year in connection with the performance of
your duties on behalf of the Company; or
(D) The order of a federal or state bank regulatory agency
or a court of competent jurisdiction requiring the
termination of your employment.
(iii) Good Reason
Termination by you of your employment for "Good Reason"
shall mean termination based on:
(A) Subsequent to a change in control of the Company, and
without your express written consent, the assignment to
you of any duties inconsistent with your positions,
duties, responsibilities and status with the Company
immediately prior to a change in control, or a change
in your reporting responsibilities, titles or offices
as in effect immediately prior to a change in control,
or any removal of you from or any failure to re-elect
you to any of such positions, except in connection with
the termination of your employment for Cause,
Disability or Retirement or as a result of your death
or by you other than for Good Reason;
(B) Subsequent to a change in control of the Company, a
reduction by the Company in your base salary as in
effect on the date hereof or as the same may be
increased from time to time;
(C) Subsequent to a change in control of the Company, a
failure by the Company to continue any bonus plans in
which you are presently entitled to participate (the
"Bonus Plans") as the same may be modified from time to
time but substantially in the forms currently in
effect, or a failure by the Company to continue you as
a participant in the Bonus Plans on at least the same
basis as you presently participate in accordance with
the Bonus Plans;
(D) Subsequent to a change in control of the Company and
without your express written consent, the Company's
requiring you to be based anywhere other than within
thirty (30) miles of your present office location,
except for required travel on the Company's business to
an extent substantially consistent with your present
business travel obligations;
(E) Subsequent to change in control of the Company, the
failure by the Company to continue in effect any
benefit or compensation plan, stock ownership plan,
stock purchase plan, stock option plan, life insurance
plan, health-and-accident plan or disability plan in
which you are participating at the time of a change in
control of the Company (or plans providing you with
substantially similar benefits), the taking of any
action by the Company which would adversely affect your
participation in or materially reduce your benefits
under any of such plans or deprive you of any material
fringe benefit enjoyed by you at the time of the change
in control, or the failure by the Company to provide
you with the number of paid vacation days to which you
are then entitled in accordance with the company's
normal vacation policy in effect on the date hereof;
(F) Subsequent to a change in control of the Company, the
failure by the Company to obtain the assumption of the
agreement to perform this Agreement by any successor as
contemplated in Section 6 hereof; or
(G) Subsequent to a change in control of the Company, any
purported termination of your employment which is not
effected pursuant to a Notice of Termination satisfying
the requirements of paragraph (iv) below (and, if
applicable, paragraph (ii) above); and for purposes of
this Agreement, no such purported termination shall be
effective.
(iv) Notice of Termination
Any purported termination by the Company pursuant to paragraph
(i) or (ii) above or by you pursuant to subparagraph (B) of
paragraph (i) or paragraph (iii) above shall be communicated
by written Notice of Termination to the other party hereto.
For purposes of this Agreement, a "Notice of Termination"
shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall
set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of your employment
under the provision so indicated.
(v) Date of Termination
"Date of Termination" shall mean (A) if your employment is
terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that you shall not have
returned to the performance of your duties on a full-time
basis during such thirty (30) day period), (B) if your
employment is terminated pursuant to paragraph (ii) above, the
date specified in the Notice of Termination, and (C) if your
employment is terminated for any other reason, the date on
which a Notice of Termination is given; provided that if
within thirty (30) days after any Notice of Termination is
given the party receiving such Notice of Termination notifies
the other party that a dispute exists concerning the
termination, the Date of Termination shall be the date on
which the dispute is finally determined, either by mutual
written agreement of the parties, by a binding and final
arbitration award or by a final judgment, order or decree of a
court of competent jurisdiction entered upon such arbitration
award (the time of appeal therefrom having expired and no
appeal having been perfected).
4. Certain Benefits Upon Termination
If, after a change in control of the Company shall have occurred, as
defined in Section 2 above, your employment by the Company shall be
terminated (A) by the Company other than for Cause, Disability or
Retirement or (B) by you for Good Reason, then you shall be entitled
to the benefits provided below:
(i) The Company shall pay you your full base salary through the Date
of Termination at the rate in effect at the time Notice of
Termination is given plus credit for any vacation earned but not
taken and the amount, if any, of any bonus for a past fiscal year
and the portion of the current fiscal year ending on the Date of
Termination which has not yet been awarded or paid to you under
the Bonus Plans;
(ii) In lieu of any further salary payments to you for periods
subsequent to the Date of Termination, the Company shall pay as
severance pay to you on the fifth day following the Date of
Termination a lump sum amount equal to two (2) times your annual
base salary at the highest rate in effect during the twelve (12)
months immediately preceding the Date of Termination;
(iii)The Company shall also pay to you all legal fees and expenses
incurred by you as a result of such termination (including all
such fees and expenses, if any, incurred in contesting or
disputing any such termination or in seeking to obtain or enforce
any right or benefit provided by this Agreement);
(iv) The Company shall maintain in full force and effect, for your
continued benefit until the earlier of (A) two (2) years after
the Date of Termination or (B) your commencement of full time
employment with a new employer, all life insurance, medical,
health and accident, and disability plans, programs or
arrangements in which you were entitled to participate
immediately prior to the Date of Termination, provided that your
continued participation is possible under the general terms and
provisions of such plans and programs. In the event that your
participation in any such plan or program is barred, the Company
shall arrange to provide you with benefits substantially similar
to those which you are entitled to receive under such plans and
programs. In addition, the Company shall pay you a lump sum
amount of equivalent actuarial value to the additional pension
benefit you would have earned under the Company's Pension Plan as
in effect on the date the change of control occurs, but
disregarding any Internal Revenue Code limitations pertaining to
qualified plans, if you were granted at the time of your
termination of employment two (2) additional years of Credited
Service and deemed 2 years older under the Plan. In determining
the equivalent actuarial value of the additional pension granted
under this Section 4, an interest rate of 5% and the mortality
table under the Company's Pension Plan shall be used to determine
the lump sum amount.
You shall not be required to mitigate the amount of any payment
provided for in this Section 4 by seeking other employment or
otherwise, nor shall the amount of any payment provided for in this
Section 4 be reduced by any compensation earned by you as the result of
employment by another employer after the Date of Termination or
otherwise.
5. CERTAIN FURTHER PAYMENTS BY THE CORPORATION
In the event that any amount or benefit paid or distributed to you
pursuant to this Agreement, taken with any amounts or benefits
otherwise paid or distributed to you by the Company or any affiliated
company (collectively the "Covered Payments"), are or become subject to
the tax (the "Excise Tax") imposed under Section 4999 of the Code or
any similar tax that may hereafter be imposed, the Company shall pay to
you at the time specified below an additional amount (the "Tax
Reimbursement Payment") such that the net amount retained by you with
respect to such Covered Payments, after deduction of any Excise Tax on
the Covered Payments and any Federal, state and local income tax and
Excise Tax on the Tax Reimbursement Payment provided for by this
Section 5, but before deduction for any Federal, state or local income
or employment tax withholding on such Covered Payments, shall be equal
to the amount of the Covered Payments.
(i) For purposes of determining whether any of the Covered Payments
will be subject to the Excise Tax and the amount of such Excise
Tax,
(A) Such Covered Payments will be treated as "parachute
payments" within the meaning of Section 280G of the Code,
and all "parachute payments" in excess of the "base amount"
(as defined under Section 280G(b)(3) of the Code) shall be
treated as subject to the Excise Tax, unless, and except to
the extent that, in the opinion of the Company's independent
certified public accountants appointed prior to the date the
Change of Control occurs or tax counsel selected by such
accountants (the "Accountants"), such Covered Payments (in
whole or in part) either do not constitute parachute
payments or represent reasonable compensation for services
actually rendered (within the meaning of Section 280G(b)(4)
of the Code) in excess of the "base amount", or such
parachute payments are otherwise not subject to such Excise
Tax, and
(B) The value of any non-cash benefits or any deferred payment
or benefit shall be determined by the Accountants in
accordance with the principles of Section 280G of the Code.
(ii) For purposes of determining the amount of the Tax Reimbursement
Payment, you shall be deemed to pay:
(A) Federal income taxes at the highest applicable marginal
rate of Federal income taxation for the calendar year
in which the Tax Reimbursement Payment is to be made,
and
(B) Any applicable state and local income taxes at the
highest applicable marginal rate of taxation for the
calendar year in which the Tax Reimbursement Payment is
to be made, net of the maximum reduction in Federal
income taxes which could be obtained from the deduction
of such state or local taxes if paid in such year.
(iii)In the event that the Excise Tax is subsequently determined to be
less than the amount taken into account hereunder in calculating
the Tax Reimbursement Payment made, you shall repay to the
Company, at the time that the amount of such reduction in the
Excise Tax is finally determined, the portion of such prior Tax
Reimbursement Payment that would not have been paid if such
Excise Tax had been applied in initially calculating such Tax
Reimbursement Payment, plus interest on the amount of such
repayment at the rate provided in Section 1274(b)(2)(B) of the
Code.
In the event that the Excise Tax is later determined to exceed
the amount taken into account hereunder at the time the Tax
Reimbursement Payment is made (including, but not limited to, by
reason of any payment the existence or amount of which cannot be
determined at the time of the Tax Reimbursement Payment), the
Company shall make an additional Tax Reimbursement Payment in
respect of such excess (plus any interest or penalty payment with
respect to such excess) at the time that the amount of such
excess is finally determined.
(iv) The Tax Reimbursement Payment (or portion thereof) provided for
in this Section 5 shall be paid to you not later than ten (10)
business days following the payment of the Covered Payments;
provided, however, that if the amount of such Tax Reimbursement
Payment (or portion thereof) cannot be finally determined on or
before the date on which payment is due, the Company shall pay to
you by such date an amount estimated in good faith by the
Accountants to be the minimum amount of such Tax Reimbursement
Payment and shall pay the remainder of such Tax Reimbursement
Payment (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code) as soon as the amount thereof can be
determined, but in no event later than 45 calendar days after
payment of the related Covered Payment. In the event that the
amount of the estimated Tax Reimbursement Payment exceeds the
amount subsequently determined to have been due, such excess
shall constitute a loan by the Corporation to you, payable on the
fifth business day after written demand by the Company for
payment (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code).
6. TERM OF AGREEMENT
This Agreement shall continue in effect so long as you are employed by
the Company provided that, if a change of control of the Company, as
defined in Section 2 hereof, shall have occurred during the term of
this Agreement, this Agreement shall continue in effect for a period of
thirty-six (36) months beyond the month in which such change in control
occurred.
7. SUCCESSOR; BINDING AGREEMENT
(i) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise)
to all or substantially all of the business and/or assets of
the Company, by agreement in form and substance satisfactory
to you, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such
succession had taken place. Failure of the Company to obtain
such agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall
entitle you to compensation from the Company in the same
amount and on the same terms as you would be entitled
hereunder if you terminated your employment for Good Reason,
except that for purposes of implementing the foregoing, the
date on which any such succession becomes effective shall be
deemed the Date of Termination. As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined and
any successor to its business and/or assets as aforesaid
which executes and delivers the agreement provided for in
this Section 7 or which otherwise becomes bound by all the
terms and provisions of this Agreement by operation of law.
(ii) This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If you should die while any amount
would still be payable to you hereunder if you had continued
to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement
to your devisee, legatee or other designee or, if there be
no such designee, to your estate.
8. NOTICE
For the purpose of this Agreement, notices and all other communications
provided for in this Agreement shall be in writing and shall be deemed
to have been duly given when delivered or mailed by certified or
registered mail, return receipt requested, postage prepaid, addressed
to the respective addresses set forth on the first page of this
Agreement, provided that all notices to the Company shall be directed
to the attention of the President of the Company with a copy to the
Secretary of the Company, or to such other address as either party may
have furnished to the other in writing in accordance herewith, except
that notice of change of address shall be effective only upon receipt.
9. MISCELLANEOUS
No provision of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing
signed by you and such officer as may be specifically designated by
the Board of Directors of the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise,
expressed or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this
Agreement; provided, however, that this Agreement shall not supersede
or in any way limit the rights, duties or obligations you may have
under any other written agreement with the Company. The validity,
interpretation, construction and performance of this Agreement shall
be governed by the laws of the State of New Jersey.
10. VALIDITY
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
11. TAX WITHHOLDING
The Company may withhold from any amounts payable under this Agreement
such federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
12. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
13. ARBITRATION
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in accordance
with the rules of the American Arbitration Association then in effect.
Judgment may be entered on the arbitrator's award in any court having
jurisdiction.
If this letter correctly sets forth our agreement on the subject matter hereof,
kindly sign and return to the Company the enclosed copy of this letter which
will then constitute our agreement on this subject.
Sincerely,
THE COMPANY
By /S/ ANTHONY D. ANDORA
-------------------------------------
Name: Anthony D. Andora
Title: Chairman of the Board
Agreed to this 2ND day
of JANUARY , 1997.
/S/ANTHONY LABOZZETTA
- ---------------------
Anthony Labozzetta, Sr. Vice President & Treasurer
Attest by: /S/ BENJAMIN ROSENZWEIG
- ---------- -----------------------
Benjamin Rosenzweig
IN THE MATTER OF :
:
ROBERT N. HARRIS :
:
and : AGREEMENT
:
INTERCHANGE STATE BANK and :
INTERCHANGE FINANCIAL :
SERVICES CORP. :
:
:
This Agreement is entered into this 2nd day of January, 1997, by and
between Interchange State Bank and Interchange Financial Services Corp.
(collectively the "Bank"), a corporation located at Park 80 West/Plaza 2, Saddle
Brook, New Jersey 07663, and Robert N. Harris ("Harris"), who now resides at 7
Brocken Drive, Mendham, New Jersey 07945.
IN CONSIDERATION OF THE MUTUAL PROMISES CONTAINED IN THIS AGREEMENT,
IT IS AGREED that:
1. Robert N. Harris, who now holds the position of Executive Vice
President and Chief Financial Officer with the Bank, has requested and been
granted separation and will, pursuant to that choice, retire effective on or
before December 31, 1996. Harris waives any and all entitlement to future
employment by the Bank, or any of its present or future affiliates, in any
capacity whatsoever.
2. Upon his retirement, Harris will receive severance pay (which shall
be deemed to include all accrued vacation pay) until he shall have attained the
age of sixty-five as of July 31, 1997, in the amount of $87,370 (less normal
payroll deductions), payable on a bi-weekly basis over a twelve-month period
beginning January 1, 1997 (i.e., 26 payments of $3,360.38 every two weeks).
3. In lieu of continued medical and dental insurance coverage during
the period beginning with his separation and ending on July 31, 1997, the Bank
will pay Harris an amount equal to the cost of premium payments that it would
make on his behalf for such coverage had he remained with the Bank until July
31, 1997. Such payments shall be on a bi-weekly basis (i.e., 15 payments of
$92.94). All benefits shall cease effective upon the date of Harris's
retirement.
4. The Bank will credit Harris with 1,000 hours' service under its
pension plan for the year 1997.
5. Harris shall be permitted to purchase the Bank vehicle being used
by him at the Bank's depreciated carrying value which, as of December 31, 1996,
is $13,035.28.
6. Harris hereby waives any and all rights which he may have to an
incentive bonus for the year 1997. Disposition of Harris's stock options shall
be determined under the terms of the Bank's Stock Option Plan of 1989. Any
restricted stock currently held by Harris, including stock he may receive as a
1996 bonus, shall be deemed non-forfeitable despite any provision of the plan to
the contrary. Harris's entitlements under the Interchange Deferred Compensation
Plan for Robert N. Harris shall be determined under the provisions of that plan,
except that he shall also receive a contribution to the Plan of $10,000 for the
year 1997. All rights and obligations arising from a "change in control"
agreement entered into between Harris and Interchange Financial Services
Corporation dated June 8, 1995, shall terminate upon his retirement, and such
agreement shall upon that date become null and void and unenforceable. However,
in the event that in the calendar year of 1997 the corporation enters into a
definitive agreement to be acquired, that upon the effective date of
acquisition, Harris will be entitled to an additional payment of $147,000 which
equals one year full salary.
7. Harris agrees forthwith to:
(a) sign the attached Release, by which he waives and releases the
Bank and the others identified therein from all claims relating to or arising
out of his employment with the Bank, particularly any and all claims of
employment discrimination under the Age Discrimination in Employment Act, Title
VII of the Civil Rights and/or the New Jersey Law Against Discrimination, the
Americans With Disabilities Act, the Conscientious Employee Act, all claims of
wrongful or unlawful termination, claims of breach of contract, express or
implied, all claims growing out of any restriction upon the Bank to terminate
the employment relationship, and such other claims cited therein which he may
have against the Bank or such other persons or entities recited therein. He
expressly agrees and acknowledges that this Agreement and the Release
contemplate the extinguishment of all such claims.
(b) If Harris executes this Agreement at any time prior to the end of
the twenty-one (21) day period that Interchange gives Harris in which to
consider this Agreement, such early execution is a knowing and voluntary waiver
of Harris's right to consider this Agreement for at least twenty-one (21) days,
and is due to Harris's belief that Harris had ample time in which to consider
and understand this Agreement, and in which to review this Agreement with an
attorney.
8. The parties expressly agree that execution of this Agreement shall
constitute an absolute bar to any legal action in any forum, judicial,
administrative or arbitral, by Harris against the Bank or any of its present or
future affiliates, or any other party identified as a releasee in the Release
relating to any matter covered by the terms of the Release.
9. Harris (and his attorneys if he consults counsel in connection with
this Agreement) agree that Harris will keep confidential and not disclose to any
person or entity (except Harris's spouse and children) the facts and terms of
this Agreement or the content of discussions leading to this Agreement except to
the extent necessary to comply with state or federal laws and that he will not
issue, or cooperate with or permit the issuance of, any public release
concerning this Agreement or discussions regarding this Agreement. It is
expressly agreed and understood that any violation of this paragraph, including
disclosure by Harris's spouse, children or attorney of the matters covered
herein, shall be a material breach of the parties' agreement.
10. Harris also agrees that all confidential information which he
acquired in his capacity as Executive Vice President and Chief Financial Officer
of the Bank, and which has not become public knowledge, is considered by the
parties hereto to be confidential business information and may not be disclosed,
discussed or utilized by Harris in any manner without the prior written
permission of the Bank. Harris agrees to cooperate fully with the Bank's
management in the handling of all business for which Harris had responsibility
or has relevant information.
11. Harris also agrees that he will not, except as may be compelled by
judicial process, cooperate in any manner or supply information of any kind in
any proceeding, investigation or inquiry related in any way to the employment
practices or procedures of the Bank.
12. In the event of a breach of this Agreement by Harris, the Bank
shall be relieved of its obligations hereunder and shall be entitled to
repayment of all monies paid to Harris pursuant to this agreement.
13. It is agreed further that should a breach of any provision of this
Agreement occur, the non-breaching party shall be entitled by court of competent
jurisdiction to all available remedies which apply to violations hereof.
14. In the event that the Bank or Harris is required to commence an
action, in law or equity, to enforce rights under any provision of this
Agreement, the nonprevailing party shall be liable for the reasonable attorney's
fees and costs incurred by the other in connection with such action.
15. It is agreed and understood that neither the execution of this
Agreement nor any other action taken by the Bank in connection with this
Agreement constitutes an admission by the Bank, or any of its directors,
officers, agents, employees or representatives, of any acts of discrimination
whatsoever against Harris, or of any violation of any law, duty or obligation,
and the Bank specifically disclaims any liability to or discrimination against
Harris, on the part of itself, its directors, officers, agents, employees or
representatives. The parties have entered into this Agreement voluntarily and
solely to effectuate Harris's decision to retire from the Bank.
16. This Agreement contains the entire Agreement of the parties and
cannot be altered or amended except in writing duly executed by the parties or
their authorized representatives.
17. This Agreement shall be interpreted and enforced in accordance with
the laws and in the courts of the State of New Jersey. If any part of this
Agreement shall be ruled unenforceable, it is understood that the surviving
portions of this Agreement shall remain binding on the parties.
18. This Agreement shall be binding upon the parties, their heirs,
successors and assigns. The Bank shall require the assumption of this Agreement
by any purchaser of the Bank during its term.
The foregoing terms and provisions are hereby agreed to and accepted:
Dated: 1/24/97
s/s Robert N. Harris --------------
- --------------------
Robert N. Harris
Sworn and subscribed to before me this 24 day of January, 1997.
s/s Carmella Tucci
- ------------------
Notary Public
For Interchange State Bank
By: s/s Anthony S. Abbate Dated: 1/27/97
--------------------- ---------------
Title: President & CEO
[SEAL]
For Interchange Financial Services Corp.
By: s/s Anthony S. Abbate Dated: 1/27/97
--------------------- --------------
Title: President & Ceo
[SEAL]
<PAGE>
GENERAL RELEASE AND WAIVER
In consideration of the special severance payments and benefits by
Interchange State Bank, which payment/benefits are over and above those payments
and/or benefits to which I am otherwise entitled under Interchange State Bank
and Interchange Finanical Service Corp.'s regular policies and programs, I
release and discharge Interchange State Bank, Interchange Financial Services
Corp. and all their present or future affiliated, related and subsidiary
corporations and their present, former and future directors, officers, employees
and representatives and the estates and/or heirs thereof from any and all claims
which I, my estate and/or heirs may have against any of them. This releases all
claims, known and unknown, which were or could have been asserted, resulting
from anything which has happened up to now, including claims for attorney's
fees. I hereby promise not to commence or pursue, or authorize anyone to
commence or pursue on my behalf, any action, legal or administrative, or
otherwise seek to recover any damages, remedy or relief of any kind from any
releasee based upon any claim covered by this General Release and Waiver.
Without limiting the scope of the foregoing provisions in any way, I
specifically release all claims relating to or arising out of any aspect of my
employment with Interchange State Bank and/or Interchange Financial Services
Corp. or the termination thereof including, but not limited to, all claims under
common law; the Age Discrimination in Employment Act and specifically 29 U.S.C.
ss.626; Title VII of the Civil Rights Act of 1964, as amended; 42 U.S.C.
ss.1981, as amended by the Civil Rights Act of 1991; the Employee Retirement
Income Security Act of 1974 ("ERISA"), 29 U.S.C. 1001, et seq.; the National
Labor Relations Act, 29 U.S.C. 151 et seq.; the Americans With Disabilities Act
of 1990, 29 U.S.C. 706 et seq.; the New Jersey Law Against Discrimination,
N.J.S.A. 10:5-1 et seq.; the New Jersey Conscientious Employee Protection Act,
N.J.S.A. 34:19-1 et seq.; any contract of employment, express or implied; any
provision of the Constitutions of the United States or the State of New Jersey;
and any other law, common or statutory, of the United States or the State of New
Jersey or any other State; and all claims growing out of any legal restrictions
on the Interchange State Bank's right to terminate its employees.
s/s Robert N. Harris Dated: 1/27/97
--------------------------
Signature
Robert N. Harris
- ------------------------------
Name (Please Print)
ACKNOWLEDGMENT
I HAVE CAREFULLY READ AND FULLY UNDERSTAND THE TERMS AND CONDITIONS OF
THIS RELEASE. I ACKNOWLEDGE THAT THIS RELEASE WAS AVAILABLE TO ME FOR REVIEW FOR
21 DAYS BEGINNING DECEMBER 16, 1996. I ACKNOWLEDGE THAT I HAD THE OPPORTUNITY
AND WAS ADVISED BY INTERCHANGE STATE BANK AND INTERCHANGE FINANCIAL SERVICES
CORP. TO REVIEW THIS RELEASE WITH MY ATTORNEY AND/OR ANYONE ELSE OF MY CHOOSING,
AND TO DISCUSS WITH SUCH PERSON THE TERMS AND CONDITIONS OF THIS RELEASE AND MY
RIGHTS UPON EXECUTION. I AGREE AND ACKNOWLEDGE THAT NEITHER INTERCHANGE STATE
BANK NOR INTERCHANGE FINANCIAL SERVICES CORP. NOR THEIR REPRESENTATIVES MADE ANY
REPRESENTATIONS CONCERNING THE TERMS OR EFFECT OF THIS RELEASE OTHER THAN AS SET
FORTH IN THE DOCUMENT, AND THAT I HAVE VOLUNTARILY SIGNED THIS RELEASE AS MY OWN
FREE ACT WITH FULL KNOWLEDGE OF ITS TERMS AND CONDITIONS, WHICH ARE FINAL AND
BINDING UPON ME.
I UNDERSTAND THAT FOR A PERIOD OF 7 DAYS FOLLOWING THE SIGNING OF THIS
RELEASE I MAY REVOKE THE RELEASE, AND THAT THIS RELEASE WILL NOT BE EFFECTIVE OR
ENFORCEABLE UNTIL THE REVOCATION PERIOD HAS EXPIRED.
Dated: 1/24/97 s/s Robert N. Harris
- ---------------- -------------------------------
Signature
Robert N. Harris
---------------------------------
Name (Please Print)
STATE OF NEW JERSEY :
SS.:
COUNTY OF BERGEN :
I CERTIFY THAT on January 24, 1997, Robert N. Harris personally came
before me and acknowledged under oath, to my satisfaction, that he is named in
and personally signed this document.
s/s Carmella Tucci
---------------------------------
Notary Public
<TABLE>
EXHIBIT 11
COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
Three months ended
March 31,
-----------------------
1997 1996
---- ----
<S> <C> <C>
Net income ......................................... $2,054 $1,612
Weighted average common shares outstanding ......... 4,262 4,251
------ ------
NET INCOME PER COMMON SHARE ........................ $ 0.48 $ 0.38
====== ======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-Mos
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-END> Mar-31-1997
<CASH> 27,555
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 13,900
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 56,606
<INVESTMENTS-CARRYING> 46,574
<INVESTMENTS-MARKET> 46,383
<LOANS> 356,650
<ALLOWANCE> 3,965
<TOTAL-ASSETS> 510,976
<DEPOSITS> 438,138
<SHORT-TERM> 11,700
<LIABILITIES-OTHER> 5,418
<LONG-TERM> 9,958
<COMMON> 4,762
0
0
<OTHER-SE> 41,000
<TOTAL-LIABILITIES-AND-EQUITY> 510,976
<INTEREST-LOAN> 7,812
<INTEREST-INVEST> 1,770
<INTEREST-OTHER> 34
<INTEREST-TOTAL> 9,616
<INTEREST-DEPOSIT> 3,292
<INTEREST-EXPENSE> 3,638
<INTEREST-INCOME-NET> 5,978
<LOAN-LOSSES> 610
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,915
<INCOME-PRETAX> 3,160
<INCOME-PRE-EXTRAORDINARY> 3,160
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,054
<EPS-PRIMARY> 0.48
<EPS-DILUTED> 0.48
<YIELD-ACTUAL> 5.05
<LOANS-NON> 2,035
<LOANS-PAST> 42
<LOANS-TROUBLED> 573
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,653
<CHARGE-OFFS> 309
<RECOVERIES> 11
<ALLOWANCE-CLOSE> 3,965
<ALLOWANCE-DOMESTIC> 3,965
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 378
</TABLE>
