<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1998
----------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
---------------- -----------------
Commission File Number: 0-15025
--------------------------
PROGRESSIVE BANK, INC.
(Exact name of registrant as specified in its charter)
NEW YORK 14-1682661
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1301 ROUTE 52, FISHKILL, NEW YORK 12524
---------------------------------------------------
(Address of principal executive offices) (Zip Code)
(914) 897-7400
----------------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
----------------------
(Former name, former address and former fiscal year, if changed
since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of May 8, 1998: 3,859,245 shares.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
<S> <C>
PAGE
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets as of March 31, 1998
and December 31, 1997.............................................................1
Consolidated Statements of Income for the Three
Months Ended March 31, 1998 and March 31, 1997....................................2
Consolidated Statements of Shareholders' Equity for the Three
Months Ended March 31, 1998 and March 31, 1997....................................3
Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 1998 and March 31, 1997....................................4
Notes to Consolidated Interim Financial Statements................................5-6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..........................................7-17
Item 3. Quantitative and Qualitative Disclosures About Market Risk.....................18
PART II - OTHER INFORMATION
Item 1. Legal Proceedings..............................................................18
Item 2. Changes in Securities..........................................................18
Item 3. Defaults Upon Senior Securities................................................18
Item 4. Submission of Matters to a Vote of Security Holders............................18
Item 5. Other Information..............................................................18
Item 6. Exhibits and Reports on Form 8-K...............................................18
Signatures.............................................................................19
</TABLE>
Explanatory Note: This Quarterly Report on Form 10-Q contains certain
forward-looking statements consisting of estimates with respect to financial
condition, results of operations and business of the Company that are subject to
various factors which could cause actual results to differ materially from these
statements. These factors include changes in general, economic and market, and
legislative and regulatory conditions, and the development of an interest rate
environment that adversely affects the interest rate spread or other income
anticipated from the Company's operations and investments.
<PAGE>
CONSOLIDATED BALANCE SHEETS
PROGRESSIVE BANK, INC. AND SUBSIDIARY
(IN THOUSANDS, EXCEPT SHARES AND PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
--------------- -------------------
ASSETS
<S> <C> <C>
Cash and due from banks........................................................ $ 14,077 13,886
Federal funds sold............................................................. 47,200 32,900
Securities:
Available for sale, at fair value.......................................... 119,488 110,064
Held to maturity, at amortized cost (fair value of
$123,258 in 1998 and $131,660 in 1997)............................. 122,955 131,299
- ----------------------------------------------------------------------------------- --------------- ---------------
Total securities........................................................ 242,443 241,363
- ----------------------------------------------------------------------------------- --------------- ---------------
Loans, net:
Mortgage loans............................................................. 498,537 497,900
Other loans................................................................ 72,183 76,414
Allowance for loan losses.................................................. (9,685) (9,801)
- ----------------------------------------------------------------------------------- --------------- ---------------
Total loans, net.................................................... 561,035 564,513
- ----------------------------------------------------------------------------------- --------------- ---------------
Accrued interest receivable.................................................... 5,469 5,677
Other real estate, net......................................................... 700 606
Premises and equipment, net ................................................... 9,917 9,726
Deferred income taxes, net .................................................... 6,567 5,857
Intangible assets ............................................................. 7,067 7,375
Other assets .................................................................. 1,635 1,591
- ----------------------------------------------------------------------------------- --------------- ---------------
TOTAL ASSETS.............................................................. $896,110 883,494
=================================================================================== =============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Savings and time deposits.................................................... $732,943 730,815
Demand deposits.............................................................. 66,419 67,778
Accrued expenses and other liabilities....................................... 17,019 6,422
- ----------------------------------------------------------------------------------- --------------- ---------------
TOTAL LIABILITIES.......................................................... 816,381 805,015
- ----------------------------------------------------------------------------------- --------------- ---------------
Shareholders' equity:
Preferred stock ($1.00 par value; 5,000,000 shares
authorized; none issued)................................................... -- --
Common stock ($1.00 par value; 15,000,000 shares
authorized; 4,427,999 shares issued)....................................... 4,428 4,428
Paid-in capital.............................................................. 25,879 25,879
Retained earnings............................................................ 59,058 57,883
Treasury stock, at cost (572,218 shares in 1998
and 596,190 shares in 1997)................................................ (9,974) (10,392)
Accumulated other comprehensive income
(net unrealized gain on securities available for sale, net of taxes)....... 338 681
- ----------------------------------------------------------------------------------- --------------- ---------------
TOTAL SHAREHOLDERS' EQUITY................................................. 79,729 78,479
- ----------------------------------------------------------------------------------- --------------- ---------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY................................. $896,110 883,494
=================================================================================== =============== ===============
</TABLE>
See accompanying notes to consolidated interim financial statements.
1
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
Progressive Bank, Inc. and Subsidiary
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS ENDED
MARCH 31,
1998 1997
------------------- ------------------
INTEREST AND DIVIDEND INCOME:
<S> <C> <C>
Mortgage loans............................................................ $11,224 11,320
Other loans............................................................... 1,715 1,818
Securities................................................................ 3,710 3,448
Federal funds sold........................................................ 563 393
- ------------------------------------------------------------------------------ ------------------- ------------------
Total interest and dividend income...................................... 17,212 16,979
Interest expense on deposits.................................................. 8,503 8,567
- ------------------------------------------------------------------------------ ------------------- ------------------
Net interest income..................................................... 8,709 8,412
Provision for loan losses..................................................... 375 600
- ------------------------------------------------------------------------------ ------------------- ------------------
Net interest income after provision for loan losses..................... 8,334 7,812
- ------------------------------------------------------------------------------ ------------------- ------------------
OTHER INCOME:
Deposit service fees...................................................... 486 577
Other service fees........................................................ 188 195
Net gain on sales of mortgage loans....................................... 65 65
Other non-interest income................................................. 131 83
- ------------------------------------------------------------------------------ ------------------- ------------------
Total other income...................................................... 870 920
- ------------------------------------------------------------------------------ ------------------- ------------------
Net interest and other income........................................... 9,204 8,732
- ------------------------------------------------------------------------------ ------------------- ------------------
OTHER EXPENSE:
Salaries and employee benefits............................................ 2,680 2,846
Occupancy and equipment................................................... 743 689
Net cost of other real estate............................................. 5 (12)
Amortization of intangible assets ........................................ 349 349
Merger-related expenses (note 2).......................................... 368 --
Other non-interest expense................................................ 1,622 1,393
- ------------------------------------------------------------------------------ ------------------- ------------------
Total other expense..................................................... 5,767 5,265
- ------------------------------------------------------------------------------ ------------------- ------------------
Income before income tax expense........................................ 3,437 3,467
Income tax expense............................................................ 1,405 1,364
- ------------------------------------------------------------------------------ ------------------- ------------------
Net income.............................................................. $ 2,032 2,103
============================================================================== =================== ==================
Earnings per common share (note 3):
Basic................................................................... $ 0.53 0.55
Diluted................................................................. 0.51 0.54
============================================================================== =================== ==================
</TABLE>
See accompanying notes to consolidated interim financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Progressive Bank, Inc. and Subsidiary
(In thousands, except shares and per share amounts)
(Unaudited)
Accumulated
Common Stock Other
----------------------------
Shares Paid-in Retained Treasury Comprehensive
Outstanding Amount Capital Earnings Stock Income (Note 4) Total
- ------------------------------- --------------- ----------- --------- ----------- ----------- ---------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997... 3,831,809 $4,428 25,879 57,883 (10,392) 681 78,479
Net income..................... -- -- 2,032 -- -- 2,032
Cash dividends declared
($0.20 per share)............. -- -- (770) -- -- (770)
Stock options exercised........ 23,972 -- -- (87) 418 -- 331
Change in net unrealized gain
on securities available for sale,
net of taxes.................. -- -- -- -- (343) (343)
- ------------------------------- --------------- ----------- --------- ----------- ----------- ---------------- ----------
Balance at March 31, 1998...... 3,855,781 $4,428 25,879 59,058 (9,974) 338 79,729
=============================== =============== =========== ========= =========== =========== ================ ==========
Balance at December 31, 1996... 3,824,684 $4,428 25,879 51,882 (10,416) 769 72,542
Net income..................... -- -- 2,103 -- -- 2,103
Cash dividends declared
($0.17 per share)............. -- -- (650) -- -- (650)
Stock options exercised........ 200 -- -- (1) 4 -- 3
Change in net unrealized gain
on securities available for sale,
net of taxes.................. -- -- -- -- (673) (673)
- ------------------------------- --------------- ----------- --------- ----------- ----------- ---------------- ----------
Balance at March 31, 1997...... 3,824,884 $4,428 25,879 53,334 (10,412) 96 73,325
=============================== =============== =========== ========= =========== =========== ================ ==========
</TABLE>
See accompanying notes to consolidated interim financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
PROGRESSIVE BANK, INC. AND SUBSIDIARY
(IN THOUSANDS)
(UNAUDITED)
FOR THE THREE MONTHS ENDED
March 31,
1998 1997
------------------- -------------------
OPERATING ACTIVITIES:
<S> <C> <C>
Net income.................................................................... $ 2,032 2,103
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses................................................. 375 600
Depreciation expense...................................................... 258 209
Net gain on sales of mortgage loans....................................... (65) (65)
Amortization of net premiums on securities................................ 135 16
Amortization of net deferred loan origination expenses (fees)............. 18 (67)
Net decrease in accrued interest receivable............................... 208 392
Gain on sales of premises and equipment................................... (186)
Gain on sales of other real estate........................................ (71) (351)
Amortization of intangible assets ........................................ 349 349
Net increase in accrued expenses and other liabilities.................... 1,614 1,015
Other, net................................................................ (536) 411
- ---------------------------------------------------------------------------------- ------------------- -------------------
Net cash provided by operating activities............................... 4,317 4,426
- ---------------------------------------------------------------------------------- ------------------- -------------------
INVESTING ACTIVITIES:
Purchases of securities:
Securities available for sale............................................. (46,211) (24,602)
Securities held to maturity............................................... (4,600) (17,517)
Proceeds from principal payments, maturities and calls of securities:
Securities available for sale............................................. 45,184 26,905
Securities held to maturity............................................... 12,813 4,748
Net disbursements for loan originations and principal collections............. (2,852) (6,084)
Proceeds from sales of mortgage loans......................................... 5,850 3,373
Purchases of premises and equipment........................................... (463) (67)
Proceeds from sales of premises and equipment................................. 14 680
Proceeds from sales of other real estate...................................... 109 1,658
- ---------------------------------------------------------------------------------- ------------------- -------------------
Net cash provided by (used in) investing activities..................... 9,844 (10,906)
- ---------------------------------------------------------------------------------- ------------------- -------------------
FINANCING ACTIVITIES:
Net increase in deposits...................................................... 769 689
Cash dividends paid on common stock........................................... (770) (650)
Net proceeds on exercises of stock options.................................... 331 3
- ---------------------------------------------------------------------------------- ------------------- -------------------
Net cash provided by financing activities............................... 330 42
- ---------------------------------------------------------------------------------- ------------------- -------------------
Net increase (decrease) in cash and cash equivalents.............................. 14,491 (6,438)
Cash and cash equivalents at beginning of period.................................. 46,786 45,570
- ---------------------------------------------------------------------------------- ------------------- -------------------
Cash and cash equivalents at end of period........................................ $61,277 39,132
================================================================================== =================== ===================
SUPPLEMENTAL DATA:
Interest paid................................................................. $ 7,752 8,614
Income taxes paid............................................................. 669 134
Loans transferred to other real estate........................................ 265 505
Loans originated to finance sales of other real estate........................ 129 170
================================================================================== =================== ===================
</TABLE>
See accompanying notes to consolidated interim financial statements.
4
<PAGE>
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
PROGRESSIVE BANK, INC. AND SUBSIDIARY
(UNAUDITED)
Note 1: Basis of Presentation
The unaudited consolidated financial statements included herein have
been prepared by Progressive Bank, Inc. ("Progressive," or, together
with its subsidiary, the "Company") in conformity with generally
accepted accounting principles for interim financial statements.
Progressive, a New York corporation, is a bank holding company whose
sole subsidiary is Pawling Savings Bank ("Pawling"), a New York
state-chartered stock savings bank. In the opinion of management, the
unaudited consolidated interim financial statements include all
adjustments, consisting of normal recurring accruals, necessary for a
fair presentation of the consolidated interim financial position and
results of operations for the periods presented. Certain information
and footnote disclosures normally included in accordance with
generally accepted accounting principles have been condensed or
omitted pursuant to the rules and regulations of the Securities and
Exchange Commission.
The unaudited consolidated interim financial statements presented
herein should be read in conjunction with the annual consolidated
financial statements of the Company for the fiscal year ended December
31, 1997.
Note 2: Proposed Merger
On December 16, 1997, Progressive entered into an agreement to merge
with and into Hudson Chartered Bancorp, Inc. ("Hudson Chartered") and
form a bank holding company to be named Premier National Bancorp, Inc.
(the "Continuing Corporation"). In addition, Pawling agreed to merge
with and into First National Bank of the Hudson Valley ("Hudson
Valley"), a wholly-owned subsidiary of Hudson Chartered, under the
national bank charter of Hudson Valley and the name Premier National
Bank. The separate existences of Progressive and Pawling will cease
upon consummation of these mergers. Under the terms of the merger
agreement, each outstanding share of Progressive common stock will be
converted into 1.82 shares of Continuing Corporation common stock and
cash in lieu of any fractional share. Consummation of the merger is
subject to satisfaction of a number of conditions, including approval
of the merger agreement by the shareholders of each of Progressive and
Hudson Chartered at stockholder meetings to be held on May 21, 1998.
All required regulatory approvals, consents or waivers have now been
obtained. The merger, which is anticipated to be consummated in July
1998, would create the largest independent banking institution
headquartered in the Hudson Valley with approximately $1.6 billion in
assets.
Note 3: Earnings Per Common Share
The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 128, "Earnings per Share," which requires entities with
complex capital structures to present both basic earnings per share
("EPS") and diluted EPS. Basic EPS excludes dilution and is computed
by dividing income available to common shareholders by the weighted
average number of common shares outstanding for the period. Diluted
EPS reflects the potential dilution that could occur if securities or
other contracts to issue common stock (such as stock options) were
exercised or converted into common stock or resulted in the issuance
of common stock that would then share in the earnings of the entity.
Diluted EPS is computed by dividing net income by the weighted average
number of common shares outstanding for the period, plus
common-equivalent shares computed using the treasury stock method.
5
<PAGE>
The table below summarizes the number of shares used in the Company's
EPS calculations for the three-month periods ended March 31, 1998 and
1997. For purposes of computing basic EPS, net income applicable to
common stock equaled net income for both of these periods.
<TABLE>
<CAPTION>
1998 1997
- -------------------------------------------------------------- ---------------------- ---------------------
(In thousands)
<S> <C> <C>
Weighted average common shares outstanding
for computation of basic EPS............................... 3,846 3,825
Common-equivalent shares due to the dilutive
effect of stock options, computed using the
treasury stock method...................................... 123 77
- -------------------------------------------------------------- ---------------------- ---------------------
Weighted average common shares for computation
of diluted EPS............................................. 3,969 3,902
============================================================== ====================== =====================
</TABLE>
Note 4: Comprehensive Income
The Company has adopted SFAS No. 130, "Reporting Comprehensive
Income," which establishes standards for the reporting and display of
comprehensive income (and its components) in financial statements. The
standard does not, however, specify when to recognize or how to
measure items that make up comprehensive income. Comprehensive income
represents net income and certain amounts reported directly in
shareholders' equity, such as the net unrealized gain or loss on
securities available for sale. While SFAS No. 130 does not require a
specific reporting format, it does require that an enterprise display
an amount representing total comprehensive income for the period.
The Company's only item of accumulated other comprehensive income
included in shareholders' equity is the net unrealized gain on
securities available for sale, net of taxes. Total comprehensive
income, representing net income and the net change in the after-tax
net unrealized gain on securities available for sale, amounted to $1.7
million and $1.4 million for the three-month periods ended March 31,
1998 and 1997, respectively.
6
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The financial condition and operating results of the Company are primarily
dependent upon the financial condition and operating results of Pawling. The
Company is engaged principally in the business of attracting retail deposits
from the general public and the business community and investing those funds in
residential and commercial mortgages, consumer loans and securities.
The operating results of the Company depend primarily on its net interest
income after provision for loan losses. Net interest income is the difference
between interest and dividend income on earning assets, primarily loans and
securities, and interest expense on deposits and other borrowings. Net income of
the Company is also affected by other income, which includes service fees and
net gain (loss) on securities and loans; other expense, which includes salaries
and employee benefits and other operating expenses; and federal and state income
taxes.
FINANCIAL CONDITION
Total assets of the Company were $896.1 million at March 31, 1998 as
compared to $883.5 million at December 31, 1997, an increase of $12.6 million or
1.4%.
Total securities increased by $1.1 million, consisting of a $9.4 million
increase in securities available for sale partially offset by an $8.3 million
decrease in securities held to maturity. The increase in securities available
for sale primarily reflects $46.2 million in purchases of adjustable rate
mortgage-backed securities and U.S. government agency debt securities, partially
offset by principal paydowns of $45.2 million. The decrease in securities held
to maturity primarily reflects maturities and principal paydowns of $12.8
million.
Net loans totaled $561.0 million at March 31, 1998, compared to $564.5
million at December 31, 1997, a decrease of $3.5 million or 0.6%. The
residential mortgage segment of the loan portfolio decreased $8.9 million or
2.2% (including secondary market loan sales of $5.8 million) from $413.4 million
at December 31, 1997 to $404.5 million at March 31, 1998. The commercial
mortgage segment of the loan portfolio increased $6.3 million or 8.2%, from
$76.6 million at December 31, 1997 to $82.8 million at March 31, 1998. The
construction mortgage segment of the loan portfolio increased $3.5 million or
36.3%, from $9.7 million at December 31, 1997 to $13.3 million at March 31,
1998. Other loans decreased $4.2 million or 5.5% during the first three months
of 1998 from $76.4 million to $72.2 million, primarily reflecting the Company's
decision in the fourth quarter of 1997 to discontinue its indirect automobile
lending program.
The $769,000 increase in deposits during the first quarter of 1998 was
primarily attributable to an increase of $12.5 million in money market accounts,
partially offset by decreases of $6.8 million in savings accounts, $2.1 million
in time deposits, $1.5 million in NOW accounts and $1.3 million in demand
deposits. The increase in money market accounts was primarily due to the
continued emphasis on our relationship manager program and products.
Shareholders' equity at March 31, 1998 was $79.7 million, an increase of
$1.3 million or 1.6% from December 31, 1997. This increase primarily reflects
net income of $2.0 million, partially offset by cash dividends of $770,000.
Shareholders' equity, as a percent of total assets, was 8.90% at March 31, 1998
compared to 8.88% at December 31, 1997. Book value per share increased to $20.68
at March 31, 1998 from $20.48 at December 31, 1997.
7
<PAGE>
ANALYSIS OF NET INTEREST INCOME
The following table shows the Company's average consolidated balances,
interest income and expense, and average rates (annualized) for the periods
indicated:
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 31, 1998 March 31, 1997
--------------------------------------- --------------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
------------- ----------- --------------------------- ----------- -------------
(Dollars in thousands)
Interest-earning assets:
<S> <C> <C> <C> <C> <C> <C>
Mortgage loans (1)........................... $500,382 11,224 8.97% $521,181 11,320 8.69%
Other loans (1).............................. 70,921 1,715 9.67 73,130 1,818 9.94
Mortgage-backed securities (2)............... 160,093 2,582 6.45 122,783 2,101 6.84
U.S. Treasury and agencies,
corporate and other securities (2,3)...... 70,728 1,128 6.38 86,766 1,347 6.21
Federal funds sold........................... 42,131 563 5.35 30,687 393 5.12
- ------------------------------------------------- ------------- ----------- ------------ ------------- ----------- -------------
Total interest-earning assets ............. 844,255 17,212 8.15% 834,547 16,979 8.14%
Non-interest-earning assets...................... 44,073 46,065
- ------------------------------------------------- ------------- ----------- ------------ ------------- ----------- -------------
Total assets............................... $888,328 $880,612
================================================= ============= =========== ============ ============= =========== =============
Interest-bearing liabilities:
Time deposits................................ $334,697 4,448 5.32% $370,489 4,906 5.30%
Other deposits (4)........................... 394,007 4,055 4.12 366,049 3,661 4.00
- ------------------------------------------------- ------------- ----------- ------------ ------------- ----------- -------------
Total interest-bearing liabilities......... 728,704 8,503 4.67% 736,538 8,567 4.65%
Non-interest-bearing liabilities................. 80,520 71,140
- ------------------------------------------------- ------------- ----------- ------------ ------------- ----------- -------------
Total liabilities.......................... 809,224 807,678
Shareholders' equity............................. 79,104 72,934
- ------------------------------------------------- ------------- ----------- ------------ ------------- ----------- -------------
Total liabilities and shareholders'
equity................................ $888,328 $880,612
================================================= ============= =========== ============ ============= =========== =============
Net earning balance.............................. $115,551 $ 98,009
================================================= ============= =========== ============ ============= =========== =============
Net interest income.............................. 8,709 8,412
================================================= ============= =========== ============ ============= =========== =============
Interest rate spread (5)......................... 3.48% 3.49%
Net yield on interest-earning
assets (margin) (6)............................ 4.13% 4.03%
================================================= ============= =========== ============ ============= =========== =============
</TABLE>
(1) Interest income on loans does not include interest on non-accrual loans;
however, such loans have been included in the calculation of the average
balances outstanding.
(2) Average balances have been calculated based on amortized cost.
(3) Yields on tax-exempt obligations have not been computed on a
tax-equivalent basis, as the effect thereof is not material.
(4) Includes NOW accounts, passbook and statement savings accounts, and money
market accounts.
(5) Represents average rate on total interest-earning assets less average rate
on total interest-bearing liabilities.
(6) Represents net interest income divided by total average interest-earning
assets.
8
<PAGE>
RESULTS OF OPERATIONS
GENERAL
The Company's net income for the quarter ended March 31, 1998 was $2.0
million or basic earnings per share of $0.53 and diluted earnings per share of
$0.51, as compared to net income of $2.1 million or basic earnings per share
$0.55 and diluted earnings per share of $0.54 for the same three-month period in
1997. The significant changes affecting current-year operating results were a
$502,000 increase in other expense (including merger-related expenses of
$368,000), a $297,000 increase in net interest income, and a $225,000 decrease
in the provision for loan losses.
NET INTEREST INCOME
Net interest income increased $297,000, or 3.5%, to $8.7 million for the
three-month period ended March 31, 1998 compared to $8.4 million for the same
period in 1997. The increase in net interest income for the first quarter of
1998 was primarily due to an increase in interest on securities and federal
funds sold, partially offset by a decrease in interest income on loans. The
Company's net interest margin widened by 10 basis points from 4.03% for the
three months ended March 31, 1997 to 4.13% for the same period in 1998,
reflecting a $17.5 million increase in average net earning balances
(interest-earning assets less interest-bearing liabilities).
Interest on loans decreased by $199,000, or 1.5%, primarily reflecting
decreases in the volume of outstanding loans. Average mortgage and other loans
decreased by $23.0 million for the first quarter of 1998 as compared to the same
quarter in the previous year.
Interest on mortgage-backed securities increased $481,000, or 22.9%,
primarily due to a $37.3 million increase in the average balance outstanding due
to additional security purchases, partially offset by a decrease in the average
yield.
Interest and dividends on U.S. Treasury and agencies, corporate and other
securities decreased by $219,000, primarily reflecting a lower average balance
outstanding due to maturities and calls.
Interest on federal funds sold increased $170,000 for the quarter ended
March 31, 1998, compared to the same period in 1997, primarily reflecting an
$11.4 million increase in the average balance outstanding.
The decrease in interest expense of $64,000 was primarily due to a $458,000
decrease in interest expense on time deposits, partially offset by a $394,000
increase in interest on other deposits. Interest expense on time deposits
decreased primarily due to a $35.8 million decrease in the average balance of
time deposits. Interest expense on other deposits increased primarily due to the
increase in money market accounts.
9
<PAGE>
PROVISION FOR LOAN LOSSES
The provision for loan losses is a charge against income which increases the
allowance for loan losses. The adequacy of the allowance for loan losses is
evaluated periodically and is determined based on management's judgment
concerning the amount of risk and potential for loss inherent in the portfolio.
Management's judgment is based upon a number of factors including a review of
non-performing and other classified loans, the value of collateral for such
loans, historical loss experience, changes in the nature and volume of the loan
portfolio, and current economic conditions.
For the three-month period ended March 31, 1998, the provision for loan
losses was $375,000, a decrease of $225,000 compared to the provision of
$600,000 for the comparable period in 1997. The allowance for loan losses
represented 1.7% of total loans at March 31, 1998 compared to 1.6% a year
earlier. Non-performing loans were $6.1 million, or 1.07% of total loans, at
March 31, 1998 compared to $5.5 million, or 0.92% of total loans, at March 31,
1997 and $5.9 million, or 1.03% of total loans, at December 31, 1997.
In determining the allowance for loan losses, management also considers the
level of slow paying loans, or loans where the borrower is contractually past
due 30 to 89 days or more, but has not yet been placed on non-accrual status. At
March 31, 1998, slow paying loans amounted to $3.0 million as compared to $4.4
million at March 31, 1997 and $4.6 million at December 31, 1997.
Loan loss provisions in future periods will continue to depend on trends in
the credit quality of the Company's loan portfolio, loan mix and the level of
loan charge-offs which, in turn, will depend in part on the economic and real
estate market conditions prevailing within the Company's lending region. If
general economic conditions or real estate values deteriorate, the level of
delinquencies, non-performing loans and charge-offs may increase and higher
provisions for loan losses may be necessary.
10
<PAGE>
Activity in the allowance for loan losses for the periods indicated is
summarized as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1998 1997
----------------- -----------------
(Dollars in thousands)
<S> <C> <C>
Balance at beginning of period................................................. $ 9,801 9,231
Provision charged to operations................................................ 375 600
Loans charged-off:
Mortgage loans:
Residential............................................................. (247) (277)
Construction and land................................................... (162) (41)
Other loans:
Consumer................................................................ (179) (111)
- ------------------------------------------------------------------------------- ----------------- -----------------
Total charge-offs................................................... (588) (429)
- ------------------------------------------------------------------------------- ----------------- -----------------
Recoveries:
Mortgage loans:
Construction and land................................................... 54 --
Other loans:
Consumer................................................................ 39 16
Commercial.............................................................. 4 3
- ------------------------------------------------------------------------------- ----------------- -----------------
Total recoveries.................................................... 97 19
- ------------------------------------------------------------------------------- ----------------- -----------------
Net charge-offs................................................................ (491) (410)
- ------------------------------------------------------------------------------- ----------------- -----------------
Balance at end of period....................................................... $ 9,685 9,421
=============================================================================== ================= =================
Ratio of net charge-offs to average total loans
outstanding (annualized)................................................... 0.34% 0.28%
=============================================================================== ================= =================
</TABLE>
11
<PAGE>
The following table sets forth information with respect to non-performing
assets and certain asset quality ratios at the dates indicated:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997 1997
------------------- ------------------- -------------------
(Dollars in thousands)
NON-PERFORMING LOANS:
Mortgage loans:
<S> <C> <C> <C>
Residential properties............................. $3,842 4,608 3,556
Commercial properties.............................. 570 652 568
Construction and land.............................. 1,676 138 1,722
- ---------------------------------------------------------- ------------------- ------------------- -------------------
6,088 5,398 5,846
Other loans........................................... 13 85 76
- ---------------------------------------------------------- ------------------- ------------------- -------------------
Total non-performing loans (1)................. 6,101 5,483 5,922
OTHER REAL ESTATE, NET.................................... 700 1,318 606
- ---------------------------------------------------------- ------------------- ------------------- -------------------
Total non-performing assets.................... $6,801 6,801 6,528
========================================================== =================== =================== ===================
Ratio of non-performing loans to total loans.............. 1.07% 0.92% 1.03%
Ratio of non-performing assets to total assets............ 0.76 0.77 0.74
Ratio of allowance for loan losses to total
non-performing loans.................................. 158.74 171.82 165.50
========================================================== =================== =================== ===================
</TABLE>
(1) Includes loans on non-accrual status of $6.1 million, $5.3 million and
$5.8 million at March 31, 1998, March 31, 1997 and December 31, 1997,
respectively. The remaining balance consists of loans greater than 90
days past due and still accruing. The Company generally stops accruing
interest on loans that are delinquent over 90 days.
The loan portfolio may also include certain restructured loans that are
current in accordance with modified payment terms and, accordingly, are not
included in the preceding table. These restructured loans are loans for which
concessions, including reduction of interest rates to below-market levels or
deferral of payments, have been granted due to the borrowers' financial
condition. There were no restructured loans at March 31, 1998 or December 31,
1997, compared to $568,000 at March 31, 1997.
At March 31, 1998, management has also identified approximately $1.4 million
in potential problem loans which represent loans having more than normal credit
risk. Although these loans are currently performing at March 31, 1998,
management believes that if economic conditions deteriorate in the Company's
lending area, some of these loans could become non-performing in the future.
The Company's recorded investment in impaired loans consisted of
non-accrual commercial mortgage and construction loans totaling $2.2 million at
March 31, 1998 and $2.3 million at December 31, 1997. At March 31, 1998, there
was no allowance for loan impairment under SFAS No. 114 due to the adequacy of
related collateral values and prior charge-offs. The average recorded investment
in impaired loans was $2.3 million and $860,000, respectively, for the first
quarters of 1998 and 1997. Interest income on impaired loans is recognized on a
cash basis and was not significant for either period.
12
<PAGE>
OTHER INCOME
Sources of other income include deposit and other service fees, net gain
(loss) on securities available for sale, net gain on sales of mortgage loans,
and other non-interest income. Other income for the three-month period ended
March 31, 1998 decreased by $50,000 or 5.4%, compared to the same period in
1997.
Deposit service fees, the largest component of other income, decreased by
$91,000, or 15.8%, to $486,000 for the three-month period ended March 31, 1998
from $577,000 for the same period in 1997. Other service fees totaled $188,000
for the quarter ended March 31, 1998 compared to $195,000 for the previous year.
Net gain on sales of mortgage loans was $65,000 for both the three-month
periods ended March 31, 1998 and 1997. Sales of mortgage loans in both periods
reflect the Company's current practice of selling substantially all newly
originated fixed rate mortgage loans.
OTHER EXPENSE
Other expense consists of general and administrative expenses incurred in
managing the core business of the Company and the net costs associated with
managing and selling other real estate properties. For the quarter ended March
31, 1998, other expense increased by $502,000, or 9.5%, to $5.8 million from
$5.3 million for the first quarter of 1997, primarily reflecting merger-related
expenses of $386,000 in the first quarter of 1998 and an increase in other
non-interest expense, partially offset by a decrease in salaries and employee
benefits expense.
Salaries and employee benefits, the largest component of other expense,
decreased by $166,000, or 5.8%, to $2.7 million for the three-month period ended
March 31, 1998 from $2.8 million for the same period in 1997. The decrease
primarily reflects decreased pension expense due to the conversion of the plan
into a cash balance plan in late 1997, as well as decreased loan commissions.
Occupancy and equipment costs increased $54,000, or 7.8%, to $743,000 for
the three-month period ended March 31, 1998 from $689,000 for the first quarter
of 1997, primarily due to decreases in depreciation expense and equipment rental
and repair expenses.
The net cost of other real estate was $5,000 for the quarter ended March 31,
1998 compared to ($12,000) for the prior year quarter, primarily reflecting
decreased gains on sales of properties, partially offset by lower holding costs.
Amortization of intangible assets remained unchanged at $349,000,
representing amortization of the purchase premium from the 1996 acquisition
of branches.
Expenses of $368,000 were incurred in the first quarter of 1998 in
connection with the proposed merger with Hudson Chartered. See note 2 of the
notes to consolidated interim financial statements.
Other non-interest expense increased $229,000 to $1.6 million for the
three-month period ended March 31, 1998 from $1.4 million for the same period in
1997. The increase primarily reflects inclusion (in the 1997 amount) of the
$186,000 gain on sale of the Newburgh operations building.
INCOME TAX EXPENSE
For both three-month periods ended March 31, 1998 and 1997, income tax
expense was $1.4 million (effective tax rates of 40.9% and 39.3%, respectively).
The Company's net deferred tax assets were $6.6 million at March 31, 1998,
compared to $5.9 million at December 31, 1997. Based on recent historical and
anticipated future pre-tax earnings, management believes it is more likely than
not that the Company will realize its net deferred tax assets.
13
<PAGE>
RATIOS
Results of operations can be measured by various ratios. Two widely
recognized performance indicators are the return on assets and the return on
equity. The following table sets forth these performance ratios for the Company
on an annualized basis:
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
1998 1997 1997
------------------- ------------------- ---------------------
Return on assets:
<S> <C> <C> <C>
Net income divided by average
total assets (1)................................. 0.91% 0.96% 0.98%
Return on equity:
Net income divided by average equity (1,2).......... 10.28% 11.53% 11.46%
</TABLE>
(1) Excluding merger-related expenses of $368,000 ($272,000 net of taxes),
return on assets for the three months ended March 31, 1998 was 1.04% and
return on equity was 11.65%. Excluding merger-related expenses of
$211,000 ($134,000 net of taxes), return on assets was 0.99% and return
on equity was 11.63% for the year ended December 31, 1997.
(2) Average equity includes the effect of the net unrealized gain (loss) on
securities available for sale, net of taxes.
LIQUIDITY
Liquidity is defined as the ability to generate sufficient cash flow to meet
all present and future funding commitments. Management monitors the Company's
liquidity position on a daily basis and evaluates its ability to meet depositor
withdrawals and to make new loans and investments as opportunities arise. The
Asset/Liability Management Committee, consisting of members of senior
management, is responsible for setting general guidelines to ensure maintenance
of prudent levels of liquidity. The mix of liquid assets and various deposit
products, at any given time, reflects management's view of the most efficient
use of these sources of funds.
The Company's cash flows are classified according to their source - operating
activities, investing activities, and financing activities. Further details
concerning the Company's cash flows are provided in the "Consolidated Statements
of Cash Flows."
Liquid assets are provided by short-term investments, proceeds from maturities
of securities and principal collections on loans. One measure used by the
Company to assess its liquidity position is the primary liquidity ratio (defined
as the ratio of cash and due from banks, federal funds sold and securities
maturing within one year to total assets). At March 31, 1998, the Company had a
primary liquidity ratio of 8.56% as compared to 7.17% at December 31, 1997.
An important source of funds is Pawling's core deposit base. Management
believes that a substantial portion of Pawling's deposits of $799.4 million at
March 31, 1998 are core deposits. Core deposits are generally considered to be a
highly stable source of liquidity due to the long-term relationships with
deposit customers. Pawling recognizes the importance of maintaining and
enhancing its reputation in the consumer and commercial markets to enable
effective gathering and retention of core deposits. The Company has not utilized
brokered deposits as a source of funds.
14
<PAGE>
In addition to the funding sources discussed above, the Company has the
ability to borrow funds from several sources. Pawling is a member of the Federal
Home Loan Bank of New York ("FHLBNY") and, at March 31, 1998, had immediate
access to additional liquidity in the form of borrowings from the FHLBNY of up
to $114.8 million. The Company also has access to the discount window of the
Federal Reserve Bank. There were no borrowings from these sources in 1998, 1997
and 1996 other than short term purchases of federal funds from the FHLBNY during
1996.
At March 31, 1998, Pawling had outstanding loan commitments and unadvanced
customer lines of credit totaling $98.1 million. These commitments do not
necessarily represent future cash requirements since certain of these
instruments may expire without being funded and others may not be fully drawn
upon. The sources of liquidity discussed above are deemed by management to be
sufficient to fund outstanding loan commitments and to meet the Company's other
obligations.
CAPITAL
Progressive, as a bank holding company, is subject to regulation and
supervision by the Federal Reserve Board ("FRB"). Pawling, as a New York
state-chartered stock savings bank, is subject to regulation and supervision by
the New York State Banking Department as its chartering agency and by the FDIC
as its deposit insurer. Both the FRB and the FDIC have developed and follow, in
substance, similar requirements to maintain minimum levels of leverage and
risk-based capital.
The risk-based capital adequacy guidelines require the Company and Pawling to
maintain capital according to the risk profile of their asset portfolios and
certain off-balance sheet items. The guidelines set forth a system for
calculating risk-weighted assets by assigning assets (and credit-equivalent
amounts for certain off-balance sheet items) to one of four broad risk-weight
categories. The amount of risk-weighted assets is determined by applying a
specific percentage (0%, 20%, 50% or 100%, depending on the level of credit
risk) to the amounts assigned to each category. As a percentage of risk-weighted
assets, a minimum ratio of 4.0% must be maintained for Tier 1 capital and 8.0%
for total capital.
At March 31, 1998, Progressive's consolidated capital ratios exceeded the
FRB's minimum regulatory capital requirements as follows:
<TABLE>
<CAPTION>
Risk-Based Capital
----------------------------------------------------------
Leverage Capital Tier 1 Total
------------------------------ ---------------------------- ----------------------------
Amount(1) Ratio Amount(1) Ratio Amount(1) Ratio
- -------------------------------- --------------- -------------- --------------- ------------ --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Actual.......................... $72,407 8.1% $72,407 14.9% $78,517 16.2%
Minimum requirement............. 35,850 4.0 19,410 4.0 38,820 8.0
- -------------------------------- --------------- -------------- --------------- ------------ --------------- ------------
Excess.......................... $36,557 4.1% $52,997 10.9% $39,697 8.2%
================================ =============== ============== =============== ============ =============== ============
</TABLE>
(1) For all capital amounts, actual capital excludes the Company's after-tax
net unrealized gain of $338,000 on securities available for sale and
intangible assets of $7.0 million.
At March 31, 1998, Pawling's capital ratios exceeded the FDIC's minimum
regulatory capital requirements as follows:
<TABLE>
<CAPTION>
Risk-Based Capital
----------------------------------------------------------
Leverage Capital Tier 1 Total
------------------------------ ---------------------------- ----------------------------
Amount(1) Ratio Amount(1) Ratio Amount(1) Ratio
- -------------------------------- --------------- -------------- --------------- ------------ --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Actual.......................... $66,785 7.5% $66,785 13.8% $72,881 15.1%
Minimum requirement............. 35,636 4.0 19,364 4.0 38,728 8.0
- -------------------------------- --------------- -------------- --------------- ------------ --------------- ------------
Excess.......................... $31,149 3.5% $47,421 9.8% $34,153 7.1%
================================ =============== ============== =============== ============ =============== ============
</TABLE>
(1) For all capital amounts, actual capital excludes Pawling's after-tax net
unrealized gain of $325,000 on securities available for sale and
intangible assets of $7.0 million.
15
<PAGE>
During 1994, the Company announced two plans to repurchase in each case up to
5% of Progressive's outstanding common stock, to be used for general corporate
purposes. The first repurchase was completed in November 1994 and consisted of
220,500 shares at a total cost of $3.1 million or $14.14 per share. The second
repurchase plan was completed in September 1995 and consisted of 210,000 shares
at a total cost of $3.3 million or $15.89 per share. A third repurchase plan,
which was announced in October 1995 and completed in July 1996, consisted of
202,500 shares at a total cost of $3.9 million or $19.19 per share. On October
21, 1996, the Company announced a fourth plan to repurchase 195,000 shares, or
approximately 5% of outstanding stock. A total of 89,250 shares were purchased
under the fourth plan, at a cost of $2.1 million or $23.03 per share, prior to
the Company's recision of this plan in connection with the proposed merger with
Hudson Chartered.
In connection with the proposed merger, Progressive and Hudson Chartered
executed stock option agreements pursuant to which (i) Progressive has an option
to purchase up to 1,415,250 unissued shares of Hudson Chartered's common stock
at $21.75 per share and (ii) Hudson Chartered has an option to purchase up to
766,300 unissued shares of Progressive's common stock at $36.63 per share. The
shares issuable upon exercise of each option represent approximately 16.7% of
the number of common shares of the issuer that would be outstanding after
exercise of the option. The options are exercisable only upon the occurrence of
certain events that could jeopardize consummation of the proposed merger.
On April 9, 1998, the Company's Board of Directors declared a dividend of
twenty cents ($0.20) per common share, payable on May 29, 1998 to shareholders
of record as of April 30, 1998.
INTEREST RATE RISK MANAGEMENT
As the business of the Company and the composition of its balance sheet
consists principally of interest-earning assets (such as loans and securities)
which are primarily funded by interest-bearing deposits, the main component of
market risk for the Company is interest rate risk. Interest rate risk can be
defined as the exposure of the Company's net interest income to adverse
movements in interest rates.
The Company's net interest income is an important component of its
operating results. The stability of net interest income in changing interest
rate environments depends on the Company's ability to manage effectively the
interest rate sensitivity and maturity of its assets and liabilities. The
Company's Asset/Liability Management Committee develops and implements risk
management strategies, and uses various risk measurement tools to evaluate the
impact of changes in interest rates on the Company's asset/liability structure
and net interest income.
The Company's asset/liability management goal is to maintain an acceptable
level of interest rate risk to produce relatively stable net interest income in
changing interest rate environments. Interest rate risk is managed primarily by
structuring the Company's balance sheet to emphasize holding adjustable rate
loans and mortgage-backed securities, and maintaining a large base of core
deposits. Management's plan to shorten the maturities of the Company's
interest-sensitive assets includes: the further use of adjustable rate lending
products; the sale of substantially all newly originated 20 and 30 year fixed
rate mortgages; the redeployment of maturing investments into adjustable rate
securities and debt securities with maturities of no more than five years; and
maintaining an appropriate balance between securities held to maturity and
securities available for sale to provide management with flexibility to
restructure the portfolio when conditions warrant. As economic conditions
change, management will modify the plan as necessary. To date, the Company has
not used synthetic hedging instruments such as interest rate futures, swaps or
options in managing its interest rate risk.
To emphasize the retention of assets with a shorter duration, the Company's
asset/liability policy allows newly originated adjustable rate and biweekly
payment mortgage loans to be held in its portfolio, while newly originated fixed
rate mortgage loans are sold in the secondary market. Despite the benefits of
adjustable rate loans to an institution's interest rate risk management, they
may pose potential additional credit risks, because when interest rates rise the
underlying payments by the borrower rise, increasing the potential for default.
16
<PAGE>
One measure of the Company's interest rate sensitivity is its interest
sensitivity gap, or the difference between interest-earning assets and
interest-bearing liabilities scheduled to mature or reprice within a specified
time frame. Shorter gaps are a measure of exposure to changes in interest rates
for shorter intervals and longer gaps measure sensitivity over a longer
interval. At March 31, 1998, the Company had a one-year gap of -6.28% of total
assets; that is, it had an excess of interest-bearing liabilities over
interest-earning assets maturing or repricing within one year. A negative gap
may enhance earnings in periods of declining interest rates in that, during such
periods, the interest expense paid on liabilities may decrease more rapidly than
the interest income earned on assets. Conversely, in a rising interest rate
environment, a negative gap may decrease earnings as the increase in interest
expense paid on liabilities may be greater than the increase in interest income
earned on assets. While a negative gap indicates the amount of interest-bearing
liabilities which may reprice before interest-earning assets, it does not
indicate the extent to which they will reprice. Therefore, at times, a negative
gap may not produce higher margins in a declining rate environment, and
conversely a positive gap may not produce higher margins in a rising rate
environment.
The following table summarizes the Company's interest rate sensitive assets
and liabilities at March 31, 1998 according to the time periods in which they
are expected to reprice, and the resulting gap for each time period.
<TABLE>
<CAPTION>
Within One to Five Over Five
One Year Years Years
------------------ ------------------ ---------------------
(Dollars in thousands)
<S> <C> <C> <C>
Total interest-earning assets................................. $482,097 309,446 61,941
Total interest-bearing liabilities............................ 538,338 98,712 95,893
- -------------------------------------------------------------- ------------------ ------------------ ------------------
(Deficiency) excess of interest-earning assets
compared to interest-bearing liabilities................. ($56,241) 210,734 (33,952)
- -------------------------------------------------------------- ------------------ ------------------ ------------------
(Deficiency) excess as a percent of total assets............ (6.28%) 23.52% (3.79%)
Cumulative (deficiency) excess as a percent of
total assets........................................... (6.28%) 17.24% 13.45%
============================================================== ================== ================== ==================
</TABLE>
Due to the limitations inherent in the gap analysis, management augments the
asset/liability management process by using simulation analysis. Simulation
analysis quantitatively measures the Company's sensitivity to interest rate risk
by estimating the impact on net interest income of hypothetical changes in the
balance sheet structure and/or interest rate environment. Management uses
computer simulations to project changes in net interest income under multiple
rate environments, based on assumptions regarding balance sheet mix, growth,
prepayments and estimated pricing levels. Although the Company's exposure to
interest rate risk as calculated by the simulation model may not be fully
representative of the actual risk in a higher or lower rate environment, the
simulation results are a useful tool in gauging the general direction and
magnitude of changes in net interest income which could occur. At the extremes,
rate changes are modeled to occur in monthly increments of 25 basis points for
eight months (total of 200 basis points up or down), with rates held constant
thereafter. At March 31, 1998, based on this assumed gradual rate change, the
Company's net interest income would change by less than 3% in both the year of
the rate changes and in the following year, as compared to base-case net
interest income computed in a flat-rate scenario based on existing rates.
17
<PAGE>
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in the Company's interest rate risk
position since December 31, 1997 (see "INTEREST RATE RISK MANAGEMENT"). Other
types of market risks, such as foreign currency exchange rate risk and commodity
price risk, do not arise in the normal course of the Company's business
activities.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibit is filed herewith:
Exhibit 27 Financial Data Schedule.
(b) No reports on Form 8-K were filed during the quarter ended March
31, 1998.
18
<PAGE>
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.
PROGRESSIVE BANK, INC.
-----------------------
(Registrant)
Date: May 8, 1998 /s/ Peter Van Kleeck
--------------------------
Peter Van Kleeck
President and Chief Executive Officer
Principal Executive Officer
Date: May 8, 1998 /s/ Robert Gabrielsen
--------------------------
Robert Gabrielsen, Treasurer
Principal Financial Officer and
Principal Accounting Officer
19
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 14,077
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 47,200
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 119,488
<INVESTMENTS-CARRYING> 122,955
<INVESTMENTS-MARKET> 123,258
<LOANS> 569,776
<ALLOWANCE> 9,685
<TOTAL-ASSETS> 896,110
<DEPOSITS> 799,362
<SHORT-TERM> 0
<LIABILITIES-OTHER> 17,019
<LONG-TERM> 0
0
0
<COMMON> 4,428
<OTHER-SE> 75,301
<TOTAL-LIABILITIES-AND-EQUITY> 896,110
<INTEREST-LOAN> 12,939
<INTEREST-INVEST> 3,710
<INTEREST-OTHER> 563
<INTEREST-TOTAL> 17,212
<INTEREST-DEPOSIT> 8,503
<INTEREST-EXPENSE> 8,503
<INTEREST-INCOME-NET> 8,709
<LOAN-LOSSES> 375
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 5,767
<INCOME-PRETAX> 3,437
<INCOME-PRE-EXTRAORDINARY> 3,437
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,032
<EPS-PRIMARY> 0.53
<EPS-DILUTED> 0.51
<YIELD-ACTUAL> 4.13
<LOANS-NON> 6,088
<LOANS-PAST> 13
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,388
<ALLOWANCE-OPEN> 9,801
<CHARGE-OFFS> 588
<RECOVERIES> 97
<ALLOWANCE-CLOSE> 9,685
<ALLOWANCE-DOMESTIC> 9,685
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<RESTATED>
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997 DEC-31-1997
<PERIOD-END> MAR-31-1997 JUN-30-1997 SEP-30-1997
<CASH> 13,432 18,121 14,325
<INT-BEARING-DEPOSITS> 0 0 0
<FED-FUNDS-SOLD> 25,700 21,300 39,100
<TRADING-ASSETS> 0 0 0
<INVESTMENTS-HELD-FOR-SALE> 134,366 132,302 111,408
<INVESTMENTS-CARRYING> 85,347 87,323 115,425
<INVESTMENTS-MARKET> 84,046 86,966 115,564
<LOANS> 593,598 596,763 583,338
<ALLOWANCE> 9,421 9,833 9,603
<TOTAL-ASSETS> 877,667 878,823 884,617
<DEPOSITS> 794,890 797,897 800,664
<SHORT-TERM> 0 0 0
<LIABILITIES-OTHER> 9,452 5,784 6,710
<LONG-TERM> 0 0 0
0 0 0
0 0 0
<COMMON> 4,428 4,428 4,428
<OTHER-SE> 68,897 70,714 72,815
<TOTAL-LIABILITIES-AND-EQUITY> 877,667 878,823 884,617
<INTEREST-LOAN> 13,138 26,454 39,676
<INTEREST-INVEST> 3,448 7,140 10,725
<INTEREST-OTHER> 393 651 1,114
<INTEREST-TOTAL> 16,979 34,245 51,515
<INTEREST-DEPOSIT> 8,567 17,172 25,939
<INTEREST-EXPENSE> 8,567 17,172 25,939
<INTEREST-INCOME-NET> 8,412 17,073 25,576
<LOAN-LOSSES> 600 1,100 1,600
<SECURITIES-GAINS> 0 15 15
<EXPENSE-OTHER> 5,265 10,651 15,928
<INCOME-PRETAX> 3,467 7,154 10,782
<INCOME-PRE-EXTRAORDINARY> 3,467 7,154 10,782
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 2,103 4,315 6,510
<EPS-PRIMARY> 0.55 1.13 1.70
<EPS-DILUTED> 0.54 1.11 1.66
<YIELD-ACTUAL> 4.03 4.08 4.07
<LOANS-NON> 5,285 5,454 7,652
<LOANS-PAST> 198 73 136
<LOANS-TROUBLED> 568 564 0
<LOANS-PROBLEM> 2,161 1,810 904
<ALLOWANCE-OPEN> 9,231 9,231 9,231
<CHARGE-OFFS> 429 865 1,703
<RECOVERIES> 19 367 475
<ALLOWANCE-CLOSE> 9,421 9,833 9,603
<ALLOWANCE-DOMESTIC> 9,421 9,833 9,603
<ALLOWANCE-FOREIGN> 0 0 0
<ALLOWANCE-UNALLOCATED> 0 0 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<RESTATED>
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996 DEC-31-1996
<PERIOD-END> MAR-31-1996 JUN-30-1996 SEP-30-1996
<CASH> 13,967 16,355 16,316
<INT-BEARING-DEPOSITS> 0 0 0
<FED-FUNDS-SOLD> 2,250 38,400 10,600
<TRADING-ASSETS> 0 0 0
<INVESTMENTS-HELD-FOR-SALE> 131,058 184,241 178,028
<INVESTMENTS-CARRYING> 71,009 79,440 76,702
<INVESTMENTS-MARKET> 70,498 78,241 75,866
<LOANS> 545,684 554,153 575,362
<ALLOWANCE> 8,275 8,666 8,834
<TOTAL-ASSETS> 785,554 901,690 886,043
<DEPOSITS> 662,591 821,781 806,280
<SHORT-TERM> 17,900 0 0
<LIABILITIES-OTHER> 35,464 8,070 7,042
<LONG-TERM> 0 0 0
0 0 0
0 0 0
<COMMON> 2,952 2,952 2,952
<OTHER-SE> 66,647 68,887 69,769
<TOTAL-LIABILITIES-AND-EQUITY> 785,554 901,690 886,043
<INTEREST-LOAN> 12,001 24,068 36,389
<INTEREST-INVEST> 2,495 6,832 10,715
<INTEREST-OTHER> 188 879 1,706
<INTEREST-TOTAL> 14,684 31,779 48,810
<INTEREST-DEPOSIT> 7,343 16,105 25,061
<INTEREST-EXPENSE> 7,373 16,156 25,112
<INTEREST-INCOME-NET> 7,311 15,623 23,698
<LOAN-LOSSES> 300 900 1,500
<SECURITIES-GAINS> 0 0 (194)
<EXPENSE-OTHER> 4,638 10,608 16,261
<INCOME-PRETAX> 3,279 5,700 8,419
<INCOME-PRE-EXTRAORDINARY> 3,279 5,700 8,419
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 1,922 4,856 7,401
<EPS-PRIMARY> 0.49 1.23 1.88
<EPS-DILUTED> 0.48 1.22 1.86
<YIELD-ACTUAL> 4.13 4.03 3.94
<LOANS-NON> 5,987 6,047 6,130
<LOANS-PAST> 180 169 167
<LOANS-TROUBLED> 1,334 1,323 1,315
<LOANS-PROBLEM> 2,427 2,973 3,343
<ALLOWANCE-OPEN> 8,033 8,033 8,033
<CHARGE-OFFS> 251 531 983
<RECOVERIES> 193 264 284
<ALLOWANCE-CLOSE> 8,275 8,667 8,834
<ALLOWANCE-DOMESTIC> 8,275 8,667 8,834
<ALLOWANCE-FOREIGN> 0 0 0
<ALLOWANCE-UNALLOCATED> 0 0 0
</TABLE>
