FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For quarterly period ended June 30, 1999
Commission File No. 0-14895
Granite State Bankshares, Inc.
(Exact name of registrant as specified in its charter)
New Hampshire 02-0399222
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification No.)
122 West Street, Keene, New Hampshire 03431
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (603) 352-1600
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 ( )
The number of shares outstanding of each of the issuer's classes of
common stock, as of August 11, 1999 was 5,786,667, $1.00 par value per share.
INDEX
Granite State Bankshares, Inc. and Subsidiary
Part I Financial Information Page
Item 1. Financial Statements:
Consolidated Statements of Financial Condition
June 30, 1999 and December 31, 1998 3
Consolidated Statements of Earnings
Three and Six months ended June 30, 1999 and 1998 4
Consolidated Statements of Comprehensive Income
Three and Six months ended June 30, 1999 and 1998 5
Consolidated Statements of Cash Flows
Three and Six months ended June 30, 1999 and 1998 6
Notes to Unaudited Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk 20
Part II Other Information
Item 1. Legal Proceedings 20
Item 2. Changes in Securities 20
Item 3. Defaults upon Senior Securities 20
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 5. Other Information 21
Item 6. Exhibits and Reports on Form 8-K 21
Signatures 22
<TABLE>
<CAPTION>
Granite State Bankshares, Inc. and Subsidiary
Part I - Financial Information
Item 1 - Financial Statements
Consolidated Statements of Financial Condition
June 30, December 31,
($ in thousands, except par values) 1999 1998
---------- ------------
<S> <C> <C>
(Unaudited)
ASSETS
Cash and due from banks $ 23,361 $ 23,506
Interest bearing deposits in other banks,
at cost which approximates market value 20,880 19,532
Securities available for sale (amortized cost
$199,662 at June 30, 1999 and $217,186 at
December 31, 1998) 199,156 219,765
Securities held to maturity (market value
$17,507 at June 30, 1999 and $22,548 at
December 31, 1998) 18,020 22,277
Stock in Federal Home Loan Bank of Boston 7,201 7,201
Loans held for sale 1,036 1,828
Loans 563,526 555,699
Less: Unearned income (1,412) (1,506)
Allowance for possible loan losses (7,170) (7,122)
------- -------
Net loans 554,944 547,071
Premises and equipment 17,382 17,700
Other real estate owned 1,344 1,601
Other assets 22,644 17,666
------- -------
Total assets $ 865,968 $ 878,147
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing deposits $ 560,818 $ 576,778
Noninterest bearing deposits 88,979 73,709
------- -------
Total deposits 649,797 650,487
Securities sold under agreements to repurchase 59,550 70,905
Other borrowings 80,586 80,608
Other liabilities 3,286 3,547
------- -------
Total liabilities 793,219 805,547
Preferred stock, $1.00 par value; authorized
7,500,000 shares; none issued
Common stock, $1.00 par value; authorized
12,500,000 shares; 6,789,582 issued at
June 30, 1999 and December 31, 1998 6,790 6,790
Additional paid-in capital 37,895 38,018
------- -------
44,685 44,808
Accumulated other comprehensive income (loss) (311) 1,583
Retained earnings 36,187 32,998
------- -------
80,561 79,389
Less: Treasury stock, at cost, 944,055 and
889,759 shares at June 30, 1999 and
December 31, 1998, respectively (7,238) (6,065)
Unallocated common stock acquired by
the ESOP (71) (71)
Unearned restricted stock (503) (653)
------- -------
Total stockholders' equity 72,749 72,600
------- -------
Total liabilities and stockholders' equity $ 865,968 $ 878,147
======= =======
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
Granite State Bankshares, Inc. and Subsidiary
Part I - Financial Information
Item 1 - Financial Statements
Consolidated Statements of Earnings
Three Months Ended Six Months Ended
June 30, June 30,
($ in thousands, except per share data) -------------------- --------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
(Unaudited) (Unaudited)
Interest and dividend income:
Loans $ 11,290 $ 11,595 $ 22,586 $ 22,870
Debt securities available for sale 2,737 1,909 5,538 4,185
Marketable equity securities available for sale 183 190 365 369
Securities held to maturity 289 248 671 768
Dividends on Federal Home Loan Bank of Boston stock 117 114 231 230
Other interest 137 226 232 307
------ ------ ------ ------
14,753 14,282 29,623 28,729
Interest expense:
Deposits 5,213 5,533 10,476 11,301
Securities sold under agreements to repurchase 520 656 1,157 1,414
Other borrowings 1,050 440 2,112 600
------ ------ ------ ------
6,783 6,629 13,745 13,315
Net interest and dividend income 7,970 7,653 15,878 15,414
Provision for possible loan losses 0 225 50 525
------ ------ ------ ------
Net interest and dividend income after
provision for possible loan losses 7,970 7,428 15,828 14,889
Noninterest income:
Customer account fees and service charges 663 515 1,291 1,087
Mortgage service fees 122 143 247 291
Net gains on sales of securities available for sale 286 800 291 1,899
Net gains on sales of loans 120 192 273 324
Other 283 323 486 619
------ ------ ------ ------
1,474 1,973 2,588 4,220
Noninterest expense:
Salaries and benefits 2,910 2,996 5,819 5,971
Occupancy and equipment 1,024 1,060 2,110 2,077
Other real estate owned 118 75 208 202
Other 1,423 1,434 2,784 3,174
------ ------ ------ ------
5,475 5,565 10,921 11,424
------ ------ ------ ------
Earnings before income taxes 3,969 3,836 7,495 7,685
Income taxes 1,412 1,325 2,668 2,667
------ ------ ------ ------
Net earnings $ 2,557 $ 2,511 $ 4,827 $ 5,018
====== ====== ====== ======
Shares used in computing net earnings per share:
Basic 5,804,985 5,831,872 5,817,752 5,789,698
Diluted 5,967,108 5,999,398 5,972,978 5,985,044
Net earnings per share -basic $ 0.44 $ 0.43 $ 0.83 $ 0.87
Net earnings per share -diluted $ 0.43 $ 0.42 $ 0.81 $ 0.84
Cash dividends declared per share $ 0.14 $ 0.125 $ 0.28 $ 0.25
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
Granite State Bankshares, Inc. and Subsidiary
Part I - Financial Information
Item 1 - Financial Statements
Consolidated Statements of Comprehensive Income
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
($ in thousands) 1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
(Unaudited) (Unaudited)
Net earnings $ 2,557 $ 2,511 $ 4,827 $ 5,018
Other comprehensive income (loss):
Unrealized holding gains (losses) arising
during the period (929) (852) (2,794) 163
Related income tax effects 359 329 1,079 (63)
------ ------ ------ ------
Net unrealized holding gains (losses),
net of related income tax effects (570) (523) (1,715) 100
------ ------ ------ ------
Less: reclassification adjustment for gains
realized in net earnings:
Realized gains (286) (800) (291) (1,899)
Related income tax effects 110 309 112 733
------ ------ ------ ------
Net reclassification adjustment (176) (491) (179) (1,166)
------ ------ ------ ------
Total other comprehensive loss (746) (1,014) (1,894) (1,066)
------ ------ ------ ------
Comprehensive Income $ 1,811 $ 1,497 $ 2,933 $ 3,952
====== ====== ====== ======
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
Granite State Bankshares, Inc. and Subsidiary
Part I - Financial Information
Item 1 - Financial Statements
Consolidated Statements of Cash Flows
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
Increase (decrease) in cash ($ In Thousands) 1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net earnings $ 2,557 $ 2,511 $ 4,827 $ 5,018
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities
Provision for possible loan losses 225 50 525
Provision for depreciation and amortization 591 609 1,186 1,204
Net (accretion) amortization of security discounts
and premiums 65 26 121 (32)
Provision for loss on other real estate owned 62 20 62 43
Realized gains on sales of securities available
for sale, net (286) (800) (291) (1,899)
Loans originated for sale (7,596) (11,541) (13,920) (19,058)
Proceeds from sale of loans originated for sale 8,223 11,652 14,985 19,149
Realized gains on sales of loans (120) (192) (273) (324)
Gains on sales of other assets (11) (11)
Increase (decrease) in unearned income (75) 75 (94) 117
Realized (gain) loss on sales of other real
estate owned (5) 24 (6) 58
Deferred income taxes (benefit) (12) 868 642 966
Increase in other assets (5,526) (2,772) (5,320) (1,627)
Increase (decrease) in other liabilities (247) 963 (342) (976)
Decrease in unearned restricted stock 75 150
------ ------ ------ ------
Net cash provided by (used in) operating activities (2,305) 1,668 1,766 3,164
Cash flows from investing activities:
Proceeds from maturities and calls of securities
held to maturity 4,300 19,765
Proceeds from sales of securities available for sale 46,836 1,072 46,836 2,551
Proceeds from maturities and calls of securities
available for sale 10,000 25,000 28,250
Purchase of securities available for sale (51,434) (19,494) (56,943) (22,080)
Principal payments received on securities available
for sale 1,144 4,371 2,757 6,163
Loan originations, net of repayments (7,037) (17,620) (8,474) (37,485)
Purchase of premises and equipment (352) (311) (901) (918)
Proceeds from sales of other assets 760 760
Proceeds from sales of other real estate owned 483 179 846 438
Net (increase) decrease in interest-bearing deposits
in other banks (4,018) (10,243) (1,348) 7,478
Other 254 41 254 28
------ ------- ------ ------
Net cash provided by (used in) investing activities (3,364) (42,005) 13,087 4,190
Cash flows from financing activities:
Net increase in demand, NOW, money market deposit
and savings accounts 12,856 7,583 9,151 14,230
Net decrease in time certificates (4,694) (9,691) (9,841) (32,061)
Net increase (decrease) in securities sold under
agreements to repurchase 4,810 5,328 (11,355) 1,981
Net increase (decrease) in other borrowings (11) 39,907 (22) 19,615
Proceeds from issuance of common stock 246 2,095
Reissuance of common stock from treasury 9 225
Purchase of treasury stock (569) (1,599)
Dividends paid on common stock (820) (730) (1,557) (1,350)
Other (281) (281)
------- ------- ------- -------
Net cash provided by (used in) financing activities 11,581 42,362 (14,998) 4,229
------- ------- ------- -------
Net increase (decrease) in cash and due from banks 5,912 2,025 (145) 11,583
Cash and due from banks at beginning of period 17,449 38,235 23,506 28,677
------- ------- ------- -------
Cash and due from banks at end of period $ 23,361 $ 40,260 $ 23,361 $ 40,260
======= ======= ======= =======
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
Granite State Bankshares, Inc. and Subsidiary
Part I - Financial Information
Item 1. Financial Statements
Notes to Unaudited Consolidated Financial Statements
June 30, 1999
Note 1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
only of normal recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the three and six months ended
June 30, 1999 are not necessarily indicative of the results that may be expected
for the current fiscal year. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report on Form 10-K for the year ended December 31, 1998.
Note 2. Earnings Per Share
Basic earnings per share is computed by dividing net earnings by the
weighted average number of common shares outstanding for the period. Diluted
earnings per share reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the earnings of the Company. Information regarding the computation of
earnings per share is as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------------- ---------------------------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
($ in Thousands, except per share data) ($ in Thousands, except per share data)
Net earnings $ 2,557 $ 2,511 $ 4,827 $ 5,018
Weighted average common
shares outstanding-Basic 5,804,985 5,831,872 5,817,752 5,789,698
Dilutive effect of stock
options computed using
the treasury stock method 162,123 167,526 155,226 195,346
--------- --------- --------- ---------
Weighted average common
shares outstanding-Diluted 5,967,108 5,999,398 5,972,978 5,985,044
========= ========= ========= =========
Net earnings per share-Basic $ 0.44 $ 0.43 $ 0.83 $ 0.87
====== ====== ====== ======
Net earnings per share-Diluted $ 0.43 $ 0.42 $ 0.81 $ 0.84
====== ====== ====== ======
</TABLE>
Weighted average options to purchase 75,000 shares of common stock were
outstanding at June 30, 1999 and March 31, 1999, but were not included in the
computation of weighted average common shares outstanding for purposes of
computing diluted earnings per share, because the effect would have been
antidilutive. All options to purchase shares at June 30, 1998 and March 31, 1998
were included in the computation of weighted average common shares outstanding
for purposes of computing diluted earnings per share.
Note 3. Securities
Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity and reported at amortized
cost; debt and equity securities that are bought and held principally for the
purpose of selling in the near term are classified as trading and reported at
fair value, with unrealized gains and losses included in earnings; and debt and
equity securities not classified as either held-to-maturity or trading are
classified as available-for-sale and reported at fair value, with unrealized
gains and losses excluded from earnings and reported as part of accumulated
other comprehensive income, net of related income tax effects. At June 30, 1999
and December 31, 1998, the Company had no securities classified as trading
securities.
The amortized cost, estimated market value and carrying value of
securities at June 30, 1999 and December 31, 1998 were as follows:
<TABLE>
<CAPTION>
Amortized Estimated Carrying
At June 30, 1999 Cost Market Value Value
--------- ------------ --------
<S> <C> <C> <C>
(In Thousands)
Securities held to maturity
US Government agency obligations $ 13,009 $ 12,690 $ 13,009
Other corporate obligations 5,011 4,817 5,011
------ ------ ------
Total securities held to maturity $ 18,020 $ 17,507 $ 18,020
====== ====== ======
Securities available for sale
US Treasury obligations $ 29,987 $ 30,231 $ 30,231
US Government agency obligations 90,450 88,542 88,542
Other corporate obligations 49,968 49,024 49,024
Mortgage-backed securities:
FNMA 5,530 5,522 5,522
FHLMC 1,886 1,863 1,863
GNMA 913 964 964
SBA 445 449 449
------- ------- -------
Total mortgage-backed securities 8,774 8,798 8,798
Mutual Funds 6,981 7,027 7,027
Marketable equity securities 13,502 15,534 15,534
------- ------- -------
Total securities available for sale $ 199,662 $ 199,156 $ 199,156
======= ======= =======
<CAPTION>
Amortized Estimated Carrying
At December 31, 1998 Cost Market Value Value
--------- ------------ --------
<S> <C> <C> <C>
(In Thousands)
Securities held to maturity
US Government agency obligations $ 17,265 $ 17,495 $ 17,265
Other corporate obligations 5,012 5,053 5,012
------ ------ ------
Total securities held to maturity $ 22,277 $ 22,548 $ 22,277
====== ====== ======
Securities available for sale
US Treasury obligations $ 82,521 $ 83,716 $ 83,716
US Government agency obligations 55,961 55,998 55,998
Other corporate obligations 46,593 46,457 46,457
Mortgage-backed securities:
FNMA 7,045 7,031 7,031
FHLMC 2,876 2,853 2,853
GNMA 1,190 1,246 1,246
SBA 552 568 568
------- ------- -------
Total mortgage-backed securities 11,663 11,698 11,698
Mutual Funds 6,326 6,402 6,402
Marketable equity securities 14,122 15,494 15,494
------- ------- -------
Total securities available for sale $ 217,186 $ 219,765 $ 219,765
======= ======= =======
</TABLE>
Note 4. Loans
Loans consist of the following at:
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
--------- ------------
<S> <C> <C>
(In Thousands)
Commercial, financial and agricultural $ 41,291 $ 48,418
Real estate-residential 347,413 328,243
Real estate-commercial 138,905 146,093
Real estate-construction and
land development 3,564 2,281
Installment 6,733 7,809
Other 25,620 22,855
------- -------
Total loans 563,526 555,699
Less:
Unearned income (1,412) (1,506)
Allowance for possible loan losses (7,170) (7,122)
------- -------
Net loans $ 554,944 $ 547,071
======= =======
</TABLE>
Real estate mortgage loans and other loans are stated at the amount of
unpaid principal, less unearned income and the allowance for possible loan
losses.
Interest on loans is accrued and credited to operations based upon the
principal amount outstanding. When management determines that significant doubt
exists as to collectibility of principal or interest on a loan, the loan is
placed on nonaccrual status. In addition, loans past due 90 days or more as to
principal or interest are placed on nonaccrual status, except those loans which,
in management's judgment, are fully secured and in the process of collection.
Interest accrued but not received on loans placed on nonaccrual status is
reversed and charged against current operations. Interest subsequently received
on nonaccrual loans is either applied against principal or recorded as income
according to management's judgment as to the collectibility of principal.
Loans considered to be uncollectible are charged against the allowance
for possible loan losses. The allowance is increased by charges to current
operations in amounts sufficient to maintain the adequacy of the allowance. The
adequacy of the allowance is determined by management's evaluation of the extent
of existing risks in the loan portfolio and prevailing economic conditions.
Changes in the allowance for possible loan losses are as follows:
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
--------------------- ---------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
(In Thousands) (In Thousands)
Balance, beginning of period $ 7,025 $ 7,492 $ 7,122 $ 7,651
Provision for possible loan losses 0 225 50 525
Loans charged off (55) (577) (297) (1,176)
Recoveries of loans previously charged off 200 187 295 327
----- ----- ----- -----
Balance, end of period $ 7,170 $ 7,327 $ 7,170 $ 7,327
===== ===== ===== =====
</TABLE>
Information with respect to impaired loans consisted of the following
at:
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
-------- ------------
<S> <C> <C>
(In Thousands)
Recorded investment in impaired loans $ 1,111 $ 1,556
===== =====
Impaired loans with specific loss allowances $ 1,111 $ 1,556
===== =====
Loss allowances reserved on impaired loans $ 346 $ 233
==== ====
</TABLE>
The Company's policy for interest income recognition on impaired loans
is to recognize income on impaired loans on the cash basis when the loans are
both current and the collateral on the loan is sufficient to cover the
outstanding obligation to the Company; if these factors do not exist, the
Company will not recognize income. The average recorded investment in impaired
loans was $1,090,000 and $3,269,000 for the six months ended June 30, 1999 and
1998, respectively. During the three and six months ended June 30, 1999 and
1998, the Company recognized no income on impaired loans.
Note 5. Interest Bearing Deposits
Interest bearing deposits consist of the following at:
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
-------- ------------
<S> <C> <C>
(In Thousands)
NOW accounts $ 196,956 $ 203,068
Savings accounts 87,965 87,150
Money market deposit accounts 18,837 19,659
Time certificates 257,060 266,901
------- -------
$ 560,818 $ 576,778
======= =======
</TABLE>
Note 6. Supplemental Disclosures of Cash Flow Information
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
(In Thousands) (In Thousands)
Cash paid for interest $ 6,833 $ 6,421 $ 13,842 $ 13,195
Income taxes paid 1,800 2,050 1,900 2,255
Non-cash investing activities:
Real estate acquired in settlement of loans 104 125 645 125
</TABLE>
Granite State Bankshares, Inc. and Subsidiary
Part I - Financial Information
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
June 30, 1999
General
All information within this section should be read in conjunction with
the consolidated financial statements and notes included elsewhere in this Form
10-Q. All references in the discussion to financial condition and results of
operations are to the consolidated financial position of the Company and its
subsidiary taken as a whole.
The principal business of the Company is to serve as a financial
intermediary attracting deposits from the general public and making both secured
and unsecured loans. The operating results of the Company depend primarily on
net interest and dividend income earned by the Company's subsidiary, Granite
Bank ("the subsidiary bank"). Net interest and dividend income is the difference
between interest and dividend income on interest earning assets, primarily loans
and securities, and interest expense on interest bearing liabilities, which
consist of deposits and borrowings. Operating results of the Company also depend
upon the provision for possible loan losses, noninterest income, noninterest
expense and income taxes.
The Company has made, and may continue to make, various forward-looking
statements with respect to its financial condition and results of operations.
The Company cautions that these forward-looking statements, which are based on
various assumptions (some of which are beyond the Company's control), are
subject to numerous risks and uncertainties and that statements for periods
subsequent to June 30, 1999 are subject to greater uncertainty because of the
increased likelihood of changes in underlying factors and assumptions. Actual
results could differ materially from those set forth in forward-looking
statements due to a variety of factors, including, but not limited to, those
related to the economic environment, particularly in the market areas in which
the Company operates, competitive products and pricing, the ability of the
Company and its competitors, vendors and customers to respond effectively to
issues related to the Year 2000, fiscal and monetary policies of the U.S.
Government, changes in government regulations affecting financial institutions,
including regulatory fees and capital requirements, changes in prevailing
interest rates, acquisitions and the integration of acquired businesses, credit
risk management, asset-liability management, the financial and securities
markets and the availability of and costs associated with sources of liquidity.
The Company does not undertake, and specifically disclaims any obligation, to
publicly release the result of any revisions which may be made to any forward-
looking statements to reflect the occurrence of anticipated or unanticipated
events or circumstances after the date of such statements.
Financial Condition
Total assets decreased by $12,179,000 or 1.39%, from $878,147,000 at
December 31, 1998 to $865,968,000 at June 30, 1999. The change in assets related
primarily to decreases in securities held to maturity and securities available
for sale partially offset by an increase in net loans. The net decrease in these
assets were primarily used to fund decreases in securities sold under agreements
to repurchase.
Interest bearing deposits with other banks, which primarily consist of
deposits with the Federal Home Loan Bank of Boston, increased $1,348,000, from
$19,532,000 at December 31, 1998 to $20,880,000 at June 30, 1999. Interest
bearing deposits with other banks are short-term overnight investments and the
level of the Company's investment in these instruments fluctuates as investments
are made in other interest earning assets such as loans, securities held to
maturity and securities available for sale, and as balances of interest bearing
liabilities such as deposits, securities sold under agreements to repurchase and
other borrowings fluctuate. These instruments are also used to fund cash and due
from bank requirements.
Securities held to maturity decreased $4,257,000, from $22,277,000 at
December 31, 1998 to $18,020,000 at June 30, 1999. Securities available for sale
decreased $20,609,000 from $219,765,000 at December 31, 1998 to $199,156,000 at
June 30, 1999. Proceeds from decreases in securities held to maturity and
securities available for sale were primarily used to fund decreases in
securities sold under agreements to repurchase as well as increases in net
loans.
Net loans were $554,944,000 at June 30, 1999, an increase of $7,873,000
from $547,071,000 at December 31, 1998. The most significant changes in the loan
portfolio related to residential real estate loans, commercial, financial and
agricultural loans and commercial real estate loans. Residential real estate
loans increased $19,170,000 to $347,413,000 or 61.65% of total loans outstanding
at June 30, 1999 from $328,243,000 or 59.07% of total loans outstanding at
December 31, 1998. The increase in residential real estate loans was partially
offset by decreases in commercial, financial and agricultural loans and
commercial real estate loans of $7,127,000 and $7,188,000, respectively. The
increase in residential real estate loans is a result of the continued low
interest rate environment which encouraged borrowers to make new home purchases
or refinance their loans. The decrease in commercial, financial and agricultural
loans and commercial real estate loans related primarily to the pace of loan
repayments as a result of the continued low interest rate environment and the
highly competitive environment for attracting loans amongst financial
institutions in the Company's market areas.
Total deposits decreased $690,000, from $650,487,000 at December 31,
1998 to $649,797,000 at June 30, 1999. The significant changes in deposits
related to a decrease in time certificates and NOW accounts of $9,841,000 and
$6,112,000, respectively, partially offset by an increase in demand deposits of
$15,270,000. The decrease in time certificates related primarily to depositors
looking to achieve higher yields by investing their funds in alternate
investment products. The decrease in NOW accounts related primarily to the
timing of the cash needs of depositors. The increase in demand deposits was
partly due to the timing of official and other bank checks which increased
$7,550,000 during this period as well as the timing of the cash needs of
depositors.
Securities sold under agreements to repurchase decreased $11,355,000,
from $70,905,000 at December 31, 1998 to $59,550,000 at June 30, 1999. The
decrease related primarily to retail investors using the cash which they had
previously invested in this investment product, as well as municipalities having
less cash to invest in this product at June 30, 1999 compared to December 31,
1998, due to the timing of their semiannual billing and collection of real
estate taxes.
Results of Operations
Net Earnings
Net earnings for the three and six months ended June 30, 1999 were
$2,557,000 and $4,827,000, compared to $2,511,000 and 5,018,000 for the three
and six months ended June 30, 1998. Basic earnings per share were $.44 and $.83
for the three and six months ended June 30, 1999, compared to $.43 and $.87 for
the three and six months ended June 30, 1998. Diluted earnings per share were
$.43 and $.81 for the three and six months ended June 30, 1999 compared to $.42
and $.84 for the three and six months ended June 30, 1998. Included in net
earnings were gains on sales of securities available for sale of $286,000 and
$291,000, respectively, for the three and six months ended June 30, 1999
compared to $800,000 and $1,899,000 for the three and six months ended June 30,
1998. Earnings before income taxes, excluding gains on sales of securities
available for sale, were $3,683,000 and $7,204,000 for the three and six months
ended June 30, 1999 compared to $3,036,000 and $5,786,000 for the three and six
months ended June 30, 1998, representing increases of 21.31% and 24.51%,
respectively. Net earnings after income taxes, exclusive of the after tax effect
of gains on sales of securities available for sale were $2,383,000 and
$4,650,000 for the three and six months ended June 30, 1999 compared to
$2,020,000 and $3,853,000 for the three and six months ended June 30, 1998,
representing increases of 17.97% and 20.69%, respectively.
Interest and Dividend Income
Interest and dividend income for the three and six months ended June 30,
1999 was $14,753,000 and $29,623,000 compared to $14,282,000 and $28,729,000 for
the corresponding periods in 1998. The increase in interest and dividend income
for the three and six months ended June 30, 1999 compared to the three and six
months ended June 30, 1998 is primarily attributable to an increase in the
average balance of interest earning assets of $75,635,000 and $84,580,000,
respectively, partially offset by a decrease in overall yield on interest
earning assets to 7.42% and 7.44% for the three and six months ended June 30,
1999 compared with 7.93% and 8.06% for the same periods in 1998. The decrease in
overall yield on interest earning assets resulted from a continued decrease in
the yield on loans to 8.14% and 8.18% for the three and six months ended
June 30, 1999 compared to 8.62% and 8.76% for the three and six months ended
June 30, 1998 and a decrease in the yield on securities and interest earning
investments to 5.74% and 5.76% for the three and six months ended June 30, 1999
compared to 5.91% and 6.15% for the three and six months ended June 30, 1998.
The decrease in loan yield is due to a shift in the mix of loans from commercial
real estate and commercial and industrial loans which comprised 31.98% and
38.36% of the loan portfolio at June 30, 1999 and June 30, 1998, respectively,
to lower yielding residential real estate loans which comprised 61.65% and
54.95% of the loan portfolio at June 30, 1999 and June 30, 1998, respectively.
The decrease in the yield on securities and interest earning assets was
primarily the result of the continued low interest rate environment, which
caused proceeds from securities which matured or were called, to be reinvested
at lower rates.
Interest Expense
Interest expense for the three and six months ended June 30, 1999 was
$6,783,000 and $13,745,000 compared to $6,629,000 and $13,315,000 for the
corresponding periods in 1998. The increase in interest expense for the three
and six months ended June 30, 1999 compared to the same periods in 1998 is
primarily due to an increase in the average balance of total interest bearing
liabilities of $55,166,000 and $62,135,000, respectively, partially offset by
a decrease in the cost of those liabilities to 3.88% and 3.92% for the three and
six months ended June 30, 1999 compared to 4.11% and 4.16% for the three and six
months ended June 30, 1998. Average balances of savings deposits increased
$9,684,000 and $11,576,000 while average time deposits increased $1,093,000 and
decreased $6,951,000 for the three and six months ended June 30, 1999 compared
to the same periods in 1998. The average cost of savings deposits decreased to
2.38%, for both the three and six months ended June 30, 1999 compared to 2.63%
and 2.64%, for the three and six months ended June 30, 1998, while the cost of
time deposits was 5.22% and 5.29%, respectively, for the three and six months
ended June 30, 1999 compared to 5.54% and 5.58% for the same periods in 1998.
The average balance of other borrowed funds increased $44,389,000 and
$57,509,000 for the three and six months ended June 30, 1999 compared to the
same periods in 1998, partially offset by a decrease in the cost of those
borrowings to 4.72% and 4.71% for the three and six months ended June 30, 1999
compared to 4.94% and 4.92% for the same periods in 1998.
Net Interest and Dividend Income
Net interest and dividend income increased by $317,000 and $464,000 for
the three and six months ended June 30, 1999 compared to the same periods in
1998. The increase for the three and six months ended June 30, 1999 compared to
the same periods in 1998 is primarily due to an increase in net interest earning
assets of $20,469,000 and $22,445,000, partially offset by a decrease in net
interest rate spread from 3.82% and 3.91% for the three and six months ended
June 30, 1998 to 3.54% and 3.53% for the three and six months ended June 30,
1999. The net yield on interest earning assets decreased from 4.25% and 4.33%
for the three and six months ended June 30, 1998 to 4.01% and 3.99% for the
three and six months ended June 30, 1999.
Provision for Possible Loan Losses
The provision for possible loan losses for the three and six months
ended June 30, 1999 was $0 and $50,000, compared to $225,000 and $525,000 for
the three and six months ended June 30, 1998. The decrease in the provision for
the three and six months ended June 30, 1999, compared to the same periods in
1998, is primarily related to a change in the mix of loans to residential real
estate loans, which accounted for 61.65% of the total loan portfolio at June 30,
1999 compared to 54.95% at June 30, 1998, while commercial real estate and
commercial and industrial loans accounted for 31.98% of the total loan portfolio
at June 30, 1999 compared to 38.36% at June 30, 1998. Also contributing to the
decrease in the provision was a decrease of $3,686,000 in nonperforming loans to
$2,098,000 at June 30, 1999 compared to $5,784,000 at June 30, 1998.
Additionally, the level of net charge-offs (recoveries) for the three and six
months ended June 30, 1999 was $(145,000) and $2,000, compared to $390,000 and
$849,000, for the corresponding periods a year ago.
The allowance for possible loan losses is maintained through provisions
for possible loan losses based upon management's ongoing evaluation of the risks
inherent in the loan portfolio. The methodology for determining the amount of
the allowance for possible loan losses consists of several elements.
Nonperforming, impaired and delinquent loans are reviewed individually and the
value of any underlying collateral is considered in determining estimates of
possible losses associated with those loans. Another element involves estimating
losses inherent in categories of loans, based primarily on historical
experience, industry trends and trends in the real estate market and the current
economic environment in the Company's primary market areas. The last element is
based on management's evaluation of various conditions, and involves a higher
degree of uncertainty because they are not identified with specific problem
credits or portfolio segments. The conditions evaluated in connection with this
element include the following: industry and regional conditions; seasoning of
the loan portfolio and changes in the composition of and growth in the loan
portfolio; the strength and duration of the current business cycle; existing
general economic and business conditions in the lending areas; credit quality
trends; historical loan charge-off experience; and the results of bank
regulatory examinations.
Noninterest Income
Noninterest income for the three and six months ended June 30, 1999
totaled $1,474,000 and $2,588,000, compared to $1,973,000 and $4,220,000 for the
same periods in 1998. The decrease of $499,000 and $1,632,000 for the three and
six months ended June 30, 1999 compared to the same periods in 1998 relates
primarily to a decrease in net gains on sales of securities available for sale
of $514,000 and $1,608,000 for the three and six months ended June 30, 1999
compared to the same periods in 1998.
Noninterest Expense
Noninterest expense for the three months ended June 30, 1999 decreased
$90,000 or 1.6% to $5,475,000 compared to $5,565,000 for the same period a year
earlier. Noninterest expense for the six months ended June 30, 1999 decreased
$503,000 or 4.4% to $10,921,000 compared to $11,424,000 for the same period a
year earlier. The decrease for the three months ended June 30, 1999 compared to
the same period in 1998 related primarily to a decrease in salaries and benefits
expenses of $86,000. The decrease for the six months ended June 30, 1999,
compared to the same period in 1998 relates primarily to decreases of $152,000
in salaries and benefits expense as well as $390,000 in other noninterest
expenses. In general, the decreases in salaries and benefits expense and other
noninterest expenses mentioned above, related to additional efficiencies
realized from the merger with Primary Bank, which was completed after the close
of business on October 31, 1997 and the related data processing system
conversion completed during the first quarter of 1998.
Income Taxes
Income tax expense for the three and six months ended June 30, 1999 was
$1,412,000 and $2,668,000, compared with $1,325,000 and $2,667,000 for the same
periods in 1998. Income tax expense as a percentage of earnings before income
taxes was 35.58% and 35.60% for the three and six months ended June 30, 1999 and
34.54% and 34.70% for the three and six months ended June 30, 1998.
Risk Elements
Total nonperforming loans decreased from $3,013,000 or 0.54% of total
loans, at December 31, 1998, to $2,098,000 or 0.37% of total loans, at
June 30, 1999. During the same period, other real estate owned, decreased from
$1,601,000 to $1,344,000. The allowance for possible loan losses as a percent of
total nonperforming loans was 341.75% at June 30, 1999, compared with 236.38% at
December 31, 1998.
As shown in the following table, nonperforming assets as a percentage of
total assets were 0.40% and 0.53%, as of June 30, 1999 and December 31, 1998,
respectively.
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
------------- -----------------
<S> <C> <C>
($ in Thousands)
Loans 90 days or more past due
and still accruing $ 306 $ 146
==== ====
Nonaccrual/nonperforming loans $ 2,098 $ 3,013
Other real estate owned 1,344 1,601
----- -----
Total nonperforming assets $ 3,442 $ 4,614
===== =====
Allowance for possible loan losses $ 7,170 $ 7,122
Nonperforming loans as a percent of
total loans 0.37% 0.54%
Allowance for possible loan losses
as a percent of total nonperforming loans 341.75% 236.38%
Nonperforming assets as a percent of total
assets 0.40% 0.53%
</TABLE>
Liquidity
The Company's primary sources of liquidity, through its subsidiary bank,
are its borrowing capacity with the Federal Home Loan Bank of Boston, interest
bearing deposits with other banks and securities available for sale,
particularly short-term investments. At June 30, 1999, short-term and long-term
borrowings from the Federal Home Loan Bank of Boston were $80,586,000, with an
additional available borrowing capacity of approximately $264,594,000; interest
bearing deposits with other banks were $20,880,000 and securities available for
sale were $199,156,000. Included in securities held to maturity and securities
available for sale are debt securities with a carrying value of $194,615,000.
The weighted average maturity for debt securities held to maturity and available
for sale, excluding mortgage-backed securities with a carrying value of
$8,798,000, is approximately 52 months. In addition to these liquidity sources,
the Company has significant cash flow from the amortization of loans through its
subsidiary bank.
Capital Resources
Under the Federal Reserve Board's guidelines, bank holding companies
such as the Company currently are required to maintain a minimum ratio of
qualifying total capital to total assets and off-balance sheet instruments, as
adjusted to reflect their relative credit risks, of 8.0 percent. At least
one-half of total capital must be comprised of common equity, retained earnings,
non-cumulative perpetual preferred stock, and a limited amount of cumulative
perpetual preferred stock, less goodwill ("Tier I capital").
The Federal Reserve Board also has established an additional capital
adequacy guideline referred to as the Tier I leverage capital ratio, which
measures the ratio of Tier I capital to total assets less goodwill. Although the
most highly-rated bank holding companies will be required to maintain a minimum
Tier I leverage capital ratio of 3.0 percent, most bank holding companies will
be required to maintain Tier I leverage capital ratios of 4.0 percent to 5.0
percent or more. The actual required ratio will be based on the Federal Reserve
Board's assessment of the individual bank holding company's asset quality,
earnings performance, interest rate risk, and liquidity. The Company was in
compliance with all regulatory capital requirements at June 30, 1999 and
December 31, 1998.
Substantially similar rules have been issued by the FDIC with respect to
state-chartered banks which are not members of the Federal Reserve System such
as the subsidiary bank. At June 30, 1999 and December 31, 1998, the subsidiary
bank was in compliance with all regulatory capital requirements. Additionally,
at June 30, 1999, the subsidiary bank was considered "well capitalized" for
purposes of the FDIC's prompt corrective action regulations.
At June 30, 1999 the Company's and the subsidiary bank's regulatory
capital ratios as a percentage of assets are as follows:
<TABLE>
<CAPTION>
June 30, 1999
--------------------
Subsidiary
Bank Company
---------- -------
<S> <C> <C>
Tier I leverage capital to average assets 8.20% 8.43%
Tier I capital to risk-weighted assets 12.92% 13.29%
Total capital to risk-weighted assets 14.17% 14.55%
</TABLE>
Year 2000
The Company is aware of the issues associated with the programming code
in existing computer systems and non-computer related embedded technology as the
millennium ("Year 2000") approaches. The Year 2000 problem is pervasive and
complex as virtually every computer operation will be affected in some way by
the rollover of the two digit year value to 00. The issue is whether computer
systems will properly recognize date sensitive information when the year changes
to 2000. Systems that do not properly recognize such information could generate
erroneous data or cause a system to fail.
The Company has developed a Year 2000 Policy Statement which was
approved by the Company's Board of Directors and is utilizing both internal and
external resources to identify, correct and test the systems for Year 2000
compliance. The Year 2000 Policy Statement contains a phases approach which
includes the following phases: awareness, inventory, assessment, renovation,
validation, implementation and post implementation. As of June 30, 1999, the
Company has substantially completed the assessment, renovation, validation and
implementation phases. The Company has substantially completed any necessary
corrections, vendor reprogramming and testing efforts which will allow adequate
time for any potential modifications in 1999. The Company is currently in the
post-implementation phase, which will utilize and test the contingency plans to
enhance back-up steps and procedures to prepare for worst case scenarios. The
Company's contingency plans were completed during the second quarter of 1999.
To date, the Company has received a warranty of compliance from its processing
vendor for loans, deposits and related products. Additionally, letters have been
received from the Company's remaining vendors that plans are being developed to
address the Year 2000 issue. All of these efforts are being coordinated through
a Year 2000 committee which is chaired by the Company's Chief Operations Officer
and includes a representative from the subsidiary bank's Board of Directors. The
Chief Operations Officer reports periodically to the Company's and the
subsidiary bank's Board of Directors with respect to the Year 2000 committee's
efforts. Management's estimate of the incremental costs related to the Year 2000
compliance are approximately $220,000 to $260,000, of which approximately
$46,000 and $101,000 has been incurred for the six months ended June 30, 1999
and the year ended December 31, 1998, respectively. The remaining Year 2000
costs are expected to be incurred throughout 1999.
The Company reviewed its loan relationships over $250,000 and assessed a
Year 2000 compliance risk for each customer. The risk assessment consisted of a
detailed questionnaire relating to the customer's Year 2000 efforts and resulted
in the assignment of risk levels of low, medium and high risk for noncompliance
with the Year 2000. The review of borrowers included the respective borrower's
customer base and the likelihood of their noncompliance. The Company has
completed a review of all borrowing relationships assigned with a medium or high
risk for noncompliance with Year 2000 issues. As a result of this review, it was
determined that there was no specific risk or significant loss exposure that
could be identified at this time resulting from the Year 2000. The Company has
also incorporated this review into the approval process for all new borrowing
relationships. In addition to the analyses of the loan relationships, the
Company's subsidiary bank has also identified deposit customers and customers
from whom the Company borrows short-term funds in the form of securities sold
under agreements to repurchase with balances greater than $250,000 and
identified large community employers in communities where branches are located
in order to determine an estimate of additional liquidity that may be needed as
a result of the Year 2000 project. Although no assurances can be given, based on
the Company's review of significant deposit and borrowing relationships as of
June 30, 1999, management believes these relationships will not have a material
adverse affect on the Company's liquidity, financial condition or results of
operations.
The most significant risk anticipated by the Company is the possibility
of interruption to its customer account processing systems. Due to the progress
described above, the Company does not presently foresee any interruptions to
these systems, but cannot predict consequences of interruptions to these systems
from outside factors, such as the loss of telecommunication and electrical power
(worst case scenario). The Company's business resumption contingency plan
addresses resumption of business should the Company lose its telecommunications
or electrical power.
Consolidated Quarterly Average Balances and Interest Rates
The table on the following page presents, for the periods indicated,
average balances of assets and liabilities, as well as yields on interest
earning assets and the cost of interest bearing liabilities.
<TABLE>
<CAPTION> Granite State Bankshares, Inc. and Subsidiary
Consolidated Quarterly Average Balances and Interest Rates
($ in Thousands)
1999 QTD 1998 QTD
------------------------------------ ------------------------------------
Second Quarter First Quarter Fourth Quarter Third Quarter
Avg. Bal. Rate Avg. Bal. Rate Avg. Bal. Rate Avg. Bal. Rate
--------- ----- --------- ----- --------- ----- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Loans $ 556,014 8.14% $ 557,245 8.22% $ 550,627 8.25% $ 542,139 8.43%
Securities and
interest earning
investments 241,779 5.74% 250,600 5.78% 250,425 5.72% 224,431 5.88%
------- ------- ------- -------
Total interest
earning assets 797,793 7.42% 807,845 7.47% 801,052 7.46% 766,570 7.68%
Noninterest earning
assets 59,725 56,931 60,832 65,235
Allowance for possible
loan losses (7,198) (7,133) (7,565) (7,385)
------- ------- ------- -------
Total Assets $ 850,320 $ 857,643 $ 854,319 $ 824,420
======= ======= ======= =======
Liabilities and
stockholders' equity:
Savings deposits $ 309,037 2.38% $ 302,555 2.37% $ 302,579 2.47% $ 295,424 2.61%
Time deposits 259,576 5.22% 264,321 5.36% 267,443 5.49% 265,876 5.55%
Other borrowed funds 133,366 4.72% 146,797 4.69% 135,860 4.64% 117,382 5.06%
------- ------- ------- -------
Total int. bearing
liabilities 701,979 3.88% 713,673 3.96% 705,882 4.03% 678,682 4.18%
Noninterest bearing
deposits 72,709 67,801 71,709 70,014
Other liabilities 2,144 2,998 3,248 3,130
Stockholders' equity 73,488 73,171 73,480 72,594
------- ------- ------- -------
Total liab. and
stockholders' equity $ 850,320 $ 857,643 $ 854,319 $ 824,420
======= ======= ======= =======
Interest rate spread 3.54% 3.51% 3.43% 3.50%
===== ===== ===== =====
Net average earning
balance / Net yield on
interest earning assets $ 95,814 4.01% $ 94,172 3.97% $ 95,170 3.90% $ 87,888 3.98%
====== ===== ====== ===== ====== ===== ====== =====
<CAPTION>
1998 QTD 1997 QTD
------------------------------------ ------------------------------------
Second Quarter First Quarter Fourth Quarter Third Quarter
Avg. Bal. Rate Avg. Bal. Rate Avg. Bal. Rate Avg. Bal. Rate
Assets: --------- ----- --------- ----- --------- ----- --------- -----
Loans $ 539,783 8.62% $ 513,365 8.91% $ 499,316 8.93% $ 488,820 8.86%
Securities and
interest earning
investments 182,375 5.91% 200,856 6.40% 232,678 6.23% 250,838 6.30%
------- ------- ------- -------
Total interest
earning assets 722,158 7.93% 714,221 8.20% 731,994 8.07% 739,658 7.99%
Noninterest earning
assets 77,019 79,945 77,425 73,898
Allowance for possible
loan losses (7,532) (7,749) (7,248) (6,632)
------- ------- ------- -------
Total Assets $ 791,645 $ 786,417 $ 802,171 $ 806,924
======= ======= ======= =======
Liabilities and
stockholders' equity:
Savings deposits $ 299,353 2.63% $ 289,066 2.65% $ 288,095 2.60% $ 284,281 2.61%
Time deposits 258,483 5.54% 279,405 5.63% 290,428 5.67% 284,698 5.64%
Other borrowed funds 88,977 4.94% 76,021 4.90% 79,722 5.03% 102,852 5.21%
------- ------- ------- -------
Total int. bearing
liabilities 646,813 4.11% 644,492 4.21% 658,245 4.25% 671,831 4.29%
Noninterest bearing
deposits 69,895 66,622 70,227 64,624
Other liabilities 3,108 5,787 7,095 5,133
Stockholders' equity 71,829 69,516 66,604 65,336
------- ------- ------- -------
Total liab. and
stockholders' equity $ 791,645 $ 786,417 $ 802,171 $ 806,924
======= ======= ======= =======
Interest rate spread 3.82% 3.99% 3.82% 3.70%
===== ===== ===== =====
Net average earning
balance / Net yield on
interest earning assets $ 75,345 4.25% $ 69,729 4.41% $ 73,749 4.25% $ 67,827 4.09%
====== ===== ====== ===== ====== ===== ====== =====
</TABLE>
Granite State Bankshares, Inc. and Subsidiary
Part I Item 3 and Part II - Other Information
June 30, 1999
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There has been no material changes in the Company's assessment of its
sensitivity to market risk since its presentation in the 1998 annual report
filed with the SEC.
Part II -Other Information
Item 1. Legal Proceedings
The Company is a defendant in ordinary and routine pending legal actions
incident to its business, none of which is believed by management to be material
to the financial condition of the Company.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
On April 13, 1999, the Company held its Annual Meeting of Stockholders.
The matters which were submitted to a vote of the security holders and the
results of the voting at such meeting were as follows.
<TABLE>
<CAPTION>
Results of Stockholder Vote
--------------------------------------------
Abstentions
and Broker
Matter Submitted For Against Withheld Non-Votes
--------- --------- --------- -----------
<S> <C> <C> <C> <C>
1)Election of the following
directors for three year terms
or until their successors are
qualified and elected:
A) Joseph S. Hart 5,144,204 0 43,649 0
B) David J. Houston 5,144,591 0 43,262 0
C) William Smedley V 5,141,867 0 45,986 0
D) E. Story Wright 5,139,772 0 48,082 0
2)Ratification of Grant Thornton as
the Company's auditors for the
fiscal year ended December 31, 1999 5,166,957 5,617 0 15,279
</TABLE>
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
1. Exhibits
10.9 Form of Executive Supplemental Retirement Income
Agreement with Messrs. Charles B. Paquette, William C. Henson and
William G. Pike
27 Financial Data Schedule
2. Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant, has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GRANITE STATE BANKSHARES, INC.
/s/ Charles W. Smith
________________________________________
Dated: August 12, 1999 By: Charles W. Smith
Chairman and
Chief Executive Officer
/s/ William G. Pike
________________________________________
Dated: August 12, 1999 By: William G. Pike
Executive Vice President and
Chief Financial Officer
EXHIBIT 10.9
FORM OF
EXECUTIVE SUPPLEMENTAL RETIREMENT
INCOME AGREEMENT
FOR EXECUTIVE OFFICERS
WILLIAM C. HENSON, CHARLES B. PAQUETTE, WILLIAM G. PIKE
GRANITE BANK
Keene, New Hampshire
April, 1999
Financial Institution Consulting Corporation
700 Colonial Road, Suite 260
Memphis, Tennessee 38117
WATS: 1-800-873-0089
FAX: (901) 684-7411
(901) 684-7400
EXECUTIVE SUPPLEMENTAL RETIREMENT INCOME AGREEMENT
This Executive Supplemental Retirement Income Agreement (the
"Agreement"), effective as of the 1st day of April 1999, formalizes the
understanding by and between GRANITE BANK (the "Bank"), a commercial bank,
and _____________________ (hereinafter referred to as "Executive").
Granite State Bankshares, Inc. (the "Holding Company") is a party to this
Agreement for the sole purpose of guaranteeing the Bank's performance
hereunder.
W I T N E S S E T H :
WHEREAS, the Executive is employed by the Bank; and
WHEREAS, the Bank recognizes the valuable services heretofore performed
by the Executive and wishes to encourage his continued employment; and
WHEREAS, the Executive wishes to be assured that he will be entitled
to a certain amount of additional compensation for some definite period
of time from and after retirement from active service with the Bank or
other termination of employment and wishes to provide his beneficiary with
benefits from and after death; and
WHEREAS, the Bank and the Executive wish to provide the terms and
conditions upon which the Bank shall pay such additional compensation to
the Executive after retirement or other termination of employment and/or
death benefits to his beneficiary after death; and
WHEREAS, the Bank has adopted this Executive Supplemental Retirement
Income Agreement which controls all issues relating to benefits as
described herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
promises herein contained, the Bank and the Executive agree as follows:
SECTION I
DEFINITIONS
When used herein, the following words and phrases shall have the
meanings below unless the context clearly indicates otherwise:
1.1 "Accrued Benefit Account" shall be represented by the bookkeeping
entries required to record the Executive's (i) Phantom Contributions plus
(ii) accrued interest, equal to the Interest Factor, earned to-date on
such amounts. However, neither the existence of such bookkeeping entries
nor the Accrued Benefit Account itself shall be deemed to create either a
trust of any kind, or a fiduciary relationship between the Bank and the
Executive or any Beneficiary.
1.2 "Act" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
1.3 "Bank" means GRANITE BANK and any successor thereto.
1.4 "Beneficiary" means the person or persons (and their heirs) designated
as Beneficiary in Exhibit B of this Agreement to whom the deceased
Executive's benefits are payable. If no Beneficiary is so designated,
then the Executive's Spouse, if living, will be deemed the Beneficiary.
If the Executive's Spouse is not living, then the Children of the
Executive will be deemed the Beneficiaries and will take on a per stirpes
basis. If there are no Children, then the Estate of the Executive will
be deemed the Beneficiary.
1.5 "Benefit Age" means the later of: (i) the Executive's sixty-five (65th)
birthday or (ii) the actual date the Executive's full-time service with
the Bank terminates. The Board of Directors may, however, in its sole
discretion, amend clause (i) of this Subsection to lower the Executive's
Benefit Age in any instance in which the Executive's employment terminates
prior to Retirement Age and the Board of Directors determines that such an
amendment is advisable, based on the circumstances of such termination, or
amend clause (ii) of this Subsection, upon the Executive's request, to
permit the Executive to commence receiving his Supplemental Retirement
Income Benefit upon the attainment of age sixty-five (65) despite the
fact that the Executive's full-time service with the Bank has not
terminated.
1.6 "Benefit Eligibility Date" means the date on which the Executive is
entitled to receive any benefit(s) pursuant to Section(s) III or V of
this Agreement. It shall be the first day of the month following the
month in which the Executive attains his Benefit Age.
1.7 "Board of Directors" means the board of directors of the Bank.
1.8 "Cause" means personal dishonesty, willful misconduct, willful
malfeasance, breach of fiduciary duty involving personal profit,
intentional failure to perform stated duties, willful violation of any
law, rule, regulation (other than traffic violations or similar offenses),
or final cease-and-desist order, material breach of any provision of this
Agreement, or gross negligence in matters of material importance to the
Bank.
1.9 "Change in Control" shall mean and include the following with respect
to the Bank or Holding Company:
(1) a Change in Control of a nature that would be required to be
reported in response to Item 1(a) of the current report on Form 8-K, as
in effect on the date hereof, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"); or
(2) a change in control of the Bank or Holding Company within the
meaning of 12 C.F.R. section 225.41 of Regulation Y of the Federal Reserve
Board; or
(3) a Change in Control at such time as
(i) any "person" (as the term is used in Sections 13(d) and
14(d) of the Exchange Act) or "group acting in concert" is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Bank or the Holding Company
representing Ten Percent (10.0%) or more of any class of equity securities
of the Bank or the Holding Company (except for any securities purchased
by the Bank's Employee Stock Ownership Plan and Trust) or any combination
of common stock, or other securities, rights, options or warrants that are
convertible into or otherwise carry the right to acquire, shares of any
class of equity security that would constitute, upon such conversion or
the exercise of such right, ten percent (10%) of any class of equity
security of the Bank or the Holding Company after giving effect to such
conversion or exercise; or
(ii) individuals who constitute the board of directors on
the date hereof (the "Incumbent Board") cease for any reason to constitute
at least a majority thereof, provided that any person becoming a director
subsequent to the date hereof whose election was approved by a vote of at
least three-quarters of the directors comprising the Incumbent Board, or
whose nomination for election by the Holding Company's stockholders was
approved by the Holding Company's nominating committee which is comprised
of members of the Incumbent Board, shall be, for purposes of this clause
(ii), considered as though he were a member of the Incumbent Board; or
(iii) merger, consolidation, or sale of all or substantially
all of the assets of the Holding Company occurs; or
(iv) a proxy statement is issued soliciting proxies from the
stockholders of the Holding Company by someone other than the current
management of the Holding Company, seeking stockholder approval of a plan
of reorganization, merger, or consolidation of the Holding Company with
one or more corporations as a result of which the outstanding shares of
the class of the Holding Company's securities are exchanged for or
converted into cash or property or securities not issued by the Holding
Company.
The term "person" includes an individual, a group acting in concert, a
corporation, a partnership, an association, a joint venture, a pool, a
joint stock company, a trust, an unincorporated organization or similar
company, a syndicate or any other group formed for the purpose of
acquiring, holding or disposing of securities. The term "acquire" means
obtaining ownership, control, power to vote or sole power of disposition
of stock, directly or indirectly or through one or more transactions or
subsidiaries, through purchase, assignment, transfer, exchange, succession
or other means, including (1) an increase in percentage ownership
resulting from a redemption, repurchase, reverse stock split or a similar
transaction involving other securities of the same class; and (2) the
acquisition of stock by a group of persons and/or companies acting in
concert which shall be deemed to occur upon the formation of such group,
provided that an investment advisor shall not be deemed to acquire the
voting stock of its advisee if the advisor (a) votes the stock only upon
instruction from the beneficial owner and (b) does not provide the
beneficial owner with advice concerning the voting of such stock. The
term "security" includes nontransferable subscription rights issued
pursuant to a plan of conversion, as well as a "security," as defined in
15 U.S.C. section 78c(2)(1); and the term "acting in concert" means (1)
knowing participation in a joint activity or interdependent conscious
parallel action towards a common goal whether or not pursuant to an
express agreement, or (2) a combination or pooling of voting or other
interests in the securities of an issuer for a common purpose pursuant
to any contract, understanding, relationship, agreement or other
arrangement, whether written or otherwise. Further, acting in concert
with any person or company shall also be deemed to be acting in concert
with any person or company that is acting in concert with such other
person or company.
Notwithstanding the above definitions, the Boards, in their absolute
discretion, may make a finding that a Change in Control of the Bank or
the Holding Company has taken place without the occurrence of any or all
of the events enumerated above.
1.10 "Children" means all natural or adopted children of the Executive,
and issue of any predeceased child or children.
1.11 "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
1.12 "Contribution(s)" means those annual contributions which the Bank is
required to make to the Retirement Income Trust Fund on behalf of the
Executive in accordance with Subsection 2.1(a) and in the amounts set
forth in Exhibit A of the Agreement.
1.13 (a) "Disability Benefit" means the benefit payable to the Executive
following a determination, in accordance with Subsection 6.1(a), that
he is no longer able, properly and satisfactorily, to perform his duties
at the Bank.
(b) "Disability Benefit-Supplemental" (if applicable) means
the benefit payable to the Executive's Beneficiary upon the Executive's
death in accordance with Subsection 6.1(b).
1.14 "Effective Date" of this Agreement shall be April 1, 1999.
1.15 "Estate" means the estate of the Executive.
1.16 "Holding Company" means Granite State Bankshares, Inc., a corporation
organized under the laws of the State of New Hampshire, the holding
company for the Bank, and any successor thereto.
1.17 "Interest Factor" means monthly compounding, discounting or
annuitizing, as applicable, at a rate set forth in Exhibit A.
1.18 "Payout Period" means the time frame during which certain benefits
payable hereunder shall be distributed. Payments shall be made in
monthly installments commencing on the first day of the month following
the occurrence of the event which triggers distribution and continuing
for the Executive's life or for a period of one hundred eighty (180)
months, whichever is longer. Should the Executive make a Timely Election
to receive a lump sum benefit payment, the Executive's Payout Period
shall be deemed to be one (1) month.
1.19 "Phantom Contributions" means those annual Contributions which the
Bank is no longer required to make on behalf of the Executive to the
Retirement Income Trust Fund. Rather, once the Executive has exercised
the withdrawal rights provided for in Subsection 2.2, the Bank shall
be required to record the annual amounts set forth in Exhibit A of the
Agreement in the Executive's Accrued Benefit Account, pursuant to
Subsection 2.1.
1.20 "Plan Year" shall mean April 1, 1999 through December 31, 1999, for
the first Plan Year. Thereafter, the term shall mean the twelve (12)
month period commencing January 1, 2000 and each consecutive twelve (12)
month period thereafter.
1.21 "Retirement Age" means the Executive's sixty-fifth (65th) birthday
provided, however, that the Executive's actual retirement from full-time
employment may occur at any later date mutually agreed upon by the
parties.
1.22 "Retirement Income Trust Fund" means the trust fund account
established by the Executive and into which annual Contributions will
be made by the Bank on behalf of the Executive pursuant to
Subsection 2.1. The contractual rights of the Bank and the Executive
with respect to the Retirement Income Trust Fund shall be outlined in a
separate writing to be known as the ___________ Grantor Trust agreement.
1.23 "Spouse" means the individual to whom the Executive is legally married
at the time of the Executive's death, provided, however, that the term
"Spouse" shall not refer to an individual to whom the Executive is
legally married at the time of death if the Executive and such individual
have entered into a formal separation agreement or initiated divorce
proceedings.
1.24 "Supplemental Retirement Income Benefit" means an annual amount (before
taking into account federal and state income taxes), payable in monthly
installments throughout the Payout Period. Such benefit is projected
pursuant to the Agreement for the purpose of determining the
Contributions to be made to the Retirement Income Trust Fund (or Phantom
Contributions to be recorded in the Accrued Benefit Account). The annual
Contributions and Phantom Contributions have been actuarially determined,
using the assumptions set forth in Exhibit A, in order to fund for the
projected Supplemental Retirement Income Benefit. The Supplemental
Retirement Income Benefit for which Contributions (or Phantom
Contributions) are being made (or recorded) is set forth in Exhibit A.
1.25 "Timely Election" means the Executive has made an election to change
the form of his benefit payment(s) by filing with the Administrator a
Notice of Election to Change Form of Payment (Exhibit C of this
Agreement). In the case of benefits payable from the Accrued Benefit
Account, such election shall have been made prior to the event which
triggers distribution and at least two (2) years prior to the Executive's
Benefit Eligibility Date. In the case of benefits payable from the
Retirement Income Trust Fund, such election may be made at any time.
SECTION II
BENEFITS - GENERALLY
2.1 (a) Retirement Income Trust Fund and Accrued Benefit Account. The
Executive shall establish the _________________ Grantor Trust into which the
Bank shall be required to make annual Contributions on the Executive's behalf,
pursuant to Exhibit A and this Section II of the Agreement. A trustee shall be
selected by the Executive. The trustee shall maintain an account, separate and
distinct from the Executive's personal contributions, which account shall
constitute the Retirement Income Trust Fund. The trustee shall be charged with
the responsibility of investing all contributed funds. Distributions from the
Retirement Income Trust Fund of the __________Grantor Trust may be made by the
trustee to the Executive, for purposes of payment of any income or employment
taxes due and owing on Contributions by the Bank to the Retirement Income Trust
Fund, if any, and on any taxable earnings associated with such Contributions
which the Executive shall be required to pay from year to year, under applicable
law, prior to actual receipt of any benefit payments from the Retirement Income
Trust Fund. If the Executive exercises his withdrawal rights pursuant to
Subsection 2.2, the Bank's obligation to make Contributions to the Retirement
Income Trust Fund shall cease and the Bank's obligation to record Phantom
Contributions in the Accrued Benefit Account shall immediately commence pursuant
to Exhibit A and this Section II of the Agreement. To the extent this Agreement
is inconsistent with the __________ Grantor Trust agreement, the ____________
Grantor Trust Agreement shall supersede this Agreement.
The annual Contributions (or Phantom Contributions) required to be made by the
Bank to the Retirement Income Trust Fund (or recorded by the Bank in the
Accrued Benefit Account) have been actuarially determined and are set forth
in Exhibit A which is attached hereto and incorporated herein by reference.
Contributions shall be made by the Bank to the Retirement Income Trust Fund
(i) within seventy-five (75) days of establishment of such trust, and (ii)
within the first ten (10) days of the beginning of each subsequent Plan Year,
unless this Section expressly provides otherwise. Phantom Contributions, if
any, shall be recorded in the Accrued Benefit Account within the first thirty
(30) days of the beginning of each applicable Plan Year, unless this Section
expressly provides otherwise. Phantom Contributions shall accrue interest at
a rate equal to the Interest Factor, during the Payout Period, until the
balance of the Accrued Benefit Account has been fully distributed. Interest
on any Phantom Contribution shall not commence until such Payout Period
commences.
The Administrator shall review the schedule of annual Contributions (or Phantom
Contributions) provided for in Exhibit A (i) within thirty (30) days prior to
the close of each Plan Year and (ii) if the Executive is employed by the Bank
until attaining Retirement Age, on or immediately before attainment of such
Retirement Age. Such review shall consist of an evaluation of the accuracy of
all assumptions used to establish the schedule of Contributions (or Phantom
Contributions). Provided that (i) the Executive has not exercised his
withdrawal rights pursuant to Subsection 2.2 and (ii) the investments contained
in the Retirement Income Trust Fund have been deemed reasonable by the Bank,
the Administrator shall prospectively amend or supplement the schedule of
Contributions provided for in Exhibit A should the Administrator determine
during any such review that an increase in or supplement to the schedule of
Contributions is necessary in order to adequately fund the Retirement Income
Trust Fund so as to provide an annual benefit (or to provide the lump sum
equivalent of such benefit, as applicable) equal to the Supplemental Retirement
Income Benefit, on an after-tax basis, commencing at Benefit Age and payable
for the duration of the Payout Period.
(b) Withdrawal Rights Not Exercised.
(1) Contributions Made Annually
If the Executive does not exercise any withdrawal rights pursuant to Subsection
2.2, the annual Contributions to the Retirement Income Trust Fund shall
continue each year, unless this Subsection 2.1(b) specifically states
otherwise, until the earlier of (i) the last Plan Year that Contributions are
required pursuant to Exhibit A, or (ii) the Plan Year of the Executive's
termination of employment.
(2) Termination Following a Change in Control
If the Executive does not exercise his withdrawal rights pursuant to Subsection
2.2 and a Change in Control occurs at the Bank, followed within thirty-six
(36) months by either (i)the Executive's involuntary termination of employment,
or (ii) Executive's voluntary termination of employment after: (A) a material
change in the Executive's function, duties, or responsibilities, which change
would cause the Executive's position to become one of lesser responsibility,
importance, or scope from the position the Executive held at the time of the
Change in Control, (B) a relocation of the Executive's principal place of
employment by more than thirty (30) miles from its location prior to the Change
in Control, or (C) a material reduction in the benefits and perquisites to the
Executive from those being provided at the time of the Change in Control, the
Contribution set forth below shall be required of the Bank. The Bank shall
be required to make a final Contribution to the Retirement Income Trust Fund
within ten (10) days of the Executive's termination of employment equal to the
present value (using the Interest Factor) of all remaining Contributions which
would have been required to be made on behalf of Executive if Executive had
remained in the employ of the Bank until Benefit Age; provided, however, in
no event shall the Contribution be less than an amount which is sufficient to
provide the Executive with after-tax benefits (assuming a constant tax rate
equal to the rate in effect as of the date of Executive's termination)
beginning at his Benefit Age, equal in amount to that benefit which would
have been payable to the Executive if no secular trust had been implemented
and the benefit obligation had been accrued under APB Opinion No. 12, as
amended by FAS 106.
(3) Termination For Cause
If the Executive does not exercise his withdrawal rights pursuant to Subsection
2.2, and is terminated for Cause pursuant to Subsection 5.2, no further
Contribution(s) to the Retirement Income Trust Fund shall be required of the
Bank, and if not yet made, no Contribution shall be required for the Plan
Year in which such termination for Cause occurs.
(4) Involuntary Termination of Employment
If the Executive does not exercise his withdrawal rights pursuant to Subsection
2.2, and the Executive's employment with the Bank is involuntarily terminated
for any reason, but excluding termination for Cause, due to disability or
following a Change in Control, within ten (10) days of such involuntary
termination of employment, the Bank shall be required to make an immediate
lump sum Contribution to the Executive's Retirement Income Trust Fund in an
amount equal to the: (i) the full Contribution required for the Plan Year in
which such involuntary termination occurs, if not yet made, plus (ii) the
present value (computed using a discount rate equal to the Interest Factor) of
the lesser of (A) the next five (5) years Contributions to the Retirement
Income Trust Fund or (B) all remaining Contributions to the Retirement Income
Trust Fund; provided however, that, if necessary, an amount shall be
contributed to the Retirement Income Trust Fund which is sufficient to
provide the Executive with after tax benefits (assuming a constant tax rate
equal to the rate in effect as of the date of the Executive's termination)
beginning at his Benefit Age, equal in amount to that benefit which would
have been payable to the Executive if no secular trust had been implemented
and the benefit obligation had been accrued under APB Opinion No. 12, as
amended by FAS 106.
(5) Termination Due to Disability
If the Executive does not exercise his withdrawal rights pursuant to
Subsection 2.2, and the Executive's employment with the Bank is involuntarily
terminated due to disability, the Bank shall be required to make an immediate
Contribution to the Retirement Income Trust Fund in an amount equal to the
full Contribution required for the Plan Year in which such disability
termination occurs, if not yet made. No further Contributions shall be
required.
(6) Death During Employment
If the Executive does not exercise any withdrawal rights pursuant to
Subsection 2.2, and dies while employed by the Bank, and if, following the
Executive's death, the assets of the Retirement Income Trust Fund are
insufficient to provide the Supplemental Retirement Income Benefit to which
the Executive is entitled, the Bank shall be required to make a Contribution
to the Retirement Income Trust Fund equal to the sum of the remaining
Contributions set forth on Exhibit A, after taking into consideration any
payments under any life insurance policies that may have been obtained on the
Executive's life by the Retirement Income Trust Fund. Such final contribution
shall be payable in a lump sum to the Retirement Income Trust Fund within
thirty (30) days of the Executive's death.
(c) Withdrawal Rights Exercised
(1) Phantom Contributions Made Annually
If the Executive exercises his withdrawal rights pursuant to Subsection 2.2,
no further Contributions to the Retirement Income Trust Fund shall be required
of the Bank. Thereafter, Phantom Contributions shall be recorded annually in
the Executive's Accrued Benefit Account within ten (10) days of the beginning
of each Plan Year, commencing with the first Plan Year following the Plan Year
in which the Executive exercises his withdrawal rights. Such Phantom
Contributions shall continue to be recorded annually, unless this Subsection
2.1(c) specifically states otherwise, until the earlier of (i) the last Plan
Year that Phantom Contributions are required pursuant to Exhibit A, or (ii)
the Plan Year of the Executive's termination of employment.
(2) Termination Following a Change in Control
If the Executive exercises his withdrawal rights pursuant to Subsection 2.2,
Phantom Contributions shall commence in the Plan Year following the Plan Year
in which the Executive first exercises his withdrawal rights. If a Change in
Control occurs at the Bank, and within thirty-six (36) months of such Change
in Control, the Executive's employment is either (i) involuntarily terminated,
or (ii) voluntarily terminated by the Executive after: (A) a material change
in the Executive's function, duties, or responsibilities, which change would
cause the Executive's position to become one of lesser responsibility,
importance, or scope from the position the Executive held at the time of the
Change in Control, (B) a relocation of the Executive's principal place of
employment by more than thirty (30) miles from its location prior to the
Change in Control, or (C) a material reduction in the benefits and
perquisites to the Executive from those being provided at the time of the
Change in Control, the Phantom Contribution set forth below shall be required
of the Bank. The Bank shall be required to record a lump sum Phantom
Contribution in the Accrued Benefit Account within ten (10) days of the
Executive's termination of employment. The amount of such final Phantom
Contribution shall be actuarially determined based on the Phantom Contribution
required, at such time, in order to provide a benefit via this Agreement
equivalent to the Supplemental Retirement Income Benefit, on an after-tax
basis, commencing on the Executive's Benefit Eligibility Date and continuing
for the duration of the Payout Period. (Such actuarial determination shall
reflect the fact that amounts shall be payable from both the Accrued Benefit
Account as well as the Retirement Income Trust Fund and shall also reflect
the amount and timing of any withdrawal(s) made by the Executive from the
Retirement Income Trust Fund pursuant to Subsection 2.2.)
(3) Termination For Cause
If the Executive is terminated for Cause pursuant to Subsection 5.2,
the entire balance of the Executive's Accrued Benefit Account at the time of
such termination, which shall include any Phantom Contributions which have
been recorded plus interest accrued on such Phantom Contributions, shall be
forfeited.
(4) Involuntary Termination of Employment
If the Executive exercises his withdrawal rights pursuant to Subsection 2.2,
and the Executive's employment with the Bank is involuntarily terminated for
any reason including termination due to disability of the Executive, but
excluding termination for Cause, or termination following a Change in Control,
within ten (10) days of such involuntary termination of employment, the Bank
shall be required to record a final Phantom Contribution in an amount equal
to: (i) the full Phantom Contribution required for the Plan Year in which
such involuntary termination occurs, if not yet made, plus (ii) the present
value (computed using a discount rate equal to the Interest Factor) of the
lesser of (A) the next five (5) years Contributions to the Retirement Income
Trust Fund or (B) all remaining Phantom Contributions.
(5) Termination Due to Disability
If the Executive exercises his withdrawal rights pursuant to Subsection 2.2,
and the Executive's employment with the Bank is involuntarily terminated due
to disability, the Bank shall be required to record an immediate Phantom
Contribution to the Accrued Benefit Account of the Executive in an amount
equal to the full Phantom Contribution required for the Plan Year in which
such disability termination occurs, if not yet made. No further Phantom
Contributions shall be required.
(6) Death During Employment
If the Executive exercises his withdrawal rights pursuant to Subsection 2.2,
and dies while employed by the Bank, Phantom Contributions included on Exhibit
A shall be required of the Bank. Such Phantom Contributions shall commence in
the Plan Year following the Plan Year in which the Executive exercises his
withdrawal rights and shall continue through the Plan Year in which the
Executive dies. The Bank shall also be required to record a final Phantom
Contribution within thirty (30) days of the Executive's death. The amount of
such final Phantom Contribution shall be actuarially determined
based on the Phantom Contribution required at such time (if any), in order to
provide a benefit via this Agreement equivalent to the Supplemental
Retirement Income Benefit commencing within thirty (30) days of the date the
Administrator receives notice of the Executive's death and continuing for the
duration of the Payout Period. (Such actuarial determination shall reflect
the fact that amounts shall be payable from the Accrued Benefit Account as
well as the Retirement Income Trust Fund and shall also reflect the
amount and timing of any withdrawal(s) made by the Executive pursuant to
Subsection 2.2.)
2.2 Withdrawals From Retirement Income Trust Fund.
Exercise of withdrawal rights by the Executive pursuant to the ______________
Grantor Trust agreement shall terminate the Bank's obligation to make any
further Contributions to the Retirement Income Trust Fund, and the Bank's
obligation to record Phantom Contributions pursuant to Subsection 2.1(c)
shall commence. For purposes of this Subsection 2.2, "exercise of withdrawal
rights" shall mean those withdrawal rights to which the Executive is entitled
under Article III of the ______________ Grantor Trust agreement and shall
exclude any distributions made by the trustee of the Retirement Income Trust
Fund to the Executive for purposes of payment of income taxes in accordance
with Subsection 2.1 of this Agreement and the tax reimbursement formula
contained in the trust document, or other trust expenses properly payable
from the ______________ Grantor Trust pursuant to the provisions of the
trust document.
2.3 Benefits Payable From Retirement Income Trust Fund
Notwithstanding anything else to the contrary in this Agreement, in the event
that the trustee of the Retirement Income Trust Fund purchases a life
insurance policy with the Contributions to and, if applicable, earnings of
the Trust, and such life insurance policy is intended to continue in force
beyond the Payout Period for the disability or retirement benefits payable
from the Retirement Income Trust Fund pursuant to this Agreement, then the
Trustee shall have discretion to determine the portion of the cash value of
such policy available for purposes of annuitizing the Retirement Income
Trust Fund to provide the disability or retirement benefits payable under
this Agreement, after taking into consideration the amounts reasonably
believed to be required in order to maintain the cash value of such policy to
continue such policy in effect until the death of the Executive and payment
of death benefits thereunder.
SECTION III
RETIREMENT BENEFIT
3.1 (a) Normal form of payment
If (i) the Executive is employed with the Bank until reaching his Retirement
Age, and (ii) the Executive has not made a Timely Election to receive a lump
sum benefit, this Subsection 3.1(a) shall be controlling with respect to
retirement benefits.
Upon attaining his Benefit Age, the Retirement Income Trust Fund
shall become available to the Executive for any lump sum or period
distributions which the Executive may desire, provided reasonable notice of
such distribution(s) is communicated by the Executive to the trustee of the
Retirement Income Trust Fund. In the event the Executive dies at any time
after attaining his Benefit Age, but prior to complete liquidation of the
Retirement Income Trust Fund, the balance of the Retirement Income Trust Fund
shall be paid to the Executive's Beneficiary in a lump sum.
The Executive's Accrued Benefit Account (if applicable), measured as of the
Executive's Benefit Age, shall be annuitized (using the Interest Factor) into
monthly installments and shall be payable for the Payout Period. Such benefit
payments shall commence on the Executive's Benefit Eligibility Date. In the
event the Executive dies at any time after attaining his Benefit Age, but
prior to commencement or completion of all the payments due and owing
hereunder, (i) the Bank shall pay to the Executive's Beneficiary the same
monthly installments (or a continuation of such monthly installments if they
have already commenced) for the balance of months remaining in the Payout
Period, or (ii) the Executive' Beneficiary may request to receive the
remainder of any unpaid benefit payments in a lump sum payment. If a lump
sum payment is requested by the Beneficiary, the amount of such lump sum
payment shall be equal to the unpaid balance of the Executive's Accrued
Benefit Account. Payment in such lump sum form shall be made only if the
Executive's Beneficiary (i) obtains Board of Director approval, and (ii)
notifies the Administrator in writing of such election within ninety (90)
days of the Executive's death. Such lump sum payment, if approved by the
Board of Directors, shall be made within thirty (30) days of such Board of
Director approval.
(b) Alternative payout option
If (i) the Executive is employed with the Bank until reaching his Retirement
Age, and (ii) the Executive has made a Timely Election to receive a lump sum
benefit, this Subsection 3.1(b) shall be controlling with respect to
retirement benefits.
The balance of the Retirement Income Trust Fund, measured as of the Executive's
Benefit Age, shall be paid to the Executive in a lump sum on his Benefit
Eligibility Date. In the event the Executive dies after becoming eligible
for such payment (upon attainment of his Benefit Age), but before the actual
payment is made, his Beneficiary shall be entitled to receive the lump sum
benefit in accordance with this Subsection 3.1(b) within thirty (30) days of
the date the Administrator receives notice of the Executive's death.
The balance of the Executive's Accrued Benefit Account (if applicable),
measured as of the Executive's Benefit Age, shall be paid to the Executive in
a lump sum on his Benefit Eligibility Date. In the event the Executive dies
after becoming eligible for such payment (upon attainment of his Benefit Age),
but before the actual payment is made, his Beneficiary shall be entitled to
receive the lump sum benefit in accordance with this Subsection 3.1(b)
within thirty (30) days of the date the Administrator receives notice of
the Executive's death.
SECTION IV
PRE-RETIREMENT DEATH BENEFIT
4.1 (a) Normal form of payment
If (i) the Executive dies while employed by the Bank, and (ii) the Executive
has not made a Timely Election to receive a lump sum benefit, this Subsection
4.1(a) shall be controlling with respect to pre-retirement death benefits.
The balance of the Executive's Retirement Income Trust Fund, measured as of
the later of (i) the Executive's death, or (ii) the date any final lump sum
Contribution is made pursuant to Subsection 2.1(b), shall be paid to the
Executive's Beneficiary in a lump sum within thirty (30) days of the date
the Administrator receives notice of the Executive's death.
The Executive's Accrued Benefit Account (if applicable), measured as
of the later of (i) the Executive's death or (ii) the date any final lump sum
Phantom Contribution is recorded in the Accrued Benefit Account pursuant to
Subsection 2.1(c), shall be annuitized (using the Interest Factor) into
monthly installments and shall be payable to the Executive's Beneficiary for
the Payout Period. Such benefit payments shall commence within thirty (30)
days of the date the Administrator receives notice of the Executive's death,
or if later, within thirty (30) days after any final lump sum Phantom
Contribution is recorded in the Accrued Benefit Account in accordance with
Subsection 2.1(c). The Executive's Beneficiary may request to receive the
remainder of any unpaid monthly benefit payments due from the Accrued Benefit
Account in a lump sum payment. If a lump sum payment is requested by the
Beneficiary, the amount of such lump sum payment shall be equal to the
balance of the Executive's Accrued Benefit Account. Payment in such lump sum
form shall be made only if the Executive's Beneficiary (i) obtains Board of
Director approval, and (ii) notifies the Administrator in writing of such
election within ninety (90) days of the Executive's death. Such lump sum
payment, if approved by the Board of Directors, shall be payable within
thirty (30) days of such Board of Director approval.
(b) Alternative payout option
If (i) the Executive dies while employed by the Bank, and (ii) the Executive
has made a Timely Election to receive a lump sum benefit, this Subsection
4.1(b) shall be controlling with respect to pre-retirement death benefits.
The balance of the Executive's Retirement Income Trust Fund, measured as of
the later of (i) the Executive's death, or (ii) the date any final lump sum
Contribution is made pursuant to Subsection 2.1(b), shall be paid to the
Executive's Beneficiary in a lump sum within thirty (30) days of the date the
Administrator receives notice of the Executive's death.
The balance of the Executive's Accrued Benefit Account (if applicable),
measured as of the later of (i) the Executive's death, or (ii) the date any
final Phantom Contribution is recorded pursuant to Subsection 2.1(c), shall
be paid to the Executive's Beneficiary in a lump sum within thirty (30) days
of the date the Administrator receives notice of the Executive's death.
SECTION V
BENEFIT(S) IN THE EVENT OF TERMINATION OF SERVICE
PRIOR TO RETIREMENT AGE
5.1 Voluntary or Involuntary Termination of Service Other Than for Cause. In
the event the Executive's service with the Bank is voluntarily or involuntarily
terminated prior to Retirement Age, for any reason including a Change in
Control, but excluding (i) any disability related termination for which the
Board of Directors has approved early payment of benefits pursuant to Subsection
6.1, (ii) the Executive's pre-retirement death, which shall be covered in
Section IV, or (iii) termination for Cause, which shall be covered in Subsection
5.2, the Executive (or his Beneficiary) shall be entitled to receive benefits in
accordance with this Subsection 5.1. Payments of benefits pursuant to this
Subsection 5.1 shall be made in accordance with Subsection 5.1 (a) or 5.1 (b)
below, as applicable.
(a) Normal form of payment
(1) Executive Lives Until Benefit Age
If (i) after such termination, the Executive lives until attaining his Benefit
Age, and (ii) the Executive has not made a Timely Election to receive a lump
sum benefit, this Subsection 5.1(a)(1) shall be controlling with respect to
retirement benefits.
Upon attaining his Benefit Age, the Retirement Income Trust Fund shall become
available to the Executive for any lump sum or period distributions which the
Executive may desire, provided reasonable notice of such distribution(s) is
communicated by the Executive to the trustee of the Retirement Income Trust
Fund. In the event the Participant dies at any time after attaining his
Benefit Age, but prior to complete liquidation of the Retirement Income
Trust Fund, the balance of the Retirement Income Trust Fund shall be paid to
the Executive's Beneficiary in a lump sum.
The Executive's Accrued Benefit Account (if applicable), measured as of the
Executive's Benefit Age, shall be annuitized (using the Interest Factor) into
monthly installments and shall be payable for the Payout Period. Such benefit
payments shall commence on the Executive's Benefit Eligibility Date. In the
event the Executive dies at any time after attaining his Benefit Age, but prior
to commencement or completion of all the payments due and owing hereunder,
(i) the Bank shall pay to the Executive's Beneficiary the same monthly
installments (or a continuation of such monthly installments if they have
already commenced) for the balance of months remaining in the Payout Period,
or (ii) the Executive's Beneficiary may request to receive the remainder of
any unpaid benefit payments in a lump sum payment. If a lump sum payment is
requested by the Beneficiary, the amount of such lump sum payment shall be
equal to the unpaid balance of the Executive's Accrued Benefit Account.
Payment in such lump sum form shall be made only if the Executive's Beneficiary
(i) obtains Board of Director approval, and (ii) notifies the Administrator
in writing of such election within ninety (90) days of the Executive's death.
Such lump sum payment, if approved by the Board of Directors, shall be made
within thirty (30) days of such Board of Director approval.
(2) Executive Dies Prior to Benefit Age
If (i) after such termination, the Executive dies prior to attaining his
Benefit Age, and (ii) the Executive has not made a Timely Election to receive
a lump sum benefit, this Subsection 5.1(a)(2) shall be controlling with
respect to retirement benefits.
The Retirement Income Trust Fund, measured as of the date of the Executive's
death, shall be paid to the Executive's Beneficiary in a lump sum. Such
benefit payment shall commence within thirty (30) days of the date the
Administrator receives notice of the Executive's death.
The Executive's Accrued Benefit Account (if applicable), measured as of the
date of the Executive's death, shall be annuitized (using the Interest Factor)
into monthly installments and shall be payable for the Payout Period. Such
payments shall commence within thirty (30) days of the date the Administrator
receives notice of the Executive's death. The Executive's Beneficiary may
request to receive the unpaid balance of the Executive's Accrued Benefit
Account in the form of a lump sum payment. If a lump sum payment is
requested by the Beneficiary, payment of the balance of the Accrued Benefit
Account in such lump sum form shall be made only if the Executive's Beneficiary
(i)obtains Board of Director approval, and (ii) notifies the Administrator in
writing of such election within ninety (90) days of the Executive's death.
Such lump sum payment, if approved by the Board of Directors, shall be made
within thirty (30) days of such Board of Director approval.
(b) Alternative Payout Option
(1) Executive Lives Until Benefit Age
If (i) after such termination, the Executive lives until attaining his Benefit
Age, and (ii) the Executive has made a Timely Election to receive a lump sum
benefit, this Subsection 5.1(b)(1) shall be controlling with respect to
retirement benefits.
The balance of the Retirement Income Trust Fund, measured as of the
Executive's Benefit Age, shall be paid to the Executive in a lump sum on his
Benefit Eligibility Date. In the event the Executive dies after becoming
eligible for such payment (upon attainment of his Benefit Age), but before
the actual payment is made, his Beneficiary shall be entitled to receive the
lump sum benefit in accordance with this Subsection 5.1(b)(1) within thirty
(30) days of the date the Administrator receives notice of the Executive's
death.
The balance of the Executive's Accrued Benefit Account (if applicable),
measured as of the Executive's Benefit Age, shall be paid to the Executive in
a lump sum on his Benefit Eligibility Date. In the event the Executive dies
after becoming eligible for such payment (upon attainment of his Benefit Age),
but before the actual payment is made, his Beneficiary shall be entitled to
receive the lump sum benefit in accordance with this Subsection 5.1(b)(1)
within thirty (30) days of the date the Administrator receives notice of the
Executive's death.
(2) Executive Dies Prior to Benefit Age
If (i) after such termination, the Executive dies prior to attaining his
Benefit Age, and (ii) the Executive has made a Timely Election to receive a
lump sum benefit, this Subsection 5.1(b)(2) shall be controlling with respect
to pre-retirement death benefits.
The balance of the Retirement Income Trust Fund, measured as of the date of
the Executive's death, shall be paid to the Executive's Beneficiary within
thirty (30) days of the date the Administrator receives notice of the
Executive's death.
The balance of the Executive's Accrued Benefit Account (if applicable),
measured as of the date of the Executive's death, shall be paid to the
Executive's Beneficiary within thirty (30) days of the date the
Administrator receives notice of the Executive's death.
5.2 Termination For Cause
If the Executive is terminated for Cause, all benefits under this Agreement,
other than those which can be paid from previous Contributions to the
Retirement Income Trust Fund (and earnings on such Contributions), shall be
forfeited. Furthermore, no further Contributions (or Phantom Contributions,
as applicable) shall be required of the Bank for the year in which such
termination for Cause occurs (if not yet made). The Executive shall be
entitled to receive a benefit in accordance with this Subsection 5.2.
The balance of the Executive's Retirement Income Trust Fund shall be paid to
the Executive in a lump sum on his Benefit Eligibility Date. In the event
the Executive dies prior to his Benefit Eligibility Date, his Beneficiary
shall be entitled to receive the balance of the Executive's Retirement Income
Trust Fund in a lump sum within thirty (30) days of the date the
Administrator receives notice of the Executive's death.
SECTION VI
OTHER BENEFITS
6.1 (a) Disability Benefit
If the Executive's service is terminated prior to Retirement Age due to a
disability which meets the criteria set forth below, the Executive may
request to receive the Disability Benefit in lieu of the retirement benefit(s)
available pursuant to Section 5.1 (which is (are) not available prior to the
Executive's Benefit Eligibility Date).
In any instance in which: (i) it is determined by a duly licensed, independent
physician selected by the Bank, that the Executive is no longer able, properly
and satisfactorily, to perform his regular duties as an officer, because of
ill health, accident, disability or general inability due to age, (ii) the
Executive requests payment under this Subsection in lieu of Subsection 5.1,
and (iii) Board of Director approval is obtained to allow payment under this
Subsection, in lieu of Subsection 5.1, the Executive shall be entitled to the
following lump sum benefit(s). The lump sum benefit(s) to which the Executive
is entitled shall include: (i) the balance of the Retirement Income Trust
Fund, plus (ii) the balance of the Accrued Benefit Account (if applicable).
The benefit(s) shall be paid within thirty (30) days following the date of
the Executive's request for such benefit is approved by the Board of
Directors. In the event the Executive dies after becoming eligible for such
payment(s) but before the actual payment(s) is (are) made, his Beneficiary
shall be entitled to receive the benefit(s) provided for in this Subsection
6.1(a) within thirty (30) days of the date the Administrator receives notice
of the Executive's death.
(b) Disability Benefit - Supplemental.
Furthermore, if Board of Director approval is obtained within thirty (30) days
of the Executive's death, the Bank shall make a direct, lump sum payment to
the Executive's Beneficiary in an amount equal to the sum of all remaining
Contributions (or Phantom Contributions) set forth in Exhibit A, but not
required pursuant to Subsection 2.1(b) (or 2.1(c)) due to the Executive's
disability-related termination. Such lump sum payment, if approved by the
Board of Directors, shall be payable to the Executive's Beneficiary within
thirty (30) days of such Board of Director approval.
6.2 Additional Death Benefit - Burial Expense. Upon the Executive's death,
the Executive's Beneficiary shall also be entitled to receive a one-time lump
sum death benefit in the amount of Ten Thousand Dollars ($10,000.00). This
benefit shall be paid directly from the Bank to the Beneficiary and shall be
provided specifically for the purpose of providing payment for burial and/or
funeral expenses of the Executive. Such death benefit shall be payable within
thirty (30) days from the date the Administrator receives notice of the
Executive's death. The Executive's Beneficiary shall not be entitled to such
benefit if the Executive is terminated for Cause prior to death.
SECTION VII
BENEFICIARY DESIGNATION
The Executive shall make an initial designation of primary and secondary
Beneficiaries upon execution of this Agreement and shall have the right to
change such designation, at any subsequent time, by submitting to (i) the
Administrator, and (ii) the trustee of the Retirement Income Trust Fund, in
substantially the form attached as Exhibit B to this Agreement, a written
designation of primary and secondary Beneficiaries. Any Beneficiary
designation made subsequent to execution of this Agreement shall become
effective only when receipt thereof is acknowledged in writing by the
Administrator.
SECTION VIII
EXECUTIVE'S RIGHT TO ASSETS
The rights of the Executive, any Beneficiary, or any other person
claiming through the Executive under this Agreement, shall be solely those of
an unsecured general creditor of the Bank. The Executive, the Beneficiary, or
any other person claiming through the Executive, shall only have the right to
receive from the Bank those payments or amounts so specified under this
Agreement. The Executive agrees that he, his Beneficiary, or any other
person claiming through him shall have no rights or interests whatsoever in
any asset of the Bank, including any insurance policies or contracts which
the Bank may possess or obtain to informally fund this Agreement. Any asset
used or acquired by the Bank in connection with the liabilities it has
assumed under this Agreement shall not be deemed to be held under any trust
for the benefit of the Executive or his Beneficiaries, unless such asset is
contained in the rabbi trust described in Section XII of this Agreement. Any
such asset shall be and remain, a general, unpledged asset of the Bank in the
event of the Bank's insolvency.
SECTION IX
RESTRICTIONS UPON FUNDING
The Bank shall have no obligation to set aside, earmark or entrust any fund
or money with which to pay its obligations under this Agreement, other than
those Contributions required to be made to the Retirement Income Trust Fund.
The Executive, his Beneficiaries or any successor in interest to him shall be
and remain simply a general unsecured creditor of the Bank in the same manner
as any other creditor having a general claim for matured and unpaid
compensation. The Bank reserves the absolute right in its sole discretion
to either purchase assets to meet its obligations undertaken by this Agreement
or to refrain from the same and to determine the extent, nature, and method of
such asset purchases. Should the Bank decide to purchase assets such as life
insurance, mutual funds, disability policies or annuities, the Bank reserves
the absolute right, in its sole discretion, to replace such assets from time
to time or to terminate its investment in such assets at any time, in whole
or in part. At no time shall the Executive be deemed to have any lien, right,
title or interest in or to any specific investment or to any assets of the
Bank. If the Bank elects to invest in a life insurance, disability or
annuity policy upon the life of the Executive, then the Executive shall
assist the Bank by freely submitting to a physical examination and by
supplying such additional information necessary to obtain such insurance or
annuities.
SECTION X
ACT PROVISIONS
10.1 Named Fiduciary and Administrator. The Bank shall be the Named Fiduciary
and Administrator (the "Administrator") of this Agreement. As Administrator, the
Bank shall be responsible for the management, control and administration of the
Agreement as established herein. The Administrator may delegate to others
certain aspects of the management and operational responsibilities of the
Agreement, including the employment of advisors and the delegation of
ministerial duties to qualified individuals.
10.2 Claims Procedure and Arbitration. In the event that benefits under this
Agreement are not paid to the Executive (or to his Beneficiary in the case of
the Executive's death) and such claimants feel they are entitled to receive such
benefits, then a written claim must be made to the Administrator within sixty
(60) days from the date payments are refused. The Administrator shall review
the written claim and, if the claim is denied, in whole or in part, it shall
provide in writing, within ninety (90) days of receipt of such claim, its
specific reasons for such denial, reference to the provisions of this Agreement
upon which the denial is based, and any additional material or information
necessary to perfect the claim. Such writing by the Administrator shall
further indicate the additional steps which must be undertaken by claimants
if an additional review of the claim denial is desired.
If claimants desire a second review, they shall notify the Administrator in
writing within sixty (60) days of the first claim denial. Claimants may
review this Agreement or any documents relating thereto and submit any
issues and comments, in writing, they may feel appropriate. In its sole
discretion, the Administrator shall then review the second claim and provide
a written decision within sixty (60) days of receipt of such claim. This
decision shall state the specific reasons for the decision and shall include
reference to specific provisions of this Agreement upon which the decision
is based.
If claimants continue to dispute the benefit denial based upon completed
performance of this Agreement or the meaning and effect of the terms and
conditions thereof, then claimants may submit the dispute to a Board of
Arbitration for final arbitration. Said Board of Arbitration shall consist
of one member selected by the claimant, one member selected by the Bank, and
the third member selected by the first two members. The Board of Arbitration
shall operate under any generally recognized set of arbitration rules.
The parties hereto agree that they, their heirs, personal representatives,
successors and assigns shall be bound by the decision of such Board of
Arbitration with respect to any controversy properly submitted to it for
determination.
SECTION XI
MISCELLANEOUS
11.1 No Effect on Employment Rights. Nothing contained herein will confer upon
the Executive the right to be retained in the service of the Bank nor limit the
right of the Bank to discharge or otherwise deal with the Executive without
regard to the existence of the Agreement.
11.2 State Law. The Agreement is established under, and will be construed
according to, the laws of the state of New Hampshire, to the extent such laws
are not preempted by the Act and valid regulations published thereunder.
11.3 Severability. In the event that any of the provisions of this Agreement or
portion thereof, are held to be inoperative or invalid by any court of competent
jurisdiction, then: (1) insofar as is reasonable, effect will be given to the
intent manifested in the provisions held invalid or inoperative, and (2) the
validity and enforceability of the remaining provisions will not be affected
thereby.
11.4 Incapacity of Recipient. In the event the Executive is declared
incompetent and a conservator or other person legally charged with the care of
his person or Estate is appointed, any benefits under the Agreement to which
such Executive is entitled shall be paid to such conservator or other person
legally charged with the care of his person or Estate.
11.5 Unclaimed Benefit. The Executive shall keep the Bank informed of his
current address and the current address of his Beneficiaries. The Bank shall
not be obligated to search for the whereabouts of any person. If the location of
the Executive is not made known to the Bank as of the date upon which any
payment of any benefits from the Accrued Benefit Account may first be made, the
Bank shall delay payment of the Executive's benefit payment(s) until the
location of the Executive is made known to the Bank; however, the Bank shall
only be obligated to hold such benefit payment(s) for the Executive until the
expiration of thirty-six (36) months. Upon expiration of the thirty-six (36)
month period, the Bank may discharge its obligation by payment to the
Executive's Beneficiary. If the location of the Executive's Beneficiary is
not made known to the Bank by the end of an additional two (2) month period
following expiration of the thirty-six (36) month period, the Bank may
discharge its obligation by payment to the Executive's Estate. If there is
no Estate in existence at such time or if such fact cannot be determined by
the Bank, the Executive and his Beneficiary(ies) shall thereupon forfeit any
rights to the balance, if any, of the Executive's Accrued Benefit Account
provided for such Executive and/or Beneficiary under this Agreement.
11.6 Limitations on Liability. Notwithstanding any of the preceding provisions
of the Agreement, no individual acting as an employee or agent of the Bank, or
as a member of the Board of Directors shall be personally liable to the
Executive or any other person for any claim, loss, liability or expense incurred
in connection with the Agreement.
11.7 Gender. Whenever in this Agreement words are used in the masculine or
neuter gender, they shall be read and construed as in the masculine, feminine or
neuter gender, whenever they should so apply.
11.8 Effect on Other Corporate Benefit Agreements. Nothing contained in this
Agreement shall affect the right of the Executive to participate in or be
covered by any qualified or non-qualified pension, profit sharing, group, bonus
or other supplemental compensation or fringe benefit agreement constituting a
part of the Bank's existing or future compensation structure.
11.9 Suicide. Notwithstanding anything to the contrary in this Agreement, if
the Executive's death results from suicide, whether sane or insane, within
twenty-six (26) months after execution of this Agreement, all further
Contributions to the Retirement Income Trust Fund (or Phantom Contributions
recorded in the Accrued Benefit Account) shall thereupon cease, and no
Contribution (or Phantom Contribution) shall be made by the Bank to the
Retirement Income Trust Fund (or recorded in the Accrued Benefit Account) in
the year such death resulting from suicide occurs (if not yet made). All
benefits other than those available from previous Contributions to the
Retirement Income Trust Fund under this Agreement shall be forfeited, and
this Agreement shall become null and void. The balance of the Retirement
Income Trust Fund, measured as of the Executive's date of death, shall be
paid to the Beneficiary within thirty (30) days of the date the Administrator
receives notice of the Executive's death.
11.10 Inurement. This Agreement shall be binding upon and shall inure to the
benefit of the Bank, its successors and assigns, and the Executive, his
successors, heirs, executors, administrators, and Beneficiaries.
11.11 Headings. Headings and sub-headings in this Agreement are inserted for
reference and convenience only and shall not be deemed a part of this Agreement.
11.12 Establishment of a Rabbi Trust. The Bank shall establish a rabbi trust
into which the Bank shall contribute assets which shall be held therein, subject
to the claims of the Bank's creditors in the event of the Bank's "Insolvency"
(as defined in such rabbi trust agreement), until the contributed assets are
paid to the Executive and/or his Beneficiary in such manner and at such times as
specified in this Agreement. It is the intention of the Bank that the
contribution or contributions to the rabbi trust shall provide the Bank with a
source of funds to assist it in meeting the liabilities of this Agreement.
11.13 Source of Payments. All payments provided in this Agreement shall be
timely paid in cash or check from the general funds of the Bank or the assets of
the rabbi trust, to the extent made from the Accrued Benefit Account. The
Holding Company, however guarantees payment and provision of all amounts and
benefits due to the Executive from the Accrued Benefit Account or Contribution
to the Retirement Income Trust Fund and, if such Contributions, amounts and
benefits due from the Bank are not timely paid or provided by the Bank, such
amounts and benefits shall be paid or provided by the Holding Company.
SECTION XII
AMENDMENT/PLAN TERMINATION
12.1 Amendment or Plan Termination. The Bank intends this Agreement to be
permanent, but reserves the right to amend or terminate the Agreement when, in
the sole opinion of the Bank, such amendment or termination is advisable.
However, any termination of the Agreement which is done in anticipation of or
pursuant to a "Change in Control", as defined in Subsection 1.9, shall be deemed
to trigger Subsection 2.1(b)(2) (or 2.1(c)(2), as applicable) of the Agreement
notwithstanding the Executive's continued employment, and benefit(s) shall be
paid from the Retirement Income Trust Fund (and Accrued Benefit Account, if
applicable) in accordance with Subsection 12.2 below and with Subsections
2.1(b)(2) (or 2.1(c)(2), as applicable). Any amendment or termination of the
Agreement by the Bank shall be made pursuant to a resolution of the Board of
Directors of the Bank and shall be effective as of the date of such
resolution. No amendment or termination of the Agreement by the Bank shall
directly or indirectly deprive the Executive of all or any portion of the
Executive's Retirement Income Trust Fund (and Accrued Benefit Account, if
applicable) as of the effective date of the resolution amending or
terminating the Agreement.
Notwithstanding the above, if the Executive does not exercise any withdrawal
rights pursuant to Subsection 2.2, and if at any time after the final
Contribution is made to the Retirement Income Trust Fund the Executive elects
to terminate the Retirement Income Trust Fund and receive a distribution of
the assets of the Retirement Income Trust Fund, then upon such distribution
this Agreement shall terminate.
12.2 Executive's Right to Payment Following Plan Termination. In the event of
a termination of the Agreement, the Executive shall be entitled to the balance,
if any, of his Retirement Income Trust Fund (and Accrued Benefit Account, if
applicable). However, if such termination is done in anticipation of or pursuant
to a "Change in Control," such balance(s) shall include the final Contribution
(or final Phantom Contribution) made (or recorded) pursuant to Subsection
2.1(b)(2) (or 2.1(c)(2)). Payment of the balance(s) of the Executive's
Retirement Income Trust Fund (and Accrued Benefit Account, if applicable) shall
not be dependent upon his continuation of employment with the Bank following the
termination date of the Agreement. Payment of the balance(s) of the Executive's
Retirement Income Trust Fund (and Accrued Benefit Account, if applicable) shall
be made in a lump sum within thirty (30) days of the date of termination of the
Agreement.
SECTION XIII
EXECUTION
13.1 This Agreement and the ______________ Grantor Trust agreement set forth
the entire understanding of the parties hereto with respect to the transactions
contemplated hereby, and any previous agreements or understandings between the
parties hereto regarding the subject matter hereof are merged into and
superseded by this Agreement and the ______________ Grantor Trust agreement.
13.2 This Agreement shall be executed in triplicate, each copy of which, when
so executed and delivered, shall be an original, but all three copies shall
together constitute one and the same instrument.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the Bank and the Executive have caused this Agreement
to be executed on the day and date first above written.
ATTEST: GRANITE BANK:
By:
Secretary (Title)
ATTEST: GRANITE STATE BANKSHARES,
INC.
__________________________ By:
____________________________
Secretary
____________________________
(Title)
WITNESS: EXECUTIVE:
EXHIBIT A
CONDITIONS, ASSUMPTIONS,
AND
SCHEDULE OF CONTRIBUTIONS AND PHANTOM CONTRIBUTIONS
WILLIAM C. HENSON
1. Interest Factor - for purposes of:
a. the Accrued Benefit Account - shall be Six percent (6%) per
annum, compounded monthly.
b. the Retirement Income Trust Fund - for purposes of annuitizing
the balance of the Retirement Income Trust Fund over the Payout
Period, the trustee of the William Henson Grantor Trust shall
exercise discretion in selecting the appropriate rate given the
nature of the investments contained in the Retirement Income
Trust Fund and the expected return associated with the investments.
2. The amount of the annual Contributions (or Phantom Contributions) to
the Retirement Income Trust Fund (or Accrued Benefit Account) has been based
on the annual incremental accounting accruals which would be required of the
Bank through the earlier of the Executive's death or Retirement Age, (i)
pursuant to APB Opinion No. 12, as amended by FAS 106 and (ii) assuming a
discount rate equal to Six percent (6%) per annum, in order to provide the
unfunded, non-qualified Supplemental Retirement Income Benefit.
3. Supplemental Retirement Income Benefit means an actuarially determined
annual amount equal to One Hundred Eighteen Thousand One Hundred Seventeen
Dollars ($118,117.00) at age 65 if paid entirely from the Accrued Benefit
Account and Seventy Thousand Nine Hundred and Three Dollars ($70,903) is paid
from the Retirement Income Trust Fund.
The Supplemental Retirement Income Benefit:
- the definition of Supplemental Retirement Income Benefit has been
incorporated into the Agreement for the sole purpose of actuarially
establishing the amount of annual Contributions (or Phantom
Contributions) to the Retirement Income Trust Fund (or Accrued
Benefit Account). The amount of any actual retirement, pre-retirement
or disability benefit payable pursuant to the Agreement will be a
function of (i) the amount and timing of Contributions (or Phantom
Contributions) to the Retirement Income Trust Fund (or Accrued
Benefit Account) and (ii) the actual investment experience of such
Contributions (or the monthly compounding rate of Phantom
Contributions).
- the Supplemental Retirement Income Benefit is determined by
multiplying the Specified Wage Replacement Percentage (i.e., 70%) by
the projected salary of the Executive at age 60 less the final
projected wage replacement for the Executive at age 65 (expressed as
a dollar amount) from the Bank's defined benefit plan. Although the
Supplemental Retirement Income Benefit will be based on a specified
percentage of the Executive's wages at 60, the benefit will be
expensed and accrued to age 65.
4. Schedule of Annual Gross Contributions/Phantom Contributions
Plan Year Amount
1999 $ 50,738
2000 50,738
2001 50,738
2002 50,738
2003 50,738
2004 50,738
2005 50,738
2006 50,738
2007 50,738
2008 50,738
2009 50,738
2010 50,738
2011 50,738
2012 50,738
2013 50,738
2014 50,738
2015 50,738
2016 50,738
2017 50,738
2018 50,738
2019 50,738
2020 61,335
Exhibit A - Cont'd.
EXHIBIT A
CONDITIONS, ASSUMPTIONS,
AND
SCHEDULE OF CONTRIBUTIONS AND PHANTOM CONTRIBUTIONS
CHARLES B. PAQUETTE
1. Interest Factor - for purposes of:
a. the Accrued Benefit Account - shall be Six percent (6%) per
annum, compounded monthly.
b. the Retirement Income Trust Fund - for purposes of annuitizing
the balance of the Retirement Income Trust Fund over the Payout
Period, the trustee of the Charles B. Paquette Grantor Trust shall
exercise discretion in selecting the appropriate rate given the
nature of the investments contained in the Retirement Income
Trust Fund and the expected return associated with the investments.
2. The amount of the annual Contributions (or Phantom Contributions) to
the Retirement Income Trust Fund (or Accrued Benefit Account) has been based
on the annual incremental accounting accruals which would be required of the
Bank through the earlier of the Executive's death or Retirement Age, (i)
pursuant to APB Opinion No. 12, as amended by FAS 106 and (ii) assuming a
discount rate equal to Six percent (6%) per annum, in order to provide the
unfunded, non-qualified Supplemental Retirement Income Benefit.
3. Supplemental Retirement Income Benefit means an actuarially determined
annual amount equal to One Hundred Eighteen Thousand One Hundred Seventeen
Dollars ($118,117.00) at age 65 if paid entirely from the Accrued Benefit
Account and Seventy Thousand Nine Hundred and Three Dollars ($70,903) is
paid from the Retirement Income Trust Fund.
The Supplemental Retirement Income Benefit:
- the definition of Supplemental Retirement Income Benefit has been
incorporated into the Agreement for the sole purpose of actuarially
establishing the amount of annual Contributions (or Phantom
Contributions) to the Retirement Income Trust Fund (or Accrued
Benefit Account). The amount of any actual retirement, pre-retirement
or disability benefit payable pursuant to the Agreement will be a
function of (i) the amount and timing of Contributions (or Phantom
Contributions) to the Retirement Income Trust Fund (or Accrued
Benefit Account) and (ii) the actual investment experience of such
Contributions (or the monthly compounding rate of Phantom
Contributions).
- the Supplemental Retirement Income Benefit is determined by
multiplying the Specified Wage Replacement Percentage (i.e., 70%) by
the projected salary of the Executive at age 60 less the final
projected wage replacement for the Executive at age 65 (expressed as
a dollar amount) from the Bank's defined benefit plan. Although the
Supplemental Retirement Income Benefit will be based on a specified
percentage of the Executive's wages at 60, the benefit will be
expensed and accrued to age 65.
4. Schedule of Annual Gross Contributions/Phantom Contributions
Plan Year Amount
1999 $ 60,586
2000 60,586
2001 60,586
2002 60,586
2003 60,586
2004 60,586
2005 60,586
2006 60,586
2007 60,586
2008 60,586
2009 60,586
2010 60,586
2011 60,586
2012 60,586
2013 60,586
2014 60,586
2015 60,586
2016 60,586
2017 74,221
Exhibit A - Cont'd.
EXHIBIT A
CONDITIONS, ASSUMPTIONS,
AND
SCHEDULE OF CONTRIBUTIONS AND PHANTOM CONTRIBUTIONS
WILLIAM G. PIKE
1. Interest Factor - for purposes of:
a. the Accrued Benefit Account - shall be Six percent (6%) per
annum, compounded monthly.
b. the Retirement Income Trust Fund - for purposes of annuitizing
the balance of the Retirement Income Trust Fund over the Payout
Period, the trustee of the William G. Pike Grantor Trust shall
exercise discretion in selecting the appropriate rate given the
nature of the investments contained in the Retirement Income
Trust Fund and the expected return associated with the investments.
2. The amount of the annual Contributions (or Phantom Contributions) to
the Retirement Income Trust Fund (or Accrued Benefit Account) has been based
on the annual incremental accounting accruals which would be required of the
Bank through the earlier of the Executive's death or Retirement Age, (i)
pursuant to APB Opinion No. 12, as amended by FAS 106 and (ii) assuming a
discount rate equal to Six percent (6%) per annum, in order to provide the
unfunded, non-qualified Supplemental Retirement Income Benefit.
3. Supplemental Retirement Income Benefit means an actuarially
determined annual amount equal to Sixty Four Thousand Nine Hundred Sixty
Seven Dollars ($64,967) at age 65 if paid entirely from the Accrued Benefit
Account and Thirty Eight Thousand Nine Hundred Eighty Dollars ($38,980) is
paid from the Retirement Income Trust Fund.
The Supplemental Retirement Income Benefit:
- the definition of Supplemental Retirement Income Benefit has been
incorporated into the Agreement for the sole purpose of actuarially
establishing the amount of annual Contributions (or Phantom
Contributions) to the Retirement Income Trust Fund (or Accrued
Benefit Account). The amount of any actual retirement, pre-retirement
or disability benefit payable pursuant to the Agreement will be a
function of (i) the amount and timing of Contributions (or Phantom
Contributions) to the Retirement Income Trust Fund (or Accrued
Benefit Account) and (ii) the actual investment experience of such
Contributions (or the monthly compounding rate of Phantom
Contributions).
- the Supplemental Retirement Income Benefit is determined by
multiplying the Specified Wage Replacement Percentage (i.e., 50%) by
the projected salary of the Executive at age 60 less the final
projected wage replacement for the Executive at age 65 (expressed as
a dollar amount) from the Bank's defined benefit plan. Although the
Supplemental Retirement Income Benefit will be based on a specified
percentage of the Executive's wages at 60, the benefit will be
expensed and accrued to age 65.
4. Schedule of Annual Gross Contributions/Phantom Contributions
Plan Year Amount
1999 $ 34,419
2000 34,419
2001 34,419
2002 34,419
2003 34,419
2004 34,419
2005 34,419
2006 34,419
2007 34,419
2008 34,419
2009 34,419
2010 34,419
2011 34,419
2012 34,419
2013 34,419
2014 34,419
2015 34,419
2016 38,123
Exhibit B
EXECUTIVE SUPPLEMENTAL RETIREMENT INCOME AGREEMENT
BENEFICIARY DESIGNATION
The Executive, under the terms of the Executive Supplemental Retirement
Income Agreement executed by the Bank, dated the 1st day of April, 1999,
hereby designates the following Beneficiary(ies) to receive any guaranteed
payments or death benefits under such Agreement, following his death:
PRIMARY BENEFICIARY: _________________________________________________
SECONDARY BENEFICIARY: _________________________________________________
This Beneficiary Designation hereby revokes any prior Beneficiary
Designation which may have been in effect.
Such Beneficiary Designation is revocable.
DATE: ______________________, 19____
___________________________________ ______________________________
(WITNESS) EXECUTIVE
___________________________________
(WITNESS)
Exhibit C
EXECUTIVE SUPPLEMENTAL RETIREMENT INCOME AGREEMENT
NOTICE OF ELECTION TO CHANGE FORM OF PAYMENT
TO: Bank
Attention:
I hereby give notice of my election to change the form of payment of
my Supplemental Retirement Income Benefit, as specified below. I understand
that such notice, in order to be effective, must be submitted in accordance
with the time requirements described in my Executive Supplemental Retirement
Income Agreement.
I hereby elect to change the form of payment of my benefits from
monthly installments throughout my Payout Period to a lump sum benefit
payment.
______________________________
Executive
______________________________
Date
Acknowledged
By: _______________________
Title: _______________________
______________________________
Date
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
Form 10-Q and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 23,361
<INT-BEARING-DEPOSITS> 20,880
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 199,156<F1>
<INVESTMENTS-CARRYING> 18,020
<INVESTMENTS-MARKET> 17,507
<LOANS> 562,114<F2>
<ALLOWANCE> 7,170
<TOTAL-ASSETS> 865,968
<DEPOSITS> 649,797
<SHORT-TERM> 59,550<F3>
<LIABILITIES-OTHER> 3,286
<LONG-TERM> 80,586<F4>
0
0
<COMMON> 6,790
<OTHER-SE> 65,959
<TOTAL-LIABILITIES-AND-EQUITY> 865,968
<INTEREST-LOAN> 22,586
<INTEREST-INVEST> 6,574
<INTEREST-OTHER> 463
<INTEREST-TOTAL> 29,623
<INTEREST-DEPOSIT> 10,476
<INTEREST-EXPENSE> 13,745
<INTEREST-INCOME-NET> 15,878
<LOAN-LOSSES> 50
<SECURITIES-GAINS> 291
<EXPENSE-OTHER> 10,921
<INCOME-PRETAX> 7,495
<INCOME-PRE-EXTRAORDINARY> 4,827
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,827
<EPS-BASIC> 0.83
<EPS-DILUTED> 0.81
<YIELD-ACTUAL> 3.99
<LOANS-NON> 2,098
<LOANS-PAST> 306
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 7,122
<CHARGE-OFFS> 297
<RECOVERIES> 295
<ALLOWANCE-CLOSE> 7,170
<ALLOWANCE-DOMESTIC> 5,708
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,462
<FN>
<F1>Securities available for sale, at market value
<F2>Loans net of unearned income, gross of allowance for possible loan losses
and excluding loans held for sale
<F3>Securities sold under agreements to repurchase of $59,550
<F4>Includes other borrowings with the Federal Home Loan Bank of Boston of
$80,586
</FN>
</TABLE>
