FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1995
/ / 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 0-17848
HUDSON CHARTERED BANCORP, INC.
(Exact name of registrant as specified in its charter)
__________New York_____________ 14-1668718____________
(State or other jurisdiction of (I.R.S. Employer)
incorporation of organization) Identification No.)
PO Box 310, Route 55, Lagrangeville, NY 12540
Address of principal executive offices) (Zip Code)
(914)471-1711
(Registrant`s telephone number, including area code)
____________________________________________________________________________
(Former name, former address and former fiscal year,
if changed since last report.)
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 such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ______
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
3,469,861 shares of Common Stock outstanding, par value $.80 per share, at
July 31, 1995.
<PAGE>
HUDSON CHARTERED BANCORP, INC. & SUBSIDIARIES
INDEX
Page Reference
PART I
Item 1 - Financial Statements
Condensed Consolidated Balance Sheets 1
Condensed Consolidated Statements
of Income & Expense 2
Condensed Consolidated Statements
of Cash Flows 3
Condensed Consolidated Statement
of Changes in Stockholders' Equity 4
Notes to Unaudited Condensed Consolidated
Financial Statements 5
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II - Other Information 20
Signatures 20
Part 1
Item 1: Financial information
<TABLE>
CONDENSED CONSOLIDATED BALANCE SHEETS Form 10-Q
HUDSON CHARTERED BANCORP, INC. AND SUBSIDIARIES
(dollars in thousands)
(Unaudited) June 30, December 31,
1995 1994
<S> <C> <C>
ASSETS
Cash and due from banks $ 28,808 $ 26,746
Federal funds sold 27,743 16,525
Total cash and cash equivalents 56,551 43,271
Securities (see Notes)
Available for sale 67,707 53,837
Held to maturity 87,333 92,974
Regulatory securities 1,877 914
Loans held for sale 11,360 95
Loans
Commercial and industrial 93,885 95,412
Consumer installment 56,680 50,135
Real estate - construction 11,031 6,417
Real estate - mortgage 256,079 277,593
Other loans 2,429 2,505
Total loans 420,104 432,062
Allowance for loan losses (8,499) (8,326)
Net loans 411,605 423,736
Premises and equipment, net 17,643 17,687
Accrued income 4,833 5,076
Other assets 9,394 8,387
TOTAL ASSETS $668,303 $645,977
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Demand deposits $124,440 $135,181
Money market accounts 69,036 85,989
NOW accounts 57,289 55,698
Savings accounts 195,218 175,153
Time deposits 162,429 128,049
Total deposits 608,412 580,070
Repurchase agreements 6,106
Notes payable 1,918 1,939
Other liabilities 2,760 5,324
TOTAL LIABILITIES 613,090 593,439
STOCKHOLDERS' EQUITY (see notes)
Preferred stock Series B, 7.25%,
convertible, cumulative 5,714 5,714
Common stock 2,769 2,730
Common paid-in capital 16,734 16,099
Retained earnings 31,016 29,353
Net unrealized securities losses (827) (1,144)
Employee stock ownership plan (193) (214)
TOTAL STOCKHOLDERS' EQUITY 55,213 52,538
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $668,303 $645,977
<FN>
<F1>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND EXPENSE FORM 10-Q
HUDSON CHARTERED BANCORP, INC. AND SUBSIDIARIES
(dollars in thousands, except per share data)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
6/30/95 6/30/94 6/30/95 6/30/94
<S> <C> <C> <C> <C>
Interest income:
Loans, including fees $ 10,066 $ 7,934 $ 19,660 $ 15,339
Federal funds sold 445 256 799 482
Taxable securities 1,642 1,724 3,257 3,302
Tax-exempt securities 505 522 1,028 1,034
Total interest income 12,658 10,436 24,744 20,157
Interest expense 5,483 3,455 10,410 6,717
Net interest income 7,175 6,981 14,334 13,440
Provision for loan loss 600 475 1,100 1,100
Net interest income after
provision for loan losses 6,575 6,506 13,234 12,340
Noninterest income:
Service charges and fees 906 881 1,741 1,718
Trust earnings 176 138 313 265
Gains on sales of securities, net 10 (9) 10 59
Gains on sales of loans, net 194 31 206 127
Other income 333 361 635 608
Total noninterest income 1,619 1,402 2,905 2,777
GROSS OPERATING INCOME 8,194 7,908 16,139 15,117
Noninterest expense:
Salaries and employee benefits 2,900 2,772 5,748 5,439
Net occupancy and equipment
expense 910 957 1,833 1,962
FDIC insurance 390 438 711 728
Stationary & supplies 241 162 453 315
Telephone 107 79 257 153
Other real estate owned 102 26 177 75
Merger related expense 310 250 310
Other expenses 1,246 1,022 2,344 2,012
Total noninterest expense 5,896 5,766 11,773 10,994
Income before income taxes 2,298 2,142 4,366 4,123
Income taxes 779 839 1,461 1,479
Net income $ 1,519 $ 1,303 $ 2,905 $ 2,644
Weighted average common shares
outstanding
Primary 3,504,586 3,405,520 3,488,692 3,394,769
Fully diluted 3,905,570 3,811,254 3,889,675 3,806,077
Per common share data:
Primary earnings $ .40 $ .35 $ .77 $ .72
Fully diluted earnings .39 .34 .75 .69
Cash dividends declared .15 .15 .30 .30
Book value outstanding
at period end 14.30 13.72
<FN>
<F1>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FORM 10-Q
HUDSON CHARTERED BANCORP, INC. AND SUBSIDIARIES
(dollars in thousands)
(Unaudited) Six months ended
6/30/95 6/30/94
OPERATING ACTIVITIES
<S> <C> <C> <C> <C>
Net income $ 2,905 $ 2,644
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 1,100 1,100
Depreciation and amortization 962 814
Amortization of security premiums and
accretion of discounts 198 529
Amortization of core deposit intangible 80 33
Realized gains on sales of securities and loans (216) (186)
Deferred income tax benefits (72) (270)
Increase in other assets, (695) (1,570)
Decrease in other liabilities (2,564) (406)
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,698 2,688
INVESTING ACTIVITIES
Proceeds from sales of securities available for sale 510 2,013
Proceeds from maturities of securities 16,052 38,357
Purchases of securities available for sale (23,966) (52,103)
Purchases of securities held to maturity (1,986) (1,741)
Sales of loans 18,961 8,065
Transfer of loans to available for sale (11,360)
Nt increase in loans (7,534) (33,898)
Purchases of premises and equipment (918) (796)
Proceeds from sale of OREO 150 _______
NET CASH USED BY INVESTING ACTIVITIES (10,091) (40,103)
FINANCING ACTIVITIES
Net increase in deposit accounts 28,342 25,305
Increase due to assumption/acquisition of deposits 14,356
Proceeds from borrowings 1,725
Repayments on borrowings (6,107) (262)
Proceeds from issuance of stock 674 448
Redemption of Series A preferred stock (805)
Cash dividends (1,236) (1,082)
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 21,673 39,685
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 13,280 2,270
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 43,271 52,413
CASH AND CASH EQUIVALENTS AT END OF PERIOD $56,551 $54,683
CASH PAID FOR:
Interest $10,329 $ 6,689
Taxes 1,620 1,695
NON-CASH ITEMS
Transfer from loans to OREO $ 1,171 $ 115
Sales of OREO properties funded by loans 88
Net change in unrealized gains (losses) recorded
on securities available for sale 544 (5,758)
Change in deferred taxes on net unrealized gains
(losses) recorded on securities available for sale (227) 2,230
<FN>
<F1>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
HUDSON CHARTERED BANCORP, INC. AND SUBSIDIARIES
(dollars in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Net
Unrealized
Common Securities
Preferred Common Paid-In Retained Gains
Stock Stock Capital Earnings (Losses) ESOP Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance January 1, 1995 $5,714 $2,730 $16,099 $29,353 ($1,144) ($214) $52,538
Net Income 2,905 2,905
Dividends declared on Preferred Stock ( 207) ( 207)
Dividends declared on Common Stock ( 1,035) ( 1,035)
($0.30 per share)
Common Stock issued under the Dividend
Investment and Stock Purchase Plan, 14 278 292
17,788 shares
Payments on ESOP borrowings 21 21
Stock options exercised:
18,258 shares @ $12.625
3,334 shares @ $11.125
9,140 shares @ $12.50 25 357 382
Market value adjustment on Securities
Available for Sale, net 317 317
Balance at June 30, 1995 $5,714 $2,769 $16,734 $31,016 ( $827) ($193) $55,213
<FN>
<F1>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
FORM 10-Q
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS HUDSON CHARTERED
BANCORP, INC. AND SUBSIDIARIES
Merger
Hudson Chartered Bancorp, Inc. was formed effective September 30, 1994 in
connection with the merger of Fishkill National Corporation and Community
Bancorp, Inc. ("Merger"). All 1994 comparative amounts reflect the pooling of
interests accounting for the merger. Also in accordance with this method,
merger related costs are expensed as incurred.
Basis of Presentation
As permitted by the Securities and Exchange Commission, the accompanying
unaudited and condensed consolidated financial statements and notes have been
condensed and, therefore, do not contain all disclosures required by generally
accepted accounting principles. See the notes to the financial statements for
the year ended December 31, 1994.
In the opinion of the Company, the accompanying unaudited condensed consolidated
financial statements contain adjustments (consisting only of normal recurring
accruals) necessary to present fairly the consolidated financial position as of
June 30, 1995 and the consolidated results of operations for the three and six
months periods ended June 30, 1995 and 1994 and the consolidated cash flows
for the six months ended June 30, 1995 and 1994.
The results of operations for the six months ended June 30, 1995 are not
necessarily indicative of the results to be expected for the full year.
The Company's consolidated revenues are primarily derived from its commercial
banking subsidiary, The First National Bank of the Hudson Valley (the "Bank").
At June 30, 1995 the Bank had total assets of $662,735,000 and total
stockholder's equity of $48,902,000, compared, respectively, to $640,815,000 and
$47,108,000 in total assets and total stockholder's equity at December 31,
1994. Net income of the Bank included in consolidated equity was $2,966,000 and
$2,694,000 for the six months ended June 30, 1995 and 1994, respectively.
Material intercompany items and transactions have been eliminated in
consolidation.
Accounting for Impairment of a Loan
As of January 1, 1995, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 114, "Accounting for Impairment of a Loan," as amended by
SFAS No. 118, "Accounting by Creditors for Impairment of a Loan-Income
Recognition and Disclosures. This statement requires recognition of the
impairment of a loan when it is probable that either principal and/or interest
are not collectible in accordance with the terms of the loan agreement.
Measurement of the impairment is based on the present value of expected cash
flows discounted at the loan's effective rate or, as a practical expedient, at
the loan's observable market price or the fair value of the collateral.
Implementation of SFAS 114 did not have a material effect on the financial
statements. Prior to 1995, the allowance for loan losses related to impaired
loans was based on undiscounted cash flows or the fair value of the collateral
for collateral dependent loans. The Company recognizes interest income on
impaired loans primarily on the cash basis method.
At June 30, 1995, the recorded investment in loans that are considered to be
impaired under SFAS 114 was $4.1 million (all of which loans were in nonaccrual
status). Each impaired loan has a related allowance for credit losses
determined in accordance with bank policy. The total allowance for loan losses
related to these impaired loans was $800,000 as of June 30, 1995. The average
recorded investment in impaired loans for the period ended June 30, 1995 was
approximately $4.5 million. For the period ending June 30, 1995, interest
income recognized by the Company on impaired loans was not material.
Pending Pronouncement
In May 1995, the Financial Accounting Standards Board issued Statement No. 122
"Accounting for Mortgage Servicing Rights" (SFAS 122). Such statement allows
banks to report originated mortgage servicing rights as assets on the balance
sheet. Such asset would be reported as the present value of estimated future
net cash flows related to servicing mortgages for secondary market investors.
The Company has not, at this point, elected early adoption of SFAS No. 122 and,
accordingly, has not recorded an asset related to originated mortgage servicing
rights. The Company has sold $18.9 Million in loans in 1995 into the secondary
market and retained servicing rights related to such loans at approximately .25%
per annum. The servicing income related to such loans sold will be recorded in
the statement of income and expense as earned. Had the Company recorded the
value of such servicing rights as an asset, other income would have increased in
1995 for the value of such rights. However, future income related to the
amounts recorded would be reduced. SFAS No. 122 must be implemented by
January 1, 1996 and can only be applied on a prospective basis. In addition,
the value of such servicing rights, when recorded, must be re-evaluated for
impairment on a quarterly basis and a valuation reserve must be established when
the then fair market value of such rights recorded is lower than the recorded
amounts.
<TABLE>
Securities
<CAPTION>
Securities consist of the following (in thousands):
At June 30, 1995 At December 31, 1994
Carrying Amortized Fair Carrying Amortized Fair
Amount Cost Value Amount Cost Value
<S> <C> <C> <C> <C> <C> <C>
US Treasury:
Available for Sale $19,838 $19,834 $19,838 $15,079 $15,187 $15,079
Held to Maturity 13,749 13,814 13,948 13,751 13,826 13,358
US Gov't Agencies:
Available for Sale 35,632 35,641 35,632 27,716 27,942 27,716
Held to Maturity 32,517 33,610 3,395 33,391 34,616 32,468
Obligations of States and
Political Subdivisions:
Available for Sale 4,605 4,608 4,605 1,412 1,470 1,412
Held to Maturity 41,042 41,222 40,934 45,807 46,005 44,941
Other Securities:
Available for Sale 7,632 7,708 7,632 9,630 9,707 9,630
Held to Maturity 25 25 25 25 25 25
Regulatory Securities 1,877 1,877 1,877 914 914 914
Total Securities $156,917 $158,339 $157,886 $147,725 $149,692 $145,543
Total Available for Sale $67,707 $67,791 $67,707 $53,837 $54,306 $53,837
Total Held to Maturity 87,333 88,671 88,302 92,974 94,472 90,792
Regulatory Securities 1,877 1,877 1,877 914 914 914
Total Securities $156,917 $158,339 $157,886 $147,725 $149,692 $145,543
</TABLE>
At June 30, 1995 the net unrealized loss on Securities Available for Sale
(net of tax effect of $34,000) included as a separate component of
stockholders' equity was $50,000.
As a result of the merger in 1994, certain securities classified as Available
for Sale when acquired were transferred to the Held to Maturity portfolio. The
securities were transferred at their estimated fair value of $71,468,000 on the
dates transferred. The difference between the amortized cost and fair value on
the transfer date aggregated $(1,637,000) or $(953,000) after tax. The
difference is being amortized over the remaining term of the securities. The
remaining unamortized loss on June 30, 1995 (net of tax effect of $555,000)
included in the separate component of stockholders' equity was $777,000.
<PAGE>
<TABLE>
Earnings per common share
Primary earnings per common share is computed as follows (in thousands, except per share data):
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Weighted average common shares outstanding 3,459 3,364 3,440 3,359
Net effect of dilutive stock options at
average market price 46 41 49 35
Total "primary" shares 3,505 3,405 3,489 3,394
Net Income $1,519 $1,303 $2,905 $2,644
Less preferred stock dividends declared 103 104 207 208
Net income applicable to common stock $1,416 $1,199 $2,698 $2,436
"Primary" earnings per common share $0.40 0.35 $0.77 $0.72
</TABLE>
<TABLE>
Fully diluted earnings per common share is computed as follows (in thousands, except per share data):
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Weighted average common shares outstanding 3,459 3,364 3,440 3,359
Net effect of dilutive stock options 46 43 49 43
Assumed conversion of Series B,
preferred stock 401 404 401 404
Total "fully diluted" shares 3,906 3,811 3,890 3,806
Net income applicable to common stock $1,519 $1,303 $2,905 $2,644
"Fully diluted" earnings per common share $0.39 $0.34 $0.75 $0.69
</TABLE>
The net dilutive effect of stock options outstanding for primary earnings per
share was based on the Treasury stock method using average market price.
The net dilutive effect of stock options outstanding for fully diluted earnings
per share was based on the Treasury stock method using the greater of the
quarter end or average market price.
<PAGE>
Stockholders' Equity
The Company has authorized 5,000,000 shares of preferred stock, $.01 par value,
which the Board of Directors is authorized to divide into series. The Board is
also authorized to fix the rights and preferences of any series so
established. The Series A and Series B described below are a portion of the
shares authorized.
On January 15, 1994, the Company redeemed all the issued and outstanding shares
of its 10% cumulative perpetual preferred stock, Series A, at its original
issue and liquidation price of $100 per share. This transaction reduced the
equity capital of the Company by $805,000.
The cumulative convertible perpetual preferred stock, Series B, is convertible
at the option of the holder into shares of common stock at $14.25 per share of
common stock, approximately 0.7 shares of common stock for each share of
Series B. The conversion price is subject to adjustment upon the occurrence of
certain events. The Series B is redeemable at $10 per share (the original issue
and liquidation price) at the Company's option prior to January 1, 1998, if the
market price of the Company's common stock has been at least 140% of the
conversion price for 20 consecutive trading days at any time during the
period. On or after January 1, 1998, the Series B is redeemable at the
Company's option at prices declining annually from $10.40 per share in 1998 to
$10.00 per share after 2002. Of the 575,000 authorized shares of Series B
preferred, 571,401 shares were outstanding at June 30, 1995 and December 31,
1994. Cumulative cash dividends are payable quarterly at the rate of 7.25%
per year on the original issue price of $10 per share. Quarterly dividends of
$.18125 per share were declared on Series B preferred stock in 1995 and 1994 by
the Company.
Shares of all the Company's preferred stock rank prior to common stock as to
dividends and liquidation. Except for a limited right of each series of
preferred stock to elect two Directors if full cumulative dividends have not
been paid for six quarterly dividend periods, and a right to vote as a class on
amendments to the Company's Certificate of Incorporation which could adversely
affect the rights of the preferred shareholder, the preferred shareholders are
not entitled to vote.
Authorized common stock, $.80 per value, is 20,000,000 shares. Issued and
outstanding shares at June 30, 1995 and December 31, 1994, were 3,460,450 and
3,411,929, respectively.
On July 27, 1995, the Company announced that its Board of Directors authorized
repurchases of up to 100,000 shares of common stock, (including equivalent
shares of its convertible preferred stock) or approximately 2.9% of outstanding
shares. Such shares will be held as treasury stock. The acquired shares will
be used in connection with employee and shareholder stock plans. If the
Company were to repurchase all of the 100,000 shares authorized, the total
reduction to stockholders' equity would be approximately $1,575,000 to
$1,700,000 based upon current market share prices. The Company believes that
such purchases will have a modest positive effect on earnings per share.
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Financial Condition
The Company's financial condition on June 30, 1995 reflected total assets of
$664,298,000, an increase of $18,321,000 or 2.8% over total assets at
December 31, 1994. Net loans (not held for sale) decreased some $12,131,000
or 2.9 % to $411,605,000 at June 30, 1995. However, in the second quarter the
Company sold certain long term fixed rate residential mortgages of which
$6,508,000 were funded at June 30, 1995 and $11,360,000 were reclassified as
loans held for sale pending funding. The Company sold these loans to reduce its
exposure to future increases in interest rates. Exclusive of the loan sales,
net loans increased $7,534,000. Cash and cash equivalents increased
$13,280,000 or 30.7% to $56,551,000 at June 30, 1995. Additionally, aggregate
securities investments were $156,917,000 at June 30, 1995, an increase of
$9,192,000 or 6.2% from the level at December 31, 1994. These increases were
funded by an increase in deposits of $28,342,000 or 4.9% from December 31, 1994
to $608,412,000 at June 30,1995. All repurchase agreements outstanding at
December 31, 1994 totaling $6,106,000 were repaid during the first quarter.
Other assets increased by $764,000. Of this increase, approximately $800,000 is
related to the net transfer, due to foreclosure, of certain non-accrual loans to
"other real estate owned".
Of the changes in loans, commercial loans decreased $1,527,000 or 1.6%, and real
estate loans decreased $21,514,000 or 7.8%, primarily related to the sale of
fixed rate residential mortgages noted above. Construction loans increased
$4,614,000 or 71.9% reflecting the seasonal period of new home building.
Consumer installment loans increased $6,545,000 or 13.1% as the Bank
continued to generate automobile loans through its network of local automobile
dealerships. Due to the competitive nature of this type of financing, the
yields may be somewhat lower than other consumer loan products. Indirect
automobile financing can carry a higher risk of loss than direct financing.
Such risk is taken into account in management's evaluation of the adequacy of
the Allowance for Loan Losses. The Company also maintains enhanced credit
policies and procedures on this portfolio.
Total deposits increased $28,342,000 or 4.9% in the first three months of 1995
to $608,412,000. Of this amount, total Public (Municipal) Funds decreased
$3,585,000 or 7.8% to $42,148,000, and total non-public funds increased
$31,927,000 or 6.0% to $566,264,000. The following tables summarize the net
changes in public fund and non-public fund deposits from December 31, 1994 to
June 30, 1995 (in thousands):
<PAGE>
<TABLE>
Public Funds
<CAPTION>
Balance Balance Net Percent Change
12/31/94 6/30/95 Change over '94
<S> <C> <C> <C> <C>
Demand accounts $ 3,484 $ 3,037 $ (447) (12.83)%
NOW accounts 10,390 14,034 3,644 35.07
Money market accounts 20,551 15,546 (5,005) (24.35)
Savings accounts 1,929 3,070 1,141 59.15
Time deposits 9,379 6,461 (2,918) (31.11)
Total public deposits $45,733 $42,148 $(3,585) (7.84)%
<FN>
<F1>
The decrease in public funds is primarily attributable to declines in school
district balances. Tax receipts for school districts occur regularly in the
third quarter of each year.
</FN>
</TABLE>
<TABLE>
Non Public Funds
<CAPTION>
Balance Balance Net Percent Change
12/31/94 6/30/95 Change over '94
<S> <C> <C> <C> <C>
Demand accounts $131,697 $121,403 ($10,294) (7.82)%
NOW accounts 45,308 43,255 (2,053) (4.53)
Money market accounts 65,438 53,490 (11,948) (18.26)
Savings accounts 173,224 192,148 18,924 10.92
Time deposits 118,670 155,968 37,298 31.43
Total non public deposits $534,337 $566,264 $31,927 5.98%
</TABLE>
The increase in nonpublic funds is principally attributable to promotion of the
Bank's Merit Plus savings product (a package of free services with a savings
account interest rate related to the Federal Reserve discount rate) and
special promotion of certain certificates of deposit products. These
promotions achieved their growth targets and, as a result, were discontinued in
May 1995. These increases offset declines in demand deposits and Money Market
deposit accounts. Management believes the declines in demand deposits and
Money Market accounts principally represents the migration of these balances to
higher interest rate products (time and savings accounts). While these shifts
in deposits will raise the cost of interest bearing liabilities, the impact on
the Company's overall average cost of funds is mitigated by the significant
level of the Company's demand deposit base.
Total stockholders' equity showed an increase of $2,675,000 or 5.1%. This
increase is due to net income of $2,905,000 for the six months ended
June 30, 1995 and additional common stock of $674,000 issued through the
dividend reinvestment plan and the exercise of stock options. Further, the
decline in interest rates in the first quarter produced an increase in the after
tax market value of Available For Sale securities of $317,000. These increases
in stockholders' equity were partially offset by dividends declared to
preferred and common shareholders' of $207,000 and $1,035,000, respectively.
<PAGE>
Results of Operations
On a tax equivalent basis, interest income for the six months ended June 30,
1995 increased $4,587,000 compared to the same period in 1994, while interest
expense increased by $3,693,000. This resulted in an increase in net
interest income of $894,000. Provision for loan losses remained constant at
$1,100,000 through June 30, 1995 and 1994. Non-interest income increased by
$128,000 to $2,905,000 for the six months ended June 30, 1995. These increases
in income were offset by $779,000 of expense growth, of which approximately
$500,000 was associated with new branches and the remainder due to general
growth of the Company. As a result, net income increased by $261,000 or 9.9%.
Primary earnings per share increased $.05 in the first six months of 1995 over
1994, and fully diluted earnings per share increased $.06 to $.75 in the same
periods of 1995 vs. 1994.
<TABLE>
Net income and earnings per common share data is presented in the following
table:
<CAPTION>
Three months ended Six months ended
6/30/95 6/30/94 6/30/95 6/30/94
<S> <C> <C> <C> <C>
Net income (in thousands) $1,519 $1,303 $2,905 $2,644
Per common share:
Primary earnings $ .40 $ .35 $ .77 $ .72
Fully diluted earnings $ .39 $ .34 $ .75 $ .69
</TABLE>
<TABLE>
The Company's annualized return on assets, return on equity and return on
common equity for the six months ended June 30, 1995 and 1994, are detailed
in the table below:
<CAPTION>
Three months ended Six months ended
6/30/95 6/30/94 6/30/95 6/30/94
<S> <C> <C> <C> <C>
Return on assets 0.92% 0.83% 0.89% 0.86%
Return on stockholders' equity 11.13 10.12 10.78 10.00
Return on common equity 11.59 10.46 11.19 10.33
</TABLE>
Interest income
The Company experienced a net increase in average loans of $56,920,000 for the
six months ended June 30, 1995 compared to June 30, 1994. These assets were
principally funded by an increase in average deposits of $42,355,000 for the six
month period ended 1995 compared to 1994, of which $32,442,000 were interest-
bearing and $9,913,000 were non-interest-bearing.
Average yields on interest earning assets increased 1.11% to 8.39% in the first
half of 1995 vs. 1994 and the average cost of interest-bearing liabilities
increased 1.33% to 4.37% in the same period. However, because of the relatively
high level of demand deposits, the average total cost of all liabilities
increased by only 1.05% to 3.46%. Net interest margins on a tax equivalent
basis increased .02% to 4.93% for the six months ended June 30, 1995 compared to
the same period in 1994 (primarily due to the increase in demand deposits).
The increase in average earnings assets of $33,762,000 contributed $911,000 in
additional net interest income in the first quarter 1995 compared to the same
period in 1994. Overall increases in the Company's cost of interest bearing
deposits over increased yields on interest earning assets reduced net interest
income by $17,000.
The net effect was that net interest income before provisions for loan losses
increased to $14,334,000 for the six months ended June 30, 1995 compared to
$13,440,000 for the comparable period in 1994, or an increase of
$894,000 (6.7%).
<PAGE>
<TABLE>
The table below sets forth the consolidated average balance sheets for the
Company for the periods included. Also set forth is information regarding
weighted average yields on interest-earning assets and weighted average rates
paid on interest-bearing Liabilities (on a tax equivalent basis):
<CAPTION>
(Six Months Ended June 30,)
1995 1994
Average Yield Average Yield/
Balance Interest Cost Balance Interest Cost
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Interest-earning assets:
Loans(1) $432,637 $19,660 9.09% $375,717 $15,339 8.19%
Taxable Securities 98,783 3,257 6.59 117,852 3,302 5.60
Tax-exempt Securities (2) 43,563 1,558 7.15 47,848 1,567 6.55
Federal Funds Sold 27,469 799 5.82 27,273 482 3.53
Total Interest-Earning Assets 602,452 25,274 8.39 568,690 20,690 7.28
Noninterest Earning Assets:
Cash & Due from Banks 29,606 26,244
Premises & Equipment 17,845 14,039
Other Assets 14,049 9,474
Allowance for Loan Loss (8,487) (7,712)
Total Assets $655,465 $609,411
LIABILITIES AND
STOCKHOLDERS' EQUITY:
Interest-Bearing Liabilities:
Savings Deposits $184,154 3,995 4.34% $157,932 2,239 2.84%
NOW Accounts 53,907 565 2.10 55,455 481 1.73
Money Market Accounts 79,375 1,429 3.60 104,533 1,391 2.66
Certificates over $100,000 26,164 745 5.69 18,646 420 4.50
Other Time Deposits 130,127 3,594 5.52 102,782 2,120 4.13
Borrowed Funds 2,329 82 7.04 2,355 66 5.61
Total Interest-Bearing Liabilities 476,056 10,410 4.37 443,640 6,717 3.04
Noninterest-Bearing Liabilities:
Demand Deposits 121,853 111,940
Other 3,638 2,868
Total Nonlnterest-Bearing Liabilities 125,491 3.46 114,808 2.41
Stockholders' Equity 53,918 52,900
Total Liabilities and
Stockholders' Equity $655,465 $609,411
Net interest margin 14,864 4.93% 13,973 4.91%
Ratio of Average Interest-Earning Assets
to Average Interest-Bearing Liabilities 126.66% 128.45%
Less Tax Equivalent Adjustments (530) (533)
Net Interest income $14,334 4.76% $13,440 4.74%
<FN>
<F1>
(1) Average Balances Include NonAccrual Loans
<FN>
<F2>
(2) Yields on Tax-Exempt Securities Based on Federal Tax Rate of 34%
</FN>
</TABLE>
<PAGE>
<TABLE>
Rate/Volume Analysis
(In Thousands)
<CAPTION>
Six Months Ended June 30,
1995 vs. 1994
Increase (Decrease) due to
Volume Rate Net
<S> <C> <C> <C>
Interest Income:
Loans $2,325 $1,996 $4,321
Taxable investment securities (534) 489 (45)
Tax-exempt investment securities (140) 131 (9)
Federal funds sold 3 14 317
Total interest income 1,654 2,930 4,584
Interest expense:
Savings deposits 372 1,384 1,756
NOW/accounts (13) 97 84
Money market accounts (335) 373 38
Certificates over $100,000 169 156 325
Other time 565 909 1,474
Borrowed funds (12) 28 16
Total interest expense 746 2,947 3,693
Net interest margin 908 (17) 891
Less tax equivalent affect 3 - 3
Net interest income $911 $(17) $894
</TABLE>
<PAGE>
Provision for loan losses and credit quality
The loan loss provision for both of the six month periods ended June 30, 1995
and 1994 was $1,100,000. Total net charge-offs for the six months
of 1995 were $927,000, compared to $539,000 for the same period in 1994.
Total nonperforming assets have decreased from $6,749,000 on June 30, 1994 to
$6,474,000 on June 30, 1995. Nonperforming assets were up slightly from
$6,269,000 at December 31, 1994, principally in the residential mortgage
portfolio.
Provisions for loan losses are based on management's assessment of risk of loss
inherent in the loan portfolio and as such reflect both trends in local
economic conditions and the categorization of the credit quality of
individual loans. Such assessment is ongoing, and may not directly reflect the
charge-offs taken in any accounting period, although the trend in charge-offs is
an important element in the evaluation of the adequacy of the allowance for loan
losses. Provisions have tended to increase in periods when the level of
charge-offs might indicate a deteriorating condition in the loan portfolio.
The ratio of the allowance for loan losses to total nonperforming loans is at
202% vs. 151% at June 30, 1994.
Although recent economic statistical data indicates that local economic
conditions may have stabilized, the local economy is not performing as well as
other major regions of the nation. Management, therefore, continues to closely
monitor local economic conditions relative to the long term impact of IBM's
downsizing and the significant vacancy rates of commercial office and industrial
space. Management believes that the allowance for loan losses is adequate to
cover the risk of loss inherent in the portfolio but no assurance can be given
that the local economy may not be unsettled by future events. Such developments
would be expected to adversely effect the financial performance of the Company.
<TABLE>
The following table shows, at the dates indicated, the allocation of the
allowance for loan losses, by category, and the percentage of loans in each
category to total gross loans (dollars in thousands):
<CAPTION>
June 30, December 31,
1995 1994 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at end of % of total % of total % of total % of total % of total
period applicable to: Amount loans Amount loans Amount loans Amount loans Amount loans
Commercial &
industrial $2,455 14.56% $2,716 22.73% $2,010 22.10% $2,520 19.10% $2,606 17.30%
Consumer & other 1,301 3.89% 1,172 11.17% 1,363 12.20% 881 9.50% 1,256 11.30%
Real estate -
construction 2.56% 1.00% 1.50% 1.00% 2.70%
Real estate -
mortgage 4,187 68.99% 2,772 65.10% 4,100 64.20% 3,155 70.40% 1,608 68.70%
Unallocated 556 1,292 853 766 324
Total $8,499 100.00% $7,952 100.00% $8,326 100.00% $7,332 100.00% $5,794 100.00%
</TABLE>
<PAGE>
<TABLE>
The table below summarizes the Company's loan loss experience for the periods indicated:
For the six months
ended June 30, For the year ended December 31,
1995 1994 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Balance at beginning of period $8,326 $7,322 $7,322 $5,794 $4,534
Chargeoffs:
Commercial 210 135 350 435 682
Installment 353 87 292 449 856
Real estate 470 455 1,059 1,103 405
Total charge-offs 1,033 677 1,701 1,987 1,943
Recoveries
Commercial 13 55 63 124 91
Installment 67 64 153 123 211
Real estate 26 19 20 2 1
Total recoveries 106 138 236 249 303
Net charge-offs (927) (539) (1,465) (1,738) (1,640)
Provision for Loan Losses 1,100 1,100 2,400 3,266 2,900
Transfers, other * - 69 69 - -
Balance at end of period $8,499 $7,952 $8,326 $7,322 $5,794
Ratio of net charge-offs to average
loans outstanding during the period
(annualized) .43% .29% .37% .49% .44%
Allowance for loan losses as a
percent of period-end loans 1.97% 2.02% 1.93% 2.01% 1.61%
Allowance as a percent of non-
performing loans 202% 151% 163% 123% 105%
Nonperforming loans and OREO
to total loans and OREO 1.42% 1.71% 1.45% 1.97% 1.74%
<FN>
<F1>
* An adjustment of $69,000 was transferred to the allowance for loan losses
as a result of the acquisition of loans of the First National Bank of
Amenia.
</FN>
</TABLE>
<PAGE>
<TABLE>
The table below summarizes the Company's nonperforming assets and restructured
loans for the periods indicated (dollars in thousands):
<CAPTION>
at June 30, at December 31,
1995 1994 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Nonaccrual loans: (1)
Real estate mortgage $3,662 $4,141 $3,866 $4,759 $4,237
Commercial & Industrial 192 323 200 331 146
Consumer & other 201 43 39 48 30
Total nonaccrual loans 4,055 4,507 4,105 5,138 4,413
Loans 90 days or more past due
and still accruing:
Real estate mortgage 61 141 620 313 349
Commercial & industrial 48 133 84 - 80
Consumer & other 10 16 191 16 20
Total 90 days past due accruing 119 290 895 329 449
Restructured - real estate 351 457 119 457 625
Total non-performing and
restructured loans 4,525 5,254 5,119 5,924 5,487
Percent of total loans 1.05% 1.34% 1.18% 1.63% 1.51%
Other real estate owned(2) 1,949 1,495 1,150 1,072 831
Total non-performing assets $6,474 $6,749 $6,269 $6,996 $6,318
<FN>
<F1>
(1) Nonaccrual status denotes loans on which, in the opinion of management,
the collection of interest is unlikely, or loans that meet other nonaccrual
criteria as established by regulatory authorities. Payments received on
loans classified as nonaccrual are either applied to the outstanding
principal balance or recorded as interest income, depending upon
management's assessment of the ultimate collectibility of the loan.
<F2>
(2) Net of allowance of $192,000 at June 30, 1994 and $250,000 at
December 31, 1993.
</FN>
</TABLE>
Other real estate owned totals $1,949,000 at June 30, 1995 and includes
properties acquired through foreclosure: two parcels of land, two residences
and three non-farm nonresidential properties. Management believes that the
carrying values of such properties adequately reflect the risk of loss in their
orderly disposal. At June 30, 1995, the Company had approximately $10,000,000
in loans requiring special attention, in addition to the nonperforming loans and
other nonperforming assets noted above. Such loans are being regularly
monitored to assess impairment of the borrower's ability to comply with
repayment terms. Virtually all such loans are collateralized by real estate.
In the opinion of management, the risk of loss on these loans is adequately
provided for in the Company's allowance for loan losses.
<PAGE>
Noninterest Income
Noninterest income increased $128,000 in the first half of 1995 to $2,905,000
compared to the same period of 1994. The level of service charges and fee
income remained relatively unchanged. Service charge schedules were revised in
connection with the merger. Reductions to customer service charges were
implemented immediately after the merger while increases to certain service
charges were phased in starting in late February 1995. This led to an increase
of $71,000 in the second quarter of 1995 over the first quarter of 1995.
Securities gains during the first half of 1995 amounted to $10,000 compared to
$59,000 in the same period of 1994.
Gains on sales of loans increased in 1995 to $206,000, principally as a result
of gains recorded of $192,000 from the sale of approximately $18,000,000 of
previously originated mortgages into the secondary market. These loans were
sold to reduce the Company's holdings of long-term fixed rate assets.
Other noninterest income increased by $27,000 primarily due to a $65,000
increase in incentives received with the sale of travelers checks which was
offset by decreases in annuity sales income of $104,000 primarily during the
second quarter of 1995.
Other Expenses
Salaries and employee benefits increased $309,000. This increase is due to
staffing increases related to the five new branches opened in 1994 and 1995 in
Amenia, Millerton, Town of Newburgh and the Town of Poughkeepsie and
approximately $50,000 in severance costs during the second quarter of 1995.
Occupancy and equipment expense declined by $129,000 as of June 30, 1995. This
decline is due to the disposal of buildings occupied by the banks prior to the
merger and rental income of $136,000 on the Company's new office building. This
decrease was partially offset by the costs associated with the new facilities
of approximately $150,000.
Supplies expense increased by $138,000 to $453,000 for the first half of 1995
vs. 1994 reflecting new forms related to combining the bank's products and the
additional expense related to the new branches which were not in full operation
in 1994.
Telephone expense increased in the six months ended June 30, 1995 from $153,000
to $257,000 as a result of customer use of "800 number" services, new branches
and the additional long distance expenses associated with a wider service area.
Of this $104,000 increase, $74,000 relates to the first quarter of 1995.
Other real estate owned expense increased $102,000 to $177,000 for the six
months ended June 30, 1995 as a result of the carrying and disposal costs
associated with additional properties obtained through foreclosure.
Other expenses increased $332,000 to $2,344,000 for the first half of 1995
compared to the same period of 1994. This increase related primarily to the
increased size of the Company, consulting expenses, and the costs associated
with promotions of deposit products and new branch locations in Millerton,
Town of Newburgh and Town of Poughkeepsie. In May, the Company hired
A. T. Hudson, a consulting firm specializing in management processes. The
total contract is approximately $300,000 of which $100,000 was expensed in the
second quarter of 1995. It is anticipated that such investment will yield
annual running salary and benefit savings well in excess of the contract cost.
Full implementation is expected in the latter half of 1995. In addition, the
Company recorded approximately $150,000 in consulting expenses related to the
merger of its data processing systems.
In the first quarter of 1995, the Company established a provision for further
potential merger expenses of $250,000 related to finalizing the conversion of
its data processing systems. In June of 1994, $310,000 was recorded in
connection with expenses incurred toward the Merger. During the balance of the
year, additional resources will be focused on improving efficiencies and
expanding the capabilities of the Company's banking operations. The Company
expects further increases in expenses in connection with these initiatives.
Pretax income, therefore, rose by $243,000 (5.9%) from $4,123,000 to $4,366,000
for the six months ended June 30, 1994 and 1995, respectively.
Income tax expense declined $18,000 despite the increase in pretax income noted
above due to the effect of the 1994 merger related expenses ($310,000) which
were not tax deductible. This increased tax expense by approximately $130,000
in 1994. The Company's effective tax rate was 33.5% and 35.9% for the six
months ended June 30, 1995 and 1994, respectively.
Three months ended June 30, 1995 vs. June 30, 1994
Net interest income increased $194,000 or 2.8% for the three months ended
June 30, 1995 compared to 1994, primarily due to the overall growth the
Company has experienced over the past year.
Provisions for loan losses increased $125,000 or 26.3% due to management's
assessment of the amounts necessary to maintain an adequate allowance for
possible loan losses.
Other income increased $217,000 to $1,619,000 for the three months ended
June 30, 1995, primarily as a result of the increased gains recorded on sales
of long term fixed rate loans, over the three months ended June 30, 1994.
Additionally, service charges increased $25,000 or 2.8% and trust earnings
increased $38,000 or 27.5% in the three months ended June 30, 1995 compared to
1994. These increased were offset by a $28,000 decrease in other noninterest
income primarily due to declines of annuity sales.
Noninterest expense increased $130,000 to $5,896,000 for the three months ended
June 30, 1995 compared to June 30, 1994. Of this amount, salaries and benefits
increased by $128,000 over this period due to severances of $50,000 and staff
increases associated with new branch facilities opened in late 1994 and early
1995. Occupancy expense declined by $47,000 as rental income and closed
duplicate failities more than offset the costs of the new branch facilities.
Stationary and supplies increased $79,000 in the second quarter of 1995 compared
to the same period of 1994 due to the general growth of the Company and the
continuing costs associated with new forms being prepared for combining the
Bank's products.
Other real estate owned expense increased $76,000 to $102,000 in the three
months ended June 30, 1995, primarily due to writedowns on properties arising
from periodic reevaluation of carrying values.
Merger related expenses incurred in the second quarter of 1994 relate to
pre-merger expenses and were nonrecurring in the second quarter of 1995.
Other noninterest expenses increased $224,000 of which $100,000 relates to the
A. T. Hudson contract and $150,000 relates to the computer consulting
expenses noted earlier.
Although pretax income increased $156,000 or 7.3% for the three months ended
June 30, 1995 compared to the same period of 1994, income taxes declined by
$60,000. In 1994, $310,000 of merger related expenses were not tax deductible,
thereby increasing tax expense by approximately $130,000. Had these expenses
been deductible, income tax expense would have increased approximately
$70,000 (an amount proportional to the increase in pretax income). Income after
taxes for the second quarter was $1,519,000 compared to $1,303,000 for the
comparable period in 1994.
Asset/Liability Management
Management believes the Company's ability to plan for changes in interest rates
is a significant profitability factor. The Company's primary objective in
managing interest rate sensitivity is to maintain a broadly balanced position
between interest sensitive assets and liabilities in order to minimize the
impact of significant interest rate fluctuations. The historical level of
demand deposits approximately 20% of total deposits) helps to mitigate increases
in interest rates and reduces the average cost of all liabilities to a level
significantly below the average cost of interest-bearing liabilities.
<TABLE>
The following chart outlines the interest rate sensitive assets and liabilities
of the Company:
<CAPTION>
subtotal greater
3 months 4 months within one yr. than
Maturity or less to one yr. one yr. to 5 yrs. five yrs. Total
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets(1) $295,154 $121,268 $416,422 $159,899 $31,510 $607,831
Interest-bearing liabilities 169,547 268,340 437,887 48,003 - 485,890
Interest sensitivity gap $125,607 $(147,072) $(21,465) $111,896 $31,510 $121,941(2)
Percent of earning assets 20.7% (24.2%) (3.5%) 18.4% 5.2% 20.1%
<FN>
<F1>
(1) Does not include loans in non-accrual status or net unrealized losses
recorded on "available for sale" securities as of June 30, 1995. Fixed rate
loans are recorded within interest-earning assets by contractual maturity,
adjusted for amortization. Fixed rate mortgage backed securities are
recorded based upon estimated prepayment rates experienced during the past
twelve months.
<F2>
(2) Non-interest bearing deposit liabilities were approximately $124,440,000 at
June 30, 1995.
</FN>
</TABLE>
<PAGE>
Interest sensitive assets that reprice in less than three months are primarily
prime rate adjustable loans, federal funds sold and floating rate securities.
Interest sensitive assets that reprice or mature with maturities in excess of
three months are loans and securities. Assets that reprice greater than five
years are primarily residential mortgages. The repricing of fixed rate assets
has been presented based upon contractual maturity, adjusted for scheduled
amortization, but does not reflect potential prepayments. Interest sensitive
liabilities are primarily money market rate-sensitive deposits in the three
month or less category. Certificates of deposit are shown by contractual
maturity. Savings and NOW accounts have been allocated for the purposes of this
table to the four months to one year category. Although rates on these types of
accounts have recently changed more frequently than in the past, such rates
still regularly lag changes in money market rates. The relative increase in
rates paid on these deposits has been greater than the increase in yields in
the Company's interest earning assets over the past twelve months. This had
a negative effect on net interest income in the six months ended
June 30, 1995 compared to the same period of 1994. If increases in interest
rates paid for interest bearing liabilities continue to exceed the increase in
yields in the Company's interest earning assets, net interest margin may be
adversely affected.
Capital Resources and Liquidity
<TABLE>
The following summarizes the minimum capital requirements and capital position
at June 30, 1995:
<CAPTION>
Capital Position Minimum
at June 30, 1995 Capital Requirements
Bank Only Consolidated
<S> <C> <C> <C>
Total Capital
to Risk-Weighted Assets 12.3% 13.5% 8.0%
Tier 1 Capital
to Risk-Weighted Assets 11.0 12.2 4.0
Tier 1 Capital to Average
Assets (Leverage Ratio) 7.2 8.1 4.0 - 5.0(1)
<FN>
<F1>
(1) Regulatory authorities require all but the most highly rated banks and bank
holding companies to maintain a minimum leverage ratio of at least
4.0% - 5.0%.
</FN>
</TABLE>
The Company believes that its cash and cash equivalents of $56,551,000 in
addition to its securities available for sale of $67,707,000 at June 30, 1995
are sufficient to meet both the funding needs of its borrowers and the liquidity
requirements of its depositors. The Company intends to invest its increases in
cash and cash equivalents over its base funding requirements in investment
securities with average lives of less than five years. It is anticipated that
such purchases will be classified as Available For Sale securities.
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of matters to a vote of security holders.
None.
Item 6(a). Exhibits
Exhibit 10.1 Employment agreement of T. Jefferson Cunningham III dated
July 1, 1995.
Exhibit 10.2 Employment agreement of Paul A. Maisch dated April 1, 1995.
Exhibit 10.3 First amendment to the Hudson Chartered Bancorp 1995 Inventive
Stock Plan.
Exhibit 27 Financial Data Schedule
Item 6(b). Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed in its behalf by the
undersigned thereunto duly authorized.
Hudson Chartered Bancorp, Inc.
(Registrant)
Date: August 14, 1995 /s/ Paul A. Maisch
Paul A. Maisch
Duly Authorized Officer and
Principal Financial Officer
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of matters to a vote of security holders.
None.
Item 6(a). Exhibits
Exhibit 10.1 Employment agreement of T. Jefferson Cunningham III dated
July 1, 1995.
Exhibit 10.2 Employment agreement of Paul A. Maisch dated April 1, 1995.
Exhibit 10.3 First amendment to the Hudson Chartered Bancorp 1995 Incentive
Stock Plan.
Exhibit 27 Financial Data Schedule
Item 6(b). Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed in its behalf by the
undersigned thereunto duly authorized.
Hudson Chartered Bancorp, Inc.
(Registrant)
Date: August 14, 1995 ____________________________
Paul A. Maisch
Duly Authorized Officer and
Principal Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
10.1 Employment agreement of T. Jefferson Cunningham III dated
July 1, 1995.
10.2 Employment agreement of Paul A. Maisch dated April 1, 1995.
10.3 First amendment to the Hudson Chartered Bancorp 1995 Incentive
Stock Plan.
27 Financial Data Schedule
<PAGE>
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
AGREEMENT effective as of July 1, 1995 between HUDSON CHARTERED BANCORP, INC.,
a New York Corporation with its principal offices at Route 55, LaGrangeville,
New York 12540 (the "Employer"), First National Bank of the Hudson Valley, a
New York Corporation with its principal offices at Route 55, LaGrangeville,
New York 12540 (the "Bank"), and T. Jefferson Cunningham III, residing at
71 East Hook Road, Hopewell Junction, New York 12533 (the "Employee").
WITNESSETH:
WHEREAS, the Employee has provided invaluable leadership while serving as the
Chief Executive Officer of the Employer and its predecessor for over five years,
and the Employer desires to assure the continued service of the Employee for an
extended period, and the Bank is the wholly owned subsidiary of the Employer.
NOW THEREFORE, the parties agree as follows:
1. The Employer agrees to employ, and the Employee agrees to be employed by
the Employer, under the terms and conditions set forth in this
Agreement. For all purposes of this Agreement, the Employer and the Bank
shall include their successors and assigns, whether by merger,
acquisition, purchase or any other means or method of consolidation. The
parties intend that the Bank shall satisfy all financial, compensation,
employee benefit, supplemental retirement payment and severance payment
obligations under this Agreement, without, however, releasing the
Employer from such obligations in the event the Bank shall fail to
fulfill them or any of them.
2. The Employee shall serve as the Chairman and Chief Executive Officer of
the Employer for the entire term of this Agreement, ashereinafter set
forth. As Chairman and Chief Executive Officer, the Employee shall serve
as the senior executive officer of the Employer, to whom all other
officers and employees of the Employer shall directly or indirectly report
and be responsible. The Employee shall report and be responsible solely to
the Board of Directors of the Employer.
3. The initial term of this Agreement shall be three (3) years commencing on
July 1, 1995 ("Commencement Date"), and expiring on June 30, 1998.
Each year, prior to the anniversary of the Commencement Date, the Board of
Directors of the Employer shall formally extend, or refuse to extend this
Agreement for one (1) additional year. If the Board of Directors of the
Employer formally decides not to extend this Agreement, the Board shall
also formally decide and resolve whether or not it elects to retain the
services of the Employee for the remaining two (2) year term of this
Agreement. If the Board resolves to retain the services of the Employee
for the remaining two (2) year term of the Agreement, all terms and
conditions of the Agreement shall remain in full force and effect for the
remaining two (2) year term of this Agreement, and the provisions of
section 7 hereof shall apply at the expiration of the term of the
Agreement. If the Board resolves not to retain the Employee's services
for such two (2) year period, the provisions of section 7 shall apply
immediately.
4. Beginning as of the Commencement Date, Employee shall be paid, by the
Employer, directly a base salary of two hundred eighteen thousand dollars
($218,000). The Board of Directors of the Employer shall have the
discretion to increase the Employee's base salary, at any time and from
time to time. Any such increase shall reflect the Employee's contribution
to the financial and business performance of the Employer during the
preceding period.
5. In addition to his base salary, the Employee shall participate in each
compensation, employee benefit and fringe benefit program provided
directly or indirectly by the Employer to its employees including, without
limitation, each bonus, stock grant, stock option, stock purchase,
retirement, insurance and welfare plan or program. The Employee's
participation in each such plan or program shall be in accordance with the
terms and provisions thereof as generally applicable to all participants.
In addition, the Employee shall be provided with an automobile, subject to
any income and payroll tax reporting and withholding relating thereto,
and the Employee shall be entitled to participate in the supplemental
retirement program described in the next section.
6. The Employee shall be eligible to participate in and benefit from a
supplemental retirement program ("SRP") as described in this section. The
SRP shall provide supplemental retirement and tax deferral benefits to the
extent benefits under the Hudson Chartered Bancorp, Inc. Retirement and
Thrift Plan or any successor plan (the "Plan") are limited by provisions
of the Internal Revenue Code, ERISA, or any other applicable law or
regulation (the "Limitations").
The SRP shall provide to the Employee an annual profit-sharing
contribution equal to the excess of the amount that would have been
contributed for the Employee under the Plan absent the Limitations, over
the amount actually contributed to the Plan. The SRP will also permit the
Employee to defer from his eligible compensation, as defined in the Plan,
a dollar amount equal to the excess he could have deferred under the
401(k) feature of the Plan, absent the Limitations, over the amount he
actually deferred under that Plan; provided however, that the Employee has
deferred the maximum amount permitted by the Limitations. The SRP will
also provide, with respect to the supplemental deferral described in the
previous sentence, a matching contribution equal to the matching
contribution that the Plan would have provided if the supplemental
deferral had been made into the 401(k) feature of the Plan.
The SRP shall be an account maintained on the books of the Employer on
behalf of the Employee which shall include each of the amounts described
in the preceding paragraph for each year of employment under this
Agreement. Each of such amounts shall be recorded in the SRP at the same
time it would have been paid or credited to the Employee's accounts under
the Plan. The Employee's Account under the SRP shall be credited with
earnings equal to the Chase Bank prime rate in effect from time to
time, at the same time that earnings would be credited under the Plan.
Although the SRP is a bookkeeping account maintained by the Employer to
record its supplemental retirement liability to the Employee, the Employer
may create a reserve or a fund to cover some or all of such liability.
However, any such reserve or fund shall at all times be subject to the
claims of creditors of the Employer. Benefits under the SRP shall be paid
solely from the general assets of the Employer, and the Employee shall
be a general unsecured creditor of the Employer with respect to the
Employer's liability to the Employee under the SRP.
Benefits under the SRP shall be fully vested at all times and shall be
paid to the Employee in the same manner and at the same time as
benefits shall be paid to the Employee from the Plan.
7. Upon termination of the employment of the Employee under this Agreement,
for any reason other than death, disability, termination for cause,
voluntary resignation by the Employee, or retirement at age 65, the
Employer shall pay the Employee a severance payment in the amount equal to
two times the highest total compensation received by the Employee in any
one of the three (3) years preceding such termination. In addition, the
Employer shall continue, at no cost to the Employee, coverage under the
medical welfare plans in which he and his dependents participated prior to
the termination, for a period of 18 months following the date such
coverage would otherwise have expired due to the termination.
For purposes of this section, "total compensation" means the sum of base
salary, bonus, other compensation such as stock grants, profit-sharing and
matching contributions under the Plan , and the amount credited to the
Employee's SRP account.
"Termination" shall include:
(i) Any merger, acquisition or change of control of the Employer to which the
Employee does not consent in writing, with "change of control" meaning
acquisition by any person or group of persons (other than shareholders of
the Employer on the effective date of this Agreement) of fifty percent
(50%) or more of the beneficial ownership of the voting stock of the
Employer;
(ii) Failure to extend the term of this Agreement as provided in section 3
hereof; and
(iii) "Termination in fact" which shall mean any action or failure to take
action by the Employer as defined in section 1 hereof to employ the
Employee as the Chief Executive Officer of the Employer or other entity
which in fact controls the operation of the business or businesses which
comprise the Employer as defined in section 1 hereof.
"Termination for cause" shall mean a termination of the Employee's
employment by the Employer on account of:
(i) a material breach by the Employee of his obligations to the Employer;
(ii) material Employment of the Employee by another employer or material
competition by the Employee against the Employer while employed by the
Employer;
(iii) a material act of dishonesty or disloyalty or a breach of trust or a
willful neglect or injurious act against the Employer; and
(iv) conviction of the Employee of a felony.
Payment of the severance payment shall be made in four (4) equal annual
installments commencing on the first anniversary of the date of termination of
the Employee; provided, however, that by written request not later than thirty
(30) days after the date of termination, the Employee may require that the
Employer pay the entire severance payment in a single lump sum on the first
anniversary of the date of termination.
Upon termination of the Employee's employment and payment to the Employee of all
amounts he earned while employed under this Agreement and of all amounts to
which he is entitled under the Plan, the SRP and this section, the Employee
shall have no right to any continued compensation or benefits from the Employer,
except as otherwise provided by law (e.g., COBRA health coverage continuation
rights).
8. Notices to be given to the parties shall be sent first class mail or
facsimile to the above addresses.
9. This Agreement shall be binding upon and enforceable by the parties
hereto, and their heirs, executors, successors and assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
HUDSON CHARTERED BANCORP, INC.
by: /s/ Robert Bowman
Signature
Robert Bowman , Chairman, Personnel/Compensation Committee
Print Name and Title
FIRST NATIONAL BANK OF THE HUDSON VALLEY
by: /s/ Robert Bowman
Signature
Robert Bowman, Chairman, Personnel/Compensation Committee
Print Name and Title
/s/ T. J. Cunningham III
T. J. Cunningham III
<PAGE>
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS AGREEMENT made the 1st day of April 1995, by and between HUDSON
CHARTERED BANCORP, INC., a company, organized and existing under and by virtue
of the laws of the State of New York with principal offices located at
Route 55, LaGrangeville, New York 12540, hereinafter (the "Company") and
PAUL A. MAISCH, residing at 7 Lorene Drive, LaGrangeville, New York 12540,
hereinafter ("Maisch").
WHEREAS, Maisch is now employed by the Company as its Chief Financial Officer
and is considered an Executive Officer as defined by the United States Code
and regulations promulgated by the Federal Reserve Board of the United States of
America, and
WHEREAS, the Board of Directors of the Company has adopted several personnel
policies relating to Officers employed by the Company, and
WHEREAS, the parties desire to enter into an agreement to incorporate these
personnel policies as well as to set forth their agreement with respect to other
issues relating to the employment of Maisch as Chief Financial Officer of the
Company.
NOW, THEREFORE, in consideration of the mutual promises and agreements
hereinafter contained, it is agreed by and between the parties as follows:
1. Employment: The Company employs and engages Maisch as its Chief Financial
Officer and Maisch accepts and agrees to employment, subject to the general
supervision of the Chairman and Chief Executive Officer and pursuant to the
orders, advice, and direction of the Board of Directors of the Company.
Maisch shall perform such other duties as customarily performed by one
holding such a position in the business of banking.
2. Term of Employment: The term of this Agreement shall be a period of two (2)
years, commencing April 1, 1995, and terminating March 31, 1997, subject,
however, to prior termination as hereinafter provided. At the expiration of
March 31, 1997, and at subsequent expiration dates, this Agreement shall
be considered automatically renewed for successive periods of one (1) year,
provided neither party submits a written notice of termination not later
than thirty (30) days prior to the expiration date.
3. Compensation: The Company shall pay Maisch, and Maisch shall accept from
the Company in full payment for his services as Chief Financial Officer,
base compensation at the rate of ONE HUNDRED FIVE THOUSAND ($105,000)
DOLLARS payable at the rate of FOUR THOUSAND THIRTY-EIGHT DOLLARS AND
FORTY-SIX CENTS ($4,038.46) per pay period while this Agreement shall be in
force ("Base Compensation"). Maisch will also be appointed as a Senior Vice
President of the First National Bank of the Hudson Valley (the "Bank").
Additionally, Maisch will be a member of the Senior Management Committee of
the First National Bank of the Hudson Valley. Maisch's compensation shall
be periodically reviewed in accordance with the Company's normal
compensation review program.
4. Benefits: Maisch shall participate in all generally available employee
benefit plans and programs for Senior Officers of the Company and the Bank
of every nature and shall, in fact, be entitled to participate in and be a
member of all such benefit plans and, where such plans are "proportionate to
compensation" plans, in proportion to his compensation hereunder. Benefit
plans shall include, but not be limited to group life, disability,
hospitalization and major medical insurance coverages, stock options, stock
purchase or bonus plans, retirement programs, profit sharing arrangements
and other incentive compensation plans. Maisch's eligible dependents shall
also be covered under any such plans and benefit programs to the extent that
dependents of other employees are similarly provided for.
Maisch shall be provided with a company automobile under arrangements at
least equivalent to those currently in effect with respect to other Bank
Senior Vice Presidents.
Maisch is authorized to incur reasonable expenses for promoting the business
of the Bank and the Company. Upon submission of proper documentation, the
Bank shall reimburse him for all expenses including entertainment, travel,
and miscellaneous other expenses reasonably incurred in promoting the
business of the Bank and the Company and in performing his duties as an
Officer of the Bank and the Company.
5. Performance of Duties: Maisch agrees that he will at all times faithfully,
industriously, and to the best of his ability, experience and talent,
perform all of the duties that may be required of and from him pursuant to
the express terms herein and to the reasonable satisfaction of the Company.
Such duties shall be rendered at Route 55, LaGrangeville, New York, and at
such other place or places as the Company shall in good faith require or as
the interest, needs, business or opportunity of the Bank shall require
or make advisable.
6. Termination: This Agreement may be terminated by either party on thirty
(30) days written notice to the other. If the Company terminates this
Agreement for any reason other than willful misconduct, gross negligence, or
illegal behavior, Maisch shall be entitled to compensation equalling twelve
(12) months of one hundred (100%) percent of his Base Compensation received
by him at such time; and payment for all accrued sick days and vacation days
not used by Maisch as of the date of termination to be paid on a per diem
rate of compensation for such days. This payment shall be a lump-sum to
Maisch no later than ten (10) days from the effective date of his
termination.
In addition, the Company shall provide and continue to provide for twelve
(12) months after termination such insurance benefits (including medical and
life insurance) as the Company generally provides for any group or class of
employee of which the employee would have been a member if his employment
had continued on the same terms and conditions generally applicable to
participants.
In addition to providing severance pay and benefits, as described above,
the Company will also provide out-placement services, at the Company's
expense.
In the event the Company elects not to renew this contract upon any
expiration date in accordance with Paragraph 2, but does not elect to
terminate Maisch's employment, Maisch may elect, by written notice not later
than thirty (30) days following expiration of this contract, to terminate
his employment. Upon the effective date of his termination, Maisch shall be
entitled to receive payment equal to six (6) months of one hundred (100%)
percent of his then current Base Compensation plus payment for his accrued
sick days and vacation days not used as of the date of termination (to be
paid on a per diem rate of compensation for such days.)
If Maisch shall terminate this Agreement other than as indicated
immediately above, he shall be entitled to payment for his accrued sick days
and vacation days not used as of the date of termination to be paid on a per
diem rate of compensation for such days. Maisch shall not be entitled to
payment for sick or vacation days if he fails to provide thirty (30) days
notice to the Company.
7. Option in the Event of Merger or Sale: In the event that the Company shall
cease to operate as an "independent" Company or part of an "independent"
banking group, whether by sale merger, or otherwise, and Maisch is not
appointed Chief Financial Officer of the successor company, then and in
that event Maisch shall have the option to terminate this Agreement
immediately or to elect to continue employment. In the event Maisch elects
to terminate this Agreement, he shall be entitled to receive payment equal
to the remaining Base Compensation at the rate then in effect for the period
until the then expiration date of the Agreement (but not less than twelve
(12) months of Base Compensation) either in a lump-sum payment payable not
later than thirty (30) days from the effective date of termination or
monthly payments over the remaining period until the then expiration date
of the Agreement. Maisch shall also be entitled to participate in all
benefit plans until the then expiration date of the Agreement on the
same terms and conditions generally applicable to participants.
8. Contract Terms to be Exclusive: This written Agreement contains the
entire agreement between the parties and supersedes any and all other
agreements between the parties. The parties acknowledge and agree that
neither of them has made any representation with respect to the subject
matter of this Agreement or any representations inducing the execution and
delivery hereof except such representations as are specifically set forth
herein, and each of the parties hereto acknowledges that he or it has relied
on his or her own judgement in entering into the same. The parties hereto
further acknowledge that any statements or representations that may have
heretofore been made by either of them to the other are void and of no
effect and that neither of them has relied thereon in connection with his or
its dealing with the other.
9. Waiver or Modification Ineffective Unless in Writing: It is further agreed
that no waiver or modification of this Agreement or of any covenant,
condition, or limitation herein contained shall be valid unless in writing
and duly executed by the party to be charged therewith and that no evidence
of any waiver or modification shall be offered or received in evidence in
any proceedings, arbitration, or litigation between the parties hereto
arising out of or affecting this Agreement, or the rights or obligations
of any party hereunder, unless such waiver or modification is in writing,
duly executed as aforesaid, and the parties further agree that the
provisions of this paragraph may not be waived except as herein set forth.
Notwithstanding anything to the contrary contained in this Agreement, in the
event that this Agreement is renewed as provided herein, the approval of a
new rate of compensation and other benefits for Maisch as established by the
Board of Directors of the Company shall be considered to be an amendment to
this Agreement, but that all other terms and provisions of this Agreement
shall govern in all respects in subsequent years.
10. Contract Governed by Law of State of New York: The parties hereto agree
that it is their intention and covenant that this Agreement and performance
hereunder and all suits and special proceedings hereunder be construed in
accordance with and under and pursuant to the laws of the Sate of New York
and that any action, special proceedings, or other proceeding that may be
brought arising out of, in connection with, or by reason of this Agreement,
the laws of the State of New York shall be applicable and shall govern to
the exclusion of the law of any other forum, without regard to the
jurisdiction in which any action or special proceeding may be instituted.
11. Survivorship of Benefits: This Agreement shall be binding on and inure
to the benefit of the respective parties hereto and their executors,
administrators, heirs, successors, assigns, and personal representatives.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above written.
HUDSON CHARTERED BANCORP, INC.
By: /s/ T. Jefferson Cunningham
T. Jefferson Cunningham
/s/ Paul A. Maisch
Paul A. Maisch
<PAGE>
EXHIBIT 10.3
First Amendment to the
Hudson Chartered Bancorp, Inc.
1995 Incentive Stock Plan
WHEREAS, Hudson Chartered Bancorp, Inc. (the "Corporation") maintains the
Hudson Chartered Bancorp 1995 Incentive Stock Plan (the "Plan"); and
WHEREAS, Section 13 of the Plan authorizes the Board of Directors of the
Corporation (the "Board") to amend the Plan at anytime, subject to the approval
of the Corporation's shareholders if such approval is required to comply with
the requirements of Rule 16b-3 under the Securities Exchange Act of 1934, as
amended; and
WHEREAS, the Plan currently authorizes the grant of stock appreciation rights
that have a base price equal to the fair market value of the Corporation's
common stock as of the date of the grant for purposes of determining the amount
of the payment to be made by the Corporation upon exercise;
WHEREAS, the Board has determined that the approval of such an amendment by
the Corporation's shareholders is not required;
NOW, THEREFORE, clause b(i) of Section 7.2 of the Plan and clause c(i) of
Section 7.3 of the Plan are hereby amended to add the following after the words
"Related Right" in such clauses:
"(or such amount in excess of such Fair Market Value as may be specified by
the Committee in connection with the grant of the Right)"
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5,714
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