<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 JUNE 30, 1998
-------------
/ / 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 1-13213
-------
PREMIER NATIONAL 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.
14,205,244 shares* of Common Stock outstanding, par value $.80 per share, at
July 31, 1998.
*Includes 7,024,566 shares of Progressive Bancorp, Inc. Common stock converted
as of July 17, 1998 merger date.
<PAGE>
PREMIER NATIONAL 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 12
Item 3 - Quantitative and Qualitative Disclosures About
Market Risk 26
PART II
Item 4 - Submission of Matters to a Vote of Security Holders 27
Item 5 - Other Information 28
Item 6(a) Exhibits 33
Item 6(b) Reports on Form 8-K 33
Signatures 34
<PAGE>
Part 1
Item 1: Financial information
PREMIER NATIONAL BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(dollars in thousands)
(Unaudited) June 30, December 31,
1998 1997
----------- ------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 35,868 $ 29,075
Federal funds sold 43,800 17,400
--------- ---------
Total cash and cash equivalents 79,668 46,475
Securities
Available for sale, at fair value 193,900 171,579
Held to maturity, at cost,(fair value of $23,154 in 1998 19,840 24,245
and $24,772 in 1997)
Regulatory securities (at cost which approximates fair value) 2,843 2,755
Loans held for sale 120 216
Loans(see notes)
Gross loans 456,905 467,021
Allowance for loan losses (9,868) (9,530)
--------- ---------
Net loans 447,037 457,491
Premises and equipment, net 17,935 15,592
Accrued income 5,540 5,504
Other assets 7,151 7,667
--------- ---------
TOTAL ASSETS $ 774,034 $ 731,524
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Non-interest bearing $ 150,699 $ 151,002
Interest bearing 543,213 503,103
--------- ---------
Total deposits 693,912 654,105
Notes payable 1,725 1,725
Other liabilities 3,733 5,336
--------- ---------
TOTAL LIABILITIES 699,370 661,166
STOCKHOLDERS' EQUITY (see notes)
Preferred stock
($.01 par value; 5,000,000 shares authorized; none issued) - -
Common stock ($.80 par value; 20,000,000 shares authorized) 5,739 5,729
7,173,794 shares issued less 3,286 treasury shares in 1998 and 7,161,278 shares
issued less 85,015 treasury shares in 1997
Additional paid-in capital 39,271 38,979
Retained earnings 28,832 27,042
Accumulated other comprehensive income 899 966
Treasury stock (77) (2,358)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 74,664 70,358
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' $ 774,034 $ 731,524
EQUITY ========= =========
</TABLE>
See notes to condensed consolidated financial statements.
- 1 -
<PAGE>
PREMIER NATIONAL BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND EXPENSE
(dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Three Six Six
Months Ended Months Ended Months Ended Months Ended
6/30/98 6/30/97 6/30/98 6/30/97
Interest income: ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Loans, including fees $ 10,159 $ 10,203 $ 20,473 $ 20,154
Federal funds sold 357 369 647 549
Taxable securities 2,108 1,804 4,013 3,622
Tax-exempt securities 914 768 1,809 1,511
---------- ---------- ---------- ----------
Total interest income 13,538 13,144 26,942 25,836
Interest expense 5,546 5,237 10,924 10,202
---------- ---------- ---------- ----------
Net interest income 7,992 7,907 16,018 15,634
Provision for loan losses 600 600 1,200 1,300
---------- ---------- ---------- ----------
Net interest income
after provision for loan losses 7,392 7,307 14,818 14,334
---------- ---------- ---------- ----------
Noninterest income:
Service charges and fees 926 1,015 1,831 2,035
Trust earnings 239 182 459 345
Gains on sales of securities, net 0 25 51 34
Gains on sales of loans, net 51 55 105 79
Other income 278 267 524 628
---------- ---------- ---------- ----------
Total noninterest income 1,494 1,544 2,970 3,121
---------- ---------- ---------- ----------
GROSS OPERATING INCOME 8,886 8,851 17,788 17,455
---------- ---------- ---------- ----------
Noninterest expense:
Salaries and employee benefits 2,975 3,093 6,023 6,113
Net occupancy and equipment expense 1,004 986 2,035 2,055
Other real estate owned 19 21 62 57
Merger expenses 710 990
Other expenses 1,240 1,365 2,528 2,656
---------- ---------- ---------- ----------
Total noninterest expense 5,948 5,465 11,638 10,881
---------- ---------- ---------- ----------
Income before income taxes 2,938 3,386 6,150 6,574
Income taxes 969 1,121 2,082 2,170
---------- ---------- ---------- ----------
Net income $ 1,969 $ 2,265 $ 4,068 $ 4,404
========== ========== ========== ==========
Weighted average common shares outstanding:
Basic 7,164,337 7,039,500 7,129,333 7,071,000
Diluted 7,370,452 7,263,000 7,330,028 7,291,500
Per common share data:
Basic earnings $ 0.28 $ 0.32 $ 0.57 $ 0.62
Diluted earnings 0.27 0.31 0.55 0.60
Cash dividends declared (1) 0.00 0.12 0.13 0.24
Book value at period end 10.41 9.34
</TABLE>
(1) Dividends with respect to the second quarter of 1998 were declared on July
10, 1998, payable on July 31, 1998.
See notes to condensed consolidated financial statements.
- 2 -
<PAGE>
PREMIER NATIONAL BANCORP, INC. AND SUBSIDIARIES FORM 10-Q
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six
Months Ended
6/30/98 6/30/97
----------- ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 4,068 $ 4,404
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 1,200 1,300
Depreciation and amortization 887 967
Amortization of security premiums and
accretion of discounts 202 118
Amortization of core deposit intangible 48 58
Realized gains on sales of securities and loans (156) (113)
Deferred income tax benefits (140) (112)
Increase in accrued income (36) 0
Other, net (227) (1,456)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 5,846 5,166
-------- --------
INVESTING ACTIVITIES
Proceeds from sales of securities available for sale 6,055 33,924
Proceeds from maturities of securities available for sale 7,491 2,500
Proceeds from maturities of securities held to maturity 8,076 10,382
Purchases of securities available for sale (35,527) (51,169)
Purchases of securities held to maturity (4,363) (4,742)
Sales of loans 5,442 3,117
Net (increase) decrease in loans 4,013 (15,542)
Purchases of premises and equipment (3,230) (692)
Proceeds from sale of OREO 198 312
-------- --------
NET CASH USED BY INVESTING ACTIVITIES (11,845) (21,910)
-------- --------
FINANCING ACTIVITIES
Net increase in deposit accounts 39,807 31,688
Proceeds from issuance of common stock from treasury 1,394 910
Repurchase of common stock (159) (3,005)
Cash dividends- common (1,850) (1,627)
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 39,192 27,966
-------- --------
INCREASE IN CASH AND CASH EQUIVALENTS 33,193 11,222
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 46,475 46,409
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 79,668 $ 57,631
======== ========
CASH PAID FOR:
Interest $ 10,731 $ 10,259
Taxes 1,714 1,902
NON-CASH ITEMS
Transfer from loans to OREO $ 438 $ 964
Net change in unrealized gains (losses) recorded
on securities available for sale (113) (20)
Change in deferred taxes on net unrealized (gains)
losses recorded on securities available for sale 46 8
Purchase of land by issuance of shares 300
</TABLE>
See notes to condensed consolidated financial statements.
- 3 -
<PAGE>
PREMIER NATIONAL BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(dollars in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Accumulated
Additional Other
Common Paid-in Retained Comprehensive Treasury
Stock Capital Earnings Income Stock
-------- --------- -------- -------------- ---------
<S> <C> <C> <C> <C> <C>
Balance January 1, 1998 $ 5,729 $ 38,979 $ 27,042 $ 966 ($ 2,358)
Net income 4,068
Cash dividends declared on common stock ($0.13 per share) (1) (930)
Dividend reinvestment and stock purchase plan - 26,302 shares 10 292 734
Options exercised - 60,601 shares 58
Purchase of land by issuances of treasury shares- 14,544 shares 300
Effect of Treasury stock issued at less than cost (1,348) 1,348
Purchase of treasury stock - 7,030 shares pursuant to employee
stock option exercises (159)
Net change in unrealized gain on securities, after tax (67)
----------------------------------------------------------------
Balance June 30, 1998 $ 5,739 $ 39,271 $ 28,832 $ 899 ($77)
================================================================
Balance January 1, 1997 $ 3,854 $ 40,863 $ 21,830 $ 296 ($ 1,549)
Net income 4,404
Cash dividends declared on common stock ($0.24 per share) (1,696)
Dividend reinvestment and stock purchase plan - 16,059 shares 421
Options exercised - 36,541 shares 489
Effect of Treasury stock issued at less than cost (289) 289
Purchase of treasury stock - 105,148 shares (3,005)
Payments on ESOP borrowings (12)
-----------------------------------------------------------------
Balance June 30, 1997 $ 3,854 $ 40,863 $ 24,249 $ 284 ($ 3,355)
=================================================================
<CAPTION>
ESOP Total
--------- ---------
<S> <C> <C>
Balance January 1, 1998 $ 70,358
Net income 4,068
Cash dividends declared on common stock ($0.13 per share) (1) (930)
Dividend reinvestment and stock purchase plan - 26,302 shares 1,036
Options exercised - 60,601 shares 58
Purchase of land by issuances of treasury shares- 14,544 shares 300
Effect of Treasury stock issued at less than cost 0
Purchase of treasury stock - 7,030 shares pursuant to employee 0
stock option exercises (159)
Net change in unrealized gain on securities, after tax (67)
Balance June 30, 1998 $ 74,664
Balance January 1, 1997 ($129) 65,165
Net income 4,404
Cash dividends declared on common stock ($0.24 per share) (1,696)
Dividend reinvestment and stock purchase plan - 16,059 shares 421
Options exercised - 36,541 shares 489
Effect of Treasury stock issued at less than cost 0
Purchase of treasury stock - 105,148 shares (3,005)
Payments on ESOP borrowings 22 22
(12)
--------------------
Balance June 30, 1997 ($107) $ 65,788
====================
</TABLE>
(1) Dividends with respect to the second quarter 1998 were declared on July 10,
1998, payable on July 31, 1998.
See notes to condensed consolidated financial statements.
-4-
<PAGE>
FORM 10-Q
PREMIER NATIONAL BANCORP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Merger
- ------
On July 17, 1998, Progressive Bank, Inc. ("Progressive") merged with and into
Hudson Chartered Bancorp, Inc.(the "Company"). The resulting bank holding
company was re-named Premier National Bancorp, Inc. (the "Continuing
Corporation"). In addition, Pawling Savings Bank, Progressive's wholly owned
subsidiary, merged with and into First National Bank of the Hudson Valley
("Hudson Valley"), a wholly-owned subsidiary of the Company, under the national
bank charter of Hudson Valley and the name Premier National Bank (the "Bank").
The transaction was accounted for on the pooling of interests method. In
connection with the merger, 3,859,869 shares of Progressive common stock were
converted, at an exchange ratio of 1.82, into 7,024,566 shares of the continuing
corporation common stock.
In connection with the merger, the Company incurred during the first six months
of 1998,$990,000 in merger-related expenses or $800,000 after tax. Merger-
related expenses are expensed as incurred. In accordance with its original
estimates, the Company expects to incur an additional $3.6 million after tax in
merger-related expenses in the third quarter of 1998. Since the merger date,
the Company has established a unified management structure under common policies
and procedures and consolidated six branches. However, the Company has
experienced some delay in implementing the integration of its data processing
and related operating systems. While originally anticipated to take place in
early July, it is now anticipated the conversion will take place over the Labor
Day holiday weekend.
This delay has deferred the realization of certain anticipated merger economies,
particularly in the area of staff reduction and other expenses as the Company is
currently operating with two separate transaction and data processing systems.
While the Company continues to believe it will reach its target level of cost
savings from the merger, the schedule for implementation of the various programs
has been pushed forward approximately three months.
While there will now be little impact on third quarter results from anticipated
merger savings, it is expected such savings should become increasingly evident
in the fourth quarter of 1998 and in subsequent quarters thereafter.
As the merger was not consummated until July 17, 1998, the June 30, 1998
unaudited condensed consolidated financial statements of the Company do not
include any of the assets, liabilities or results of operations of Progressive.
At June 30, 1998, Progressive had $883,821,000 in assets and $79,752,000 in
stockholders' equity. Progressive's net income for the six months ended June
30, 1998 was $2,777,000 which was net of $900,000 in merger related expenses
after tax. See pro forma financial information elsewhere herein. The financial
statements will be restated to reflect the merger on the pooling of interests
method of accounting beginning in the third quarter of 1998.
Basis of Presentation
- ---------------------
The unaudited condensed consolidated financial statements and related notes of
Premier National Bancorp, Inc. have been prepared in accordance with Regulation
S-X under the Securities Exchange Act of 1934, as amended, and consequently the
accompanying unaudited, condensed consolidated financial statements and notes do
not contain all disclosures required by generally
5
<PAGE>
accepted accounting principles. These interim financial statements should be
read in conjunction with the audited consolidated financial statements and note
disclosures in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997.
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements contain all adjustments (consisting only of normal
recurring accruals) necessary to present fairly the Company's consolidated
financial position as of June 30, 1998 and December 31, 1997 and its
consolidated results of operations for the three and six month periods ended
June 30, 1998 and 1997 and the consolidated cash flows and changes in
consolidated stockholders' equity for the six months ended June 30, 1998 and
1997.
In preparing such financial statements, management is required to make estimates
and assumptions that affect the reported amounts of assets and liabilities as of
the dates of the consolidated statements of condition and the revenues and
expenses for the periods reported. Actual results could differ significantly
from those estimates.
Estimates that are particularly susceptible to significant change relate to the
determination of the adequacy of the allowance for loan losses and the valuation
of other real estate acquired in connection with foreclosures or in satisfaction
of loan receivables. In connection with the determination of the balances of
the allowance for loan losses and other real estate owned, management obtains
independent appraisals for significant properties, according to Bank policy or
regulation.
The results of operations for the six months ended June 30, 1998 are not
necessarily indicative of the results to be expected for the full year.
Material intercompany items and transactions have been eliminated in
consolidation. Certain reclassifications have been made to conform to current
presentation.
Forward-Looking Statements
- --------------------------
The Company has made, and may continue to make, various forward-looking
statements with respect to earnings, credit quality and other financial and
business matters for the remainder of 1998 and, in certain instances, subsequent
periods. The Company cautions that these forward-looking statements are subject
to numerous assumptions, risks and uncertainties, and that statements for
subsequent periods are subject to greater uncertainty because of the increased
likelihood of changes in underlying factors and assumptions. Actual results
could differ materially from forward-looking statements.
In addition to those factors previously disclosed by the Company and those
factors identified elsewhere herein, the following factors could cause actual
results to differ materially from such forward-looking statements: pricing
pressures on loan and deposit products; actions of competitors; changes in
economic conditions; the extent and timing of actions of the Federal Reserve
Board; customer deposit disintermediation; changes in customers' acceptance of
the Company's products and services; other normal business risks such as credit
losses, litigation, etc.; the extent and timing of legislative and regulatory
actions and reform, estimated cost savings from recent or anticipated
acquisitions and mergers cannot be fully realized within the expected time
frame, revenues following such transactions are lower than
6
<PAGE>
expected, and costs or difficulties related to the integration of acquired and
existing businesses are greater than expected or system costs related to the
year 2000 are greater than expected.
The Company's forward-looking statements speak only as of the date on which such
statements are made. By making any forward-looking statements, the Company
assumes no duty to update them to reflect new, changing or unanticipated events
of circumstances.
PENDING ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued three new accounting
standards having implementation dates subsequent to June 30, 1998.
Implementation of those standards, individually and in the aggregate, will not
have any significant affect on the Company's or Premier's financial condition of
Results of Operations. The new accounting standards are:
. Statement of Financial Accounting Standards (SFAS) No. 131, "Disclosures
About Segments of an Enterprise and Related Information" requires
disclosures regarding reportable segments of an enterprise. Information
required to be disclosed for each reported segment includes among other
factors used to identify segments, selected financial data; profit and
loss, revenues and other operating and non-operating expenses. In
accordance with the effective date of this SFAS, the disclosures will be
included in the Company's 1998 Annual Report on Form 10-K.
. SFAS No. 132, "Disclosures About Pensions and Other Postretirement
Benefits", amends disclosure requirements related to pension and other
postretirement benefits previously required under Statements of Financial
Accounts Standards Nos. 87, 88 and 106. SFAS 132 does not change the
measurement or recognition of these plans.
. SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities" requires that entities recognize all derivatives as either
assets or liabilities in the statement of financial condition and measure
those instruments at fair value. Under SFAS 133, an entity may designate
certain derivatives as a hedge of exposure. Depending upon the
effectiveness of the hedge and/or the transaction being hedged, any changes
in the fair value of the derivative instrument is either recognized in
current year earnings in the current year, deferred to future periods, or
recognized in other comprehensive income. Changes in the fair value of all
derivative instruments not recognized under hedge accounting will be
recognized in current year earnings. Because held to maturity securities
will not be available for hedge accounting treatment, when adopted, SFAS
133 will allow a one-time transfer of securities currently classified as
held to maturity into the available for sale category, without calling into
question management's previous intent and ability to hold other securities
to maturity. Adoption of SFAS 133 is required for all fiscal quarters or
fiscal years beginning after June 15, 1999.
7
<PAGE>
Loans
- -----
Major classifications of loans (excluding loans held for sale) are summarized
below (in thousands):
At June 30, 1998 At December 31, 1997
---------------- --------------------
Commercial and industrial $78,346 $79,138
Consumer installment 89,397 88,375
Real estate - construction 12,657 10,871
Real estate - mortgage 147,118 147,327
(Commercial)
Real estate - mortgage 125,003 133,460
(Residential & Home Equity)
Other loans 4,384 7,850
-------- --------
Total $456,905 $467,021
======== ========
Deposits
- --------
Major classifications of deposits are summarized below (in thousands):
At June 30, 1998 At December 31, 1997
---------------- --------------------
Demand deposits $150,699 $151,002
NOW accounts 57,642 49,921
Money market deposit accounts 66,598 59,028
Savings accounts 219,342 207,522
Time deposits under $100,000 137,095 131,815
Time deposits over $100,000 62,536 54,817
-------- --------
Total $693,912 $654,105
======== ========
8
<PAGE>
Securities
- ----------
Securities consist of the following (in thousands):
<TABLE>
<CAPTION>
At June 30, 1998 At December 31, 1997
------------------------------------ ------------------------------------
Carrying Amortized Fair Carrying Amortized Fair
Amount Cost Value Amount Cost Value
------------------------------------ ------------------------------------
<S> <C> <C> <C> <C> <C> <C>
US Treasury:
Available for Sale $ 46,664 $ 46,425 $ 46,664 $ 40,615 $ 40,386 $ 40,615
US Gov't Agencies:
Available for Sale 28,545 28,368 28,545 32,409 32,270 32,409
Obligations of States and
Political Subdivisions:
Available for Sale 83,324 82,170 83,324 70,946 69,686 70,946
Held to Maturity 19,765 19,765 20,236 24,170 24,170 24,669
Other Securities:
Available for Sale 35,367 35,412 35,367 27,609 27,599 27,609
Held to Maturity 75 75 75 75 75 75
Regulatory Securities 2,843 2,843 2,843 2,755 2,755 2,755
--------------------------------------------------------------------------
Total Securities $216,583 $215,058 $217,054 $198,579 $196,941 $199,078
==========================================================================
Total Available for Sale $193,900 $192,375 $193,900 $171,579 $169,941 $171,579
Total Held to Maturity 19,840 19,840 20,311 24,245 24,245 24,744
Regulatory Securities 2,843 2,843 2,843 2,755 2,755 2,755
--------------------------------------------------------------------------
Total Securities $216,583 $215,058 $217,054 $198,579 $196,941 $199,078
==========================================================================
</TABLE>
At June 30, 1998 the net unrealized gain on securities available for sale (net
of tax effect of $626,000) that was included in accumulated other comprehensive
income, a separate component of stockholders' equity, was $899,000.
9
<PAGE>
Earnings per common share (1997 data has been adjusted for the three for two
- -------------------------
stock split paid as a 50% stock dividend declared September 1997.)
Basic earnings per common share is computed as follows (in thousands, except per
share data):
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------- ---------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average common shares
outstanding 7,164 7,040 7,129 7,071
Total basic shares 7,164 7,040 7,129 7,071
====== ====== ====== ======
Net income $1,969 $2,265 $4,068 $4,404
====== ====== ====== ======
Basic earnings per common share $0.28 $0.32 $0.57 $0.62
====== ====== ====== ======
</TABLE>
Diluted earnings per common share is computed as follows (in thousands, except
per share data):
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
--------------- --------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average common shares
outstanding 7,164 7,040 7,129 7,071
Net effect of dilutive stock 206 223 201 221
options ------ ------ ------ ------
Total diluted shares 7,370 7,263 7,330 7,292
====== ====== ====== ======
Net income $1,969 $2,265 $4,068 $4,404
====== ====== ====== ======
Diluted earnings per
common share $0.27 $0.31 $0.55 $0.60
====== ====== ====== ======
</TABLE>
Stockholders' Equity
- --------------------
Authorized common stock, $.80 par value, is 20,000,000 share and was increased
to 50,000,000 shares as of July 17, 1998. Issued and outstanding shares (net of
treasury shares) at June 30, 1998 and December 31, 1997, were 7,170,508 and
7,076,263, respectively. The Company paid a 50% stock dividend in October 1997
which increased common shares outstanding by 2,351,654. (All 1997 share data
has been accordingly restated in the condensed consolidated statements of
income and expense and Stockholders' Equity.)
Components of Comprehensive Income
- ----------------------------------
Effective January 1, 1998, the Company adopted SFAS No. 130, Reporting
Comprehensive Income, which established standards for the reporting and display
of comprehensive income (and its components) in financial statements. The
standard does not, however, specify when to recognize or how to measure items
that make up comprehensive income. Comprehensive income represents net income
and certain amounts reported directly in shareholders' equity, such as the net
unrealized gain or loss on securities available for sale. While SFAS No. 130
does not require a specific reporting format, it does require that an enterprise
display an amount representing total comprehensive income for the period.
10
<PAGE>
The Company's only item of accumulated other comprehensive income included in
shareholders' equity is the net unrealized gain on securities available for
sale, net of taxes.
The Company's comprehensive income for the six months ended June 30, 1998 was as
follows:
Description Amount
- ---------------------------------------------- -----------
Net income $4,068,000
Other comprehensive income, net of tax:
unrealized holding losses on securities
available for sale arising during the period $(49,000)
Less reclassification of gains included in
net income, net of tax (18,000) (67,000)
-------- ----------
Comprehensive income $3,998,000
==========
These unrealized holding losses, net of tax benefit, represent a decrease in the
unrealized appreciation of available for sale securities, net of tax, during the
six months ended June 30, 1998. The cumulative balance of this unrealized gain,
net of tax, at June 30, 1998 was $899,000.
11
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Financial Condition
- --------------------
The Company's financial condition on June 30, 1998 reflected total assets of
$774.0 million, an increase of $42.5 million or 5.8% over total assets at
December 31, 1997. Net loans decreased $10.5 million or 2.3% to $447.0 million
at June 30, 1998. Cash and cash equivalents increased from $46.5 million at
December 31, 1997 to $79.7 million at June 30, 1998. Other assets increased by
$1.8 million. Aggregate securities were $216.6 million at June 30, 1998, an
increase of $18.0 million or 9.1% from the level at December 31, 1997.
During the first half of 1998, the Bank originated $56.4 million of new loans.
However, normal amortization and prepayments (which were approximately $61.4
million during the first half of 1998) and sales of loans into the secondary
market, with servicing retained (which were approximately $5.5 million) resulted
in a net $10.5 million decrease in loan balances outstanding at June 30,1998
compared to December 31, 1997. The decreases arose in the categories of
residential real estate loans ($8.5 million) due primarily to customers
refinancing adjustable rate mortgages and home equity loans into fixed rate
mortgage loans (many of which were financed by the Company and sold into the
secondary market), and other loans of $3.5 million.
Period end total deposits increased seasonally $39.8 million or 6.1% in the
first six months of 1998 to $693.9 million. Such increases were primarily in
money market and time deposits. Of this amount, total Public (Municipal) Funds
increased $15.2 million or 25.04% to $75.9 million and total non-public funds
increased $24.6 million or 4.15% to $618.0 million. Of the increase in non-
public funds, $7.8 million in NOW accounts and $12.2 million in savings accounts
represented exceptional customer deposits on June 30, 1998, which funds were
withdrawn within three business days after the period end and not redeposited
with the Bank after that date.
12
<PAGE>
The following tables summarize the net changes in public (municipal) fund and
non-public fund deposits from December 31, 1997 to June 30, 1998 (in thousands):
Public Funds
Percent
Change
Balance Balance Net over
12/31/97 6/30/98 Change Y/E'97
------------------------------------------
Demand accounts $ 3,061 $ 3,288 $ 227 7.42%
NOW accounts 10,299 10,187 (112) (1.09)
Money market accounts 10,334 15,668 5,334 51.62
Savings accounts 3,354 2,951 (403) (12.02)
Time deposits 33,670 43,829 10,159 30.17
------------------------------------------
Total public deposits $ 60,718 $ 75,923 $15,205 25.04%
==========================================
Public funds balances increased in the first half of 1998 due to the
solicitation of new municipal relationships, actively managing large time
deposits, and receiving deposits of village tax assessments levied in June. This
increase usually reverses by year end as the result of the municipalities
employing their funds. However, increases are expected in the third quarter due
to school district tax levies.
Non Public Funds
Percent
Change
Balance Balance Net over
12/31/97 6/30/98 Change Y/E'97
-----------------------------------------
Demand accounts $ 147,941 $147,411 $ (530) (0.36)%
NOW accounts 39,622 47,455 7,833 19.77
Money market accounts 48,694 50,930 2,236 4.59
Savings accounts 204,167 216,391 12,224 5.99
Time deposits 152,963 155,802 2,839 1.86
------------------------------------------
Total non public deposits $ 593,387 $617,989 $24,602 4.15%
==========================================
Exclusive of the prior mentioned exceptional deposits, normal non-public fund
deposit activity increased deposits by $5.4 million or .83% compared to December
31, 1997.
Consolidated stockholders' equity at quarter end was $74.7 million, up $4.3
million over year end 1997. The Company's net retained earnings for the first
half ($3.1 million) were complimented by $1.4 million of stock issuance proceeds
which included $.3 million issued in connection with the purchase of land for
the Company's Newburgh branch and normal issuances under the Company's stock
option plans ($.4 million) and dividend reinvestment plan ($.7 million)
partially offset by the decrease in unrealized gains, after tax, in the market
value of the Company's available-for-sale investment portfolio ($.1 million).
The ratio of shareholders' equity to total assets remained strong at June 30,
1998 standing in excess of 9.6%.
13
<PAGE>
Results of Operations
- ---------------------
Interest income as reported, for the six months ended June 30, 1998, compared to
the same period in 1997, increased $1.1 million while interest expense increased
by $.7 million. This resulted in an increase in net interest income of $.4
million. Provision for loan losses decreased by $100,000. Total non-interest
income decreased $151,000 or 4.8%. Total noninterest expenses increased by
$757,000 or 7.0%, which was due entirely to merger-related expenses of $990,000
incurred in the first half of 1998. Excluding merger related expenses, total
non-interest expense was down $233,000 or 2.1%. Net income after tax decreased
by $336,000 or 7.6%. Diluted earnings per common share decreased to $.55 for the
six months of 1998 compared to $.60 for 1997. Excluding merger-related expenses
incurred in 1998 of $990,000 or $803,000 after-tax earnings, net income on a pro
forma basis would have been $4,871,000 and diluted earnings per common share
would have been $.66.
The net income and earnings per common share data discussed above is presented
in the following table:
<TABLE>
<CAPTION>
Six months ended Three months ended
Actual Pro forma Actual Actual Pro forma Actual
------ --------- ------ ------- --------- ------
6/30/98 6/30/98(1) 6/30/97* 6/30/98 6/30/98(1) 6/30/97*
------- ---------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Net income (in $4,068 $4,871 $4,404 $ 1,969 $ 2,509 $ 2,265
thousands)
Per common share:*
Basic earnings $ 0.57 $ 0.68 $ 0.62 $ 0.28 $ 0.35 $ 0.32
Diluted earnings 0.55 0.66 0.60 0.27 0.34 0.31
</TABLE>
(1) Excludes merger-related expenses.
*Adjusted for the 50% stock dividend declared September 1997.
The Company's actual and pro forma (excluding merger-related expenses) return on
average assets and return on average equity for both the three months and six
months ended June 30, 1998 and 1997, are detailed in the table below:
<TABLE>
<CAPTION>
Six months ended Three months ended
Actual Pro forma Actual Actual Pro forma Actual
------ --------- ------ ------- --------- ------
6/30/98 6/30/98(1) 6/30/97* 6/30/98 6/30/98(1) 6/30/97*
------- ---------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Actual:
- ------
Return on assets 1.09% 1.30% 1.25% 1.04% 1.33% 1.26%
Return on total
stockholders' equity 11.25 13.47 13.51 10.72 13.65 13.91
</TABLE>
(1)Excludes merger-related expenses
14
<PAGE>
Interest income
- ---------------
On a tax equivalent basis, gross interest income increased by $1,293,000 or 4.3%
for the six months ended June 30, 1998 compared to the same period in 1997, due
principally to the increase in average earning assets of $39.6 million. For the
first six months of 1998, the Company experienced a net increase in average
earning assets compared to the same period of 1997 of $39.6 million. Average
loans increased by $9.3 million, securities increased $27.1 million and federal
funds increased by $3.2 million.
Total interest expense increased by $722,000 or 7.1% for the six months period
ended June 30, 1998 as compared to the six months ended June 30, 1997 due
primarily to an increased volume of interest-bearing accounts. For the six month
period ended 1998 compared to 1997, the growth in average assets of $42.0 was
principally funded by an increase in average deposits of $36.6 million (of which
$26.7 million were interest- bearing deposits), and an increase in average
shareholders' equity of $7.2 million.
15
<PAGE>
The table below sets forth the consolidated average balance sheets for the
Company for the periods indicated. Also set forth is information regarding
weighted average yields on interest-earning assets and weighted average rates
paid on interest-bearing liabilities.
Six Months Ended June 30,
<TABLE>
<CAPTION>
1998 1997
---- ----
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Loans (1) $463,531 $20,473 8.83% $454,182 $20,154 8.87%
Taxable Securities 128,587 4,013 6.24% 118,998 3,622 6.09%
Tax-exempt Securities (2) 80,841 2,741 6.78 63,343 2,256 7.12%
Fed Funds Sold 23,342 647 5.54% 20,154 549 5.45
-------- ------- -------- -------
Total Interest Earning Assets 696,301 27,874 8.01% 656,677 26,581 8.10%
NonInterest Earning Assets:
Cash & Due from Banks 34,529 32,141
Premises & Equipment 16,540 16,282
Other Assets 12,000 11,947
Allowance for Loan Losses (9,790) (9,470)
-------- ------- -------- -------
Total Assets $749,580 27,874 7.44% $707,577 26,581 7.51%
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest-Bearing Liabilities:
Savings Deposits $205,581 $ 4,164 4.05% $210,233 $ 4,185 3.98%
NOW Accounts 54,769 290 1.06% 48,786 291 1.19%
Money Market Accounts 67,132 1,084 3.23% 69,699 1,176 3.37%
CD's over $100,000 60,165 1,663 5.53% 39,710 1,071 5.39%
Other Time Deposits 135,184 3,676 5.44% 127,701 3,426 5.37%
Borrowed Funds 1,725 47 5.45% 1,843 53 5.75%
-------- ------- -------- -------
Total Interest-Bearing Liabilities 524,556 10,924 4.17% 497,972 10,202 4.10%
Noninterest-Bearing Liabilities:
Demand Deposits 147,975 138,107
Other 4,709 6,321
-------- --------
Total Noninterest-Bearing
Liabilities 152,684 144,428
Stockholders' Equity 72,340 65,177
-------- ------- -------- -------
Total Liabilities and
Stockholders' Equity $749,580 10,924 2.91% $707,577 10,202 2.88%
======== ------- ======== -------
Net interest Margin 16,950 4.87% 16,379 4.99%
Less Tax Equivalent Adjustments (932) (745)
------- -------
Net Interest Income $16,018 4.60% $15,634 4.76%
======= ==== ======= ====
Excess of interest earning assets
over interest bearing liabilities $171,745 $158,705
Ratio of Average Interest-Earning
Assets to Average Interest-Bearing
Liabilities 132.74% 131.87%
- --------------------------------------------------------------------------------------------------
</TABLE>
(1) Average Balances include non-accrual loans.
(2) Tax Equivalent Yields on tax-exempt securities based on a Federal tax rate
of 34%.
16
<PAGE>
The table below details the changes in interest income and interest expense for
the period indicated due to both changes in average outstanding balances and
changes in average interest rates (in thousands):
Rate/Volume Analysis (in thousands)
Six Months Ended June 30,
1998 vs. 1997
-------------------------------------
Increase (Decrease) due to
-------------------------------------
Volume Rate Net(1)
------ ---- ------
Interest Income:(2)
Loans $ 413 $ (94) $ 319
Taxable investment securities 299 92 391
Tax-exempt investment securities 593 (108) 485
Federal funds sold 88 10 98
---------- --------- ----------
Total interest income 1,393 (100) 1,293
Interest expense:
Savings deposits (93) 72 (21)
NOW/accounts 32 (33) (1)
Money market accounts (41) (51) (92)
Certificates over $100,000 565 27 592
Other Time Deposits 203 47 250
Borrowed funds (3) (3) (6)
---------- --------- ----------
Total interest expense 663 59 722
---------- --------- ----------
Net interest margin 730 (159) 571
Less tax equivalent affect 202 (15) 187
---------- --------- ----------
Net interest income $ 528 $(144) $ 384
========== ========= ==========
(1) The change in interest due to both rate and volume has been allocated to
volume and rate changes in proportion to the relationship of the absolute
dollar amounts of the change in each to the total change.
(2) Yields on tax exempt securities based on a Federal tax rate of 34%.
Average yields on interest earning assets decreased to 8.01% for the six months
ended June 30, 1998 vs. 8.10% as of the same period in 1997 due to declines in
tax exempt investment yields (due to the growth in tax exempt investment
portfolio in a lower interest rate environment as well as slightly lower loan
yields due to the competitive loan environment). Average interest bearing
liability rates increased to 4.17% for the six months ended June 30, 1998 vs.
4.10% for the six months ended June 1997 (due primarily to the growth in
certificates of deposit which are at higher rates than other deposit products).
Net interest margins on a tax equivalent basis declined .12% to 4.87% for the
six months ended June 30, 1998 compared to the same period in 1997. Thus, while
the overall growth in the balance
17
<PAGE>
sheet was achieved with incrementally lower net interest margins, such growth
still created overall increases in net interest income. Variances due to changes
in rates produced a $144,000 decrease in net interest income in the six months
of 1998 compared to the same period in 1997, while the increase in average
earning assets of $39.6 million (compared to an increase in interest bearing
liabilities of $26.6 million) principally contributed to the $528,000 increase
in net interest income due to volume variances over the same period. The net
effect was that net interest income before provisions for loan losses grew to
$16.0 million for the six months ended June 30, 1998 compared to $15.6 million
for the comparable period in 1997, or an increase of $384,000 (2.5%).
Provision for loan losses and credit quality
- --------------------------------------------
Provisions for loan losses are based on management's assessment of risk of loss
inherent in the loan portfolio and as such reflect, among other things, both
trends in local economic conditions and the categorization of the credit quality
of individual loans. Such assessment is ongoing, and may not directly reflect
the charge-offs taken in any accounting period, although the trend in charge-
offs is an important element in the evaluation of the adequacy of the allowance
for loan losses. Provision for loan losses declined from $1,300,000 to
$1,200,000 in the first half of 1998 compared to 1997, primarily due to the
significant decline in nonperforming assets, lower levels of charge-offs
compared to the prior year,(which are detailed below), lower levels of other
loans requiring special attention, and the assessments by management noted
above.
Total net charge-offs for the first six months of 1998 were $861,000, compared
to $1,174,000 for the same period in 1997. The ratio of net chargeoffs to
average loans, on an annualized basis, decreased to .37% in the first six months
of 1998 vs. .52% for the same period of 1997. Total nonperforming assets
decreased to $3.8 million at June 30, 1998 compared to $5.9 million at June 30,
1997 and remained at comparable levels vs. December 31, 1997.
OREO balances outstanding of $972,000 showed a negligable increase of $14,000 at
June 30, 1998, while non-performing loans decreased over the June 30, 1997 by
some $2,142,000, from $5.0 million to $2.8 million. Real estate mortgage
nonperforming loans, including restructured troubled debt and loans 90 days past
due decreased by $1,407,000 while nonperforming commercial and industrial loans
decreased by $566,000, and consumer and other nonperforming loans decreased by
$169,000. The Company's ratio of loan loss allowance to non-performing loans
stood at 350% at June 30, 1998 and 305% at year-end 1997 and 190% at June 30,
1997. The allowance represented 2.16% of loans at June 30, 1998 vs. 2.04% at
both the end of 1997 and at June 30, 1997. The period-end ratio of non-
performing assets, to total assets, at .49%, for June 30, 1998 declined compared
to .53% at December 31, 1997 and .81% at June 30, 1997.
Nonperforming assets represent 58 loans or OREO properties of which on1y 11 have
balances in excess of $100,000, and no nonperforming assets have a balance
greater than $400,000. Of the total nonperforming loans, 35% is collateralized
by residential property, 52% by commercial property, and 13% by other assets or
unsecured.
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
relatively stable current economic conditions 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.
18
<PAGE>
The table below summarizes the Company's loan loss experience for the periods
indicated:
<TABLE>
<CAPTION>
For the six months For the year
ended June 30, ended December 31,
1998 1997 1997 1996 1995
----------------------- ---------------------------------
<S> <C> <C> <C> <C> <C>
Balance at beginning of
period $9,529 $9,302 $9,302 $8,770 $8,326
Chargeoffs:
Commercial & industrial 254 876 1,448 889 411
Consumer installment & other 395 292 742 554 593
Real estate mortgage 407 224 629 1,289 1,164
----------------------- ---------------------------------
Total charge-offs 1,056 1,392 2,819 2,732 2,168
Recoveries:
Commercial & industrial 58 22 147 89 75
Consumer installment & other 111 32 80 130 193
Real estate mortgage 26 164 320 195 44
----------------------- ---------------------------------
Total recoveries 195 218 547 414 312
----------------------- ---------------------------------
Net charge-offs (861) ( 1,174) (2,272) (2,318) (1,856)
Provision for loan losses 1,200 1,300 2,500 2,850 2,300
------ ------- ------- ------- -------
Balance at end of period $9,868 $9,428 $9,530 $9,302 $ 8,770
======================= =================================
Ratio of net charge-offs to
average loans outstanding
during the period
(annualized) .37% .52% .50% .53% .43%
Allowance for loan losses as
a percent of period-end loans 2.16% 2.04% 2.04% 2.06% 2.08%
Allowance as a percent of
non-performing loans 350% 190% 305% 169% 166%
Nonperforming loans and OREO
to total loans and OREO .83% 1.27% .83% 1.36% 1.53%
</TABLE>
19
<PAGE>
The table below summarizes the Company's nonperforming assets and restructured
loans at the dates indicated (dollars in thousands):
<TABLE>
<CAPTION>
at June 30, at December 31,
----------- ---------------
1998 1997 1997 1996 1995
----------------------- -------------------------------------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans: (1)
Real estate mortgage $2,199 $2,997 $1,756 $3,503 $3,246
Commercial & Industrial 181 555 214 712 1,013
Consumer & other 42 136 73 313 148
----------------------- -------------------------------------
Total nonaccrual loans 2,422 3,688 2,043 4,528 4,407
Loans 90 days or more
past due and still
accruing:
Real estate mortgage 180 128 216 28
Commercial & industrial 82 274 188 193 476
Consumer & other 75 51 22 18
----------------------- -------------------------------------
Total 90 days past due
accruing 82 529 367 431 522
Restructured - real
estate 312 741 712 534 349
----------------------- -------------------------------------
Total non-performing
and restructured loans 2,816 4,958 3,122 5,493 5,278
Other real estate owned 972 958 760 653 1,196
----------------------- -------------------------------------
Total non-performing
assets $3,788 $5,916 $3,882 $6,146 $6,474
======================= =====================================
Non-performing and re-
structured loans as a
percent of total loans .62% 1.07% .67% 1.22% $1,196
======================= =====================================
Nonperforming assets as
a percent of total
assets .49% .81% .53% .88% .93%
======================= =====================================
</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.
Other real estate owned totals $972,000 at June 30, 1998 and includes 12
properties acquired through foreclosure: one parcel of land, 5 residences, and 6
non-farm nonresidential properties. Management believes that the carrying values
of such properties adequately reflect the risk of loss in their orderly
disposal.
20
<PAGE>
At June 30, 1998, the Company had approximately $11.6 million in loans requiring
special attention (substandard) compared to $8.7 million at June 30, 1997, in
addition to the nonperforming loans and other nonperforming assets noted above.
Such loans are being monitored so that if concern about the borrowers ability to
comply with repayment terms becomes evident, management will be able to quickly
assess impairment. Approximately 75% of all such loans are collateralized by
real estate. Further deterioration in such borrowers' financial position may
result in classifying them as nonperforming assets. The following table
summarizes impaired loans for the periods indicated (in thousands):
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997 June 30, 1997
------------- ----------------- -------------
<S> <C> <C> <C>
Impaired loans with allowance established
($678,000 and $901,000, and $859,000
respectively) $2,704,149 $2,335,000 $2,419,000
Impaired loans with a writedown
($983,000 and $1,133,000, and $1,420,000
respectively) 1,059,000 1,068,000 1,945,000
---------- ---------- ----------
Total $3,763,149 $3,403,000 $4,364,000
========== ========== ==========
Average amount of impaired loans
for the period $3,441,000 $4,177,000 $4,658,000
========== ========== ==========
</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>
June 30,
1998 1997
---------------------------------------------
Balance at end % of % of
of period Amount total Amount total
applicable to: loans loans
---------------------------------------------
<S> <C> <C> <C> <C>
Commercial &
industrial $1,843 17.1% $2,236 16.9%
Consumer & other 1,844 20.5 1,928 19.8
Real estate -
construction 2.8 2.9
Real estate -
mortgage 4,162 59.6 4,091 60.4
Unallocated 2,019 1,173
---------------------------------------------
Total $9,868 100.00% $9,428 100.00%
=============================================
<CAPTION>
December 31,
1997 1996 1995
------------------------------------------------------------------
Balance at end % of % of % of
of period Amount total Amount total Amount total
applicable to: loans loans loans
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Commercial &
industrial $2,131 17.2% $2,476 15.9% $2,355 16.6%
Consumer & other 1,873 20.6 1,702 19.3 1,400 16.1
Real estate -
construction 2.3 2.7 3.1
Real estate -
mortgage 4,149 59.9 3,985 62.1 4,247 64.2
Unallocated 1,377 1,139 768
------------------------------------------------------------------
Total $9,530 100.00% $9,302 100.00% $8,770 100.00%
==================================================================
</TABLE>
21
<PAGE>
Noninterest Income
- ------------------
Total noninterest income decreased $151,000 in the first six months of 1998 to
$2,970,000 compared to the same period of 1997. Gains on sales of securities
increased by $17,000. Trust earnings increased $114,000 and net gains on sales
of loans increased by $26,000. These increases were offset by declines in net
service charges and fees of $204,000 (due primarily to customers maintaining
deposit balances to avoid charges), and decrease in "other" non-interest income
of $104,000, of which $108,000 was due to declines in annuity commissions,
$22,000 was due to interest on a previous year income tax refund received in
1997 and a 1997 recovery of student loan interest of $43,000, partially offset
by an increase of $53,000 in ATM income (due to the introduction of foreign
usage charges).
Other Expenses
- --------------
In total, noninterest expense was up by $757,000 or 7.0% to $11,638,000 for the
first six months of 1998 compared to the same period of 1997, due entirely to
merger-related expenses incurred of $990,000.
Salaries and employee benefits decreased by $90,000 in the first six months of
1998 compared to 1997. Underlying salary and benefit expense declined by
approximately $210,000, due to a first quarter 1997 recovery of $120,000 in
compensation expense related to officers waiving tandem stock appreciation
rights, but retaining the rights to underlying stock options. The declines in
salary and benefits expense primarily relates to not filling vacant positions in
contemplation of the pending merger with Progressive in the third quarter of
1998.
Occupancy and equipment expense showed a decrease of $20,000 over the same
period in 1997, despite new branches, due to declines in depreciation expense
(as a substantial portion of the Company's equipment is fully depreciated).
Other real estate owned expense increased slightly by $5,000 to $62,000 for the
six months ended June 30, 1998. Other expenses declined by $128,000 primarily in
the areas of trust, postage, advertising, directors' expense and employee
education and travel.
Pretax income decreased by $424,000. However, income tax expense only decreased
by $88,000 primarily due to $456,000 of the merger-related expenses being
considered nontax-deductible. The Company's effective tax rate, therefore,
increased to 33.9% from 32.9% as a result of the nondeductible expenses
incurred. Net income was $4,068,000 for the six months ended June 30, 1998 vs
$4,404,000 for the same period in 1997, a decrease of $335,600 or 7.6%.
Three months ended June 30, 1998 vs. June 30, 1997
- --------------------------------------------------
Net interest income increased $85,000 or 1.1% for the three months ended June
30, 1998 compared to 1997, primarily due to higher average investment balances,
partially offset by interest expense related to growth in underlying Certificate
of Deposit balances.
Provisions for loan losses remained the same at $600,000 for the three month
period ended June 30, 1998 and June 30, 1997.
Other income decreased $50,000 to $1,494,000 for the three months ended June 30,
1998 compared to 1997, primarily as a result of service charge declines of
$89,000 in the three months ended June 30, 1998 compared to 1997, a $25,000
decline in gain on sales of securities and the 1997 recovery of
22
<PAGE>
prior year student loan interest of $43,000. These were partially offset by a
$57,000 increase in trust earnings due to higher account balances under
administration.
Total noninterest expense increased $483,000 to $5,948,000 for the three months
ended June 30, 1998 compared to June 30, 1997 due entirely to merger related
expenses of $710,000 incurred in 1998 offset by decreases in salaries and
benefits of $118,000 and $125,000 in "other" expenses.
Occupancy expense increased by $18,000 due to the cost associated with opening
the Wappingers Falls branch, while other real estate owned expense decreased
$2,000 to $19,000 in the three months ended June 30, 1998.
"Other" expenses are $125,000 below the second quarter of 1997 levels primarily
in the areas of director expense accruals for phantom stock and trust expense.
Additionally, advertising and stationary and supplies expenses have been reduced
in contemplation of the merger with Progressive.
Pretax income decreased $448,000 or 13.2% for the three months ended June 30,
1998 compared to the same period of 1997, while income taxes decreased by
$152,000. Comparative income after taxes decreased $296,000 to $1,969,000 or
13.1% for the quarter ended June 30, 1998 vs. 1997.
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 20-25% of total deposits) tends 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 June 30, 1998 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 June 30, 1998, assuming no management
action, the Company's near-term interest rate risk is to a rising rate
environment over the one year time frame, principally due to a higher level of
rate sensitive liabilities relative to assets (20.6%) that would reprice in that
time frame. However, beyond one year due to higher levels of assets repricing,
the Company's long-term exposure is to an extended period of declining rates as
the excess of assets repricing over liabilities may cause a contraction in net
interest margins. 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 actions that may be taken to
manage this risk.
23
<PAGE>
<TABLE>
<CAPTION>
Maturity Repricing Greater
Date (1)(2) Total One yr. than
3 months 4 months within to 5 five
or less to one yr. one yr. yrs. yrs. Total
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Securities (3) $32,979 $47,479 $80,458 $88,208 $46,393 $215,059
Fed Funds 43,800 43,800 43,800
Fixed rate loans 33,502 52,267 85,769 181,691 21,912 289,372
Floating rate loans (3) 108,396 50,606 159,002 5,917 164,919
Total interest
earning assets (1) 218,677 150,352 369,029 275,816 68,305 713,150
-------- --------- --------- -------- ------- --------
Other interest bearing
deposits (4) 138,984 205,231 344,215 344,215
Time/Other (5) 96,615 75,306 171,921 26,741 336 198,998
Total interest-bearing
liabilities 235,599 280,537 516,136 26,741 336 543,213
-------- --------- --------- -------- ------- --------
Interest Sensitivity
gap (6) $(16,922) $(130,185) $(147,107) $249,075 $67,969 $169,937
======================================================================
Gap as a percent of
earnings assets (2.4)% (18.3)% (20.6)% 34.9% 9.5% 23.8%
======================================================================
</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 losses recorded on "available-for-sale" securities as of June
30, 1998.
(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) Other interest-bearing deposits include Money Market accounts (three months
or less) and Savings and NOW accounts (four months to one year) reflecting
the lagging period that historically exists in Savings and NOW account
interest rate movements. The remainder of other interest-bearing deposits
are "Merit" accounts (savings accounts whose yield is repriced directly
with the Federal Reserve Discount Rate). This discount rate changes less
frequently than other market rates. As a result, management places these
balances at one-half is the three month or less category and the balance in
four months to one year repricing category (the Federal Reserve Discount
Rate has not changes since January 1996.) The interest rate sensitivity
assumptions presented for these deposits are based on historical and
current experiences regarding balance retention and interest rate repricing
behavior.
(5) Time/Other: Time deposits and other interest-bearing liabilities are
classified by contractual maturity or repricing frequency.
(6) Non-interest bearing deposit liabilities were approximately $151 million at
June 30, 1998.
24
<PAGE>
Capital Resources and Liquidity
- -------------------------------
The following summarizes the minimum capital requirements and capital position
at June 30, 1998:
To be Well Capitalized
Under "Prompt
Capital Position at Corrective Action"
June 30, 1998 Provision of FIDICIA
------------------- ----------------------
Bank Only Consolidated
---------- ------------
Total Capital
to Risk-Weighted Assets 12.67% 15.31% 10%
Tier 1 Capital
to Risk-Weighted Assets 11.42 14.06 6
Tier 1 Capital to Average
Assets (Leverage Ratio) 7.65 9.38 5(1)
(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%.
At June 30, 1998, the Bank met the requirements for a "well capitalized"
institution based on its capital ratios as of such date.
The Company believes that its cash and cash equivalents of $79.7 million in
addition to its securities available for sale of $193 million at June 30, 1998
are sufficient to meet both the funding needs of its borrowers and the liquidity
requirements of its depositors.
The Company plans to open a new branch in Middletown, NY (Orange County) the
summer of 1998 and relocate its Newburgh branch in early July 1998 to a larger
regional office. The construction and land costs associated with these new
facilities is anticipated to total approximately $1,500,000 of which $1,120,000
has been expended to date. The Company has sufficient capital resources to fund
such construction.
The Company's total capital to assets level is approximately 9.6% at June 30,
1998. As such, management believes that the Company has ample capital available
for future expansion and diversification and regularly evaluates appropriate
business opportunities to efficiently deploy its capital resources.
Year 2000
- ---------
As described in greater detail in the Company's Annual Report on Form 10-K for
the year ended December 31, 1997, the Company continues with its systematic
plans to address the Year 2000 ("Y2K") compliance requirements. Management
believes it remains on schedule to be at the proper stage of assessment,
remediation and testing to be Year 2000 compliant by year end 1998. The Company
is exposed to substantial risks due to the Year 2000 problem. Such risks arise
both in its information technology (data processing) systems and its non-
information technology (operating) systems. The Company has made material
progress in assessing and remediating all its principal data processing and
operating systems. All principal data processing systems are expected to be Y2K
compliant by year end 1998 based on
25
<PAGE>
reviews with the Company's systems vendors, all of which are major suppliers of
such systems. All of the Company's essential operating systems are also expected
to be Y2K compliant by year end based on the Company's scheduled assessment,
testing and replacement of such equipment. The Company is also assessing the
impact on its loan portfolio and funding base of principal clients who are
vulnerable to Y2K issues, and such assessment is expected to be completed by the
end of the third quarter.
As with similar financial institutions, the Company is dependent on
unrelated third parties for the conduct of its business, especially the Federal
Reserve payment system, the automated clearing house system, the national
telecommunications system and the Company's local energy provider. The Company
is not currently aware of any problems such third party systems may have in
achieving Y2K compliance and expects to receive relevant assurances in due
course. However, the Company cannot influence or control the readiness of such
providers for the Year 2000.
All "mission critical" systems and processes have been identified, and the
Company expects to address during the remainder of this year contingency
planning in the event the remediation of any of its several data processing
systems or operating systems fail.
The Company also plans to assess the state of preparedness of unrelated third
party systems early in 1999 and to the extent possible, develop emergency
contingency plans in the event of their failure. The Company believes, however,
that failure of any of these third-party systems for anything other than the
shortest periods may result in a disruption of its business, preventing the
Company from providing its normal banking services to its customers.
There can be no assurance that the Company's contingency plans or its efforts
with respect to third parties will not prevent a material adverse effect on the
Company's operations or financial condition.
Further, the Company continues to believe that it will not incur expenses in
excess of $150,000 for its Year 2000 assessment and remediation, although it may
also need to replace certain hardware and software, at immaterial costs, which
would be capitalized.
26
<PAGE>
Item 3. Quantitative and Qualitative Disclosure About Market Risk.
Quantitative and qualitative disclosure about market risk is presented at
December 31, 1997 in Item 7A in the Company's Annual Report on Form 10-K/A filed
with the Securities and Exchange Commission on April 9, 1998. There have been no
material changes in the Company's market risk at June 30, 1998 compared to
December 31, 1997. The following is an update of the discussion provided
therein:
General. The Company's largest component of market risk continues to be interest
rate risk. The Company is not subject to foreign currency exchange or commodity
price risk. At June 30, 1998, neither the Company nor the Bank owned any trading
assets, nor did they utilize hedging transactions such as interest rate swaps
and caps.
Assets and Deposit Liabilities. During the six months ended June 30, 1998, the
Company has added $17.9 million in securities and $26.4 million in fed funds
sold, funded by an increase in municipal deposits of which $10.2 million are
short-term certificates of deposits and two large exceptional deposits totaling
$19.2 million. However, the Company's overall level of interest rate risk,
inclusive of the effects of these transactions, has not changed materially from
December 31, 1997 to June 30, 1998. There have been no other material changes in
the composition of assets or deposit liabilities from December 31, 1997 to June
30, 1998.
GAP Analysis. The one-year and five-year cumulative interest sensitivity gap as
a percentage of total assets fall within 2% of their levels at June 30, 1998
utilizing the same assumptions as at December 31, 1997.
Interest Rate Risk Compliance. The Bank continues to monitor the impact of
interest rate volatility upon net interest income and net portfolio value in the
same manner as at December 31, 1997. There have been no changes in the board
approved limits of acceptable variance in net interest income and net portfolio
value change at June 30, 1998 compared to December 31, 1997, and the projected
changes continue to fall within all board approved limits for potential interest
rate volatility.
27
<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 21, 1998. The
following matters were approved by the Company's shareholders at the meeting:
(1) Election of three directors for one year term expiring in 1999, three
directors for a two year term expiring in 2000, and four directors for a
three year term expiring in 2001.
The total shares outstanding on the record date of April 6, 1998 were
7,152,256.
Individually votes cast were as follows:
For a one year term expiring 1999:
Votes FOR Votes WITHHELD
--------- --------------
Edward vK. Cunningham Jr. 6,517,514 10,429
Warren R. Marcus 6,517,314 10,429
John C. VanWormer 6,504,454 23,490
For a two year term expiring 2000:
Tyler Dann 6,517,514 10,429
Thomas C. DeBenedictus 6,517,314 10,629
Lewis J. Ruge 6,518,735 9,208
For a three year term expiring 2001:
Robert M. Bowman 6,518,735 9,208
H. Todd Brinckerhoff 6,517,385 10,558
T. Jefferson Cunningham III 6,517,486 10,458
R. Abel Garraghan 6,518,735 9,208
(2) Merger
To consider and vote upon proposal to approve and adopt an Agreement and
Plan of Reorganization and a related Plan of Merger between Hudson
Chartered Bancorp, Inc. and Progressive Bank, Inc. and their respective
subsidiaries.
Votes FOR Votes AGAINST Votes ABSTAINED Broker Non Votes
--------- ------------- --------------- ----------------
5,948,280 36,480 44,034 499,149
28
<PAGE>
Item 5 - Other Information
1) If Premier does not receive notice at its principal executive offices on or
before December 15, 1998 of a shareholder proposal for consideration at the
1999 annual meeting of shareholders, the proxies named by Premier's Board
of Directors with respect to the meeting shall have discretionary voting
authority with respect to such proposal.
2) On July 17, 1998, the Company completed its Merger with Progressive Bank,
Inc. and was renamed Premier National Bancorp, Inc. (Premier). In
connection with the Merger, Premier National Bancorp, Inc. Issued 7,024,566
shares of its common stock in exchange for 3,859,869 shares of Progressive
common stock at an exchange ratio of 1.82 shares of Premier common stock
for each share of common stock of Progressive. The transaction was
accounted for under the pooling of interests method of accounting.
The following Pro forma Condensed Combined Balance Sheet and Statements of
Income reflect the condensed financial position and results of operations
assuming that the Merger had occurred at or prior to June 30, 1998 under
the pooling of interests method of accounting. Pro forma earnings per
common share and weighted average common shares are based on the Exchange
Ratio. The combined statements reflect $1.7 million in after tax charges
for merger related expenses and $.7 million in exceptional pre-merger
charges, after tax, to conform accounting practices (principally in the
areas of benefit accruals, loan loss provisioning policy and OREO expense).
Consistent with its original estimates, the Company anticipates further
one-time merger reorganization and restructuring charges of $3.6 million,
after tax, to be recorded in the third quarter of 1998.
These statements are not necessarily indicative of the combined financial
position and results of operations that would have occurred if the Merger had
been consummated on December 31, 1997 or at the beginning of the periods or that
may be attined in the future.
29
<PAGE>
PREMIER NATIONAL BANCORP, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AT JUNE 30, 1998
(Unaudited)
(In thousands, except share amount)
<TABLE>
<CAPTION>
Hudson Pro forma
Chartered Progressive Adjustments Total
--------- ------------ ----------- -----
<S> <C> <C> <C> <C>
Assets:
Cash and due from banks $35,868 $14,275 $50,143
Federal funds sold 43,800 40,700 84,500
Securities 216,583 258,506 475,089
Loans, net of unearned income 457,025 547,309 1,004,334
Less: Allowance for loan losses (9,868) (10,052) (19,920)
-------- -------- ----------
Net loans 447,157 537,257 984,414
Premises and equipment 17,935 10,457 28,392
Intangible asset 508 6,769 7,277
Other assets 12,183 15,857 28,040
-------- -------- ----------
TOTAL ASSETS $774,034 $883,821 $1,657,855
======== ======== ==========
Liabilities:
Non interest bearing deposits $150,699 $72,254 $222,953
Interest bearing deposits 543,213 727,312 1,270,525
-------- -------- ----------
Total deposits 693,912 799,566 1,493,478
Notes payable 1,725 1,725
Other liabilities 3,733 4,503 8,236
-------- -------- ----------
TOTAL LIABILITIES 699,370 804,069 1,503,439
-------- -------- ----------
Common stock 5,739 4,428 $(1,191) 11,358
Additional paid-in capital 39,271 25,879 4,971 60,179
Retained earnings 28,832 59,029 6,126 81,735
Accumulated other comprehensive income 899 322 1,221
Treasury stock (77) (9,906) (9,906) (77)
-------- -------- ----------- ----------
TOTAL STOCKHOLDERS' EQUITY (Note 6) 74,664 79,752 154,416
-------- -------- ----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $774,034 $883,821 $1,657,855
======== ======== ==========
Book value per share $10.41 $20.67 $10.90
</TABLE>
See notes to unaudited pro forma condensed combined financial statements
30
<PAGE>
PREMIER NATIONAL BANCORP, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
AT JUNE 30, 1998
(Unaudited)
(In thousands, except share amount)
<TABLE>
<CAPTION>
Six months ended 6/30/98 Three months ended 6/30/98
------------------------- --------------------------
Hudson Hudson
Chartered Progressive Total Chartered Progressive Total
--------- ----------- ----- --------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Interest income:
Loans, including fees $20,473 $25,636 $46,109 $10,159 $12,697 $22,856
Federal funds sold
and other 647 1,149 1,796 357 586 943
Securities 5,822 7,508 13,330 3,022 3,798 6,820
------ ------ ------ ------ ------ ------
Total interest income 26,942 34,293 61,235 13,538 17,081 30,619
====== ====== ====== ====== ====== ======
Interest expense:
Deposits 10,877 16,945 27,822 5,522 8,442 13,964
Other 47 47 24 24
Total interest expense 10,924 16,945 27,869 5,546 8,442 13,988
------ ------ ------ ----- ----- ------
Net interest income 16,018 17,348 33,366 7,992 8,639 16,631
Provision for loan
losses 1,200 2,330 3,530 600 1,955 2,555
------ ------ ------ ----- ----- ------
Net interest income
after provision for loan
losses 14,818 15,018 29,836 7,392 6,684 14,076
Noninterest income 2,970 1,902 4,872 1,494 1,032 2,526
Other expense 11,638 12,118 23,756 5,948 6,351 12,299
Income before income
taxes 6,150 4,802 10,952 2,938 1,365 4,303
Income taxes 2,082 2,025 4,107 969 620 1,589
------ ------ ------ ----- ----- -----
Net income 4,068 2,777 6,845 1,969 745 2,714
====== ====== ====== ===== ===== =====
Weighted average common
share:
Basic 7,129,333 7,012,620 14,141,953 7,164,337 7,024,751 14,189,088
Diluted 7,330,028 7,231,196 14,561,224 7,370,452 7,256,389 14,626,841
Per common share:
Basic $0.57 $0.40 $0.48 $0.28 $0.11 $0.19
Diluted earnings 0.55 0.38 0.47 0.27 0.10 0.19
Dividends declared 0.13 0.20 0.26 (1) 0.20 0.13
</TABLE>
See notes to unaudited pro forma condensed combined financial statements.
(1) Dividends of $.13 per share with respect to the second quarter of 1998 were
declared on July 10, 1998, payable on July 31, 1998.
31
<PAGE>
PREMIER NATIONAL BANCORP, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(1) The accompanying unaudited pro forma condensed combined financial statements
were prepared assuming that the Merger had been consummated as of June 30, 1998,
and the pooling-of-interests method had been applied in accounting for the
Merger.
(2) Pro forma earnings per common share (EPS) have been calculated based on the
applicable average number of Hudson Chartered common shares outstanding, plus
the absolute number of additional common shares assumed to be issued in the
Merger in exchange for outstanding Progressive common shares based on the
Exchange Ratio of 1.82. To the extent cash is paid to Progressive stockholders
in lieu of fractional shares, common shares outstanding and common stockholders'
equity would be reduced. The respective managements expect that cash will be
paid to stockholders in lieu of issuing fractional shares for less than 1/4 of
1% of the shares held by Progressive stockholders and, accordingly, such shares
have not been excluded from the pro forma data.
(3) The pro forma information presented does not reflect remaining anticipated
merger (legal, accounting, tax, regulatory and severance) and integration costs
(conversion, abandonments, relocation, promotional material and forms). These
remaining costs are presently estimated to total $4.7 million before taxes and
$3.6 million after taxes. The pro forma information also does not reflect
potential cost savings or revenue enhancements expected to be realized
subsequent to consummation of the Merger.
(4) Pro forma entry to retire Treasury stock held by Progressive (approximately
567,000 shares having a par value of $1.00 per share):
Common stock $ 567,000
Additional paid-in capital (A) 3,213,000
Retained earnings 6,126,000
Treasury stock (at cost) $9,906,000
(A) Represents the pro rata portion of Progressive's total paid-in capital
applicable to the Treasury shares.
(5) Pro forma entry to issue 1.82 Premier National Bancorp common shares in
exchange for each Progressive common share. The par value of Premier National
Bancorp common shares which would be issued as of June 30, 1998, is determined
as follows:
Hudson Chartered common shares 7,170,508
Progressive common shares (3,860,745
common shares times exchange ratio of 1.82) 7,026,555
-----------
Total common shares 14,197,063
Par value per common share $ 0.80
-----------
Total par value $11,357,650
===========
32
<PAGE>
Actual combined par value of common stock at June 30, 1998:
Hudson Chartered $5,739,000
Progressive (after retirement of Treasury shares) 3,861,000 $9,600,000
----------- ----------
Required increase in par value 1,757,650
----------
Entry to record increase in par value:
Additional paid-in capital $1,758,000
Common stock $1,758,000
(6) Summary of the pro forma entries in Notes (4) and (5) above:
Additional paid-in capital $4,971,000
Retained earnings 6,126,000
Common stock $1,191,000
Treasury stock 9,906,000
(7) Authorized, issued and outstanding share information is as follows at
June 30, 1998
Hudson Premier
Preferred Chartered Progressive Pro forma
- --------- --------- ----------- ---------
Authorized 5,000,000 5,000,000 5,000,000
Issued and outstanding - - -
Common
- ------
Par value $0.80 $1.00 $0.80
Authorized 20,000,000 15,000,000 50,000,000(A)
Issued 7,173,794 4,427,999 14,200,812
Outstanding 7,170,508 3,860,745 14,197,064(B)
(A) Reflects the increase in authorized shares from 20,000,000 to 50,000,000
upon consummation of the Merger.
(B) Does not reflect Progressive shares held in Treasury, which will be retired
upon consummation of the Merger.
33
<PAGE>
Part II
Item 6(a). Exhibits
- --------------------
Exhibit 3.1 Restated Certificate of Incorporation
Exhibit 3.2 Bylaws, as amended
Exhibit 27 Financial Data Schedule
Item 6(b). Reports on Form 8-K
- -------------------------------
On July 20, 1998, the Company filed a Current Report on Form 8-K to disclose the
completion of the Merger of Progressive Bank, Inc. With and into the Company
effective July 17, 1998. The Company's new name is Premier National Bancorp,
Inc. (Premier). In connection with the Merger, the Company issued 7,024,566
shares of Premier National Bancorp, Inc. Common stock in exchange for 3,859,431
shares of Progressive common stock at an exchange ratio of 1.82 shares of
Premier for each share of Progressive (Premier).
Exhibit 99.2
Also included were an unaudited pro forma combined balance sheet at March 31,
1998 and an unaudited pro forma combined income statement for the three months
ended March 31, 1998 and 1997, giving effect to the Merger of Hudson Chartered
Bancorp Inc. and Progressive Bancorp Inc. under the pooling of interests method
of accounting.
34
<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: August 11, 1998 /s/ Paul A. Maisch
------------------
Paul A. Maisch
Duly Authorized Officer and
Principal Financial Officer
35
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
3.1 Restated Certification of Incorporation of Premier National
Bancorp, Inc., filed herewith
3.2 Bylaws, as amended, of Premier National Bancorp, Inc., filed
herewith
27 Financial Data Schedule
<PAGE>
Exhibit 3.1
-----------
SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
PREMIER NATIONAL BANCORP, INC.
(Under Section 807 of the Business Corporation Law)
1. Name. The name of the Corporation is Premier National Bancorp, Inc.
----
(hereinafter called the "Corporation").
2. Purposes. Subject to any limitation provided in the Business
--------
Corporation Law of the State of New York (the "Business Corporation Law") or any
other statute of the State of New York, and except as otherwise specifically
provided in this Certificate of Incorporation, the purposes for which the
Corporation is formed are:
2.1 To act as a bank holding company, with all of the rights,
powers and privileges, and subject to all of the limitations, specified in
any applicable state or federal legislation from time to time in effect;
and
2.2 To engage in any other lawful act or activity for which
corporations may be organized under the Business Corporation Law, provided
that the Corporation shall not engage in any act or activity requiring the
consent or approval of any state official, department, board, agency or
other body without such consent or approval first being obtained.
3. Office. The office of the Corporation is to be located in the
------
County of Dutchess, State of New York.
4. Capital Stock. The aggregated number of shares of all classes of
-------------
capital stock which the Corporation has authority to issue is 55,000,000 shares,
of which 50,000,000 are to be shares of common stock, $.80 par value per share
(the "Common Stock"), and 5,000,000 are to be shares of serial preferred stock,
$.01 par value per share (the "Preferred Stock"). The shares of capital stock
may be issued by the Corporation from time to time as approved by the Board of
Directors of the Corporation without the approval of the shareholders, except as
otherwise provided in this Article 4, the Business Corporation Law or, if
applicable, the rules of a national securities exchange on which the
Corporation's capital stock is listed. The consideration for the issuance of
the shares of capital stock shall be paid to or received by the Corporation in
the form and manner permitted by the Business Corporation Law and shall not be
less than the par value per share of such shares.
Notwithstanding any other provision of this Certificate of
Incorporation, no holder of any shares of the Corporation's capital stock shall
have or be entitled to any preemptive, preferential or other right, under
Section 622 of the Business Corporation Law or otherwise, to subscribe for,
purchase or otherwise acquire any shares of any class of the Corporation's
capital stock or any series thereof, whether now or
<PAGE>
hereafter authorized, or other obligations or securities of the Corporation
convertible into or exchangeable for such shares, or carrying rights or options
to purchase shares of any class of the Corporation's capital stock or any series
thereof, including without limitation warrants, subscription rights or options
to subscribe for, purchase or otherwise acquire such shares or securities, or
any other instruments evidencing such rights or options.
Subject to the provisions of the Business Corporation Law, the
Corporation is authorized to make pro rata distributions of its authorized but
unissued shares of capital stock to holders of shares of the same or any other
class of the Corporation's capital stock or series thereof.
A description of the different classes and series (if any) of the
Corporation's capital stock, and a statement of the relative powers,
designations, preferences and rights of the shares of each class and series (if
any) of capital stock, and the qualifications, limitations or restrictions
thereof, are as follows:
A. Common Stock. Subject to all of the powers, rights and
------------
preferences of the holders of Preferred Stock provided by resolution or
resolutions of the Board of Directors pursuant to this Article 4 or by the
Business Corporation Law, holders of shares of Common Stock shall
exclusively possess all voting power and shall be entitled to one vote for
each share held by such holders with respect to all matters voted on by
the shareholders of the Corporation.
Whenever there shall have been paid, or declared and set aside
for payment, to the holders of the outstanding shares of any class of
capital stock having preference over the Common Stock as to the payment of
dividends or other distributions the full amount of dividends or such
other distributions, and sinking fund or retirement fund or other
retirement payments, if any, to which such holders are respectively
entitled in preference to holders of the Common Stock, then dividends or
such other distributions, as the case may be, may be paid on the Common
Stock, and on any class or series of capital stock entitled to participate
therewith as to dividends or such other dividends, as the case may be, to
the holders thereof out of any assets legally available for the payment of
dividends or such other distributions, but only when and as declared by
the Board of Directors of the Corporation.
In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation (none of which for purposes
of any provision of this Certificate of Incorporation shall be deemed to
include a consolidation or merger of the Corporation, or the sale of all
or substantially all of the Corporation's assets), after there shall have
been paid, or declared and set aside for payment, to the holders of the
outstanding shares of any class of capital stock having preference over
the Common Stock as to distribution of assets of the Corporation in any
such event the full preferential amounts to which the holders of such
shares are respectively entitled, the holders of the Common Stock and of
any class or series of capital stock entitled to participate therewith,
-2-
<PAGE>
in whole or in part, as to distribution of the Corporation's assets, shall
be entitled, after payment or provision for payment of all debts and
liabilities of the Corporation, to receive the remaining assets of the
Corporation available for distribution, in cash or in kind, ratably in
proportion to the number of shares of Common Stock held by them.
Each share of Common Stock shall have the same relative powers,
preferences and rights as, and shall be identical in all respects with,
all the other shares of Common Stock.
B. Preferred Stock. Subject to limitations prescribed by the
---------------
Business Corporation Law and the provisions of this Certificate of
Incorporation, the Board of Directors of the Corporation is authorized to
provide from time to time by resolution or resolutions for the issuance of
one or more series of Preferred Stock, and, by filing a certificate
pursuant to the Business Corporation Law, to establish from time to time
the number of shares of Preferred Stock to be included in each such
series, and to fix and state the powers, designations, preferences and
relative, participating, optional or other special rights of the shares of
each such series, and the qualifications, limitations or restrictions
thereof, including, but not limited to determination of any of the
following:
(1) the distinctive serial designation and the number of shares
constituting such series, which number the Board of Directors may
thereafter (except where otherwise provided in a resolution
designating a particular series) increase (but not above the total
number of authorized shares of the series) or decrease (but not
below the number of shares of such series then outstanding);
(2) the dividend rates or the amount of dividends to be paid on
the shares of such series, the record and payment date or dates for
dividends, whether dividends shall be cumulative and, if so, from
which date or dates, and the participating or other special rights,
if any, including any relative rights of priority of payment, with
respect to dividends to be paid on shares of such series;
(3) whether the shares of such series shall have voting rights
in addition to the voting rights provided by law, and, if so, the
terms and conditions of such voting rights, including, but not
limited to, the right of the holders of such shares to vote as a
separate class either alone or with the holders of shares of one or
more other series of Preferred Stock and the right to have more than
one vote per share;
(4) whether the shares of such series shall be redeemable and,
if so, the times, prices and other terms and conditions upon which
such shares may be redeemed, including, but not limited to, the
amount per share which shall be payable upon such redemption, which
-3-
<PAGE>
amount may vary under different conditions and at different
redemption dates;
(5) the amount or amounts payable upon the shares of such
series in the event of voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, and the relative
rights of priority, if any, of payment upon shares of such series;
(6) whether the shares of such series shall be entitled to the
benefits of a sinking or retirement fund to be applied to the
purchase or redemption of such shares, and, if so entitled, the
terms and conditions of such fund, including, but not limited to,
the amount of such fund and the manner of its application, including
the price or prices at which such shares may be redeemed or
purchased through the application of such funds;
(7) whether the shares of such series shall be convertible
into, or exchangeable for, shares of any other class or classes of
the Corporation's capital stock or any series thereof and, if so
convertible or exchangeable, the conversion price or prices or the
rate or rates of exchange, and the adjustments thereof, if any, at
which such conversion or exchange may be made, and any other terms
and conditions of such conversion or exchange;
(8) the subscription or purchase price and form of
consideration for which the shares of such series shall be issued;
(9) whether the shares of such series which are redeemed,
converted or exchanged shall have the status of authorized but
unissued shares of Preferred Stock and whether such shares may be
reissued as shares of the same or any other series of Preferred
Stock; and
(10) any other relative rights, preferences and limitations of
the shares of such series.
Each share of each series of Preferred Stock shall have the same
relative powers, preferences and rights as, and shall be identical in all
respects with, all the other shares of the same series of Preferred Stock.
Except as required by the Business Corporation Law, the Board of Directors
of the Corporation is authorized to amend this Certificate of
Incorporation to provide for one or more series of Preferred Stock without
obtaining the approval of the holders of any class of capital stock of the
Corporation.
5. Designation of Secretary of State; Mailing Address; Registered Agent.
--------------------------------------------------------------------
The Secretary of State of the State of New York is designated as the agent of
the Corporation upon whom process in any action or proceeding against the
Corporation may be served,
-4-
<PAGE>
and the address to which the Secretary of State shall mail a copy of process in
any action or proceeding against the Corporation which may be served upon him
is:
Premier National Bancorp, Inc.
Route 55
LaGrangeville, New York 12540
Attention: Secretary.
In addition, [ ], Secretary of the Corporation, whose
business address is Premier National Bancorp, Inc., Route 55, LaGrangeville, New
York 12540, is designated as the Corporation's registered agent in New York
upon whom process in any action or proceeding against the Corporation may be
served at such address.
6. Duration. The duration of the Corporation is to be perpetual.
--------
7. Cumulative Voting Rights. Cumulative voting rights shall not exist
------------------------
with respect to the election of directors.
8. Factors to be Considered by the Directors. In connection with taking
-----------------------------------------
any action, including, without limitation, action which may involve or relate to
any business combination or transaction, including, without limitation, any
merger, consolidation or sale of the Corporation's assets, or a proposal by
another Person or Persons to make a business combination or transaction or a
tender or other exchange offer (whether in cash or securities, or both) or any
other proposal relating to a change or potential change in the control of the
Corporation, and the exercise of its or their judgment in determining what is in
the best interest of the Corporation and its shareholders, the Board of
Directors, any Committee of the Board of Directors or any individual director
may, but shall not be required to, in addition to considering the long-term and
short-term interests of the Corporation and its shareholders, consider all of
the following factors and any other factors which it deems relevant: (i) the
social, legal, economic and other effects of the action or matter being or to be
considered on the Corporation and its subsidiaries, its and their employees,
depositors, customers and creditors and the communities in which the Corporation
and its subsidiaries operate or are located; and (ii) when evaluating a business
combination or transaction or a proposal by another Person or Persons to make a
business combination or transaction or a tender or other exchange offer or any
other proposal relating to a change or potential change in control of the
Corporation, (v) the business, reputation and financial condition and earnings
prospects of the acquiring Person or Persons and the possible effects of such
factors on the Corporation and its subsidiaries, its and their employees,
depositors, customers and creditors, the future value of the Corporation's
capital stock, and the communities in which the Corporation and its subsidiaries
operate or are located; (w) the reputation, business practices, competence,
experience and integrity of the acquiring Person or Persons and its or their
management and affiliates; (x) the prospects for successful conclusion of the
business combination, transaction, offer or proposal; (y) whether the price or
value of the securities being offered in the business combination, transaction
or offer is acceptable based on the historical and present operating results and
financial condition of the Corporation and whether a more favorable price could
be obtained for the Corporation's securities or
-5-
<PAGE>
assets, whichever the case may be, in the future; and (z) any antitrust or other
legal or regulatory issues that are raised by the business combination,
transaction, offer or proposal. As used in this Article 8, the term "Person"
means any individual, partnership, firm, corporation, association, trust,
unincorporated organization or other entity; when two or more Persons act as a
partnership, limited partnership, syndicate, or other group acting in concert
for the purpose of acquiring, holding, voting or disposing of securities of the
Corporation, such partnership, limited partnership, syndicate or group shall
also be deemed a "Person" for purposes of this Article 8.
If the Board of Directors determines that a business combination,
transaction, offer or proposal should not be recommended to the shareholders, it
may take any lawful action to accomplish its purpose of opposing or not
recommending such business combination, transaction, offer or proposal,
including, without limitation, any or all of the following: advising
shareholders not to accept the business combination, transaction, offer or
proposal; soliciting proxies against the business combination, transaction,
offer or proposal; initiating or filing, in good faith, litigation or complaints
with governmental or regulatory authorities against the business combination,
transaction, offer or proposal; issuing the authorized but unissued securities
or treasury stock of the Corporation or granting options (either statutory or
nonstatutory, or both) with respect thereto in accordance with applicable law;
acquiring another entity or entities to create an antitrust or other regulatory
problem for the business combination, transaction, offer or proposal; and
obtaining a more favorable offer or proposal.
The provisions of this Article 8 shall be deemed solely to grant
discretionary authority to the directors and shall not be deemed to provide to
any constituency the right to be considered. In addition, the provisions of
this Articles 8 shall be supplemental to and in no way limiting of the powers
and authority granted to the directors by applicable law.
9. Classification of Directors. The Board of Directors of the Corporation
---------------------------
shall be divided into three classes. The respective terms of office of the
members of each such class shall end in successive years. The number of
directors in each class shall be as specified in, or as determined pursuant to,
the Bylaws and shall be nearly as equal as possible. Except as provided in
Article 10 of this Certificate of Incorporation, the directors in each class
shall be elected to hold office until the third successive annual meeting of
shareholders after their election and until their successors shall have been
elected and qualified. At each annual meeting of shareholders the directors of
only one class shall be elected, except directors who may be elected to fill
vacancies. If the number of directors comprising the Board of Directors, is
changed, any increase or decrease shall be apportioned among the classes so as
to maintain or attain the number of directors in each class as nearly equal as
reasonably possible, but in no case shall a decrease in the number of directors
shorten the term of any incumbent director.
10. Filling of Vacancies in the Board of Directors. Any vacancies in the
----------------------------------------------
Board of Directors for any reason, including, but not limited to, any vacancy
resulting by reason of the removal of a director with or, if permitted by this
Certificate of Incorporation, without cause, and any newly created directorships
resulting by reason of any increase in
-6-
<PAGE>
the number of directors may be filled only by the Board of Directors, acting by
a majority of the remaining directors then in office, although less than a
quorum, or by a sole remaining director. Any director so elected by the Board of
Directors to fill a vacancy shall hold office only until the next annual meeting
of shareholders and until his or her successor shall have been elected and
qualified, notwithstanding that the term of office of other directors in the
class of which he or she is a member does not expire at the time of such
meeting. The successor to any director elected by the Board to fill a vacancy
shall be elected by the shareholders to a term of office which shall expire at
the same time as the term of office of the other directors in the class to which
he or she is elected and until his or her successor is elected and qualified.
Notwithstanding any other provision of this Certificate of Incorporation, if the
holders of any class or classes of shares of the Corporation's capital stock,
other than the Common Stock, or any series thereof shall be entitled to elect
one or more directors pursuant to this Certificate of Incorporation, any vacancy
in the directors elected by such class or classes or series may be filled by a
majority of the directors elected by such class or classes or series then in
office, or, if no such director is then in office, by the Board of Directors as
otherwise provided in this Article 10.
11. Indemnification.
---------------
11.1. Right to Indemnification. Each person who was or is made a
------------------------
party or is threatened to be made a party to or is otherwise involved in
any action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact:
(a) that he or she is or was a director or officer of the
Corporation, or
(b) that he or she, being at the time a director or officer of the
Corporation, is or was serving at the request of the Corporation as a
director, trustee, officer, employee or agent of another corporation or
of a partnership, joint venture, trust or other enterprise, including
service with respect to an employee benefit plan (collectively,
"another enterprise" or "other enterprise"),
whether either in case (a) or in case (b) the basis of such proceeding is
alleged action or inaction (x) in an official capacity as a director or
officer of the Corporation, or as a director, trustee, officer, employee
or agent of such other enterprise, or (y) in any other capacity related to
the Corporation or such other enterprise while so serving as a director,
trustee, officer, employee or agent, shall be indemnified and held
harmless by the Corporation to the fullest extent authorized by the
Business Corporation Law, as the same exists or may hereafter be amended
(but, in the case of any such amendment, with respect to actions taken
prior to such amendment, only to the extent that such amendment does not
prohibit the Corporation from providing broader indemnification rights
than permitted prior thereto), against all expense, liability and loss
(including, without limitation, attorneys' fees, judgments, fines, ERISA
excise taxes or penalties and amounts paid in settlement) reasonably
incurred or suffered by such person in
-7-
<PAGE>
connection therewith. The persons indemnified by this Article 11 are
hereinafter referred to as "indemnitees." Such indemnification as to such
alleged action or inaction shall continue as to an indemnitee who has
after such alleged action or inaction ceased to be a director or officer
of the Corporation, or director, officer, employee or agent of another
enterprise; and shall inure to the benefit of the indemnitee's heirs,
executors and administrators. The right to indemnification conferred in
this Article 11: (i) shall be a contract right; (ii) shall not be affected
adversely as to any indemnitee by any amendment of this Certificate of
Incorporation with respect to any action or inaction occurring prior to
such amendment; and (iii) shall, subject to any requirements imposed by
law and the Bylaws, include the right to be paid by the Corporation the
expenses incurred in defending any such proceeding in advance of its final
disposition.
11.2. Relationship to Other Rights and Provisions Concerning
------------------------------------------------------
Indemnification. The rights to indemnification and to the advancement of
---------------
expenses conferred in this Article 11 shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute,
this Certificate of Incorporation, Bylaws, agreement (including any
agreement between such person and any of the Corporation's affiliates,
predecessor or subsidiary corporations or any constituent corporation
absorbed by the Corporation in a consolidation or merger), vote of
shareholders or disinterested directors or otherwise. The Bylaws may
contain such other provisions concerning indemnification, including
provisions specifying reasonable procedures relating to and conditions to
the receipt by indemnitees of indemnification, provided that such
provisions are not inconsistent with the provisions of this Article 11.
11.3. Agents and Employees. The Corporation may, to the extent
--------------------
authorized from time to time by the Board of Directors and to the fullest
extent authorized by the Business Corporation Law, as the same exists or
may hereafter be amended, grant rights to indemnification, and to the
advancement of expenses, to any employee or agent of the Corporation (or
any person, other than a director or officer of the Corporation, serving at
the Corporation's request as a director, trustee, officer, employee or
agent of another enterprise) or to persons who are or were a director,
officer, employee or agent of any of the Corporation's affiliates,
predecessor or subsidiary corporations or of a constituent corporation
absorbed by the Corporation in a consolidation or merger or who is or was
serving at the request of such affiliate, predecessor or subsidiary
corporation or of such constituent corporation as a director, officer,
employee or agent of another enterprise, in each case as determined by the
Board of Directors to the fullest extent of the provisions of this Article
11 in cases of the indemnification and advancement of expenses of directors
and officers of the Corporation, or to any lesser extent (or greater
extent, if permitted by law) determined by the Board of Directors. Nothing
in this Article 11.3 shall limit the indemnification provided in Article
11.1 hereof to any officer or director of the Corporation who was or is
made a party or is threatened to be made a party to or is otherwise
involved in any proceeding by reason of the fact that he or she is or was
serving
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<PAGE>
at the request of the Corporation as a director, officer, trustee, employee
or agent of any subsidiary of the Corporation or any other enterprise.
11.4. Limitations on Indemnification. Notwithstanding any other
------------------------------
provision of this Certificate of Incorporation or the Corporation's Bylaws,
(i) indemnification of any indemnitee or any person under any provision of
this Article 11 or any provision of the Corporation's Bylaws shall be
subject to the applicable rules, regulations and interpretations of the
Office of the Comptroller of the Currency, the Federal Deposit Insurance
Corporation and the Board of Governors of the Federal Reserve System, as
the same exist or may hereafter be amended (but, in the case of any such
amendment, with respect to actions taken prior to such amendment, only to
the extent that such amendment does not prohibit the Corporation from
providing broader indemnification rights than permitted prior thereto), and
(ii) indemnification of any director, officer, employee or agent of any
national bank subsidiary of the Corporation under any provision of this
Article 11 or any provision of the Corporation's Bylaws shall be subject to
the limitations, if any, contained in such subsidiary's Articles of
Association.
12. Limitation on Liability of Directors. No director of the Corporation
------------------------------------
shall be personally liable to the Corporation or its shareholders for monetary
damages for any breach of fiduciary duty by such director as a director, except
to the extent such exculpation is prohibited by the Business Corporation Law.
No amendment to or repeal of this Article 12 shall apply to or have any effect
on the liability or alleged liability of any director of the Corporation for or
with respect to any acts or omissions of such director occurring prior to such
amendment or repeal.
13. Removal of Directors. Any director may be removed from office at any
--------------------
time for cause by (i) the affirmative vote of the holders of at least sixty-six
and two-thirds percent (66 2/3%) of the combined voting power of all of the
shares of capital stock of the Corporation then entitled to vote generally in
the election of directors or (ii) the affirmative vote of sixty-six and two-
thirds percent (66 2/3%) of the entire Board of Directors, other than the
director to be removed. Notwithstanding the immediately preceding sentence,
when the holders of any series of Preferred Stock are entitled to elect one or
more directors pursuant to a resolution or resolutions providing for any series
of Preferred Stock under Article 4 hereof, any director so elected by the
holders of such series may be removed only by the applicable vote of the holders
of the shares of such series as set forth in such resolution or resolutions.
Directors shall not be removed without cause. Cause is defined as any one or
more of the following: the commission of any violation of law, rule or
regulation or of a cease and desist order which has become final; engaging or
participating in any unsafe or unsound practice in connection with the
Corporation or any of its subsidiaries regardless of whether actual harm or
damages result to the Corporation; the commission or omission of or engaging in
any act, or practice which constitutes a material breach of a director's
fiduciary duty as director, involves personal dishonesty on the part of the
director or demonstrates a willful or continuing disregard for the best
interests of the Corporation; the adjudication that a director is of an unsound
mind; the adjudication that a director is bankrupt; the intentional destruction
of
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<PAGE>
the Corporation's property; the breach or violation of any agreements with the
Corporation or any of its subsidiaries signed by the director, including, but
not limited to, confidentiality and nondisclosure agreements; or engaging in
dishonorable or disruptive behavior, practices or acts which would be reasonably
expected to harm or bring into disrepute the Corporation, its business or its
employees. The phrase "the entire Board of Directors" or "the entire Board," as
used in this Certificate of Incorporation shall refer to the total number of
directors which the Corporation would have if there were no vacancies.
14. Loans to Directors. The Corporation may lend money to or guarantee
------------------
the obligation of any director of the Corporation if the particular loan or
guarantee is approved by the shareholders of the Corporation pursuant to the
provisions of the Business Corporation Law or if the Board of Directors
determines that the particular loan or guarantee benefits the Corporation and
either approves the particular loan or guarantee or a general plan authorizing
such loans and guarantees.
15. Consent of Shareholders. Subject to applicable law and except as
-----------------------
otherwise expressly required by this Certificate of Incorporation, any action
required or permitted to be taken by the shareholders of the Corporation must be
effected or taken at a duly called annual or special meeting of such
shareholders and may not be effected or taken by any consent in writing by any
such shareholders.
16. Amendment of Certificate of Incorporation. (a) The Corporation
-----------------------------------------
hereby reserves the right to amend, alter, change or repeal any provision
contained in this Certificate of Incorporation, and all rights conferred upon
shareholders are granted subject to this reservation. Except as may be required
by applicable law or any other provision of this Certificate of Incorporation,
any such amendment, alteration, change or repeal of any provision of this
Certificate of Incorporation shall require the affirmative vote of both (a) a
majority of the Board of Directors and (b) a majority of the combined voting
power of all of the shares of capital stock of the Corporation then entitled to
vote generally in the election of directors.
(b) Notwithstanding anything contained in this Certificate of
Incorporation to the contrary, the affirmative vote of a majority of the Board
of Directors and the holders of at least sixty-six and two-thirds percent (66
2/3%) of the combined voting power of all of the shares of capital stock of the
Corporation then entitled to vote generally in the election of directors shall
be required to amend, repeal, alter, change or adopt any provision inconsistent
with Articles 8, 9, 10 and 13 hereof and this Section 16(b).
17. Amendment of Bylaws. In furtherance and not in limitation of the
-------------------
powers conferred by statute, the Board of Directors is expressly authorized to
adopt, make, amend, change, alter or repeal the Bylaws of the Corporation.
-10-
<PAGE>
IN WITNESS WHEREOF, each the undersigned subscribes this Certificate and
affirms it as true under the penalties of perjury on this ________ day of
___________________, 1998.
------------------------------------------------
Peter Van Kleeck, President
------------------------------------------------
[ ], Secretary
-11-
<PAGE>
Exhibit 3.2
-----------
BYLAWS
------
OF
--
PREMIER NATIONAL BANCORP, INC.
------------------------------
AS AMENDED AND RESTATED ON JULY 17, 1998
----------------------------------------
These Bylaws of Premier National Bancorp, Inc. (the "Corporation") are
supplemental to the New York Business Corporation Law (the "BCL") 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 on such date and at such time as
may be fixed by the Board of Directors. Only such business may be conducted at
the annual meeting as has been brought before the annual meeting by, or at the
direction of, the Board of Directors or by a shareholder who has given timely
written notice to the Secretary of the Corporation of such shareholder's
intention to bring such business before the meeting pursuant to these Bylaws.
Prior to the annual meeting, the Corporation shall furnish or cause to be
furnished to its shareholders an annual report pursuant to applicable law and
the rules of any national securities exchange on which the Corporation's capital
stock is listed.
Section 103. Special Meetings. Special meetings of the shareholders, for
------------ -----------------
any purpose or purposes, unless otherwise prescribed by law, may be called at
any time by the Chairman of the Board of Directors, the Chief Executive Officer,
the President or by the majority vote of the entire Board of Directors. The
only business which may be conducted at such a meeting, other than procedural
matters and matters relating to the conduct of the meeting, shall be the matter
or matters described in the notice of the meeting.
Section 104. Notice of Meetings. Notice of meetings of shareholder shall
------------ ------------------
be given as required by applicable law not less than ten days nor more than
sixty days before such meeting (unless a different time is specified by law) to
every shareholder entitled by law to notice of such meeting. Notice of any such
meeting need not be given to any shareholder who shall, either before or after
the meeting, submit a signed waiver of notice or who shall attend such meeting,
except when he/she shall attend for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened.
<PAGE>
Section 105. List of Stockholders. A complete list of the shareholders
------------ --------------------
entitled to vote at any meeting of shareholders, certified by the Secretary or
by the transfer agent, showing the address of each shareholder and the number
of shares registered in the name of each shareholder, shall be prepared by the
Secretary and shall be open to the examination of any shareholder upon request,
for any purpose germane to the meeting, at the place of the meeting during the
whole time of the meeting.
Section 106. Quorum. One-third (33 1/3%) of the voting power of the
------------ ------
outstanding shares of the Corporation entitled to vote on the matters at issue,
present in person or represented by proxy, shall constitute a quorum, except as
otherwise required by the BCL. When a quorum is once present to organize a
meeting of shareholders, it is not broken by the subsequent withdrawal of any
shareholder. The holders of a majority of the voting power of the outstanding
shares present in person or represented in proxy and entitled to vote at any
meeting of shareholders may adjourn such meeting from time to time without
notice other than an announcement at the meeting, whether or not a quorum is
present. At any such adjourned meeting at which there is a quorum, any business
may be transacted that might have been transacted at the meeting originally
called.
Section 107. Conduct of Shareholders' Meetings. The Chairman of the
------------ ----------------------------------
Board of Directors shall preside at all shareholders' meetings. In the absence
of the Chairman of the Board of Directors, the Deputy Chairman of the Board of
Directors shall preside or, in his/her absence, the Chief Executive Officer
shall preside, or, in his/her absence, any other Officer designated by the Board
of Directors shall preside. The Secretary or, in his/her absence or inability
to act, the person appointed secretary of the meeting by the person presiding
over the meeting, shall act as secretary of the meeting and keep the minutes
thereof. The person 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.
Section 108. Shareholder Nominations and Proposals. (a) No proposal for
------------ -------------------------------------
a shareholder vote shall be submitted by a shareholder (a "Shareholder
Proposal") to the Corporation's shareholders unless the shareholder submitting
such proposal (the "Proponent") shall have filed a written notice setting forth
with particularity (i) the names and business addresses of the Proponent and all
Persons (as such term is defined in Section 3(a)(9) of the Securities Exchange
Act of 1934, as amended through the date of adoption of these Bylaws) acting in
concert with the Proponent; (ii) the names and addresses of the Proponent and
the Persons identified in clause (i), as they appear on the Corporation's books
(if they so appear); (iii) the class and number of shares of the Corporation
beneficially owned by the Proponent and the Persons identified in clause (i);
(iv) a description of the Shareholder Proposal containing all material
information relating thereto; and (v) such other information as the Board of
Directors reasonably determines is necessary or appropriate to enable the Board
of Directors and shareholders of the Corporation to consider the Shareholder
Proposal. Upon receipt of the Shareholder Proposal and prior to the shareholder
meeting at which such Shareholder Proposal will be considered, if the Board of
Directors or a designated committee or the Officer who will preside at the
shareholder meeting determines that the information provided in a Shareholder
Proposal does not satisfy the informational requirements of these Bylaws or is
otherwise not in accordance with law, the
<PAGE>
Secretary of the Corporation shall promptly notify such Proponent of the
deficiency in the notice. Such Proponent shall have an opportunity to cure the
deficiency by providing additional information to the Secretary within the
period of time, not to exceed five days from the date such deficiency notice is
given to the Proponent, determined by the Board of Directors, such committee or
such Officer. If the deficiency is not cured within such period, or if the Board
of Directors, such committee or such Officer determines that the additional
information provided by the Proponent, together with the information previously
provided, does not satisfy the requirements of this Section 108, then such
proposal shall not be presented for action at the meeting in question.
(b) Only persons who are selected and recommended by the Board of
Directors or the Nominating Committee thereof, or who are nominated by
shareholders in accordance with the procedures set forth in this Section 108,
shall be eligible for election, or qualified to serve, as directors.
Nominations of individuals for election to the Board of Directors of the
Corporation at any annual meeting or any special meeting of shareholders at
which directors are to be elected may be made by any shareholder of the
Corporation entitled to vote for the election of directors at that meeting by
compliance with the procedures set forth in this Section 108. Nominations by
shareholder shall be made by written notice (a "Nomination Notice"), which shall
set forth (i) as to each individual nominated, (A) the name, date of birth,
business address and residence address of such individual; (B) the business
experience during the past five years of such nominee, including his/her
principal occupations and employment during such period, the name and principal
business of any corporation or other organization in which such occupations and
employment were carried on and such other information as to the nature of
his/her responsibilities and level of professional competence as may be
sufficient to permit assessment of his/her prior business experience; (C)
whether the nominee is or has ever been at any time a director, officer or owner
of 5% or more of any class of capital stock, partnership interests or other
equity interest of any corporation, partnership or other entity; (D) any
directorships held by such nominee in any company with a class of securities
registered pursuant to Section 12 of the Securities Exchange Act of 1934, as
amended, or subject to the requirements of Section 15(d) of such Act or any
company registered as an investment company under the Investment Company Act of
1940, as amended; and (E) whether, in the last five years, such nominee has been
convicted in a criminal proceeding or has been subject to a judgment, order,
finding or decree of any federal, state or other governmental entity, concerning
any violation of federal, state or other law, or any proceeding in bankruptcy;
and (ii) as to the Person submitting the Nomination Notice and any Person acting
in concert with such Person, (x) the name and business address of such Persons,
(y) the name and address of such Persons and as they appear on the Corporation's
books (if they so appear) and (z) the class and number of shares of the
Corporation which are beneficially owned by such Persons. A written consent to
being named in a proxy statement as a nominee, and to serve as a Director if
elected, signed by the nominee, shall be filed with any Nomination Notice. If
the presiding Officer at any shareholder meeting determines that a nomination
was not made in accordance with the procedures prescribed by these Bylaws,
he/she shall so declare to the meeting and the defective nomination shall be
disregarded.
(c) Nomination Notices and Shareholder Proposals shall be delivered to
the Secretary at the principal executive office of the Corporation during the
time periods prior to the date of the meeting of shareholders if such Nomination
Notice or Shareholder Proposal is to be submitted at
<PAGE>
an annual shareholder meeting as required and specified in or pursuant to Rule
14a-8 promulgated under the Securities Exchange Act of 1934, as amended.
Nomination Notices and Shareholder Proposals shall be delivered to the Secretary
at the principal executive office of the Corporation no later than the close of
business on the tenth day following the day on which notice of the date of a
special meeting of shareholders was given if the Nomination Notice or
Shareholder Proposal is to be submitted at a special shareholder meeting.
Section 109. Voting. Unless otherwise provided in the Corporation's
------------ ------
Certificate of Incorporation (the "Certificate of Incorporation") or the BCL,
every shareholder shall be entitled to one vote, in person or by written proxy,
for each share of capital stock held of record by such shareholder which is
entitled to vote generally in the election of Directors. If the Certificate of
Incorporation provides for more or less than one vote for any share, on any
matter, every reference in these Bylaws or the BCL to a majority or other
proportion of stock shall refer to such majority or other proportion of the
votes of such stock. The provisions of Sections 609 and 612 of the BCL shall
apply in determining whether any shares of capital stock may be voted and the
persons, if any, entitled to vote such shares, but the Corporation shall be
protected in treating the persons in whose names shares of capital stock stand
on the record of shareholder as owners thereof for all purposes. All elections
for the Board of Directors shall be decided by a plurality of the votes cast by
the holders of shares entitled to vote in the election of Directors and, except
as otherwise required by law, by the Certificate of Incorporation, or by a
provision of these Bylaws adopted by the shareholders, all other questions shall
be decided by a majority of the votes cast by the holders of shares entitled to
vote thereon. Abstentions shall not be considered to be votes cast. In voting
on any question on which a vote by ballot is required by law, by the Certificate
of Incorporation or by the Officer presiding over the meeting, or is demanded by
any shareholder entitled to vote, the voting shall be by written ballot. Each
ballot shall be signed by the shareholder voting or by his/her proxy, and shall
state the number of shares voted. On all other questions, the voting may be
viva voce. Every shareholder entitled to vote at a meeting of shareholders may
authorize another person or persons to act for him by proxy. The validity and
enforceability of any proxy shall be determined in accordance with applicable
law.
Section 110. Inspectors. The Board of Directors, in advance of any
------------ ----------
meeting of shareholders, shall appoint one or more inspectors to act at such
meeting or any adjournment thereof and to make a written report thereof. The
Board of Directors may designate one or more alternate inspectors to replace any
inspector who fails to appear or act. If no inspectors or alternate inspectors
shall have been appointed or if the inspectors and alternate inspectors are
unable to act the person presiding over the meeting shall appoint one or more
inspectors to act at the meeting. Each inspector, before entering upon the
discharge of his/her duties, shall take and sign an oath faithfully to execute
the duties of inspector at such meeting with strict impartiality and according
to the best of his/her ability. The inspectors shall determine the number of
shares of capital stock of the Corporation outstanding and the voting power of
each, the number of shares represented at the meeting, the existence of a
quorum, the validity and effect of proxies, and shall receive votes, ballots or
consents, hear and determine all challenges and questions arising in connection
with the right to vote, count and tabulate all votes, ballots or consents,
determine the results, and do such acts as are proper to conduct the election or
vote with fairness to all shareholders. On request of the person presiding over
the meeting, the inspectors shall make a report in writing of any challenge,
request or matter determined by them and shall
<PAGE>
execute a certificate of any fact found by them. No Director or candidate for
the office of Director shall act as an inspector of an election of Directors.
Inspectors need not be shareholders.
ARTICLE II. DIRECTORS AND BOARD MEETINGS.
- ----------- -----------------------------
Section 201. Management by Board of Directors. The business and affairs
------------ ---------------------------------
of the Corporation shall be managed by, or under the direction of, 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. Eligibility and Mandatory Retirement. Each Director shall
------------ -------------------------------------
be at least eighteen years of age. Each 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. Directors
need not be residents of the State of New York. 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 203. Number of Directors. The Board of Directors shall consist
------------ --------------------
of not less than five (5) nor more than twenty-five (25) persons, as fixed by a
majority of the entire Board of Directors; provided, however, that the number of
Directors shall not be increased by fifty percent (50%) or more in any twelve-
month period without the approval by at least sixty-six and two-thirds percent
(66 2/3%) of the entire Board of Directors. No reduction in the number of
Directors shall have the effect of shortening the term of any Director in office
at the time such reduction becomes effective.
Section 204. 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. At each annual meeting of the shareholders the members of
one class of Directors shall be elected to serve until the third succeeding
annual meeting of the shareholders following their election and until their
successors shall be elected and shall qualify or until their earlier death,
removal or resignation in the manner provided in the Certificate of
Incorporation or herein.
Section 205. Compensation of Directors. Directors, and members of any
------------ --------------------------
committee of the Board of Directors, shall be entitled to receive such
reasonable compensation, including fees and reimbursement of expenses, for their
services as the Board of Directors may determine. Any Director may serve the
Corporation in any other capacity and receive compensation therefor.
<PAGE>
Section 206. Place of Meetings. Meetings of the Board of Directors shall
------------ -----------------
be held at such place or places, within or without the State of New York, as the
Board of Directors may from time to time determine or as shall be specified in
the notice of any such meeting.
Section 207. 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. Notice need
not be given of regular meetings of the Board of Directors except as otherwise
required by applicable law or these Bylaws. 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, shall be
given pursuant to Section 209 of these Bylaws.
Section 208. Annual Meeting. The Board of Directors shall meet for the
------------ --------------
purpose of organization, the election of officers and the transaction of other
business, as soon as practicable after each annual meeting of shareholders, on
the same day and at the same place where such annual meeting of shareholders
shall be held. Notice of such Board meeting need not be given. In the event
such annual meeting of shareholders is not so held, the annual meeting of the
Board of Directors may be held at such other time or place (within or without
the State of New York) as shall be specified in a notice thereof given as
hereinafter provided in Section 209 hereof.
Section 209. Notice of Meetings. Notice of each special meeting of the
------------ ------------------
Board of Directors (and of each regular meeting for which notice shall be
required) shall be given by the Secretary as hereinafter provided in this
Section 209, in which notice shall be stated the time and place of the meeting.
Notice of a special meeting shall state the general purpose of the meeting, but
other routine business may be conducted at a special meeting without such matter
being stated in the notice. Notice of each such meeting shall be (i) mailed,
postage prepaid, to each Director at his/her designated address at least seven
days before the day on which such meeting is to be held, (ii) sent by overnight
courier to each Director at his/her designated address at least two days before
the day on which such meeting is to be held (with delivery scheduled to occur no
later than the day before the meeting), or (iii) given orally by telephone or
other means, or by facsimile, telegraph, cable, telex, telecopier or other
similar means, to each Director at his/her designated address at least twenty-
four hours before the time at which such meeting is to be held. Notice of any
such meeting need not be given to any Director who shall, either before or after
the meeting, submit a signed waiver of notice or who shall attend such meeting,
except when he/she shall attend for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened.
Section 210. Organization. The Board of Directors, at the annual meeting
------------ ------------
(or at a special meeting called for that purpose), shall elect, by the
affirmative vote of a majority of the Directors present, one Director as
Chairman of the Board of Directors and, may elect, by the same percentage vote,
one Director as Deputy Chairman of the Board of Directors, each to serve at the
pleasure of the Board of Directors. The Chairman of the Board of Directors
shall preside at all meetings of the Board of Directors at which he/she is
present, shall be an ex-officio member of all Committees of the Board of
Directors (other than the Audit Committee) and shall
<PAGE>
perform such other duties and possess such powers as are usually vested in the
office of the Chairman of the Board and as may be determined and required of
him/her by the Board of Directors or these Bylaws. The Chairman of the Board of
Directors is authorized to execute on behalf of the Corporation all documents
and instruments requiring such execution and to affix or cause to be affixed a
seal to such documents and instruments, except to the extent that execution
thereof shall have been delegated to some other Officer or agent of the
Corporation by the Board of Directors. In the absence of the Chairman of the
Board of Directors, the Deputy Chairman of the Board of Directors, and in
his/her absence the Chief Executive Officer, shall preside at meetings of the
Board of Directors, and in his/her absence, such other Director as selected by
the Directors present at such meeting shall preside at the meeting. The Deputy
Chairman of the Board of Directors, and in his/her absence the Chief Executive
Officer, shall, in the absence or disability of the Chairman of the Board of
Directors, perform the duties and exercise the powers of the Chairman of the
Board of Directors and shall perform such other duties as may be determined and
required of him/her by the Board of Directors. At each meeting of the Board of
Directors, the Secretary, or in his/her absence, any person appointed by the
Director presiding over the meeting, shall act as secretary of the meeting and
keep the minutes thereof.
Section 211. Special Meetings. Special meetings of the Board of
------------ -----------------
Directors may be called by the Chairman of the Board of Directors, the Deputy
Chairman of the Board of Directors, the Chief Executive Officer, the President
or at the request of a majority of the Directors. A special meeting of the
Board of Directors shall be deemed to be any meeting other than a regular
meeting of the Board of Directors. Notice of the time and place of every
special meeting shall be given pursuant to Section 209 of these Bylaws.
Section 212. Quorum. A majority of the entire Board of Directors shall
------------ ------
constitute a quorum for the transaction of business. If at any meeting of the
Board of Directors a quorum is not present, a majority of the Directors in
attendance may adjourn the meeting from time to time until a quorum is obtained.
Notice of the time and place of any such adjourned meeting shall be given to all
of the Directors unless such time and place were announced at the meeting at
which the adjournment was taken, in which case such notice shall only be given
to the Directors who were not present thereat. At any adjourned meeting at
which a quorum is present, any business may be transacted which might have been
transacted at the meeting as originally called.
Section 213. Voting Requirements. Except as otherwise required by the
------------ -------------------
BCL, the Certificate of Incorporation or these Bylaws, a majority of those
Directors present 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.
Section 214. 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.
<PAGE>
Section 215. Resignations. Any Director of the Corporation may resign at
------------ ------------
any time by giving written notice of his/her resignation to the Chairman of the
Board, the Deputy Chairman of the Board, the Chief Executive Officer or the
Secretary. Any such resignation shall take effect at the time specified therein
or, if the time when it shall become effective shall not be specified therein,
immediately upon its receipt. Unless otherwise specified therein or required by
applicable law, the acceptance of such resignation shall not be necessary to
make it effective.
Section 216. Action by Consent. Unless restricted by the Certificate of
------------ -----------------
Incorporation or these Bylaws, any action required or permitted to be taken by
the Board of Directors or any committee thereof may be taken without a meeting
if all members of the Board of Directors or of such committee, as the case may
be, consent thereto in writing, and the writing or writings are filed with the
minutes of the proceedings of the Board of Directors or such committee, as the
case may be.
Section 217. Telephonic Meeting. Unless restricted by the Certificate of
------------ ------------------
Incorporation or these Bylaws, any one or more members of the Board of Directors
or any committee thereof may participate in a meeting of the Board of Directors
or such committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other. Participation by such means shall constitute presence in person at
a meeting.
ARTICLE III. COMMITTEES.
- ------------ -----------
Section 301. Committees. (a) Subject to the provisions of Section 712
------------ -----------
of the BCL, the Board of Directors may, by resolutions passed by a majority of
the entire Board of Directors, designate members of the Board of Directors to
constitute committees of the Board of Directors, which shall in each case
consist of such number of directors and have and may execute such powers and
authority as may be determined and specified by these Bylaws or in the
respective resolutions appointing them. Each such committee shall serve at the
pleasure of the Board of Directors.
(b) 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, Personnel and Compensation Committee and
Nominating Committee.
Section 302. Executive Committee. The Executive Committee shall consist
------------ --------------------
of the Chairman of the Board of Directors, the Deputy Chairman of the Board of
Directors, the Chief Executive Officer and, if he/she is also a Director, the
President, and at least four (4) other Directors who are not also Officers of
the Corporation as may be elected by the Board of Directors to serve on the
Executive Committee. The Executive Committee shall be chaired by the Chairman
of the Board of Directors and, in his/her absence, the Deputy Chairman of the
Board of Directors or the Chief Executive Officer. A majority of the members of
the Executive Committee shall constitute a quorum, and actions of a majority of
those members present at a meeting at which a quorum is present shall be actions
of the Executive Committee. Meetings of
<PAGE>
the Executive Committee may be called at any time by the Chairman of the
Executive Committee, and shall be called whenever two (2) or more members of the
Executive 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, the members of which shall be appointed annually by the
Board of Directors. Each member of the Audit Committee shall serve until
his/her successor is appointed. The Audit Committee shall consist of not less
than four (4) members of the Board of Directors, none of whom shall be an
Officer or employee of the Corporation or of any subsidiary of the Corporation,
and one of whom shall be appointed chairman of the Audit Committee. The duties
of this Committee shall be (i) to review the systems of internal control and the
internal and external audit functions to ensure the integrity of all financial
statements and other audit-related public disclosures, (ii) to monitor
compliance with legal and regulatory requirements, and (iii) perform such other
duties as shall be delegated to the Audit Committee by the Board of Directors
from time to time.
(b) The Corporation's internal auditor shall serve as the principal
staff for the Audit Committee. The Audit 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 Audit 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 for ratification at the next meeting of
the Board of Directors. At the conclusion of each meeting of the Audit
Committee, management may be excused to provide the opportunity for the Audit
Committee to discuss issues privately with the internal auditor and/or the
external auditors.
<PAGE>
Section 304. Investment Committee. There shall be a standing committee
------------ ---------------------
known as the Investment Committee of the Board of Directors, the members of
which shall be appointed annually by the Board of Directors and shall serve
until their successors are appointed. The Investment Committee shall consist of
at least three (3) Directors, a majority of whom are not active officers or
employees of the Corporation or of any subsidiary of the Corporation, and one of
whom shall be appointed Chairman of the Investment Committee. The Investment
Committee shall be empowered to act with regard to asset and liability
management policies of the Corporation, capital structure, planning and
financing for the Corporation and mergers, acquisitions and similar transactions
involving the Corporation. All meetings of the Investment Committee shall be
recorded in writing and reported to the Board of Directors for ratification at
the next meeting of the Board of Directors.
Section 305. Personnel and Compensation Committee. There shall be a
------------ -------------------------------------
standing committee known as the Personnel and Compensation Committee, the
members of which shall be elected annually by the Board of Directors and shall
serve until their successors are appointed. The Personnel and Compensation
Committee shall consist of at least three (3) members of the Board of Directors,
none of whom shall be an active Officer or employee of the Corporation or of any
subsidiary of the Corporation. The Personnel and Compensation Committee is
empowered to set and maintain employment policies and procedures, a performance
appraisal system, to fix compensation levels for all executive or similar senior
officers of the Corporation and to perform such other duties with respect to
compensation and compensation plans as shall be delegated to the Personnel and
Compensation Committee by the Board of Directors from time to time. All
meetings of the Personnel and Compensation Committee shall be recorded in
writing and reported to the Board of Directors for ratification at the next
meeting of the Board of Directors.
Section 306. Nominating Committee. There shall be a standing committee
------------ --------------------
known as the Nominating Committee, the members of which shall be appointed
annually by the Board of Directors and shall serve until their successors are
appointed. The Nominating Committee shall consist of at least five (5)
Directors. The Nominating Committee shall select nominees for election as
Directors and perform such other duties in connection with the nomination of
persons for election as Directors and the election of Directors as shall be
delegated to the Nominating Committee by the Board of Directors from time to
time.
Section 307. 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, if any, to serve
at the pleasure of the Board until the next annual meeting of shareholders. The
Board of Directors shall have the power to change the membership of any
Committee, fill vacancies in any Committee or remove any members of any
Committee, either with or without cause, at any time.
Section 308. 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 of such Committee
if appointed by the Board, 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 214 of these Bylaws. Except as otherwise set
forth in this Section 308 and unless the Board of Directors shall otherwise by
<PAGE>
resolution provide, each Committee may fix its rules of procedure, determine its
manner of acting and fix the time and place, whether within or without the State
of New York, of its meetings and specify what notice thereof, if any, shall be
given. Unless otherwise provided by the Board of Directors or a Committee,
quorum, voting and other procedures shall be the same as those applicable to
actions taken by the Board of Directors.
ARTICLE IV. OFFICERS.
- ----------- ---------
Section 401. Officers. The Officers of the Corporation shall be elected
------------ ---------
by the Board of Directors and shall include the Chairman of the Board, whose
duties and powers are as set forth in Section 210 of these Bylaws, Chief
Executive Officer, President, one (1) or more Vice Presidents, Secretary,
Treasurer, and such other Officers and Assistant Officers as the Board of
Directors may from time to time deem advisable. The same individual may hold
any two (2) or more offices. Officers and Assistant Officers of the Corporation
may, but need not, also be members of the Board. At its first meeting after
each annual meeting of the shareholders, the Board of Directors shall elect the
Officers. The election or appointment of an Officer shall not of itself create
contract rights. 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/her office for the period for which he/she was elected or appointed by the
Board and until his/her successor has been elected or appointed and qualified,
unless he/she shall resign, become disqualified, die, or be removed at the
pleasure of the Board of Directors. Any Officer of the Corporation may resign
at any time by giving written notice of his/her resignation to the Chairman of
the Board, the Chief Executive Officer, or the Secretary. Any such resignation
shall take effect at the time specified therein or, if the time when it shall
become effective shall not be specified therein, immediately upon its receipt.
Unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective. Should any vacancy occur among the Officers,
the position shall be filled for the unexpired portion of the term by
appointment made by the Board. The duties of the Officers of the Corporation
shall be such as are set forth in these Bylaws and, from time to time,
prescribed by the Board of Directors.
Section 402. Chief Executive Officer. The Chief Executive Officer shall
------------ ------------------------
be the chief executive officer of the Corporation and, subject to the control of
the Board of Directors, shall have and exercise general supervision and control
of the business of the Corporation and 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
Chairman of the Board of Directors or, if the Chief Executive Officer is the
Chairman of the Board, 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, other than those directed by these Bylaws or the Board of Directors
to report to the Chairman of the Board, 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
Chairman
<PAGE>
of the Board of Directors, the Chief Executive Officer or the President. In the
event of the death, incapacity, resignation or extended absence of the Chief
Executive Officer, the Chairman of the Board of Directors shall perform the
duties of the Chief Executive Officer.
Section 403. President. The President shall 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, the Chairman of the Board of Directors, or 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, the Chairman of the Board of
Directors or the Chief Executive Officer.
Section 404. Executive and Other Vice Presidents. The Vice Presidents,
------------ ------------------------------------
if any, in such gradations as the Board of Directors may determine, shall
perform such duties, do such acts and be subject to such supervision as may be
prescribed by the Board of Directors, the Chairman of 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 405. Secretary. The Secretary shall act under the supervision of
------------ ----------
the Chairman of the Board of Directors or such other Officers as the Board of
Directors 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 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, the Chairman of 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, the Chairman of the Board
of Directors, or such other Officer as the Chairman of the Board of Directors
may designate.
Section 406. Treasurer. The Treasurer shall act under the supervision of
------------ ----------
the Chairman of the Board of Directors or such other Officer as the Board of
Directors may designate. The Treasurer shall have custody of the Corporation's
funds, keep the fiscal accounts of the Corporation, deposit all moneys and other
valuable effects in the name and to the credit of the Corporation in such
depositories as may be designated by the Board or any Officer authorized to so
designate, disburse the funds of the Corporation as may be ordered by the Board
or any Officer authorized to so order, render, when so requested, accounts of
the financial transactions and condition of the Corporation to the Chairman of
the Board, the Chief Executive Officer and the Board of Directors, and perform
such other duties as may be prescribed by the Board of Directors, the Chairman
of the Board of Directors or such other Officer as the Chairman of the Board of
Directors may designate.
<PAGE>
Section 407. 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 Officers 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 408. Compensation. The salaries and compensation of all Officers
------------ -------------
appointed or elected by the Board of Directors shall be fixed by or in the
manner designated by the Board of Directors.
Section 409. 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
be executed by the Chairman, the Chief Executive Officer, the President, any
Vice President or such Officers or employees or agents of the Corporation 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 deem appropriate.
Section 410. General Powers. The Officers are authorized to do and
------------ ---------------
perform such 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. Indemnification Provisions in Certificate of Incorporation.
------------ ----------------------------------------------------------
The provisions of this Article V are intended to supplement Article 11 of the
Certificate of Incorporation pursuant to Section 11.2 of the Certificate of
Incorporation. To the extent that this Article V contains any provisions
inconsistent with said Article 11, the provisions of the Certificate of
Incorporation shall govern. Terms defined in such Article 11 shall have the
same meaning in this Article V.
Section 502. Undertakings for Advances of Expenses. If and to the extent
------------ -------------------------------------
the BCL or the Board of Directors requires, an advancement by the Corporation of
expenses incurred by an indemnitee pursuant to clause (iii) of the last sentence
of Section 11.1 of the Certificate of Incorporation (hereinafter an "advancement
of expenses") shall be made only upon delivery to the Corporation of an
undertaking (hereinafter an "undertaking"), by or on behalf of such indemnitee,
to repay all amounts so advanced if it shall ultimately be determined by final
judicial decision from which there is no further right to appeal (hereinafter a
"final adjudication") that such indemnitee is not entitled to be indemnified for
such expenses under Article 11 of the Certificate of Incorporation or otherwise.
Section 503. Claims for Indemnification. If a claim for indemnification
------------ --------------------------
under this Article V is not paid in full by the Corporation within sixty (60)
days after it has been received in
<PAGE>
writing by the Corporation, except in the case of a claim for an advancement of
expenses in which case the applicable period shall be twenty (20) days, the
indemnitee may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim. If successful in whole or in part in any
such suit, or in a suit brought by the Corporation to recover an advancement of
expenses pursuant to the terms of an undertaking, the indemnitee shall be
entitled to be paid also the expense of prosecuting or defending such suit. In
any suit brought by the indemnitee to enforce a right to indemnification
hereunder (but not in a suit brought by the indemnitee to enforce a right to an
advancement of expenses) it shall be a defense that, and in any suit by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the Corporation shall be entitled to recover such expenses only
upon a final adjudication that, the indemnitee has not met the applicable
standard of conduct set forth in the BCL. Neither the failure of the Corporation
(including the Board of Directors, independent legal counsel or its
shareholders) to have made a determination prior to the commencement of such
suit that indemnification of the indemnitee is proper in the circumstances
because the indemnitee has met the applicable standard of conduct set forth in
the BCL, nor an actual determination by the Corporation (including the Board of
Directors, independent legal counsel, or its shareholder) that the indemnitee
has not met such applicable standard of conduct, shall create a presumption that
the indemnitee has not met the applicable standard of conduct or, in the case of
such a suit brought by the indemnitee, be a defense to such suit. In any suit
brought by the indemnitee to enforce a right to indemnification or to an
advancement of expenses hereunder, or by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the burden of
proving that the indemnitee is not entitled to be indemnified, or to have or
retain such advancement of expenses, under Article 11 of the Certificate of
Incorporation or this Article V or otherwise, shall be on the Corporation.
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 BCL or any successor provision
thereto.
Section 505. Relationship to Other Rights and Provisions Concerning
------------ ------------------------------------------------------
Indemnification. The provisions of this Article V regarding claims for
- ---------------
indemnification and the advancement of expenses shall govern claims for
indemnification and the advancement of expenses which any person may have a
right to or may hereafter acquire a right to pursuant to (i) the Certificate of
Incorporation or these Bylaws and (ii) any statute, agreement (including any
agreement between such person and any of the Corporation's affiliates,
predecessor or subsidiary corporations or any constituent corporation absorbed
by the Corporation in a consolidation or merger), vote of shareholders or
disinterested directors or otherwise, except with respect to any provisions of
any such statute, agreement or vote of shareholders of disinterested directors
regarding any matter set forth in Sections 502 or 503 of these Bylaws, in which
case the terms of such provisions of any such statute, agreement or vote of
shareholders or disinterested directors shall govern in lieu of Sections 502 or
503 hereof, as the case may be.
Section 506. Severability. In the event that any of the provisions of
------------ ------------
this Article V (including any provision within a single section, paragraph or
sentence) is held by a court of competent jurisdiction to be invalid, void or
otherwise unenforceable, the remaining provisions are severable and shall remain
enforceable to the full extent permitted by law.
<PAGE>
ARTICLE VI. SHARES OF CAPITAL STOCK.
- ----------- ------------------------
Section 601. Stock Certificates. Every share certificate of the
------------ ------------------
Corporation shall be in such form (consistent with applicable law and, if
applicable, the rules of a national securities exchange on which the
Corporation's capital stock is listed) as shall be determined by the Board,
signed by the Chairman of the Board or the President and the Secretary or
Assistant Secretary or the Treasurer or Assistant Treasurer. Certificates may
be signed by a facsimile signature if the certificate is countersigned by a
transfer agent or registered by a registrar other than the Corporation or its
employees. All certificates for shares shall be consecutively numbered or
otherwise identified. The name and address of the person to whom the shares
represented thereby are issued, with the number of shares and date of issue,
shall be entered on the stock transfer books of the Corporation. All
certificates surrendered to the Corporation for transfer shall be canceled and
no new certificate shall be issued until the former certificate for a like
number of shares shall have been surrendered and canceled. Notwithstanding any
other provision of these Bylaws and subject to the requirements of the BCL, the
shares of the Corporation's capital stock may be uncertificated shares.
Section 602. Registered Stockholders. A record of the name and address
------------ -----------------------
of the holder of each certificate, the number of shares represented thereby and
the date of issue thereof shall be made on the Corporation's books. The
Corporation shall be entitled to recognize the exclusive right of a person
registered on its records as the owner of shares of stock to receive dividends
and to vote as such owner, shall be entitled to hold liable for calls and
assessments a person registered on its records as the owner of shares of stock,
and shall not be bound to recognize any equitable or other claim to or interest
in such share or shares of stock on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
the laws of the State of New York.
Section 603. Transfers of Stock. Transfer of shares of stock of the
------------ ------------------
Corporation shall be made in accordance with the BCL. Transfers of stock shall
be made on the books of the Corporation only by direction of the person named in
the stock certificate or such person's attorney, lawfully constituted in
writing, and only upon the surrender of the certificate therefor accompanied by
a written assignment of the shares evidenced thereby, which certificate shall be
canceled before any new certificate is issued.
Section 604. Transfer Agents and Registrars. The Board of Directors may
------------ ------------------------------
appoint, or authorize any Officer or Officers to appoint, one or more transfer
agents and one or more registrars. In case any Officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such Officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if such person were such Officer, transfer agent or registrar at
the date of issue.
Section 605. Regulations. The Board of Directors may make such
------------ -----------
additional rules and regulations, not inconsistent with the Certificate of
Incorporation, these Bylaws or the BCL, as it
<PAGE>
may deem expedient concerning the issue, transfer and registration of
certificates for shares of stock of the Corporation or pertaining to
uncertificated shares of stock of the Corporation.
Section 606. 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, the
Chairman of the Board of Directors or the Secretary with an indemnity agreement
satisfactory in form and substance to the Board of Directors; and (c) satisfied
any other reasonable requirements (including providing an affidavit and a surety
bond) fixed by the Board of Directors, the Chairman of the Board of Directors 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 a record date
------------ ------------
for the determination of the shareholders entitled to notice of, or to vote at
any meeting of shareholders or any adjournment thereof, or to express consent to
or dissent from any proposal without a meeting, or for the purpose of
determining shareholders entitled to receive payment of any dividend,
distribution or the allotment of any rights, or to exercise rights in respect to
any change, conversion or exchange of shares, or for the purpose of any other
action; provided, that such date shall be a permitted record date under the BCL
and the rules of any national securities exchange on which the Corporation's
capital stock is listed.
Section 703. Emergency Bylaws. In the event of any emergency resulting
------------ -----------------
from a nuclear or other attack or any similar disaster or catastrophe or other
similar emergency condition as a result of which a quorum of the Board of
Directors or a standing Committee thereof cannot readily be convened for action,
and during the continuance of such emergency, the following Emergency 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 Directors in attendance at the meeting of the Board of
Directors or of any Committee thereof shall constitute a quorum, but in no event
shall there be a quorum unless at least two (2) Directors are present; 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.
<PAGE>
Section 704. 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 705. 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 Chairman of the Board or, in the absence
of the Chairman of the Board, the Chief Executive Officer 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.
Section 706. Seal. The seal of the Corporation shall be in such form as
------------ -----
shall be approved by the Board of Directors.
Section 707. Dividends. Subject to the provisions of the Certificate of
------------ ---------
Incorporation and the BCL, dividends may be declared by the Board of Directors
at any regular or special meeting and may be paid in cash, in shares of the
Corporation's capital stock or its bonds or other property. Before payment of
any dividend, there may be set aside out of any funds of the Corporation legally
available for the payment of dividends such sums or sums as the Board of
Directors from time to time, in its absolute discretion, determines are proper
as a reserve fund to meet contingencies, or for equalizing dividends, or for
such other purpose as the Board of Directors shall determine conducive to the
interests of the Corporation, and the Board of Directors may modify or abolish
any such reserve in the manner in which it was created.
Section 708. Loans. No loans and no renewals of loans shall be
----------- -----
contracted on behalf of the Corporation except as authorized by the Board of
Directors. Such authority may be general or confined to specific instances, or
otherwise limited, and if the Board so provides may be delegated by the person
so authorized. When authorized, any Officer or agent of the Corporation may
obtain loans and advances for the Corporation from any firm, corporation or
individual, and for such loans and advances, may make, execute and deliver
promissory notes, bonds or other evidences of indebtedness of the Corporation.
Section 709. Offices and Records. The Corporation may have offices at
------------ -------------------
such places both within or without the State of New York as the Board of
Directors may from time to time determine or the business of the Corporation may
require. Subject to applicable law, the books and records of the Corporation
may be kept outside the State of New York at such place or places as may be
designated from time to time by the Board of Directors. The Corporation shall
keep correct and complete books and records of account, minutes of the
proceedings of the shareholders, Board of Directors and any committees thereof,
a current list of the Directors and Officers and any other records required
pursuant to applicable law.
<PAGE>
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. The phrase
"the entire Board of Directors" or "the entire Board," as used in these Bylaws
shall refer to the total number of Directors which the Corporation would have if
there were no vacancies.
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.
Section Involved Date Amended or Repealed Approved By
---------------- ------------------------ -----------
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