<PAGE>
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 MARCH 31, 1996
--------------
/ / 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 or 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.
4,293,699 shares of Common Stock outstanding, par value $.80 per share, at
May 2, 1996.
<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 11
PART II - Other Information 25
Signatures 26
<PAGE>
Part 1
Item 1: Financial information
HUDSON CHARTERED BANCORP, INC. AND SUBSIDIARIES Form 10-Q
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
--------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 32,805 $ 38,856
Federal funds sold 31,238 28,997
------- -------
Total cash and cash equivalents 64,043 67,853
Securities
Available for sale 169,918 167,334
Held to maturity 13,725 14,465
Regulatory securities 2,755 2,107
Loans held for sale 330 273
Loans( see notes)
Gross loans 429,243 422,083
Allowance for loan losses (8,781) (8,770)
------- -------
Net loans 420,462 413,313
Premises and equipment, net 16,697 17,062
Accrued Income 5,621 5,618
Other assets 7,412 8,458
------- -------
TOTAL ASSETS $ 700,963 $ 696,483
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits (see notes)
Non-Interest Bearing $ 132,568 $ 138,656
Interest Bearing 501,844 492,404
------- -------
Total deposits 634,412 631,060
Notes payable 1,886 1,896
Other liabilities 3,911 3,598
------- -------
TOTAL LIABILITIES 640,209 636,554
STOCKHOLDERS' EQUITY (see notes)
Preferred stock Series B,
7.25%, convertible, cumulative liquidation value 4,930 5,713
Common stock 3,145 3,086
Common paid-in capital 24,316 23,378
Retained earnings 28,750 27,454
Net unrealized securities (losses) gains (15) 586
Employee stock ownership plan (161) (171)
Treasury Stock (211) (117)
------- -------
TOTAL STOCKHOLDERS' EQUITY 60,754 59,929
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' $ 700,963 $ 696,483
EQUITY ======= =======
</TABLE>
See notes to condensed consolidated financial statements.
- 1 -
<PAGE>
HUDSON CHARTERED BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND EXPENSE
(dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Three
Months Ended Months Ended
3/31/96 3/31/95
----------------------------
<S> <C> <C>
Interest income:
Loans, including fees $ 9,746 $ 9,594
Federal funds sold 418 354
Taxable securities 2,015 1,615
Tax-exempt securities 524 523
------- -------
Total interest income 12,703 12,086
Interest expense 5,165 4,927
------- -------
Net interest income 7,538 7,159
Provision for loan loss 600 500
------- -------
Net interest income
after provision for loan losses 6,938 6,659
------- -------
Noninterest income:
Service charges and fees 1,010 835
Trust earnings 164 167
Gains on sales of securities, net 73
Gains on sales of loans, net 56 12
Other income 242 272
------- -------
Total noninterest income 1,545 1,286
------- -------
GROSS OPERATING INCOME 8,483 7,945
------- -------
Noninterest expense:
Salaries and employee benefits 2,987 2,848
Net occupancy and equipment expense 1,008 923
FDIC insurance 7 321
Stationary & supplies 151 212
Telephone 83 150
Other real estate owned 26 75
Merger related expense 250
Other expenses 1,127 1,098
------- -------
Total noninterest expense 5,389 5,877
------- -------
Income before income taxes 3,094 2,068
Income taxes 1,081 682
------- -------
Net income $ 2,013 $ 1,386
======= =======
Weighted average common shares outstanding:
Primary 3,988 3,831
Fully diluted 4,392 4,263
Per common share data:
Primary earnings $ 0.48 $ 0.34
Fully diluted earnings 0.46 0.33
Cash dividends declared 0.16 0.14
Book value outstanding
at period end $14.13 $12.72
</TABLE>
See notes to condensed consolidated financial statements.
- 2 -
<PAGE>
HUDSON CHARTERED BANCORP, INC. AND SUBSIDIARIES FORM 10-Q
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
3/31/96 3/31/95
OPERATING ACTIVITIES ------------ ------------
<S> <C> <C>
Net income $ 2,013 $ 1,386
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 600 500
Depreciation and amortization 455 419
Amortization of security premiums and
accretion of discounts 88 98
Amortization of core deposit intangible 33 53
Realized gains on sales of securities and loans (129) (12)
Deferred income tax benefits (112) (10)
(Increase) decrease in other assets 967 (1,983)
(Increase) decrease in other liabilities 260 (356)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 4,175 95
-------- --------
INVESTING ACTIVITIES
Proceeds from sales of securities
available for sale 3,141
Proceeds from maturities of securities available for sale 9,846 6,942
Proceeds from maturities of securities held to maturity 1,887 1,628
Purchases of securities available for sale (16,493) (2,010)
Purchases of securities held to maturity (1,489) (1,986)
Sales of loans 2,826 492
Net increase in loans (10,576) (5,623)
Purchases of premises and equipment (90) (701)
Proceeds from sale of OREO 155
-------- --------
NET CASH USED BY INVESTING ACTIVITIES (10,793) (1,258)
-------- --------
FINANCING ACTIVITIES
Net increase in deposit accounts 3,352 23,379
Repayments on borrowings (6,106)
Proceeds from issuance of stock 214 483
Repurchase of common stock (94)
Cash dividends- preferred (86) (104)
Cash dividends- common (578) (511)
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,808 17,141
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (3,810) 15,978
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 67,853 43,271
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 64,043 $ 59,249
======== ========
CASH PAID FOR:
Interest $ 6,025 $ 3,499
Taxes 58
NON-CASH ITEMS
Transfer from loans to OREO $ 56 $ 986
Net change in unrealized gains (losses) recorded
on securities available for sale 1,016 278
Change in deferred taxes on net unrealized gains
(losses) recorded on securities available for sale 527 (116)
Conversion of Preferred Series B stock into common shares 783
</TABLE>
See notes to condensed consolidated financial statements.
- 3 -
<PAGE>
HUDSON CHARTERED BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER EQUITY
(dollars in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Additional
Preferred Common Paid-in Retained
Stock Stock Capital Earnings
<S> <C> <C> <C> <C>
Balance January 1, 1996 $5,713 $3,086 $23,378 $27,454
Net Income 2,013
Cash dividends declared on preferred stock (89)
Cash dividends declared on common stock ($0.16 per share) (628)
Dividend reinvestment and stock purchase plan - 10,894 shares 9 177
Conversion of Series B preferred stock - 78,268 shares (783) 48 735
(converted into 60,417 common shares)
Options exercised - 2,451 shares 2 26
Purchase of treasury stock
Payments on ESOP borrowings
Net unrealized loss on securities
-------------------------------------------------
Balance March 31, 1996 $4,930 $3,145 $24,316 $28,750
=================================================
<CAPTION>
Net
Unrealized
Gains(losses) Treasury
on Securities Stock ESOP Total
Balance January 1, 1996 $586 ($117) ($171) $59,929
Net Income 2,013
Cash dividends declared on preferred stock (89)
Cash dividends declared on common stock ($0.16 per share) (628)
Dividend reinvestment and stock purchase plan - 10,894 shares 186
Conversion of Series B preferred stock - 78,268 shares 0
(converted into 60,417 common shares)
Options exercised - 2,451 shares 28
Purchase of treasury stock (94) (94)
Payments on ESOP borrowings 10 10
Net unrealized loss on securities (601) (601)
-------------------------------------------------
Balance March 31, 1996 ($15) ($211) ($161) $60,754
=================================================
</TABLE>
- 4 -
<PAGE>
FORM 10-Q
HUDSON CHARTERED BANCORP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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, 1995.)
In the opinion of the Company, the accompanying unaudited condensed consolidated
financial statements contain all adjustments (consisting only of normal
recurring accruals) necessary to present fairly the consolidated financial
position as of March 31, 1996 and the consolidated results of operations for the
three month periods ended March 31, 1996 and 1995 and the consolidated cash
flows for the three month periods ended March 31, 1996 and 1995.
The results of operations for the three months ended March 31, 1996 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 March 31, 1996 the Bank had total assets of $694.9 million and total
stockholder's equity of $53.7 million, compared, respectively, to $690.6 million
and $53.0 million in total assets and total stockholder's equity at December 31,
1995. Net income of the Bank included in consolidated equity was $2.1 million
and $1.4 million for the three month periods ended March 31, 1996 and 1995,
respectively.
Material intercompany items and transactions have been eliminated in
consolidation.
Accounting for Stock-Based Compensation
- ---------------------------------------
In October 1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for Stock-Based Compensation". SFAS No. 123 establishes a fair
value based method of accounting for stock-based compensation plans and
encourages, but does not require, entities to adopt that method in place of the
provisions of Accounting Principles Board Opinion ("APBO") No. 25, "Accounting
for Stock Issued to Employees", for all arrangements under which employees
receive shares of stock or other equity instruments of the employer or the
employer incurs liabilities to employees in amounts based on the price of the
stock. SFAS No. 123 also establishes fair value as the measurement basis for
transactions in which an entity acquires goods or services from nonemployees in
exchange for equity instruments.
An entity may continue to apply APBO No. 25 in accounting for stock-based
employee compensation arrangements. However, entities doing so will be required
to disclose pro forma net income and earnings per share determined as if the
fair value based method established by SFAS No. 123 had been applied in
measuring compensation cost.
5
<PAGE>
The accounting provisions of SFAS No. 123 are effective for transactions entered
into after December 15, 1995. Following adoption of SFAS No. 123, the Company
will continue measuring compensation cost for employee stock compensation plans
in accordance with the provisions of APBO No. 25.
Accounting for Mortgage Servicing Rights
- ----------------------------------------
The Company adopted SFAS No. 122 "Accounting for Mortgage Servicing Rights"
effective January 1, 1996. As a result of implementation, $18,000 was recorded
as an asset for originated mortgage servicing rights which accordingly increased
gains on sales of loans. This asset represents the present value of estimated
future net cash flows related to normal servicing rights on $2,826,000 in
originated mortgages sold into the secondary market in the first quarter of
1996. The Company regards .25% of sold loans as normal servicing rights. It is
expected that most future originated long-term mortgages will be sold, many of
which will be servicing retained, and thus the asset related to originated
mortgage servicing rights will increase. As a result, gains on sales of loans
may increase, and the annual income related to mortgage servicing may
accordingly decline. The Company will reevaluate the asset on a quarterly basis
for impairment and would establish a reserve if the fair value of such servicing
rights is less than the recorded amounts. All previously originated and sold
loans will continue to accrue income at the related servicing income of .25% as
SFAS No. 122 can only be adopted prospectively.
6
<PAGE>
Loans
- -----
Major classification of loans (not held for sale) are summarized below (in
thousands):
<TABLE>
<CAPTION>
At March 31, 1996 At December 31, 1995
----------------- --------------------
<S> <C> <C>
Commercial and industrial $74,156 $69,889
Consumer installment 64,897 63,554
Real estate - construction 9,015 13,347
Real estate - mortgage 277,254 271,068
Other loans 3,922 4,225
-------- --------
Total $429,243 $422,083
======== ========
Deposits
- --------
Major classifications of deposits are summarized below (in thousands):
At March 31, 1996 At December 31, 1995
------------------ --------------------
Demand deposits $132,568 $138,656
NOW accounts 72,947 50,106
Money market deposit account 52,223 66,526
Savings accounts 213,135 204,693
Time deposits under $100,000 131,794 132,895
Time deposits over $100,000 31,745 38,184
-------- --------
Total $634,412 $631,060
======== ========
</TABLE>
7
<PAGE>
Securities
- ----------
Securities consist of the following (in thousands):
<TABLE>
<CAPTION>
At March 31, 1996 At December 31, 1995
---------------------------------- ----------------------------------
Carrying Amortized Fair Carrying Amortized Fair
Amount Cost Value Amount Cost Value
================================== ==================================
<S> <C> <C> <C> <C> <C> <C>
US Treasury:
Available for Sale $77,491 $77,501 $77,491 $76,984 $76,504 $76,984
US Gov't Agencies:
Available for Sale 28,516 28,417 28,516 36,555 36,247 36,555
Obligations of States and Political Subdivisions:
Available for Sale 35,187 35,230 35,187 33,244 32,958 33,244
Held to Maturity 13,725 13,725 13,857 14,440 14,440 14,897
Other Securities:
Available for Sale 28,724 28,793 28,724 20,551 20,636 20,551
Held to Maturity 25 25 25 25 25 25
Regulatory Securities 2,755 2,755 2,755 2,107 2,107 2,107
--------------------------------------------------------------------------
Total Securities $186,398 $186,421 $186,530 $183,906 $182,917 $184,363
==========================================================================
Total Available for Sale $169,918 $169,941 $169,918 $167,334 $166,345 $167,334
Total Held to Maturity 13,725 13,725 13,857 14,465 14,465 14,922
Regulatory Securities 2,755 2,755 2,755 2,107 2,107 2,107
--------------------------------------------------------------------------
Total Securities $186,398 $186,421 $186,530 $183,906 $182,917 $184,363
==========================================================================
</TABLE>
At March 31, 1996 the net unrealized loss on Securities Available for Sale (net
of tax effect of $12,500) that was included as a separate component of
stockholders' equity was $(14,617).
8
<PAGE>
Earnings per common share (1995 Data adjusted for 10% stock dividend)
- -------------------------
Primary earnings per common share is computed as follows (in thousands, except
per share data):
<TABLE>
<CAPTION>
Three months ended
March 31,
------------------------
1996 1995
---- ----
<S> <C> <C>
Weighted average common
shares outstanding 3,916 3,772
Net effect of dilutive
stock options at average
market price 71 59
------ ------
Total "primary" shares 3,987 3,831
====== ======
Net Income $2,013 $1,386
Less preferred stock
dividends declared 89 104
------ ------
Net income applicable to
common stock $1,924 $1,282
====== ======
"Primary" earnings per
common share $.48 $.34
====== ======
</TABLE>
Fully diluted earnings per common share is computed as follows (in thousands,
except per share data):
<TABLE>
<CAPTION>
Three months ended
March 31,
------------------------
1996 1995
---- ----
<S> <C> <C>
Weighted average common shares
outstanding 3,916 3,772
Net effect of dilutive stock
options 94 59
Assumed conversion of Series B,
preferred stock 381 432
------ ------
Total "fully diluted" shares 4,391 4,263
====== ======
Net income $2,013 $1,386
Less preferred stock
dividends declared - -
------ ------
Net income applicable to
common stock $2,013 $1,386
====== ======
"Fully diluted" earnings
per common share $.46 $.33
====== ======
</TABLE>
9
<PAGE>
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.
Stockholders' Equity
- --------------------
The Company has authorized 5,000,000 shares of preferred stock, $.01 par value,
which the Board of Directors has the authority to divide into series and to fix
the rights and preferences of any series so established. The Series B described
below is a portion of the shares authorized and is the only outstanding series
of preferred stock.
The cumulative convertible perpetual Preferred Stock, Series B, is convertible
at the option of the holder into shares of common stock at $12.95 per share of
common stock, approximately .772 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 March 12, 1996, the Company called all the outstanding (571,301) shares of
the Series B preferred stock for redemption, effective April 15, 1996. Of the
571,301 shares outstanding, 559,055 shares of Series B preferred were converted
into 431,500 shares of common stock of the Company and 12,246 shares were
redeemed, for a total reduction of stockholders' equity related to redemption of
$122,500, which was paid from the Company's liquid assets. Of the 575,000
authorized shares of Series B Preferred, 493,033 and 571,301 shares were
outstanding at March 31, 1996 and December 31, 1995, respectively. 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 1996 and 1995 by the Company.
Authorized common stock, $.80 par value, is 20,000,000 shares. Issued and
outstanding shares at March 31, 1996 and December 31, 1995, were 3,918,408 and
3,499,825, respectively. The Company paid a 10% stock dividend in January 1996
which increased common shares outstanding by 350,000 shares.
10
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Financial Condition
- --------------------
The Company's financial condition on March 31, 1996 reflected total assets of
$701 million or an increase of $4.5 million or .6% over total assets at December
31, 1995. All major balance sheet captions have remained relatively unchanged
since December 31, 1995. Net loans increased some $7.2 million or 1.7% to
$420.7 million at March 31, 1996. Cash and cash equivalents decreased $3.8
million or 5.6% to $64.0 million at March 31, 1996. Other assets decreased by
$1.1 million. Aggregated securities investments were $186.4 million at March 31,
1996, an increase of $2.5 million or 1.4% from the level at December 31, 1995.
Of the increase in loans, commercial loans increased $4.3 million or 6.1%.
Consumer installment loans increased $1.3 million or 2.1% as the Bank continues
to generate automobile loans through its network of local automobile dealerships
in order to build its consumer loan volumes. Due to the competitive nature of
this type of financing, the yields obtained on this type of financing may be
somewhat lower than other consumer loan products. Indirect automobile financing
can carry a higher risk of loss than direct financing. In order to manage the
risk the Company maintains enhanced credit policies and procedures on this
portfolio. Real estate mortgage loans (construction and permanent financing)
increased slightly by $1.9 million to $286.3 million at March 31, 1996,
reflecting the closing of approximately $6 million in previously committed new
loans.
Total deposits increased $3.4 million or .5% in the first three months of 1996
to $634.4 million. Of this amount, total Public (Municipal) Funds increased
$14.3 million or 34.1% to $56.3 million and total non-public funds decreased
$10.9 million or 1.9% to $578.1 million. The following tables summarize the net
changes in public (municipal) fund and non-public fund deposits from December
31, 1995 to March 31, 1996 (in thousands):
11
<PAGE>
Public Funds
<TABLE>
<CAPTION>
Percent
Change
Balance Balance Net over
12/31/95 3/31/96 Change Y/E'95
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Demand accounts $2,947 $4,154 $1,207 41.0%
NOW accounts 8,237 13,904 5,667 68.8
Money market accounts 12,223 22,624 10,401 85.1
Savings accounts 3,094 3,339 245 7.9
Time deposits 15,465 12,243 (3,222) (20.8)
------------------------------------------------------------------
Total public deposits $41,966 $56,264 $14,298 34.1%
==================================================================
</TABLE>
The increase in public funds is primarily attributable to seasonal deposits of
tax receipts which regularly occur in the first and third quarters of each year.
Non Public Funds
<TABLE>
<CAPTION>
Percent
Change
Balance Balance Net over
12/31/95 3/31/96 Change Y/E'95
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Demand accounts $135,709 $128,414 $(7,295) (5.4)%
NOW accounts 41,869 38,319 (3,550) (8.5)
Money market accounts 54,303 50,323 (3,980) (7.3)
Savings accounts 201,599 209,796 8,197 4.1
Time deposits 155,614 151,296 (4,318) (2.8)
------------------------------------------------------------------
Total non public deposits $589,094 $578,148 $(10,946) (1.9)%
===================================================================
</TABLE>
The increase in nonpublic savings funds of $8.2 million is principally
attributable to the growth in savings due to the Bank's Merit savings product (a
package of free services with a savings account interest rate tied to the
Federal Reserve discount rate). This increase offsets declines in other
accounts. Management believes the decline in demand deposits of $7.3 million
represents the first quarter's regular seasonal pattern and the decline in Money
Market and NOW accounts represent a continued migration of these balances to
higher interest products (time and savings accounts). The decline in time
deposit accounts of $4.3 million represents maturing certificates of deposit
which had interest rates higher than renewal rates. Many of these funds were
reinvested in the Merit savings products which pay a relatively higher rate of
interest without the term restrictions associated with time deposits. These
shifts in deposits will raise the cost of interest bearing liabilities.
However, the impact on the Company's overall average cost of funds is mitigated
by the high level of the Company's demand deposit base. Thus the Company's net
interest margin fell by only .03% quarter to quarter.
12
<PAGE>
In addition, the Company previously offered a premium rate "15 month"
certificate of deposit. Such deposits totaling approximately $17.0 million
carry interest rates between 6.75% and 7.25%. These deposits mature during the
second quarter of 1996. Although the Company is promoting alternative products
to these customers, due to the significantly lower general market rates, it is
anticipated that a certain amount of these deposits will not be "rolled over",
and may leave the Bank. The remainder should reprice at a lower interest rate.
This should have a positive effect on interest expense by reducing the overall
cost of funding of the bank's assets.
Total stockholders' equity showed an increase of $825,000 or 1.4%. This
increase is due to net income of $2.0 million, for the three months ended March
31, 1996 and additional common stock of $215,000 issued through the dividend
reinvestment plan and the exercise of stock options. These increases in
stockholders' equity were partially offset by dividends declared to preferred
and common shareholders of $89,000 and $628,000, respectively, purchases of
treasury stock of $94,000, and a $601,000 decline (after tax)in unrealized
securities gains due to movement in market rates. In addition, a 60,400
increase in common shares was due to the conversion of approximately 78,000
shares of Series B preferred stock. On March 12, 1996, the Company called all
the outstanding (571,301) shares of the Series B preferred stock for redemption,
effective April 15, 1996. Of the 571,301 shares outstanding, 559,055 shares of
Series B preferred were converted into 431,500 shares of common stock of the
Company and 12,246 shares were redeemed, for a total reduction of stockholders'
equity related to redemption of $122,500, which was paid from the Company's
liquid assets. The redemption/conversion of the preferred stock will reduce the
overall dividends paid by approximately $138,000 per annum from the levels paid
on the preferred stock.
13
<PAGE>
Results of Operations
- ---------------------
Interest income as reported, for the three months ended March 31, 1996 compared
to the same period in 1995 increased $617,000 while interest expense increased
by $238,000. This resulted in an increase in net interest income of $379,000.
Provision for loan losses increased by $100,000. Net income increased by
$628,000 or 45.3%. Primary earnings per share increased $.14 to $.48 in the
first quarter of 1996 vs. 1995. In addition, fully diluted earnings per share
increased $.13 to $.46 in the first quarter of 1996 vs. 1995.
Net income and earnings per common share data is presented in the following
table:
<TABLE>
<CAPTION>
Three months ended
3/31/96 3/31/95
------- -------
<S> <C> <C>
Net income (in thousands) $2,013 $1,386
====== ======
Per common share:
Primary earnings $ .48 $ .34
Fully diluted earnings $ .46 $ .33
</TABLE>
The Company's return on assets, return on equity and return on common equity for
the three months ended March 31, 1996 and 1995, are detailed in the table below:
<TABLE>
<CAPTION>
Three months ended
3/31/96 3/31/95
------- -------
<S> <C> <C>
Return on assets 1.17% 0.85%
Return on total stockholders' equity 13.35 10.41
Return on common equity 14.10 10.80
</TABLE>
Interest income
- ---------------
On a tax equivalent basis, gross interest income increased by $610,000 or 4.9%
for the three months ended March 31, 1996 compared to the same period in 1995.
Total interest expense increased by $238,000 or 4.8% for the three months period
ended March 31, 1996 as compared to the three months ended March 31, 1995. The
Company experienced a net increase in average earning assets of $33.0 million,
but a net decrease in average loans of $7.3 million for the three months ended
March 31, 1996 compared to March 31, 1995 as a result of the sales of $25.0
million in long-term fixed rate mortgages in the second and third quarter of
1995. Consequently, fed funds sold and securities increased by approximately
$40.3 million. These assets generally carry lower yields than loans. This
asset growth was principally funded by an increase in average deposits of $29.0
million for the three month period ended 1996 compared to 1995, of which $23.2
million were interest bearing (generally higher yielding products such as Merit
savings and time deposits) and $5.8 million were non-interest-bearing. The
remaining growth was funded by an increase in shareholders' equity.
14
<PAGE>
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.
<TABLE>
<CAPTION>
Three Months Ended March 31,
1996 1995
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Loans $425,707 $ 9,746 9.16% $433,037 $9,594 8.86%
Taxable Securities 133,568 2,015 6.03% 99,365 1,615 6.50%
Tax-exempt Securities (2) 44,899 786 7.00% 45,809 792 6.92%
Fed Funds Sold 31,830 418 5.25% 24,777 354 5.71%
-------- ------- -------- -------
Total Interest Earning Assets 636,004 12,965 8.15% 602,988 12,355 8.20%
Cash & Due from Banks 30,866 29,090
Premises & Equipment 16,918 17,827
Other Assets 14,121 12,496
Allowance for Loan Loss (8,885) (8,338)
-------- --------
Total Assets $689,024 $654,063
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest-Bearing Liabilities:
Savings Deposits $206,834 $2,049 3.96% $181,473 $1,860 4.10%
NOW accounts 49,623 153 1.23% 54,629 291 2.13%
Money Market Accounts 70,006 585 3.34% 83,021 742 3.57%
Certificates over $100,000 24,949 345 5.53% 31,275 418 5.35%
Other Time Deposits 142,173 2,006 5.64% 120,013 1,565 5.22%
Borrowed Funds 1,891 27 5.71% 2,735 51 7.46%
-------- ------- -------- -------
Total Interest-Bearing Liabilities 495,476 5,165 4.17% 473,146 4,927 4.17%
Demand Deposits 128,751 122,931
Other 4,465 4,737
-------- --------
Total Noninterest-
Bearing Liabilities 133,216 3.29% 127,668 3.28%
Stockholder Equity 60,332 53,249
-------- --------
Total Liabilities and Stockholders'
Equity $689,024 $654,063
======== ========
Net interest Margin 7,800 4.90% 7,428 4.93%
Ratio of Average Interest-Earning
Assets
to Average Interest-Bearing
Liabilities 128.36% 127.44%
Less Tax Equivalent Adjustments (262) (269)
------- -------
Net Interest Income $ 7,538 4.74% $ 7,159 4.75%
======= ======= ====
</TABLE>
(1) Average Balances include non-accrual loans.
(2) Yields on tax-exempt securities based on a Federal tax rate of 34%.
15
<PAGE>
The following table reflects the effects of changes in volumes and interest
rates of each of the above categories on a tax equivalent basis:
<TABLE>
<CAPTION>
Rate/Volume Analysis (in thousands)
Three Months Ended March 31,
1996 vs. 1995
--------------------------------------
Increase (Decrease) due to
--------------------------------------
Volume Rate Net
------ ---- ---
<S> <C> <C> <C>
Interest Income:
Loans $(162) $314 $152
Taxable investment securities 560 (160) 400
Tax-exempt investment (16) 10 (6)
securities
Federal funds sold 101 (37) 64
--------- --------- --------
Total interest income 483 127 610
Interest expense:
Savings deposits 261 (72) 189
NOW/accounts (26) (112) (138)
Money market accounts (116) (41) (157)
Certificates over $100,000 (83) 10 (73)
Other time 291 150 441
Borrowed funds (15) (9) (24)
--------- --------- --------
Total interest expense 312 (74) 238
--------- --------- --------
Net interest margin 167 201 368
--------- --------- --------
Less tax equivalent affect 6 1 7
--------- --------- --------
Net interest income $177 $202 $379
========= ========= ========
</TABLE>
Average yields on interest earning assets decreased .05% to 8.15% in the first
quarter 1996 vs. 1995 and the average cost of interest-bearing liabilities
remained the same in the same period. Net interest margins on a tax equivalent
basis declined .03% to 4.90% for the three months ended March 31, 1996 compared
to the same period in 1995. The arithmetical calculations of variances due to
changes in rates produced a $202,000 increase in net interest income in the
first quarter of 1996 compared to the same period in 1995. Additionally, the
increase in average earnings assets of $33.0 million contributed $177,000 in
additional net interest income over the same periods.
The net effect was that net interest income before provisions for loan losses
increased to $7.5 million for the three months ended March 31, 1996 compared to
$7.2 million for the comparable period in 1995, or an increase of $375,000
(5.2%).
16
<PAGE>
Provision for loan losses and credit quality
- --------------------------------------------
The loan loss provision for the three month period ended March 31, 1996 was
$600,000 compared to $500,000 for the comparable period in 1995, a 20.0%
increase. Total net charge-offs for the three months of 1996 were $589,000,
compared to $476,000 for the same period in 1995. The ratio of net chargeoffs to
loans, on an annualized basis, increased to .55% in the first three months of
1996 vs. .43% over the full year of 1995. Total nonperforming assets have
increased from $6.6 million to $6.8 million over the past twelve months,
primarily in the commercial and industrial loan portfolio. Nonperforming assets
were up slightly from $6.5 million at December 31, 1995, principally in the
commercial mortgage portfolio. The ratio of nonperforming assets to outstanding
loans and other real estate owned remained at 1.53% for March 31, 1996 and
December 31, 1995. These nonperforming assets represent 105 loans or properties
of which only 23 have balances in excess of $100,000. Of the total nonperforming
assets, 37% is secured by residential property, 44% by commercial property, and
19% by other assets or unsecured.
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 the individual loans
it has made. 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, and accordingly, provisions have tended to increase in periods when the
level of charge-offs might indicate a deteriorating condition in the loan
portfolio. Provisioning policy during the recent years has resulted in a ratio
of allowance for loan losses to total loans of approximately 2.0%. The ratio of
the allowance for loan losses to total nonperforming loans does not reflect
collateral values, although 81% of all of the Bank's nonperforming assets are
collateralized by real estate. The allowance for loan losses as a percent of
total nonperforming loans is 143% as of March 31, 1996 compared to 184% as of
March 31, 1995 and 166% as of December 31, 1995.
Although recent economic statistical data indicates that local economic
conditions may have stabilized, the local economy continues to perform less
favorably in comparison to many other regions in the United States. Management,
therefore, continues to closely monitor local economic conditions relative to
the impact of IBM's downsizing and the significant vacancy rates of commercial
office and industrial space. Of the previously announced 4,000 jobs planned to
move to the IBM Kingston facility, approximately 3,000 private sector jobs have
been agreed by the State, although many of these jobs will initially be
seasonal. The move of the remaining jobs (state employees) has been put on hold
pending further analysis by State officials. 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 current apparent stabilization
of the Company's overall market area will not be unsettled by future events. Any
such developments would be expected to adversely effect the financial
performance of the Company.
17
<PAGE>
The table below summarizes the Company's loan loss experience for the periods
indicated:
<TABLE>
<CAPTION>
For the three months For the year
ended March 31, ended December 31,
1996 1995 1995 1994 1993
------------------------- ---------------------------------
<S> <C> <C> <C> <C> <C>
Balance at beginning of $8,770 $8,326 $ 8,326 $ 7,322 $ 5,794
period
Chargeoffs:
Commercial & industrial 208 96 411 350 435
Consumer installment & other 123 172 593 292 449
Real estate mortgage 342 251 1,164 1,059 1,103
------------------------- ---------------------------------
Total charge-offs 673 519 2,168 1,701 1,987
Recoveries
Commercial 3 9 75 63 124
Installment 54 34 193 153 123
Real estate 27 44 20 2
------------------------- ---------------------------------
Total recoveries 84 43 312 236 249
------------------------- ---------------------------------
Net charge-offs (589) (476) (1,856) (1,465) (1,738)
Provision for Loan Losses 600 500 2,300 2,400 3,266
Transfers, other * 69
------------------------- ---------------------------------
Balance at end of period $8,781 $8,350 $ 8,770 $ 8,326 $ 7,322
========================= =================================
Ratio of net charge-offs to
average loans outstanding
during the period .55% .44% .43% .37% .49%
(annualized)
Allowance for loan losses as
a percent of period-end loans 2.05% 1.91% 2.08% 1.93% 2.01%
Allowance as a percent of
non-performing loans 143% 184% 166% 163% 123%
Nonperforming loans and OREO
to total loans and OREO 1.53% 1.51% 1.53% 1.45% 1.97%
</TABLE>
* 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.
18
<PAGE>
The table below summarizes the Company's nonperforming assets and restructured
loans for the periods indicated (dollars in thousands):
<TABLE>
<CAPTION>
at March 31, at December 31,
1996 1995 1995 1994 1993
------------------ ------------------------------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans: (1)
Real estate mortgage $4,043 $3,886 $3,246 $3,866 $4,759
Commercial & Industrial 1,043 386 1,013 200 331
Consumer & other 105 66 148 39 48
------------------ ------------------------------
Total nonaccrual loans 5,191 4,338 4,407 4,105 5,138
Loans 90 days or more
past due and still
accruing:
Real estate mortgage 98 73 28 620 313
Commercial & industrial 104 476 84
Consumer & other 84 18 18 191 16
------------------ ------------------------------
Total 90 days past due 286 91 522 895 329
accruing
Restructured - real 235 117 349 119 457
estate
------------------ ------------------------------
Total non-performing
and restructured loans 5,712 4,546 5,278 5,119 5,924
Percent of total loans 1.28% 1.03% 1.23% 1.18% 1.63%
Other real estate 1,120 2,061 1,196 1,150 1,072
owned(2)
------------------ ------------------------------
Total non-performing $6,832 $6,607 $6,474 $6,269 $6,996
assets
================== ==============================
Nonperforming assets as
a percent of total
assets .97% .99% .93% .97% 1.17%
================== ==============================
</TABLE>
(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
collectibility of the loan.
(2) Net of allowance of $250,000 in 1993.
19
<PAGE>
Other real estate owned totals $1,120,000 at March 31, 1996 and includes eleven
properties acquired through foreclosure: three parcels of land, five residences,
and three non-farm nonresidential properties. Of this amount, there are
contracts currently in place for sale of $851,000. Management believes that
the carrying values of such properties adequately reflect the risk of loss in
their orderly disposal. At March 31, 1996, the Company had approximately $12.2
million in loans requiring special attention (substandard), in addition to the
nonperforming loans and other nonperforming assets noted above. Such loans are
being monitored so that management will be able to quickly assess impairment, if
present concerns about the borrowers ability to comply with repayment terms
becomes evident. Most all such loans are collateralized by real estate. Further
deterioration in such borrowers' financial position may result in classifying
them as nonperforming assets. In the opinion of management, the risk of loss on
these loans is adequately provided for in the Company's allowance for loan loss.
The following table summarizes impaired loans for the periods indicated (in
thousands):
<TABLE>
<CAPTION>
March 31, 1996 March 31, 1995 December 31, 1995
-------------- -------------- -----------------
<S> <C> <C> <C>
Impaired loans with
allowance established
($712, $840 and $1,239,
respectively) $3,563 $3,498 $3,450
Impaired loans with a
writedown ($1,161, $280
and $740, respectively) 1,628 507 1,071
------ ------ ------
Total $5,191 $4,455 $4,521
====== ====== ======
Average amount of impaired loans
for the period $4,856 $4,700 $4,287
====== ====== ======
</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):
<TABLE>
<CAPTION>
March 31, March 31, December 31,
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
Balance at end % of % of % of % of % of
of period Amount total Amount total Amount total Amount total Amount total
applicable to: loans loans loans loans loans
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial &
industrial $ 2,376 17.28% $ 2,289 22.50% $ 2,355 16.6% $ 2,010 22.10% $ 2,520 19.10%
Consumer & other 1,466 16.51% 1,283 13.50% 1,400 16.1% 1,363 12.20% 881 9.50%
Real estate -
construction 2.10% 1.80% 3.1% 1.50% 1.00%
Real estate - 4,151 64.11% 4,049 62.20% 4,247 64.2% 4,100 64.20% 3,155 70.40%
mortgage
Unallocated 788 729 768 853 766
-------------------------------------------------------------------------------------------------------
Total $8,781 100.00% $8,350 100.00% $8,770 100.00% $8,326 100.00% $7,332 100.00%
=======================================================================================================
</TABLE>
20
<PAGE>
Noninterest Income
- ------------------
Noninterest income increased $259,000 in the first quarter of 1996 to $1,545,000
compared to the same period of 1995. Of this amount, the level of service
charges and fee income increased $175,000 due to implementation of a new service
charge structure effective February 1996. An additional $73,000 related to
sales of securities and $144,000 related to gains on sales of loans. These
increases were partially offset by a decrease of $22,000 in annuity commissions.
Other Expenses
- --------------
Salaries and employee benefits increased $139,000. This increase is due
entirely to recognizing the increased potential liability to the Company, from
the impact of the recent increase of the Company's share price, on the value of
certain stock appreciation rights previously granted to officers.
Occupancy and equipment expense increased by $85,000 to $1,008,000 at
March 31, 1996. This increase is due to harsh weather experienced in the first
quarter of 1996 compared to the mild weather in the first quarter of 1995.
Supplies expense decreased by $61,000 to $151,000 for the first quarter 1996 vs.
1995. Telephone expense decreased in the first quarter by $67,000 to $83,000.
These expenses decreased due to both initiatives undertaken to reduce overhead
expenses and a reduction in the remaining level of integration costs.
Other real estate owned expense decreased $20,000 to $26,000 for the three
months ended March 31, 1996 as a result of reduced carrying costs associated
with the lower levels of other real estate owned in 1996.
FDIC insurance expense decreased $314,000 to $7,000 as a result of the Bank
Insurance Fund reaching the statutory limits of 1.25% of insured deposits. The
Bank is currently billed at the statutory minimum of $2,000 per annum. The Bank
has approximately $13 million in deposits insured by the Savings Association
Insurance Fund of the FDIC, for which it is required to pay $.23 per thousand
dollars of deposits.
Merger expenses decreased by $250,000 to $0. The Company established a one time
provision for finalizing the conversion of its data processing systems in the
first quarter of 1995.
Other expenses decreased $99,000 to $1,361,000 for the first quarter 1996
compared to the same period of 1995. This decrease related primarily to
reductions in both promotional costs associated with new branches and products
and miscellaneous write-offs from 1995 levels.
Pretax income, therefore, rose by $1,026,000 (49.6%) from $2,068,000 to
$3,094,000 for the three months ended March 31, 1995 and 1996, respectively.
21
<PAGE>
Income tax expense rose $398,000 as a result of the increase in pretax income
noted above. The Company's effective tax rate was 34.9% and 33.0% for the three
months ended March 31, 1996 and 1995, respectively as more of the Company's
increase in pretax income was taxable at the statutory tax rates.
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. Further, 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 only interest-bearing liabilities.
The following chart (in thousands) provides a quantification of the Company's
interest rate sensitivity gap as of March 31, 1996 based upon the known
repricing dates of certain assets and liabilities and the assumed repricing
dates of others. As shown in the chart below, at March 31, 1995, assuming no
management action, the Company's near-term interest rate risk is to a declining
rate environment, that is, net interest revenue would be expected to be
adversely affected by a decline in interest rates below the rates embedded in
the current yield curve. Over the first three months of 1996, approximately 10%
---
of the Company's interest rate sensitivity is related to changes in short term
interest rates, particularly the prime rate. Interest rate risk exposure in the
one year time frame is to a rising rate scenario, principally due to a high
level of fixed-rate assets relative to liabilities that would reprice in that
time frame. This chart displays only a static view of the Company's interest
rate sensitivity gap and does not capture the dynamics of balance sheet, rate
and spread movements nor management's actions that may be taken to manage this
position.
22
<PAGE>
<TABLE>
<CAPTION>
Greater
Total One yr. than
Maturity Repricing 3 months 4 months within to 5 five
Date (1)(2) or less to one yr. one yr. yrs. yrs. Total
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Securities $ 55,627 $ 45,183 $100,810 $ 75,701 $16,636 $193,147
Fed Funds 31,238 31,238 31,238
Commercial loans (3) 85,189 2,889 88,078 10,560 700 99,338
Consumer loans (3) 30,067 7,640 37,707 53,927 1,604 93,238
Mortgage loans (3) 69,492 35,333 104,825 47,594 15,556 167,975
------ ------ ------- ------ ------ -------
Total interest
earning assets (1) 271,613 91,045 362,658 187,782 34,496 632,328
------- ------ ------- ------- ------ -------
Savings (4) 65,415 147,720 213,135 213,135
NOW (5) 52,223 52,223 52,223
MMDA (5) 71,909 71,909 71,909
Time (5) 70,737 50,738 121,475 41,260 162,735
------- ------ ------- ------- -------
Other interest-bearing
liabilities 1,886 1,886
Total interest-bearing
liabilities 208,061 250,681 458,742 43,146 501,888
------- -------- ------- ------ -------
Interest Sensitivity
gap (6) $ 63,552 $(159,636) $(96,084) $144,636 $34,496 $130,440
--------------------------------------------------------------------
Gap as a percent of
earnings assets 10.05% (25.3)% (15.2)% 22.8% 5.5% 20.6%
====================================================================
</TABLE>
(1) Interest rate sensitivity gaps are defined as the fixed rate positions
(assets less liabilities) for a given time period. The gaps measure the
time weighted dollar equivalent volume of positions fixed for a particular
period. The gap positions reflect a repricing date at which date funds are
assumed to "mature" and reprice to a current market rate for the asset or
liability. The table does not include loans in nonaccrual status or net
unrealized gains recorded on "available-for-sale" securities as of March
31, 1996.
(2) Variable rate balances are reported based on their repricing formulas.
Fixed rate balances are reported based on their scheduled contractual
maturity dates, except for certain investment securities and loans secured
by 1-4 family residential properties that are based on anticipated cash
flows.
(3) Prime-priced loans and investments are considered as 1 to 3 month assets.
(4) Savings accounts: one half of the level of Merit savings accounts, which
reprice against changes in the Federal Reserve Discount rate, are
classified as three months or less maturities. Managements' analysis of
changes in levels indicate that changes in this rate are approximately half
as often as changes in other market rates. The balance of these accounts
and other savings accounts are classified as four months to one year
maturities, reflecting the lagging period that historically exists in rates
paid on passbook and savings accounts.
(5) Other deposits: Time deposits are classified by contractual maturity or
repricing frequency. NOW accounts are classified as four months to one year
maturities. The balance of deposits are considered less than three month
maturities, including all money market deposit accounts. The interest rate
sensitivity assumptions presented for these deposits are based on
historical and current experiences regarding balance retention and interest
rate repricing behavior.
(6) Non-interest bearing deposit liabilities were approximately $132.6 million
at March 31, 1996.
23
<PAGE>
Capital Resources and Liquidity
- -------------------------------
The following summarizes the minimum capital requirements and capital position
at March 31, 1996:
<TABLE>
<CAPTION>
Capital Position Minimum
at March 31, 1996 Capital Requirements
----------------- --------------------
Bank Only Consolidated
--------- -------------
<S> <C> <C> <C>
Total Capital
to Risk-Weighted Assets 13.32% 14.76% 10%
Tier 1 Capital
to Risk-Weighted Assets 12.06 13.50 6
Tier 1 Capital to Average
Assets (Leverage Ratio) 7.60 8.53 5(1)
</TABLE>
(1) Regulatory authorities require all but the most highly rated banks and bank
holding companies to have a leverage ratio of at least between 4.0% -5.0%.
The Company believes that its cash and cash equivalents of $64 million in
addition to its securities available for sale of $169.9 million at March 31,
1996 are sufficient to meet both the funding needs of its borrowers and the
liquidity requirements of its depositors.
24
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of matters to a vote of security holders.
- -------------------------------------------------------------
The Company held its Annual Meeting of Shareholders on May 2, 1996. The
following matters were approved by the Company's shareholders at the meeting:
(1) Election of directors for three year terms expiring in 1999.
The total shares outstanding on the record date of March 29, 1996 were
3,918,404.755.
Individually votes cast were as follows:
<TABLE>
<CAPTION>
Votes FOR Votes WITHHELD
--------- --------------
<S> <C> <C>
Robert M. Bowman 2,860,415 1,706
T. Jefferson Cunningham III 2,860,312 1,809
Robert R. Fraleigh 2,860,290 1,832
Other Directors continuing: Term expires in
---------------
R. Abel Garraghan 1997
Warren R. Marcus 1997
Robert J. Marvin 1997
Jack A. McEnroe 1997
Lewis J. Ruge 1997
James R. Williams 1997
H. Todd Brinckerhoff 1998
Edward vK. Cunningham, Jr. 1998
Tyler Dann 1998
Robert L. Patrick 1998
John Charles VanWormer 1998
</TABLE>
Item 5. Other Information
- --------------------------
On May 2, 1996, at the Organizational Meeting of the Board of Directors, the
Board amended Section 801 of the Company's bylaws to eliminate the requirement
that Sections 103, 207, 209, 210 and 801 may be amended or repealed, in whole or
in part, only by vote of 80% of the entire Board of Directors. By doing so, any
or all of the Company's bylaws may be amended or repealed by a majority vote of
the entire Board of Directors.
Item 6(a). Exhibits
- --------------------
Exhibit 3.2 Bylaws, as amended, of Hudson Chartered Bancorp, Inc.
(filed herewith).
Exhibit 27 Financial Data Schedule
25
<PAGE>
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: May 10, 1996 /s/ Paul A. Maisch
------------------
Paul A. Maisch
Duly Authorized Officer and
Principal Financial Officer
26
<PAGE>
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: May 10, 1996 ___________________________
Paul A. Maisch
Duly Authorized Officer and
Principal Financial Officer
27
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
3.2 Bylaws, as amended, of Hudson Chartered Bancorp, Inc.
27 Financial Data Schedule
<PAGE>
EXHIBIT 3.2
- -----------
BYLAWS
------
OF
--
HUDSON CHARTERED BANCORP, INC.
------------------------------
These Bylaws are supplemental to the New York Business Corporation Law
and other applicable provisions of law, as the same shall from time to time be
in effect.
ARTICLE I. MEETINGS OF SHAREHOLDERS.
- ---------- -------------------------
Section 101. Place of Meetings. All meetings of the shareholders
------------ ------------------
shall be held at such place or places, within or without the State of New York,
as shall be determined by the Board of Directors from time to time.
Section 102. Annual Meetings. The annual meeting of the shareholders
------------ ----------------
for the election of Directors and the transaction of such other business as may
properly come before the meeting shall be held at such date or hour as may be
fixed by the Board of Directors. Any business which is a proper subject for
shareholder action may be transacted at the annual meeting, irrespective of
whether the notice of said meeting contains any reference thereto, except as
otherwise provided by applicable law.
Section 103. Special Meetings. Special meetings of the shareholders
------------ -----------------
may be called at any time by the Chairman, the Chief Executive Officer, the
President or by the majority vote of the entire Board of Directors.
Section 104. Conduct of Shareholders' Meetings. The Chairman shall
------------ ----------------------------------
preside at all shareholders' meetings. In the absence of the Chairman, the Vice
Chairman shall preside or, in his/her absence, the President or any Officer
designated by the Board of Directors shall preside. The Officer presiding over
the shareholders' meeting may establish such rules and regulations for the
conduct of the meeting as he/she may deem to be reasonably necessary or
desirable for the orderly and expeditious conduct of the meeting. Unless the
Officer presiding over the Shareholders' meeting otherwise requires,
shareholders need not vote by ballot on any question.
ARTICLE II. DIRECTORS AND BOARD MEETINGS.
- ----------- -----------------------------
Section 201. Management by Board of Directors. The business and
------------ ---------------------------------
affairs of the Corporation shall be managed by its Board of Directors. The
Board of Directors may exercise all such powers of the Corporation and do all
such lawful acts and things as are not by statute, regulation, the Certificate
of Incorporation or these Bylaws directed or required to be exercised or done by
the shareholders.
Section 202. Nomination for Directors. Nominations for Directors to
------------ -------------------------
be elected at an annual meeting of shareholders, except those made by Directors
<PAGE>
of the Corporation, must be submitted to the Secretary of the Corporation in
writing not later than the close of business on the twentieth (20th) day
immediately preceding the date of the meeting. Such notification shall contain
the following information to the extent known to the notifying shareholder: (a)
name and address of each proposed nominee; (b) the principal occupation of each
proposed nominee; (c) the total number of shares of capital stock of the
Corporation that will be voted for each proposed nominee; (d) the name and
residence address of the notifying shareholder; and (e) the number of shares of
capital stock of the Corporation owned by the notifying shareholder. Nominations
not made in accordance herewith may, in his/her discretion, be disregarded by
the Presiding Officer of the meeting, and upon his/her instruction, the vote
tellers may disregard all votes cast for each such nominee. In the event the
same person is nominated by more than one shareholder, the nomination shall be
honored, and all shares of capital stock of the Corporation shall be counted if
at least one nomination for that person complies herewith.
Section 203. Directors Must Be Shareholders. Every Director must be a
------------ -------------------------------
shareholder of the Corporation and shall own in his/her own right the number of
shares (if any) required by law in order to qualify as such Director. Any
Director shall forthwith cease to be a Director when he/she no longer holds such
shares, which fact shall be reported to the Board of Directors by the Secretary,
whereupon the Board of Directors shall declare the seat of such Director
vacated.
Section 204. Eligibility and Mandatory Retirement. No person shall be
------------ -------------------------------------
eligible to be newly elected or appointed as a Director if he/she shall have
attained the age of seventy (70) years on or prior to the date of his/her
election. Any Director of this Corporation who attains the age of seventy (70)
years shall cease to be a Director (without any action on his/her part) at the
close of business on the day prior to the date of the next shareholders' meeting
at which Directors are to be elected regardless of whether or not his/her term
as a Director would otherwise expire at such shareholders' meeting.
Section 205. Number of Directors. The Board of Directors shall
------------ --------------------
consist of not less than five (5) nor more than twenty-five (25) shareholders of
the Corporation, as fixed by the Board of Directors.
Section 206. Classification of Directors. The Directors shall be
------------ ----------------------------
divided into three (3) classes, as nearly equal in number as possible, known as
Class 1, Class 2 and Class 3. The initial Directors of Class 1 shall serve until
the third (3rd) annual meeting of shareholders. At the third (3rd) annual
meeting of shareholders, the Directors of Class 1 shall be elected for a term of
three (3) years and, after expiration of such term, shall thereafter be elected
every three (3) years for three (3) year terms. The initial Directors of Class 2
shall serve until the second (2nd) annual meeting of shareholders. At the second
(2nd) annual meeting of shareholders, the Directors of Class 2 shall be elected
for a term of three (3) years and, after the expiration of such term, shall
thereafter be elected every three (3) years for three (3) year terms. The
initial Directors of Class 3 shall serve until the first (1st) annual meeting of
2
<PAGE>
shareholders. At the first (1st) annual meeting of shareholders, the Directors
of Class 3 shall be elected for a term of three (3) years and, after the
expiration of such term, shall thereafter be elected every three (3) years for
three (3) year terms. Each Director shall serve until his/her successor shall
have been elected and shall qualify, even though his/her term of office as
herein provided has otherwise expired, except in the event of his/her earlier
resignation, removal or disqualification.
Section 207. Vacancies. Vacancies in the Board of Directors,
------------ ----------
including vacancies resulting from an increase in the number of Directors due to
an amendment of these Bylaws, may be filled by the remaining members of the
Board, even though less than a quorum. Any Director elected to fill a vacancy in
the Board of Directors shall become a member of the same class of Directors in
which the vacancy existed; provided, however, if the vacancy results from an
increase in the number of directors, a majority of the members of the Board
shall designate such directorship as belonging to Class 1, Class 2, or Class 3
so as to maintain the three (3) classes of Directors as nearly equal in number
as possible. Each Director so elected shall be a Director until his or her
successor is elected by the shareholders, who may make such election at the next
annual meeting of the shareholders or at any special meeting duly called for
that purpose and held prior thereto.
Section 208. Compensation of Directors. No Director shall be entitled
------------ --------------------------
to any salary as such; but the Board of Directors may fix, from time to time, a
reasonable annual fee for acting as a Director and a reasonable fee to be paid
each Director for his/her services in attending meetings of the Board and
meetings of committees appointed by the Board. The Corporation may reimburse
Directors for expenses related to their duties as members of the Board.
Section 209. Regular Meetings. Regular meetings of the Board of
------------ -----------------
Directors shall be held on such day, at such hour, and at such place, consistent
with applicable law, as the Board shall from time to time designate or as may be
designated in any notice from the Secretary calling the meeting. The Board of
Directors shall meet for reorganization at the first regular meeting following
the annual meeting of shareholders at which the Directors are elected. Notice
need not be given of regular meetings of the Board of Directors which are held
at the time and place designated by the Board of Directors. If a regular meeting
is not to be held at the time and place designated by the Board of Directors,
notice of such meeting, which need not specify the business to be transacted
thereat and which may be either verbal or in writing, shall be given by the
Chairman, the Vice Chairman, the Chief Executive Officer, the President or the
Secretary to each member of the Board at least twenty-four (24) hours before the
time of the meeting.
Except as otherwise provided in the Certificate of Incorporation, a
majority of the members of the Board of Directors shall constitute a quorum for
the transaction of business. If at the time fixed for the meeting, including the
meeting to organize the new Board following the annual meeting of shareholders,
3
<PAGE>
a quorum is not present, the Directors in attendance may adjourn the meeting
from time to time until a quorum is obtained.
Except as otherwise provided in these Bylaws or the Certificate of
Incorporation, a majority of those Directors present and voting at any meeting
of the Board of Directors shall decide each matter considered. A Director cannot
vote by proxy, or otherwise act by proxy, at a meeting of the Board of
Directors.
A majority of the directors present at any meeting of the Board of
Directors, including an adjourned meeting, whether or not a quorum is present,
may adjourn such meeting to another time and place. Notice of any adjourned
meeting of the Board of Directors need not be given to any director whether or
not present at the time of the adjournment. Any business may be transacted at
any adjourned meeting that might have been transacted at the meeting as
originally called.
Section 210. Special Meetings. Special meetings of the Board of
------------ -----------------
Directors may be called by the Chairman, the Vice Chairman, the Chief Executive
Officer, the President or at the request of three (3) or more members of the
Board of Directors. A special meeting of the Board of Directors shall be deemed
to be any meeting other than the regular meeting of the Board of Directors.
Notice of the time and place of every special meeting, which need not specify
the business to be transacted thereat, shall be given and such meeting shall be
held with not less than twenty-four (24) hours' notice to each Director, which
notice shall be given on a best efforts basis by those calling the meeting.
Section 211. Reports and Records. The reports of Officers and
------------ --------------------
Committees and the records of the proceedings of all Committees shall be filed
with the Secretary of the Corporation and presented to the Board of Directors,
if practicable, at its next regular meeting. The Board of Directors shall keep
complete records of its proceedings in a minute book kept for that purpose. When
a Director shall request it, the vote of each Director upon a particular
question shall be recorded in the minutes.
ARTICLE III. COMMITTEES.
- ------------ -----------
Section 301. Committees. The following Committees of the Board of
------------ -----------
Directors shall be established by the Board of Directors in addition to any
other Committee the Board of Directors may in its discretion establish:
Executive Committee, Audit Committee, Investment Committee and Personnel and
Compensation Committee.
Section 302. Executive Committee. The Executive Committee shall
------------ --------------------
consist of the Chairman, the Vice Chairman, the President and seven other
Directors elected by the Board of Directors. The Executive Committee shall be
chaired by the Chairman and, in his/her absence, the Vice Chairman. A majority
of the members of the Executive Committee shall constitute a quorum, and actions
of a majority of those present at a meeting at which a quorum is present shall
4
<PAGE>
be actions of the Committee. Meetings of the Committee may be called at any time
by the Chairman or Secretary of the Committee, and shall be called whenever two
(2) or more members of the Committee so request in writing. The Executive
Committee shall have and exercise the authority of the Board of Directors in the
management of the business of the Corporation between the dates of regular
meetings of the Board.
Section 303. Audit Committee.
------------ ----------------
(a) There shall be a standing committee of the Corporation
known as the Audit Committee, appointed annually by the Board of Directors. Each
member of this Committee shall serve until his successor is appointed. The
Committee shall consist of not less than four (4) members of the Board of
Directors, each of whom is independent of management of the Corporation, one of
whom shall be appointed Chairman. The duties of this Committee shall be to
review the systems of internal control and the internal and external audit
functions so as to ensure the integrity of all financial statements and other
audit-related public disclosures.
(b) The internal auditor shall serve as the principal staff for
the Committee. The Committee shall review, evaluate, and discuss the findings
and performance of the internal auditor; approve the scope and reporting
mechanisms of the annual internal audit program; review, adopt, and ensure
appropriate follow-up on all audit reports; and monitor the audit department in
complying with its audit program and reporting schedule.
(c) The Audit Committee, upon its own recommendation and with
the approval of the Board of Directors, shall employ a qualified firm of
Certified Public Accountants to make an examination and audit of the Corporation
at least once a year. The Committee shall annually approve the scope of the
external audit engagement after assuring itself that the engagement addresses
the applicable requirements of 12 CFR Part 363 and other audit-related
regulations; review with the external auditor significant accounting policies
and generally accepted accounting principles and their effect on the
Corporation; review, evaluate, and discuss the findings and performance of the
external auditor; review any reports issued under 12 CFR Part 363 and the basis
for these reports; review with management and the external auditor the
Corporation's compliance with laws and regulations and their assessments of the
adequacy of internal controls; and oversee and evaluate management's
effectiveness at implementing policies with respect to internal controls.
(d) All meetings of the Audit Committee shall be recorded in
writing and reported to the Board of Directors at its next meeting for
ratification. At the conclusion of each meeting, management may be excused to
provide the opportunity for the Committee to discuss issues privately with the
internal auditor and/or the external auditors.
5
<PAGE>
Section 304. Investment Committee. There shall be a standing
------------ ---------------------
committee known as the Investment Committee of the Board of Directors appointed
annually by the Board of Directors. This Committee shall serve until their
successors are appointed and consist of at least three (3) directors, a majority
of whom are not active officers of the Corporation and one of whom shall be
appointed Chairman of this Committee. The Investment Committee shall be
empowered to act with regard to asset and liability management policies of the
Corporation, compliance by the Corporation with the requirements of the
Securities and Exchange Commission, capital structure, planning and financing
for the Corporation and mergers, acquisitions and similar transactions involving
the Corporation. All meetings of this Committee shall be recorded in writing and
reported to the Board of Directors at its next meeting for ratification.
Section 305. Personnel and Compensation Committee. There shall be a
------------ -------------------------------------
standing committee known as the Personnel and Compensation Committee appointed
annually by the Board of Directors. Each member shall serve until his successor
is appointed and shall consist of at least three (3) members of the Board of
Directors, none of whom shall be active officers of the Corporation. This
Committee is empowered to set and maintain employment policies and procedures, a
performance appraisal system, and to fix compensation levels for all Officers
appointed by the Board of Directors. All meetings of this Committee shall be
recorded in writing and reported to the Board of Directors at its next meeting
for ratification.
Section 306. Appointment of Committee Members. The Board of Directors
------------ ---------------------------------
shall elect the members of the Committees and, except as otherwise provided
herein, the Chairman and Vice Chairman of each such Committee to serve until the
next annual meeting of shareholders. The Board of Directors may appointment,
from time to time, other Committees, for such purposes and with such powers as
the Board may determine.
Section 307. Organization and Proceedings. Each Committee of the
------------ -----------------------------
Board of Directors shall effect its own organization by the appointment of a
Secretary and such other Officers, except the Chairman and Vice Chairman, as it
may deem necessary. A record of proceedings of all Committees shall be kept by
the Secretary of such Committee and filed and presented as provided in Section
211 of these Bylaws.
ARTICLE IV. OFFICERS.
- ----------- ---------
Section 401. Officers. The Officers of the Corporation shall be a
------------ ---------
Chairman, a Chief Executive Officer, a President, one (1) or more Vice
Presidents, a Secretary, a Treasurer, and such other Officers and Assistant
Officers as the Board of Directors may from time to time deem advisable. Except
for the President, Secretary, and Treasurer, the Board may refrain from filling
any of the said offices at any time and from time to time. The same individual
may hold any two (2) or more offices except both the offices of President and
Secretary. The following Officers shall be elected by the Board of Directors at
6
<PAGE>
the time, in the manner and for such terms as the Board of Directors from time
to time shall determine: Chairman, Chief Executive Officer, President, one or
more Vice Presidents, Secretary, and Treasurer. Any Officer may be removed at
any time, with or without cause, and regardless of the term for which such
Officer was elected, but without prejudice to any contract right of such
Officer. Each Officer shall hold his office for the period for which he was
elected or appointed by the Board unless he shall resign, becomes disqualified,
or be removed at the pleasure of the Board of Directors.
Section 402. Chairman and Vice Chairman. The Board of Directors shall
------------ ---------------------------
elect a Chairman at the first regular meeting of the Board following each annual
meeting of shareholders at which Directors are elected. The Chairman shall be a
member of the Board of Directors, shall be an ex-officio member of all
Committees of the Board of Directors except for the Audit Committee, shall
preside at the meetings of the Board and perform such other duties as may be
prescribed by the Board of Directors. In the absence of the Chairman, a Vice
Chairman or, in the absence of both, the Chief Executive Officer or the
President shall preside at all such meetings.
Section 403. Chief Executive Officer. The Chairman shall initially be
------------ ------------------------
the Chief Executive Officer of the Corporation and thereafter, at such time as
the Board of Directors shall determine, the Chief Executive Officer shall be
such officer and director as the Board of Directors shall designate from time to
time. The Chief Executive Officer shall be responsible for carrying out the
policies adopted by the Board of Directors and having all orders and resolutions
of the Board of Directors carried into effect, and shall report directly to the
Board of Directors. The Chief Executive Officer shall be an ex-officio member of
all Committees of the Board of Directors except for the Audit Committee. All
Officers and Assistant Officers of the Corporation shall report directly or
indirectly to the Chief Executive Officer. The Chief Executive Officer shall
execute on behalf of the Corporation and may affix or cause to be affixed a seal
to all authorized documents and instruments requiring such execution, except to
the extent that signing and execution thereof shall have been delegated to some
other Officer or Agent of the Corporation by the Board of Directors or by the
Chief Executive Officer or the President.
Section 404. President. The President shall be a director of the
------------ ----------
Corporation and have such powers and perform such duties as may be provided for
herein and as may be assigned from time to time by the Board of Directors or the
Chief Executive Officer. The President shall be an ex-officio member of all
Committees of the Board of Directors except for the Audit Committee. In the
event of incapacity, death, resignation or extended absence of the Chief
Executive Officer, the President shall perform the duties of the Chief Executive
Officer. The President shall execute on behalf of the Corporation and may affix
or cause to be affixed a seal to all authorized documents and instruments
requiring such execution, except to the extent that signing and execution
thereof shall have been delegated to some other Officer or Agent of the
Corporation by the Board of Directors or by the Chief Executive Officer or the
President.
7
<PAGE>
Section 405. Vice Presidents. The Vice Presidents shall perform such
------------ ----------------
duties, do such acts and be subject to such supervision as may be prescribed by
the Board of Directors, the Chief Executive Officer or the President. In the
event of the absence or disability of the President or his/her refusal to act,
the Vice Presidents, in the order of their rank, and within the same rank in the
order of their authority, shall perform the duties and have the powers and
authorities of the President, except to the extent inconsistent with applicable
law.
Section 406. Secretary. The Secretary shall act under the supervision
------------ ----------
of the Chief Executive Officer or such other Officers as the Chief Executive
Officer may designate. Unless a designation to the contrary is made at a
meeting, the Secretary shall attend all meetings of the Board of Directors and
all meetings of the shareholders and record all of the proceedings of such
meetings in a book to be kept for that purpose, and shall perform like duties
for the standing Committees when required by these Bylaws or otherwise. The
Secretary shall give, or cause to be given, notice of all meetings of the
shareholders and of the Board of Directors. The Secretary shall keep a seal of
the Corporation, and, when authorized by the Board of Directors or the Chief
Executive Officer, cause it to be affixed to any documents and instruments
requiring it. The Secretary shall perform such other duties as may be prescribed
by the Board of Directors, Chief Executive Officer, or such other Supervising
Officer as the Chief Executive Officer may designate.
Section 407. Treasurer. The Treasurer shall act under the supervision
------------ ----------
of the Chief Executive Officer or such other Officer as the Chief Executive
Officer may designate. The Treasurer shall have custody of the Corporation's
funds and such other duties as may be prescribed by the Board of Directors,
Chief Executive Officer or such other Supervising Officer as the Chief Executive
Officer may designate.
Section 408. Assistant Officers. Unless otherwise provided by the
------------ -------------------
Board of Directors, each Assistant Officer shall perform such duties as shall be
prescribed by the Board of Directors, the Chairman, the Chief Executive Officer,
the President or the Officer to whom he/she is an Assistant. In the event of the
absence or disability of an Officer or his/her refusal to act, his/her assistant
Officer shall, in the order of their rank, and within the same rank in the order
of their seniority, have the powers and authorities of such Officer.
Section 409. Compensation. The salaries and compensation of all
------------ -------------
Officers and Assistant Officers appointed or elected by the Board of Directors
shall be fixed by or in the manner designated by the Board of Directors, and the
salaries and compensation of any other Officer shall be fixed by or in the
manner designated by the Chief Executive Officer.
Section 410. Execution of Instruments; Mechanical Endorsements.
------------ --------------------------------------------------
Checks, notes, drafts, other commercial instruments, assignments, guarantees of
signatures and contracts (except as otherwise provided herein or by law) shall
8
<PAGE>
be executed by the Chairman, the Chief Executive Officer, the President, any
Vice President or such officers or employees or agents as the Board of Directors
or any of such designated officers may direct. Such designated officers or the
Secretary may authorize any endorsement on behalf of the Corporation to be made
by such mechanical means or stamps as any of such officers may seem appropriate.
Section 411. General Powers. The Officers are authorized to do and
------------ ---------------
perform much corporate acts as are necessary in the carrying on of the business
of the Corporation, subject always to the direction of the Board of Directors.
ARTICLE V. INDEMNIFICATION.
- ---------- ----------------
Section 501. Mandatory Indemnification. The Corporation shall, to the
------------ --------------------------
full extent permitted by the New York Business Corporation Law, as amended from
time to time, indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that he/she is or was a Director, Officer or Employee of the Corporation or of
any of its subsidiaries. Such right of indemnification shall not be deemed
exclusive of any other rights to which such person may be entitled apart from
the foregoing provisions. Except to the extent otherwise required by law, any
repeal or modification of the rights granted pursuant to this Section 501 shall
not affect any rights or obligations then existing or thereafter arising with
respect to any state of facts then or theretofore existing or thereafter arising
or any action, suit or proceeding theretofore or thereafter brought or
threatened based in whole or in part upon any such state of facts.
Section 502. Optional Indemnification. In all situations in which
------------ -------------------------
Indemnification is not mandatory under Section 501 hereof, the Corporation may,
to the full extent permitted by the New York Business Corporation Law, as
amended from time to time, indemnify all persons whom it is empowered to
indemnify pursuant thereto.
Section 503. Advancement of Expenses. Expenses incurred by a person
------------ ------------------------
in connection with any action or proceeding as to which indemnification may be
given under Sections 501 or 502 of this Article V may be paid by the Corporation
in advance of the final disposition of such action or proceeding upon (a)
receipt of any undertaking by or on behalf of such person to repay such
advancement in the event that such director or officer is ultimately found not
to be entitled to indemnification as authorized by this Article V and (b)
approval by the Board of Directors acting by a quorum consisting of Directors
who are not parties to such action or proceeding or, if such a quorum is not
obtainable, then approval by shareholders. To the extent permitted by law, the
Board of Directors or, if applicable, the shareholders shall not be required
under this Section 503 to find that the person has met the applicable standard
of conduct provided by law for indemnification in connection with such action or
proceeding.
9
<PAGE>
Section 504. Insurance. The Board of Directors in its discretion
------------ ----------
shall have the power to purchase and maintain insurance in accordance with, and
subject to, the provisions of Section 726 of the New York Business Corporation
Law or any successor provision thereto.
ARTICLE VI. SHARES OF CAPITAL STOCK.
- ----------- ------------------------
Section 601. Authority to Sign Share Certificates. Every share
------------ -------------------------------------
certificate of the Corporation shall be signed by the President and by the
Secretary or one of the Assistant Secretaries. Certificates may be signed by a
facsimile signature of the President and the Secretary or one of the Assistant
Secretaries of the Corporation, provided that the certificate is countersigned
by a transfer agent or registered by a registrar other than the Corporation or
its employees, or that at the time of such facsimile signature the shares of the
Corporation are listed on a registered national securities exchange.
Section 602. Lost or Destroyed Certificates. Any person claiming a
------------ -------------------------------
share certificate to be lost, destroyed or wrongfully taken shall receive a
replacement certificate if such person shall have: (a) requested such
replacement certificate before the Corporation has notice that the shares have
been acquired by a bona fide purchaser; (b) provided the Corporation with an
indemnity agreement satisfactory in form and substance to the Board of
Directors, or the President or the Secretary; and (c) satisfied any other
reasonable requirements (including providing an affidavit and a surety bond)
fixed by the Board of Directors, or the President or the Secretary.
ARTICLE VII. GENERAL.
- ------------ --------
Section 701. Fiscal Year. The fiscal year of the Corporation shall
------------ ------------
begin on the first (1st) day of January in each year and end on the thirty-first
(31st) day of December in each year.
Section 702. Record Date. The Board of Directors may fix anytime
------------ ------------
whatsoever (but not more than fifty (50) days nor less than ten (10) days) prior
to the date of any meeting of shareholders, or the date for the payment of any
dividend or distribution, or the date for the allotment of rights, or the date
when any change or conversion or exchange of shares will be made or will go into
effect, as a record date for the determination of the shareholders entitled to
notice of, or to vote at, any such meetings, or entitled to receive payment of
any such dividend or distribution, or to receive any such allotment of rights,
or to exercise the rights in respect to any such change, conversion or exchange
of shares.
Section 703. Absentee Participation in Meetings. One (1) or more
------------ -----------------------------------
Directors may participate in a meeting of the Board of Directors, or of a
Committee of the Board, by means of a conference telephone or similar
communications equipment, by means of which all persons participating in the
meeting can hear each other.
10
<PAGE>
Section 704. Emergency Bylaws. In the event of any emergency
------------ -----------------
resulting from a nuclear attack or similar disaster, and during the continuance
of such emergency, the following Bylaw provisions shall be in effect,
notwithstanding any other provisions of the Bylaws:
(a) A meeting of the Board of Directors or of any Committee thereof
may be called by any Officer or Director upon one (1) hour's notice to all
persons entitled to notice whom, in the sole judgment of the notifier, it is
feasible to notify;
(b) The Director or Directors in attendance at the meeting of the
Board of Directors or of any Committee thereof shall constitute a quorum; and
(c) These Bylaws may be amended or repealed, in whole or in part, by
a majority vote of the Directors attending any meeting of the Board of
Directors, provided such amendment or repeal shall only be effective for the
duration of such emergency.
Section 705. Severability. If any provision of these Bylaws is
------------ -------------
illegal or unenforceable as such, such illegality or unenforceability shall not
affect any other provision of these Bylaws and such other provisions shall
continue in full force and effect.
Section 706. Voting of Stock Owned by the Corporation. Powers of
------------ -----------------------------------------
attorney, proxies, waivers of notice of meeting, consents and other instruments
relating to securities owned by the Corporation may be executed in the name or
and on behalf of the Corporation by the Chief Executive Officer or, in the
absence of the Chief Executive Officer, the President or such other officers or
employees or agents as the Board of Directors or any of such designated officers
may direct. Any such officer may, in the name of and on behalf of the
Corporation, take all such action as any such officer may deem advisable to vote
in person or by proxy at any meeting of security holders of any corporation in
which the Corporation may own securities and at any such meeting shall possess
and may exercise any and all rights and powers incident to the ownership of such
securities and which, as the owner thereof, the Corporation might have exercised
and possessed if present. The Board of Directors may from time to time confer
like powers upon any other person or persons.
ARTICLE VIII. AMENDMENT OR REPEAL.
- ------------- --------------------
Section 801. Amendment or Repeal by the Board of Directors. These
------------ ----------------------------------------------
Bylaws may be amended or repealed, in whole or in part, by a majority vote of
the entire Board of Directors, at any regular or special meeting of the Board
duly convened. Notice need not be given of the purpose of the meeting of the
Board of Directors at which the amendment or repeal is to be considered.
11
<PAGE>
Section 802. Recording Amendments and Repeals. The text of all
------------ ---------------------------------
amendments and repeals to these Bylaws shall be attached to the Bylaws with a
notation of the date and vote of such amendment or repeal.
<TABLE>
<CAPTION>
Date Amended
Section Involved or Repealed Approved By
---------------- ------------ -----------
<S> <C> <C>
801 May 2, 1996 Board of Directors
</TABLE>
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 32,805
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 31,238
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 169,918
<INVESTMENTS-CARRYING> 16,480
<INVESTMENTS-MARKET> 16,612
<LOANS> 429,243
<ALLOWANCE> 8,781
<TOTAL-ASSETS> 700,963
<DEPOSITS> 634,412
<SHORT-TERM> 0
<LIABILITIES-OTHER> 3,911
<LONG-TERM> 1,886
0
4,930
<COMMON> 55,824
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 700,963
<INTEREST-LOAN> 9,746
<INTEREST-INVEST> 2,539
<INTEREST-OTHER> 418
<INTEREST-TOTAL> 12,703
<INTEREST-DEPOSIT> 5,138
<INTEREST-EXPENSE> 5,165
<INTEREST-INCOME-NET> 7,538
<LOAN-LOSSES> 600
<SECURITIES-GAINS> 56
<EXPENSE-OTHER> 5,389
<INCOME-PRETAX> 3,094
<INCOME-PRE-EXTRAORDINARY> 2,013
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,013
<EPS-PRIMARY> .48
<EPS-DILUTED> .46
<YIELD-ACTUAL> 8.15
<LOANS-NON> 5,191
<LOANS-PAST> 286
<LOANS-TROUBLED> 235
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 8,770
<CHARGE-OFFS> 673
<RECOVERIES> 84
<ALLOWANCE-CLOSE> 8,781
<ALLOWANCE-DOMESTIC> 7,993
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 788
</TABLE>
