UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: AUGUST 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to ___________
Commission File Number 0-17709
RCSB FINANCIAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 16-1484699
(State or other jurisdiction of (I.R.S. employer identification number)
incorporation or organization)
235 EAST MAIN STREET, ROCHESTER, NEW YORK 14604
(Address of principal executive offices) (Zip Code)
(716) 423-7270
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES X NO
---- ----
Number of shares of common stock outstanding on September 30, 1996: 15,385,719
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RCSB FINANCIAL, INC. AND SUBSIDIARIES
FORM 10-Q
For the Quarter Ended
August 31, 1996
INDEX
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Page
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Consolidated Statements of Condition as of
August 31, 1996 and November 30, 1995 3
Consolidated Statements of Income for the three and nine
months ended August 31, 1996 and 1995 4
Consolidated Statements of Changes in Shareholders' Equity
for the three and nine months ended August 31, 1996 and 1995 5
Consolidated Statements of Cash Flows for the nine months
ended August 31, 1996 and 1995 6
Notes to Consolidated Financial Statements 8
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 11
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 20
SIGNATURES 21
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<TABLE>
<CAPTION>
RCSB FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
(Unaudited)
(thousands)
AUGUST 31, November 30,
1996 1995
-------------- --------------
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ASSETS
Cash and due from banks $ 78,661 $ 78,877
Interest-bearing deposits in banks 10,707 15,913
Securities available for sale, at fair value (cost $21,411
in 1996 and $85,335 in 1995) 18,943 84,128
Securities held to maturity, at cost (fair value $1,567,718
in 1996 and $1,398,727 in 1995) 1,604,141 1,398,067
Loans receivable:
Residential mortgage loans 790,204 910,891
Automobile loans and leases 953,297 807,629
Commercial mortgage loans 64,033 71,240
Other consumer and other loans 87,363 83,596
Residential mortgage loans held for sale 152,740 123,755
-------------- --------------
Total loans receivable 2,047,637 1,997,111
Allowance for loan losses (28,036) (26,091)
-------------- --------------
Net loans receivable 2,019,601 1,971,020
Premises and equipment 34,546 28,896
Federal Home Loan Bank stock 40,713 38,498
Loan servicing rights 111,744 106,517
Other real estate 6,302 3,965
Other assets 81,397 145,559
-------------- --------------
Total assets $ 4,006,755 $ 3,871,440
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits $ 2,353,196 $ 2,222,970
Borrowings and repurchase agreements with
Federal Home Loan Bank 616,856 674,350
Other repurchase agreements and borrowings 467,257 295,090
Mortgagors' deposits under escrow agreements 111,810 77,053
Other liabilities 140,191 226,050
-------------- --------------
Total liabilities 3,689,310 3,495,513
-------------- --------------
Commitments and contingent liabilities (see note 3)
SHAREHOLDERS' EQUITY:
Preferred stock, at par value - 2,989
Common stock, at par value 15,386 14,067
Paid-in capital in excess of par value 159,188 241,392
Surplus fund 51,070 51,070
Undivided profits 99,653 76,755
Loans to employee stock plan (3,358) (4,371)
Net unrealized holding loss on securities, net of taxes (4,494) (4,985)
Treasury stock, at cost (44 shares in 1995) - (990)
-------------- --------------
Total shareholders' equity 317,445 375,927
-------------- --------------
Total liabilities and shareholders' equity $ 4,006,755 $ 3,871,440
============== =============
</TABLE>
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<TABLE>
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RCSB FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(thousands, except per share amounts)
Three Months Ended Nine Months Ended
August 31, August 31,
1996 1995 1996 1995
------------ ------------ ------------ ------------
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Interest income:
Interest and fees on loans $ 44,713 $ 45,184 $ 132,661 $ 125,661
Interest on mortgage-backed and other
securities 29,440 26,718 86,965 73,891
Other interest income 289 268 552 836
------------ ------------ ------------ ------------
Total interest income 74,442 72,170 220,178 200,388
------------ ------------ ------------ ------------
Interest expense:
Interest on deposits 25,903 24,159 75,959 68,073
Interest on FHLB borrowings and
repurchase agreements 9,760 10,300 28,110 29,683
Interest on other repurchase agreements
and borrowings 6,154 6,308 18,752 11,032
------------ ------------ ------------ ------------
Total interest expense 41,817 40,767 122,821 108,788
------------ ------------ ------------ ------------
Net interest income 32,625 31,403 97,357 91,600
Provision for loan losses 3,104 2,083 9,324 5,108
------------ ------------ ------------ ------------
Net interest income after
provision for loan losses 29,521 29,320 88,033 86,492
------------ ------------ ------------ ------------
Noninterest income:
Mortgage banking 14,234 10,869 36,623 25,156
Retail banking 2,538 2,404 7,613 6,989
Automobile loan banking 1,024 592 2,609 1,725
Net securities sale gains 257 - 1,252 40
Other 10 16 76 54
------------ ------------ ------------ ------------
Total noninterest income 18,063 13,881 48,173 33,964
------------ ------------ ------------ ------------
Operating expenses:
Salaries and benefits 19,175 17,078 53,493 45,339
Occupancy 4,159 3,864 14,306 12,939
Deposit insurance 48 1,261 217 3,761
Other 8,232 8,184 22,730 21,519
------------ ------------ ------------ ------------
Total operating expenses 31,614 30,387 90,746 83,558
------------ ------------ ------------ ------------
Income before income taxes 15,970 12,814 45,460 36,898
Income tax provision 4,998 3,090 15,320 9,593
------------ ------------ ------------ ------------
Net income $ 10,972 $ 9,724 $ 30,140 $ 27,305
============ ============ ============ ============
Net income per common share (fully diluted) $ 0.69 $ 0.52 $ 1.74 $ 1.46
============ ============ ============ ============
Net income applicable to common shares $ 10,988 $ 8,416 $ 27,540 $ 23,381
============ ============ ============ ============
Net income per common share (primary) $ 0.80 $ 0.60 $ 2.05 $ 1.67
============ ============ ============ ============
</TABLE>
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<TABLE>
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RCSB FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY
(Unaudited)
(thousands, except per share amounts)
Three Months Ended
August 31,
1996 1995
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Shareholders' equity at beginning of period $ 349,590 $ 358,716
Net income 10,972 9,724
Purchase of RCSB common stock (43,919) -
Redemption of RCSB preferred stock (18) -
Common stock options exercised 84 592
Dividends declared on preferred stock 16 (1,308)
Dividends declared on common stock ($0.10 per share
in 1995) (see note 4) 69 (1,401)
Loan repayments from employee stock plan 253 368
Change in net unrealized holding loss on securities,
net of taxes 398 707
------------- ------------
Shareholders' equity at end of period $ 317,445 $ 367,398
============= ============
Nine Months Ended
August 31,
1996 1995
------------- ------------
Shareholders' equity at beginning of period $ 375,927 $ 346,999
Net income 30,140 27,305
Purchase of RCSB common stock (84,776) -
Redemption of RCSB preferred stock (18) -
Common stock options exercised 1,910 988
Dividends declared on preferred stock (2,600) (3,924)
Dividends declared on common stock ($0.36 and
$0.30 per share in 1996 and 1995, respectively) (4,642) (4,198)
Loan repayments from employee stock plan 1,013 1,083
Change in net unrealized holding loss on securities,
net of taxes 491 (855)
------------- ------------
Shareholders' equity at end of period $ 317,445 $ 367,398
============= ============
</TABLE>
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<TABLE>
<CAPTION>
RCSB FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(thousands)
Nine Months Ended
August 31,
1996 1995
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OPERATING ACTIVITIES:
Net income $ 30,140 $ 27,305
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 9,324 5,108
Depreciation 4,755 3,872
Amortization of loan servicing rights 10,508 8,494
Amortization of intangible assets, hedging gains
or losses, and securities premiums or discounts 3,315 (296)
Deferred income tax benefit (1,800) (6,100)
Decrease in allowance for foreclosed real estate - (1,307)
(Gains) losses on the sale of loans, securities, loan
servicing rights and other real estate (3,216) 109
Increase in mortgage loans held for sale (28,985) (57,804)
(Increase) decrease in other assets 63,459 (4,184)
Increase in accrued expenses 635 630
Decrease in loans to employee stock plan 1,013 1,083
---------------- ----------------
Net cash provided (used) by operating activities 89,148 (23,090)
---------------- ----------------
INVESTING ACTIVITIES:
Decrease in interest-bearing deposits in banks 5,206 11,611
Purchases of:
Securities available for sale (17,921) -
Securities held to maturity (401,644) (301,152)
Loans (92) (181,108)
Loan servicing rights, including those on originated loans (39,440) (26,585)
Premises and equipment (10,405) (5,171)
Proceeds from sales of:
Securities available for sale 78,698 39
Loan servicing rights 26,029 -
Other real estate 5,330 7,547
Principal repayments on:
Securities available for sale 3,705 2,643
Securities held to maturity 197,090 75,307
Loan originations, net of repayments and other reductions (36,735) 69,929
(Increase) decrease in FHLB stock (2,215) 2,260
---------------- ----------------
Net cash used by investing activities (192,394) (344,680)
---------------- ----------------
</TABLE>
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<TABLE>
<CAPTION>
RCSB FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(thousands)
Nine Months Ended
August 31,
1996 1995
---------------- ----------------
(Continued)
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FINANCING ACTIVITIES:
Increase in deposits 130,226 86,331
Decrease in FHLB borrowings
and repurchase agreements (57,494) (174,289)
Increase in other repurchase agreements
and borrowings 172,167 419,251
Increase in mortgagors' escrow deposits 34,757 29,209
Increase (decrease) in other liabilities (85,192) 31,248
Net proceeds from exercise of stock options 1,910 988
Purchase of RCSB common stock (84,776) -
Redemption of preferred stock (18) -
Dividends paid on preferred stock (3,908) (3,924)
Dividends paid on common stock (4,642) (4,198)
---------------- ----------------
Net cash provided by financing activities 103,030 384,616
---------------- ----------------
Increase (decrease) in cash and cash equivalents (216) 16,846
Cash and cash equivalents at beginning of period 78,877 63,702
---------------- ----------------
Cash and cash equivalents at end of period $ 78,661 $ 80,548
================ ================
Supplemental cash flow disclosures:
Cash paid during the period for:
Interest $ 121,455 $ 106,668
Income taxes 17,749 13,955
Additions to other real estate through foreclosure 7,828 4,806
Conversion of 7% Series B preferred stock
to common stock 71,394 -
</TABLE>
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RCSB FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (condensed)
AUGUST 31, 1996
(unaudited)
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements, which include the accounts
of RCSB Financial, Inc. and its subsidiaries (RCSB or the Company), have been
prepared in accordance with the instructions for Form 10-Q, and therefore, do
not include all information and footnotes necessary for a complete
presentation of financial position, results of operations and cash flows in
accordance with generally accepted accounting principles. The financial
statements and the information under the heading "Management's Discussion and
Analysis of Financial Condition and Results of Operations" are prepared under
the presumption that the interim consolidated financial statements are read in
conjunction with the Company's Annual Report on Form 10-K for the year ended
November 30, 1995.
In the opinion of management, the unaudited, consolidated interim financial
statements of RCSB Financial, Inc. and subsidiaries reflect all adjustments
(consisting of normal recurring accruals) necessary for a fair presentation of
the statements. The results of operations for the interim periods are not
necessarily indicative of the results of operations which may be expected for
the entire year. For consistency among the periods presented, certain amounts
in the prior year's consolidated financial statements have been reclassified
to conform with the 1996 presentation.
2. ACCOUNTING CHANGE
RCSB adopted Financial Accounting Standards Board (FASB) Statement No. 114
entitled "Accounting by Creditors for Impairment of a Loan" and Statement No.
118, "Accounting by Creditors for Impairment of a Loan - Income Recognition
and Disclosures" on December 1, 1995. The statements require that certain
impaired loans be measured based on the present value of expected future cash
flows discounted at the loan's effective interest rate, or as a practical
expedient, based on the loan's observable market price or the fair value of
collateral if the loan is collateral dependent. For purposes of Statement
114, a loan is impaired when, based on current information and events, it is
probable that a creditor will be unable to collect all contractual interest
and principal payments according to the terms of the loan agreement.
Implementing the provisions of Statements 114 and 118 had no material impact
on the Company's consolidated financial statements on the date of adoption.
Most of RCSB's loan portfolios are excluded from the scope of Statements 114
and 118 because the pronouncements are generally not applicable to large
groups of smaller-balance homogeneous loans such as residential mortgage,
automobile and other consumer loans. The pronouncement does apply to RCSB's
commercial mortgage loan portfolio, from which impaired loans are identified
during reviews of loans that (a) are delinquent, (b) have been classified by
management or banking regulators or (c) are believed by management to involve
potential collectibility concerns. In most cases, the Company measures
impairment based on the fair value of loan collateral, minus estimated costs
to sell the property. If the measure of an impaired loan is less than the
recorded investment in the loan, a valuation allowance is established with a
corresponding charge to the provision for loan losses. Charge-offs are
recorded when definitive information indicates that collection of the
identified impaired amount is doubtful.
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At August 31, 1996, RCSB's recorded investment in loans considered impaired
totaled $3.8 million, and no allowance for loan losses was required for the
identified loans under the provisions of Statements 114 and 118. The average
recorded investment in impaired loans during 1996 totaled $4.6 million. Cash
receipts on impaired loans are either (a) added to the allowance for loan
losses if a previously recorded charge-off has not been recovered, or (b) used
to reduce the carrying value of the loan or recognized as interest income,
depending upon management's judgment regarding the likelihood of collecting
the recorded loan balance. Interest income recognized on impaired loans was
less than $0.1 million during the first nine months of 1996, none of which was
recognized on a cash basis.
In late September 1996, the Company was notified by a commercial real estate
borrower that scheduled payments under a $6.2 million loan agreement would not
be made due to cash flow shortfalls being experienced in operating the
underlying property, a warehouse facility. Through the end of August 1996,
payments had been made according to the terms of the loan. While RCSB is in
the early stages of evaluating alternatives for collecting or otherwise
realizing its investment in the loan, the Company considers its loan loss
allowance adequate to absorb any loss that may result. The Company
discontinued the accrual of interest on the loan in September.
3. CONTINGENCIES
In February 1995, a trust company providing check processing and securities
custodial services to the Company's subsidiary, Rochester Community Savings
Bank (the Bank), and other financial institutions was seized by state banking
regulators due to the trust company's deteriorating financial condition.
Subsequently, a liquidation of the trust company was commenced and remains in
progress. In connection with services being provided to the Bank, certain
cash balances and collateral in the form of securities were maintained with
the trust company. Under conditions of the seizure and liquidation, cash
balances, securities held as collateral and payments on these and other
securities totaling approximately $11.5 million were temporarily frozen by the
regulators. During May 1996, the banking regulators released to the Bank
securities held as collateral and related payments on the securities totaling
$9.4 million, and in June 1996, the Bank received an initial settlement of
$1.0 million on its remaining assets. The Bank's $2.4 million investment in
trust company stock and debentures was charged off as expense in 1995, and an
allowance of $1.1 million remained at August 31, 1996.
Under federal legislation enacted on September 30, 1996, the Bank is required
to participate in recapitalizing the Federal Deposit Insurance Corporation's
(FDIC) Savings Association Insurance Fund (SAIF). While most of the Bank's
deposits are insured through the FDIC's Bank Insurance Fund (BIF),
approximately $89 million are insured through the SAIF and are subject to an
assessment of approximately $0.5 million. The cost of the assessment was
charged against earnings in September 1996.
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4. CERTAIN COMMON AND PREFERRED STOCK TRANSACTIONS
In July 1996, RCSB completed previously announced programs for the purchase of
its common shares through market sources. During 1996 the Company acquired
3.5 million shares for $84.8 million.
In May 1996, the Company announced it would redeem all outstanding convertible
preferred stock at the close of business on July 15, 1996 for $26.225 per
share plus accrued dividends. Alternatively, preferred shareholders could
convert their stock to common shares at any time prior to the redemption at a
ratio of 1.5625 shares of common for each preferred share. Due to the excess
of the market price for RCSB's common shares over the announced redemption
price, 3.0 million preferred shares were converted to common and only 652
shares were redeemed.
On September 25, 1996, the Board of Directors declared a dividend of $0.15 per
common share, payable November 1, 1996 to shareholders of record on October
15, 1996. The declaration represented a 25% increase from recent quarterly
dividend amounts. To facilitate the redemption of RCSB's preferred shares,
declaration of the prior quarter's common stock dividend was accelerated to
May 1996, one month earlier than the Company's usual timing.
5. NET INCOME PER SHARE
Primary net income per common share amounts for the three and nine months
ended August 31, 1996 and 1995 were computed by dividing net income, reduced
by preferred stock dividends, if any, by the weighted average number of common
shares outstanding during the periods. The weighted average number of common
shares outstanding totaled 13,669,343 and 14,013,386 for the three months
ended August 31, 1996 and 1995, respectively, and 13,440,176 and 13,992,774
for the nine months ended August 31, 1996 and 1995, respectively.
Fully diluted net income per common share amounts for the three and nine
months ended August 31, 1996 and 1995 were computed by dividing net income by
the sum of the weighted average number of common shares outstanding and the
common shares issuable if all outstanding preferred shares were converted to
common at the beginning of the periods. The weighted average number of common
shares utilized in this computation totaled 15,881,712 and 18,684,788 for the
three months ended August 31, 1996 and 1995, respectively, and 17,287,939 and
18,664,490 for the nine months ended August 31, 1996 and 1995, respectively.
There were no materially dilutive common stock equivalents during either
period.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
RCSB Financial, Inc. and subsidiaries reported net income of $11.0 million or
$.69 per fully diluted share for the three months ended August 31, 1996,
compared to $9.7 million or $.52 per share in the third quarter of 1995. For
the first nine months of 1996, RCSB earned net income of $30.1 million or
$1.74 per share, compared to $27.3 million or $1.46 per share in 1995. While
pretax earnings in the third quarter and first nine months of 1996 rose by
24.6% and 23.2%, respectively, a higher effective rate of income tax in the
current year lessened the increase in net income for the periods. The
improvement in pretax earnings was aided by higher levels of net interest
income and growth in mortgage banking revenues, including a $2.1 million gain
on the sale of mortgage servicing rights. Earnings per fully diluted share in
the 1996 third quarter and nine month period increased by 32.7% and 19.2%,
respectively, reflecting higher net income and a decrease in the number of
shares outstanding.
Third Quarter Review
Net interest income grew by 3.9% to $32.6 million in the third quarter of 1996
from $31.4 million in 1995. This increase resulted from a widening of the
average interest rate spread in RCSB's portfolios, purchases of
mortgage-backed securities during 1996 and the latter half of 1995, and a 23%
increase in average automobile loans outstanding. Asset growth was funded by
additional borrowings and higher levels of customer deposits at the Bank.
Interest expense on $85.8 million in borrowings utilized to repurchase common
shares during the past year lessened the increase in net interest income.
RCSB's interest rate spread rose to 3.33% in 1996 from 3.17% in 1995 due to a
greater decrease in the average rate on interest-bearing liabilities than in
the average yield on interest-earning assets. The spread was affected by a
widening, during the 1996 second and third quarters, of the average difference
between market interest rates on short-term financial instruments versus those
on longer-term instruments. Because RCSB's assets generally have longer terms
to maturity or repricing than its liabilities, the increase experienced in
general marketplace spreads had a positive influence on the Company's interest
rate spread. Net interest margin, which is influenced by the interest rate
spread and changes in the relationship of interest-earning asset volumes to
interest-bearing liability volumes, decreased slightly to 3.51% in 1996 from
3.52% in 1995.
The following table presents information for the third quarter of 1996 and
1995 regarding interest yields and rates, average earning asset and liability
volumes, and the allocation of interest variations between amounts caused by
volumes and amounts attributable to rates. No tax equivalent adjustments have
been made for minor amounts of tax-exempt income earned by RCSB.
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<TABLE>
<CAPTION>
AVERAGE BALANCES, YIELDS AND RATES AND CHANGES IN INTEREST INCOME AND EXPENSE
(dollars in thousands)
Three Months Ended
--------------------------------------------------------------
August 31, 1996 August 31, 1995
--------------------------------------------------------------
Change
Average Yield/ Average Yield/ in Change due to
Balance Interest Rate Balance Interest Rate Interest Volume Rate
---------- --------- ------- ---------- --------- ------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING
ASSETS:
Federal funds and
interest-bearing deposits $ 12,849 $ 289 9.00% $ 14,764 $ 268 7.26% $ 21 $ (38) $ 59
Mortgage-backed and
other securities 1,691,217 29,440 6.96 1,543,221 26,718 6.93 2,722 2,576 146
Loans receivable, net 2,017,946 44,713 8.86 2,006,049 45,184 9.01 (471) 267 (738)
---------- --------- ---------- --------- ---------- -------- --------
Total interest-
earning assets $3,722,012 74,442 8.00 $3,564,034 72,170 8.10 2,272 2,805 (533)
========== --------- ========== --------- ---------- -------- --------
INTEREST-BEARING
LIABILITIES:
Transaction, money market
and savings deposits $1,091,658 6,335 2.31 $1,069,158 6,539 2.43 (204) 136 (340)
Term deposits 1,358,973 19,568 5.73 1,163,512 17,620 6.01 1,948 2,852 (904)
---------- --------- ---------- --------- ---------- -------- --------
Total deposits 2,450,631 25,903 4.20 2,232,670 24,159 4.29 1,744 2,988 (1,244)
FHLB borrowings
and repurchase agreements 672,536 9,760 5.77 646,642 10,300 6.32 (540) 401 (941)
Other repurchase agreements
and borrowings 436,104 6,154 5.61 401,881 6,308 6.23 (154) 513 (667)
---------- --------- ---------- --------- ---------- -------- --------
Total interest-
bearing liabilities $3,559,271 41,817 4.67% $3,281,193 40,767 4.93% 1,050 3,902 (2,852)
========== --------- ========== --------- ---------- -------- --------
Net interest income $ 32,625 $ 31,403 $ 1,222 $(1,097) $ 2,319
========= ========= ========== ======== ========
Excess of interest-earning
assets over interest-bearing
liabilities $ 162,741 $ 282,841
RATIOS:
Interest rate spread 3.33% 3.17%
Net interest margin 3.51 3.52
</TABLE>
RCSB's provision for loan losses was $3.1 million in the third quarter of
1996, compared to $2.1 million a year ago. The increased provisions in 1996
were primarily due to growth in the automobile loan portfolio resulting from
higher volumes of loan originations in the quarter. The adequacy of the
Company's loan loss allowance is evaluated quarterly with consideration given
to the status of particular loans, the general risk characteristics of the
loan portfolio, historical charge-offs and recoveries, the regulatory
environment, current appraisals and economic and market conditions. As of
August 31, 1996, RCSB's allowance for loan losses totaled $28.0 million or
119.9% of nonperforming loans, compared to $26.1 million or 106.6% of
nonperforming loans at November 30, 1995.
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Mortgage banking noninterest income totaled $14.2 million in the third quarter
of 1996, up 31% from $10.9 million in 1995. The increase resulted from the
sale of servicing on $1.5 billion of residential mortgage loans, higher levels
of loan originations, and increased loan servicing income generated by
American Home Funding, Inc. (AHF), RCSB's mortgage banking subsidiary. AHF's
residential mortgage loan originations amounted to $404.8 million during the
third quarter, up 24.7% from $324.7 million in the prior year. The growth in
loan servicing income was driven by continuing purchases of such rights and
the retention of servicing on loans originated by AHF and sold to other
entities. AHF realized a pretax gain of $2.1 million on the third quarter
sale of servicing. The subsidiary's remaining portfolio of loans serviced for
others totaled $8.6 billion at August 31, 1996, compared to $7.2 billion at
August 31, 1995.
During 1996, AHF expanded its loan origination capabilities by taking over six
loan offices formerly operated by another entity in the states of Alabama,
Kansas, Missouri, North Carolina and Texas and opening 16 loan offices in
Connecticut, Indiana, Louisiana, Mississippi, New Jersey, New York, North
Carolina and Ohio. Current year activity has expanded the scope of AHF's loan
origination operations to encompass 57 offices in 17 states, compared to 41
offices in 10 states at the end of 1995.
RCSB's retail banking units generated noninterest income of $2.5 million in
the third quarter, up slightly from $2.4 million in 1995. Earnings in this
category are derived from fees and service charges collected for various
deposit-related activities and revenues from the Company's securities
brokerage and insurance sales operations. In September 1996, RCSB reorganized
its securities brokerage and insurance sales activities. As part of this
reorganization, the Company has contracted with an independent third party to
provide securities services and products through the Company's retail banking
offices. Previously, a subsidiary of the Company had offered full service
securities brokerage services. RCSB has also contracted with an independent
third party to provide marketing and sales support services in connection with
the Company's insurance sales activities. The new structure will facilitate
continuing efforts to sell annuity, mutual fund and insurance products. The
reorganization is not expected to have a material effect on consolidated net
income.
Noninterest income from automobile loan banking was $1.0 million for the third
quarter of 1996, compared to $0.6 million in 1995. Automobile loan banking
income represents revenues generated from pools of sold auto loans serviced by
RCSB for others. No such loans have been sold since mid-1992 and there were
no remaining loans being serviced for others at August 31, 1996. The
Company's automobile lending business in recent years has been focused mainly
on originating and servicing loans for RCSB's auto loan portfolio, which
totaled $953.3 million at the end of the third quarter, up from $781.0 million
a year earlier. Noninterest revenues from the sold loan pools included $0.9
million in the third quarter of 1996 and $0.3 million in 1995 resulting from
reductions in certain allowances carried by RCSB to cover estimated losses
under recourse obligations. Allowances for credit losses on RCSB's portfolio
of owned automobile loans are established through charges to the provision for
loan losses.
Net gains from the sale of securities totaled $0.3 million in the 1996 third
quarter, while there were no such gains in the 1995 quarter. In 1996, RCSB
sold $17.9 million of mortgage-backed securities from the available-for-sale
portfolio in response to interest rate-related market opportunities.
-13-
<PAGE>
Third quarter 1996 operating expenses were $31.6 million compared to $30.4
million in the prior year. The increase was primarily attributable to higher
variable expenses associated with loan origination and servicing volumes at
AHF and American Credit Services Inc. (ACSI), the Company's automobile lending
subsidiary, and expenses resulting from recently opened retail banking
branches. These costs were partially offset by a substantial reduction in
FDIC deposit insurance premiums and the absence of losses in 1996 relating to
a liquidating trust company in which RCSB formerly held an interest.
Under federal legislation enacted on September 30, 1996, the Bank is required
to participate in recapitalizing the Federal Deposit Insurance Corporation's
(FDIC) Savings Association Insurance Fund (SAIF). While most of the Bank's
deposits are insured through the FDIC's Bank Insurance Fund (BIF),
approximately $89 million are insured through the SAIF and are subject to an
assessment of approximately $0.5 million. The cost of the assessment was
charged against earnings in September 1996.
While still below a normal rate of income taxes for RCSB, the Company's
effective tax rate increased to 31.3% in the third quarter of 1996 from 24.1%
in 1995. Reductions in RCSB's deferred tax valuation allowance during both
years accounted for the difference from normal rates.
Nine Month Review
For the first nine months of 1996, RCSB's net interest income was $97.4
million, an increase of 6.3% from $91.6 million in the prior year. The
increase was largely due to the effects of investing, on average, $371.0
million more in mortgage-backed securities and loans during 1996. Asset growth
was funded by the reinvestment of earnings, additional customer deposits and
increased borrowings. RCSB's interest rate spread declined 0.11% to 3.19% in
1996, primarily due to the effects on the Company's portfolios of the narrow
marketplace spreads experienced in 1995. RCSB's spread for the second and
third quarters improved, however, from levels experienced earlier in the year
partially due to a recent widening in marketplace spreads between short-term
and intermediate-term rates. Net interest margin was 3.51% in 1996, compared
to 3.66% in 1995.
The following table presents information regarding interest yields and rates,
average earning asset and liability volumes, and the allocation of interest
variations between amounts caused by volumes and amounts attributable to rates
for the nine months ended August 31, 1996 and 1995. No tax equivalent
adjustments have been made for minor amounts of tax-exempt income earned by
RCSB.
-14-
<PAGE>
<TABLE>
<CAPTION>
AVERAGE BALANCES, YIELDS AND RATES AND CHANGES IN INTEREST INCOME AND EXPENSE
(dollars in thousands)
Nine Months Ended
--------------------------------------------------------------
August 31, 1996 August 31, 1995
--------------------------------------------------------------
Change
Average Yield/ Average Yield/ in Change due to
Balance Interest Rate Balance Interest Rate Interest Volume Rate
---------- --------- ------- ---------- --------- ------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING
ASSETS:
Federal funds and
interest-bearing deposits $ 13,330 $ 552 5.52% $ 16,931 $ 836 6.58% $ (284) $ (161) $ (123)
Mortgage-backed and
other securities 1,687,842 86,965 6.87 1,412,423 73,891 6.98 13,074 14,206 (1,132)
Loans receivable, net 1,999,741 132,661 8.85 1,904,220 125,661 8.80 7,000 6,334 666
---------- --------- ---------- --------- ---------- -------- --------
Total interest-
earning assets $3,700,913 220,178 7.93 $3,333,574 200,388 8.01 19,790 20,379 (589)
========== --------- ========== --------- ---------- -------- --------
INTEREST-BEARING
LIABILITIES:
Transaction, money market
and savings deposits $1,054,259 18,498 2.34 $1,087,479 20,280 2.48 (1,782) (609) (1,173)
Term deposits 1,318,531 57,461 5.80 1,096,748 47,793 5.80 9,668 9,692 (24)
---------- --------- ---------- --------- ---------- -------- --------
Total deposits 2,372,790 75,959 4.26 2,184,227 68,073 4.15 7,886 9,083 (1,197)
FHLB borrowings
and repurchase agreements 642,580 28,110 5.82 659,397 29,683 6.00 (1,573) (749) (824)
Other repurchase agreements
and borrowings 431,682 18,752 5.78 235,878 11,032 6.23 7,720 8,582 (862)
---------- --------- ---------- --------- ---------- -------- --------
Total interest-
bearing liabilities $3,447,052 122,821 4.74% $3,079,502 108,788 4.71% 14,033 16,916 (2,883)
========== ========== --------- ---------- -------- --------
Net interest income $ 97,357 $ 91,600 $ 5,757 $ 3,463 $ 2,294
========= ========= ========== ======== ========
Excess of interest-earning
assets over interest-bearing
liabilities $ 253,861 $ 254,072
RATIOS:
Interest rate spread 3.19% 3.30%
Net interest margin 3.51 3.66
</TABLE>
RCSB provided $9.3 million for possible loan losses in the first nine months
of 1996 compared to $5.1 million in 1995. A higher level of automobile loan
originations produced an increase in the Company's automobile loan portfolio
and a corresponding requirement for additional loan loss allowances. The
portion of the Company's loan loss allowance allocated to auto loans is equal
to 1.10% of the August 31, 1996 portfolio, and annualized net charge-offs for
the first nine months of 1996 represent 0.70% of average auto loans
outstanding.
Mortgage banking noninterest income was $36.6 million in 1996, up 45.6% from
$25.2 million in 1995. The increase was attributable to greater loan
origination fees, higher levels of loan servicing income and a pretax gain of
$2.1 million on an August 1996 sale of loan servicing rights. During the first
nine months of 1996, residential mortgage originations at AHF totaled $1.15
billion, an increase of 60.1% from $720.3 million originated in 1995.
-15-
<PAGE>
Retail banking noninterest income increased to $7.6 million in 1996 from $7.0
million in 1995, primarily due to greater revenues from the Company's
securities brokerage subsidiary and slightly higher fees and service charges
from deposit related activities. Reduced 1996 earnings from RCSB's insurance
sales subsidiary reflect decreased demand for fixed-rate annuity products
during the lower interest rate environment of the first half of the year.
Noninterest income from automobile loan banking was $2.6 million in 1996,
compared to $1.7 million in 1995. The increase was the net result of a
reduced requirement for sold loan loss allowances, offset in part by a decline
in revenue from servicing loans for others. RCSB has continued to retain
recently originated auto loans in its portfolio, and the remaining trust for
sold loans being serviced by the Company matured in June 1996.
During the first nine months of 1996, RCSB sold $77.4 million of securities
from its available-for-sale portfolio, generating gains of $1.3 million.
There were no significant gains or losses from the sale of securities in the
1995 nine-month period.
Operating expenses for first nine months of 1996 totaled $90.7 million
compared to $83.6 million in the prior year. Expense increases are mainly
attributable to significant growth in 1996 in the volume of loans originated
and serviced by the Company's mortgage banking and automobile lending
subsidiaries. Since mortgage loans originated by AHF are generally sold
within 60 to 90 days, that subsidiary's expenses vary significantly based on
changes in origination volumes. Also affecting expenses were the costs of
retail banking offices opened in the Buffalo market during 1995 and 1996.
Expense reductions were realized by RCSB from lower deposit insurance rates
and the absence in 1996 of losses from the Company's interest in a liquidating
trust company.
The Company's effective tax rate was 33.7% in 1996, compared to 26.0% in 1995,
reflecting reductions in deferred tax valuation allowances during both years.
Changes in the allowances are based on ongoing analyses of the projected
realizability of RCSB's deferred tax assets.
FINANCIAL CONDITION
At August 31, 1996, RCSB's total assets were $4.01 billion, compared to $3.87
billion at November 30, 1995. Loans at the end of the third quarter totaled
$2.02 billion, compared to $1.97 billion at November 30, 1995. Loan growth
during the first nine months of 1996 occurred primarily in the automobile loan
portfolio which increased to $953.3 million at August 31, 1996, compared to
$807.6 million at the end of the 1995 fiscal year. Automobile loan
originations were $134.8 million in the 1996 third quarter and $457.1 million
in the first nine months, up from $103.8 million and $271.6 million,
respectively, in the prior year periods.
Securities held to maturity increased to $1.60 billion at August 31, 1996,
compared to $1.40 billion at November 30, 1995 as the result of purchasing
$401.6 million of mortgage-backed securities during the year. Deposits
increased to $2.35 billion at August 31, 1996, up from $2.22 billion at
November 30, 1995. Nationally marketed term accounts at RCSB grew to $116.3
million at August 31, 1996 from $22.6 million at the prior year end. Federal
Home Loan Bank borrowings, repurchase agreements and other borrowings totaled
$1.08 billion at August 31, 1996, compared to $969.4 million at November 30,
1995.
The Company's interest bearing portfolios are liability sensitive to interest
rate changes in the one-year timeframe to the extent of 6.6% of total assets
at August 31, 1996. The one-year gap reflected net liability sensitivity
amounting to 3.9% of assets at November 30, 1995 and 7.0% at
-16-
<PAGE>
August 31, 1995. Shareholders' equity totaled $317.4 million or $20.63 per
common share on a fully diluted basis at August 31, 1996, compared to $375.9
million or $20.11 per common share at November 30, 1995. Equity per common
share at November 30, 1995 is computed as if all convertible preferred shares
were converted to common. The decline in shareholders' equity resulted from
purchases of RCSB common stock through programs completed in July 1996. The
Company purchased 3.5 million common shares at a cost of $84.8 million in the
first eight months of the year.
In May 1996, the Company announced it would redeem all outstanding convertible
preferred stock at the close of business on July 15, 1996 for $26.225 per
share plus accrued dividends. Alternatively, preferred shareholders could
convert their stock to common shares at any time prior to the redemption at a
ratio of 1.5625 shares of common for each preferred share. Due to the excess
of the market price for RCSB's common shares over the announced redemption
price, 3.0 million preferred shares were converted to common and only 652
shares were redeemed.
On September 25, 1996, the Board of Directors declared a dividend of $0.15 per
common share, payable November 1, 1996 to shareholders of record on October
15, 1996. The declaration represented a 25% increase from recent quarterly
dividend amounts. To facilitate the redemption of RCSB's preferred shares,
declaration of the prior quarter's common stock dividend was accelerated to
May 1996, one month earlier than the Company's usual timing.
In accordance with requirements of the FDIC and the New York State Banking
Department, the Company's subsidiary, Rochester Community Savings Bank, must
meet certain measures of capital adequacy with respect to leverage and
risk-based capital. At June 30, 1996, the most recent FDIC reporting date,
the Bank's capital ratios were in excess of required levels as shown in the
table below.
<TABLE>
<CAPTION>
CAPITAL ADEQUACY
June 30, 1996
Actual Required Excess
---------------------------
<S> <C> <C> <C>
Core (Tier 1) leverage capital 8.01% 4.00% 4.01%
Risk-Based capital:
Core (Tier 1) capital 11.88 4.00 7.88
Total capital 12.88 8.00 4.88
</TABLE>
-17-
<PAGE>
Allowance for Loan Losses and Nonperforming Assets
The determination of the allowance for loan losses is based on ongoing
analyses of the loan portfolio and reflects an amount which, in management's
judgment, is adequate to provide for potential losses. While management used
all currently available information to determine the adequacy of the
allowance, future additions may be necessary based on changes in economic and
market conditions and specific borrower situations. In addition, various
regulatory agencies, as an integral part of the examination process,
periodically review the Company's allowance for losses on loans. Such
agencies may require the Company to recognize additions to the allowance based
on their judgments about information available at the time of their
examinations. RCSB's allowance for loan losses at August 31, 1996 equaled
119.9% of nonperforming loans, essentially double the average of approximately
60% for all publicly-held thrifts as of June 30, 1996, the most recent date
for which such information is available. Activity in RCSB's loan loss
allowance during the first nine months of 1996 and 1995 is presented below.
<TABLE>
<CAPTION>
ALLOWANCE FOR LOAN LOSSES
(thousands)
Nine Months Ended
August 31,
----------------------------------
1996 1995
---------------- ----------------
<S> <C> <C>
Beginning balance $ 26,091 $ 26,225
Provision for loan losses 9,324 5,108
Loans charged off (11,316) (10,540)
Loan recoveries 3,937 4,343
---------------- ----------------
Ending balance $ 28,036 $ 25,136
================ ================
</TABLE>
-18-
<PAGE>
The Company defines nonperforming assets to include nonaccrual loans, loans
past due 90 days and accruing, restructured loans and other real estate.
Total nonperforming assets at August 31, 1996 were $29.7 million compared to
$28.4 million at November 30, 1995. The $1.3 million increase in
nonperforming assets in the first nine months of 1996 reflects growth in
RCSB's loan portfolio and a slowing noted nationally in the repayment of
consumer debt. The following table summarizes nonperforming assets as of the
end of the third quarter and prior year.
<TABLE>
<CAPTION>
NONPERFORMING ASSETS
(dollars in thousands)
AUGUST 31, November 30,
1996 1995
-------------- --------------
<S> <C> <C>
Nonaccrual loans $ 19,004 $ 21,789
Loans past due 90 days and accruing 4,381 2,689
-------------- --------------
Total nonperforming loans 23,385 24,478
Other real estate, net of allowances 6,302 3,965
-------------- --------------
Total nonperforming assets $ 29,687 $ 28,443
============== ==============
Nonperforming loans as a percent of
total loans 1.14% 1.23%
Nonperforming assets as a percent of
total assets 0.74% 0.73%
</TABLE>
In late September 1996, the Company was notified by a commercial real estate
borrower that scheduled payments under a $6.2 million loan agreement would not
be made due to cash flow shortfalls being experienced in operating the
underlying property, a warehouse facility. Through the end of August 1996,
payments had been made according to the terms of the loan. While RCSB is in
the early stages of evaluating alternatives for collecting or otherwise
realizing its investment in the loan, the Company considers its loan loss
allowance adequate to absorb any loss that may result. The Company
discontinued the accrual of interest on the loan in September.
-19-
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Document
------ --------
Compensatory plans or arrangements:
10.1 Senior Executive Severance Plan of Rochester Community
Savings Bank
10.2 Form of Salary Continuation Agreement between
Rochester Community Savings Bank and certain officers
10.3 Amendment to the Non-Employee Director Stock Plan of
RCSB Financial, Inc., effective September 25, 1996
***************************
27 Article 9 Financial Data Schedule
(b) Reports on Form 8-K
On August 8, 1996, RCSB filed Form 8-K with the Securities and Exchange
Commission reporting the redemption of all outstanding shares of the
Company's Series B Preferred Stock at the close of business on July 15, 1996
and the election of John P. Tierney to the Board of Directors.
-20-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
RCSB FINANCIAL, INC.
--------------------
(registrant)
October 11, 1996 /s/ Leonard S. Simon
---------------- --------------------
Date Leonard S. Simon
Chairman of the Board, President
and Chief Executive Officer
October 11, 1996 /s/ Paul R. Wuest
---------------- -----------------
Date Paul R. Wuest
Senior Vice President and
Chief Financial Officer
-21-
<PAGE>
EXHIBIT INDEX
Regulation
S-K Exhibit
Number Document
------ --------
10.1 Senior Executive Severance Plan of Rochester Community
Savings Bank
10.2 Form of Salary Continuation Agreement between Rochester
Community Savings Bank and certain officers
10.3 Amendment to the Non-Employee Director Stock Plan of RCSB
Financial, Inc., effective September 25, 1996
27 Article 9 Financial Data Schedule
-22-
Exhibit 10.1
ROCHESTER COMMUNITY SAVINGS BANK
SENIOR EXECUTIVE SEVERANCE PLAN
1. Preamble and Statement of Purpose. The purpose of this Plan is
to assure that Rochester Community Savings Bank ("RCSB") will have the
continued dedication of, and the availability of objective advice and counsel
from, key executives of RCSB and its affiliates (the "RCSB Entities")
notwithstanding the possibility, threat or occurrence of a Change in Control
of RCSB Financial Inc. ("RCSB Financial"), the parent company of RCSB.
In the event RCSB Financial receives any proposals from a third person
concerning a possible business combination with RCSB Financial, or acquisition
of RCSB Financial's equity securities, or the possibility of a change in
control of RCSB Financial otherwise arises, the Board of Directors of RCSB
(the "Board") believes it imperative that the Board and the RCSB Entities be
able to rely upon key executives to continue in their positions and be
available for advice, if requested, without concern that those individuals
might be distracted by the personal uncertainties and risks inherent in such
situations. In addition to their regular duties, under such circumstances,
such key executives may be called upon to, among other things, assist in the
assessment of proposals, and provide advice as to whether such proposals would
be in the best interest of RCSB, the RCSB Entities and RCSB Financial's
shareholders.
2. Eligible Executives. An executive who is employed by the RCSB
Entities shall be covered by this Plan and eligible for benefits hereunder
upon being designated by the Board as being covered by this Plan. Each
executive who is designated by the Board as being covered by this Plan shall
be designated as either a "Group A Executive" or a "Group B Executive" for
purposes of this Plan. For purposes of this Plan, an executive who has been
designated either as a Group A Executive or a Group B Executive is herein
referred to as an "Executive." An Executive shall cease to be covered by this
Plan when notified by the Board that the Board has determined to remove the
Executive from coverage under the Plan; provided, however, that no such
determination that an Executive shall be removed from coverage under the Plan
may be made (i) for a two-year period (a three-year period in the case of a
Group A Executive) commencing as of the date of a Change in Control or (ii)
during any period that a Potential Change in Control exists.
- 1 -
<PAGE>
3. Severance Payments and Benefits. Subject to Sections 3(d) and
3(g) hereof, RCSB shall provide to an Executive the payments and benefits
described in this Section 3 upon the termination of the Executive's employment
within two years following a Change in Control, unless such termination is (i)
by RCSB or an RCSB Entity for Cause, (ii) by reason of death, Disability or
Retirement, or (iii) by the Executive without Good Reason. An Executive's
employment shall be deemed to have been terminated following a Change in
Control by the RCSB Entities without Cause or by the Executive with Good
Reason if the Executive's employment is terminated prior to a Change in
Control without Cause at the direction of a Person who has entered into an
agreement with RCSB Financial the consummation of which will constitute a
Change in Control or if the Executive terminates his employment with Good
Reason prior to a Change in Control (determined by treating a Potential Change
in Control as a Change in Control in applying the definition of Good Reason)
if the circumstance or event which constitutes Good Reason occurs at the
direction of such Person.
(a) Severance Payment. RCSB shall pay to the Executive a lump
sum severance payment, in cash, equal to the Severance Payment Factor
multiplied by the sum of (i) the Executive's Annual Base Salary and (ii) the
Executive's Annual Bonus. Such lump sum cash payment shall be made within
five business days of an Executive's Date of Termination.
(b) Continued Welfare Benefits. The Executive's participation
in life, medical and dental insurance plans (the "RCSB Welfare Plans")
maintained by the RCSB Entities shall, at the election of the Executive made
within ten days of his Date of Termination, be continued during the Coverage
Period at a cost to the Executive that is commensurate with the cost incurred
by the Executive immediately prior to the Executive's Date of Termination;
provided, however, that the Executive's coverage under the RCSB Welfare Plans
shall cease upon the Executive becoming eligible for coverage under
substantially similar plans of a new employer. Notwithstanding the foregoing,
if the Executive becomes employed by a new employer that maintains a medical
and/or dental plan that either (i) does not cover the Executive or a family
member or dependent with respect to a preexisting condition that was covered
under the applicable RCSB Welfare Plan, or (ii) does not cover the Executive
or a family member or dependent for a designated waiting period, the
Executive's coverage under the applicable RCSB Welfare Plan shall continue
until the earlier of: (I) the end of the applicable period of
noncoverage under the new employer's plan, or (ii) the expiration of the
Coverage Period. RCSB may condition the provision of anybenefits under this
Section 3(b) upon the
- 2 -
<PAGE>
Executive agreeing in writing to report to RCSB any coverage and benefits
actually received by the Executive or made available to the Executive from
such other employer(s). The Executive shall be entitled to elect to change
his level of coverage and/or his choice of coverage options (such as Executive
only or family medical coverage) with respect to the RCSB Welfare Plans to the
same extent that actively employed executives of the RCSB Entities are
permitted to make such changes; provided, however, that in the event of any
such changes the Executive shall pay the amount of any cost increase that
would actually be paid by an actively employed executive of the RCSB Entities
by reason of making the same change in his level of coverage or coverage
options.
(c) Incentive Compensation. RCSB shall pay to the Executive a
lump sum amount, in cash, equal to the sum of (i) any incentive compensation
which has been allocated or awarded to the Executive for a completed fiscal
year or other measuring period preceding his Date of Termination under any
incentive compensation plan maintained by any of the RCSB Entities but that
has not yet been paid, (ii) any incentive compensation that has been deferred
(and has not been paid as of the Executive's Date of Termination) under any
plan maintained by any of the RCSB Entities, and (iii) a pro rata portion
calculated through the Executive's Date of Termination of the aggregate value
of all contingent incentive compensation awards to the Executive for all
uncompleted periods under any incentive compensation plan maintained by any of
the RCSB Entities-, with the amount of the payment with respect to each such
award being equal to the product of (x) and (y), where (x) is an amount equal
to the target bonus amount which the Executive could earn for the year in
which the Date of Termination occurs pursuant to the applicable plan assuming
that 100% of any objectives or goals provided for thereunder had been met for
that year, and (y) is a fraction the numerator of which is the number of days
from and including the first day of the year in which the Date of Termination
occurs until (and including) the Executive's Date of Termination and the
denominator of which is 365 days. Such lump-sum cash payment shall be made
within five business days of the Executive's Date of Termination.
(d) Reduction in Severance Pay. In the case of an Executive who
has not, as of his Date of Termination, been employed by the RCSB Entities for
a period of at least five years, the payment provided for by Section 3(a)
hereof shall instead be a percentage of such amount, as follows:
- 3 -
<PAGE>
Period of Employment Percentage
- ------------------------------------------------------
4 years or more, but less than 5 years 90%
3 years or more, but less than 4 years 70%
2 years or more, but less than 3 years 50%
Less than 2 years 40%
(e) Split Dollar Life Insurance. Within five business days of
the Executive's Date of Termination, RCSB shall transfer and assign to
Executive RCSB's rights under, and entire interest in, the split dollar life
insurance policy covering Executive without any payment to the Bank on the
part of the Executive.
(f) Rights Under Certain Other Plans. The Executive also shall
be entitled to the total retirement benefits payable under the retirement
plans of the RCSB Entities or any successor plans of the RCSB Entities, in the
manner and in the amount prescribed by such plans.
Limitation on Certain Parachute Payments. Notwithstanding any other
provision of this Agreement, in the event that any payment or benefit received
or to be received by the Executive in connection with a Change in Control or
the termination of the Executive's employment (whether pursuant to the terms
of this Agreement or any other plan, arrangement or agreement with the RCSB
Entities, any Person whose actions result in a Change in Control or any Person
affiliated with the RCSB Entities or such Person) (all such payments and
benefits, including the Severance Benefits, being hereinafter called the
"Total Benefits") would be subject (in whole or part), to the Excise Tax, then
RCSB shall cause the following to occur:
(i) Tax counsel selected by RCSB's independent auditors and
acceptable to the Executive ("Tax Counsel") shall compute the net present
value to the Executive of the Total Payments after reduction for the Excise
Tax and for any federal, state, or local income taxes that would be imposed
on the Executive if such Total Payments constituted the Executive's sole
taxable income; and
(ii) Tax Counsel shall next compute the maximum amount of Total
Payments that can be provided without any such Total Payments being subject
to the Excise Tax and reduce that amount by the amount of any federal,
state and local income taxes that would be imposed on the Executive if such
reduced Total Payments constituted the Executive's sole taxable income.
- 4 -
<PAGE>
If the amount determined under clause (i) does not exceed the amount
determined under clause (ii) by more than $10,000, then the Severance Benefits
shall be reduced to the extent necessary so that no portion of the Total
Benefits is subject to the Excise Tax. For purposes of determining whether
and the extent to which the Total Payments will be subject to the Excise Tax,
(i) no portion of the Total Benefits the receipt or enjoyment of which the
Executive shall have effectively waived in writing prior to the Date of
Termination shall be taken into account and (ii) the value of any non-cash
benefit or any deferred payment or benefit included in the Total Benefits
shall be determined by RCSB's independent auditors in accordance with the
principles of sections 280G(d)(3) and (4) of the Code.
4. Miscellaneous.
(a) Reimbursement of Legal Costs. RCSB shall pay to an
Executive all legal fees and expenses incurred by the Executive in seeking to
obtain or enforce in good faith any right or benefit provided by this Plan.
Such payments shall be made within five (5) business days after delivery of
the Executive's respective written requests for payment accompanied by such
evidence of fees and expenses incurred as the RCSB reasonably may require.
(b) No Right to Continued Employment. Nothing in the Plan shall
be deemed to give any Executive the right to be retained in the employ of the
RCSB Entities, or to interfere with the right of the RCSB Entities to
discharge an Executive at any time and for any lawful reason, with or without
notice, subject in all cases to the terms of this Plan.
(c) No Assignment of Benefits. Except as otherwise provided
herein or by law, no right or interest of any Executive under this Plan shall
be assignable or transferable, in whole or in part, either directly or by
operation of law or otherwise, including without limitation by execution,
levy, garnishment, attachment, pledge or in any manner; no attempted
assignment or transfer thereof shall be effective; and no right or interest of
any Executive under the Plan shall be liable for, or subject to, any
obligation or liability of such Executive.
(d) Death. This Plan shall inure to the benefit of and be
enforceable by an Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If an
Executive shall die while any amount would still be payable to the Executive
hereunder (other than amounts which, by their terms, terminate upon the death
of the Executive) if the Executive had continued
- 5 -
<PAGE>
to live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Plan to the executors, personal
representatives or administrators of the Executive's estate.
(e) Incompetency. Any benefit payable to or for the benefit of
an Executive, if legally incompetent or incapable of giving a receipt therefor
shall be deemed paid when paid to such Executive's guardian or to the party
providing or reasonably appearing to provide for the care of such person, and
such payment shall fully discharge RCSB and all other parties with respect
thereto.
(f) Reduction of Benefits By Legally Required Benefits.
Notwithstanding any other provision of this Plan to the contrary, if any of
the RCSB Entities is obligated by law or by contract (other than under this
Plan) to pay severance pay, a termination indemnity, notice pay, or the like,
to an Executive or if any of the RCSB Entities is obligated by law or by
contract to provide advance notice of separation ("Notice Period") to an
Executive, then any Severance Benefits payable to the Executive hereunder
shall be reduced by the amount of any such severance pay, termination
indemnity, notice pay or the like, as applicable, and by the amount of any pay
received during any Notice Period.
(g) Enforceability. If any provision of the Plan shall be held
invalid or unenforceable, such invalidity or unenforceability shall not affect
any other provisions hereof, and the Plan shall be construed and enforced as
if such provisions had not been included.
(h) No Mitigation. RCSB agrees that if an Executive becomes
entitled to the payments and benefits provided for by Section 3 hereof, the
Executive is not required to seek other employment or to attempt in any way to
reduce any amounts payable or benefits provided to the Executive pursuant to
this Plan. Further, the amount of any payment or benefit provided for under
this Plan (other than to the extent provided in Section 3(b) hereof) shall not
be reduced by any compensation earned by the Executive as the result of
employment by another employer, by retirement benefits, or by offset against
any amount claimed to be owed by the Executive to the RCSB Entities, or
otherwise.
(i) Successors. In addition to any obligations imposed by law upon
any successor to RCSB, RCSB shall be obligated to require any successor
(whether direct or indirect, by purchase, merger, consolidation, operation of
law, or otherwise) to all or substantially all of the business and/or assets
of RCSB to
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expressly assume RCSB's obligations under this Plan in the same manner and to
the same extent that RCSB would be required to perform it if no such
succession had taken place. The failure of RCSB to
obtain such assumption and agreement prior to the effectiveness of any such
succession shall entitle each Executive to compensation and benefits from RCSB
in the same amount and on the same terms as each such Executive would be
entitled to hereunder if the Executive were to terminate the Executive's
employment for Good Reason immediately following a Change in Control. For
purposes of this Plan: (A) the term "RCSB" includes any successor to RCSB's
business and/or assets which successor expressly agrees to assume RCSB's
obligations under this Plan in accordance with the preceding provisions of
this Section 4(i); (B) the term "RCSB Entities" includes any successor(s) to
the business and/or assets of the RCSB Entities; and (C) the term "RCSB
Financial" includes any successor to the business and/or assets of RCSB
Financial, except for purposes of determining whether or not any Change in
Control of RCSB Financial has occurred in connection with such succession.
(j) Waiver. No term or condition of this Plan shall be deemed
to have been waived, nor shall there be any estoppel against enforcement of
any provision of this Plan, except by written instrument of the party charged
with such waiver or estoppel. No such written waiver shall be deemed a
continuing waiver unless specifically stated therein, and each such waiver
shall operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future or as to any act
other than that specifically waived.
(k) Withholding Taxes. The provision of payments and benefits
hereunder to an Executive shall be subject to satisfaction by an Executive of
any applicable withholding required under federal, state or local law and any
additional withholding to which an Executive has agreed.
(l) Rules of Construction. The masculine pronoun wherever used
shall include the feminine pronoun, and the singular shall include the plural
unless the context clearly indicates the distinction. The headings of
Sections herein are included solely for convenience of reference and shall not
affect the meaning or interpretation of any of the provisions of this Plan.
(m) Notices. Any notice or other communication required or
permitted pursuant to the terms hereof shall be deemed to have been duly given
when delivered or mailed by United States Mail, first class, postage prepaid,
addressed to the intended recipientat his, her or its last known address.
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(n) Statutory Changes. All references to sections of the
Exchange Act or the Code shall be deemed also to refer to any successor
provisions to such sections.
(o) Governing Law. This Plan shall be construed and enforced
according to the laws of the State of New York to the extent not preempted by
Federal law.
5. Termination and Amendment. The Board shall have the power at
any time, in its discretion, to amend, abandon or terminate this Plan, in
whole or in part; except that no amendment, abandonment or termination shall
impair or abridge the obligations of RCSB to any Executive then designated as
a Class A or Class B Executive under this Plan if such amendment, abandonment
or termination is made within three years after a Change of Control or during
the existence of a Potential Change in Control.
6. Certain Definitions.
(a) "Annual Base Salary" means the higher of (a) an Executive's
highest annual base salary in effect during the one-year period preceding a
Change in Control, or (b) the Executive's highest annual base salary in effect
during the one-year period preceding the Executive's Date of Termination.
(b) "Annual Bonus" means the greater of the average annual
amount paid to the Executive in cash as incentive or bonus pay during (i) the
three-year period preceding a Change in Control or (ii) the three-year period
preceding the Executive's Date of Termination.
(c) "Cause" means with respect to an Executive:
(i) the willful and continued failure of the Executive to
substantially perform the Executive's duties with the RCSB Entities (other
than any such failure resulting from incapacity due to physical or mental
illness), after a written demand for substantial performance is delivered to
the Executive by the Board or the Chief Executive Officer of RCSB which
specifically identifies the manner in which the Board or Chief Executive
Officer believes that the Executive has not substantially performed the
Executive's duties; or
(ii) the willful engaging by the Executive in illegal conduct or
gross misconduct which is materially and demonstrably injurious to the RCSB
Entities.
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For purposes of the preceding clauses (i) and (ii), no act or failure to
act, on the part of the Executive, shall be considered "willful" unless it is
done, or omitted to be done, by the Executive in bad faith and without
reasonable belief that the Executive's action or omission was in the best
interests of the RCSB Entities. Any act, or failure to act, based upon prior
approval given by the Board or upon the instruction or with the approval of
the Chief Executive Officer or the Executive's superior or based upon the
advice of counsel for RCSB or the RCSB Entities shall be conclusively presumed
to be done, or omitted to be done, by the Executive in good faith and in the
best interests of the RCSB Entities. The cessation of employment of an
Executive shall not be deemed to be for Cause unless and until there shall
have been delivered to the Executive a copy of a resolution duly adopted by
the affirmative vote of not less than three-quarters of the entire membership
of the Board at a meeting of the Board called and held for such purpose (after
reasonable notice is provided to the Executive and the Executive is given an
opportunity, together with counsel, to be heard before the Board), finding
that, in the good faith opinion of the Board, the Executive is guilty of the
conduct described in clause (i) or (ii) above, and specifying the particulars
thereof in detail.
(d) "Change in Control" means a change in control of a nature
that would be required to be reported by RCSB Financial in response to Item
6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act or
any successor provision (whether or not RCSB Financial is then subject to the
requirements of the Exchange Act); provided that, without limitation, a Change
in Control shall be deemed to have occurred if:
(i) Any "person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act in effect on the date first written above), is
or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of RCSB
Financial representing twenty-five percent (25%) or more of the
combined voting power of the RCSB Financial's then outstanding
securities;
(ii) During any period of two consecutive years, individuals who
at the beginning of such period constitute the board of directors of
RCSB Financial cease for any reason to constitute at least a majority
thereof, unless the election of each director who was not a director
at the beginning of such period has been approved in advance by
directors representing at least two-thirds of the directors then in
office who were directors at the beginning of the period;
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(iii) The stockholders of RCSB Financial approve a merger or
consolidation of RCSB Financial with any other corporation, other than
a merger or consolidation which would result in the voting securities
of RCSB Financial outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least fifty percent
(50%) of the total voting power represented by the voting securities
of RCSB Financial or such surviving entity outstanding immediately
after such merger or consolidation; or
(iv) RCSB Financial or RCSB Financial's stockholders approves a
plan of complete liquidation or an agreement for the sale or
disposition (in one transaction or a series of transactions) of all or
substantially all of RCSB's assets.
A Change in Control shall exclude:
(i) A public stock offering;
(ii) A sale of an equity interest in RCSB Financial to a group of
investors which includes members of management of RCSB Financial at the
time of such purchase; or
(iii) A convertible debt offering.
(e) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
(f) "Coverage Period" means the period commencing on an
Executive's Date of Termination within two years following a Change in Control
and ending on the second anniversary date of the Executive's Date of
Termination (or, in the case of a Group A Executive, the third anniversary
date thereof); provided, however, that an Executive's Coverage Period shall in
all events terminate not later than the Executive's Mandatory Retirement Age.
(g) "Date of Termination" means the date of termination of an
Executive's employment by the RCSB Entities.
(h) "Disability" shall mean the absence of an Executive from the
Executive's duties with the RCSB Entities on a full-time basis for 180
consecutive business days as a result of incapacity due to mental or physical
illness which is determined to be total and permanent by a physician selected
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by RCSB or its insurers and acceptable to the Executive or the Executive's
legal representative (such agreement as to acceptability not to be withheld
unreasonably), provided that such absence shall constitute "Disability" only
if the Executive is entitled to long-term disability benefits for the period
of his disability after such 180 day period at least equal to 60% of his
Annual Base Salary.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
(j) "Excise Tax" means any excise tax imposed under section 4999
of the Code.
(k) "Good Reason" for termination by an Executive of the
Executive's employment shall mean the occurrence (without the Executive's
express written consent) of any one of the following acts by RCSB or any of
the RCSB Entities, or failures by RCSB or any of the RCSB Entities to act,
unless, in the case of any act or failure to act described below in clauses
(i), (ii), (iv), (v), or (vi) below, such act or failure to act is corrected
prior to the Executive's Date of Termination:
(i) the assignment to the Executive of any duties inconsistent
with the Executive's status as officer of RCSB or an RCSB Entity or an
adverse alteration in the nature or status of the Executive's
responsibilities from those in effect immediately prior to the Change
in Control other than any such alteration primarily attributable to
the fact that RCSB Financial may no longer be a public company;
(ii) a reduction by RCSB or any RCSB Entity in the Executive's
annual base salary as in effect on the date hereof or as the same
may be increased from time to time;
(iii) the transfer of the Executive to an employment location with
RCSB or an RCSB Entity that is more than 35 miles from the Executive's
employment location with RCSB or an RCSB Entity immediately prior to
the Change in Control;
(iv) the failure by RCSB or any RCSB Entity, without the
Executive's consent, to pay to the Executive any portion of the
Executive's current compensation within seven (7) days of the date
such compensation is due;
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(v) (A) the failure by RCSB or any RCSB Entity to continue in
effect any compensation plan in which the Executive participates
immediately prior to the Change in Control which is material to the
Executive's total compensation, including but not limited to stock
option, restricted stock, and incentive compensation plans, unless an
equitable arrangement (embodied in an ongoing substitute or
alternative plan) has been made with respect to such plan; or (B) the
failure by RCSB or any of the RCSB Entities to continue the
Executive's participation therein (or in such substitute or
alternative plan) on a basis not materially less favorable, both in
terms of the amount of benefits provided and the level of the
Executive's participation relative to other participants, as existed
at the time of the Change in Control; or
(vi) (A) the failure by RCSB or any of the RCSB Entities to
continue to provide the Executive with benefits substantially similar
to those enjoyed by the Executive under any of the pension, life
insurance, medical, health and accident, or disability plans
maintained by the RCSB Entities in which the Executive was
participating at the time of the Change in Control; (B) the taking
of any action by RCSB or any of the RCSB Entities which would
directly or indirectly materially reduce any of such benefits or
deprive the Executive of any aterial fringe benefit enjoyed by the
Executive at the time of the Change in Control; or (C) the failure by
the RCSB or any of the RCSB Entities to provide the Executive with
the number of paid vacation days to which the Executive is entitled
on the basis of years of service with RCSB and the RCSB Entities in
accordance with RCSB's and the RCSB Entities' normal vacation policies
in effect at the time of the Change in Control.
The Executive's continued employment shall not constitute consent to,
or a waiver of rights with respect to, any act or failure to act constituting
Good Reason hereunder.
(l) "Mandatory Retirement Age" means age sixty-five (65) in the
case of an Executive who has served for a minimum of two (2) years at a high
level executive or high policy-making position and who is entitled to a
nonforfeitable, immediate, annual employer-provided retirement benefit from
any source, which is at least equal to a benefit, computed as a life annuity,
of at least $44,000 per year (or such other amount as may be provided by
future legislation). In the case of all other Executives, there shall be no
Mandatory Retirement Age.
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(m) "Person" shall have the meaning given in Section 3(a)(9) of
the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof;
however, a Person shall not include (i) RCSB Financial or any of the RCSB
Entities, (ii) a trustee or other fiduciary holding securities under an
employee benefit plan of any of the RCSB Entities, (iii) an underwriter
temporarily holding securities pursuant to an offering of such securities, or
(iv) a corporation owned, directly or indirectly, by the stockholders of RCSB
Financial in substantially the same proportions as their ownership of stock of
RCSB Financial.
(n) "Potential Change in Control" shall be deemed to exist during any
period in which any of the conditions set forth in the following paragraphs
shall have been satisfied:
RCSB Financial enters into an agreement, the consummation of
which would result in the occurrence of a Change in Control;
(ii) RCSB Financial or any Person publicly announces an intention
to take or to consider taking actions which, if consummated, would
constitute Change in Control; or
(iii) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a Potential Change in Control exists.
(o) "Retirement" means an Executive's termination of employment by
the RCSB Entities on or after the Executive has attained age 65.
(p) "Severance Benefits" means the payments and benefits
provided for by Sections 3(a), 3(b), 3(c) and 3(e) hereof.
(q) "Severance Factor" means three in the case of a Group A
Executive and two on the case of a Group B Executive; provided however that an
Executive's Severance Factor shall in no event exceed the number of years and
fractions thereof from the Executive's Date of Termination until his Mandatory
Retirement Date.
7. Effective Date. This amended and restated plan shall be effective
as of August 1, 1996.
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Exhibit 10.2
SALARY CONTINUATION AGREEMENT
THIS AGREEMENT is made as of XXXXXXX between THE ROCHESTER COMMUNITY
SAVINGS BANK ("RCSB") and XXXXXXXXXX ("Executive").
BACKGROUND. Executive Is employed by the Bank in a senior executive
capacity and has acquired knowledge and expertise of considerable value to the
Bank. In recognition of Executive's value to the Bank and of Executive's past
services, and as an inducement to secure his future services and his agreement
to the covenants set forth herein, the Bank desires to provide Executive with
certain benefits.
NOW, THEREFORE, to induce Executive to remain in the employ of the Bank,
and for other good and valuable consideration, the Bank hereby agrees with
Executive as follows:
1 DEFINITIONS.
For the purposes of this Agreement, unless the context otherwise
requires, the following terms, when capitalized, shall have the meanings set
forth below:
.1 "Bank" means The Rochester Community Savings Bank and its
successors.
.2 "Cause" means willful misconduct or gross negligence by
Executive in connection with the performance of his duties to the Bank or any
of the RCSB Entities; misappropriation of, or intentional material damage to,
the property or business of the Bank or any of the RCSB Entities by Executive;
or commission of a felony by Executive.
.3 "Change in Control Plan" means the Rochester Community Savings
Bank Senior Executive Severance Plan, as amended to the date of this
Agreement, a copy of which is attached to this Agreement as Exhibit A.
.4 "Disability" means total disability, as that term is defined
in the long-term disability plan in effect for key executives of the Bank at
the time the disability arises, or if no such definition is in effect, "total
disability" shall be defined in accordance with the Social Security Act,
provided that the period of such total disability shall exceed six (6)
consecutive months.
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.5 "Final Monthly Salary" means an amount equal to the
Executive's highest monthly base salary paid or payable by the Bank during the
twelve months immediately preceding any Termination of Executive's employment.
.6 "RCSB Entity" means any corporation, a majority of whose shares
entitled to vote for directors are owned directly or indirectly by RCSB
Financial, Inc. ("RCSB Financial"), the Bank or any of their subsidiaries or
any partnership or other entity, a majority of whose voting interest is owned
directly or indirectly by RCSB Financial, the Bank or any of their
subsidiaries.
.7 "Severance Expiration Date" means the earliest of the
following to occur: (a) the expiration of [TWELVE (12) OR TWENTY-FOUR (24)]
full calendar months after the month in which Termination of Executive's
employment occurs; (b) the date of Executive's death; and (c) Executive's
attainment of age 65.
.8 "Termination" means (a) termination of the employment of
Executive with the Bank and the RCSB Entities for any reason other than death,
Disability or Cause, or (b) resignation of Executive within twelve months
after the occurrence of (i) a significant reduction in the nature or the scope
of the Executive's authority as an executive of the Bank or any of the RCSB
Entities, or (ii) a reduction in Executive's base salary (not taking into
account any increases in payroll deductions for medical or other benefits or
the effect or tax increases) payable by the Bank and the RCSB Entities, unless
any such reduction in base salary shall have been mutually agreed to in
advance by the Bank and Executive.
2 RIGHTS UNDER CHANGE IN CONTROL PLAN
.1 Group A Executive. It is hereby agreed that Executive will,
so long as he remains employed by the Bank, remain a participant in, and be
designated a "Group A Executive" under, the Change in Control Plan.
.2 Effect of Amendments. No amendment, abandonment or
termination of the Change in Control Plan after the date hereof shall be
effective to impair or abridge the rights of Executive thereunder, provided,
however, that any amendment to the Change in Control Plan that is required by
law and does not, taken as a whole, decrease the benefits to Executive under
the Change in Control Plan, shall be effective with respect to the Executive
and his rights under the Change in Control Plan.
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<PAGE>
3 TERMINATION BENEFITS
Subject to Executive's compliance with the terms of Sections 4, 5 and 6
hereof, in the event of a Termination of Executive's employment (other than a
Termination entitling Executive to severance payments and benefits under the
Change in Control Plan), Executive shall be entitled to receive the severance
payments and benefits described in the following Sections 3.1 through 3.5:
.1 Monthly Payments. The Bank will make monthly payments to
Executive of Executive's Final Monthly Salary, in accordance with the Bank's
normal payroll practices, commencing with the month after Termination occurs
and ending with the month in which the Severance Expiration Date occurs.
.2 Supplemental Executive Retirement Plan. If, as of the date of
this Agreement, Executive is a participant in a supplemental executive
retirement plan (a "SERP") maintained by the Bank or any RCSB Entity, or if
the Executive shall become covered by a SERP sponsored by the Bank or any RCSB
Entity after the date of this Agreement, Executive shall continue to be an
active participant in the SERP until his Severance Expiration Date and
contributions to, and benefit accruals under, any such SERP, shall be
determined in accordance with the terms of the SERP as if the monthly payments
under Section 3.1 hereof were "compensation" for services provided by
Executive as an active employee of the Bank. Notwithstanding the foregoing,
to the extent that Executive commences receiving benefits under any such SERP,
then from the date such benefit payments commence from the SERP, the monthly
payments under Section 3.1 shall cease to be taken into account for purposes
of such SERP.
.3 Split Dollar Life Insurance. Executive shall continue as an
active participant in the Bank's split dollar life insurance program until the
Severance Expiration Date and the Bank will continue to pay its share of the
premiums payable thereunder until such date. After the Severance Expiration
Date, the Bank shall transfer and assign to Executive the Bank's rights under,
and entire interest in, the split dollar life insurance policy covering
Executive upon Executive's payment to the Bank of the lesser of (a) the
aggregate amount of premiums previously paid by the Bank under such insurance
policy, and (b) the cash surrender value of such insurance policy.
.4 Continuation of Other Benefits. The Executive shall receive,
at a cost to the Executive not in excess of costs imposed on similarly
situated executives who are actively employed by the Bank, all other welfare
and fringe benefits he would have been entitled to receive had he continued in
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the employ of the Bank until his Severance Expiration Date, including, without
limitation, life, medical and dental insurance, automobile, and club dues
associated with club memberships provided to Executive prior to the
Termination. Notwithstanding the foregoing, after Executive's Termination,
Executive shall not be entitled to participate in any tax-qualified plans
(including, but not limited to, the RCSB Retirement Savings Plan and the RCSB
Employee Investment and Stock Ownership Plan), any stock-based plans, or any
short-term disability, long-term disability, or accidental death or
dismemberment plans or policies maintained by any of the RCSB Entities, except
to the extent required by applicable law.
.5 Benefits Superseded by Change in Control Plan. In the event
of any Termination that entitles Executive to severance payments and benefits
under the Change in Control Plan, the Executive shall receive the payments and
benefits provided for under the Change in Control Plan. In such event, this
Agreement and the obligations of the Bank and Executive hereunder shall
terminate.
4 CERTAIN RESTRICTIVE COVENANTS
Executive agrees that for a period of one-year after Executive's
Termination, Executive will not (and he will not cause, or permit if it is
within his power to prevent, any other person to) employ or offer employment
to, or conduct or participate in discussions concerning the employment of, any
officer or employee of any RCSB Entity without the prior written consent of
the Bank.
5 CONFIDENTIALITY
.1 Confidential Information. Executive acknowledges that he has
no right to use or disclose to any person, firm or corporation information
concerning any customer list, trade or business secrets or confidential,
commercial or financial information of the RCSB Entities that he knew or
should have known was intended by the RCSB Entities to be confidential and
that he did not have reason to believe had been made public other than through
his breach of this Section 5 (collectively, "Confidential Information").
Accordingly, Executive covenants and agrees that he shall not use, and he will
not permit if it is within his reasonable power to prevent the use of, any
Confidential Information, and shall not divulge any Confidential Information
to any person, firm or corporation whatsoever, except as may be required by
applicable law. The Bank agrees that Executive may obtain future employment
in the banking or financial services industry and, in that capacity, he may
use general information and knowledge regarding business and banking practices
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<PAGE>
and information other than Confidential Information, some or all of which may
have been acquired or developed while Executive was employed by the Bank, and
such use will not be deemed a violation of this Section 5.
.2 No Removal of Confidential Information. Executive agrees that
on and after his Termination, he will not remove from the RCSB Entities,
reproduce or make abstracts of any Confidential Information belonging to or
within the custody or possession of any of the RCSB Entities, and that he will
return to RCSB, or destroy and certify the destruction of, any Confidential
Information in his possession or under his control.
.3 Required Notices. In the event that Executive believes that
any Confidential Information is excepted from his obligations under this
Section 5, or he is requested or becomes legally compelled (by oral questions,
interrogatories, requests for information or documents, subpoena, criminal or
civil investigative demand or similar process) to disclose any Confidential
Information, he will use his best efforts to provide the RCSB Entities with
prompt written notice so that they may seek (with Executive's cooperation, if
so requested by the Bank) a protective order or other appropriate remedy
and/or waive compliance with the provisions of this Agreement. The RCSB
Entities will advise Executive promptly of the action they intend to take. In
the event that such protective order or other remedy is not promptly obtained,
or that the Bank waives compliance with the provisions of this Agreement,
Executive will furnish or use only that portion of the Confidential
Information which is legally required or otherwise permitted. In the absence
of instruction from any appropriate governmental agency (or the staff thereof)
or court of competent jurisdiction, any decision as to what portion of the
Confidential Information is legally required to be furnished will be made by
Executive in consultation with the Bank.
6 SPECIFIC PERFORMANCE
Executive acknowledges that any breach of the covenants set forth in
Sections 4 and 5 hereof will cause irreparable damage that would be incapable
of precise measurement and for which no adequate remedy would exist at law and
agrees that injunctive relief, in addition to all other remedies, shall be
available therefor. It is the intent and understanding of the parties hereto
that if, in any action before any court or agency legally empowered to enforce
this Agreement, any term, restriction, covenant, or promise is found to be
unreasonable and for that reason unenforceable, then such term, restriction,
covenant, or promise shall be deemed modified to the extent necessary to make
it enforceable by such court or agency, and, if it cannot be so modified, that
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it shall be deemed amended to delete therefrom such provision or portion
adjudicated to be invalid or unenforceable, such modification or amendment in
any event to apply only with respect to the operation of this Agreement in the
particular jurisdiction in which such adjudication is made.
7 MISCELLANEOUS
.1 Rights to Contractual Benefits. The rights of Executive to
benefits under this Agreement shall be solely those of an unsecured creditor
of the Bank.
.2 Successors. This Agreement shall be binding upon and inure to
the benefit of Executive, his beneficiaries and estate, and the Bank and any
successor to the Bank, but neither this Agreement nor any rights arising
hereunder may be assigned or pledged by Executive except by will or by the
laws of descent and distribution.
.3 No Right to Continued Employment. Nothing in this Agreement
shall be deemed to give Executive the right to be retained in the employ of
the Bank or any RCSB Entity, or to interfere with the right of the Bank or any
RCSB Entity to discharge him at any time and for any lawful reason, with or
without notice, subject in all cases to the terms of this Agreement.
.4 Transfer to Subsidiary. In the event that Executive is
transferred to an RCSB Entity other than the Bank, the Bank agrees that this
Agreement shall be amended in such manner as may be necessary or appropriate
to ensure that this Agreement will continue to provide Executive with the
benefits and protections intended to be provided hereby.
.5 Effect of Bank's Merger or Transfer of Assets. Except as set
forth in Section 3.6, this Agreement shall not be terminated or affected in
any way by any: (a) merger or consolidation involving RCSB Financial or the
Bank; or (b) transfer of all or substantially all of the assets of RCSB
Financial or the Bank. In the event of any such merger, consolidation the
Bank or transfer of assets of the Bank, the surviving or resulting entity or
the transferee the Bank's assets shall be bound by the provisions of this
Agreement. The Bank shall take all actions necessary to ensure that such
entity or transferee is bound by the provisions of this Agreement.
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.6 Severability. Any provision in this Agreement that is
prohibited or unenforceable shall be ineffective only to the extent of such
prohibition or unenforceability without invalidating or affecting the
remaining provisions hereof.
.7 Entire Agreement; Amendment. This Agreement constitutes the
entire agreement between the parties with respect to the subject matter hereof
and supersedes all previous proposals, both oral and written, negotiations,
representations, commitments, writings and all other communications between
the parties. It may not be released, discharged, or modified except by an
instrument in writing signed by both parties.
.8 Withholding Taxes. Any payments or benefits provided to
Executive hereunder shall be subject to Executive's satisfaction of any
applicable withholding required under federal, state or local law and any
additional withholding to which Executive has agreed.
.9 Headings. The headings and captions herein are provided for
reference and convenience only, shall not be considered part of the Agreement,
and shall not be employed in the construction of the Agreement.
.10 Governing Law. This Agreement shall in all respects be
governed by, and construed in accordance with, the laws of the State of New
York applicable to contracts made and to be performed therein.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above set forth.
__________________________
XXXXXXXXXXXX
THE ROCHESTER COMMUNITY SAVINGS BANK
By __________________________
Leonard S. Simon
Title Chairman of the Board of Directors,
President and Chief
Executive Officer
- 7 -
Exhibit 10.3
AMENDMENT TO THE RCSB FINANCIAL, INC.
NON-EMPLOYEE DIRECTOR STOCK PLAN
WHEREAS, the Board of Directors and Shareholders of RCSB FINANCIAL, INC. (the
"Company") have previously approved the Non-Employee Director Stock Plan (the
"Plan"), and
WHEREAS, the Board of Directors believes it desirable to amend Article X of
the Plan to provide that Elective shares awarded under the Plan to directors
be held for a period of not less than six months from the date of such grant,
NOW, THEREFORE, Article X, Section 10.2 of the Plan is hereby amended to read
in its entirety as follows:
"10.2 Number of Shares. The number of Shares granted pursuant to this
Article shall be the whole number of Shares equal to (I) the portion of the
Quarterly Fees Earned for the prior calendar quarter which the Non-Employee
Director has elected pursuant to Section 10.1 shall be payable in Shares,
divided by (ii) the Stock Award Fair Market Value on the Stock Award Date.
Any fraction of a Share shall be disregarded and the remaining amount of such
Quarterly Fees Earned shall be paid in cash unless the Non-Employee Director
has elected to defer receipt of such compensation under the Deferral Plan.
Where no deferral election exists, the stock certificate representing such
Shares shall be issued and transferred to the Non-Employee Director, whereupon
the Non-Employee Director shall become a shareholder of the Company with
respect to such Shares and shall be entitled to vote the Shares. In the event
the Non-Employee Director has elected to defer the compensation described in
the article under the Deferral Plan, fractional shares of stock shall be
accumulated in the Deferral Plan and Shares in the Deferral Plan shall not be
issued until the Deferral Payment Date elected under the terms of that Plan.
Shares issued and transferred to the Non-Employee Directors pursuant to this
Article may not be sold or otherwise transferred for a period of six months
following the date of grant of the Shares pursuant to this Article and, where
a Non-Employee Director has elected to defer receipt of such Shares under the
Deferral Plan, neither the Share Equivalents credited to such Non-Employee
Director's account under the Deferral Plan nor the Shares issuable under the
Deferral Plan in connection therewith may be sold or otherwise transferred for
a period of six months following the date of grant of the Shares pursuant to
this Article."
IN WITNESS WHEREOF, this Amendment has been adopted by the Board of Directors
of the Company at a duly authorized meeting thereof held on this 25th day of
September, 1996.
- 1 -
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM RCSB
FINANCIAL, INC'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED AUGUST 31,
1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000840068
<NAME> RCSB FINANCIAL, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-END> AUG-31-1996
<CASH> 78661
<INT-BEARING-DEPOSITS> 10707
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 18943
<INVESTMENTS-CARRYING> 1604141
<INVESTMENTS-MARKET> 1567718
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<ALLOWANCE> 28036
<TOTAL-ASSETS> 4006755
<DEPOSITS> 2353196
<SHORT-TERM> 1028164
<LIABILITIES-OTHER> 252001
<LONG-TERM> 55949
0
0
<COMMON> 15386
<OTHER-SE> 302059
<TOTAL-LIABILITIES-AND-EQUITY> 4006755
<INTEREST-LOAN> 132661
<INTEREST-INVEST> 86965
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<INTEREST-TOTAL> 220178
<INTEREST-DEPOSIT> 75959
<INTEREST-EXPENSE> 122821
<INTEREST-INCOME-NET> 97357
<LOAN-LOSSES> 9324
<SECURITIES-GAINS> 1252
<EXPENSE-OTHER> 90746
<INCOME-PRETAX> 45460
<INCOME-PRE-EXTRAORDINARY> 30140
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 30140
<EPS-PRIMARY> 2.05
<EPS-DILUTED> 1.74
<YIELD-ACTUAL> 3.51
<LOANS-NON> 19004
<LOANS-PAST> 4381
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 26091
<CHARGE-OFFS> 11316
<RECOVERIES> 3937
<ALLOWANCE-CLOSE> 28036
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<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
