<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-------------------------------------------
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OF THE SECURITIES
EXCHANGE ACT OF 1934 for Quarter Ended March 31, 2000
-------------------------------------------
Commission File Number 0-16018
ABINGTON BANCORP, INC.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Massachusetts 04-3334127
----------------- ---------------------------
(State or Other Jurisdiction (I.R.S. Identification No.)
of Incorporation or Organization)
536 Washington Street, Abington, Massachusetts 02351
- ---------------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (781) 982-3200
--------------
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 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 Registrant's classes of
common stock, as of the latest practicable date: 3,033,800 shares as of May 5,
2000.
<PAGE>
Certain statements in this Form 10-Q constitute "forward-looking statements"
within the meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act. Further, any statements contained in this Form 10-Q that are not
statements of historical fact may be deemed to be forward-looking statements.
Without limiting the foregoing, the words "expect," "anticipate," "plan,"
"believe," "seek," "estimate," "internal" and similar words are intended to
identify expressions that may be forward-looking statements. Forward-looking
statements involve certain risks and uncertainties, and actual results may
differ materially from those contemplated by such statements. For example,
actual results may be adversely affected by the following possibilities: (1)
competitive pressure among depository institutions may increase; (2) changes in
interest rates may reduce banking interest margins; (3) general economic
conditions and real estate values may be less favorable than contemplated; and
(4) adverse legislation or regulatory requirements may be adopted. Many of such
factors are beyond the Company's ability to control or predict. Readers of this
Form 10-Q are accordingly cautioned not to place undue reliance on
forward-looking statements. The Company disclaims any intent or obligation to
update publicly any of the forward-looking statements herein, whether in
response to new information, future events or otherwise.
<PAGE>
ABINGTON BANCORP, INC.
FORM 10-Q
---------
INDEX
-----
<TABLE>
<CAPTION>
PAGE
Part I Financial Information
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 2000
(Unaudited) and December 31, 1999.............................. 4
Consolidated Statements of Operations (Unaudited) for the
Three Months Ended March 31, 2000 and 1999..................... 5
Consolidated Statements of Changes in Stockholders'
Equity (Unaudited) for the Three Months Ended
March 31, 2000 and 1999........................................ 6
Consolidated Statements of Comprehensive Income for the Three
Months Ended March 31, 2000 and 1999........................... 7
Consolidated Statements of Cash Flows (Unaudited)
for the Three Months Ended March 31, 2000 and 1999............. 8
Notes to Unaudited Consolidated Financial Statements........... 10
Item 2. Management's Discussion and Analysis of Consolidated
Financial Condition and Results of Operations.................. 15
Item 3. Quantitative and Qualitative Disclosures about Market Risk.............. 28
Part II Other Information
Item 1. Legal Proceedings ............................................. 29
Item 2. Change in Securities .......................................... 29
Item 3. Defaults upon Senior Securities................................ 29
Item 4. Submission of Matters to a Vote of Security Holders............ 29
Item 5. Other Information.............................................. 29
Item 6. Exhibits and Reports on Form 8-K............................... 29
Signature Page................................................................... 33
Index to Exhibits ............................................................... 34
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
ABINGTON BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Unaudited)
March 31, December 31,
2000 1999
---- ----
(In Thousands)
<S> <C> <C>
ASSETS
Cash and due from banks..................... $ 19,217 $ 33,497
Short-term investments...................... 227 225
-------- --------
Total cash and cash equivalents........... 19,444 33,722
-------- --------
Loans held for sale......................... 3,564 2,730
Securities available for sale - at
market value............................ 258,495 235,623
Loans....................................... 387,647 389,681
Less:
Allowance for possible loan losses...... (3,767) (3,701)
-------- --------
Loans, net.............................. 383,880 385,980
-------- --------
Federal Home Loan Bank stock................ 12,910 12,910
Banking premises and equipment, net......... 9,209 9,037
Other real estate owned, net................ - -
Intangible assets........................... 3,049 3,161
Bank owned life insurance - contract value.. 3,382 3,348
Other assets................................ 9,117 9,739
-------- --------
$703,050 $696,250
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits.................................... $411,290 $389,692
Short-term borrowings....................... 131,503 152,551
Long-term debt.............................. 110,917 107,200
Accrued taxes and expenses.................. 2,849 2,552
Other liabilities........................... 6,067 4,413
-------- --------
Total liabilities....................... 662,626 656,408
-------- --------
Guaranteed preferred beneficial interest in the
Company's junior subordinated debentures, net 12,027 12,010
Commitments and contingencies
Stockholders' equity:
Serial preferred stock, $.10 par value,
3,000,000 shares authorized; none issued. - -
Common stock, $.10 par value 12,000,000
shares authorized; 4,834,000 shares issued
in 2000 483 483
Additional paid-in capital................ 22,624 22,610
Retained earnings......................... 27,038 26,176
-------- --------
50,145 49,269
Treasury stock - 1,806,000 and 1,641,000 shares
for 2000 and 1999, respectively, at cost.. (17,584) (15,885)
Compensation plans........................ 61 29
Other accumulated comprehensive income -
Net unrealized loss on available for
sale securities, net of taxes........... (4,225) (5,581)
-------- --------
Total stockholders' equity..... 28,397 27,832
-------- --------
$703,050 $696,250
======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
4
<PAGE>
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ABINGTON BANCORP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
--------
2000 1999
---- ----
(In thousands, except per share data)
<S> <C> <C>
Interest and dividend income:
Interest and fees on loans ..................................... $ 7,295 $ 6,782
Interest on mortgage-backed investments ........................ 2,786 2,158
Interest on bonds and obligations .............................. 1,254 846
Dividend income ................................................ 215 169
Interest on short-term investments ............................. 15 9
---------- ----------
Total interest and dividend income ........................... 11,565 9,964
---------- ----------
Interest expense:
Interest on deposits ............................................ 3,002 2,829
Interest on short-term borrowings ............................... 1,989 828
Interest on long-term debt ...................................... 1,638 1,634
---------- ----------
Total interest expense ....................................... 6,629 5,291
---------- ----------
Net interest income .............................................. 4,936 4,673
Provision for possible loan losses ............................... -- 190
---------- ----------
Net interest income, after provision for
Possible loan losses ........................................... 4,936 4,483
---------- ----------
Non-interest income:
Loan servicing fees ............................................ 83 97
Other customer service fees .................................... 1,125 947
Gain on sales of securities, net ............................... 245 177
Gain on sales of mortgage loans, net ........................... 243 163
Gain on sales and write-down of
other real estate owned, net .................................. -- --
Other ............................................................ 101 95
---------- ----------
Total non-interest income .................................... 1,797 1,479
---------- ----------
Non-interest expense:
Salaries and employee benefits ................................. 2,514 2,090
Occupancy and equipment expenses ............................... 904 753
Trust preferred securities expense ............................. 280 261
Other non-interest expense ..................................... 1,285 1,195
---------- ----------
Total non-interest expense ................................... 4,983 4,299
---------- ----------
Income before provision for income
taxes ......................................................... 1,750 1,663
Provision for income taxes ....................................... 617 602
---------- ----------
Net income ................................................... $ 1,133 $ 1,061
========== ==========
Earnings per share
Basic -
Net income per share ...................................... $ .36 $ .32
========== ==========
Weighted average common shares ............................ 3,112,000 3,347,000
========== ==========
Diluted -
Net income per share .......................................... $ .35 $ .30
========== ==========
Weighted average common and common share and
share equivalents ............................................. 3,249,000 3,537,000
========== ==========
Dividends per share ............................................. $ .09 $ .20
========== ==========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
- --------------------------------------------------------------------------------
ABINGTON BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Net
Unrealized
Gain
(Loss) on
Additional Available
Common Paid-In Retained Treasury for Sale Compensa-
Stock Capital Earnings Stock Securities tion Plans Total
- -------------------------------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1999 .................... $483 $ 22,610 $ 26,176 $(15,885) $ (5,581) $ 29 $ 27,832
Net income ...................................... -- -- 1,133 -- -- -- 1,133
Change in obligation related to directors
deferred stock plan .......................... -- -- -- -- -- 12 12
Decrease in unearned compen-
sation - ESOP ................................. -- 14 -- -- -- 20 34
Decrease in unrealized loss on
available for sale securities,
net of taxes .................................. -- -- -- -- 1,356 -- 1,356
Repurchase of stock ............................. -- -- -- (1,699) -- -- (1,699)
Dividends declared ($.09 per share) ............. -- -- (271) -- -- -- (271)
---- -------- -------- -------- -------- ----- --------
Balance at March 31, 2000 ....................... $483 $ 22,624 $ 27,038 $(17,584) $ (4,225) $ 61 $ 28,397
==== ======== ======== ======== ======== ===== ========
Balance at December 31, 1998 .................... $480 $ 21,830 $ 23,182 $(13,283) $ 965 $(114) $ 33,060
Net income ...................................... -- -- 1,061 -- -- -- 1,061
Change in obligation related to
directors deferred stock plan ................ -- -- -- -- -- 19 19
Decrease in unearned compensation
- ESOP ....................... -- 14 -- -- -- 21 35
Decrease in unrealized gain on
available for sale securities,
net of taxes ................................... -- -- -- (456) -- (456)
Repurchase of stock ............................. -- -- -- -- -- -- --
Dividends declared ($.20 per share) ............. -- -- (670) -- -- -- (670)
---- -------- -------- -------- -------- ----- --------
Balance at March 31, 1999 ....................... $480 $ 21,844 $ 23,573 $(13,283) $ 509 $ (74) $ 33,049
==== ======== ======== ======== ======== ===== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements
6
<PAGE>
- --------------------------------------------------------------------------------
ABINGTON BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
---- ----
(Dollars in thousands)
<S> <C> <C>
Net income, as reported $1,133 $1,061
Change in unrealized gains/(losses) on securities,
net of taxes 1,515 (346)
Less: Reclassification adjustment for securities gains
included in net income, net of taxes 159 110
------ ------
Comprehensive income (loss) $2,489 $ 605
====== ======
</TABLE>
7
<PAGE>
- --------------------------------------------------------------------------------
ABINGTON BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------
2000 1999
---- ----
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income ........................................................... $ 1,133 $ 1,061
Adjustments to reconcile net income to net
cash provided (used) by operating
activities
Provision for loan losses ............................................ -- 190
(Gain) loss on sales and write-down of
other real estate owned, net ....................................... -- --
Amortization, accretion and depreciation,
net ................................................................ 647 428
Gain on sales of securities, net ..................................... (245) (177)
Loans originated for sale in the
secondary market ................................................... (11,700) (7,529)
Proceeds from sales of loans ....................................... 11,109 10,605
Gain on sales of mortgage loans, net ............................... (243) (163)
Other, net ......................................................... 1,407 516
-------- --------
Net cash provided (used) by operating
activities ......................................................... $ 2,108 $ 4,931
-------- --------
Cash flows from investing activities:
Proceeds from sales of available for sale
securities ......................................................... 459 4,602
Proceeds from principal payments on
available for sale securities ...................................... 5,004 8,661
Purchase of available for sale securities ............................ (25,950) (30,374)
Loans (originated/purchased) paid, net ............................... 2,100 (1,541)
Purchases of FHLB stock .............................................. -- --
</TABLE>
See accompanying notes to unaudited consolidated financial statements
8
<PAGE>
- --------------------------------------------------------------------------------
ABINGTON BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
- --------------------------------------------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------
2000 1999
---- ----
(In thousands)
<S> <C> <C>
Purchase of banking premises and equipment
and improvements to other real estate
owned ........................................... $ (536) $ (764)
Proceeds from sales of other real estate
owned ........................................... -- --
-------- --------
Net cash provided (used) by investing
activities ...................................... (18,923) (19,416)
-------- --------
Cash flows from financing activities:
Net increase in deposits .......................... 21,598 3,747
Net increase (decrease) in borrowings with original
maturities of three months or less .............. (16,048) (376)
Proceeds from short-term borrowings with
maturities in excess of three months ............ -- 5,000
Principal payments on short-term borrow-
ings with maturities in excess of
three months .................................... (5,000) (10,000)
Proceeds from issuance of long-term debt .......... 12,717 10,000
Principal payments on long term debt .............. (9,000) --
Proceeds from issuance of stock ................... 12 14
Purchase of treasury stock ........................ (1,699) --
Cash paid for dividends ........................... (163) (168)
-------- --------
Net cash provided from financing
activities ...................................... 2,417 8,217
-------- --------
Net increase (decrease)in cash and cash
equivalents ..................................... (14,278) (6,268)
Cash and cash equivalents at beginning of
period .......................................... 33,722 19,717
-------- --------
Cash and cash equivalents at end of period ........ $ 19,444 $ 13,449
======== ========
Supplemental cash flow information:
Interest paid on deposits ......................... $ 3,004 $ 2,838
Interest paid on borrowed funds ................... 3,626 2,534
Income taxes paid ................................. 638 27
Transfer to other real estate owned,
net ............................................. -- --
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
9
<PAGE>
- --------------------------------------------------------------------------------
ABINGTON BANCORP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENT
March 31, 2000
- --------------------------------------------------------------------------------
A) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements include the accounts of Abington Bancorp,
Inc. (the "Company") (a Massachusetts Corporation) and its wholly-owned
subsidiaries, Abington Savings Bank (the "Bank") and Abington Bancorp Capital
Trust. The Bank also includes its wholly-owned subsidiaries Abington Securities
Corporation, which invests primarily in obligations of the United States
Government and its agencies and equity securities, Old Colony Mortgage
Corporation, which originates and sells residential mortgages to investors on a
servicing released basis, and Holt Park Place Development Corporation and
Norroway Pond Development Corporation, each typically owning properties being
marketed for sale.
The accompanying consolidated financial statements as of March 31, 2000 and for
the three period ended March 31, 2000 and 1999 have been prepared by the Company
without audit, and reflect all adjustments (consisting of normal recurring
adjustments) which, in the opinion of management, are necessary to reflect a
fair statement of the results of the interim periods presented. Certain
information and footnote disclosures normally included in the annual
consolidated financial statements which are prepared in accordance with
generally accepted accounting principles have been condensed or omitted.
Accordingly, the Company believes that although the disclosures are adequate to
make the information presented not misleading, these consolidated financial
statements should be read in conjunction with the footnotes contained in the
Company's consolidated financial statements as of and for the year ended
December 31, 1999, which are included in the Company's Annual Report to
Stockholders. Interim results are not necessarily indicative of results to be
expected for the entire year. All significant intercompany balances and
transactions have been eliminated in consolidation.
10
<PAGE>
- --------------------------------------------------------------------------------
ABINGTON BANCORP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000 (continued)
- --------------------------------------------------------------------------------
B) DIVIDEND DECLARATION
The Board of Directors of Abington Bancorp., Inc. declared a cash dividend
of $.09 per share to holders of its common stock in March, 2000. This dividend
was payable on April 20, 2000 to stockholders of record as of the close of
business on April 6, 2000.
11
<PAGE>
- --------------------------------------------------------------------------------
ABINGTON BANCORP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000 (continued)
- --------------------------------------------------------------------------------
C) Stock Repurchase Program
On March 27, 1997, the Company announced that its Board of Directors had
authorized the Company to repurchase up to 10% (375,000 shares) of its currently
outstanding common stock from time to time at prevailing market prices. On
February 24, 1998, the Company announced that its Board of Directors had
authorized the Company to repurchase an additional 10% (347,000) of its
outstanding common stock, as adjusted for amounts remaining to be repurchased
under the March 1997 plan. On March 25, 1999, the Board of Directors authorized
the Company to repurchase an additional 10% (320,000) of its outstanding common
stock, as adjusted for amounts remaining to be purchased under the previously
authorized plans. The Board delegated to the discretion of the Company's senior
management the authority to determine the timing of the repurchase program's
commencement, subsequent purchases and the prices at which the repurchases will
be made.
As of May 5, 2000, the Company had repurchased 932,600 shares of its common
stock under these plans at a total cost of approximately $13,882,000.
D) Earnings per Share
The primary difference between basic and fully diluted average common shares
outstanding for the periods presented relates to options issued to officers and
directors which are currently exercisable and are not anti-dilutive. The
calculation of common stock equivalents for fully diluted per share computations
excludes shares which are not yet currently exercisable and /or have an exercise
price in excess of the average closing price of the Company's stock for the
period presented. At March 31, 2000 there were approximately 147,000 options
with exercise prices ranging from $11.20 to $15.50 which were vested but
anti-dilutive and non-vested options of approximately 145,083 options with
exercise prices ranging from $13.50 to $20.75. These options were excluded from
fully diluted calculations.
12
<PAGE>
- --------------------------------------------------------------------------------
ABINGTON BANCORP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000 (continued)
- --------------------------------------------------------------------------------
E.) Business Segments
March 31, 2000:
<TABLE>
<CAPTION>
Community Mortgage
Banking Banking Other Elimination Total
--------- --------- ----- ----------- -----
<S> <C> <C> <C> <C> <C>
Securities ........................ $258,495 $ -- $ -- $ -- $258,495
Net loans ......................... 387,426 5,214 -- (5,196) 387,444
Net assets ........................ 698,993 6,688 45,345 (47,796) 703,050
Total deposits .................... 414,098 -- -- (2,808) 411,290
Total borrowings .................. 242,420 5,196 -- (5,196) 242,420
Total liabilities ................. 665,163 5,327 140 662,626
Three months ended
Total interest income ............. $ 11,551 $ 67 $ 27 $ (80) $ 11,565
Total interest expense ............ 6,656 53 -- (80) 6,629
Net interest margin ............... 4,895 14 27 -- 4,936
Provisions for possible loan losses -- -- -- -- --
Total non-interest income ......... 1,554 293 -- (50) 1,797
Total non-interest expense ........ 4,274 395 314 -- 4,983
Net income ........................ 1,419 (63) (190) (33) 1,133
</TABLE>
13
<PAGE>
- --------------------------------------------------------------------------------
ABINGTON BANCORP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000 (continued)
- --------------------------------------------------------------------------------
E.) Business Segments (continued)
March 31, 1999:
<TABLE>
<CAPTION>
Community Mortgage
Banking Banking Other Elimination Total
--------- --------- ----- ----------- -----
<S> <C> <C> <C> <C> <C>
Securities ........................ $197,934 $ -- $ -- $ -- $197,934
Net loans ......................... 359,173 -- -- -- 359,173
Net assets ........................ 599,915 -- 45,500 (45,434) 599,981
Total deposits .................... 374,852 -- -- (7,152) 367,700
Total borrowings .................. 181,752 -- -- -- 181,752
Total liabilities ................. 562,132 -- -- (7,152) 554,980
Three months ended
Total interest income ............. $ 9,964 $ -- $ 27 $ (27) $ 9,964
Total interest expense ............ 5,318 -- -- (27) 5,291
Net interest margin ............... 4,646 -- 27 -- 4,673
Provisions for possible loan losses 190 -- -- -- 190
Total non-interest income ......... 1,479 -- -- -- 1,479
Total non-interest expense ........ 3,985 -- 314 -- 4,299
Net income ........................ 1,269 -- (208) -- 1,061
</TABLE>
14
<PAGE>
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
GENERAL
The Company's results of operations depend primarily on its net interest income
after provision for possible loan losses, its revenue from other banking
services and non-interest expenses. The Company's net interest income depends
upon the net interest rate spread between the yield on the Company's loan and
investment portfolios and the cost of funds, consisting primarily of interest
expense on deposits and Federal Home Loan Bank advances. The interest rate
spread is affected by the match between the maturities or repricing intervals of
the Company's assets and liabilities, the mix and composition of interest
sensitive assets and liabilities, economic factors influencing general interest
rates, loan prepayment speeds, loan demand and savings flows, as well as the
effect of competition for deposits and loans. The Company's net interest income
is also affected by the performance of its loan portfolio, amortization or
accretion of premiums or discounts on purchased loans and mortgage - backed
securities, and the level of non-earning assets. Revenues from loan fees and
other banking services depend upon the volume of new transactions and the market
level of prices for competitive products and services. Non-interest expenses
depend upon the efficiency of the Company's internal operations and general
market and economic conditions.
NET INTEREST INCOME
Net interest income is affected by the mix and volume of assets and liabilities,
the movement and level of interest rates and interest spread, which is the
difference between the average yield received on earning assets and the average
rate paid on deposits and borrowings. The Company's net interest rate spread was
2.96% for the quarter ended March 31, 2000 and 3.27% for the quarter ended March
31, 1999.
The level of nonaccrual (impaired) loans and other real estate owned can have an
impact on net interest income but balances in these categories have generally
been immaterial in 1999 and 2000. At March 31, 2000, the Company had $585,000 in
non-accrual loans, and no other real estate owned, compared to $616,000 in
non-accrual loans and no other real estate owned as of December 31, 1999 and
$698,000 in non-accrual loans and no other real estate owned as of March 31,
1999.
15
<PAGE>
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
The table below presents the components of interest income and expense for the
major categories of assets and liabilities for the periods indicated.
<TABLE>
<CAPTION>
Three Months Ended
March 31
--------
2000 1999
---- ----
(In Thousands)
<S> <C> <C>
Interest and dividend income:
Interest and fees on loans ............ $ 7,295 $6,782
Interest on mortgage-backed investments 2,786 2,158
Interest on bonds and obligations ..... 1,254 846
Dividend income ....................... 215 169
Interest on short-term investments .... 15 9
------- ------
Total interest and dividend income ... $11,565 $9,964
------- ------
Interest expense:
Interest on deposits .................. 3,002 2,829
Interest on short-term borrowings ..... 1,989 828
Interest on long-term debt ............ 1,638 1,634
------- ------
Total interest expense ............... 6,629 5,291
------- ------
Net interest income .................... $ 4,936 $4,673
======= ======
</TABLE>
A breakdown of the components of the Company's net interest-rate spread is as
follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31
--------
2000 1999
---- ----
<S> <C> <C>
Weighted average yield earned on:
Loans ................................ 7.58% 7.58%
Mortgage-backed investments .......... 6.81 6.66
Bonds and obligations ................ 6.53 6.62
Marketable and other equity securities 4.27 4.37
Short-term investments ............... 3.54 5.35
Weighted average yield earned on
interest-earning assets .............. 7.11 7.19
Weighted average rate paid on:
NOW and non-interest NOW deposits .... .43 .53
Savings deposits ................... 2.23 2.15
Time deposits ...................... 5.16 5.22
Total deposits ..................... 3.04 3.13
Short-term borrowings .............. 5.76 5.01
Long-term debt ..................... 6.12 5.79
Weighted average rate paid on
deposits and borrowings .............. 4.14% 3.91%
Net interest-rate spread ................ 2.96% 3.27%
</TABLE>
16
<PAGE>
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
- --------------------------------------------------------------------------------
RATE/VOLUME ANALYSIS
The following tables present, for the periods indicated, the change in interest
income and the change in interest expense attributable to the change in interest
rates and the change in the volume of earning assets and interest-bearing
liabilities. The change attributable to both volume and rate has been allocated
proportionately to the change due to volume and the change due to rate.
<TABLE>
<CAPTION>
Three Months Ended March 31
---------------------------
2000 Vs. 1999
Increase (Decrease)
-------------------
Due to
--------------------------
Volume Rate Total
----------------------------------
(In thousands)
Interest and dividend income:
<S> <C> <C> <C>
Loans .......................... $ 510 $ 3 $ 513
Mortgage-backed investments .... 671 (43) 628
Bonds and obligations .......... 383 25 408
Equity securities .............. 50 (4) 46
Short-term investments ......... 10 (4) 6
------- ----- -------
Total interest and dividend
income ................... 1,624 (23) 1,601
------- ----- -------
Interest expense:
NOW deposits .................. 16 (25) (9)
Savings deposits .............. 66 21 87
Time deposits ................. 119 (24) 95
Short-term borrowings ......... 1,020 141 1,161
Long-term debt ................ (86) 90 4
------- ----- -------
Total interest expense .... 1,135 203 1,338
------- ----- -------
Net interest income ............. $ 489 $(226) $ 263
======= ===== =======
</TABLE>
17
<PAGE>
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
- --------------------------------------------------------------------------------
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
GENERAL. Net income for the quarter ended March 31, 2000 was $1,133,000 or $.35
per diluted share compared to net income of $1,061,000 or $.30 per diluted share
in the corresponding period of 1999, a net increase of $72,000 or 6.8%. The
overall increase in net income was mainly attributable to increases in net
interest income, customer service fees and gains on mortgage loans, and
decreases in the provision for possible loan losses, offset in part by increases
in non-interest expense.
INTEREST AND DIVIDEND INCOME. Interest and dividend income increased $263,000 or
5.6% during the three month period ended March 31, 2000, as compared to the same
period in 1999. The increase was attributable to increases in earning assets
offset in part by reductions in the yield earned on those assets. The balance of
average earning assets for the three month period ended March 31, 2000 was
approximately $650,844,000 as compared to $554,704,000 for the same period in
1999, an overall increase of $96,140,000 or 17.3%. The increase in earning
assets was, in part, due to increases in average loan balances which were
$384,728,000 for the three months ended March 31, 2000, as compared to
$357,833,000 for the same period in 1999, an increase of $26,895,000 or 7.5%.
This increase was generally caused by larger volumes of commercial loan
originations in 1999 and into 2000 as well as higher residential loan balances
which were the result of the steady volume of loan originations and purchases
throughout 1999 and into 2000. See "Liquidity and Capital Resources" and
"Asset/Liability Management" for further discussion of the Company's investment
strategies.
The average yield earned on loans remained flat at 7.58% for the first quarter
of 2000. Loan yields in 2000 have been affected by consistently high levels of
prepayment activity on higher yielding loans experienced in the first half of
1999 and slight increases in the yields on loans originated/purchased in the
second half of 1999 and into 2000. Yields on loans were positively affected by
growth in the Company's commercial loan portfolio which has grown to
approximately $73,100,000 at March 31, 2000 from $63,900,000 at March 31, 1999,
an increase of $9,200,000 or 14.4%. Commercial loans typically carry a higher
yield than residential mortgages.
Average balances of mortgage-backed investments and bond investment securities
were $170,599,000 and $73,668,000, respectively, for the three months ended
March 31, 2000 as compared to $129,581,000 and $51,135,000, respectively, for
the corresponding period in 1999. These balances, when combined, increased
$63,551,000 or 35.2%. The yield on mortgage-backed investments declined to 6.53%
in the first quarter of 2000, generally due to the level of prepayment activity
on higher yielding securities during the first six months of 1999 and the
reinvestment of proceeds into lower yielding securities during that period.
The yield on bond investment securities increased to 6.81% for the three months
ended March 31, 2000 as compared to 6.62% for the same period in 1999. This
increase is generally due to the acquisitions of higher yielding securities in
the latter half of 1999 which favorably affected the comparative yields for the
first quarter of 2000.
18
<PAGE>
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
- --------------------------------------------------------------------------------
INTEREST EXPENSE. Interest expense for the quarter ended March 31, 2000
increased $1,338,000 or 25.3% compared to the same period in 1999, generally due
to increases in the average balances of deposits and borrowed funds. The average
balance of core and time deposits rose to $222,738,000 and $171,955,000,
respectively, for the first quarter of 2000 as compared to $199,176,000 and
$162,754,000, respectively, for the corresponding period in 1999, for increases
of 11.8% and 5.7%, respectively. The Company will continue to closely manage its
cost of deposits by continuing to seek methods of acquiring new core deposits
and maintaining its current core deposits while prudently adding time deposits
at reasonable rates in comparison to local markets and other funding
alternatives, including borrowings. The average balances of borrowed funds
increased overall during the first quarter of 2000 as compared to 1999, to
$245,107,000 from $178,923,000, an increase of 37.0%. These increased borrowings
were used to fund earning asset growth over the past year. The blended weighted
average rate paid on deposits and borrowed funds was 4.14% for the three months
ended March 31, 2000 as compared to 3.91% for the same period in 1999. The
weighted average rates paid on deposits was 3.04% for the quarter ended March
31, 2000 as compared to 3.13% for the same period in 1999. The overall cost of
deposits has declined in the first quarter of 2000 as compared to the same
period in 1999, generally due to the continued success of promotional efforts to
attract core deposits (NOW accounts, demand deposits, savings and money
markets), which typically have a lower cost of funds than time deposits and
borrowings. The overall weighted average rates paid on borrowed funds increased
to approximately 5.92% for the quarter ended March 31, 2000 from 5.50% in 1999.
This increase is reflective of the net cumulative effect of actions taken by the
Federal Reserve over the past six to eight months to increase the inter-bank
borrowing rate by 100 basis points. The Company will continue to evaluate the
use of borrowing as an alternative funding source for asset growth in future
periods. See "Asset/Liability Management" for further discussion of the
competitive market for deposits and overall strategies for uses of borrowed
funds.
NON-INTEREST INCOME. Total non-interest income increased $318,000 or 21.5% in
the first quarter of 2000 in comparison to the same period in 1999. Customer
service fees, which were $1,125,000 for the quarter ended March 31, 2000 as
compared to $947,000 for 1999, for an increase of $178,000 or 18.8%, rose
primarily due to growth in deposit accounts, primarily NOW and checking account
portfolios. Loan servicing fees and gains on sales of mortgage loans were
$83,000 and $243,000, respectively, for the first quarter of 2000 as compared to
$97,000 and $163,000, respectively, for the same period in 1999, a combined
increase of $66,000 or 25.4%. This generally is reflective of the Company's
acquisition of Old Colony Mortgage in April, 1999 and related greater volume of
loans being originated and sold in the first quarter of 2000 as compared to the
same period in 1999. As the Company has been selling loans generally on a
servicing released basis since 1996, the portfolio of loans serviced for others
has declined which has caused the continued drop in loan servicing income.
19
<PAGE>
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
- --------------------------------------------------------------------------------
Gains on sales of securities were $245,000 for the first quarter of 2000 as
compared to $177,000 for 1999 for a increase of $68,000 or 38.4%. The gains on
securities is reflective of the continued strength of the Company's equity
portfolio and the related gains generated on sales activities.
NON-INTEREST EXPENSES. Non-interest expenses for the quarter ended March 31,
2000 increased $684,000 or 15.9% compared to the same period in 1999. Salaries
and employee benefits increased 20.3% or $424,000 primarily due to the
acquisition of Old Colony Mortgage (approximately $264,000) and increases in
supermarket branch staffing (approximately $47,000), and other general increases
salaries and customer service related staff levels of $113,000. The increases in
supermarket branch staff is related to Brockton, which opened in May 1999. These
increases correspond with the Company's strategic focus of attracting core
deposits and new customer relationships. Occupancy expenses increased $151,000
or 20.1% primarily due to the acquisition of Old Colony Mortgage (approximately
$35,000), the new supermarket branch as previously noted (approximately $23,000)
and the general inflationary and capital expenditure increases, particularly in
technology. Other non-interest expenses, including trust preferred expenses,
also increased $109,000 or 7.5% for the quarter ended March 31, 2000 in
comparison to the same period in 1999. Of this amount, approximately $96,000 of
the aforementioned increases relates to the acquisition of Old Colony Mortgage
and supermarket branch growth ($13,000). Other operating expenses remained
relatively flat for the first quarter of 2000 as compared to 1999, after the
aforementioned consideration of Old Colony Mortgage and the Brockton supermarket
branch.
PROVISION FOR POSSIBLE LOAN LOSSES. There was no provision for possible loan
losses for the quarter ended March 31, 2000 as compared to $190,000 for the
quarter ended March 31, 1999. The reduction is generally attributable to a large
recovery of a previously charged-off commercial real estate loan for
approximately $90,000 as well as the continued strength of other asset quality
factors that management uses to measure and evaluate the adequacy of loan loss
reserve levels. The resulting level of loan loss reserves were approximately
.97% of period end loans at March 31, 2000 as compared to .95% and .89% at
December 31, and March 31, 1999, respectively.
PROVISION FOR INCOME TAXES. The Company's effective income tax rate for the
quarter ended March 31, 2000 was 35.3% compared to 36.2% for the quarter ended
March 31, 1999. The lower effective tax rate in comparison to statutory rates
for both periods is reflective of income earned by certain non-bank subsidiaries
which are taxed, for state tax purposes, at lower rates.
20
<PAGE>
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
- --------------------------------------------------------------------------------
ASSET/LIABILITY MANAGEMENT
The objective of asset/liability management is to ensure that liquidity, capital
and market risk are prudently managed. Asset/liability management is governed by
policies reviewed and approved annually by the Company's Board of Directors
(Board). The Board delegates responsibility for asset/liability management to
the corporate Asset/Liability Management Committee (ALCO). ALCO sets strategic
directives that guide the day-to-day asset/liability management activities of
the Company. ALCO also reviews and approves all major funding, capital and
market risk-management programs. ALCO is comprised of members of management and
executive management of the Company and the Bank.
Interest rate risk is the sensitivity of income to variations in interest rates
over both short-term and long-term time horizons. The primary objective of
interest rate risk management is to control this risk within limits approved by
the Board and by ALCO. These limits and guidelines reflect the Company's
tolerance for interest rate risk. The Company attempts to control interest rate
risk by identifying potential exposures and developing tactical plans to address
such potential exposures. The Company quantifies its interest rate risk
exposures using sophisticated simulation and valuation models, as well as a more
simple gap analysis. The Company manages its interest rate exposures by
generally using on-balance sheet strategies, which is most easily accomplished
through the management of the durations and rate sensitivities of the Company's
investments, including mortgage-backed securities portfolios, and by extending
or shortening maturities of borrowed funds. Additionally, pricing strategies,
asset sales and, in some cases, hedge strategies are also considered in the
evaluation and management of interest rate risk exposures.
The Company uses simulation analysis to measure the exposure of net interest
income to changes in interest rates over a 1 to 5 year time horizon. Simulation
analysis involves projecting future interest income and expense from the
Company's assets, liabilities, and off-balance sheet positions under various
interest rate scenarios.
The Company's limits on interest rate risk specify that if interest rates were
to ramp up or down 200 basis points over a 12 month period, estimated net
interest income for the next 12 months should decline by less than 10%. The
following table reflects the Company's estimated exposure, as a percentage of
estimated net interest income for the next 12 months, which does not materially
differ from the impact on net income, on the above basis:
<TABLE>
<CAPTION>
Rate Change Estimated Exposure as a
(Basis Points) % of Net Interest Income
- -------------- ------------------------
<S> <C>
+200 (6.0)%
-200 .5%
</TABLE>
21
<PAGE>
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
- --------------------------------------------------------------------------------
Interest rate gap analysis provides a static view of the maturity and repricing
characteristics of the on-balance sheet and off-balance sheet positions. The
interest rate gap analysis is prepared by scheduling all assets, liabilities and
off-balance sheet positions according to scheduled repricing or maturity.
Interest rate gap analysis can be viewed as a short-hand complement to
simulation and valuation analysis.
The Company's policy is to match, as well as possible, the interest rate
sensitivities of its assets and liabilities. Residential mortgage loans that the
Company currently originates or purchases for the Company's own portfolio are
primarily 1-year, 3-year and 5-year adjustable rate mortgages and shorter term
(generally 15-year or seasoned 30-year) fixed rate mortgages. Residential
mortgage loans currently originated by the Company are primarily sold in the
secondary market.
The Company also emphasizes loans with terms to maturity or repricing of 3 years
or less, such as certain adjustable rate residential mortgage loans, commercial
mortgages, business loans, residential construction loans, second mortgages and
home equity loans.
22
<PAGE>
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
- --------------------------------------------------------------------------------
Management desires to expand its interest earning asset base in future periods
primarily through growth in the Company's loan portfolio. Loans comprised
approximately 59.1% of the average interest earning assets for the first three
months of 2000. In the future, the Company intends to continue to be competitive
in the residential mortgage market but plans to place greater emphasis on home
equity and commercial loans. The Company generally has been, and expects to
remain, active in pursuing wholesale opportunities to purchase loans. During the
first quarter of 2000 and 1999, the Company acquired approximately $0 and
$25,800,000, respectively, of residential first mortgages.
The Company has also used mortgage-backed investments (typically with weighted
average lives of 5 to 7 years) as a vehicle for fixed and adjustable rate
investments and as an overall asset/liability tool. These securities have been
highly liquid given current levels of prepayments in the underlying mortgage
pools and, as a result, have
provided the Company with greater reinvestment flexibility.
The level of the Company's liquid assets and the mix of its investments may
vary, depending upon management's judgment as to market trends, the quality of
specific investment opportunities and the relative attractiveness of their
maturities and yields. Management has been aggressively promoting the Company's
core deposit products since the first quarter of 1995, particularly checking and
NOW accounts. The success of this program has favorably impacted the overall
deposit growth to date, despite interest rate and general market pressures, and
has helped the Company to increase its customer base. However, given the strong
performance of money market mutual funds and the equity markets in general, the
Company and many of its peers have begun to see lower levels of growth in time
deposits as compared to prior years as customers reflect their desire to
increase their returns on investment. This pressure has been exacerbated
currently by the historically low long-term economic interest rates. Management
believes that the markets for future time deposit growth, particularly with
terms in excess of 2 years, will remain highly competitive. Management will
continue to evaluate future funding strategies and alternatives accordingly as
well as to continue to focus its efforts on attracting core, retail deposit
relationships.
The Company is also a voluntary member of the Federal Home Loan Bank ("FHLB") of
Boston. This borrowing capacity assists the Company in managing its
asset/liability growth because, at times, the Company considers it more
advantageous to borrow money from the FHLB of Boston than to raise money through
non-core deposits (i.e., certificates of deposit). Borrowed funds totaled
$242,420,000 at March 31, 2000 compared to $259,751,000 at December 31, 1999.
These borrowings are primarily comprised of FHLB of Boston advances and have
primarily funded residential loan originations and purchases as well as
mortgage-backed investments and investment securities. Borrowing levels at
December 31, 1999 also included approximately $18 million of draw-downs of cash
from the Fed to prepare for anticipated larger than average cash withdrawals
associated with potential customer demand in their preparations for the change
of the century. This cash was generally returned to the Fed in early January
2000, with a corresponding decrease to borrowings.
Additionally, the Company obtained funding in June 1998 through the issuance of
trust preferred securities which carry a higher interest rate than similar FHLB
borrowings but at the same time are included as capital, without diluting
earnings per share and are tax deductible. See "Liquidity and Capital Resources"
for further discussion.
23
<PAGE>
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
- --------------------------------------------------------------------------------
The following table sets forth maturity and repricing information relating to
interest sensitive assets and liabilities at March 31, 2000. The balance of such
accounts has been allocated among the various periods based upon the terms and
repricing intervals of the particular assets and liabilities. For example, fixed
rate mortgage loans and mortgage-backed securities, regardless of "available for
sale" classification, are shown in the table in the time periods corresponding
to projected principal amortization computed based on their respective weighted
average maturities and weighted average rates using prepayment data available
from the secondary mortgage market.
Adjustable rate loans and securities are allocated to the period in which the
rates would be next adjusted. The following table does not reflect partial or
full prepayment of certain types of loans and investment securities prior to
scheduled contractual maturity. Additionally, all securities or borrowings which
are callable at the option of the issuer or lender are reflected in the
following table based upon the likelihood of call options being exercised by the
issuer on certain investments or borrowings in a most likely interest rate
environment. Since regular passbook savings and NOW accounts are subject to
immediate withdrawal, such accounts have been included in the "Other Savings
Accounts" category and are assumed to mature within 6 months. This table does
not include non-interest bearing deposits.
While this table presents a cumulative negative gap position in the 6 month to 5
year horizon, the Company considers its earning assets to be more sensitive to
interest rate movements than its liabilities. In general, assets are tied to
increases that are immediately impacted by interest rate movements while deposit
rates are generally driven by market area and demand which tend to be less
sensitive to general interest rate changes. In addition, other savings accounts
and money market accounts are substantially stable core deposits, although
subject to rate changes. A substantial core balance in these type of accounts is
anticipated to be maintained over time.
24
<PAGE>
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AT MARCH 31, 2000
------------------------------------------------------------------------------
REPRICING/MATURITY INTERVAL
-------------------------------------------------------
(1) (2) (3) (4) (5) (6)
Over
0-6 Mos. 6-12 Mos. 1-2 Yrs. 2-3 Yrs. 3-5 Yrs. 5 Yrs. Total
------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Assets subject to interest rate adjustment:
Short-term investments ....................... $ 227 $ -- $ -- $ -- $ -- $ - $ 227
Bonds and obligations ........................ 43,178 8,101 2,993 9,399 10,127 2,681 76,479
Mortgage-backed investments .................. 38,752 14,705 21,145 18,349 30,552 57,744 181,247
Mortgage loans subject to
rate review ................................. 36,137 14,161 16,651 19,057 38,549 5,802 130,357
Fixed-rate mortgage loans .................... 24,517 16,143 32,536 37,993 43,093 83,225 237,508
Commercial and other loans ................... 13,854 3,625 1,577 1,192 2,633 466 23,346
--------- ------- ------- ------- -------- ------- --------
Total .................................... $ 156,665 $ 56,735 $74,902 $85,990 $124,954 $149,918 $649,164
--------- ------- ------- ------- -------- ------- --------
Liabilities subject to interest rate adjustment:
Money market deposit accounts ................ 17,873 -- -- -- -- -- 17,873
Savings deposits - term
certificates ................................ 84,161 51,632 20,317 5,357 13,189 -- 174,656
Other savings accounts ....................... 166,051 -- -- -- -- -- 166,051
Borrowed funds ............................... 156,503 30,067 25,350 -- 10,000 20,500 242,420
--------- ------- ------- ------- -------- ------- --------
Total .......................................... 424,588 81,699 45,667 5,357 23,189 20,500 601,000
--------- ------- ------- ------- -------- ------- --------
Guaranteed preferred beneficial
interest in junior subordinated
debentures ................................... $ -- $ -- $ -- $ -- $ -- $12,027 $12,027
--------- ------- ------- -------- ------- ------- --------
Excess (deficiency) of rate-
sensitive assets over rate-
sensitive liabilities ......................... $(267,923) $(24,964) 29,235 $80,633 $101,765 $117,391 $36,137
--------- ------- ------- ------- -------- ------- --------
Cumulative excess (deficiency)
of rate-sensitive assets over
rate sensitive liabilities .................... $(267,923) $(292,887)$(263,652)$(183,019) $(81,254) $ 36,137
========== ======= ======= ======== ======== =======
Rate-sensitive assets as a
percent of rate-sensitive
liabilities (1) ............................... 36.9% 42.2% 52.2% 67.2% 86.0% 105.9%
</TABLE>
(1) Cumulative as to the amounts previously repriced or matured. Assets held
for sale are reflected in the period in which sales are expected to take place.
Securities classified as available for sale are shown at repricing/maturity
intervals as if they are to be held to maturity as there is no definitive plan
of disposition. They are also shown at amortized cost.
25
<PAGE>
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
- --------------------------------------------------------------------------------
Liquidity and Capital Resources
Payments and prepayments on the Company's loan and mortgage-backed investment
portfolios, sales of fixed rate residential loans, increases in deposits,
borrowed funds and maturities of various investments comprise the Company's
primary sources of liquidity. The Company is also a voluntary member of the FHLB
of Boston and, as such, is entitled to borrow an amount up to the value of its
qualified collateral that has not been pledged to outside sources. Qualified
collateral generally consists of residential first mortgage loans, securities
issued, insured or guaranteed by the U.S. Government or its agencies, and funds
on deposit at the FHLB of Boston. Short-term advances may be used for any sound
business purpose, while long-term advances may be used only for the purpose of
providing funds to finance housing. At March 31, 2000, the Company had
approximately $154,000,000 in unused borrowing capacity that is contingent upon
the purchase of additional FHLB of Boston stock. Use of this borrowing capacity
is also impacted by capital adequacy considerations.
The Company's short-term borrowing position consists primarily of FHLB of Boston
advances with original maturities of approximately 1 to 3 months. The Company
utilizes borrowed funds as a primary vehicle to manage interest rate risk, due
to the ability to easily extend or shorten maturities as needed. This enables
the Company to adjust its cash needs to the increased prepayment activity in its
loan and mortgage-backed investment portfolios, as well as to quickly extend
maturities when the need to further balance the Company's GAP position arises.
The Company regularly monitors its asset quality to determine the level of its
loan loss reserves through periodic credit reviews by members of the Company's
Management Credit Committee. The Management Credit Committee, which reports to
the Executive Committee of the Company's Board of Directors, also works on the
collection of non-accrual loans and disposition of real estate acquired by
foreclosure. The allowance for possible loan losses is determined by the
Management Credit Committee after consideration of several key factors
including, without limitation potential risk in the current portfolio, levels
and types of non-performing assets and delinquency, levels of potential problem
loans on the watched asset reports and the impact that they may have on loan
collateral and repayment. Workout approach and financial condition of borrowers
are also key considerations to the evaluation of non-performing loans.
Non-performing assets were $585,000 at March 31, 2000, compared to $616,000 at
December 31, 1999, a decrease of $31,000 or 5.0%. The Company's percentage of
delinquent loans to total loans was .37% at March 31, 2000, as compared to .28%
at December 31, 1999. Management believes that while delinquency rates and
non-performing assets remain at relatively low levels at March 31, 2000, it is
likely that at some point in the future some degree of economic slow down is
likely which in turn may result in future increases in problem assets and loan
loss provisions. Management continues to monitor the overall economic
environment and its potential effects on future credit quality on an ongoing
basis.
At March 31, 2000, the Company had outstanding commitments to originate,
purchase and sell residential mortgage loans in the secondary market amounting
to $12,896,000, $0 and $3,564,000, respectively. The Company also has
outstanding commitments to grant advances under existing home equity lines of
credit amounting to $13,866,000. Unadvanced commitments under outstanding
commercial and construction loans totaled $14,599,000 as of March 31, 2000. The
Company believes it has adequate sources of liquidity to fund these commitments.
26
<PAGE>
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
- --------------------------------------------------------------------------------
The Company's total stockholders' equity was $28,397,000 or 4.0% of total assets
at March 31, 2000, compared with $27,832,000 or 4.0% of total assets at December
31, 1999. The increase in total stockholders' equity of approximately $565,000
or 2.0% primarily resulted from decreases in the unrealized loss on market value
of available for sale securities, net of taxes, and net income for the first
quarter of 2000, offset in part by stock repurchases and dividend paid or
payable, by the Company.
The Company issued $12,650,000 of 8.25% Trust Preferred Securities in June 1998.
Under current regulatory guidelines, trust preferred securities are allowed to
represent up to approximately 25% of the Company's Tier 1 capital with any
excess amounts available as Tier 2 capital. As of March 31, 2000, approximately
$10,874,000 of these securities was included in Tier 1 capital.
Bank regulatory authorities have established a capital measurement tool called
"Tier 1" leverage capital. A 4.00% ratio of Tier 1 capital to assets now
constitutes the minimum capital standard for most banking organizations and a
5.00% Tier 1 leverage capital ratio is required for a "well-capitalized"
classification. At March 31, 2000, the Company's Tier 1 leverage capital ratio
was approximately 5.75%. In addition, regulatory authorities have also
implemented risk-based capital guidelines requiring a minimum ratio of Tier 1
capital to risk-weighted assets of 4.00% (6.00% for "well-capitalized") and a
minimum ratio of total capital to risk-weighted assets of 8.00% (10.00% for
"well-capitalized"). At March 31, 2000, the Company's Tier 1 and total
risk-based capital ratios were approximately 10.51% and 11.33%, respectively.
The Company is categorized as "well-capitalized" under the Federal Deposit
Insurance Corporation Improvement Act of 1991 (F.D.I.C.I.A.). The Bank is also
categorized as "well-capitalized" as of March 31, 2000.
27
<PAGE>
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
- --------------------------------------------------------------------------------
IMPACT OF INFLATION
The Consolidated Financial Statements of the Company and related Financial Data
presented herein have been prepared in accordance with generally accepted
accounting principles which generally require the measurement of financial
condition and operating results in terms of historical dollars without
considering the changes in the relative purchasing power of money over time due
to inflation. The primary impact of inflation on operations of the Company is
reflected in increased operating costs. Unlike most industrial companies, almost
all the assets and liabilities of a financial institution are monetary in
nature. As a result, interest rates have a more significant impact on a
financial institution's performance than the effects of general levels of
inflation. Interest rates do not necessarily move in the same direction or in
the same magnitude as the price of goods and services.
PROPOSED ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This Statement establishes accounting and
reporting standards for derivative instruments and hedging activities. The
Statement, as amended for SFAS No. 137, is effective for all fiscal quarters of
fiscal years beginning after June 15, 2000. The Company does not expect that the
adoption of this Statement will have a material impact on the Company's
financial position or results of operation.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Information required by this Item 3 is incorporated by reference from Item 2 of
Part I of this Form 10-Q, entitled "Management's Discussion and Analysis -
Asset/Liability Management."
28
<PAGE>
Part II. OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is a defendant in various legal matters, none of which is believed
by management to be material to the consolidated financial statements.
Item 2. Changes in Securities.
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
(d) Not applicable.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
2.1 Plan of Reorganization and Acquisition dated as
of October 15, 1996 between the Company and
Abington Savings Bank incorporated by reference
to the Company's Registration Statement on Form
8-A, effective January 13, 1997.
3.1 Articles of Organization of the Company
incorporated by reference to the Company's
Registration Statement on Form 8-A, effective
January 13, 1997.
3.2 By-Laws of the Company, filed herewith.
4.1 Specimen stock certificate for the Company's
Common Stock incorporated by reference to the
Company's Registration Statement on Form 8-A,
effective January 31, 1997.
4.2 Form of Indenture between Abington Bancorp, Inc.
and State Street Bank and Trust Company
incorporated by reference to Exhibit 4.1 of the
Registration Statement on Form S-2 of the Company
and Abington Bancorp Capital Trust, filed on May
12, 1998.
4.3 Form of Junior Subordinated Debenture
incorporated by reference to Exhibit 4.2 of the
Registration Statement on Form S-2 of the Company
and Abington Bancorp Capital Trust, filed on May
12, 1998.
4.4 Form of Amended and Restated Trust Agreement by
and among the Company, State Street Bank and
Trust Company, Wilmington Trust Company and the
Administrative
29
<PAGE>
Trustees of the Trust incorporated by reference
to Exhibit 4.4 of the Registration Statement on
Form S-2 of the Company and Abington Bancorp
Capital Trust, filed on May 12, 1998.
4.5 Form of Preferred Securities Guarantee Agreement
by and between the Company and State Street Bank
and Trust Company incorporated by reference to
Exhibit 4.6 of the Registration Statement on Form
S-2 of the Company and Abington Bancorp Capital
Trust, filed on May 12, 1998.
*10.1 (a) Amended and Restated Special Termination
Agreement dated as of January 1997 among the
Company, the Bank and James P. McDonough
incorporated by reference to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1996 filed on March 31, 1997.
*(b) Amendment to Amended and Restated Special
Termination Agreement, dated as of July 1, 1997
among the Company, the Bank and James P.
McDonough, incorporated by reference to the
Company's quarterly report on Form 10-Q for the
second quarter of 1997, filed on August 13,
1997.
*10.2 Special Termination Agreement dated as of
November 2, 1998 among the Company, the Bank and
Kevin M. Tierney, incorporated by reference to
the Company's quarterly report on Form 10-Q for
the third quarter of 1998, filed on November 12,
1998.
*10.3 Special Termination Agreement dated as of May
28, 1998 among the Company, the Bank and John R.
Sylva, incorporated by reference to the
Company's quarterly report on Form 10-Q for the
second quarter of 1998, filed on August 10,
1998.
*10.4 (a) Amended and Restated Special Termination
Agreement dated as of January 31, 1997 among the
Company, the Bank and Mario A. Berlinghieri
incorporated by reference to the Company's
Annual Report for the year ended December 31,
1996 on Form 10-K filed on March 31, 1997.
(b) Amendment to Amended and Restated Special
Termination Agreement, dated as of July 1, 1997
among the Company, the Bank and Mario A.
Berlinghieri, incorporated by reference to the
Company's quarterly report on Form 10-Q for the
second quarter of 1997, filed on August 13,
1997.
(c) Amendment No. 2 to Amended and Restated
Special Termination Agreement, dated as of
April 16, 1998, by and among the Company, the
Bank and Mario A. Berlinghieri, incorporated by
reference to the Company's quarterly report on
Form 10-Q for the first quarter of 1998, filed
on May 8, 1998.
*10.5 Abington Bancorp, Inc. Incentive and
Nonqualified Stock Option Plan, as amended and
restated to reflect holding company formation
incorporated by reference to the Company's
Annual Report for the year ended December 31,
1996 on Form 10-K filed on March 31, 1997.
*10.6 Senior Management Incentive Plan, incorporated
by reference to the Company's Annual Report for
the year ended December 31, 1999 on Form 10-K
filed on March 28, 2000.
30
<PAGE>
*10.7 Revised Long Term Performance Incentive Plan
dated January 2000 incorporated by reference to
the Company's Annual Report for the year ended
December 31, 1999 on Form 10-K filed on March
28, 2000.
10.8 (a) Lease for office space located at 538
Bedford Street, Abington, Massachusetts
("lease"), used for the Bank's principal and
administrative offices dated January 1, 1996
incorporated by reference to the Company's
Annual Report for the year ended December 31,
1996 on Form 10-K filed on March 31, 1997.
Northeast Terminal Associates, Limited owns the
property. Dennis E. Barry and Joseph L. Barry,
Jr., who beneficially own more than 5% of the
Company's Common Stock, are the principal
beneficial owners of Northeast Terminal
Associates, Limited.
(b) Amendment to Lease dated December 31, 1997,
incorporated by reference to the Company's
Annual Report for the year ended December 31,
1997 on Form 10-K filed on March 25, 1998.
10.9 Dividend Reinvestment and Stock Purchase Plan
is incorporated by reference herein to the
Company's Registration Statement on Form S-3,
effective January 31, 1997.
*10.10 Abington Bancorp, Inc. 1997 Incentive and
Nonqualified Stock Option Plan, incorporated by
reference herein to Appendix A to the Company's
proxy statement relating to its special meeting
in lieu of annual meeting held on June 17,
1997, filed with the Commission on April 29,
1997.
*10.11 (a) Special Termination Agreement dated as of
July 1, 1997 among the Company, the Bank and
Robert M. Lallo, incorporated by reference to
the Company's quarterly report on Form 10-Q for
the second quarter of 1997, filed on August 13,
1997.
(b) Amendment No. 1 to Special Termination
Agreement, dated April 16, 1998, by and among
the Company, the Bank and Robert M. Lallo,
incorporated by reference to the Company's
quarterly report on Form 10-Q for the first
quarter of 1998, filed on May 8, 1998.
*10.12 Merger Severance Benefit Program dated as of
August 28, 1997, incorporated by reference to
the Company's Quarterly Report on Form 10-Q for
the third quarter of 1997, filed on November 15,
1997.
*10.13 Supplemental Executive Retirement Agreement
between the Bank and James P. McDonough dated as
of March 26, 1998, incorporated by reference to
the Company's quarterly report on Form 10-Q for
the first quarter of 1998, filed on May 8, 1998.
*10.14 Deferred Stock Compensation Plan for Directors,
effective July 1, 1998 incorporated by reference
to Appendix A to the Company's proxy statement
(schedule 14A) for its 1998 Annual Meeting,
filed with the Commission on April 13, 1998.
*10.15 Special Termination Agreement dated as of
February 7, 2000 among the Company, the Bank and
Jack B. Meehl, incorporated by reference to the
Company's Annual Report for the year ended
December 31, 1999 on Form 10-K filed on March
28, 2000.
11.1 A statement regarding the computation of
earnings per share is included in Item 8 of this
Report.
31
<PAGE>
27.1 Financial Data Schedule, March 31, 2000
(b) Reports on Form 8-K.
The Company filed no reports on Form 8-K during the first quarter of
2000.
- ---------------------------------------------------
* Management contract or compensatory plan or arrangement.
32
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
ABINGTON BANCORP, INC.
----------------------
(Company)
Date: May 10, 2000 By /s/James P. Mcdonough
-------------------------
James P. McDonough
President and Chief Executive Officer
Date: May 10, 2000 By /s/Robert M. Lallo
----------------------
Robert M. Lallo
Treasurer
(Principal Financial Officer)
33
<PAGE>
INDEX TO EXHIBITS
2.1 Plan of Reorganization and Acquisition dated as of October 15, 1996
between the Company and Abington Savings Bank incorporated by reference
to the Company's Registration Statement on Form 8-A, effective January
13, 1997.
3.1 Articles of Organization of the Company incorporated by reference to the
Company's Registration Statement on Form 8-A, effective January 13, 1997.
3.2 By-Laws of the Company, filed herewith.
4.1 Specimen stock certificate for the Company's Common Stock incorporated by
reference to the Company's Registration Statement on Form 8-A, effective
January 31, 1997.
4.2 Form of Indenture between Abington Bancorp, Inc. and State Street Bank
and Trust Company incorporated by reference to Exhibit 4.1 of the
Registration Statement on Form S-2 of the Company and Abington Bancorp
Capital Trust, filed on May 12, 1998.
4.3 Form of Junior Subordinated Debenture incorporated by reference to
Exhibit 4.2 of the Registration Statement on Form S-2 of the Company and
Abington Bancorp Capital Trust, filed on May 12, 1998.
4.4 Form of Amended and Restated Trust Agreement by and among the Company,
State Street Bank and Trust Company, Wilmington Trust Company and the
Administrative Trustees of the Trust incorporated by reference to Exhibit
4.4 of the Registration Statement on Form S-2 of the Company and Abington
Bancorp Capital Trust, filed on May 12, 1998.
4.5 Form of Preferred Securities Guarantee Agreement by and between the
Company and State Street Bank and Trust Company incorporated by reference
to Exhibit 4.6 of the Registration Statement on Form S-2 of the Company
and Abington Bancorp Capital Trust, filed on May 12, 1998.
*10.1 (a) Amended and Restated Special Termination Agreement dated as of
January 31, 1997 among the Company, the Bank and James P. McDonough
incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1996 filed on March 31, 1997.
*(b) Amendment to Amended and Restated Special Termination Agreement,
dated as of July 1, 1997 among the Company, the Bank and James P.
McDonough, incorporated by reference to the Company's quarterly report on
Form 10-Q for the second quarter of 1997, filed on August 13, 1997.
*10.2 Special Termination Agreement dated as of November 2, 1998 among the
Company, the Bank and Kevin M. Tierney, incorporated by reference to the
Company's quarterly report on Form 10-Q for the third quarter of 1998,
filed on November 12, 1998.
*10.3 Special Termination Agreement dated as of May 28, 1998 among the Company,
the Bank and John R. Sylva, incorporated by reference to the Company's
quarterly report on Form 10-Q for the second quarter of 1998, filed on
August 10, 1998.
34
<PAGE>
*10.4 (a) Amended and Restated Special Termination Agreement dated as of
January 31, 1997 among the Company, the Bank and Mario A. Berlinghieri
incorporated by reference to the Company's Annual Report for the year
ended December 31, 1996 on Form 10-K filed on March 31, 1997.
(b) Amendment to Amended and Restated Special Termination Agreement,
dated as of July 1, 1997 among the Company, the Bank and Mario A.
Berlinghieri, incorporated by reference to the Company's quarterly report
on Form 10-Q for the second quarter of 1997, filed on August 13, 1997.
(c) Amendment No. 2 to Amended and Restated Special Termination
Agreement, dated as of April 16, 1998, by and among the Company, the Bank
and Mario A. Berlinghieri, incorporated by reference to the Company's
quarterly report on form 10-Q for the first quarter of 1998, filed on May
8, 1998.
*10.5 Abington Bancorp, Inc. Incentive and Nonqualified Stock Option Plan, as
amended and restated to reflect holding company formation incorporated by
reference to the Company's Annual Report for the year ended December 31,
1996 on Form 10-K filed on March 31, 1997.
*10.6 Senior Management Incentive Plan, incorporated by reference to the
Company's Annual Report for the year ended December 31, 1999 on Form 10-K
filed on March 28, 2000.
*10.7 Revised Long Term Performance Incentive Plan dated January 2000,
incorporated by reference to the Company's Annual Report for the year
ended December 31, 1999 on Form 10-K filed on March 28, 2000.
10.8 (a) Lease for office space located at 538 Bedford Street, Abington,
Massachusetts ("Lease"), used for the Bank's principal and administrative
offices dated January 1, 1996 incorporated by reference to the Company's
Annual Report for the year ended December 31, 1996 on Form 10-K filed on
March 31, 1997. Northeast Terminal Associates, Limited owns the property.
Dennis E. Barry and Joseph L. Barry, Jr., who beneficially own more than
5% of the Company's Common Stock, are the principal beneficial owners of
Northeast Terminal Associates, Limited.
(b) Amendment to Lease dated December 31, 1997, incorporated by reference
to the Company's Annual Report for the year ended December 31, 1997 on
Form 10-K filed on March 25, 1998.
10.9 Dividend Reinvestment and Stock Purchase Plan is incorporated by
reference herein to the Company's Registration Statement on Form S-3,
effective January 31, 1997.
*10.10 Abington Bancorp, Inc. 1997 Incentive and Nonqualified Stock Option Plan,
incorporated by reference herein to Appendix A to the Company's proxy
statement relating to its special meeting in lieu of annual meeting held
on June 17, 1997, filed with the Commission on April 29, 1997.
*10.11 (a) Special Termination Agreement dated as of July 1, 1997 among the
Company, the Bank and Robert M. Lallo, incorporated by reference to the
Company's quarterly report on Form 10-Q for the second quarter of 1997,
filed on August 13, 1997.
35
<PAGE>
(b) Amendment No. 1 to Special Termination Agreement, dated as of April
16, 1998, by and among the Company, the Bank and Robert M. Lallo,
incorporated by reference to the Company's quarterly report on Form 10-Q
for the first quarter of 1998, filed on May 8, 1998.
*10.12 Merger Severance Benefit Program dated as of August 28, 1997,
incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the third quarter of 1997, filed on November 15, 1997.
*10.13 Supplemental Executive Retirement Agreement between the Bank and James P.
McDonough dated as of March 26, 1998, incorporated by reference to the
Company's quarterly report on Form 10-Q for the first quarter of 1998,
filed on May 8, 1998.
*10.14 Deferred Stock Compensation Plan for Directors, effective July 1, 1998
incorporated by reference to Appendix A to the Company's proxy statement
(schedule 14A) for its 1998 Annual Meeting, filed with the Commission on
April 13, 1998.
*10.15 Special Termination Agreement dated as of February 7, 2000 among the
Company, the Bank and Jack B. Meehl, incorporated by reference to the
Company's Annual Report for the year ended December 31, 1999 on Form 10-K
filed on March 28, 2000.
11.1 A statement regarding the computation of earnings per share is included
in Item 8 of this Report.
27.1 Financial Data Schedule, March 31, 2000
- --------------------
* Management contract or compensatory plan or arrangement.
36
<PAGE>
EXHIBIT 3.2
BY-LAWS
OF
ABINGTON BANCORP, INC.
April, 2000
<PAGE>
BY-LAWS
OF
ABINGTON BANCORP, INC.
ARTICLE I
Organization 1
ARTICLE II
Stockholders 1
SECTION 2.1 Annual Meeting.......................................1
SECTION 2.2 Special Meetings.....................................1
SECTION 2.3 Matters to be Considered at Annual Meetings..........2
SECTION 2.4 Notice of Meetings...................................3
SECTION 2.5 Quorum...............................................3
SECTION 2.6 Voting and Proxies...................................3
SECTION 2.7 Action at Meeting....................................4
SECTION 2.8 Action without Meeting...............................4
SECTION 2.9 Presiding Officer....................................4
SECTION 2.10 Voting Procedures and Inspectors of Elections........4
SECTION 2.11 Rescheduling of Meetings; Adjournments...............5
ARTICLE III
Directors 5
SECTION 3.1 Powers...............................................5
SECTION 3.2 Composition and Term.................................5
SECTION 3.3 Director Nominations.................................6
SECTION 3.4. Qualifications.......................................7
SECTION 3.5 Resignation..........................................7
SECTION 3.6 Removal..............................................7
SECTION 3.7 Vacancies............................................7
SECTION 3.8 Compensation.........................................7
SECTION 3.9 Regular Meetings.....................................7
SECTION 3.10 Special Meetings.....................................8
SECTION 3.11 Notice of Special Meetings...........................8
SECTION 3.12 Quorum...............................................8
SECTION 3.13 Action at Meeting....................................8
SECTION 3.14 Action by Consent....................................8
SECTION 3.15 Presumption of Assent................................8
SECTION 3.16 Committees...........................................9
SECTION 3.17 Manner of Participation..............................9
i
<PAGE>
ARTICLE IV
Officers 9
SECTION 4.1 Enumeration..........................................9
SECTION 4.2 Election.............................................9
SECTION 4.3 Qualification........................................9
SECTION 4.4 Tenure...............................................9
SECTION 4.5 Removal.............................................10
SECTION 4.6 Vacancies...........................................10
SECTION 4.7 Chairman of the Board...............................10
SECTION 4.8 Chief Executive Officer.............................10
SECTION 4.9 President and Vice Presidents.......................10
SECTION 4.10 Treasurer, Vice Treasurers, and
Assistant Treasurers...............................10
SECTION 4.11 Clerk and Assistant Clerks.........................11
SECTION 4.12 Secretary and Assistant Secretaries................11
SECTION 4.13 Other Powers and Duties............................11
ARTICLE V
Capital Stock 11
SECTION 5.1 Certificates of Stock...............................11
SECTION 5.2 Transfers...........................................11
SECTION 5.3 Record Holders......................................11
SECTION 5.4 Record Date.........................................12
SECTION 5.5 Replacement of Certificates.........................12
SECTION 5.6 Issuance of Capital Stock...........................12
SECTION 5.7 Dividends...........................................12
ARTICLE VI
Indemnification 12
SECTION 6.1 Officers............................................12
SECTION 6.2 Non-Officer Employees...............................12
SECTION 6.3 Service at Direction of Board of Directors..........13
SECTION 6.4 Good Faith..........................................13
SECTION 6.5 Prior to Final Disposition..........................13
SECTION 6.6 Notification and Defense of Claim. ................13
SECTION 6.7 Insurance...........................................14
SECTION 6.8 Definitions.........................................14
SECTION 6.9 Other Indemnification Rights........................14
SECTION 6.10 Survival of Benefits...............................15
SECTION 6.11 Subsequent Amendment. ............................15
SECTION 6.12 Merger or Consolidation. .........................15
SECTION 6.13 Subsequent Legislation.............................15
ARTICLE VII
Miscellaneous Provisions 15
SECTION 7.1 Fiscal Year.........................................15
ii
<PAGE>
SECTION 7.2 Seal................................................15
SECTION 7.3 Execution of Instruments............................15
SECTION 7.4 Voting of Securities................................15
SECTION 7.5 Resident Agent......................................16
SECTION 7.6 Corporation Records.................................16
SECTION 7.7 Articles of Organization............................16
SECTION 7.8 By-Law Amendments...................................16
iii
<PAGE>
BY-LAWS
OF
ABINGTON BANCORP, INC.
ARTICLE I
ORGANIZATION
The name of this Corporation shall be "Abington Bancorp, Inc." The
Corporation shall have and may exercise all the powers, privileges and
authority, express, implied and incidental, now or hereafter conferred by
applicable law and the Corporation's Articles of Organization.
ARTICLE II
STOCKHOLDERS
SECTION 2.1 ANNUAL MEETING. The annual meeting of the
stockholders for elections and other purposes shall be held on the third
Tuesday in May at 10 a.m. (or if that be a legal holiday in the place where
the meeting is to be held, on the next succeeding full business day), at the
main office of the Corporation in Massachusetts, unless a different hour,
date or place within or without the United States is fixed by the Board of
Directors, the Chairman of the Board or the President. If no annual meeting
has been held on the date fixed above, a special meeting in lieu thereof may
be held, and such special meeting shall have for the purposes of these
By-Laws or otherwise all the force and effect of an annual meeting.
SECTION 2.2 SPECIAL MEETINGS. Special meetings of stockholders
may be called by a majority of the Directors then in office (provided,
however, that if there is an Interested Stockholder, any such call by the
Board of Directors shall also require the affirmative vote of a majority of
the Continuing Directors then in office). Special meetings shall be called
by the Clerk or in the case of the death, absence, incapacity or refusal of
the Clerk, by any other officer, upon written application of one or more
stockholders who hold at least (i) 66-2/3% in interest of the capital stock
entitled to vote at such meeting or (ii) such lesser percentage, if any, (but
not less than 40%) as shall be determined to be the maximum percentage which
the Corporation is permitted by applicable law to establish for the call of
such a meeting. Application to a court pursuant to Section 34(b) of Chapter
156B of the General Laws of the Commonwealth of Massachusetts requesting the
call of a special meeting of stockholders because none of the officers is
able and willing to call such a meeting may be made only by stockholders who
hold at least (i) 66-2/3% in interest of the capital stock entitled to vote
at such meeting or (ii) such lesser percentage, if any, (but not less than
40%) as shall be determined to be the maximum percentage which the
Corporation is permitted by applicable law to establish for the call of such
a meeting.
Any written application for a special meeting by one or more
stockholders shall set forth as to each matter proposed to be brought before
the special meeting (a) a brief description of the proposal desired to be
brought before the special meeting and the reasons for conducting such
business at the special meeting, (b) the name and address, as they appear on
the Corporation's books, of the stockholder(s) proposing such business and
any other stockholders known by such
1
<PAGE>
stockholder(s) to be supporting such proposal, (c) the class and number of
shares of the Corporation's capital stock which are beneficially owned by the
stockholder(s) on the date of such stockholder application and by any other
stockholders known by such stockholder(s) to be supporting such proposal on
the date of such stockholder application, and (d) any financial interest of
the supporting stockholder(s) in such proposal.
The hour, date and place of any special meeting and the record date
for determining the stockholders having the right to notice of and to vote at
such meeting shall be determined by the Board of Directors or the President.
At a special meeting of stockholders, only such business shall be conducted,
and only such proposals shall be acted upon, as shall have been stated in the
written notice of the special meeting, unless otherwise provided by law.
SECTION 2.3 MATTERS TO BE CONSIDERED AT ANNUAL MEETINGS. At an
annual meeting of stockholders, only such new business shall be conducted,
and only such proposals shall be acted upon as shall be proper subjects for
stockholder action pursuant to the Articles of Organization, these By-Laws,
or applicable law and shall have been brought before the annual meeting (a)
by, or at the direction of, the Board of Directors, The Chairman of the
Board, or the President or (b) by any holder of record (both as of the time
notice of such proposal is given by the stockholder as set forth below and as
of the record date for the Annual Meeting in question) of any shares of
capital stock of the Corporation entitled to vote at such Annual Meeting who
complies with the requirements set forth in this Section 2.3.
For a proposal to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in writing
to the Clerk of the Corporation. To be timely, a stockholder's notice must
be received at the principal executive offices of the Corporation not less
than 60 days nor more than 150 days prior to the scheduled annual meeting,
regardless of any postponements, deferrals or adjournments of that meeting to
a later date; provided, however, that if less than 70 days' notice or prior
public disclosure of the date of the scheduled annual meeting is given or
made, notice by the stockholder to be timely must be so delivered or received
not later than the close of business on the tenth day following the earlier
of the day on which such notice of the date of the scheduled annual meeting
was mailed or the day on which public disclosure was made. A stockholder's
notice to the Clerk shall set forth as to each matter the stockholder
proposes to bring before the annual meeting (a) a brief description of the
proposal desired to be brought before the annual meeting and the reasons for
conducting such business at the annual meeting, (b) the name and address, as
they appear on the Corporation's books, of the stockholder proposing such
business and any other stockholders known by such stockholder to be
supporting such proposal, (c) the class and number of shares of the
Corporation's capital stock which are beneficially owned by the stockholder
on the date of such stockholder notice and by any other stockholders known by
such stockholder to be supporting such proposal on the date of such
stockholder notice, and (d) any financial interest of the stockholder in such
proposal.
The Board of Directors, a designated committee thereof or the
presiding officer at the Annual Meeting may reject any stockholder proposal
not made in accordance with the terms of this Section 2.3. If there is an
Interested Stockholder, any determinations to be made by the Board of
Directors or a designated committee thereof pursuant to the provisions of
this paragraph shall also require the concurrence of a majority of the
Continuing Directors then in office.
This provision shall not prevent the consideration and approval or
disapproval at the annual meeting of reports of officers, Directors, and
committees, but in connection with such reports, no
2
<PAGE>
matter shall be acted upon at such annual meeting unless stated and filed as
herein provided.
As used in these By-Laws, the terms "Interested Stockholder" and
"Continuing Director" shall have the same respective meanings assigned to
them in the Corporation's Articles of Organization. Any determination of
beneficial ownership of securities under these By-Laws shall be made in the
manner specified in the Articles of Organization.
Notwithstanding the provisions of this Section 2.3, a stockholder
shall also comply with all applicable requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and the rules and regulations
thereunder with respect to the matters set forth in this Section 2.3.
Nothing contained in this Section 2.3 shall require proxy materials
distributed by the management of the Corporation to include any information
with respect to stockholder proposals.
SECTION 2.4 NOTICE OF MEETINGS. A written notice of all annual
and special meetings of stockholders shall state the place, date, hour, and
purposes of such meetings, and shall be given by the Clerk or an Assistant
Clerk (or other person authorized by these By-Laws or by law) at least seven
(7) days before the meeting to each stockholder entitled to vote at such
meeting or to each stockholder who, under the Articles of Organization, or
under these By-laws, is entitled to such notice, by leaving such notice with
him or at his residence or usual place of business, or by mailing it, postage
prepaid, and addressed to such stockholder at his address as it appears on
the stock transfer books of the Corporation. When any stockholders' meeting,
either annual or special, is adjourned for thirty (30) days or more, notice
of the adjourned meeting shall be given as in the case of an original
meeting. It shall not be necessary to give any notice of the time and place
of any meeting adjourned for less than thirty (30) days or of the business to
be transacted thereat, other than an announcement at the meeting at which
such adjournment is taken. A written waiver of notice, executed before or
after a meeting by such stockholder or his attorney thereunto authorized and
filed with the records of the meeting, shall be deemed equivalent to notice
of the meeting.
SECTION 2.5 QUORUM. The holders of a majority in interest of all
stock issued, outstanding, and entitled to vote, represented in person or by
proxy, shall constitute a quorum at a meeting of stockholders, but if less
than a quorum is present at a meeting, a majority in interest of the
stockholders present or the presiding officer may adjourn the meeting from
time to time and the meeting may be held as adjourned without further notice,
except as provided in Section 2.4 of this Article II. At such adjourned
meeting at which a quorum shall be present or represented, any business may
be transacted which might have been transacted at the meeting as originally
noticed. The stockholders present at a duly constituted meeting may continue
to transact business until adjournment notwithstanding the withdrawal of
enough stockholders to leave less than a quorum.
SECTION 2.6 VOTING AND PROXIES. Stockholders shall have one vote
for each share of stock entitled to vote owned by them of record according to
the books of the Corporation, unless otherwise provided by law or by the
Articles of Organization. Stockholders of record may vote either in person
or by written proxy dated not more than six (6) months before the meeting
named therein, unless the proxy is coupled with an interest and provides
otherwise. Proxies shall be filed with the Clerk at the meeting, or of any
adjournment thereof, before being voted. Proxies solicited on behalf of the
management shall be voted as directed by the stockholder or, in the absence
of such direction, as determined by a majority of the Board of Directors.
Except as otherwise limited therein, proxies shall entitle the persons
authorized thereby to vote at any adjournment of such meeting, but they shall
not be valid after final adjournment of such meeting. A proxy with respect
to
3
<PAGE>
stock held in the name of two or more persons shall be valid if executed
by one of them unless at or prior to exercise of the proxy the Clerk of the
Corporation receives a specific written notice to the contrary from any one
of them. Whenever stock is held in the name of two or more persons, in the
absence of specific written notice to the Corporation to the contrary, at any
meeting of the stockholders of the Corporation any one or more of such
stockholders may cast, in person or by proxy, all votes to which such
ownership is entitled. In the event an attempt is made to cast conflicting
votes, in person or by proxy, by the several persons in whose names shares of
stock stand, the vote or votes to which those persons are entitled shall be
cast as directed by a majority of those holding such stock and present in
person or by proxy at such meeting, but no votes shall be cast for such stock
if a majority does not agree. A proxy purporting to be executed by or on
behalf of a stockholder shall be deemed valid unless successfully challenged
at or prior to its exercise, and the burden of proving invalidity shall rest
on the challenger.
SECTION 2.7 ACTION AT MEETING. When a quorum is present, any
matter before the meeting shall be decided by vote of the holders of a
majority of the shares of stock voting on such matter, except where a larger
vote is required by law, by the Articles of Organization, or by these
By-Laws. Any election by stockholders shall be determined by a plurality of
the votes cast, except where a larger vote is required by law, by the
Articles of Organization, or by these By-Laws. No ballot shall be required
for any election unless requested by a stockholder entitled to vote in the
election. The Corporation shall not directly or indirectly vote any share of
its own stock; provided however, that no provision of these By-Laws shall be
construed to limit the voting rights and powers relating to shares of stock
held pursuant to a plan which is intended to be an "employee stock ownership
plan" as defined in the Internal Revenue Code, as now or hereafter in effect.
SECTION 2.8 ACTION WITHOUT MEETING. Any action to be taken at any
annual or special meeting of stockholders may be taken without a meeting if
all stockholders entitled to vote on the matter consent to the action in
writing and the written consents are filed with the records of the meetings
of stockholders. Such consents shall be treated for all purposes as a vote
at a meeting.
SECTION 2.9 PRESIDING OFFICER. The Chairman of the Board, if one
is elected, or if not elected or in his absence, the President, shall preside
at all annual or special meetings of stockholders and shall have the power,
among other things, to adjourn such meeting at any time and from time to
time, subject to Sections 2.4 and 2.5. The order of business and all other
matters of procedure at every meeting of the stockholders shall be determined
by the presiding officer.
SECTION 2.10 VOTING PROCEDURES AND INSPECTORS OF ELECTIONS. In
advance of any meeting of stockholders, the presiding officer may appoint one
or more inspectors to act at an annual or special meeting of stockholders and
make a written report thereon. Any inspector may, but need not, be an
officer, employee or agent of the Corporation. Each inspector, before
entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector with strict impartiality and
according to the best of his or her ability. The inspector(s) shall (i)
ascertain the number of shares outstanding and the voting power of each, (ii)
determine the shares represented at a meeting and the validity of proxies and
ballots, (iii) count all votes and ballots, (iv) determine and retain for a
reasonable period a record of the disposition of any challenges made to any
determination by the inspectors, and (v) certify their determination of the
number of shares represented at the meeting, and their count of all votes and
ballots. The inspector(s) may appoint or retain other persons or entities to
assist the inspector(s) in the performance of the duties of the inspector(s).
The presiding officer may review all determinations made by the
inspector(s), and in so doing the presiding officer shall be entitled to
exercise his sole judgment and discretion and he
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shall not be bound by any determinations made by the inspector(s). All
determinations by the inspector(s) and, if applicable, presiding officer
shall be subject to further review by any court of competent jurisdiction.
SECTION 2.11 RESCHEDULING OF MEETINGS; ADJOURNMENTS. The Board of
Directors or a designated committee thereof may postpone and reschedule any
previously scheduled annual or special meeting of stockholders, and a record
date with respect thereto, regardless of whether any notice or public
disclosure with respect to any such meeting or record date has been sent or
made (unless there is an Interested Stockholder, in which case the
affirmative vote of a majority of the Continuing Directors shall also be
required). In no event shall the public announcement of an adjournment,
postponement or rescheduling of any previously scheduled Annual Meeting of
stockholders commence a new time period for the giving of a stockholder's
notice under Section 2.3 and Section 3.3 of these By-Laws.
ARTICLE III
DIRECTORS
SECTION 3.1 POWERS. The business and affairs of the Corporation
shall be managed by a Board of Directors who may exercise all the powers of
the Corporation except as otherwise provided by law, by the Articles of
Organization or by these By-Laws. In the event of a vacancy in the Board of
Directors, the remaining Directors, except as otherwise provided by law, may
exercise the powers of the full Board until the vacancy is filled.
SECTION 3.2 COMPOSITION AND TERM. The Board of Directors shall
be composed of: (a) those persons elected by the incorporator(s) of the
Corporation to serve as the initial Directors of the Corporation in
accordance with Section 12 of Chapter 156B of the Massachusetts General Laws,
such persons to serve as Directors until the respective expiration dates of
their terms as established by the incorporator(s) and until their successors
are elected and qualified; and (b) as such terms expire, those persons who
are elected as Directors from time to time as provided herein. Subject to
the rights of the holders of any series of Preferred Stock, the number of
Directors and their respective classifications shall be fixed from time to
time exclusively by the Board of Directors; provided, however, that if at the
time of such action there is an Interested Stockholder, such action shall in
addition require a majority vote of the Continuing Directors then in office.
The Directors, other than those who may be elected by the holders of
any series of preferred stock of the Corporation, shall be classified, with
respect to the term for which they severally hold office, into three classes,
labelled Group A, Group B and Group C, respectively, such classes to be as
nearly equal in number as possible. The initial Directors of the Corporation
shall hold office as follows: the first class of Directors shall hold office
initially for a term expiring at the annual meeting of stockholders to be
held in 1997, the second class of Directors shall hold office initially for a
term expiring at the annual meeting of stockholders to be held in 1998, and
the third class of Directors shall hold office initially for a term expiring
at the annual meeting of stockholders to be held in 1999. At each succeeding
annual meeting of stockholders, the successors of the class of Directors
whose term expires at that meeting shall be elected by a plurality vote of
all votes cast at such meeting to hold office for a term expiring at the
annual meeting of stockholders held in the third year following the year of
their election. Members of each class shall hold office until their
successors are duly elected and qualified or until their earlier resignation
or removal.
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SECTION 3.3 DIRECTOR NOMINATIONS. Nominations of candidates for
election as Directors at any annual meeting of stockholders may be made (a)
by, or at the direction of, a majority of the Board of Directors or a
designated committee thereof (unless there is an Interested Stockholder, in
which case the affirmative vote of a majority of the Continuing Directors
shall also be required) or (b) by any holder of record (both as of the time
notice of such nomination is given by the stockholder as set forth below and
as of the record date for the Annual Meeting in question) of any shares of
capital stock of the Corporation entitled to vote at such Annual Meeting who
complies with the requirements set forth in this Section 3.3. Only persons
nominated in accordance with the procedures set forth in this Section 3.3
shall be eligible for election as Directors at an annual meeting.
Nominations, other than those made by, or at the direction of, the
Board of Directors (or by the Continuing Directors, if required), shall be
made pursuant to timely notice in writing to the Clerk of the Corporation as
set forth in this Section 3.3. To be timely, a stockholder's notice shall be
delivered to, or mailed and received, at the principal executive offices of
the Corporation not less than 60 days nor more than 150 days prior to the
date of the scheduled annual meeting, regardless of postponements, deferrals,
or adjournments of that meeting to a later date; provided, however, that if
less than 70 days' notice or prior public disclosure of the date of the
scheduled annual meeting is given or made, notice by the stockholder to be
timely must be so delivered or received not later than the close of business
on the tenth day following the earlier of the day on which such notice of the
date of the scheduled annual meeting was mailed or the day on which such
public disclosure was made. Such stockholder's notice shall set forth (a) as
to each person whom the stockholder proposes to nominate for election or
re-election as a Director and as to the stockholder giving the notice (i) the
name, age, business address and residence address of such person, (ii) the
principal occupation or employment of such person, (iii) the class and number
of shares of the Corporation's capital stock which are beneficially owned by
such person on the date of such stockholder notice and (iv) any other
information relating to such person that is required to be disclosed in
solicitations of proxies with respect to nominees for election as Directors,
pursuant to the Exchange Act and the Rules and regulations thereunder,
including, but not limited to, the written consent of such person to serve as
a Director if elected; and (b) as to the stockholder giving the notice (i)
the name and address as they appear on the Corporation's books, of such
stockholder and any other stockholders known by such stockholder to be
supporting such nominees and (ii) the class and number of shares of the
Corporation's capital stock which are beneficially owned by such stockholder
on the date of such stockholder notice and by any other stockholders known by
such stockholder to be supporting such nominees on the date of such
stockholder notice. At the request of the Board of Directors, any person
nominated by, or at the direction of, the Board for election as a Director at
an annual or special meeting shall furnish to the Clerk of the Corporation
that information required to be set forth in the stockholder's notice of
nomination which pertains to the nominee.
Nothing contained in this Section 3.3 shall require proxy materials
distributed by the management of the Corporation to include any information
with respect to nominations by stockholders.
No person shall be elected as a Director of the Corporation unless
nominated in accordance with the procedures set forth in this Section 3.3.
Ballots bearing the names of all the persons who have been nominated for
election as Directors at an annual or special meeting in accordance with the
procedures set forth in this Section 3.3 shall be provided for use at such
annual or special meeting.
The Board of Directors, a designated committee thereof, or the
presiding officer may reject
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any nomination by a stockholder that is not timely made in accordance with
this Section 3.3 or does not satisfy the requirements of this Section 3.3 in
any material respect. If there is an Interested Stockholder, any
determinations to be made by the Board of Directors or a designated committee
thereof pursuant to the provisions of this paragraph shall also require the
concurrence of a majority of the Continuing Directors then in office.
SECTION 3.4. QUALIFICATIONS. Each Director shall have such
qualifications as are required by applicable law.
SECTION 3.5 RESIGNATION. Any Director may resign at any time by
delivering his written resignation to the main office of the Corporation
addressed to the Chairman of the Board or the President. Such resignation
shall be effective upon receipt thereof by the Chairman of the Board or the
President, unless it is specified to be effective at some other time or upon
the happening of some other event.
SECTION 3.6 REMOVAL. Subject to the rights of the holders of any
Preferred Stock then outstanding, any Director (including persons elected by
Directors to fill vacancies in the Board of Directors) may be removed from
office, with or without cause, by an affirmative vote of not less than
two-thirds (2/3) of the total votes eligible to be cast by stockholders,
voting together as a single class, at a duly constituted meeting of
stockholders called expressly for such purpose. At least 30 days prior to
such meeting of stockholders, written notice shall be sent to the Director
whose removal will be considered at the meeting and, if the removal is for
cause, the Director will be provided an opportunity to be heard before the
stockholders.
SECTION 3.7 VACANCIES. Subject to the rights of the holders of
any series of Preferred Stock or any other series or class of stock as set
forth in the Articles of Organization, any vacancy occurring on the Board of
Directors as a result of resignation, removal, death or other cause, and
newly created directorships resulting from any increase in the authorized
number of Directors, may be filled only by the affirmative vote of the
majority of the remaining Directors then in office, though less than a quorum
of the number constituting the full board as fixed by the Board of Directors;
provided, however, that if at the time of such vacancy there is an Interested
Stockholder, such vacancy may only be filled by vote of a majority of the
Continuing Directors then in office. A Director elected to fill such a
vacancy shall be elected to serve for the full term of the Class of Directors
in which the vacancy occurred or the new directorship was created and until
such Director's successor has been elected and qualified, or until such
Director's earlier resignation or removal.
SECTION 3.8 COMPENSATION. The members of the Board of Directors
and the members of either standing or special committees may be allowed such
compensation for attendance at meetings as the Board of Directors or the
Executive Committee may determine.
SECTION 3.9 REGULAR MEETINGS. A regular meeting of the Board of
Directors shall be held without other notice than this By-Law on the same
date and at the same place as the annual meeting of stockholders, or the
special meeting held in lieu thereof, following such meeting of stockholders.
The Board of Directors may provide by resolution, the time, date and place
for the holding of regular meetings without other notice than such
resolution. There shall be regular meetings of the Board of Directors at a
place or places fixed from time to time by the Board of Directors.
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SECTION 3.10 SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by or at the request of the Chairman of the Board,
the President, or a majority of the Directors. The persons authorized to
call special meetings of the Board of Directors may fix the time, date and
place for holding any special meeting of the Board of Directors called by
such persons.
SECTION 3.11 NOTICE OF SPECIAL MEETINGS. Notice of the time,
date and place of all special meetings of the Board of Directors shall be
given to each Director by the Secretary, or if there be no Secretary, by the
Clerk or Assistant Clerk or in the case of the death, absence, incapacity or
refusal of such persons, by the officer or one of the Directors calling the
meeting. Notice of any special meeting of the Board of Directors shall be
given to each Director in person or by telephone or sent to his business or
home address by telecommunication at least twenty-four (24) hours in advance
of the meeting, or by written notice mailed to his business or home address
at least forty-eight (48) hours in advance of such meeting. If mailed, such
notice shall be deemed to be delivered when deposited in the mail so
addressed, with postage thereon prepaid. When any Board of Directors'
meeting, either regular or special, is adjourned for thirty (30) days or
more, notice of the adjourned meeting shall be given as in the case of an
original meeting. It shall not be necessary to give any notice of the time
and place of any meeting adjourned for less than thirty (30) days or of the
business to be transacted thereat, other than an announcement at the meeting
at which such adjournment is taken. Any Director may waive notice of any
meeting by a writing executed by him either before or after the meeting and
filed with the records of the meeting. The attendance of a Director at a
meeting shall constitute a waiver of notice of such meeting, except where the
Director protests the lack of notice to him prior to the meeting or at its
commencement. Neither the business to be transacted at, nor the purpose of,
any meeting of the Board of Directors need be specified in the notice or
waiver of notice of such meeting.
SECTION 3.12 QUORUM. A majority of the number of Directors then
in office shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors, but if less than a quorum is present at a
meeting, a majority of the Directors present may adjourn the meeting from
time to time and the meeting may be held as adjourned without further notice,
except as provided in Section 3.11. At such adjourned meeting at which a
quorum shall be present or represented, any business may be transacted which
might have been transacted at the meeting as originally noticed.
SECTION 3.13 ACTION AT MEETING. The act of the majority of the
Directors present at a meeting at which a quorum is present shall be the act
of the Board of Directors, unless a greater number is prescribed by governing
law, by the Articles of Organization or by these By-Laws.
SECTION 3.14 ACTION BY CONSENT. Any action required or permitted
to be taken by the Board of Directors at any meeting may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the Directors then in office. Such written consents shall
be filed with the records of the meetings of the Board of Directors and shall
be treated for all purposes as a vote at a meeting of the Board of Directors.
SECTION 3.15 PRESUMPTION OF ASSENT. A Director of the
Corporation who is present at a meeting of the Board of Directors at which
action on any Corporation matter is taken shall be presumed to have assented
to the action taken unless his dissent or abstention has been entered in the
minutes of the meeting or unless he has filed a written dissent to such
action with the person acting as the Clerk of the meeting before the
adjournment thereof or has forwarded such dissent by registered mail to the
Clerk of the Corporation within five (5) days after the date such dissenting
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Director receives a copy of the minutes of the meeting. Such right to
dissent shall not apply to a Director who voted in favor of such action.
SECTION 3.16 COMMITTEES. The Board of Directors, by vote of a
majority of all of the Directors then in office, may elect such committees as
it deems appropriate, and may delegate to such committees some or all of its
powers except those which by law, by the Articles of Organization or by these
By-Laws may not be delegated. Except as the Board of Directors may otherwise
determine, any such committee may make rules for the conduct of its business,
but unless otherwise provided by the Board of Directors or in such rules, its
business shall be conducted so far as possible in the same manner as is
provided by these By-Laws for the Board of Directors. All members of such
committees shall hold such offices at the pleasure of the Board of Directors.
The Board of Directors may abolish any such committee at any time, subject
to applicable law. Any committee to which the Board of Directors delegates
any of its powers or duties shall keep records of its meetings and shall
report its action to the Board of Directors. The Board of Directors shall
have power to rescind any action of any committee, but no such rescission
shall have retroactive effect. With approval of the Board of Directors, the
Chief Executive Officer may appoint such other committees consisting of such
Directors as the Chief Executive Officer shall select. Any recommendations
of such committees appointed by the Chief Executive Officer shall be
submitted to the Board of Directors.
SECTION 3.17 MANNER OF PARTICIPATION. Members of the Board of
Directors may participate in meetings of the Board by means of conference
telephone or similar communications equipment by which all persons
participating in the meeting can hear each other. Such participation shall
constitute presence in person.
ARTICLE IV
OFFICERS
SECTION 4.1 ENUMERATION. The officers of the Corporation shall
consist of a President, a Treasurer, a Clerk, and such other officers,
including without limitation a Chairman of the Board, a Secretary, and one or
more Vice Presidents, Vice Treasurers, Assistant Vice Presidents, Assistant
Treasurers, Assistant Clerks or Assistant Secretaries, as the Board of
Directors may determine.
SECTION 4.2 ELECTION. The President, the Treasurer and the Clerk
shall be elected annually by the Board of Directors at their first meeting
following the annual meeting of stockholders. Other officers may be chosen
by the Board of Directors at such first meeting of the Board of Directors or
at any other meeting.
SECTION 4.3 QUALIFICATION. Any two or more offices may be held by
any person. The President shall be a Director. The Clerk shall be a
resident of Massachusetts unless the Corporation has a resident agent
appointed for the purpose of service of process. Any officer may be required
by the Board of Directors to give bond for the faithful performance of his
duties in such amount and with such sureties as the Board of Directors may
determine. Other than as required by applicable law or regulation, no
officer or Director need be a stockholder.
SECTION 4.4 TENURE. Except as otherwise provided by law, by the
Articles of Organization or by these By-Laws, the President, Treasurer and
Clerk shall hold office until the first meeting of the Board of Directors
following the next annual meeting of stockholders and until their
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respective successors are chosen and qualified. All other officers shall
hold office until the first meeting of the Board of Directors following the
next annual meeting of stockholders and until their successors are chosen and
qualified, or for such shorter term as the Board of Directors may fix at the
time such officers are chosen. Any officer may resign by delivering his
written resignation to the Corporation at its main office addressed to the
President, Clerk or Secretary. Such resignation shall be effective upon
receipt thereof by the President, Clerk or Secretary, unless it is specified
to be effective at some other time or upon the happening of some other event.
Election or appointment of an officer, employee or agent shall not of itself
create contract rights to continued employment or otherwise. The Board of
Directors may authorize the Corporation to enter into an employment contract
with any officer in accordance with governing law or regulation, but no such
contract right shall preclude the Board of Directors from exercising right to
remove any officer at any time in accordance with Section 4.5.
SECTION 4.5 REMOVAL. Except as otherwise provided by law, the
Board of Directors may remove any officer with or without cause by a vote of
two-thirds (2/3) of the entire number of Directors then in office; provided,
however, that if at the time of such removal there is an Interested
Stockholder, the affirmative vote of a majority of the Continuing Directors
then in office shall instead be required. An officer may be removed for
cause only after reasonable notice and opportunity to be heard by the Board
of Directors.
SECTION 4.6 VACANCIES. Any vacancy in any office may be filled
for the unexpired portion of the term by the Board of Directors.
SECTION 4.7 CHAIRMAN OF THE BOARD. The Board of Directors may
annually elect a Chairman of the Board. Unless the Board of Directors
otherwise provides, the Chairman of the Board shall be the Chief Executive
Officer of the Corporation and shall preside, when present, at all meetings
of the stockholders and of the Board of Directors.
SECTION 4.8 CHIEF EXECUTIVE OFFICER. The Chief Executive Officer
shall, subject to the direction of the Board of Directors, have general
supervision and control of the Corporation's business.
SECTION 4.9 PRESIDENT AND VICE PRESIDENTS. The President shall
have such powers and shall perform such duties as the Board of Directors may
from time to time designate and shall serve as the Chief Executive Officer of
the Corporation if there is no Chairman of the Board. Unless otherwise
provided by the Board of Directors, he shall preside, when present, at all
meetings of stockholders and of the Board of Directors if the Chairman of the
Board does not attend such meetings.
Any Vice President or Assistant Vice President shall have such
powers and shall perform such duties as the Board of Directors or the Chief
Executive Officer may from time to time designate.
SECTION 4.10 TREASURER, VICE TREASURERS, AND ASSISTANT TREASURERS.
The Treasurer shall, subject to the direction of the Board of Directors,
have general charge of the financial affairs of the Corporation and shall
cause to be kept accurate books of account. He shall have custody of all
funds, securities, and valuable documents of the Corporation, except as the
Board of Directors may otherwise provide. The Treasurer shall also perform
such other duties as the Board of Directors may from time to time designate.
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Any Vice Treasurer and any Assistant Treasurer shall have such
powers and perform such duties as the Board of Directors or the Chief
Executive Officer may from time to time designate.
SECTION 4.11 CLERK AND ASSISTANT CLERKS. The Clerk shall keep a
record of the meetings of stockholders. In case a Secretary is not elected
or is absent, the Clerk or an Assistant Clerk shall keep a record of the
meetings of the Board of Directors. In the absence of the Clerk from any
meeting of the stockholders, an Assistant Clerk if one be elected, otherwise
a Temporary Clerk designated by the person presiding at the meeting, shall
perform the duties of the Clerk.
SECTION 4.12 SECRETARY AND ASSISTANT SECRETARIES. The Secretary,
if one be elected, shall keep a record of the meetings of the Board of
Directors. In the absence of the Secretary, any Assistant Secretary, the
Clerk and any Assistant Clerk, a Temporary Secretary shall be designated by
the person presiding at such meeting to perform the duties of the Secretary.
SECTION 4.13 OTHER POWERS AND DUTIES. Subject to these By-Laws,
each officer of the Corporation shall have in addition to the duties and
powers specifically set forth in these By-Laws, such duties and powers as are
customarily incident to his office, and such duties and powers as may be
designated from time to time by the Board of Directors.
ARTICLE V
CAPITAL STOCK
SECTION 5.1 CERTIFICATES OF STOCK. Each stockholder shall be
entitled to a certificate of the capital stock of the Corporation in such
form as may from time to time be prescribed by the Board of Directors. Such
certificate shall be signed by the President or a Vice President and by the
Treasurer or an Assistant Treasurer, and sealed with the corporate seal or a
facsimile thereof. Such signatures may be facsimile if the certificate is
signed by a transfer agent, or by a registrar, other than a Director, officer
or employee of the Corporation. In case any officer who has signed or whose
signature has been placed on such certificate shall have ceased to be such
officer before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer at the time of
its issue. Each certificate for shares of capital stock shall be
consecutively numbered or otherwise identified. Every certificate for shares
of stock which are subject to any restriction on transfer and every
certificate issued when the Corporation is authorized to issue more than one
class or series of stock shall contain such legend with respect thereto as is
required by law.
SECTION 5.2 TRANSFERS. Subject to any restrictions on transfer,
shares of stock may be transferred on the books of the Corporation by the
surrender to the Corporation or its transfer agent of the certificate
therefor properly endorsed or accompanied by a written assignment and power
of attorney properly executed, with transfer stamps (if necessary) affixed,
and with such proof of the authenticity of signature as the Corporation or
its transfer agent may reasonably require.
SECTION 5.3 RECORD HOLDERS. Except as may be otherwise required by
law, by the Articles of Organization or by these By-Laws, the Corporation
shall be entitled to treat the record holder of stock as shown on its books
as the owner of such stock for all purposes, including the payment of
dividends and the right to vote with respect thereto, regardless of any
transfer, pledge or other disposition of such stock, until the shares have
been transferred on the books of the Corporation in accordance with the
requirements of these By-Laws.
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It shall be the duty of each stockholder to notify the Corporation
of his current post office address.
SECTION 5.4 RECORD DATE. The Board of Directors may fix in advance
a time of not more than sixty (60) days preceding the date of any meeting of
stockholders, or the date for the payment of any dividend or the making of
any distribution to stockholders, or the last day on which the consent or
dissent of stockholders may be effectively expressed for any purpose, as the
record date for determining the stockholders having the right to notice of
and to vote at such meeting, and any adjournment thereof, or the right to
receive such dividend or distribution or the right to give such consent or
dissent. In such case only stockholders of record on such record date shall
have such right, notwithstanding any transfer of stock on the books of the
Corporation after the record date. Without fixing such record date the Board
of Directors may for any of such purposes close the transfer books for all or
any part of such period.
If no record date is fixed and the transfer books are not closed,
(a) the record date for determining stockholders having the right to notice
of or to vote at a meeting of stockholders shall be at the close of business
on the day next preceding the day on which notice is given, and (b) the
record date for determining stockholders for any other purpose shall be at
the close of business on the day on which the Board of Directors acts with
respect thereto.
SECTION 5.5 REPLACEMENT OF CERTIFICATES. In case of the alleged
loss, destruction or mutilation of a certificate of stock, a duplicate
certificate may be issued in place thereof, upon such terms as the Board of
Directors may prescribe.
SECTION 5.6 ISSUANCE OF CAPITAL STOCK. The Board of Directors
shall have the authority to issue or reserve for issue from time to time the
whole or any part of the capital stock of the Corporation which may be
authorized from time to time, to such persons or organizations, for such
consideration, whether cash, property, services or expenses, and on such
terms as the Board of Directors or a designated committee thereof may
determine, including without limitation the granting of options, warrants, or
conversion or other rights to subscribe to said capital stock.
SECTION 5.7 DIVIDENDS. Subject to applicable law, the Articles of
Organization and these By-Laws, the Board of Directors may from time to time
declare, and the Corporation may pay, dividends on outstanding shares of its
capital stock.
ARTICLE VI
INDEMNIFICATION
SECTION 6.1 OFFICERS. To the extent permitted by law and except
as provided in Sections 6.3 and 6.4, each Officer of the Corporation (and his
heirs and personal representatives) shall be indemnified by the Corporation
against all Expenses incurred by him in connection with any Proceeding in
which he is involved as a result of (a) his serving or having served as an
Officer or employee of the Corporation, (b) his serving or having served as a
Director, officer or employee of any of its wholly-owned subsidiaries, or (c)
his serving or having served in any capacity with respect to any other
corporation, organization, partnership, joint venture, trust, employee
benefit plan or other entity at the request or direction of the Corporation.
SECTION 6.2 NON-OFFICER EMPLOYEES. To the extent permitted by law
and except as
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provided in Sections 6.3 and 6.4, each non-Officer Employee of the
Corporation (and his heirs and personal representatives) may, in the
discretion of the Board of Directors, be indemnified against any or all
Expenses incurred by him in connection with any Proceeding in which he is
involved as a result of (a) his serving or having served as a non-Officer
Employee of the Corporation, (b) his serving or having served as a Director,
officer, or employee of any of its wholly-owned subsidiaries, or (c) his
serving or having served in any capacity with respect to any other
corporation, organization, partnership, joint venture, trust employee benefit
plan or other entity at the request or direction of the Corporation.
SECTION 6.3 SERVICE AT DIRECTION OF BOARD OF DIRECTORS. No
indemnification shall be provided to an Officer or non-Officer Employee with
respect to his serving or having served in any capacity "at the request or
direction of the Corporation" unless such service was required or directed by
vote of the Board of Directors prior to the occurrence of the event to which
the indemnification relates; provided that the Board of Directors may provide
an Officer or non-Officer Employee with indemnification, as to a specific
Proceeding, even though such Board of Directors vote was not obtained, if in
its discretion, the Board of Directors determines it to be appropriate for
the Corporation to do so.
SECTION 6.4 GOOD FAITH. No indemnification shall be provided to
an Officer or to a non-Officer Employee with respect to a matter as to which
he shall have been adjudicated in any Proceeding not to have acted in good
faith in the reasonable belief that his action was in the best interests of
the Corporation. In the event that a Proceeding is compromised or settled so
as to impose any liability or obligation upon an Officer or upon a
non-Officer Employee, no indemnification shall be provided to said Officer or
to said non-Officer Employee with respect to a matter if this Corporation has
obtained an opinion of counsel that with respect to said matter said Officer
or said non-Officer Employee did not act in good faith in the reasonable
belief that his action was in the best interests of the Corporation.
SECTION 6.5 PRIOR TO FINAL DISPOSITION. In the event that the
Corporation does not assume the defense, or unless and until the Corporation
assumes the defense pursuant to Section 6.6 of any Proceeding of which the
Corporation receives notice under this Article VI, the Corporation shall pay
any Expenses incurred by an Indemnitee in defending a Proceeding or any
appeal therefrom in advance of the final disposition of such Proceeding;
provided, however, that if the Proceeding is initiated by the Continuing
Directors (or, if there is no Interested Stockholder, by the Board of
Directors), then the Corporation may, but need not, pay such Expenses in
advance of the final disposition of such Proceeding.
Notwithstanding the foregoing, Expenses incurred by an Indemnitee in
advance of the final disposition of a Proceeding may be paid only upon the
Corporation's receipt of an undertaking by the Indemnitee to repay such
payment if he shall be adjudicated or determined to be not entitled to
indemnification under Section 6.4. The Corporation may accept such
undertaking without reference to the financial ability of the Indemnitee to
make such repayment.
SECTION 6.6 NOTIFICATION AND DEFENSE OF CLAIM. As a condition
precedent to his or her right to be indemnified, the Indemnitee must notify
the Corporation in writing as soon as practicable of any action, suit,
proceeding or investigation involving him or her or with respect to which
indemnity will or could be sought. With respect to any action, suit,
proceeding or investigation of which the Corporation is so notified, the
Corporation will be entitled to participate therein at its own expense and/or
to assume the defense thereof at its own expense, with legal counsel
reasonably
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acceptable to the Indemnitee. After the Corporation notifies the Indemnitee
of its election so to assume such defense, the Corporation shall not be
liable to the Indemnitee for any legal or other expenses subsequently
incurred by the Indemnitee in connection with such claim, other than as
provided below in this Section. The Indemnitee shall have the right to
employ his or her own counsel in connection with such claim, but the fees and
expenses of such counsel incurred after notice from the Corporation of its
assumption of the defense thereof shall be at the expense of the Indemnitee
unless (i) the employment of counsel by the Indemnitee has been authorized by
the Corporation, (ii) counsel to the Indemnitee shall have reasonably
concluded that there may be a conflict of interest or position on any
significant issue between the Corporation and the Indemnitee in the conduct
of the defense of such action, or (iii) the Corporation shall not in fact
have employed counsel to assume the defense of such action. In each such
case, the fees and expenses of Indemnitee's counsel reasonably acceptable to
the Corporation shall be at the expense of the Corporation, except as
otherwise expressly provided by this Article VI. The Corporation shall not
be entitled, without the consent of the Indemnitee, to assume the defense of
any claim brought by or in the right of the Corporation or as to which
counsel for the Indemnitee shall have reasonably made the conclusion provided
for in clause (ii) above.
SECTION 6.7 INSURANCE. The Corporation may purchase and maintain
insurance to protect itself and any Indemnitee against any liability of any
character asserted against and incurred by the Corporation or any such
Indemnitee, or arising out of any such status, whether or not the Corporation
would have the power to indemnify such person against such liability by law
or under the provisions of this Article VI or under Chapter 156B of the
Massachusetts General Laws.
SECTION 6.8 DEFINITIONS. For the purposes of this Article VI:
(a) "Officer" means (A) any person who serves or has served as
a Director of the Corporation (B) any person who serves or has served in any
other office filled by election or appointment by the Board of Directors,
whether or not such person is an officer of the Corporation within the
definition of that term as contained in Article V hereof, and (C) any other
person who serves or has served, at the request or direction of the
Corporation, as a Director or officer of any of the Corporation's
wholly-owned subsidiaries;
(b) "non-Officer Employee" means any person who serves or has
served as an employee or agent of the Corporation but who is not an Officer;
(c) "Indemnitee" means each Officer, and each non-Officer Employee
whom the Board of Directors has determined to indemnify pursuant to Section
6.2;
(c) "Proceeding" means any action, suit or proceeding, civil or
criminal, brought or threatened in or before any court, tribunal,
administrative or legislative body or agency; and
(d) "Expenses" means any liability fixed by a judgment, order,
decree or award in a Proceeding, any amount actually and reasonably paid in
settlement of a Proceeding and any professional fees and other disbursements
reasonably incurred in a Proceeding.
SECTION 6.9 OTHER INDEMNIFICATION RIGHTS. The provisions of this
Article VI shall not be construed to be exclusive. The Corporation shall
have the power to indemnify its Officers and any of its agents or employees
who are not Officers and to enter into specific agreements, commitments or
arrangements for indemnification on any terms not prohibited by law which it
14
<PAGE>
deems to be appropriate. Nothing in this Article VI shall limit any lawful
rights to indemnification existing independently of this Article VI.
SECTION 6.10 SURVIVAL OF BENEFITS. The provisions of this Article
VI shall be applicable to persons who shall have ceased to be Directors or
officers of the Corporation, and shall inure to the benefit of the heirs,
executors and administrators of persons entitled to be indemnified hereunder.
Nothing hereunder shall be deemed to limit the Corporation's authority to
indemnify any person pursuant to any contract or otherwise.
SECTION 6.11 SUBSEQUENT AMENDMENT. No amendment, termination or
repeal of this Article VI or of the relevant provisions of Chapter 156B of
the Massachusetts General Laws or any other applicable laws shall affect or
diminish in any way the rights of any Indemnitee to indemnification under the
provisions hereof with respect to any Proceeding arising out of or relating
to any actions, transactions or facts occurring prior to the final adoption
of such amendment, termination or repeal.
SECTION 6.12 MERGER OR CONSOLIDATION. If the Corporation is
merged into or consolidated with another corporation and the Corporation is
not the surviving corporation, the surviving Corporation shall assume the
obligations of the Corporation under this Article VI with respect to any
action, suit, proceeding or investigation arising out of or relating to any
actions, transactions or facts occurring at or prior to the date of such
merger or consolidation.
SECTION 6.13 SUBSEQUENT LEGISLATION. If the Massachusetts General
Laws are amended after adoption of this Article VI to expand further the
indemnification permitted to Indemnitees, then the Corporation shall
indemnify such persons to the fullest extent permitted by the Massachusetts
General Laws, as so amended.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1 FISCAL YEAR. Except as otherwise determined by the
Board of Directors, the fiscal year of the Corporation shall be the twelve
months ending December 31st.
SECTION 7.2 SEAL. The Board of Directors shall have power to
adopt and alter the seal of the Corporation.
SECTION 7.3 EXECUTION OF INSTRUMENTS. All deeds, leases,
transfers, contracts, bonds, notes and other instruments and obligations to
be entered into by the Corporation in the ordinary course of its business
without Board of Directors action may be executed on behalf of the
Corporation by the Chairman of the Board, President, any Vice President,
Treasurer or any other officer, employee or agent of the Corporation as the
Board of Directors may authorize.
SECTION 7.4 VOTING OF SECURITIES. Unless otherwise provided by
the Board of Directors, the Chairman of the Board, the President or Treasurer
may waive notice of and act on behalf of the Corporation, or appoint another
person or persons to act as proxy or attorney in fact for the Corporation
with or without discretionary power and/or power of substitution, at any
meeting of stockholders or shareholders of any other organization, any of
whose securities are held by the Corporation; provided, however, that this
Section 7.4 shall not authorize any officer, without specific
15
<PAGE>
authority of the Board of Directors, to vote the shares of the Corporation's
primary banking subsidiary in any election of Directors of such subsidiary or
with respect to any merger, sale of stock or sale of substantially all of the
assets of such subsidiary.
SECTION 7.5 RESIDENT AGENT. The Board of Directors may appoint a
resident agent upon whom legal process may be served in any action or
proceeding against the Corporation. Said resident agent shall be either an
individual who is a resident of and has a business address in Massachusetts,
a corporation organized under the laws of The Commonwealth of Massachusetts,
or a corporation organized under the laws of any other state of the United
States, which has qualified to do business in, and has an office in,
Massachusetts.
SECTION 7.6 CORPORATION RECORDS. The original, or attested
copies, of the Articles of Organization, By-Laws and record of all meetings
of the Directors or stockholders, and the stock and transfer records, which
shall contain the names of all stockholders and the record address and the
amount of stock held by each, shall be kept in Massachusetts at the main
office of the Corporation, or at an office of its transfer agent, Clerk or
resident agent.
SECTION 7.7 ARTICLES OF ORGANIZATION. All references in these
By-Laws to the Articles of Organization shall be deemed to refer to the
Articles of Organization of the Corporation, as amended and in effect from
time to time.
SECTION 7.8 BY-LAW AMENDMENTS.
A. AMENDMENT BY DIRECTORS. Except as otherwise required by law,
the By-laws of the Corporation may be amended or repealed by the affirmative
vote of a majority of the Directors then in office at a duly constituted
meeting of the Board of Directors, unless at the time of such action there
shall be an Interested Stockholder, in which case such action shall also
require the affirmative vote of a majority of the Continuing Directors then
in office at such meeting. Not later than the time of giving notice of the
annual meeting of stockholders next following the amending or repealing by
the Directors of any By-law, notice thereof stating the substance of such
change shall be given to all stockholders entitled to vote on amending the
By-laws.
B. AMENDMENT BY STOCKHOLDERS. The By-laws of the Corporation may
be amended or repealed at a duly constituted meeting of stockholders called
expressly for such purpose, by the affirmative vote of at least 80% of the
total voted eligible to be cast by stockholders on such amendment or repeal,
voting together as a single class; provided, however, that if the Board of
Directors recommends, by the affirmative vote of two thirds of the Directors
then in office at a duly constituted meeting of the Board of Directors
(unless at the time of such action there shall be an Interested Stockholder,
in which case such action shall also require the affirmative vote of a
majority of the Continuing Directors then in office at such meeting), that
stockholders approve such amendment or repeal at such meeting of
stockholders, such amendment or repeal shall only require the affirmative
vote of a majority of the total votes eligible to be cast by stockholders on
such amendment or repeal, voting together as a single class.
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