<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
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SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1999
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Commission File Number 0-18301
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IROQUOIS BANCORP, INC.
----------------------
(Exact name of Registrant as specified in its charter)
NEW YORK 16-1351101
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
115 Genesee Street, Auburn, New York 13021
------------------------------------ -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (315) 252-9521
---------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
------ ------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 2,426,880 shares of common
stock on August 6, 1999.
<PAGE>
INDEX
Page No.
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets -
June 30, 1999 and December 31, 1998 3
Condensed Consolidated Statements of Income -
Three Months Ended June 30, 1999 and 1998 4
Condensed Consolidated Statements of Income -
Six Months Ended June 30, 1999 and 1998 5
Consolidated Statements of Shareholders' Equity
and Comprehensive Income
Six Months Ended June 30, 1999 and 1998 6
Condensed Consolidated Statements of Cash Flows
Six months ended June 30, 1999 and 1998 7
Notes to Condensed Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-14
Item 3. Quantitative and Qualitative Disclosures About Market Risk 15
PART II OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities and Use of Proceeds 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
2
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PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
IROQUOIS BANCORP, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
(dollars in thousands, except
share data) 6/30/99 12/31/98
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 10,239 $ 9,571
Interest-bearing deposits and Federal funds sold 2,500 6,393
Securities available for sale, at fair value 67,301 61,431
Securities held to maturity (fair value of $55,609 in 1999 and
$47,717 in 1998) 55,716 47,056
Loans 418,967 404,092
Less allowance for loan losses 3,364 3,815
-------- ---------
Loans, net 415,603 400,277
Other assets 27,522 22,692
-------- ---------
Total Assets $578,881 $ 547,420
======== =========
LIABILITIES
Savings and time deposits $410,244 $ 412,334
Demand deposits 35,363 30,905
Borrowings 90,882 61,591
Other liabilities 2,802 4,248
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Total Liabilities 539,291 509,078
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SHAREHOLDERS' EQUITY
Preferred Stock, $1.00 par value, 3,000,000 shares authorized;
none issued and outstanding -- --
Common Stock, $1.00 par value; 6,000,000 shares authorized;
2,426,880 and 2,402,980 shares issued and outstanding at June
30, 1999 and December 31, 1998, respectively 2,427 2,410
Additional paid-in capital 9,590 9,303
Retained earnings 28,437 26,557
Accumulated other comprehensive income (loss) (446) 490
Unallocated shares of Stock Ownership Plan (418) (418)
-------- ---------
Total Shareholders' Equity 39,590 38,342
-------- ---------
Total Liabilities and Shareholders' Equity $578,881 $ 547,420
======== =========
</TABLE>
See accompanying notes to condensed consolidated financial statements
3
<PAGE>
IROQUOIS BANCORP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
(dollars in thousands, except
share data) 6/30/99 6/30/98
- -----------------------------------------------------------------------------------------------------
Interest Income:
Loans $ 8,208 $ 8,063
Securities 1,746 1,592
Other 134 130
-------- --------
Total Interest Income 10,088 9,785
-------- --------
Interest Expense:
Deposits 3,994 4,071
Borrowings 1,027 724
-------- --------
Total Interest Expense 5,021 4,795
-------- --------
Net interest income 5,067 4,990
Provision for loan losses 366 360
-------- --------
Net Interest Income after Provision
for Loan Losses 4,701 4,630
Net gain on sales of securities and loans 5 18
Noninterest income 928 911
Noninterest expense 3,731 3,626
-------- --------
Net income before income taxes 1,903 1,933
Provision for income taxes 655 697
-------- --------
Net Income 1,248 1,236
Preferred stock dividend -- 38
-------- --------
Net income attributable to common stock $ 1,248 $ 1,198
======== ========
Earnings per share
Basic $0.52 $0.50
Diluted 0.52 0.49
Cash dividends declared per common share $0.10 $0.10
</TABLE>
See accompanying notes to condensed consolidated financial statements
4
<PAGE>
IROQUOIS BANCORP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended
- -----------------------------------------------------------------------------------------------------
(dollars in thousands, except
share data) 6/30/99 6/30/98
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest Income:
Loans $ 16,249 $ 15,990
Securities 3,403 3,202
Other 262 240
-------- --------
Total Interest Income 19,914 19,432
-------- --------
Interest Expense:
Deposits 7,890 7,950
Borrowings 1,927 1,436
-------- --------
Total Interest Expense 9,817 9,386
-------- --------
Net interest income 10,097 10,046
Provision for loan losses 724 720
-------- --------
Net Interest Income after Provision
for Loan Losses 9,373 9,326
Net gain on sales of securities and loans 15 18
Noninterest income 1,705 1,726
Noninterest expense 7,482 7,222
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Net income before income taxes 3,611 3,848
Provision for income taxes 1,253 1,394
-------- --------
Net Income 2,358 2,454
Preferred stock dividend -- 149
-------- --------
Net income attributable to common stock $ 2,358 $ 2,305
======== ========
Earnings per share
Basic $ 0.98 $ 0.97
Diluted 0.98 0.94
Cash dividends declared per common share $ 0.20 $ 0.20
</TABLE>
See accompanying notes to condensed consolidated financial statements
5
<PAGE>
IROQUOIS BANCORP, INC.
Consolidated Statements of Shareholders' Equity and Comprehensive Income
(unaudited)
Six months ended June 30, 1998:
<TABLE>
<CAPTION>
Unallocated
Addi- Accumulated Shares of
(dollars in thousands, tional Other Stock
except share data) Preferred Common Paid-In Retained Comprehensive Ownership
Stock Stock Capital Earnings Income Plan Total
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
Balances at December 31, 1997 $ 49 2,389 13,793 22,868 213 (283) 39,029
- ----------------------------------------------------------------------------------------------------------------------------
Comprehensive income:
Net Income -- -- -- 2,454 -- -- 2,454
Change in net unrealized gain
on securities available for
sale, net of taxes -- -- -- -- 67 -- 67
-------
Total comprehensive income 2,521
-------
Preferred Stock Redemption
(145 shares) (31) -- (3,022) -- -- -- (3,053)
Stock Options Exercised -- 14 167 -- -- -- 181
Cash dividends declared:
Common stock -- -- -- (488) -- -- (488)
Preferred stock -- -- -- (149) -- -- (149)
Balances at June 30, 1998 $ 18 2,403 10,938 24,685 280 (283) 38,041
- ----------------------------------------------------------------------------------------------------------------------------
Six months ended June 30, 1999:
Unallocated
(dollars in thousands) Addi- Accumulated Shares of
tional Other Stock
Common Paid-In Retained Comprehensive Ownership
Stock Capital Earnings Income Plan Total
- ----------------------------------------------------------------------------------------------------------------------------
Balances at December 31, 1998 $2,410 9,303 26,557 490 (418) 38,342
- ----------------------------------------------------------------------------------------------------------------------------
Comprehensive income:
Net Income -- -- 2,358 -- -- 2,358
Change in net unrealized gain
on securities available for
sale, net of taxes -- -- -- (936) -- (936)
-------
Total comprehensive income 1,422
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Stock Options Exercised 17 287 -- -- -- 304
Cash dividends declared
on common stock -- -- (478) -- -- (478)
- ----------------------------------------------------------------------------------------------------------------------------
Balances at June 30, 1999 $2,427 9,590 28,437 (446) (418) 39,590
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to condensed consolidated financial statements
6
<PAGE>
IROQUOIS BANCORP, INC. AND SUBSIDIARIES
---------------------------------------
Condensed Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Six months ended June 30,
- -----------------------------------------------------------------------------------------------------
(dollars in thousands) 1999 1998
- -----------------------------------------------------------------------------------------------------
Cash flows from operating activities:
<S> <C> <C>
Net Income $ 2,358 $ 2,454
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan/lease losses 724 720
Depreciation and amortization 647 734
Net gain on sale of securities and loans (15) (18)
Decrease in other assets 1,572 518
Decrease in other liabilities (1,446) (1,066)
Net cash provided by operating activities 3,840 3,342
---------- ----------
Cash flows from investing activities:
Proceeds from maturities of available-for-sale securities 6,121 4,925
Proceeds from sales of available-for-sale securities 1,713 1,085
Proceeds from maturities of held-to-maturity securities 5,849 9,677
Purchases of available for sale securities (21,042) (10,215)
Purchases of held to maturity securities (8,779) (5,531)
Proceeds from sales of loans 1,569 1,140
Net increase in loans (18,373) (22,240)
Purchases of bank premises and equipment (149) (182)
Purchase of corporate owned life insurance (5,000) --
Purchase of FHLB stock (459) (375)
---------- ----------
Net cash used by investing activities (38,550) (21,716)
Cash flows from financing activities:
Net increase in demand deposits, money market 4,344 9,223
accounts, and savings accounts
Net increase(decrease) in time deposits (1,976) 8,455
Net increase(decrease) in other borrowings 21,300 (2,915)
Proceeds of long-term borrowings 17,500 25,000
Repayment of long-term borrowings (9,509) (16,007)
Cash dividends (478) (637)
Net proceeds from exercise of stock options, and related tax 304 181
benefit
Redemption of Preferred stock -- (3,053)
---------- ----------
Net cash provided by financing activities 31,485 20,247
---------- ----------
Net increase(decrease) in cash and cash equivalents (3,225) 1,873
Cash and cash equivalents at beginning of period 15,964 13,483
---------- ----------
Cash and cash equivalents at end of period $ 12,739 $ 15,356
========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 9,718 $ 9,386
Income taxes 2,089 1,515
Supplemental schedule of non-cash investing activities:
Additions to other real estate 762 512
Transfer of AFS Securities to HTM Securities 5,744 --
</TABLE>
See accompanying notes to condensed consolidated financial statements
7
<PAGE>
IROQUOIS BANCORP, INC. AND SUBSIDIARIES
Notes to Condensed Unaudited Consolidated Financial Statements
1) Financial Statements
--------------------
The interim financial statements contained herein are unaudited, but in the
opinion of management of the Company, include all adjustments (consisting
only of normal recurring adjustments) necessary for a fair presentation of
the results of operations for these periods. The results of operations for
the interim periods are not necessarily indicative of the results of
operations for the full year.
The data in the consolidated condensed balance sheet for December 31, 1998
was derived from the Company's 1998 Annual Report to Shareholders. That
data, along with the other interim financial information presented in the
consolidated condensed balance sheets, statements of income, shareholders'
equity and comprehensive income and statements of cash flows should be read
in conjunction with the consolidated financial statements, including the
notes thereto, contained in the 1998 Annual Report to Shareholders.
8
<PAGE>
IROQUOIS BANCORP, INC.
AND CONSOLIDATED SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
- -------
Iroquois Bancorp, Inc. ("Iroquois" or the "Company") is a bank holding company
with two financial institutions: Cayuga Bank of Auburn, New York, a New York
state-chartered commercial bank and trust company, and The Homestead Savings
(FA) of Utica, New York, a federally-chartered savings association.
RESULTS OF OPERATIONS
- ---------------------
Three months ended June 30, 1999 compared to June 30, 1998
- ----------------------------------------------------------
Net income for the three months ended June 30, 1999 was $1,248,000, or $.52
basic earnings per share, compared to net income of $1,236,000, or $.50 basic
earnings per share, for the three months ended June 30, 1998. Diluted earnings
per share were $.52 and $.49 for the three months ended June 30, 1999 and 1998,
respectively.
Net interest income was $5,067,000 for the second quarter of 1999 compared to
$4,990,000 for the second quarter of 1998. Net interest margin for the second
quarter of 1999 was 3.73%, compared to 4.09% in 1998. Growth in residential
mortgages and securities as a percentage of total assets combined with a lower
yield curve compared to the prior year were the primary reasons for the decline
in net interest margin. Asset yields decreased to 7.44% for the current quarter
compared to 7.90% the year earlier. Interest-bearing liability costs were 4.02%
for the current quarter compared to 4.22% the year earlier.
Interest income increased 3.1%, to $10,088,000, for the three months ended June
30, 1999, compared to $9,785,000 for the same period the year earlier. Average
earning assets increased 9.3%, to $544.0 million in 1999, from $497.6 million in
1998. Average residential mortgage loans increased $36.0 million, or 15.5%,
while the yield on mortgages decreased from 7.75% in the second quarter of 1998
to 7.39% in the current quarter. Average commercial mortgage loan balances
remained relatively constant while average commercial loans declined $3.9
million in the same period. Residential mortgage loans represented 49.3% of
average earning assets for the three months ended June 30, 1999, compared to
46.6% for the same three months in 1998.
Interest expense on deposits and borrowings increased 4.7%, to $5,021,000, for
the three months ended June 30, 1999, compared to $4,795,000 for the three
months ended June 30, 1998. The increase was due primarily to the growth in
average deposits and borrowings. Average deposit balances increased 5.3%, from
$434.3 million to $457.5 million while the average cost of deposits decreased
from 3.76% in 1998 to 3.50% in 1999. Average borrowings increased 52.6%, from
9
<PAGE>
$48.6 million in 1998 to $74.2 million in 1999. The average cost of borrowings
decreased from 5.97% for the three months ended June 30, 1998 to 5.55% for the
three months ended June 30, 1999.
The provision for loan losses increased slightly from $360,000 for the quarter
ended June 30, 1998, to $366,000 for the same period in 1999.
Total noninterest income remained relatively constant at $933,000 for the
quarter ended June 30, 1999, compared to $929,000 for the quarter ended June 30,
1998. Net gains on sales of securities and loans contributed $5,000 to
noninterest income for the three months ended June 30, 1999, compared to $18,000
for the second quarter of 1998.
Total noninterest expense was $3,731,000 for the quarter ended June 30, 1999,
compared to $3,626,000 for the quarter ended June 30, 1998, an increase of 2.9%.
The increase was primarily due to higher legal and consulting fees and increased
costs relating to foreclosed real estate.
The provision for income taxes for the three months ended June 30, 1999 was
$655,000, or an effective tax rate of 34.4%, compared to $697,000, or an
effective tax rate of 36.1%, for the three months ended June 30, 1998.
Six months ended June 30, 1999 compared to June 30, 1998
- --------------------------------------------------------
Net income for the six months ended June 30, 1999 was $2,358,000 or $.98 basic
earnings per share, compared to $2,454,000, or $.97 basic earnings per share,
for the six months ended June 30, 1998. Diluted earnings per share were $.98
and $.94 for the six months ended June 30, 1999 and 1998, respectively.
Net interest income was $10,097,000 for the first six months of 1999, compared
to $10,046,000 for the first six months of 1998. The yield on interest earning
assets decreased from 7.96% for the six months ended June 30, 1998, to 7.46% for
the six months ended June 30, 1999. The cost of interest bearing liabilities
decreased from 4.22% to 4.03% for the same period. The net interest margin
declined from 4.11% in 1998 to 3.75% in 1999.
Interest income was $19,914,000 for the six months ended June 30, 1999, compared
to $19,432,000 for the six months ended June 30, 1998, an increase of 2.5%. The
increase is primarily due to the 9.2% increase in average earning assets, from
$491.1 million for the six months ended June 30, 1998 to $536.4 million for the
six months ended June 30, 1999. Average residential mortgages increased 16.6%,
from $225.7 million for the first six months of 1998 to $263.2 million for the
same period in 1998. The average securities portfolio increased 13.6%, or $15.0
million, while average commercial mortgages and commercial loans declined $.6
million and $4.0 million, respectively, during the same period.
10
<PAGE>
Interest expense on deposits and borrowings increased 4.6%, from $9,386,000 for
the six months ended June 30, 1998 to $9,817,000 for the six months ended June
30, 1999. Combined increases in public deposits, retail deposits and commercial
deposits of $13.2 million, $11.5 million and $.6 million, respectively, resulted
in a 5.9% increase in average deposits for the first six months of 1999 compared
to the same period the year earlier. The average cost of deposits decreased
from 3.76% in 1998 to 3.52% in 1999. Average borrowings increased 44.0%, from
$48.4 million for the six months ended June 30, 1998 to $69.8 million for the
six months ended June 30, 1999. The average cost of borrowings was 5.57% for
the first six months of 1999 compared to 5.98% in 1998.
The provision for loan losses remained relatively constant for the period at
$724,000 for the six months ended June 30, 1999 compared to $720,000 for the
same period in 1998.
Total non-interest income was $1,720,000 for the first six months of 1999,
compared to $1,744,000 for the first six months of 1999. A decline in
commercial lending related fees in 1999 compared to 1998 offset noninterest
income growth generated by increased fees from deposit and trust services and
earnings from the Company's investment in corporate owned life insurance.
Noninterest expense increased 3.6%, from $7,222,000 for the six months ended
June 30, 1998 to $7,482,000 for the six months ended June 30, 1999. The
increase was attributable primarily to increased occupancy and equipment costs,
as well as increased expense relating to other real estate.
The provision for income taxes was $1,253,000, for an effective tax rate of
34.7% for the six months ended June 30, 1999, compared to $1,394,000, or an
effective tax rate of 36.2%, for the six months ended June 30, 1998.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
- ----------------------------------------------------
Consolidated assets were $578.9 million at June 30, 1999, compared to $547.4
million at December 31, 1998, an increase of $31.5 million, or 5.7%.
Loans increased $14.9 million, or 3.7%, to $419.0 million at June 30, 1999,
compared to $404.1 million at year end 1998. Residential mortgage loans
increased $17.5 million, from $254.8 million at year end 1998, to $272.3 million
at June 30, 1999. Commercial mortgage loans increased $.9 million, to $40.4
million at June 30, 1999. Commercial loans decreased $2.8 million from December
31, 1998 to June 30, 1999, ending the period at $34.6 million. The decline in
commercial loans continues to reflect lower loan demand and increased
competition in the small business market.
The allowance for loan losses decreased from $3.8 million at December 31, 1998,
to $3.4 million at June 30, 1999 as year to date net charge-offs exceeded the
loan loss provision. Nonperforming assets decreased $1.6 million to $5.1
million at June 30, 1999. Nonperforming loans decreased from $6.0 million at
year end 1998 to $4.5 million at June 30, 1999. The percentage of
11
<PAGE>
nonperforming loans to total loans decreased from 1.49% at December 31, 1998, to
1.07% at June 30, 1999. Residential mortgage loans represented 45.2% of total
nonperforming loans at June 30, 1999, while commercial mortgages represented
35.0% and consumer and commercial loans represented 19.8%.
Total securities increased 13.4%, from $108.5 million at year end 1998 to $123.0
million at June 30, 1999. Securities available for sale increased from $61.4
million at December 31, 1998 to $67.3 million at June 30, 1999, while in the
same period securities held to maturity increased from $47.1 million to $55.7
million. Holdings of U.S. Government Agency securities and mortgage-backed
securities increased while holdings of U.S. Government securities and state and
municipal obligations declined compared to year end 1998.
Other assets increased $4.8 million, or 23.1%, from $22.7 million at December
31, 1998 to $27.5 at June 30, 1999. The increase is primarily attributable to
the Company's first quarter purchase of $5 million in corporate owned life
insurance.
Total deposits increased $2.4 million, or .5%, to $445.6 million at June 30,
1999, compared to $443.2 million at December 31, 1998. Personal deposits
increased $5.5 million, while public deposits and business deposits decreased
$7.8 million and $1.9 million, respectively.
Borrowings at June 30, 1999 were $90.9 million, compared to $61.6 million at
December 31, 1998, an increase of 47.6%. Term advances from the Federal Home
Loan Bank ("FHLB") and advances against overnight lines of credit with the FHLB
increased $8.0 million and $21.3 million, respectively. Borrowings represented
15.7% of total assets at June 30, 1999 compared to 11.3% at year end 1998. The
increase in borrowings was used to fund asset growth and offset seasonal
declines in public deposits.
At June 30, 1999, Iroquois had total shareholders' equity of $39.6 million,
compared to $38.3 million at December 31, 1998. The Company's regulatory Tier 1
capital to average assets ratio decreased slightly from 6.70% at December 31,
1998 to 6.67% at June 30, 1999, and the ratio of Tier 1 Capital to risk weighted
assets increased from 10.55% to 10.60%. As of June 30, 1999, the capital ratios
of Iroquois and both of its banking subsidiaries continued to exceed the
respective capital requirements for classification as "well capitalized" under
applicable regulatory provisions.
At June 30, 1999, the Company held securities maturing in one year or less
(excluding estimated payments from amortizing securities) of $25.5 million,
compared to $21.8 million at December 31, 1998. The Company considers its
current level of liquidity along with other available sources of funds as both
sufficient and within acceptable ranges.
12
<PAGE>
YEAR 2000
- ---------
The Company's Year 2000 (or "Y2K") activities continue on schedule under the
framework of the FFIEC's Five Step program. Senior management and the Company's
Board of Directors are actively involved in managing efforts in support of these
activities, monitoring the Company's progress, and evaluating risks of the
process to the Company's strategic plan.
Step 1 Awareness Phase
- ----------------------
The Company continues to follow a comprehensive reporting and communication
plan. All employees have participated in Y2K awareness training. Customer
awareness is being promoted through various mailings, in-branch signage and
community education seminars.
Step 2 Assessment Phase
- -----------------------
The assessment phase has been completed. All software, hardware and other
systems applications have been identified and evaluated for Year 2000
compliance.
All business customers with loan relationships in excess of $150,000 have been
identified and contacted relative to their Y2K readiness.
Step 3 Renovation Phase
- -----------------------
The renovation phase has been completed. All required upgrades to Y2K compliant
versions of various software products have been installed. Noncompliant
hardware systems, primarily PCs, have been replaced in all areas.
The Company's primary data services and item processing provider, Fiserv Inc.,
has indicated that its systems have been upgraded to Year 2000 compliance and
have been tested and implemented as of June 30, 1999.
Step 4 Validation Phase
- -----------------------
All critical systems and applications, both internal and those supplied by
service providers, have been tested and certified for Y2K compliance. Two non-
critical applications remain to be tested.
Step 5 Implementation Phase
- ---------------------------
All hardware and software products that have passed Y2K testing have been placed
back into daily production.
Costs to Address Year 2000 Issues
- ---------------------------------
The Company has incurred and will continue to incur expenses related to its Year
2000 project activities. These actual and anticipated expenses are not
considered material to the business, operations, or financial condition of the
Company.
Risks of Year 2000 Issues
- -------------------------
The Company faces three primary risks in regard to Year 2000 issues:
operational risk, liquidity risk, and credit risk.
13
<PAGE>
The Company's banking operations could be disrupted in the event of computer
failure by third parties, electrical power outages and/or telecommunications
failures. The Company cannot make any assurance that significant disruptions
attributable to such parties will not occur. Failure of a third party fully to
address its Year 2000 issues could have an adverse effect on the business,
operations and/or financial condition of the Company.
Because of general fears relating to Y2K, customers of the Company's subsidiary
banks may withdraw substantial amounts of currency causing an increase in
required liquidity to handle increased cash outflows. A Y2K Liquidity Plan has
been formulated to prepare for increased demands on the Company's cash and/or
liquidity.
In addition, the risk of credit losses exists should any customer and/or bond
issuer experience significant business disruption causing default on outstanding
obligations. The Company has taken steps to limit its risk through
diversification, and through monitoring of its larger loan and security
investments relative to their stated Y2K preparedness.
Contingency Plans
- -----------------
Business resumption contingency plans have been completed and tested for all of
the Company's critical business processes. These plans address the actions that
would be taken if key business processes could not be performed in the normal
manner. An Event Management Plan has also been completed detailing
responsibilities and activities relative to the century rollover--before, during
and after the actual event.
FORWARD-LOOKING STATEMENTS
- --------------------------
Portions of this document may constitute "forward looking statements" as defined
by federal law. Although the Company believes any such statements are based on
reasonable assumptions, there is no assurance that actual outcomes will not be
materially different. The Company assumes no duty to update forward-looking
statements, and cautions that these statements are subject to numerous
assumptions, risk, and uncertainties, all of which could change over time.
14
<PAGE>
Item 3. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the risk of loss from adverse changes in market prices and
rates. The Company's market risk arises primarily from interest rate risk
inherent in its lending and deposit activities. Other types of market
risk, such as foreign currency exchange rate risk and commodity price risk,
do not arise in the normal course of the Company's business activities.
Managing interest rate risk is of primary importance to Iroquois. The
Company's asset and liability management program includes a process for
identifying and measuring potential risks to earnings and to the market
value of equity due to changes in interest rates. Interest rate risk is
measured and managed for each bank and monitored from a holding company
perspective. The goal of interest rate risk analysis is to minimize the
potential loss in net interest income and net portfolio value that could
arise from changes in interest rates. Iroquois' asset/liability management
strategies emphasize balancing the mix and repricing characteristics of its
loans, securities, deposits and borrowings to ensure that exposure to
interest rate risk is limited within acceptable levels. Iroquois
determines sensitivity of earnings and capital to changes in interest rates
by utilizing various tools.
A simulation model is the primary tool used to assess the impact of changes
in interest rates on net interest income. The Company also uses a net
portfolio value ("NPV") analysis as another means of measuring and
monitoring its interest rate risk, and in addition also uses a cumulative
gap analysis to measure interest rate sensitivity. The Company establishes
guidelines to monitor the results to ensure interest rate risk is limited
within acceptable levels. At June 30, 1999, the Company's interest rate
risk as measured by the above mentioned analyses was within established
guidelines.
The following table sets forth at June 30, 1999 the analysis of the
Company's interest rate risk as measured by the estimated changes in NPV
resulting from instantaneous and sustained parallel shifts in the interest
rate yield curve. The NPV represents the difference between the present
value of the Company's liabilities and the present value of the expected
cash flows from its assets. For purposes of the NPV table, assumptions
similar to those used in the 1998 Annual Report, adjusted to reflect
current market conditions, were used.
NET PORTFOLIO VALUE ANALYSIS at June 30, 1999
($ in thousands)
<TABLE>
<CAPTION>
Changes in interest Estimated Change in NPV
rate (basis points) NPV Amount %
----------------------- --------------- -------------------------------
<S> <C> <C> <C> <C>
+200 $42,711 (13,454) (24.0)
+100 49,746 (6,419) (11.4)
0 56,165 --
-100 61,836 5,671 10.1
-200 66,493 10,328 18.4
</TABLE>
15
<PAGE>
IROQUOIS BANCORP, INC.
AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In the normal course of business, there are various outstanding legal
proceedings.
In the opinion of management based on review with counsel, the
proceedings should not have a material effect on the financial
condition, liquidity or results of operations of the Company.
Item 2. Changes in Securities and Use of Proceeds - None
Item 3. Defaults upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Shareholders of the Company was held on
April 29, 1999.
(b) At the Annual Meeting, two directors were elected to three year
terms: Arthur A. Karpinski, Henry D. Morehouse.
(c) On the proposal for the election of the two directors, the
following votes were cast:
For Withheld
--- --------
Arthur A. Karpinski 1,981,373 123,166
Henry D. Morehouse 1,987,396 117,144
On the proposal to approve the selection of KPMG LLP as independent
auditors, the following votes were cast:
For Against Abstain
--- ------- -------
2,037,002 56,619 10,915
There were no broker non-votes as there was no non-discretionary
matter on the agenda for which brokers may not vote without
instruction.
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Number Description
------ -----------
10 (L) Employment agreement with Robert B. Bantle
10 (M) Incentive agreement with Robert B. Bantle
11 Statement Regarding Computation of Earnings per
Common Share
27 Financial Data Schedule
(b) Reports on Form 8-K - None
16
<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.
Iroquois Bancorp, Inc.
Registrant
Date: August 11, 1999 /s/Richard D. Callahan
-------------------------
Richard D. Callahan
President & CEO
Date: August 11, 1999 /s/Marianne R. O'Connor
-----------------------
Marianne R. O'Connor
Treasurer & CFO
17
<PAGE>
EXHIBIT INDEX
-------------
Number Description
- ------ -----------
10 (L) Employment Agreement with Robert B. Bantle
10 (M) Incentive Agreement with Robert B. Bantle
11 Statement Regarding Computation of Earnings per Common Share
27 Financial Data Schedule
18
<PAGE>
Exhibit 10(L)
Modified Trigger
EMPLOYMENT AGREEMENT
THIS AGREEMENT, is made as of this 14th day of June, 1999, by and among
Iroquois Bancorp, Inc., a New York corporation ("Iroquois"), Cayuga Bank
("Member Bank") (Iroquois and Member Bank each an "Employer" and collectively,
"Employers") and Robert B. Bantle a New York State resident (the "Executive").
WHEREAS, Executive's managerial experience is of great value to the
Employers; and
WHEREAS, the Employers and the Executive desire and agree to enter into
and/or continue the employment relationship by means of this Employment
Agreement.
NOW, THEREFORE, in consideration of the promises and mutual covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, it is mutually covenanted and
agreed by and among the parties as follows:
1. Employment and Duties.
(a) Iroquois and Member Bank each hereby employ the Executive as Senior Vice
President: Human Resources, Marketing and Planning, with all the powers
and duties customary to such position in similar corporations and banking
institutions, and the Executive hereby accepts such employment. The
Executive shall perform such other duties and have such other powers and
responsibilities as may be assigned to the Executive by the Employers and
which are commensurate with the Executive's position. The Executive shall
report directly to the president/chief executive officer of Iroquois or
such other executive officer as the president/chief executive officer may
designate or to the board of directors of the Employers, as appropriate.
(b) During the term of this Agreement, the Executive shall devote his or her
entire time and attention to the business and affairs of the Employers and
shall do all that is reasonably in his or her power to promote, develop,
and extend the business of Iroquois and its affiliates. The Executive
shall at all times during employment hereunder, conduct himself or herself
faithfully and diligently in a manner consistent with the position and
shall not knowingly perform any act contrary to the best interests of the
Employers or any affiliate thereof.
<PAGE>
2. Term.
Unless sooner terminated as provided by Section 5 herein, the term of this
Agreement shall commence June 14, 1999 and end December 31, 1999. The term may
be renewed annually thereafter, each renewal term for a period of twelve (12)
months, by affirmative action of the boards of directors of the Employers upon
the same terms and conditions and at such compensation level determined
appropriate by the boards of directors at the time of renewal. Employers shall
notify the Executive of the Employers' intention not to renew this Agreement not
less than thirty (30) days prior to expiration of the initial term of this
Agreement or any renewal term.
3. Compensation.
(a) The annual base salary of the Executive during the initial term of this
Agreement shall be $115,000.00, subject to adjustment at the time of
renewal by the appropriate board of directors. The Executive will be
advised of any adjustment to base salary not later than forty-five (45)
days after the commencement of the renewal term. Any such adjustment in
base salary however, shall be made in the sole discretion of such board of
directors, and nothing herein contained shall be construed to provide the
Executive with any assurance that base salary will be increased upon
affirmative renewal of this Agreement. Base salary shall be prorated for
any year in which employment under this Agreement does not consist of a
full year of service.
(b) The Executive, if otherwise eligible under any particular program or plan,
shall participate in any bonus or incentive compensation plan, stock
purchase or stock option plan, profit sharing plan, retirement plan,
supplemental retirement plan or other plan or program designed for or
available generally to senior management of Iroquois and its affiliates.
4. Additional Benefits.
(a) The Executive shall be entitled to reimbursement of reasonable expenses
incurred in the performance of the duties required hereunder in furtherance
of the business of the Employers and affiliates of the Employers, upon
submission of appropriate invoices or vouchers documenting such expenses
and provided such expenditures were consistent with the Employers'
policies.
(b) The Executive shall be eligible for four (4) weeks of paid vacation in any
calendar year, to be taken at such time or times as the Executive shall
elect in accordance with Employers' policies then in effect. Unused
vacation may not be accrued or carried over from year to year.
2
<PAGE>
(c) The Executive shall be eligible to receive full salary during any period of
disability, subject to a limitation of eighteen (18) months of continued
salary and benefits with respect to any single disability. In the event
that the Executive is entitled to payments under any disability insurance
policy during such period of disability, the aggregate payments from such
disability insurance coverage and from the Employers for salary and
benefits shall not exceed an amount equal to the Executive's full salary
and benefits for such period.
(d) The Executive shall be eligible to participate in any Employer group
medical or hospitalization insurance plan and in any other fringe benefit
plan generally available to employees of the Employers. The Executive may
also be entitled to special fringe benefits, if applicable, as identified
on Schedule A attached hereto, which Schedule may be amended by the
----------
appropriate board of directors at the time of renewal or such other time as
such boards of directors deem appropriate under the circumstances. The
foregoing benefits and special benefits described in clauses (a) through
(d) of this Section 4 shall be known collectively as the "Welfare
Benefits".
5. Termination.
(a) Termination Events: the Executive's employment shall terminate during the
-------------------
term of this Agreement upon the occurrence of any of the following events:
(i) the Executive's death;
(ii) termination by the Employers of the Executive's employment for reasons
of Disability (as hereinafter defined) upon fifteen (15) days written
notice to the Executive;
(iii) termination by the Employers of the Executive's employment for Cause
(as hereinafter defined) upon written notice to the Executive;
(iv) termination by the Employers of the Executive's employment other than
for Cause (as hereinafter defined) upon thirty (30) days written
notice to the Executive; or
(v) resignation of the Executive.
(b) Termination Definitions: The following words and phrases shall have the
------------------------
meanings indicated below:
(i) Disability. "Disability" shall mean the Executive's incapacity or
inability to further perform services contemplated under this
Agreement for a period of at least eighteen (18) months because of an
impairment of his or her physical or
3
<PAGE>
mental health so as to make it impossible or impractical for the
Executive to perform the duties and responsibilities contemplated
hereunder.
(ii) Cause. "Cause" shall mean personal dishonesty, willful or negligent
misconduct, breach of fiduciary duty, intentional failure to perform
stated duties, willful violation of any law, rule, or regulation
(other than traffic violations or similar minor offenses) or court or
administrative order, or any removal or permanent prohibition of the
Executive from participating in the conduct or affairs of Iroquois or
a Member Bank by an order of any regulatory authority having
jurisdiction.
(iii) Date of Termination. "Date of Termination" shall mean:
- with respect to termination due to the death or resignation of the
Executive, the date of death or resignation;
- with respect to termination due to Disability, fifteen (15) days
following the giving of notice as referred to in Section 5(a)(ii)
above;
- with respect to termination by the Employers for Cause, the date
notice is given to the Executive, as referred to in Section
5(a)(iii) above;
- with respect to termination by the Employers other than for Cause,
thirty (30) days following the giving of notice as referred to in
Section 5(a)(iv) above.
(c) Employers' Obligations Upon Termination:
------------------------------------------
(i) Death. If the Executive's employment is terminated by reason of the
Executive's death during the term of this Agreement, this Agreement
shall terminate without further obligation to any legal representative
of the Executive, other than for any obligations accrued prior to the
Executive's death, which shall be payable (in a lump sum) within
thirty (30) days of the Date of Termination. Notwithstanding such
termination, the Executive's legal representative shall be obligated
to return Employer's property pursuant to Section 7 herein.
(ii) Disability. If the Executive's employment is terminated by reason of
the Executive's Disability during the term of this Agreement, this
Agreement shall terminate (with the exception of Section 7 herein)
without further obligation to the Executive, other than for any
obligations accrued prior to the Executive's Date of Termination,
which shall be payable (in a lump sum) within thirty (30) days of the
Date of Termination.
4
<PAGE>
(iii) Cause. If the Executive's employment is terminated for Cause during
the term of this Agreement, this Agreement shall terminate (with the
exception of Section 7 herein) without further obligation to the
Executive other than for any obligations accrued prior to the
Executive's Date of Termination.
(iv) Termination by the Employers other than for Cause. If, during the
term of this Agreement, the Executive's employment shall be terminated
by Employers other than for Cause, or for reasons other than the
Executive's death, Disability or voluntary resignation, then the
Executive shall be entitled to the benefits provided below:
(A) The Employers shall pay to the Executive any accrued but unpaid
base salary through the Date of Termination.
(B) In lieu of any further base salary and annual incentive payments
for periods subsequent to the Date of Termination, the Employers
shall pay to the Executive, within thirty (30) days of the Date
of Termination, a cash payment in an amount equal to 100 percent
(hereinafter the "Severance Percentage") of the sum of (x) the
Executive's annual base salary for the year in which the
Executive is terminated and the two years immediately preceding
the year of termination, divided by three, and (y) the
Executive's target annual incentive (under the Iroquois Annual
Management Incentive Compensation Plan) for the year in which the
Executive is terminated and the annual incentive earned by the
Executive over the two years immediately preceding the year of
termination, divided by three. For purposes of this computation,
in the event Executive has been employed less than three years,
the annual base salary and annual incentive in the initial year
of Executive's employment (without regard to adjustment for a
partial year of employment) shall be deemed to be annual base
salary and annual incentive for any year prior to employment.
(C) The Employers shall continue to provide the Executive with
Welfare Benefits in the amounts and upon the terms and conditions
present immediately prior to the Date of Termination (and only to
the extent the benefit is permissible under such contract or
plan), for a Severance Period consisting of a number of months
calculated based on the Severance Percentage applicable to the
Executive where a Severance Percentage of 100% results in a
Severance Period of twelve (12) months (the "Severance Period");
provided, however, that such Welfare Benefits shall cease upon
the Executive's becoming eligible to receive substantially
similar Welfare Benefits from a new employer.
5
<PAGE>
(D) For the period of months set forth in Schedule B attached, the
----------
Employers shall reimburse all reasonable expenses (as determined
in the sole discretion of the appropriate board of directors)
incurred by the Executive for professional outplacement services;
provided, however, that such reimbursement shall not exceed that
percentage of the Executive's annual base salary set forth in
Schedule B and that such reimbursement shall be discontinued once
----------
the Executive attains employment in a position with duties,
responsibilities and level of compensation substantially similar
to his or her duties, responsibilities and level of compensation
with the Employers.
(v) Resignation. If the Executive's employment is terminated by reason of
the Executive's voluntary resignation during the term of this
Agreement, this Agreement shall terminate (with the exception of
Section 7 herein) without further obligation to the Executive, other
than for any obligations accrued prior to the Executive's resignation,
which shall be payable (in a lump sum) within thirty (30) days of the
Date of Termination.
(d) In the event the Executive's employment is terminated for any reason with
either Iroquois or Member Bank, employment shall be terminated
automatically with both Employers unless the non-terminating Employer shall
agree in writing to continue the terms of this Agreement solely between the
Executive and such non-terminating Employer.
(e) In the event this Agreement is not renewed at the discretion of the Board
and without cause pursuant to Section 2 above, the Executive shall be
entitled to:
(i) the compensation and benefits described in Sections 3 and 4 above, for
the remainder of the term of this Agreement; and
(ii) if the Executive is no longer employed by the Employers or any
affiliates of the Employers, those benefits described in Subsections
(A), (B), (C) and (D) of Section 5(c)(iv) above.
6. Suspension.
If the Executive is suspended or temporarily prohibited from participating in
the conduct or the affairs of Iroquois or Member Bank by action of any
regulatory authority having jurisdiction, the obligations of the Employers under
this Agreement shall be suspended as of the date of service of written notice of
such suspension by such regulatory agency, unless stayed by appropriate
proceedings. If the charges underlying such actions are dismissed, the
Executive shall be entitled to reinstatement and any compensation withheld while
the Employers' obligations under this Agreement were suspended.
6
<PAGE>
7. Confidential Information and Business Materials.
(a) During the term of this Agreement and for a period of two years following
the termination or non-renewal of this Agreement, the Executive agrees to
receive confidential and proprietary information of Employers and any
affiliates in confidence, and not to disclose such information to others
except as authorized by the relevant Employer or affiliate. Confidential
and proprietary information shall mean information not generally known to
the public that is disclosed to the Executive and is a consequence of
employment by either Employer, whether or not pursuant to this Agreement.
(b) The Executive further covenants and agrees that every document, computer
disc, computer software program, notation, record, diary, memorandum,
development, investigation, file, or the like, and any method or manner of
doing business of either Employer or any affiliate made or acquired by the
Executive during employment, is and shall be the sole and exclusive
property of such Employer or affiliate. The Executive will deliver the
same (and every copy, disc, abstract, summary or reproduction of same made
by or for the Executive or acquired by the Executive) whenever either
Employer may so require and in any event prior to or at the termination of
said employment.
(c) Employers and the Executive hereby acknowledge that the restrictions stated
herein above are reasonably necessary for the protection of Employers'
legitimate proprietary interests and Employers may enforce such provisions
through action for specific performance.
8. Change of Control.
(a) In the event the Executive's employment is terminated (x) by the Employers
for any reason other than for Cause, death or Disability, or (y) by the
Executive for Good Reason (as defined in Section 8(d) below), in either
event within twenty-four (24) months following a Change Of Control (as
defined in Section 8(b) below, or (z) by the Executive for any reason
during the thirty (30) day period beginning on the first anniversary of a
Change of Control, then:
(i) The Employers shall pay the Executive, within thirty (30) days after
the Date of Termination:
(A) any accrued but unpaid base salary earned through the Date of
Termination; and
7
<PAGE>
(B) a pro-rata incentive award in an amount equal to the product of
(x) the target incentive amount which the Executive could earn
for the year in which the Date of Termination occurs pursuant to
the Iroquois Annual Management Incentive Plan, and (y) a
fraction, the numerator of which is the number of days in the
fiscal year through the Date of Termination, and the denominator
of which is 365; and
(C) a lump-sum cash payment equal to 2.99 times the sum of: (x) the
Executive's base salary immediately preceding the Date of
Termination, or immediately preceding the Change of Control,
whichever is greater, and (y) the average annual incentive
received by the Executive during the three years immediately
preceding the Date of Termination (such cash payment being in
lieu of any further base salary and annual incentive payments the
Executive may have been entitled to pursuant to this Agreement).
(ii) The Employer shall continue all Welfare Benefits received by the
Executive for the Severance Period; provided, however, that such
Welfare Benefits shall cease upon the Executive becoming eligible to
receive substantially similar benefits from a new employer.
(iii) For the period of months set forth in Schedule B attached, the
Employers shall reimburse all reasonable expenses (as determined in
the sole discretion of the appropriate board of directors) incurred by
the Executive for professional outplacement services; provided,
however, that such reimbursement shall not exceed that percentage of
the Executive's annual base salary set forth in Schedule B and that
such reimbursement shall be discontinued once the Executive attains
employment in a position with duties, responsibilities and level of
compensation substantially similar to his or her duties,
responsibilities and level of compensation with the Employers.
(b) For the purposes of this Agreement, a "Change Of Control" shall mean: (i)
any "person," including a "group" as determined in accordance with the
Section 13(d) of the Securities Exchange Act of 1934 (the "Exchange Act"),
is or becomes the beneficial owner, directly or indirectly, of securities
of Iroquois representing 20% or more of the combined voting power of the
then outstanding securities of Iroquois; (ii) as a result of, or in
connection with, any tender offer or exchange offer, merger or other
business combination (a "Transaction"), the persons who were directors of
Iroquois before the Transaction shall cease to constitute a majority of the
board of directors of Iroquois or any successor of Iroquois, (iii) Iroquois
is merged or consolidated with another corporation and as a result of the
merger or consolidation less than 80% of the outstanding voting securities
of the surviving or resulting corporation shall then be owned in the
aggregate by the former shareholders of
8
<PAGE>
Iroquois, other than (A) affiliates within the meaning of the Exchange Act,
or (B) any party to the merger or consolidation; (iv) a tender offer or
exchange offer is made and consummated for the ownership of securities of
Iroquois representing 20% or more of the combined voting power of Iroquois'
then outstanding voting securities; or (v) Iroquois transfers substantially
all of its assets to another corporation which is not controlled by
Iroquois.
9
<PAGE>
(c) Iroquois agrees that during the term of this Agreement, any options granted
to the Executive under the 1988 Stock Option Plan, as amended, or the 1996
Stock Option Plan, as amended, or any other similar plan subsequently
instituted by the Employers (collectively the "Plans"), shall provide that
the Executive may, upon a Change Of Control of Iroquois, and without regard
to any restrictions on exercise that may otherwise apply, within twelve
(12) months of the date the Executive receives written notice of such
Change Of Control, (i) surrender such option or options for a cash payment
equal to the difference between the aggregate option exercise price and the
aggregate fair market value of the shares of stock subject to the option,
as such fair market value is determined in accordance with the Plan, or
(ii) exercise such option or options, whether or not such options are
exercisable pursuant to the terms of the Plans.
(d) For purposes of this Section 8, "Good Reason" shall mean:
(i) assignment to the Executive of any duties inconsistent with his or her
status as an executive officer of Iroquois or a Member Bank, or a
substantial adverse alteration in the nature or status of the
Executive's responsibilities from those in effect immediately prior to
the Change Of Control;
(ii) reduction of the Executive's base salary as in effect immediately
preceding the Change of Control, or any reduction in the Executive's
normative incentive award percentage or any change in the method for
applying the normative incentive award percentage to determine the
Executive's incentive award, which would materially reduce such
incentive award;
(iii) failure by the Employers to continue to provide the Executive with
Welfare Benefits substantially similar to those received by the
Executive immediately preceding the Change of Control; or
(iv) the relocation of the Employers principal executive offices and the
principal offices occupied by the Executive more than a reasonable
distance from their current location.
In the event the Executive terminates employment for Good Reason, the Date
of Termination shall mean the date on which the Executive notifies the
Employers of such termination.
(e) Notwithstanding anything contained in this Agreement to the contrary, to
the extent that the payments and benefits provided under this Agreement or
provided for the benefit of the Executive under any other plan or agreement
of or with the Employers (each such payment of benefit, a "Payment," and
such payments and benefits collectively, the "Payments"), would be subject
to the excise tax imposed under Sections 4999 and 280G of the Internal
Revenue Code, or any interest or penalties with
10
<PAGE>
respect to such excise tax (such excise tax, together with any such
interest and penalties are hereinafter collectively referred to as the
"Excise Tax"), the Payments shall be reduced to the maximum amount which
may be paid so that no such Payment shall be subject to the Excise Tax. If
necessary, the Employers shall reduce or eliminate the Payments by first
reducing or eliminating the payments due under Section 8(a)(i)(B) above,
then by reducing or eliminating the amounts payable under Section
8(a)(i)(C), and then by reducing or eliminating benefits which are not
payable in cash, in each case, in reverse order beginning with payments or
benefits which are to be paid the farthest in time from the Date of the
Termination.
9. Compliance With Laws.
Any payments made to the Executive pursuant to this Agreement, or otherwise, by
Iroquois or a Member Bank, are subject to and conditioned upon compliance with
all federal and state laws and regulations as may be applicable at the time to
Iroquois, the Member Bank or any other affiliate for which the Executive has
been assigned direct duties or responsibilities, including without limitation,
Section 18(k) of the Federal Deposit Insurance Act.
10. Binding Effect; Benefits.
This Agreement shall inure to the benefit of, and shall be binding upon, the
parties hereto and their respective successors, assigns, heirs, and legal
representatives, except that insofar as the Executive is concerned, this
Agreement, being personal, cannot be assigned.
11. Notices.
All notices and other communications which are required or permitted hereunder
shall be in writing and shall be sufficient if delivered or mailed by registered
or certified mail, postage prepaid, to the following addresses or such other
address as any party hereto shall have specified by a notice in writing to the
other parties hereto:
If to the Executive: Robert B. Bantle
Martin Point
Auburn, New York 13021
11
<PAGE>
If to Iroquois: Iroquois Bancorp, Inc.
115 Genesee Street
Auburn, New York 13021
Attn: Chairman of the Board
If to Member Bank: Cayuga Bank
115 Genesee Street
Auburn, New York 13021
Attn: Chairman of the Board
All such notices and communications shall be deemed to have been received on the
date of delivery thereof or the fifth business day after the mailing thereof,
whichever is earlier. A copy of any notice to either Iroquois or to Member Bank
shall be sent promptly by the Executive to the other.
12. Entire Agreement.
This Agreement and the Incentive Agreement, a copy of which is attached hereto,
contain the entire agreement between the parties hereto and supersede all other
discussions and understandings, oral or written, between the parties hereto with
respect to the subject matter hereof, except that in the event there is any
conflict during the initial term of this Agreement between a letter dated March
23, 1999 from Iroquois to Executive and this Agreement, the letter shall
control.
13. Amendment and Waivers.
This Agreement may not be modified or amended except by an instrument or
instruments in writing signed by the party against whom enforcement or any such
modification or amendment is sought. The waiver by any party hereto of a breach
of any term or provision of this Agreement shall not be construed as a waiver of
any subsequent breach.
14. Section and Other Headings.
This section and other headings contained in this Agreement are for reference
purposes only and shall not be deemed to be a part of this Agreement or to
control or affect the meaning or construction of any provision of this
Agreement.
12
<PAGE>
15. Severability.
If any term or provision of this Agreement is held or deemed to be invalid or
unenforceable, in whole or in part, by a court of competent jurisdiction, this
Agreement shall be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforeceable the remaining terms
and provisions of this Agreement.
16. Governing Law.
This Agreement shall be governed by and construed in accordance with the laws of
the State of New York.
13
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this agreement as
of the date first above written.
IROQUOIS BANCORP, INC.
By: /s/ Richard D. Callahan /s/ Robert B. Bantle
---------------------- --------------------
Its: President & CEO Robert B. Bantle
MEMBER BANK
By /s/ Richard D. Callahan
-----------------------
Its: President & CEO
14
<PAGE>
SCHEDULE A TO EMPLOYMENT AGREEMENT
pursuant to Section 4(d)
During the initial term of this Agreement, benefits described in a letter dated
March 23, 1999 from Iroquois Bancorp, Inc. to Robert B. Bantle.
15
<PAGE>
SCHEDULE B TO EMPLOYMENT AGREEMENT
pursuant to Section 5(c)(iv)(D)
12 months of outplacement services.
Reimbursement shall not exceed 12% of base salary.
16
<PAGE>
Exhibit 10(M)
INCENTIVE AND ADVANCE AGREEMENT
THIS INCENTIVE AGREEMENT is made as of this 14th day of June, 1999, by and
among IROQUOIS BANCORP, INC. a New York corporation ("Iroquois"), CAYUGA BANK
("Member Bank") (Iroquois and Member Bank each an "Employer" and collectively,
"Employers") and ROBERT B. BANTLE, a New York State resident (the "Executive").
WHEREAS, Employers and Executive have entered into an Employment Agreement
dated as of the date hereof; and
WHEREAS, Employers have agreed to provide Executive certain additional
benefits as an incentive to accepting a position with Employers and entering
into the Employment Agreement; and
WHEREAS, the parties wish to document the specific terms of these
additional benefits.
NOW, THEREFORE, in consideration of the covenants and premises hereinafter
contained, and for other good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
1. Relocation Assistance. Employers agree to reimburse Executive for (a)
---------------------
the costs of packing, moving and unpacking of household goods relating to moving
himself and his family from Rochester, New York to Auburn, New York; (b) actual
and reasonable closing costs incurred by Executive in connection with the
purchase of a home in Auburn; (c) payment of finance charges associated with a
bridge loan if such financing is required, to be made available through
September 30, 2000 provided Executive is a party to a written contract for the
purchase of a single family residence; and (d) an allowance of $5,000 to cover
miscellaneous moving expenses and payable at the time of Executive's move. If
Executive has not relocated from his present location to Auburn, New York by
June 30, 2000, the foregoing benefits will expire. The foregoing relocation
assistance will only be available for purposes of the purchase of single-family
residential property.
2. Incentive Advance.. Employers hereby agree to pay Executive an
------------------
incentive bonus of $30,000, to become earned on a straight line basis over a
period of three (3) years commencing the date hereof. In consideration for the
incentive bonus, Executive agrees to remain employed by the company for a period
of at least three years. Employers agree to advance the incentive bonus to
Executive on January 1, 2000 and, if Executive's employment is terminated prior
to the completion of three years from the date hereof, either as a result of
either voluntary resignation by the Executive or termination for cause by either
Employer, Executive will repay the unearned portion of the incentive bonus
previously advanced, with interest thereon at the Cayuga Bank prime rate of
interest. To evidence Executive's agreement to the terms of the incentive,
Executive has executed the promissory note attached hereto for repayment of any
unearned portion of the advance of Executive's incentive bonus upon appropriate
termination. In the event of a Change of Control (as
<PAGE>
defined in the Employment Agreement), the entire advance of $30,000 shall be
deemed to be fully earned and the obligation for any repayment of unearned
advance shall cease.
3. Miscellaneous.
-------------
(a) This Agreement shall governed by and construed in accordance with
the laws of the State of New York.
(b) This Agreement may not be modified or amended except in a writing
executed by both parties hereto.
(c) If any term or provision of this Agreement is held or deemed to be
in valid or unenforceable, in whole or in part, by a court of competent
jurisdiction, this Agreement shall be ineffective to the extent of such
invalidity or unenforceability without rendering invalid or unenforceable the
remaining terms and provisions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first above written.
IROQUOIS BANCORP, INC.
By: /s/ Richard D. Callahan
-----------------------
Richard D. Callahan, President and CEO
CAYUGA BANK
By: /s/ Richard D. Callahan
-----------------------
Richard D. Callahan, President and CEO
EXECUTIVE
/s/ Robert B. Bantle
--------------------
Robert B. Bantle, SVP
<PAGE>
Exhibit 11
Statement Regarding Computation of
Earnings per Common Share
Basic and diluted earnings per share were computed as follows:
<TABLE>
<CAPTION>
Three months ended Six months ended
(In thousands, except per share data) June 30 June 30
- -----------------------------------------------------------------------------------------------------
1999 1998 1999 1998
---- ---- ---- ----
Basic earnings per share:
Earnings available for common shares:
<S> <C> <C> <C> <C>
Net income $1,248 1,236 2,358 2,454
Provision for cash dividends on
preferred stock -- 38 -- 149
- -----------------------------------------------------------------------------------------------------
Net earnings available for common
shareholders $1,248 1,198 2,358 2,305
- -----------------------------------------------------------------------------------------------------
Weighted average common shares
outstanding 2,397 2,378 2,393 2,375
- -----------------------------------------------------------------------------------------------------
Basic earnings per share $ .52 .50 .98 .97
- -----------------------------------------------------------------------------------------------------
Diluted earnings per share:
Net earnings available for common
shares and common stock
equivalent shares deemed to have
a dilutive effect $1,248 1,198 2,358 2,305
- -----------------------------------------------------------------------------------------------------
Weighted average common shares
outstanding 2,397 2,378 2,393 2,375
Additional potentially dilutive
securities (equivalent in common
stock):
Stock options 22 70 26 68
- -----------------------------------------------------------------------------------------------------
Total 2,419 2,448 2,419 2,443
- -----------------------------------------------------------------------------------------------------
Diluted earnings per share $ .52 .49 .98 .94
- -----------------------------------------------------------------------------------------------------
</TABLE>
The additional potentially dilutive securities calculation for 1999 excludes an
average of 42,900 options because the exercise price of the options was greater
than the average market price.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 10239
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 2500
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 67301
<INVESTMENTS-CARRYING> 55716
<INVESTMENTS-MARKET> 55609
<LOANS> 418967
<ALLOWANCE> 3364
<TOTAL-ASSETS> 578881
<DEPOSITS> 445607
<SHORT-TERM> 42343
<LIABILITIES-OTHER> 2802
<LONG-TERM> 48539
0
0
<COMMON> 2427
<OTHER-SE> 37163
<TOTAL-LIABILITIES-AND-EQUITY> 578881
<INTEREST-LOAN> 16249
<INTEREST-INVEST> 3403
<INTEREST-OTHER> 262
<INTEREST-TOTAL> 19914
<INTEREST-DEPOSIT> 7890
<INTEREST-EXPENSE> 9817
<INTEREST-INCOME-NET> 10097
<LOAN-LOSSES> 724
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 7482
<INCOME-PRETAX> 3611
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2358
<EPS-BASIC> .98
<EPS-DILUTED> .98
<YIELD-ACTUAL> 3.75
<LOANS-NON> 4084
<LOANS-PAST> 416
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3815
<CHARGE-OFFS> 1255
<RECOVERIES> 80
<ALLOWANCE-CLOSE> 3364
<ALLOWANCE-DOMESTIC> 3364
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
