<PAGE>
As filed with the Securities and Exchange Commission on July 26, 1999
Registration No. 333-82465
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
Amendment No. 1
to
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_________________________
NEW HAMPSHIRE THRIFT BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
_________________________
Delaware 02-0430695
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
9 Main Street
Newport, New Hampshire 03773
(603) 863-0886
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
_________________________
NHTB CAPITAL TRUST I
(Exact name of registrant as specified in its charter)
_________________________
Delaware Pending
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
c/o New Hampshire Thrift Bancshares, Inc.
9 Main Street
Newport, New Hampshire 03773
(603) 863-0886
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
_________________________
Stephen W. Ensign
Vice Chairman of the Board, President and
Chief Executive Officer
New Hampshire Thrift Bancshares, Inc.
9 Main Street
Newport, New Hampshire 03773
(603) 863-0886
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
_________________________
Copies of communications to:
Richard A. Schaberg, Esq. Stephen J. Coukos, Esq.
Thacher Proffitt & Wood Sullivan & Worcester LLP
1700 Pennsylvania Avenue, N.W. One Post Office Square
Suite 800 Boston, MA 02109
Washington, DC 20006 (617) 338-2800
(202) 347-8400
_________________________
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.
_________________________
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
<PAGE>
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 (the "Securities Act"), other than securities offered only in connection
with dividend or interest reinvestment plans, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
_________________________
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
===========================================================================================================================
Amount Proposed Maximum Proposed Maximum Amount of
Title of Shares to be Offering Price Aggregate Offering Registration
to be Registered Registered Per Unit(1) Price (1) Fee
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Junior Subordinated Deferrable Interest
Debentures of New Hampshire Thrift
Bancshares, Inc.(2).......................... 1,750,000 $10.00 $17,500,000 $4,865
- ---------------------------------------------------------------------------------------------------------------------------
Capital Securities of NHTB Capital Trust I.... 1,750,000 $10.00 $17,500,000 N/A
- ---------------------------------------------------------------------------------------------------------------------------
The New Hampshire Thrift Bancshares,
Inc. Guarantee with respect to Capital N/A N/A N/A N/A
Securities(3)(4).............................
===========================================================================================================================
Total....................................................... 100% $17,500,000(5) $4,865
===========================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of computing the registration fee.
(2) The Junior Subordinated Deferrable Interest Debentures will be purchased by
NHTB Capital Trust I with the proceeds of the sale of the Capital
Securities.
(3) No separate consideration will be received for the New Hampshire Thrift
Bancshares, Inc. Guarantee.
(4) This Registration Statement is deemed to cover the Junior Subordinated
Deferrable Interest Debentures of New Hampshire Thrift Bancshares, Inc., the
rights of holders of Junior Subordinated Deferrable Interest Debentures of
New Hampshire Thrift Bancshares, Inc. under the Indenture, the rights of
holders of Capital Securities of NHTB Capital Trust I under the Trust
Agreement, the rights of holders of the Capital Securities under the
Guarantee, which, taken together, fully, irrevocably and unconditionally
guarantee all of the respective obligations of NHTB Capital Trust I under
the Capital Securities.
(5) Such amount represents the principal amount of Junior Subordinated
Deferrable Interest Debentures issued at their principal amount and the
issue price rather than the principal amount of Junior Subordinated
Deferrable Interest Debentures issued at an original issue discount. Such
amount also represents the initial public offering price of the Capital
Securities of NHTB Capital Trust I.
_________________________
The Registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
PRELIMINARY PROSPECTUS
Subject to Completion, dated , 1999
$17,500,000 Capital Securities
[LOGO] NHTB CAPITAL TRUST I
___% Capital Securities
fully guaranteed by
New Hampshire Thrift Bancshares, Inc.
- -----------------------------------------------------------------------------
New Hampshire Thrift Bancshares, Inc.: We are a savings and loan
holding company that offers, through our subsidiary Lake Sunapee Bank, fsb, a
full range of community banking and related financial services to our customers
in west-central New Hampshire.
NHTB Capital Trust I: NHTB Capital Trust I is a subsidiary of New
Hampshire Thrift Bancshares, Inc. and a statutory business trust created under
Delaware law.
The Offering: In connection with this offering, the Trust will:
. sell capital securities to the public and common securities to us;
. use the proceeds from these sales to buy an equivalent principal
amount of % subordinated debentures due 2029 issued by us; and
. distribute the future cash payments it receives on the subordinated
debentures to the holders of the capital and common securities.
The capital securities represent preferred ownership interests in the
assets of the Trust.
Each capital security pays a cumulative quarterly distribution at the
annual rate of % of the $10.00 liquidation amount of each capital security,
beginning September 30, 1999.
Application has been made to have the capital securities listed on the
Nasdaq National Market under the symbol "NHTBP". If approved for listing, we
expect trading to commence within 30 days after the capital securities are first
issued.
The capital securities will be ready for delivery in book-entry form
only through The Depository Trust Company on or about , 1999.
We will sell our subordinated debentures to the Trust, which will be
its sole asset. We may defer interest payments on the subordinated debentures
from time to time for up to 20 consecutive quarterly periods. We may redeem the
subordinated debentures on or after 2004, and before , 2004 upon the
occurrence of a tax, investment company or bank regulatory event described in
this prospectus.
Investing in the capital securities involves certain risks which are
described in the "Risk Factors" section beginning on page of this prospectus.
You should read this prospectus carefully before you invest in the capital
securities.
Neither the SEC nor any state securities commission has approved or
disapproved of the capital securities or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
The capital securities are not deposits or other obligations of a bank
or savings association and are not insured by the Federal Deposit Insurance
Corporation or any other governmental agency.
<TABLE>
<CAPTION>
_________________________ ________________
Per capital security Total
<S> <C> <C>
Public Offering Price....... $10.00 $17,500,000
Proceeds to the Trust....... $10.00 $17,500,000
</TABLE>
The Trust will use all proceeds to purchase the junior subordinated
debentures. We will pay all underwriting discounts and commissions, equal to
$0.35 per capital security, or $612,500 in total.
Tucker Anthony Cleary Gull
The date of this prospectus is
<PAGE>
[MAP OF LOCATIONS INCLUDING NLT BRANCHES TO BE ACQUIRED]
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Forward-looking statements relating to
future performance or expectations....................................................... 4
Summary Information......................................................................... 5
Summary Selected Consolidated Financial
Data..................................................................................... 11
Risk Factors................................................................................ 13
New Hampshire Thrift Bancshares, Inc........................................................ 22
Management.................................................................................. 26
NHTB Capital Trust I........................................................................ 27
Use of Proceeds............................................................................. 28
Capitalization.............................................................................. 29
Accounting Treatment........................................................................ 31
Description of Capital Securities........................................................... 31
Description of Subordinated
Debentures............................................................................... 45
Description of Guarantee.................................................................... 57
Relationship Among the Capital
Securities, the Subordinated
Debentures and the Guarantee............................................................. 60
Certain Federal Income Tax
Consequences............................................................................. 62
ERISA Considerations........................................................................ 66
Underwriting................................................................................ 69
Legal Matters .............................................................................. 70
Experts..................................................................................... 71
Where you can find more information ....................................................... 71
Additional information we have incorporated
in the prospectus........................................................................ 71
Annual Report on Form 10-KSB................................................................ A-1
Quarterly Report on Form 10-QSB............................................................. B-1
</TABLE>
3
<PAGE>
Forward-looking statements relating to future performance or expectations
We have used and incorporated by reference "forward-looking statements" in
this prospectus. Words such as "believes," "expects," "may," "will," "should,"
"projected," "contemplates" or "anticipates" may constitute forward-looking
statements. These statements are within the meaning of the Private Securities
Litigation Reform Act of 1995 and are subject to risks and uncertainties that
could cause our actual results to differ materially. We have used these
statements to describe our expectations and estimates in various areas,
including:
. our overall business conditions particularly in the markets in which
we operate,
. fiscal and monetary policy,
. the market for mortgage originations and purchases,
. year 2000 compliance issues,
. competitive products and pricing,
. credit risk management and
. changes in regulations affecting financial institutions.
Our actual results could vary materially from the future results covered in our
forward-looking statements. The statements in the "Risk Factors" section are
cautionary statements identifying important factors, including certain risks and
uncertainties, that could cause our results to vary materially from the future
results covered in such forward-looking statements. Other factors, such as the
general state of the United States economy, could also cause actual results to
vary materially from the future results covered in such forward-looking
statements. We disclaim any obligation to announce publicly future events or
developments that affect the forward-looking statements in this prospectus.
Certain persons participating in this offering may engage in transactions
that stabilize, maintain, or otherwise affect the price of the capital
securities being offered, including over-alloting shares of the capital
securities and bidding for and purchasing such securities at a level above that
which otherwise might prevail in the open market. For a description of these
activities, see "Underwriting." Such stabilizing transactions, if commenced, may
be discontinued at any time. In connection with this offering, certain
underwriters (and selling group members) may engage in passive market making
transactions in the capital securities on the Nasdaq National Market in
accordance with Rule 103 of Regulation M. See "Underwriting."
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations not contained in this prospectus in
connection with the offering of the capital securities. If given or made, such
information or representations must not be relied upon as having been authorized
by us or the underwriters. This prospectus does not constitute an offer to sell,
or a solicitation of an offer to buy, the capital securities in any
jurisdiction where, or to any person to whom, it is unlawful to make such offer
or solicitation. Neither the delivery of this prospectus nor any sale made
hereunder shall, under any circumstances, imply that there has not been any
change in the facts in this prospectus or our affairs since the date of this
prospectus.
4
<PAGE>
Summary Information
The following information is a summary of our business operations and the
major terms of the offering of capital securities. You should carefully read the
more detailed discussion and financial information appearing elsewhere or
incorporated in this prospectus before you decide to invest in the capital
securities. In this prospectus, references to "we," "us," "our" and "NHTB" are
to New Hampshire Thrift Bancshares, Inc.
New Hampshire Thrift Bancshares, Inc.
Overview
We are a Delaware chartered savings and loan holding company headquartered
in Newport, New Hampshire. We are regulated by the Office of Thrift Supervision
(the "OTS") of the United States Department of the Treasury. Through our wholly-
owned subsidiary, Lake Sunapee Bank, fsb (the "Bank"), we provide community
banking services to our principal market area, the Upper Valley-Kearsarge-Lake
Sunapee area of west-central New Hampshire, including the counties of Merrimack,
Sullivan, Hillsboro and Grafton. The Bank was originally chartered in 1868 and
presently operates as a federally-chartered stock savings bank through its main
office and eleven branch locations.
We provide a wide range of community banking products and services to
individuals and small- to medium-sized businesses located in our market area. We
are engaged principally in the business of attracting deposits from the general
public, borrowing funds and investing those deposits and funds in various types
of residential and commercial real estate loans, residential construction loans,
consumer loans, commercial loans, municipal loans and investment securities. In
addition, we offer our customers a range of services such as safe deposit box
rentals, money orders, wire transfers, drive-through teller facilities, ATMs,
telephone banking, debit cards and check imaging. We also provide trust
services, investment brokerage services and life insurance products through our
subsidiaries and through arrangements with third parties. We expect to offer our
customers PC banking services by the third quarter of this year.
We have grown to $317.6 million in assets and $275.4 million in deposits at
March 31, 1999. Our deposits are insured by the Savings Association Insurance
Fund of the Federal Deposit Insurance Corporation ("FDIC") up to FDIC limits
(generally $100,000 per depositor).
Our principal executive office is located at 9 Main Street, Newport, New
Hampshire 03773 and our telephone number is (603) 863-0886.
Business Strategy
We offer community banking products and services to individuals and small-
to medium-sized businesses in our market area. Our goal is to enhance our
regional presence by expanding our geographic market area and customer base
through selective acquisitions and branch expansion and by increasing the
financial services we provide our customers. The major components of our growth-
oriented community banking strategy are set forth below.
. Growth of Our Community Banking Franchise
. Becoming a Full-Service Financial Provider
. Providing Technologically Enhanced Products and Services
5
<PAGE>
. Controlled Growth Through Selective Acquisitions and Branch Expansion
. Efficient Capital Management and Consistent Shareholder Returns
Pending Acquisition of Three New London Trust, FSB Branches
On April 12, 1999, we announced the signing of a definitive agreement to
purchase three branches located in New London, Andover and Newbury, New
Hampshire from New London Trust, FSB. The transaction, which is subject to
regulatory approval, is currently expected to close in the fourth quarter of
1999. The Bank has filed the regulatory applications necessary to obtain the
required regulatory approvals.
Under the agreement, the Bank will acquire all of the deposits, certain
loans and certain other assets and liabilities related to the three branches. At
March 31, 1999, approximately $103.0 million in deposits and approximately $88.0
million in loans at the three branches would be acquired by us.
6
<PAGE>
NHTB Capital Trust I
We organized the Trust as a statutory Delaware business trust on July 7,
1999. The Trust will sell its capital securities to the public and its common
securities to us. The Trust will use all of the proceeds from the sale of the
capital securities and the common securities to buy our % subordinated
debentures due , 2029. The subordinated debentures have the same
financial terms as the capital securities. We are obligated to make interest
payments and other payments under the subordinated debentures to the Trust,
which the Trust will use to make distributions on the capital securities to you.
Our obligations under the subordinated debentures are unsecured and rank junior
to all of our other borrowings, except borrowings that by their terms rank equal
or junior to the capital securities. We will, on a subordinated basis, fully,
irrevocably and unconditionally guarantee the payment by the Trust of the
amounts that are required to be paid on the capital securities, to the extent
that the Trust has funds available for such payment.
The Trust intends to maintain its status as an entity that is not taxable
as a corporation for federal income tax purposes. The Trust has no separate
financial statements. The statements would not be meaningful to you, because the
Trust has no independent operations. The Trust has a term of approximately 30
years, but may be dissolved earlier.
The Offering
Securities Offered............ The underwriter is offering 1,750,000 capital
securities each with a liquidation amount of
$10.00. Each capital security represents an
undivided preferred beneficial interest in
the assets of the Trust. Each capital
security that you own will entitle you to
receive quarterly distributions as described
in this prospectus.
The Offering Price............ The Trust is offering capital securities at a
price of $10.00 for each capital security.
Distributions................. If you purchase any capital securities, you
will be entitled to receive quarterly cash
distributions at an annual rate of % of the
liquidation amount of $10.00 for each capital
security. You will be entitled to be paid
distributions on March 31, June 30, September
30 and December 31 of each year, beginning
September 30, 1999. The amount of each
distribution will include amounts accrued up
to the date the distribution is due. The
distribution payable on September 30, 1999
will equal the amount accrued from ___, 1999
through September 29, 1999. These payments
are identical to the payments that we are
required to make under the subordinated
debentures.
Subordinated Debentures....... The Trust will invest the proceeds from the
issuance of the capital securities and the
common securities in an equivalent amount of
our % subordinated debentures.
Maturity...................... The subordinated debentures are scheduled to
mature on , 2029 unless we shorten the
maturity date. We will not shorten the
maturity date unless we have first received
any required regulatory approvals. The Trust
must redeem the capital securities when the
subordinated debentures are
7
<PAGE>
paid on the maturity date, or following any
earlier redemption of the subordinated
debentures.
We Have the Ability to Defer
Payment of your Distributions... We can, on one or more occasions, defer
interest payments on the subordinated
debentures for up to 20 consecutive quarters,
unless an event of default exists under the
subordinated debentures. We cannot defer
interest payments beyond , 2029, the
stated maturity date of the subordinated
debentures.
If we defer interest payments on the
subordinated debentures, the Trust will also
defer distributions on the capital
securities. During this deferral period, the
capital securities will still accumulate
distributions at an annual rate of % of
the liquidation amount of $10.00 for each
capital security. Additionally, any unpaid
distributions on the capital securities will
accumulate additional distributions at the
same rate, compounded quarterly, to the
extent permitted by law. If the Trust defers
your distributions, you will still be
required to accrue interest income and
include it in your gross income for United
States federal income tax purposes, even if
you are a cash basis taxpayer.
Our Guarantee of
the Capital Securities.......... We will fully, irrevocably and
unconditionally guarantee, on a subordinated
basis, to the extent that the Trust has funds
legally available to make the following
payment obligations:
. payment of distributions on the capital
securities,
. payments on liquidation of the Trust, and
. payments on maturity or earlier redemption
of the capital securities.
If we do not make a payment on the
subordinated debentures, the Trust will not
have sufficient funds to make payments on the
capital securities. Our guarantee does not
cover the payment of distributions when the
Trust does not have sufficient funds to pay
the distributions. Our obligations under the
guarantee and under the subordinated
debentures are unsecured and rank junior to
all of our other borrowings, except
borrowings that by their terms rank equal or
junior to the subordinated debentures.
8
<PAGE>
Redemption.................... The Trust will redeem the capital securities
when we pay the subordinated debentures at
maturity on , 2029. In addition, if we
redeem some or all of the subordinated
debentures before maturity, the Trust will
use the cash it receives from the redemption
of the subordinated debentures to redeem
proportionately an amount of capital
securities and common securities having an
aggregate liquidation amount (the number of
securities times $10.00) equal to the
aggregate principal amount of the
subordinated debentures that we redeem.
We can redeem some or all of the subordinated
debentures before , 2004 at their principal
amount plus any accrued and unpaid interest
to the date of redemption at any time on or
after , 2004.
We can redeem all but not less than all of
the subordinated debentures before ,
2004 at their principal amount plus any
accrued and unpaid interest to the date of
redemption at any time if changes in the bank
regulatory, investment company or tax laws
occur that would adversely affect the status
of the Trust, the capital securities or the
subordinated debentures.
We may have to obtain regulatory approvals,
including the approval of the OTS, before we
redeem any subordinated debentures prior to
maturity.
Distribution of
Subordinated Debentures........ We have the right at any time to dissolve the
Trust and cause the subordinated debentures
to be distributed to holders of capital
securities in liquidation of the Trust,
subject to receiving prior approval of the
OTS to do so if we are then required under
applicable capital guidelines or policies of
the OTS. See "Description of Capital
Securities---Liquidation of the Trust and
Distribution of Subordinated Debentures."
Trustees of NHTB
Capital Trust I................ There are five trustees of the Trust.
Wilmington Trust Company will be the property
trustee, Wilmington Trust Company will be the
Delaware trustee and three individuals who
are employees of NHTB will be the
administrative trustees of the Trust.
As the sole holder of the common securities,
we can replace or remove any of the trustees.
However, if an event of default exists under
the trust agreement governing the Trust, only
the holders of a majority in aggregate
liquidation amount of the capital securities
would be able to remove and replace the
property trustee and the Delaware trustee. As
owner of all of the common securities, only
we can remove or replace the administrative
trustees. The duties
9
<PAGE>
and obligations of each trustee are governed
by the trust agreement.
Form of the Capital Securities
When They Are Issued........... The capital securities will be represented by
one or more global securities that will be
deposited with and registered in the name of
The Depository Trust Company, New York, New
York ("DTC") or its nominee. This means that
you will not receive a certificate for the
capital securities. We expect that the
capital securities will be ready for delivery
through DTC on or about , 1999.
Purchases of the Capital
Securities for an Employee
Benefit Plan.................. If you are purchasing the capital securities
for an employee benefit plan, you should read
"ERISA Considerations" for a discussion of
prohibited transactions and your fiduciary
duties.
Limited Voting Rights.......... If you purchase the capital securities, you
will have no voting rights, except in limited
circumstances. See "Description of Capital
Securities---Voting Rights; Amendment of
Trust Agreement."
Use of Proceeds................ All the proceeds to the Trust from the sale
of the capital securities and the common
securities will be invested by the Trust in
the subordinated debentures. Of the $17.5
million in proceeds, we will contribute
approximately $15.0 million to the Bank as
equity capital for the purpose of providing
additional capital to support the pending
acquisition of three branches of New London
Trust, FSB. The balance of the proceeds will
be used for:
. financing growth, which may include
expansion of the Bank's lending and
investment activities, one or more branch
acquisitions, acquisitions of other
financial institutions, or acquisitions of
other financial services companies;
. repurchases of our common stock; and
. general corporate purposes.
The offering of the capital securities is not
contingent upon consummation of the pending
branch acquisition. If the branch acquisition
is not consummated, we may use the proceeds
for expansion of the Bank's lending and
investment activities, repurchases of our
common stock and for general corporate
purposes.
Listing of the Capital
Securities.................... Application has been made to have the capital
securities listed on the Nasdaq National
Market under the symbol "NHTBP." If approved
for listing, we expect trading to commence
within 30 days after the capital securities
are first issued.
10
<PAGE>
Summary Selected Consolidated Financial Data
We have selected highlights from our consolidated financial data as of, and
for the quarters ended March 31, 1999 and 1998 and as of, and for the three
years ended December 31, 1998. You should read our consolidated financial
statements and related notes included in our annual report on Form 10-KSB for
the year ended December 31, 1998 and the quarterly report on Form 10-QSB for the
three months ended March 31, 1999, which we have attached to this prospectus as
Appendix A and Appendix B, respectively.
<TABLE>
<CAPTION>
-----------------------------------------
At or For the Three
Months Ended At or For the Years Ended December 31,
March 31,
------------ ------------ ------------ ------------ ------------
1999 1998 1998 1997 1996
(Dollars in thousands, excluding per share data)
<S> <C> <C> <C> <C> <C>
SELECTED FINANCIAL
CONDITION DATA:
Total assets.............................. $ 317,578 $ 320,592 $ 323,408 $ 317,989 $ 264,385
Loans receivable, net..................... 240,619 247,427 232,321 255,224 216,003
Securities available for
sale at fair value.................. 51,266 32,942 52,138 30,180 25,291
Other investments...................... 2,033 2,065 2,033 1,988 2,308
Total deposits............................ 275,442 272,307 282,049 271,227 213,959
Securities sold under agreements
to repurchase....................... 7,085 8,924 11,849 8,393 8,663
FHLB advances and other borrowings........ 3,848 10,177 - 10,546 20,179
Total shareholders' equity............. 27,604 25,940 27,780 25,563 19,194
SELECTED OPERATIONS DATA:
Total interest and dividend income........ $ 5,533 $ 5,814 $ 23,263 $ 23,386 $ 18,704
Total interest expense.................... 2,684 3,062 12,184 12,605 10,324
------------ ------------ ------------ ------------ ------------
Net interest income....................... 2,849 2,752 11,079 10,781 8,380
Provision for loan losses................. 30 15 120 932 1,661
------------ ------------ ------------ ------------ ------------
Net interest income after provision
for loan losses...................... 2,819 2,737 10,959 9,849 6,719
Other income.............................. 614 391 2,643 2,553 1,923
Other expenses............................ 2,403 2,090 8,880 8,398 7,745
------------ ------------ ------------ ------------ ------------
Income before income tax expense.......... 1,030 1,038 4,722 4,004 897
Income tax expense........................ 319 335 1,603 1,233 286
------------ ------------ ------------ ------------ ------------
Net income(1)............................. $ 711 $ 703 $ 3,119 $ 2,771 $ 611
============ ============ ============ ============ ============
PER SHARE DATA:
Basic earnings per share(1)............... $ 0.34 $ 0.34 $ 1.49 $ 1.36 $ 0.36
Diluted earnings per share(1)............. 0.34 0.33 1.47 1.33 0.35
Book value per share...................... 13.12 12.41 13.20 12.24 11.26
Dividends per share....................... 0.16 0.15 0.60 0.50 0.50
</TABLE>
(footnotes on next page)
<TABLE>
<CAPTION>
-----------------------------------------
At or For the Three
Months Ended At or For the Years Ended December 31,
March 31,
------------ ------------ ------------ ------------ ------------
1999 1998 1998 1997 1996
<S> <C> <C> <C> <C> <C>
PERFORMANCE RATIOS(2):
Return on average assets.............. 0.89% 0.88% 0.96% 0.88% 0.24%
Return on average equity.............. 10.54 10.81 11.76 11.44 3.15
Interest rate spread(2)............... 3.57 3.43 3.44 3.43 3.13
Interest rate margin(2)............... 3.80 3.67 3.69 3.67 3.44
</TABLE>
11
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Average interest-earning assets to
average interest-bearing liabilities.. 106.45 106.27 106.29 105.72 107.32
Efficiency ratio(3) (4)................... 70.30 66.54 65.44 65.70 74.98
EARNINGS TO FIXED CHARGES RATIOS(5):
Including interest on deposits............ 1.38x 1.34x 1.39x 1.32x 1.09x
Excluding interest on deposits............ 17.09 7.65 13.05 5.02 1.54
BANK ASSET QUALITY RATIOS:
Nonperforming loans to total loans........ 0.96% 0.98% 0.85% 0.49% 0.75%
Allowance for loan losses to total loans.. 1.29 1.20 1.30 1.18 0.98
Allowance for loan losses to
nonperforming loans..................... 134.00 125.12 154.23 241.02 131.83
Net charge-offs to average loans(2)....... 0.00 0.02 0.03 0.35 0.63
CAPITAL RATIOS:
Stockholders' equity to total assets...... 8.69% 8.09% 8.59% 8.04% 7.26%
Tier 1 risk-based capital ratio........... 11.60 11.65 12.03 11.12 11.81
Total risk-based capital ratio............ 12.19 12.54 12.63 11.86 12.00
Core capital (to tangible assets)......... 7.32 6.72 7.31 6.47 6.76
Tangible Capital (to tangible assets)..... 7.32 6.72 7.31 6.47 6.76
</TABLE>
_____________________
(1) Net income for 1996, excluding the one time special assessment charge of
$995,000 imposed to recapitalize the Savings Association Insurance Fund,
would have been $1,267,411, or $0.75 per basic share ($0.74 per share
diluted).
(2) Ratios are annualized for the three months ended March 31, 1999 and 1998.
(3) Ratios are calculated using fully tax equivalent (FTE) interest income.
(4) Equals other expenses divided by net interest income (FTE) plus other
income (excluding writedowns and net gains or losses on securities
transactions).
(5) For purposes of computing the ratios of earnings to fixed charges, earnings
represent income before income tax expense plus fixed charges. Fixed
charges represent one-third rent expense and total interest expense,
including and excluding interest on deposits.
12
<PAGE>
Risk Factors
An investment in the capital securities involves a number of risks.
Some of these risks relate to the capital securities and others relate to us. We
urge you to carefully consider this information, together with the other
information in this prospectus and in the documents that we have incorporated by
reference in this prospectus.
Risks related to your investment in the capital securities
We will depend primarily on any dividends we may receive from our subsidiaries
in making payments under the subordinated debentures, which could affect the
payments made to you under the capital securities
Because we are a savings and loan holding company, substantially all of
our operating assets are owned by the Bank. We rely primarily on dividends from
the Bank to pay principal and interest on our outstanding debt obligations and
corporate expenses. The board of directors of the Bank has the sole discretion
to declare and pay any dividends to us. In addition, the OTS limits all capital
distributions by the Bank directly or indirectly to us, including dividend
payments. Without prior approval, the Bank may not declare a dividend if the
total amount of all dividends declared by the Bank in any calendar year exceeds
the total of the Bank's retained net income for the current year and retained
net income for the preceding two years. Under federal law, the Bank cannot pay
any dividend if, after paying the dividend, the Bank will be "undercapitalized."
The OTS may declare a dividend payment to be unsafe and unsound even though the
Bank would continue to meet its capital requirements after the dividend. If the
Bank does not pay dividends to us and we are unable to make payments on the
subordinated debenture, the Trust will not be able to pay distributions and
other payments on the capital securities and the guarantee will not apply.
We cannot make payments under the guarantee or the subordinated debentures if we
default on our other obligations that are more senior
Our obligations under the guarantee issued for your benefit are
unsecured and rank
. junior to all of our other borrowings, except those borrowings
that by their terms are equal or junior to the guarantee;
. senior to our common stock.
This means that we cannot pay under the guarantee if we default on
payments of any of our other borrowings, unless, by their terms, those
borrowings are equal or junior to the guarantee. If we liquidate, go bankrupt or
dissolve, we would be able to pay under the guarantee only after we have paid
all our other liabilities that are senior to the guarantee.
Our obligations under the subordinated debentures are unsecured and
rank junior in priority to all of our senior indebtedness, which includes our
borrowings that are not by their terms equal or junior to the subordinated
debentures. If we default on a payment on our senior indebtedness, we cannot pay
principal or interest on the subordinated debentures. If we liquidate, go
bankrupt or dissolve, we would be able to pay the Trust under the subordinated
debentures only after we have made all payments on our senior indebtedness. As
of March 31, 1999, we had senior indebtedness of $3.8 million.
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<PAGE>
If we default on our obligations to pay principal or interest on the
subordinated debentures, the Trust will not have sufficient funds to make
distribution payments or liquidation payments on the capital securities. As a
result, you will not be able to rely upon our guarantee for payment of these
amounts. Instead, you or the property trustee may enforce the rights of the
Trust under the subordinated debentures against us. For more information, please
refer to "Description of Subordinated Debentures-Enforcement of Certain Rights
by Holders."
The capital securities, the guarantee, the subordinated debentures and
the indenture do not limit our ability or the ability of any subsidiary to incur
additional debt, including debt that is senior in priority of payment.
For more information on payments under the guarantee and the
subordinated debentures, you should refer to "Description of Guarantee-Status of
the Guarantee" and "Description of Subordinated Debentures-Subordination."
We may defer interest payments on the subordinated debentures which could have
adverse consequences to you
We have the right, at one or more times, unless an event of default
exists under the subordinated debentures, to defer interest payments on the
subordinated debentures for up to 20 consecutive quarters, but not beyond ,
2029. If we defer interest payments, the Trust will defer paying distributions
to you on your capital securities during the deferral period. However, during
this period, the capital securities would still accumulate distributions at the
rate of % per year, compounded quarterly, to the extent permitted by
law. During any deferral period, we will be prohibited from declaring or paying
cash dividends on our capital stock or from paying on or repaying, repurchasing
or redeeming any debt which ranks equal or junior to the subordinated
debentures. For more information, please refer to "Description of Capital
Securities-Distributions."
When any deferral period ends and we pay all interest then accrued and
unpaid on the subordinated debentures, we may elect to begin a new deferral
period. There is no limitation on the number of times that we may elect to begin
a deferral period. See "Description of Capital Securities-Distributions" and
"Description of Subordinated Debentures-Option to Extend Interest Payment Date."
If we exercise our right to defer payments of interest on the
subordinated debentures, you will be required to accrue income as original issue
discount (OID) in respect of the deferred stated interest allocable to your
capital securities for U.S. federal income tax purposes, which will be allocated
but not distributed to you. As a result, you will be required to recognize
income for United States federal income tax purposes before you receive any cash
and will not receive the cash related to this interest income from the Trust if
you dispose of your capital securities prior to the record date for the
distribution payment. For more information, you should read "Certain Federal
Income Tax Consequences-Interest Income and Original Issue Discount" and "-Sales
or Redemption of Capital Securities."
We do not currently intend to exercise our right to defer interest
payments on the subordinated debentures. However, if we exercise this right in
the future, the market price of the capital securities will probably be
affected. The capital securities may trade at a price that does not fully
reflect the value of accrued but unpaid interest on the subordinated debentures.
If you sell your capital securities during a deferral period, you may not
receive the same return on your investment as someone else who continues to hold
the capital securities.
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<PAGE>
The guarantee covers payments only if the Trust has cash available
If we default on our obligations to pay principal or interest on the
subordinated debentures, the Trust will not have sufficient funds to make
distribution payments or liquidation payments on the capital securities. Because
our guarantee does not cover payments when the Trust does not have sufficient
funds, you will not be able to rely upon the guarantee for payment of these
amounts. Instead, you or the property trustee may enforce the rights of the
Trust under the subordinated debentures against us. For more information, please
refer to "Description of Subordinated Debenture-Enforcement of Certain Rights by
Holders."
The Trust may redeem the capital securities before , 2004 if a
special event occurs; you may be taxed on the redemption proceeds and you may
not be able to reinvest the redemption proceeds at the same or a higher rate of
return
If there are changes in the bank regulatory, investment company or tax
laws that would adversely affect the status of the Trust, the capital securities
or the subordinated debentures, we have the right to redeem the subordinated
debentures, in whole but not in part. Our redemption of the subordinated
debentures will cause the Trust to redeem the capital securities and the common
securities at a price equal to $10.00 per security plus any accrued and unpaid
distributions. Under current United States federal income tax law, the
redemption of the capital securities would be a taxable event to you. In
addition, depending upon capital market conditions at the time of such
redemption, you may not be able to reinvest the money you receive in the
redemption at a rate that is equal to or higher than the rate of return you
received on the capital securities. We may have to obtain regulatory approval,
including the approval of the OTS, before we redeem any subordinated debentures.
For more information, you should refer to "Description of Capital Securities-
Redemption."
If we distribute the subordinated debentures, there may be an adverse effect on
the trading market and trading price of your investment, and there may be
adverse tax effects
We may dissolve the Trust at any time and, after satisfying the
liabilities owed to the Trust's creditors under applicable law, the Trust will
distribute the subordinated debenture to you, as a holder of capital securities,
and us, as the holder of common securities.
If the trustees distribute the subordinated debentures to you, we will
use our best efforts to list the subordinated debentures on the Nasdaq National
Market. We cannot be sure that the subordinated debentures will be approved for
listing on Nasdaq or that a trading market will exist for the subordinated
debentures. Accordingly, the capital securities or the subordinated debentures
may trade at a discount from the price that an investor paid to purchase the
capital securities. Because holders of capital securities may receive
subordinated debentures in liquidation of the Trust and because distributions
are otherwise limited to payments on the subordinated debentures; prospective
purchasers of capital securities are also making an investment decision with
regard to the subordinated debentures and should carefully review all the
information regarding the subordinated debentures contained in this prospectus.
Under current United States federal income tax law, a distribution of
the subordinated debentures following the dissolution of the Trust would not be
a taxable event to you unless the distribution occurs at a time when the Trust
is treated as an association taxable as a corporation. However, any
distributions of cash for the subordinated debentures would be a taxable event
to you.
15
<PAGE>
You should refer to "Certain Federal Income Tax Considerations-Receipt of
Subordinated Debentures or Cash Upon Liquidation of the Trust" for more
information.
You will have limited voting rights
As a holder of capital securities, you will have limited voting rights.
You can vote only to modify the capital securities and to exercise the Trust's
rights as a holder of the subordinated debentures. In general, only we can
replace or remove any of the trustees. However, if an event of default exists
under the trust agreement, the holders of the capital securities may replace the
property trustee and the Delaware trustee.
We, along with the property trustee and the administrative trustees,
may amend the trust agreement without your consent even if these actions
adversely affect your interests, to ensure that the Trust:
(a) will not be classified as an association taxable as a corporation
for United States federal income tax purposes and
(b) will not be required to register as an "investment company" under
the Investment Company Act of 1940.
You will have no voting rights with respect to any matters submitted to
a vote of our stockholders. For more information on your voting rights, please
refer to "Description of Capital Securities-Voting Rights; Amendment of the
Trust Agreement" and "-Removal of Trustees."
The holders of the capital securities and the subordinated debentures are not
protected by covenants in the indenture and the trust agreement
Neither the indenture, which sets forth the terms of the subordinated
debentures, nor the trust agreement, which sets forth the terms of the capital
securities and the common securities, protects holders of the subordinated
debentures or the capital securities, respectively, in the event we experience
significant adverse changes in our financial condition or results of operations.
In addition, neither the indenture nor the trust agreement limits our ability or
the ability of any subsidiary to incur additional indebtedness. Therefore, the
provisions of these governing instruments should not be considered a significant
factor in evaluating whether we will be able to comply with our obligations
under the subordinated debentures or the guarantee.
Trading price may not reflect the full value of the capital securities
We cannot predict the market prices for the capital securities or the
subordinated debentures that may be distributed if we dissolve the Trust. The
capital securities or the subordinated debentures may trade at a discount from
the price that you paid for the capital securities and may trade at prices that
do not fully reflect the value of any accrued and unpaid interest on the
underlying subordinated debentures.
A holder who uses the accrual method of accounting for tax purposes
(and a cash method holder, if the subordinated debenture are deemed to have been
issued with OID) and who disposes of its capital securities between record
dates for payments of distributions) will be required to include accrued but
unpaid interest on the subordinated debentures through the date of disposition
in income as ordinary income (i.e., interest or, possibly, OID), and to add such
amount to its adjusted
16
<PAGE>
tax basis in its share of the underlying subordinated debentures deemed disposed
of. To the extent the selling price is less than the holder's adjusted tax basis
(which will include all accrued but unpaid interest), a holder will recognize a
capital loss. Subject to certain limited exceptions, capital losses cannot be
applied to offset ordinary income for United States federal income tax purposes.
See "Certain Federal Income Tax Considerations-Interest Income and Original
Issue Discount" and "-Sales or Redemptions of Capital Securities."
We have applied for the capital securities to be listed on the Nasdaq
National Market. Although the underwriter of the offering has indicated that it
intends to make a market in the capital securities, it is not obligated to do so
and may stop any market-making activities at any time without notice. We cannot
be sure that there will be a liquid trading market for the capital securities.
Risks related to NHTB
We may experience difficulties in managing our growth
As part of our general strategy we may continue to acquire banks and
businesses that we believe provide a strategic fit with our business. To the
extent that we do grow, we cannot assure you that we will be able to adequately
and profitably manage our growth. Acquiring other banks and businesses will
involve risks commonly associated with acquisitions, including:
. potential exposure to liabilities of banks and businesses we acquire;
. difficulty and expense of integrating the operations and personnel of
banks and businesses we acquire;
. potential disruption to our business;
. potential diversion of our management's time and attention;
. impairment of relationships with and the possible loss of key employees
and customers of the banks and businesses we acquire; and
. incurrence of amortization expense if we account for an acquisition as
a purchase.
The success of our internal growth strategy will depend primarily on
our ability to generate an increasing level of loans and deposits at acceptable
risk levels and on acceptable terms without significant increases in non-
interest expenses relative to revenues generated. There is no assurance that we
will be successful in implementing our internal growth strategy. Our financial
performance also depends, in part, on our ability to manage various portfolios
and our ability to successfully introduce additional financial products and
services. There can be no assurance that additional financial products and
services will be introduced or, if introduced, that such financial products and
services will be successful. Furthermore, the success of our growth strategy
will depend on maintaining sufficient regulatory capital levels and on economic
conditions.
17
<PAGE>
If we are unable to successfully compete for customers in our market area, our
financial condition and results of operations could be adversely affected
We face intense and increasing competition in making loans, attracting
deposits and providing other financial products and services. The market area in
which we operate, west-central New Hampshire, has numerous financial
institutions that we compete with for customers. Our competition for loans comes
principally from
. commercial banks, . mortgage banking companies,
. savings banks, . finance companies, and
. savings and loan associations, . credit unions.
Our competition for deposits comes principally from
. commercial banks, . brokerage firms,
. savings banks, . insurance companies,
. savings and loan associations, . money market mutual funds,
and
. credit unions, . mutual funds (such as
corporate and government
securities funds).
Many of these competitors have greater financial resources and name
recognition, more locations, more advanced technology and more financial
products to offer than we have. Our profitability depends on our continued
ability to attract new customers and compete in west-central New Hampshire. If
we are unable to successfully compete, our financial condition and results of
operations will be adversely affected.
Because we primarily serve west-central New Hampshire, a decline in the local
economy could lower our profitability
We serve the west-central New Hampshire counties of Merrimack,
Sullivan, Hillsboro, and Grafton with our main office and 11 branches. The level
of our profits depend on providing products and services to customers in this
local region. An increase in unemployment, a decrease in real estate values
or an increase in interest rates are among the factors that could weaken the
local economy. With a weaker local economy:
. customers may not want or need our products and services;
. borrowers may be unable to repay their loans;
. the value of the collateral securing our loans to borrowers may
decline; and
. the overall quality of our loan portfolio may decline.
Making mortgage loans is a significant source of our profits. If
customers in the local area do not want these loans, our profits may decrease.
Although we could make other investments, we may earn less revenue on these
investments than on loans. Also, our losses on loans may increase if borrowers
are unable to make payments on their loans.
18
<PAGE>
Our future profits will be affected by our ability to successfully integrate the
new branches to be acquired from New London Trust, FSB
The Bank has agreed, subject to regulatory approval, to purchase three
branches located in New London, Andover and Newbury, New Hampshire. Under the
agreement, the Bank will acquire all of the deposits and certain loans related
to the branches (approximately $103.0 million and 88.0 million, respectively, as
of March 31, 1999). The Bank's future profits will be affected by the Bank's
ability to retain the acquired deposits, to generate revenues from the new
locations, to manage the costs associated with the acquisition and to otherwise
successfully integrate the new branches into its operations.
Interest rate changes may reduce our profitability
To be profitable, we have to earn more money in interest income and fee
income than we pay as interest on deposits and other interest-bearing
liabilities and as other expenses. If interest rates fall, the amount of
interest we earn on loans and investment securities may decrease more quickly
than the amount of interest we pay on deposits and other interest-bearing
liabilities. This would result in a decrease in our profitability.
Changes in the level or structure of interest rates also affect
. our ability to originate loans,
. the value of our loan and securities portfolios,
. our ability to realize gains from the sale of loans and
securities assets,
. the average life of our deposits and
. our ability to obtain deposits.
Fluctuations in interest rates will ultimately affect both the level of income
and expense we record on a large portion of the Bank's assets and liabilities,
and the market value of all interest-earning assets, other than interest-earning
assets that mature in the short term. The Bank's interest rate management
strategy is designed to stabilize net interest income and preserve capital over
a broad range of interest rate movements by matching the interest rate
sensitivity of assets and liabilities. Although we believe that our current mix
of loans, investment securities and deposits is reasonable, significant
fluctuations in interest rates may have a negative effect on our profitability.
In addition, we are assuming $103.0 million of deposit liabilities from
New London Trust, FSB and creating $17.5 million in interest-bearing liabilities
in connection with this offering. The assumption of these interest bearing
liabilities could affect our interest rate risk.
We cannot predict how changes in technology will affect our business
The financial services market, including banking services, is
increasingly affected by advances in technology, including developments in:
. telecommunications;
19
<PAGE>
. data processing;
. automation;
. Internet-based banking;
. telebanking; and
. debit cards and so-called "smart cards."
Our ability to compete successfully in the future will depend on whether
we can anticipate and respond to technological changes. To develop these and
other new technologies we will likely have to make additional capital
investments. Although we continually invest in new technology, we cannot assure
you that we will have sufficient resources or access to the necessary
proprietary technology to remain competitive in the future.
The year 2000 problem could hurt our operations and profits
We rely upon computers to conduct our daily business. If our computer
systems fail to recognize a date using "00" as the year 2000, we may be unable
to do our routine business and provide service to our customers. The failure of
the computer systems of parties we do business with or utilities, including the
electric and telephone companies, to recognize the year 2000 may also disrupt
our operations. For example, we may not be able to process withdrawals or
deposits, prepare account statements or engage in any of the transactions that
constitute our normal operations. Any one or more of these events could hurt our
profits.
We use a combination of purchased and contract-based software as well as
other third party vendors for many of our data processing needs. Our vendor has
modified or replaced many of its computer applications and systems necessary to
correct the year 2000 date issue. We have substantially completed testing these
modified applications and systems. Our internal assessment of potential computer
issues for the year 2000 has been substantially completed. Where potential
computer issues have been identified, the vendors have committed to definitive
dates to resolve such issues. We have established contingency plans for systems
for which year 2000 issues will not be corrected. If our vendors do not achieve
year 2000 compliance, our operations could be adversely affected.
The OTS, our primary federal bank regulator, along with the other
federal bank regulators, has identified the year 2000 issue as a substantive
area of examination for both regularly scheduled and special bank examinations.
In accordance with regulatory guidelines issued by the banking regulators, we
have substantially completed our testing of both internally and externally
supplied systems and all renovations as of June 30, 1999. Because of this review
by the banking regulatory agencies, if we do not become year 2000 compliant, we
could become subject to administrative remedies similar to those imposed on
financial institutions otherwise found not to be operating in a safe and sound
manner, including remedies available under prompt corrective action
regulations.
There has been limited litigation filed against corporations regarding
the year 2000 problem and a corporation's compliance efforts. However, the law
in this area will probably continue to develop well into the new millennium. If
we experience a year 2000 failure, our exposure could be significant and
material.
20
<PAGE>
Through March 31, 1999, we had incurred approximately $49,908 in costs
associated with achieving year 2000 compliance. We expect to incur approximately
$110,000 in additional costs to achieve year 2000 compliance during 1999.
We may be adversely affected by changes in laws and regulations affecting the
financial services industry
The Bank is subject to extensive regulation and supervision as a
federal savings bank. The regulatory authorities have extensive discretion in
connection with their supervision and enforcement activities and their
examination policies, including the imposition of restrictions on the operation
of a bank, the classification of assets by an institution and requiring an
increase in a federal savings bank"s allowance for loan losses. Any change in
the regulatory structure or the applicable statutes or regulations, whether by
the regulators or Congress, could have a material effect on us, the Bank, and
our operations.
21
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES, INC.
Overview
We are a Delaware chartered savings and loan holding company, regulated
by the Office of Thrift Supervision of the United States Department of Treasury
and headquartered in Newport, New Hampshire. Through our wholly-owned
subsidiary, Lake Sunapee Bank, fsb, we provide community banking services to our
principal market area, the Upper Valley-Kearsarge-Lake Sunapee area of west-
central New Hampshire, including the counties of Merrimack, Sullivan, Hillsboro
and Grafton. The Bank was originally chartered in 1868 and presently operates as
a federally-chartered stock savings bank through its main office and eleven
branch locations.
We provide a wide range of community banking products and services to
individuals and small- to medium-sized businesses located in our market area. We
are engaged principally in the business of attracting deposits from the general
public, borrowing funds and investing those deposits and funds in various types
of residential and commercial real estate loans, residential construction loans,
consumer loans, commercial loans, municipal loans and investment securities. In
addition, we offer our customers a range of services such as safe deposit box
rentals, money orders, wire transfers, drive-through teller facilities, ATMs,
telephone banking, debit cards and check imaging. We also provide trust
services, investment brokerage services and life insurance products through our
subsidiaries and through arrangements with third parties. We expect to offer our
customers PC banking services by the third quarter of this year.
We have grown to $317.6 million in assets and $275.4 million in deposits
at March 31, 1999. Our deposits are insured by the Savings Association Insurance
Fund of the Federal Deposit Insurance Corporation ("FDIC") up to FDIC limits
(generally $100,000 per depositor).
Our principal executive office is located at 9 Main Street, Newport,
New Hampshire 03773 and our telephone number is (603) 863-0886.
Business Strategy
The target customer base for our community banking products and services
is composed of the individuals and small- to medium-sized businesses in our
market area. Our goal is to enhance our regional presence by expanding our
geographic market area and customer base through selective acquisitions and
branch expansion and by increasing the financial services we provide our
customers. The major components of our growth-oriented community banking
strategy are set forth below.
. Growth of Our Community Banking Franchise
We strive to be the premier community-oriented bank in our market area.
Our focus is on developing long-term customer relationships, which we
believe is accomplished by providing personalized service, convenient
locations, and the flexibility to meet the needs of both individuals and
businesses. Over the past five years we have demonstrated a commitment
to grow our community banking franchise by expanding our deposit base
(from $194.5 million to $275.4 million during this period), acquiring
other whole institutions (such as Landmark Bank of Lebanon, New
Hampshire in 1997), establishing new branches and introducing products
and services that are attractive to retail customers (such as telephone
banking, debit cards and check imaging). Our "gateway strategy" seeks to
establish an initial checking account relationship with a new customer
and, thereafter, to
22
<PAGE>
provide other types of transaction accounts and expanded financial
services to the customer. As a result of this strategy, the Bank has
increased the number of our checking accounts by 32% over the last three
years. We believe the continued success of these core strategies for
retail growth will be a key component to our ability to continue to
expand our franchise.
. Becoming a Full-Service Financial Provider
Unlike many traditional thrifts, we offer a full-range of deposit, loan,
trust, securities brokerage, insurance and other financial products and
services to our customers. We view these products and services as a
natural extension of our community banking franchise. Commencing with
the acquisition of Landmark Bank of Lebanon, New Hampshire in 1997, we
have adopted a strategy to become a more active business lender and to
achieve a greater diversification of assets on our balance sheet. We
offer small- to medium-sized businesses in our market area traditional
loan products and commercial services that enhance their ability to
compete effectively by giving business owners not only increased working
capital but also the financial means and capability to implement a
variety of modernization plans and operating efficiencies, such as
inventory controls, equipment upgrading and real estate acquisition and
plant construction projects. As a result of these efforts, our
commercial and commercial real estate loan portfolios have grown to
represent 18.5% of our loan portfolio at March 31, 1999. Because
commercial and commercial real estate loans typically carry a higher
yield than investment securities, we anticipate that continued growth in
these portfolios will further enhance our overall profitability. In
addition, we provide trust services, investment brokerage services and
life insurance products through our subsidiaries and through
arrangements with third parties. By becoming a full-service provider of
financial services, we have enhanced our ability to attract and retain
both retail and commercial customers in our market area.
. Providing Technologically Enhanced Products and Services
In order to adequately serve the needs of our customers, we must ensure
that our products and services are easily accessed by and effectively
delivered to our customers. In recent years, the increased use of
alternative delivery channels has simplified and reduced the costs of
financial transactions for consumers, businesses and financial
institutions. In addition to conducting financial transactions at branch
offices and through ATMs, customers are increasingly using telephone
banking services, online banking and bill processing services and
electronic funds transfer services. Our 24 hour Telebanker service
provides our customers with around the clock access to their accounts
through the use of a touch tone telephone. We also plan to introduce PC
banking services, which will give our customers the ability to access
their accounts and conduct online banking, bill payment and bill
presentment activities through their personal computers, in the third
quarter of 1999. In addition, we have added several new reporting and
servicing capabilities. Our new check imaging system, instituted in
1998, has substantially simplified record keeping for both us and our
customers, providing fully sorted and easy-to-store digital printouts of
all checks. This new digital check imaging system also offers further
flexibility and ease of use for customers by having this documentation
available in the form of CD-ROMs.
. Controlled Growth Through Selective Acquisitions and Branch Expansion
We have an established track record of capitalizing on strategic
opportunities for growth through acquisitions and branch expansion. On
January 22, 1997, we acquired Landmark Bank, a $57.8 million asset
commercial bank located in Lebanon, New Hampshire. In October, 1997 we
opened a de novo branch in Centerra Plaza, Lebanon, New Hampshire.
23
<PAGE>
Consistent with this strategy, on April 12, 1999, we agreed to acquire
three retail banking offices from New London Trust, FSB located in New
London, Andover and Newbury, New Hampshire. Our success in implementing
a strategy of controlled growth is reflected by the expansion of our
deposit base over the last five years from $194.5 million to $275.4
million. We will acquire all of the deposit liabilities and certain
loans associated with these offices (approximately $103.0 million and
$88.0 million, respectively, at March 31, 1999). We will continue to
consider selective acquisition and branch expansion opportunities as a
means for enhancing our regional presence, increasing market
penetration, expanding the scope of our financial services and achieving
improved operating and cost efficiencies. We will also continue to
evaluate our technology, operations and product offerings in connection
with our assessment of growth opportunities.
. Efficient Capital Management and Consistent Shareholder Returns
Our policy has always been to maintain our financial strength through
risk management, conservative loan underwriting standards, investment in
high grade assets and consistent earnings. We have made progress in
providing a more attractive return on equity over the past few years
primarily as a result of the growth of our loan portfolio and deposit
liabilities, increases in non-interest income and controlled growth of
non-interest expenses, while maintaining our commitment to capital
strength and asset quality. We have paid a cash dividend in each of the
40 consecutive quarters of our existence as a public company and, in
recent years, we have a history of increasing quarterly cash dividends
to enhance returns for our shareholders. Additionally, we will consider
repurchasing shares of our common stock from time to time at prevailing
market prices in order to enhance our return on equity.
Pending Acquisition of Three New London Trust, FSB Branches
On April 12, 1999, we announced the signing of a definitive agreement to
purchase three branches located in New London, Andover and Newbury, New
Hampshire from New London Trust, FSB. The transaction, which is subject to
regulatory approval, is currently expected to close in the fourth quarter of
1999. The Bank has filed the regulatory applications necessary to obtain the
required regulatory approvals.
Under the agreement, the Bank will acquire all of the deposits, certain
loans and other assets and liabilities related to the three branches. At March
31, 1999, the total amount of deposits amounted to approximately $103.0 million
classified as follows:
<TABLE>
<CAPTION>
--------------------------- ---------------------------------
Amount Weighted Average
Interest Rate
(In thousands)
<S> <C> <C>
Demand deposits...................................... $ 25,026 0.80%
Money market......................................... 25,329 4.01
Savings deposits..................................... 9,107 2.54
Time deposits........................................ 43,615 5.02
---------------------------------------------------------------
Total deposits.................................... $ 103,077 3.53%
===============================================================
</TABLE>
24
<PAGE>
At March 31, 1999, the total amount of loans amounted to approximately
$88.0 million categorized as follows:
<TABLE>
<CAPTION>
-------------- ----------------
Amount Weighted Average
Interest Rate
<S> <C> <C>
Real estate loans
Conventional...................................... $ 47,393 7.59%
Construction...................................... 1,072 8.03
Consumer loans....................................... 6,202 8.44
Commercial and municipal loans....................... 33,538 8.86
-------------- --------
Total loans....................................... $ 88,205 8.14%
============== ========
</TABLE>
25
<PAGE>
MANAGEMENT
Set forth below is certain biographical information with respect to our
Directors and Executive Officers. Each of these persons has been engaged in the
principal occupation or employment specified for the past five years unless
otherwise noted.
Directors
LEONARD R. CASHMAN, age 56, a resident of Etna, New Hampshire, is an
owner and a partner of C.O.H. Properties, and owner, President and a Director of
C.O.H. Enterprises, Inc., and a partner in Etna Real Estate Associates. He is
also involved in the marketing of specialized group medical insurance products.
He was formerly Vice President and General Manager of P&C Foods, Inc. Mr.
Cashman has been a Director of NHTB since 1997.
STEPHEN W. ENSIGN, age 52, has been associated with the Bank in various
positions since 1971. He was elected President, Chief Operating Officer and
Director of the Bank in May 1987 and Director of NHTB in 1989. On January 1,
1992 he was elected NHTB's President and Chief Executive Officer. In 1997, Mr.
Ensign was elected Vice Chairman of the Board of Directors of both NHTB and the
Bank.
RALPH B. FIFIELD, JR., age 74, retired in 1995 from his position as
Executive Vice President of the Bank. From April 1987 to August 1990, Mr.
Fifield was employed as a regional president of BankEast Corporation, Hanover,
New Hampshire. Prior to that, he was a Senior Vice President at the First
National Bank of Boston where he retired after 37 years of service. He has
served as a Director of the Bank and NHTB since 1990.
JOHN A. KELLEY, Jr., age 69, is a retired building contractor from
Warner, New Hampshire, and is the owner of a commercial laundromat located in
Warner, New Hampshire. He has served as a Director of the Bank since 1975, and
NHTB since 1989.
JOHN J. KIERNAN, age 73, has been associated with the Bank since 1960.
He has served as a Director of the Bank since 1968 and was elected Chairman of
its Board in 1984. He has served as a Director and Chairman of the Board of NHTB
since 1989. Prior to his retirement on December 31, 1991, he served as Chief
Executive Officer of the Bank and as NHTB's President and Chief Executive
Officer. Mr. Kiernan is the father-in-law of Stephen R. Theroux.
PETER R. LOVELY, age 56, has been associated with the Bank since 1980.
In 1983, he formed the Bank's Brokerage Services Department and served as
Investment Manager of the Newport, New London, and Upper Valley offices of the
Bank until his retirement in 1998. He has served as a Director of the Bank since
1996.
DENNIS A. MORROW, age 62, is Sales Manager of Cote and Reney Lumber
Company in Grantham, New Hampshire, and has been associated with that firm for
20 years. He has served as a Director of the Bank since 1984 and NHTB since
1989.
JACK H. NELSON, age 54, a resident of Hanover, New Hampshire, is the
Chairman of the Board of Directors of North East Environmental Products Inc., a
manufacturer and distributor of water treatment equipment. Additionally, Mr.
Nelson is President of the Hanover Water Company. Mr. Nelson has been a Director
since 1997.
26
<PAGE>
PRISCILLA W. OHLER, age 74, has resided in New London, New Hampshire for
over 40 years. She is a volunteer in various state and community activities.
Mrs. Ohler has served as a Director of the Bank since 1981, and NHTB since 1989.
STEPHEN R. THEROUX, age 49, was elected Executive Vice President of the
Bank in May, 1987. He has served as a Director of the Bank since 1986. Mr.
Theroux is NHTB Executive Vice President and a Director of NHTB having served in
such capacities since 1989. Mr. Theroux has served as Chief Operating Officer of
the Bank since 1997. Mr. Theroux is the son-in-law of John J. Kiernan.
KENNETH D. WEED, age 72, is a partner of L.E. Weed & Sons, a cement
manufacturer located in Newport, New Hampshire. He has served as a Director of
the Bank since 1973, and NHTB since 1989.
JOSEPH B. WILLEY, age 57, is a resident of Norwich, Vermont. Mr. Willey
is a principal owner, the President and a Director of Pro-Cut International,
Inc., a company engaged in the manufacture, sale and export of automotive repair
products. He was previously a principal owner and a Vice President of Northern
States Tire Corporation. He has served as a Director of the Bank since 1997 and
a Director of NHTB since 1998.
Executive Officers Who are Not Directors
DARYL J. CADY, age 37, has been associated with the Bank since 1985 and
has served in various positions since that time. Ms. Cady was elected Senior
Vice President and the Chief Financial Officer of the Bank and NHTB in April,
1998. Ms. Cady is a certified public accountant, a member of the AICPA, and a
member of the Financial Managers Society.
NHTB Capital Trust I
We organized the Trust as a statutory business trust under Delaware law
pursuant to the trust agreement that we, as sponsor, and the trustees executed.
We, together with the trustees, filed a certificate of trust with the Delaware
Secretary of State on July 7, 1999.
The Trust exists solely to:
. issue and sell the capital securities to the public and the
common securities to us;
. use the proceeds from the sale of the capital securities and
common securities to purchase our subordinated debentures, which
will be the only assets of the Trust;
. maintain its status as a grantor trust for federal income tax
purposes; and
. engage in other activities that are necessary or incidental to
these purposes.
We will purchase all of the common securities of the Trust. The common
securities will represent an aggregate liquidation amount equal to 3% of the
Trust's total capitalization. The capital securities will represent the
remaining 97% of the Trust's total capitalization. The common securities will
have terms substantially identical to the capital securities. However, if we
default on our payments under the subordinated debentures, the Trust will only
pay cash distributions and liquidation, redemption and other amounts payable to
us with respect to the common securities after it pays you these amounts on the
capital securities.
27
<PAGE>
The Trust has a term of 30 years, but we may dissolve it earlier as
provided in the trust agreement. The trustees conduct the Trust's business and
affairs. We appoint each trustee. The trustees are:
. Wilmington Trust Company, as property trustee;
. Wilmington Trust Company, as Delaware trustee; and
. Three individuals who are our employees, as administrative
trustees.
As the sole holder of the common securities, we can replace or remove
any of the trustees. However, if an event of default exists under the trust
agreement, the holders of the capital securities with at least a majority of
aggregate liquidation amount of the capital securities will be able to remove
and replace the property trustee and the Delaware trustee. Only we, as owner of
all of the common securities, can remove or replace the administrative trustees.
The duties and obligations of each trustee are governed by the trust agreement.
We will pay all fees and expenses related to the Trust and the offering
of the capital securities, as well as all of the ongoing costs and expenses of
the Trust. We will not be responsible for the Trust"s obligations under the
capital securities, except as provided by our guarantee of the capital
securities.
The Trust has no separate financial statements. The statements would not
be meaningful to you because the Trust has no independent operations.
The principal executive office of the Trust is c/o New Hampshire Thrift
Bancshares, Inc., 9 Main Street, P.O. Box 9, Newport, NH 03773 and its telephone
number is (603) 863-0886.
Use of Proceeds
All the proceeds to the Trust from the sale of the capital securities
and the common securities will be invested by the Trust in the subordinated
debentures. We expect to receive estimated net proceeds equal to $16.5 million
from the sale of the subordinated debentures after commissions and other
offering expenses. Of the $16.5 million, we will contribute approximately $15.0
million to the Bank as equity capital for the purpose of providing additional
capital to support the pending acquisition of three branches from New London
Trust, FSB. We will retain the balance of the proceeds for:
. financing growth, which may include expansion of our lending and
investment activities, one or more branch acquisitions,
acquisitions of other financial institutions, or acquisitions of
other financial services companies;
. repurchases of our common stock; and
. general corporate purposes.
The offering of the capital securities is not contingent upon consummation of
the pending branch acquisition. If the branch acquisition is not consummated, we
may use the proceeds for the expansion of our lending and investment activities,
repurchases of our common stock and for general corporate purposes.
Capitalization
The following table presents our consolidated capitalization at
March 31, 1999 and as adjusted to show the effect of the completion of the
offering of the capital securities and the
28
<PAGE>
issuance of the subordinated debentures to the Trust. You should read this table
together with the consolidated financial statements and notes incorporated by
reference to our Annual Report on Form 10-KSB for the fiscal year ended December
31, 1998 and our Quarterly Report on Form 10-QSB for the three months ended
March 31, 1999 and the "Use of Proceeds" section in this prospectus.
<TABLE>
<CAPTION>
-------------------------------------------------------
At March 31, 1999
-----------------
As Adjusted
-------- -------------- ----------------
Securities Sale
Actual Securities Sale and Branch
Acquisition
(Dollars in thousands)
<S> <C> <C> <C>
Guaranteed preferred beneficial interest in our subordinated
debentures(1)............................................... $ - $ 17,500 $ 17,500
--------- ------------- -------------
Shareholders" equity:
Common stock, $.01 par value per share, 5,000,000 shares
authorized, 2,479,858 shares issued and 2,104,285
shares outstanding at March 31, 1999......................... 25 25 25
Paid-in capital............................................... 17,875 17,875 17,875
Retained earnings............................................. 12,457 12,457 12,457
Net unrealized loss on securities available for sale.......... (295) (295) (295)
Treasury stock, at cost (375,573 shares as of
March 31, 1999)............................................. (2,458) (2,458) (2,458)
--------- -------------- --------------
Total shareholders" equity................................. $ 27,604 $ 27,604 $ 27,604
--------- -------------- --------------
Total guaranteed preferred beneficial interest in our
subordinated debentures and stockholders' equity........... $ 27,604 $ 45,104 $ 45,104
========= ============== ==============
Capital ratios (2):
Tier 1 risk-based capital ratio(3)............................ 11.60% 19.16% 10.08%
Total risk-based capital ratio(3)............................. 12.19 19.76 10.84
Core capital (to tangible assets) ............................ 7.32 12.09 6.51
Tangible capital (to tangible assets) ........................ 7.32 12.09 6.51
</TABLE>
- --------------------
(1) The sole assets of the Trust, which we will treat as one of our
subsidiaries, will be $18.0 million aggregate principal amount of our
subordinated debentures, which will mature on , 2029. NHTB will own
all of the common securities issued by the Trust.
(2) Assumes that we will contribute $15.0 million of proceeds from the sale of
the capital securities to the Bank. The capital ratios, as adjusted,
are computed in a manner consistent with OTS guidelines.
(3) For purposes of the "as adjusted" risk-based capital ratios, the proceeds
from the securities offering were assumed to have a risk-weighting of
0% and the estimated net proceeds from the acquisition of the branches
from New London Trust, fsb and were assumed to have an average risk-
weighting consistent with the average risk-weighting for the Bank.
29
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1999
(Dollars in thousands)
<TABLE>
<CAPTION>
-------------- ----------- ---------- ----------- --------------
Unaudited Capital Pro Forma Acquisition Pro Forma
NHTB at Securities After of NLT NHTB at
March 31, 1999 Issuance(1) Capital Branches(2) March 31, 1999
Securities
Issuance
<S> <C> <C> <C> <C> <C>
Assets
Cash and due from banks....................... $ 6,370 $ - $ 6,370 $ 850 $ 7,220
Federal funds sold............................ - 16,887 16,887 - 16,887
--------- -------- --------- -------- ---------
Cash and cash equivalents.................... 6,370 16,887 23,257 850 24,107
Securities available for sale, at fair value.. 51,266 - 51,266 - 51,266
Other investments ............................ 2,033 - 2,033 - 2,033
Loans receivable, net......................... 240,619 - 240,619 88,205 328,824
Accrued interest receivable................... 1,947 - 1,947 - 1,947
Premises and equipment, net................... 8,327 - 8,327 3,255 11,582
Investments in real estate.................... 528 - 528 - 528
Real estate owned and property
acquired in settlement of loans........... 687 - 687 - 687
Goodwill ..................................... 3,151 - 3,151 11,326 14,477
Other assets.................................. 2,650 613 3,263 3,170 6,433
--------- -------- --------- -------- ---------
Total assets.............................. $ 317,578 $ 17,500 $ 335,078 $ 106,806 $ 441,884
========= ======== ========= ========= =========
Liabilities, Guaranteed Preferred Beneficial
Interests in Our Subordinated
Debentures and Shareholders' Equity
Total deposits................................ $ 275,442 $ - $ 275,442 $103,077 $ 378,519
Securities sold under agreements
to repurchase............................. 7,085 - 7,085 - 7,085
FHLB advances and other borrowings............ 3,848 - 3,848 - 3,848
Accrued expenses and other liabilities........ 3,599 3,599 3,729 7,328
--------- -------- --------- -------- ---------
Total liabilities......................... 289,974 - 289,974 106,806 396,780
--------- -------- --------- -------- ---------
Guaranteed preferred beneficial interests in.. - 17,500 17,500 - 17,500
--------- -------- --------- -------- ---------
Shareholders' equity:
Common stock............................. 25 - 25 - 25
Additional paid-in capital................ 17,875 - 17,875 - 17,875
Retained earnings......................... 12,457 - 12,457 - 12,457
Accumulated other comprehensive loss...... (295) - (295) - (295)
Treasury stock, at cost................... (2,458) - (2,458) - (2,458)
--------- -------- --------- -------- ---------
Total shareholders' equity............. 27,604 - 27,604 - 27,604
--------- -------- --------- -------- ---------
Total liabilities, guaranteed preferred
beneficial interests in our
subordinated debentures and
shareholders' equity.................. $ 317,578 $ 17,500 $ 335,078 $106,806 $ 441,884
========= ======== ========= ======== =========
</TABLE>
___________________________
(1) Represents the issuance of the capital securities, with the net proceeds
reflected as federal funds sold. The estimated offering costs of $613,000
will be included in other assets and amortized over the 30 year term of the
subordinated debentures. Does not reflect additional offering expenses
estimated to be approximately $375,000.
(2) Represents, as of March 31, 1999, the assets to be acquired and the
liabilities to be assumed in the proposed acquisition of the three branches
from New London Trust, FSB. Since the assets acquired and liabilities
assumed do not constitute a business which has continuity, historical
financial statements are not available or relevant and are accordingly not
included herein. Loans and premises and equipment to be acquired
approximates the assets' fair value. The deposits assumed are all
considered to be at market rates and, accordingly, approximate fair value.
Intangible assets represents the tax deductible deposit premium of 10.26%
of the deposits assumed, including accrued interest payable, which will be
amortized over 15 years on a straight-line basis plus $750,000 in
transaction costs. The net cash received in the settlement of the
transaction has been shown as federal funds sold.
30
<PAGE>
Accounting Treatment
For financial reporting purposes, we will treat the Trust as our
subsidiary. We will include the Trust's accounts in our consolidated financial
statements. The capital securities will be presented as a separate line item in
our consolidated balance sheet under the caption "borrowed funds," and
appropriate disclosures about the capital securities, the guarantee and the
subordinated debentures will be included in the notes to our consolidated
financial statements. For financial reporting purposes, we will record
distributions payable on the capital securities as an expense in our
consolidated statements of income.
Description of Capital Securities
This summary describes the material provisions of the capital securities.
This description is not complete and you should refer to, the trust agreement,
including the definitions used in the trust agreement, and the Trust Indenture
Act for more information. We have filed the form of the trust agreement as an
exhibit to the registration statement of which this prospectus is a part.
General
The capital securities of the Trust will rank equal to, and payments made
on the capital securities will be made on a pro rata basis with, the common
securities of the Trust, except as described under "--Subordination of Common
Securities." The property trustee will have legal title to the subordinated
debentures and will hold them in trust for the benefit of you and the other
holders of the capital securities. Our guarantee for the benefit of the holders
of the capital securities will be a guarantee on a subordinated basis with
respect to the capital securities, but will not guarantee payment of
distributions or amounts payable on redemption or liquidation of the capital
securities when the Trust does not have funds legally available to pay
distributions or other amounts to the holders of the capital securities. You
should read "Description of Guarantee" for more information about our guarantee.
Distributions
The capital securities represent beneficial ownership interests in the
Trust. Distributions on the capital securities will be cumulative, and will
accumulate from the date that the capital securities are first issued.
Distributions will be made at the annual rate of % of the stated liquidation
amount of $10.00, payable quarterly in arrears on the distribution dates, which
are March 31, June 30, September 30 and December 31 of each year, to holders of
the capital securities on the relevant record dates. If the capital securities
are in book-entry form, the record dates will be one business day prior to the
relevant distribution date. If the capital securities are not in book-entry
form, record dates will be the 15th day of the month in which the distribution
is to be paid.
The first distribution date for the capital securities will be September
30, 1999. The period beginning on and including the date the capital securities
are first issued and ending on but excluding September 30, 1999, and each period
thereafter beginning on and including a distribution date and ending on but
excluding the next distribution date is a distribution period. The amount of
distributions payable for any distribution period will be based on a 360-day
year of twelve 30-day months.
If any distribution date would otherwise fall on a day that is not a
business day, the distribution date will be postponed to the next day that is a
business day without any additional payments for the delay, unless the
distribution would fall in the next calendar year, in which case the
distribution date
31
<PAGE>
will be the last business day of the calendar year. A business day means any day
other than a Saturday or a Sunday, or a day on which banks in New York, New York
or Wilmington, Delaware are authorized or required by law or executive order to
remain closed or a day on which the principal corporate trust office of the
property trustee is closed for business.
The Trust's revenue available for distribution to holders of the capital
securities will be limited to our payments to the Trust under our subordinated
debentures. For more information, please refer to "Description of Subordinated
Debentures --General." If we do not make interest payments on the subordinated
debentures, the property trustee will not have funds available to pay
distributions on the capital securities and on the common securities. We will
guarantee the payment of distributions if and to the extent that the Trust has
funds legally available to pay the distributions. You should read "Description
of Guarantee" for more information about the extent of our guarantee.
Option to Defer Interest Payments
As long as no event of default exists, we have the right under the
indenture to elect to defer the payment of interest on the subordinated
debentures, at any time or from time to time, for no more than 20 consecutive
quarters with respect to each deferral period, provided that no deferral period
will end on a date other than an interest payment date on the subordinated
debentures, or extend beyond , 2029, the maturity date of the
debentures. If we defer payments, the Trust will defer quarterly distributions
on the capital securities during a deferral period. During any deferral period
distributions will continue to accrue on the capital securities and on any
accrued and unpaid distributions, compounded quarterly from the relevant
distribution date at the applicable distribution rate, which will be equal to
the applicable interest rate on the subordinated debentures. The term
distributions includes any accumulated additional distributions.
Before the end of any deferral period, we may extend the deferral period,
as long as the extension does not cause the deferral period to exceed 20
consecutive quarters, or, to end on a date other than an interest payment date
or extend beyond , 2029. At the end of any deferral period and upon the
payment of all amounts then due obn any interest payment date, we may elect to
begin a new deferral period, subject to the above requirements. No interest
shall be due and payable during a deferral period until the deferral period
ends. We must give the property trustee, the administrative trustees and the
debenture trustee notice of our election to defer interest payments or to extend
a deferral period at least five business days before the earlier of:
. the date the distributions on the capital securities would have
been payable except for the election to begin a deferral period;
and
. the date the administrative trustees are required to give notice
to any securities exchange or automated quotation system or to
holders of the capital securities of the record date or the date
such distributions are payable, but in any event not less than
five business days prior to such record date.
There is no limitation on the number of times that we may elect to begin a
deferral period. Please refer to "Description of Subordinated Debentures--Option
to Extend Interest Payment Date" and "Certain Federal Income Tax Consequences--
Interest Income and Original Issue Discount."
During any deferral period, we may not:
. declare or pay any dividends or distributions on, or redeem,
purchase, acquire, or make a liquidation payment with respect
to, any of our capital stock;
32
<PAGE>
. make any payment of principal of, or interest or premium, if
any, on or repay, repurchase or redeem any debt securities that
rank equal or junior to the subordinated debentures; or
. make any guarantee payments with respect to any guarantee of the
debt securities of any subsidiary (including our guarantee of
the capital securities issued by NHTB Capital Trust I and other
similar guarantees) if such guarantee ranks equal or junior to
the subordinated debentures.
Notwithstanding the foregoing, during a deferral period we may make
the following payments:
(a) dividends or distributions in shares of, or options,
warrants or rights to subscribe for or purchase shares
of, our common stock,
(b) any declaration of a dividend in connection with the
implementation of a stockholders' rights plan, or the
issuance of rights, stock or other property under any
such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto,
(c) payments under the guarantee,
(d) as a result of a reclassification of our capital stock
or the exchange or conversion of one class or series of
our capital stock or indebtedness for another class or
series of our capital stock,
(e) the purchase of fractional interests in shares of our
capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being
converted or exchanged and
(f) purchases of common stock related to the issuance of
common stock or rights under any of our benefit plans
for our directors, officers or employees or any of our
dividend reinvestment plans.
We do not currently intend to exercise our right to defer payments of
interest on the subordinated debentures. Our obligations under the guarantee to
make payments of distributions is limited to the extent that the Trust has funds
legally available to pay distributions. You should read "Description of
Guarantee" for more information about the extent of our guarantee.
Redemption
Upon repayment on , 2029 or prepayment, in whole or in part
prior to , 2029, of the subordinated debentures (other than following the
distribution of the subordinated debentures to you as a holder of the capital
securities and us, as the holder of the common securities), the property trustee
will apply the proceeds from the repayment or prepayment of the subordinated
debentures (as long as the property trustee has received written notice no later
than 45 days before the repayment) to redeem at the applicable redemption price
an amount of capital securities having an aggregate liquidation amount equal to
the principal amount of the subordinated debentures paid to the Trust. We will
give notice of any redemption between 30 and 60 days prior to the redemption
date.
33
<PAGE>
If we prepay less than all of the subordinated debentures on a
redemption date, then the property trustee will allocate the proceeds of the
prepayment on a pro rata basis among the capital securities and the common
securities. If a court of competent jurisdiction enters an order to dissolve the
Trust, the subordinated debentures will be subject to optional prepayment in
whole, but not in part, on or after , 2004.
We will have the right to prepay the subordinated debentures:
(1) in whole or in part, on or after , 2004; and
(2) in whole but not in part, at any time prior to March ,
2004, if there are changes in the bank regulatory, investment company or tax
laws that would adversely affect the status of the Trust, the capital securities
or the subordinated debentures.
We may have to obtain regulatory approval, including the approval of
the OTS, before we redeem any subordinated debentures.
Please refer to "Description of Subordinated Debentures--Optional
Prepayment" and "--Special Event Prepayment" for information on prepayment of
the subordinated debentures.
Liquidation of the Trust and Distribution of Subordinated Debentures
We, as holder of the outstanding common securities, will have the
right at any time to dissolve the Trust and, after satisfying the liabilities
owed to the Trust's creditors as required by applicable law, we will have the
right to distribute the subordinated debentures to the holders of the capital
securities and to us as holder of the common securities. Our right to dissolve
the Trust is subject to our receiving:
. an opinion of counsel to the effect that if we distribute the
subordinated debentures, the holders of the capital
securities will not experience a taxable event; and
. any required regulatory approval.
The Trust will automatically dissolve if:
(1) certain bankruptcy events occur, or we dissolve or liquidate;
(2) we distribute subordinated debentures having a principal
amount equal to the liquidation amount of the capital securities to holders of
the capital securities and we, as holder of the common securities, have given
written directions to the property trustee to dissolve the Trust (which
direction is at our option and, except as described above, wholly within our
discretion, as holder of the common securities);
(3) the Trust redeems all of the capital securities as described
under "--Redemption;"
(4) the Trust's term expires; or
(5) a court of competent jurisdiction enters an order for the
dissolution of the Trust.
If the Trust is dissolved as described in clause (1), (2), (4), or (5)
above, the Trust will be liquidated by the trustees as quickly as the trustees
determine to be possible by distributing to holders of the capital securities,
after satisfying the liabilities owed to the Trust's creditors as provided by
applicable law, subordinated debentures having a principal amount equal to the
34
<PAGE>
liquidation amount of the capital securities, unless the property trustee
determines that this distribution is not practicable. If the property trustee
determines that this distribution is not practicable, the holders of the capital
securities will be entitled to receive an amount equal to the aggregate in
liquidation amount plus accumulated and unpaid distributions on the capital
securities to the date of payment (such amount being the "liquidation
distribution") out of the assets of the Trust legally available for distribution
to holders, after satisfying the liabilities owed to the Trust's creditors as
provided by applicable law. If the liquidation distribution can be paid only in
part because the Trust has insufficient assets legally available to pay the full
amount of the liquidation distribution, or if a debenture event of default
exists, the capital securities will have a priority over the common securities.
For more information, please refer to "--Subordination of Common Securities."
After the liquidation date is fixed for any distribution of
subordinated debentures to holders of the capital securities:
(1) the capital securities and the common securities will no longer
be deemed to be outstanding;
(2) DTC or its nominee will receive in respect of each registered
global certificate representing capital securities and the common securities a
registered global certificate representing the subordinated debentures to be
delivered upon this distribution; and
(3) any certificates representing capital securities and the common
securities not held by DTC or its nominee will be deemed to represent
subordinated debentures having a principal amount equal to the liquidation
amount of those capital securities, and bearing accrued and unpaid interest in
an amount equal to the accumulated and unpaid distributions on those capital
securities until such certificates are presented to the administrative trustees
or their agent for cancellation, in which case we will issue to those holders,
and the Delaware trustee will authenticate, a certificate representing the
subordinated debentures.
We cannot assure you of the market prices for the capital securities
or the subordinated debentures that may be distributed to you in exchange for
the capital securities if a dissolution and liquidation of the Trust were to
occur. Accordingly, the capital securities that you purchase, or the
subordinated debentures that you may receive upon a dissolution and liquidation
of the Trust, may trade at a discount to the price that you paid to purchase the
capital securities offered by this prospectus
If we elect not to prepay the subordinated debentures prior to
maturity and either elect not to or we are unable to liquidate the Trust and
distribute the subordinated debentures to holders of the capital securities, the
capital securities will remain outstanding until the repayment of the
subordinated debentures on , 2029.
Redemption Procedures
If we redeem the subordinated debentures, the Trust will redeem
capital securities and the common securities at the applicable redemption price
with the proceeds that it receives from our redemption of the subordinated
debentures. Any redemption of capital securities and the common securities will
be made and the applicable redemption price will be payable on the redemption
date only to the extent that the Trust has funds legally available to pay the
applicable redemption price. For more information, you should refer to
"--Subordination of Common Securities."
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If the Trust gives a notice of redemption for the capital securities,
then, by 12:00 noon, New York City time, on the redemption date, to the extent
funds legally are available, with respect to:
. the capital securities held by DTC or its nominees, the
property trustee will deposit, or cause the paying agent to
deposit, irrevocably with DTC funds sufficient to pay the
applicable redemption price and will give DTC irrevocable
instructions and authority to pay the redemption price to the
holders of the capital securities. For more information, you
should refer to "--Form, Denomination, Book-Entry Procedures
and Transfer."
. the capital securities held in certificated form, the
property trustee will irrevocably deposit with the paying
agent funds sufficient to pay the applicable redemption price
and will give the paying agent irrevocable instructions and
authority to pay the applicable redemption price to the
holders upon surrender of their certificates evidencing the
capital securities. For more information, you should refer to
"--Payment and Paying Agency."
The paying agent will initially be the property trustee and any
co-paying agent chosen by the property trustee and acceptable to the
administrative trustees and us.
Notwithstanding the foregoing, distributions payable on or before the
redemption date will be payable to the holders of the capital securities on the
relevant record dates for the related distribution dates. If the Trust gives a
notice of redemption and funds are deposited as required, then upon the date of
the deposit, all rights of the holders of the capital securities called for
redemption will cease, except the right of the holders of the capital securities
to receive the applicable redemption price, without interest, and the capital
securities called to be redeemed will cease to be outstanding.
If any redemption date for the capital securities is not a business
day, then the applicable redemption price, without interest or any other payment
in respect of the delay, will be paid on the next business day, except that, if
the next business day falls in the next calendar year, the payment shall be made
on the last business day of the calendar year. If payment of the applicable
redemption price is improperly withheld or refused and not paid either by the
Trust or by us pursuant to the guarantee:
(1) distributions on the capital securities will continue to
accumulate at %, from the redemption date originally established by
the Trust to the date such applicable redemption price is actually paid; and
(2) the actual payment date will be the redemption date for purposes
of calculating the applicable redemption price.
Notice of any redemption will be mailed between 30 and 60 days before
the redemption date to each holder of capital securities at its registered
address. Unless we default in payment of the applicable redemption price on, or
in the repayment of, the subordinated debentures, on and after the redemption
date, distributions will cease to accrue on the capital securities called for
redemption.
Subject to applicable law (including, without limitation, U.S. federal
securities laws), we or our subsidiaries may at any time, and from time to time,
purchase outstanding capital securities in the open market or by private
agreement.
Subordination of Common Securities
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Payment of distributions on, and the redemption price of, the capital
securities and the common securities, as applicable, will generally be made on a
pro rata basis. However, if a debenture event of default exists on any
distribution or redemption date, no payment of any distribution on, or
applicable redemption price of, any of the common securities, and no other
payment on account of the redemption, liquidation or other acquisition of the
common securities, will be made unless payment in full in cash of all
accumulated and unpaid distributions on all of the outstanding capital
securities for all distribution periods terminating on or before the
distribution or redemption date, or payment of the applicable redemption price
is made in full. All funds available to the property trustee will first be
applied to the payment in full in cash of all distributions on, or redemption
price of, the capital securities then due and payable.
In the case of any event of default, we, as holder of all of the
common securities, will be deemed to have waived any right to act with respect
to the event of default until the effect of the event of default has been cured,
waived or otherwise eliminated. Until any event of default has been cured,
waived or otherwise eliminated, the property trustee will act solely on behalf
of the holders of the capital securities and not on our behalf, and only the
holders of the capital securities will have the right to direct the property
trustee to act on their behalf.
Events of Default; Notice
An event of default under the indenture constitutes an event of
default under the trust agreement. See "Description of Subordinated
Debentures--Debenture Events of Default."
The trust agreement provides that within five (5) business days after
any event of default actually known to the property trustee occurs, the property
trustee will give notice of the event of default to the holders of the capital
securities, the administrative trustees and to us, as sponsor, unless the event
of default has been cured or waived. We, as sponsor, and the administrative
trustees are required to file annually with the property trustee a certificate
as to whether we and the administrative trustees have complied with the
applicable conditions and covenants of the trust agreement.
If a debenture event of default exists, the capital securities will
have a preference over the common securities as described under "--Liquidation
of the Trust and Distribution of Subordinated Debentures" and "--Subordination
of Common Securities." An event of default does not entitle the holders of
capital securities to accelerate the maturity date of the capital securities.
Removal of Trustees
Unless a debenture event of default exists, we may remove the property
trustee and the Delaware trustee at any time. If a debenture event of default
exists, the property trustee and the Delaware trustee may be removed only by the
holders of a majority in liquidation amount of the outstanding capital
securities. In no event will the holders of the capital securities have the
right to vote to appoint, remove or replace the administrative trustees, because
these voting rights are vested exclusively in us as the holder of all of the
common securities. No resignation or removal of the property trustee or the
Delaware trustee and no appointment of a successor trustee shall be effective
until the acceptance of appointment by the successor trustee in accordance with
the trust agreement.
Merger or Consolidation of Issuer Trustees
If the property trustee, the Delaware trustee or any administrative
trustee that is not a natural person is merged, converted or consolidated into
another entity, or the property trustee is a
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party to a merger, conversion or consolidation which results in a new entity, or
an entity succeeds to all or substantially all of the corporate trust business
of the property trustee, the new entity shall be the successor of the respective
trustee under the trust agreement, provided that the entity is otherwise
qualified and eligible.
Mergers, Consolidations, Amalgamations or Replacements of the Trust
The Trust may not merge with or into, consolidate, amalgamate or be
replaced by, or convey, transfer or lease substantially all of its properties
and assets to any corporation or other entity, except as described below or as
otherwise described under "--Liquidation of the Trust and Distribution of
Subordinated Debentures." The Trust may, at our request, as sponsor, and with
the consent of the administrative trustees but without the consent of the
holders of the capital securities, merge with or into, consolidate, amalgamate
or be replaced by or convey, transfer or lease substantially all of its
properties and assets to a trust organized as such under the laws of any state;
provided, that:
(1) the successor either
(a) expressly assumes all of the obligations of the Trust
with respect to the capital securities and the common securities or
(b) substitutes securities for the capital securities and
the common securities that have substantially the same terms as the
capital securities and the common securities so long as the substitute
securities rank equal to the capital securities and the common
securities in priority with respect to distributions and payments upon
liquidation, redemption and otherwise;
(2) we appoint a trustee of the successor possessing the same
powers and duties as the property trustee with respect to the subordinated
debentures;
(3) the substitute securities are listed, or any substitute
securities will be listed upon notification of issuance, on any national
securities exchange or other organization on which the capital securities and
the common securities are then listed or quoted, if any;
(4) if the capital securities, substitute securities or
subordinated debentures are rated by any nationally recognized statistical
rating organization prior to such transaction, the transaction does not cause
any of those securities to be downgraded by the rating organization;
(5) the transaction does not adversely affect the rights,
preferences and privileges of the holders of the capital securities (including
any successor securities) in any material respect;
(6) the successor has a purpose substantially identical to that of
the Trust;
(7) prior to the transaction, we received an opinion from
independent counsel to the Trust experienced in such matters to the effect that
(a) the transaction does not adversely affect the rights,
preferences and privileges of the holders of the capital securities
(including any successor securities) in any material respect (other
than any dilution of such holders' interests in the new entity), and
(b) following the transaction, neither the Trust nor the
successor will be required to register as an investment company under
the Investment Company Act; and
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(8) we, or any permitted successor or assignee owns all of the
common securities of the successor and guarantees the obligations of the
successor under the substituted securities at least to the extent provided by
the guarantee and the common securities guarantee.
Notwithstanding the foregoing, the Trust shall not, except with the
consent of holders of 100% in liquidation amount of the capital securities,
consolidate, amalgamate, merge with or into, or be replaced by or convey,
transfer or lease its properties and assets as an entirety or substantially as
an entirety to, any other entity or permit any other entity to consolidate,
amalgamate, merge with or into, or replace it if the transaction would cause the
Trust or the successor to be classified as an association taxable as a
corporation for United States federal income tax purposes.
Voting Rights; Amendment of the Trust Agreement
Except as provided below and under "--Mergers, Consolidations,
Amalgamations or Replacements of the Trust" and "Description of
Guarantee--Amendments and Assignment" and as otherwise required by law and the
trust agreement, the holders of the capital securities will have no voting
rights.
We, as holder of the common securities, together with the property
trustee and the administrative trustees, may amend the trust agreement from time
to time, without the consent of the holders of the capital securities:
(1) to cure any ambiguity, correct or supplement any provisions in
the trust agreement that may be inconsistent with any other provision, or to
make any other provisions with respect to matters or questions arising under the
trust agreement, which are not inconsistent with the other provisions of the
trust agreement; or
(2) to modify, eliminate or add to any provisions of the trust
agreement as is necessary to ensure that at all times that any capital
securities are outstanding, the Trust will not be classified as an association
taxable as a corporation or to enable the Trust to qualify as a grantor trust,
in each case for United States federal income tax purposes, or to ensure that
the Trust will not be required to register as an investment company under the
Investment Company Act,
provided, however, that in the case of clause (1) the amendment would
not adversely affect in any material respect the interests of the holders of the
capital securities. Any amendments of the trust agreement pursuant to the
foregoing shall become effective when notice of the amendment is given to the
holders of the capital securities.
We, as holder of the common securities, together with the trustees,
may amend the trust agreement:
(1) with the consent of holders representing a majority (based
upon liquidation amount) of the outstanding capital securities; and
(2) upon receipt by the trustees of an opinion of counsel
experienced in such matters to the effect that the amendment or the exercise of
any power granted to the trustees in accordance with the amendment will not
affect the Trust's classification as an entity that is not taxable as a
corporation or as being a grantor trust for United States federal income tax
purposes or the Trust's exemption from status as an investment company under the
Investment Company Act,
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provided that, without the consent of each holder of capital securities, no
amendment may change the amount or timing of any distribution on the capital
securities and the common securities or otherwise adversely affect the amount of
any distribution required to be made in respect of the capital securities and
the common securities as of a specified date; or restrict the right of a holder
of capital securities and the common securities to sue for the enforcement of
any payment on or after the specified date.
So long as any subordinated debentures are held by the property trustee,
the trustees may not:
. direct the time, method and place of conducting any proceeding for any
remedy available to the debenture trustee, or execute any trust or
power conferred on the debenture trustee with respect to the
subordinated debentures;
. waive certain past defaults under the indenture;
. exercise any right to rescind or annul a declaration accelerating the
maturity of the principal of the subordinated debentures; or
. consent to any amendment, modification or termination of the indenture
or the subordinated debentures, where such consent shall be required,
without, in each case, obtaining the prior consent of the holders of a majority
in liquidation amount of all outstanding capital securities; provided, however,
that where a consent under the indenture would require the consent of each
holder of subordinated debentures affected by the amendment, modification or
termination, the property trustee will not give consent without the prior
approval of each holder of the capital securities.
The trustees shall not revoke any action previously authorized or approved
by a vote of the holders of the capital securities except by subsequent vote of
such holders. The property trustee shall notify each holder of capital
securities of any notice of default with respect to the subordinated debentures.
In addition to obtaining the approvals of the holders of the capital securities,
prior to taking any of the foregoing actions, the trustees shall obtain an
opinion of counsel experienced in such matters to the effect that the Trust will
not be classified as an association taxable as a corporation for United States
federal income tax purposes on account of such action.
Any required approval of holders of capital securities may be given at a
meeting of the holders convened for the purpose of approving the matter or
pursuant to written consent. The property trustee will cause a notice of any
meeting at which holders of capital securities are entitled to vote, or of any
matter upon which action by written consent of such holders has been taken, to
be given to each holder of record of capital securities in accordance with the
trust agreement.
No vote or consent of the holders of capital securities will be required
for the Trust to redeem and cancel the capital securities in accordance with the
trust agreement.
Notwithstanding that holders of the capital securities are entitled to vote
or consent under any of the circumstances described above, any of the capital
securities that are owned by us, the trustees or any of our or any trustee's
affiliates, shall, for purposes of such vote or consent, be treated as if they
were not outstanding.
Depositary Procedures
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DTC has advised the Trust and us that it is a limited-purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the Uniform
Commercial Code and a "clearing agency" registered pursuant to the provisions of
Section 17A of the Exchange Act. DTC was created to hold securities for its
participating organizations (collectively, "participants") and to facilitate the
clearance and settlement of transactions in those securities between
participants through electronic book-entry changes in accounts of its
participants, to eliminate the need for physical movement of certificates.
Participants include securities brokers and dealers (including the
underwriters), banks, trust companies, clearing corporations and certain other
organizations. Indirect access to DTC's system is also available to banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly (collectively,
"indirect participants"). Persons who are not participants may beneficially own
securities held by or on behalf of DTC only through participants or indirect
participants. The ownership interest and transfer of ownership interest of each
actual purchaser of each security held by or on behalf of DTC are recorded on
the records of participants and indirect participants.
DTC also has advised the Trust and us that, pursuant to procedures
established by it, (1) upon deposit of the global capital securities, DTC will
credit the accounts of participants designated by the underwriters with portions
of the liquidation amount of the global capital securities and (2) ownership of
interests in the global capital securities will be shown on, and the transfer of
ownership of the global capital securities, will be effected only through
records maintained by DTC (with respect to participants) or by participants and
indirect participants (with respect to other owners of beneficial interests in
the global capital securities).
Registration of Capital Securities
The capital securities will be represented by one or more global
certificates registered in the name of DTC or its nominee. Beneficial interests
in the capital securities will be shown on, and transfers of the global capital
securities will be effected only through, records maintained by participants.
Except as described below, capital securities in certificated form will not be
issued in exchange for the global certificates. See "Exchange of Book-Entry
Capital Securities for Certificated Capital Securities."
You may hold your interests in the global capital security directly through
DTC if you are a participant, or indirectly through organizations that are
participants. All interests in a global capital security will be subject to the
procedures and requirements of DTC. The laws of some states require that certain
persons take physical delivery in certificated form of securities that they own.
Consequently, the ability to transfer beneficial interests in a global capital
security to those persons will be limited to that extent. Because DTC can act
only on behalf of participants, which in turn act on behalf of indirect
participants and certain banks, the ability of a person having beneficial
interests in a global capital security to pledge its interests to persons or
entities that do not participate in the DTC system, or otherwise take actions in
respect of its interests, may be affected by the lack of a physical certificate
evidencing its interests. For certain other restrictions on the transferability
of the capital securities, see "--Exchange of Book-Entry Capital Securities for
Certificated Capital Securities."
Payments on the global capital security registered in the name of DTC, or
its nominee, will be payable by the property trustee to DTC in its capacity as
the registered holder under the trust agreement. Under the terms of the trust
agreement, the property trustee will treat the persons in whose names the
capital securities, including the global capital securities, are registered as
the owners thereof for the purpose of receiving such payments and for any and
all other purposes
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whatsoever. Neither the property trustee nor any agent thereof has or will have
any responsibility or liability for:
. any aspect of DTC's records or any participant's or indirect
participant's records relating to, or payments made on account of,
beneficial ownership interests in the global capital securities, or
for maintaining, supervising or reviewing any of DTC's records or any
participant's or indirect participant's records relating to the
beneficial ownership interests in the global capital securities; or
. any other matter relating to the actions and practices of DTC or any
of its participants or indirect participants.
DTC has advised the Trust and us that its current practice, upon receipt of
any payment on the capital securities, is to credit the accounts of the relevant
participants with the payment on the payment date, in amounts proportionate to
their respective holdings in liquidation amount of the capital securities as
shown on the records of DTC unless DTC has reason to believe it will not receive
payment on the payment date. Payments by participants and indirect participants
to the beneficial owners of capital securities will be governed by standing
instructions and customary practices and will be the responsibility of
participants or indirect participants and will not be the responsibility of DTC,
the property trustee, the Trust or us. None of the Trust, NHTB nor the property
trustee will be liable for any delay by DTC or any of its participants or
indirect participants in identifying the beneficial owners of the capital
securities, and the Trust, NHTB and the property trustee may conclusively rely
on, and will be protected in relying on, instructions from DTC or its nominee
for all purposes.
Any secondary market trading activity in interests in the global capital
securities will settle in immediately available funds, subject in all cases to
the rules and procedures of DTC and its participants. Transfers between
participants in DTC will be effected in accordance with DTC's procedures, and
will settle in same-day funds.
DTC has advised the Trust and us that it will take any action permitted to
be taken by a holder of capital securities (including, without limitation,
presenting the capital securities for exchange as described below) only at the
direction of one or more participants who have an interest in DTC's global
capital securities in respect of the portion of the liquidation amount of the
capital securities as to which the participant or participants has or have given
direction. However, if an event of default exists under the trust agreement, DTC
reserves the right to exchange the global capital securities for legended
capital securities in certificated form and to distribute the certificated
capital securities to its participants.
We believe that the information in this section concerning DTC and its
book-entry system has been obtained from reliable sources, but we do not take
responsibility for the accuracy of this information.
Although DTC has agreed to the procedures described in this section to
facilitate transfers of interests in the global capital securities among
participants in DTC, DTC is not obligated to perform or to continue to perform
these procedures, and these procedures may be discontinued at any time. None of
the Trust, NHTB nor the property trustee will have any responsibility or
liability for any aspect of the performance by DTC or its participants or
indirect participants of any of their respective obligations under the rules and
procedures governing their operations or for maintaining, supervising or
reviewing any records relating to the global capital securities that are
maintained by DTC or any of its participants or indirect participants.
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Exchange of Book-Entry Capital Securities for Certificated Capital Securities
A global capital security can be exchanged for capital securities in
registered certificated form if:
(1) DTC notifies the Trust that it is unwilling or unable to continue as
depositary for the global capital security and the Trust fails to appoint a
successor depositary within 90 days of receipt of DTC's notice, or has ceased to
be a clearing agency registered under the Exchange Act and the Trust fails to
appoint a successor depositary within 90 days of becoming aware of this
condition;
(2) the Trust, in its sole discretion, elects to cause the capital
securities to be issued in certificated form; or
(3) an event of default, or any event which after notice or lapse of time
or both would be an event of default, exists under the trust agreement.
In addition, beneficial interests in a global capital security may be
exchanged by or on behalf of DTC for certificated capital securities upon
request by DTC, but only upon at least 20 days' prior written notice given to
the property trustee in accordance with DTC's customary procedures. In all
cases, certificated capital securities delivered in exchange for any global
capital security will be registered in the names, and issued in any approved
denominations, requested by or on behalf of DTC (in accordance with its
customary procedures).
Payment and Paying Agency
The Trust will make payments on the capital securities that are held in
global form to DTC, which will credit the relevant accounts at DTC on the
applicable distribution dates. The Trust will make payments on the capital
securities that are not held by DTC by mailing a check to the address of the
holder entitled to the payment as the holder's address appears on the register.
The paying agent will initially be the property trustee and any co-paying agent
chosen by the property trustee and acceptable to the administrative trustees and
us. The paying agent will be permitted to resign as paying agent upon 30 days'
notice to the property trustee, the administrative trustees and us. In the event
that the property trustee is no longer the paying agent, the administrative
trustees will appoint a successor (which must be a bank or trust company
acceptable to the administrative trustees and us) to act as paying agent.
Registrar and Transfer Agent
The property trustee will act as registrar and transfer agent for the
capital securities.
The Trust will register transfers of the capital securities without charge,
except for any tax or other governmental charges that may be imposed in
connection with any transfer or exchange. The Trust will not be required to have
the transfer of the capital securities registered after they have been called
for redemption.
Information Concerning the Property Trustee
Except if an event of default exists, the property trustee will undertake
to perform only the duties specifically set forth in the trust agreement. After
an event of default, the property trustee must exercise the same degree of care
and skill as a prudent person would exercise or use in the conduct of his or her
own affairs. Subject to this provision, the property trustee is not obligated to
exercise any of the powers vested in it by the trust agreement at the request of
any holder of capital
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securities, unless it is offered reasonable indemnity against the costs,
expenses and liabilities that it might incur. If no event of default exists and
the property trustee is required to decide between alternative causes of action,
construe ambiguous provisions in the trust agreement or is unsure of the
application of any provision of the trust agreement, and the matter is not one
on which holders of the capital securities or the common securities are entitled
under the trust agreement to vote, then the property trustee shall take such
action as directed by us and, if not directed, shall take such action as it
deems advisable and in the best interests of the holders of the capital
securities and will have no liability, except for its own bad faith, negligence
or willful misconduct.
Miscellaneous
The administrative trustees are authorized and directed to conduct the
affairs of and to operate the Trust in such a way that:
(1) The Trust will not be deemed to be an investment company required to
be registered under the Investment Company Act;
(2) The Trust will be classified as a grantor trust for United States
federal income tax purposes; and
(3) the subordinated debentures will be treated as our indebtedness for
United States federal income tax purposes.
We, together with the administrative trustees, are authorized to take any
action, not inconsistent with applicable law, the certificate of trust of the
Trust or the trust agreement, that we and the administrative trustees determine
in our discretion is necessary or desirable, as long as it does not materially
adversely affect the interests of the holders of the capital securities.
The trust agreement provides that holders of the capital securities have no
preemptive or similar rights to subscribe for any additional capital securities
and the issuance of capital securities is not subject to preemptive rights.
The Trust may not borrow money, issue debt, execute mortgages or pledge any
of its assets.
Description of Subordinated Debentures
This summary describes the material provisions of the subordinated
debentures. This description is not complete and you should refer to the
indenture and the Trust Indenture Act for more information. We have filed the
indenture as an exhibit to the registration statement of which this prospectus
is a part. Wilmington Trust Company will act as debenture trustee under the
indenture. The indenture is qualified under the Trust Indenture Act.
General
The Trust will invest the proceeds from the sale of the capital securities
and the common securities in the subordinated debentures issued by us. The
subordinated debentures will bear interest at the annual rate of % of the
principal amount of the subordinated debentures, payable quarterly in arrears on
interest payment dates of March 31, June 30, September 30 and December 31 of
each year and at maturity to the person in whose name each subordinated
debenture is registered at the close of business on the relevant record date.
The first interest payment date for the subordinated debentures will be
September 30, 1999. The period beginning on and including the date the
subordinated debentures are first issued and ending on but excluding September
30,
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1999, and each period beginning on and including an interest payment date and
ending on but excluding the next interest payment date, is an interest period.
We anticipate that, until the liquidation, if any, of the Trust, each
subordinated debenture will be held by the property trustee in trust for the
benefit of the holders of the capital securities. The amount of interest payable
for any interest period will be computed on the basis of a 360-day year of
twelve 30-day months. In the event that any interest payment date would
otherwise fall on a day that is not a business day, the interest payment date
will be postponed to the next business day (without any interest or other
payment due to the delay) unless it would fall in the next calendar year, in
which case the interest payment date shall be the last business day of the
calendar year.
Accrued interest that is not paid on the applicable interest payment date
will bear additional interest (to the extent permitted by law) at the rate of
% per annum, compounded quarterly from the relevant interest payment date.
The term "interest" as used in this prospectus includes quarterly interest
payments and interest on quarterly interest payments not paid on the applicable
interest payment date.
Notwithstanding anything to the contrary set forth above, if the maturity
date falls on a day that is not a business day, the payment of principal and
interest will be paid on the next business day, with the same force and effect
as if made on the maturity date, and no interest on such payments will accrue
from and after the maturity date.
The subordinated debentures will be issued as a series of subordinated
debentures under the indenture.
The subordinated debentures will mature on , 2029.
The subordinated debentures will rank equal to all of our other
subordinated debentures which have been or may be issued to other trusts
established by us, in each case similar to the Trust, and will be unsecured and
rank subordinate and junior to all indebtedness for money that we borrow to the
extent and in the manner set forth in the indenture. See "--Subordination."
We are a savings and loan holding company regulated by the OTS, and
substantially all of our operating assets are owned by the Bank. We are a legal
entity separate and distinct from our subsidiaries. Holders of subordinated
debentures should look only to us for payments on the subordinated debentures.
The principal sources of our income are dividends, interest and fees from the
Bank. We rely primarily on dividends from the Bank to meet our obligations for
payment of principal and interest on our outstanding debt obligations and
corporate expenses. Dividend payments from the Bank are subject to regulatory
limitations, generally based on current and retained earnings, imposed by the
various regulatory agencies with authority over the Bank. In addition to
regulatory restrictions on the payment of dividends, the Bank is subject to
restrictions imposed by federal law on any extensions of credit to us and other
affiliates of the Bank and on investments in stock or other securities of
affiliates. Also, as a savings and loan holding company, our right to receive
distributions from the Bank may be limited if the Bank is liquidated or
reorganized. For more information about these regulatory limits , you should
read "Risk Factors -- Risks related to your investment in the capital
securities-- We will depend primarily on any dividends we may receive from our
subsidiaries in making payments under the subordinated debentures, which could
affect the payments made to you under the capital securities."
The subordinated debentures will be effectively subordinated to all
existing and future liabilities of the Bank (including the Bank's deposit
liabilities) and all liabilities of any of our future
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subsidiaries. The indenture does not limit us or the Bank from incurring or
issuing other secured or unsecured debt, including senior indebtedness. See
"--Subordination."
Form, Registration and Transfer
If the subordinated debentures are distributed to the holders of the
capital securities, the subordinated debentures may be represented by one or
more global certificates registered in the name of Cede & Co., as the nominee of
DTC. The depositary arrangements for such subordinated debentures are expected
to be substantially similar to those in effect for the capital securities. For a
description of DTC and the terms of the depositary arrangements relating to
payments, transfers, voting rights, redemptions and other notices and other
matters, you should read "Description of Capital Securities -- Form,
Denomination, Book-Entry Procedures and Transfer."
Payment and Paying Agents
Payment of principal and interest on the subordinated debentures will be
made at the office of the debenture trustee in New York, New York or at the
office of such paying agent or paying agents as we may designate from time to
time, except that, at our option, payment of any interest may be made, except in
the case of subordinated debentures in global form:
. by check mailed to the address of the person or entity entitled to the
interest payment as such address shall appear in the register for the
subordinated debentures; or
. by transfer to an account maintained by the person or entity entitled
to the interest payment as specified in the register, provided that
proper transfer instructions have been received by the relevant record
date.
Payment of any interest on any subordinated debenture will be made to the
person or entity in whose name the subordinated debenture is registered at the
close of business on the record date for the interest payment date, except in
the case of defaulted interest. We may at any time designate additional paying
agents or rescind the designation of any paying agent; however we will always be
required to maintain a paying agent in each place of payment for the
subordinated debentures.
Any moneys deposited with the debenture trustee or any paying agent, or
then held by us, in trust for the payment of the principal or interest on any
subordinated debenture and remaining unclaimed for two years after such
principal or interest has become due and payable shall, at our request, be
repaid to us and the holder of the subordinated debenture shall thereafter look,
as a general unsecured creditor, only to us for payment.
Option to Extend Interest Payment Date
So long as no debenture event of default exists, we will have the right
under the indenture to defer the payment of interest on the subordinated
debentures, at any time and from time to time, for no more than 20 consecutive
quarters for each deferral period, provided that no deferral period shall end on
a date other than an interest payment date or extend beyond , 2029. At
the end of a deferral period, we must pay all interest then accrued and unpaid
(together with interest thereon at the rate of % per year, compounded
quarterly from the relevant interest payment date, to the extent permitted by
applicable law). During a deferral period, interest will continue to accrue, and
holders of the capital securities or, if the subordinated debentures have been
distributed to holders of the capital securities, holders of subordinated
debentures, will be required to include that deferred interest in gross income
for United States federal income tax purposes on an accrual method of accounting
prescribed by the Internal Revenue Code of 1986 (the "Code") and Treasury
regulation provisions on original
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issue discount prior to the receipt of cash attributable to that income. See
"Certain Federal Income Tax Consequences--Original Issue Discount."
During any such deferral period, we may not:
(1) declare or pay any dividends or distributions on, or redeem, purchase,
acquire, or make a liquidation payment with respect to, any of our capital
stock;
(2) make any payment of principal of, or interest or premium, if any, on
or repay, repurchase or redeem any of our debt securities that rank equal to or
junior to the subordinated debentures; or
(3) make any guarantee payments with respect to any guarantee by us of the
debt securities of any of our subsidiaries (including our guarantee of the
capital securities of the Trust and any other guarantees) if such guarantee
ranks equal or junior to the subordinated debentures other than
(a) dividends or distributions in shares of, or options, warrants or
rights to subscribe for or purchase shares of, our common stock;
(b) any declaration of a dividend in connection with the
implementation of a stockholders' rights plan, or the issuance of
rights, stock or other property under any such plan in the future, or
the redemption or repurchase of any rights pursuant thereto,
(c) payments under the guarantee,
(d) as a result of a reclassification of our capital stock or the
exchange or conversion of one class or series of our capital stock or
indebtedness for another class or series of our capital stock,
(e) the purchase of fractional interests in shares of our capital
stock pursuant to the conversion or exchange provisions of such
capital stock or the security being converted or exchanged and
(f) purchases of our common stock related to the issuance of common
stock or rights under any of our benefit plans for our directors,
officers or employees or any of our dividend reinvestment plans.
We do not currently intend to exercise our option to defer payments of
interest on the subordinated debentures.
Before the end of any deferral period, we may extend the deferral period,
as long as no event of default exists and the extension does not cause the
deferral period to exceed 20 consecutive quarterly periods, to end on a date
other than an interest payment date or to extend beyond , 2029. At the
end of any deferral period and upon the payment of all then accrued and unpaid
interest (together with interest thereon at the rate of % per year, compounded
quarterly, to the extent permitted by applicable law), we may elect to begin a
new deferral period, subject to the requirements set forth herein. No interest
shall be due and payable during a deferral period until the deferral period
ends. We must give the property trustee, the administrative trustees and the
debenture trustee notice of our election at least five business days before the
earlier of:
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. the date the distributions on the capital securities and the common
securities would have been payable except for the election to begin or
extend such deferral period;
. the date the administrative trustees are required to give notice to
any securities exchange or automated quotation system on which the
capital securities are listed or quoted or to holders of capital
securities of the record date for such distributions; or
. the date such distributions are payable, but at least five business
days prior to the record date.
The debenture trustee will notify holders of the capital securities of our
election to begin or extend a new deferral period.
There is no limit on the number of times that we may elect to begin a
deferral period.
Optional Prepayment
We may prepay the subordinated debentures, in whole or in part, at our
option on or after , 2004, subject to our receipt of any required
regulatory approval, at an optional prepayment price equal to 100% of the
principal amount of the subordinated debentures.
Special Event Prepayment
If there are changes in the bank regulatory, investment company or tax laws
that adversely affect the status of the Trust, the capital securities or the
subordinated debentures, we may, at our option, and subject to our receipt of
any required regulatory approval, prepay the subordinated debentures, in whole
but not in part, at any time within 90 days of the change in the law, at the
special event prepayment price. If we exercise our option to prepay the
subordinated debentures under these circumstances, then the proceeds of that
prepayment must be applied to redeem the capital securities at a prepayment
price equal to 100% of the principal amount of the subordinated debentures so
prepaid, plus, in each case, accrued and unpaid interest on the subordinated
debentures, if any, to the date of prepayment. See "Description of Capital
Securities--Redemption."
A change in the bank regulatory law means our receipt of an opinion of
independent bank regulatory counsel experienced in such matters to the effect
that, as a result of
. any amendment to, or change (including any announced prospective
change) in, any laws or regulations of the United States or any rules,
guidelines or policies of an applicable regulatory agency or authority
or
. any official administrative pronouncement or judicial decision
interpreting or applying such laws or regulations,
which amendment or change is effective or which pronouncement or decision is
announced on or after the date the capital securities and the common securities
are first issued, the capital securities do not constitute, or within 90 days of
the opinion will not constitute, Tier 1 Capital (or its then equivalent if we
were subject to such capital requirement).
A change in the investment company law means the receipt by us and the
Trust of an opinion of independent securities counsel experienced in such
matters to the effect that, as a result of
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. any amendment to, or change (including any announced prospective
change) in, any laws or regulations of the United States or any rules,
guidelines or policies of any applicable regulatory agency or
authority or
. any official administrative pronouncement or judicial decision
interpreting or applying such laws or regulations,
which amendment or change is effective or which pronouncement or decision is
announced on or after the date the capital securities are first issued, the
Trust is, or within 90 days of the date of the opinion will be, considered an
investment company that is required to be registered under the Investment
Company Act.
A change in tax law means the receipt by us and the Trust of an opinion of
independent tax counsel experienced in such matters to the effect that, as a
result of:
. any amendment to, or change (including any announced prospective
change) in, any laws or regulations of the United States or any
political subdivision or taxing authority thereof or therein or
. any official administrative pronouncement or judicial decision
interpreting or applying such laws or regulations,
which amendment or change is effective or which pronouncement or decision is
announced on or after the date the capital securities are first issued, there is
more than an insubstantial risk that:
. The Trust is, or will be within 90 days of the date of such opinion,
subject to United States federal income tax with respect to any income
received or accrued on the subordinated debentures;
. interest payable by us on the subordinated debentures is not, or
within 90 days of the date of such opinion will not be, deductible by
us, in whole or in part, for United States federal income tax
purposes; or
. The Trust is, or will be within 90 days of the date of such opinion,
subject to more than a de minimis amount of other taxes, duties or
other governmental charges.
We will mail any notice of prepayment between 30 and 60 days before the
prepayment date to each holder of subordinated debentures to be prepaid at its
registered address. Unless we default in payment of the prepayment price, on the
prepayment date interest shall cease to accrue on the subordinated debentures
called for prepayment.
If the Trust is required to pay any additional taxes, duties or other
governmental charges as a result of a change in the tax law, we will pay as
additional amounts on the subordinated debentures any amounts as may be
necessary in order that the amount of distributions then due and payable by the
Trust on the outstanding capital securities shall not be reduced as a result of
any additional sums, including taxes, duties or other governmental charges to
which the Trust has become subject as a result of a change in the tax law.
Certain Covenants by Us
We will also covenant that we will not:
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(1) declare or pay any dividends or distributions on, or redeem,
purchase, acquire or make a liquidation payment with respect to, any of our
capital stock;
(2) make any payment of principal of, or interest or premium, if
any, on or repay, repurchase or redeem any of our debt securities that rank
equal or junior to the subordinated debentures; or
(3) make any guarantee payments with respect to any of our
guarantees of the debt securities of any of our subsidiaries if such guarantee
ranks equal or junior to the subordinated debentures, other than
(a) dividends or distributions in shares of, or options,
warrants or rights to subscribe for or purchase shares of, our common stock,
(b) any declaration of a dividend in connection with the
implementation of a stockholders' rights plan, or the issuance of rights, stock
or other property under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto,
(c) payments under the guarantee,
(d) as a result of a reclassification of our capital
stock or indebtedness or the exchange or conversion of one class or series of
our capital stock for another class or series of our capital stock,
(e) the purchase of fractional interests in shares of our
capital stock pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged, and
(f) purchases of our common stock related to the issuance
of common stock or rights under any of our benefit plans for its directors,
officers or employees or any of our dividend reinvestment plans,
if at such time:
. we have actual knowledge that there is any event that is, or
with the giving of notice or the lapse of time, or both, would
be, a debenture event of default and that we have not taken
reasonable steps to cure;
. we are in default with respect to our payment of any
obligations under the guarantee; or
. we have given notice of our election to exercise our right to
defer interest payments on the subordinated debentures as
provided in the indenture and the deferral period, or any
extension of the deferral period, is continuing.
So long as the capital securities and common securities remain
outstanding, we also will covenant:
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. to maintain 100% direct or indirect ownership of the common
securities; provided, however, that any of our permitted
successors under the indenture may succeed to our ownership
of the common securities;
. to use commercially reasonable efforts to cause the Trust to
remain a business trust, except in connection with the
distribution of subordinated debentures to the holders of
capital securities in liquidation of the Trust, the
redemption of all of the capital securities, or certain
mergers, consolidations or amalgamations, each as permitted
by the trust agreement;
. to use commercially reasonable efforts to cause the Trust to
otherwise continue not to be classified as an association
taxable as a corporation and to be classified as a grantor
trust for United States federal income tax purposes;
. to use commercially reasonable efforts to cause each holder
of capital securities to be treated as owning an undivided
beneficial interest in the subordinated debentures; and
. to not cause, as sponsor of the Trust, or permit, as holder
of the common securities, the dissolution, winding-up or
liquidation of the Trust, except as provided in the trust
agreement.
Modification of Indenture
From time to time, we, together with the debenture trustee, may,
without the consent of the holders of subordinated debentures, amend the
indenture for specified purposes, including, among other things, curing
ambiguities, defects or inconsistencies, provided that any amendment in the
indenture does not materially adversely affect the interest of the holders of
subordinated debentures, and qualifying, or maintaining the qualification of,
the indenture under the Trust Indenture Act.
The indenture permits us and the debenture trustee, with the consent
of the holders of a majority in aggregate principal amount of subordinated
debentures, to modify the indenture in a manner affecting the rights of the
holders of the subordinated debentures; provided that no modification may,
without the consent of the holders of each outstanding subordinated debenture
affected:
. change the stated maturity date, or reduce the principal
amount, of the subordinated debentures,
. reduce the amount payable on prepayment or reduce the rate
or extend the time of payment of interest except pursuant to
our right under the indenture to defer the payment of
interest (see "--Option to Extend Interest Payment Date"),
. make the principal or interest on the subordinated debentures
payable in any coin or currency other than that provided in the
subordinated debentures,
. impair or affect the right of any holder of subordinated
debentures to institute suit for the payment thereof, or
. reduce the percentage of the principal amount of the subordinated
debentures, the holders of which are required to consent to any
such modification.
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Debenture Events of Default
A "debenture event of default" is
. our failure for 30 days to pay any interest (including compounded
interest and additional sums, if any) on the subordinated
debentures or any other debentures when due (subject to the
deferral of any interest due date in the case of a deferral
period with respect to the subordinated debentures or other
debentures as the case may be); or
. our failure to pay any principal on the subordinated debentures
or any other debentures when due whether at maturity, upon
prepayment, by accelerating the maturity or otherwise; or
. our failure to observe or perform, in any material respect, any
other covenant contained in the indenture for 90 days after
written notice to us from the debenture trustee or to us and the
debenture trustee from the holders of at least 25% in aggregate
outstanding principal amount of subordinated debentures; or
. certain events related to our bankruptcy, insolvency or
reorganization.
The holders of a majority in aggregate outstanding principal amount of
the subordinated debentures have, subject to certain exceptions, the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the debenture trustee. The debenture trustee or the holders of not
less than 25% in aggregate outstanding principal amount of the subordinated
debentures may declare the principal due and payable immediately upon a
debenture event of default. The holders of a majority in aggregate outstanding
principal amount of the subordinated debentures may annul this declaration and
waive the default if the default (other than the non-payment of the principal of
the subordinated debentures which has become due solely by such acceleration)
has been cured and a sum sufficient to pay all matured installments of interest
and principal due otherwise than by acceleration has been deposited with the
debenture trustee.
The holders of a majority in aggregate outstanding principal amount of
the subordinated debentures affected may, on behalf of the holders of all the
subordinated debentures, waive any past default, except a default in the payment
of principal or interest (unless such default has been cured and a sum
sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the debenture trustee) or
a default in respect of a covenant or provision which under the indenture cannot
be modified or amended without the consent of the holder of each outstanding
subordinated debenture.
The indenture requires that we file with the debenture trustee a
certificate annually as to the absence of defaults specified under the
indenture.
The indenture provides that the debenture trustee may withhold notice
of a debenture event of default from the holders of the subordinated debentures
if the debenture trustee considers it in the interest of the holders to do so.
Enforcement of Certain Rights by Holders of Capital Securities
If a debenture event of default exists that is attributable to our
failure to pay the principal or interest (including compounded interest and
additional sums, if any) on the subordinated debentures on the due date, a
holder of capital securities may institute a direct action. We may not amend the
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indenture to remove this right to bring a direct action without the prior
written consent of the holders of all of the capital securities. Notwithstanding
any payments that we make to a holder of capital securities in connection with a
direct action, we shall remain obligated to pay the principal or interest
(including compounded interest and additional sums, if any) on the subordinated
debentures, and we shall be subrogated to the rights of the holder of the
capital securities with respect to payments on the capital securities to the
extent that we make any payments to a holder in any direct action.
The holders of the capital securities will not be able to exercise
directly any remedies, other than those described in the above paragraph,
available to the holders of the subordinated debentures, unless an event of
default exists under the trust agreement. See "Description of Capital
Securities--Events of Default; Notice."
Consolidation, Merger, Sale of Assets and Other Transactions
The indenture provides that we will not consolidate with or merge into
any other person or convey, transfer or lease all or substantially all of our
properties to any person, and no person shall consolidate with or merge into us
or convey, transfer or lease all or substantially all of its properties to us,
unless:
. in case we consolidate with or merge into another person or
convey or transfer all or substantially all of our properties to
any person, the successor is organized under the laws of the
United States or any state or the District of Columbia, and the
successor expressly assumes our obligations under the indenture
with respect to the subordinated debentures;
. immediately after giving effect to the transaction, no debenture
event of default, and no event which, after notice or lapse of
time or both, would become a debenture event of default, exists;
and
. certain other conditions as prescribed in the indenture are met.
The general provisions of the indenture do not afford holders of the
subordinated debentures protection in the event of a highly leveraged or other
transaction that we may become involved in that may adversely affect holders of
the subordinated debentures.
Satisfaction and Discharge
The indenture provides that when, among other things,
. all subordinated debentures not previously delivered to the
debenture trustee for cancellation have become due and payable or
will become due and payable at maturity or called for prepayment
within one year, and
. we deposit or cause to be deposited with the debenture trustee
funds, in trust, for the purpose and in an amount sufficient to
pay and discharge the entire indebtedness on the subordinated
debentures not previously delivered to the debenture trustee for
cancellation, for the principal and interest (including
compounded interest and additional sums, if any) to the date of
the prepayment or to , 2029, as the case may be,
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then the indenture will cease to be of further effect (except as to our
obligations to pay all other sums due pursuant to the indenture and to provide
the officers' certificates and opinions of counsel), and we will be deemed to
have satisfied and discharged the indenture.
Subordination
We have promised that any subordinated debentures issued under the
indenture will be ranked junior to all senior indebtedness to the extent
provided in the indenture. Upon any payment or distribution of our assets to
creditors upon our liquidation, dissolution, winding up, reorganization,
assignment for the benefit of our creditors, marshaling of our assets or any
bankruptcy, insolvency, debt restructuring or similar proceedings in connection
with any insolvency or bankruptcy proceeding of us, the senior indebtedness must
be paid in full before the holders of the subordinated debentures will be
entitled to receive or retain any payment in respect thereof.
If the maturity of subordinated debentures is accelerated, the holders
of all senior indebtedness outstanding at such time will first be entitled to
receive payment in full of such senior indebtedness before the holders of
subordinated debentures will be entitled to receive or retain any payment in
respect of the principal or interest, if any, on the subordinated debentures.
No payments on account of principal or interest, if any, in respect of
the subordinated debentures may be made if there is a default in any payment
with respect to senior indebtedness, or an event of default exists with respect
to any senior indebtedness that accelerates the maturity of the senior
indebtedness, or if any judicial proceeding shall be pending with respect to the
default.
Indebtedness for money borrowed means any obligation of or any
obligation guaranteed by us, to repay borrowed money, whether or not evidenced
by bonds, debentures, notes or other written instruments; except that
indebtedness for money borrowed does not include trade accounts payable or
accrued liabilities arising in the ordinary course of business.
Indebtedness ranking on a parity with the subordinated debentures
means:
. indebtedness for money borrowed, whether outstanding on the date
the indenture is executed or created, assumed or incurred after
the date that the indenture is executed, to the extent the
indebtedness for money borrowed by its terms ranks equal to and
not prior to the subordinated debentures in the right of payment
upon the happening of our dissolution, winding-up, liquidation or
reorganization and
. all other debt securities, and guarantees in respect of those
debt securities, issued to any trust other than the Trust, or a
trustee of the trust, partnership or other entity affiliated with
us, that is our financing vehicle (a "financing entity"), in
connection with the issuance by the financing entity of equity
securities or other securities guaranteed by us pursuant to an
instrument that ranks equal to, with or junior to the guarantee,
including the guarantee issued with respect to the capital
securities of the Trust. The securing of any indebtedness
otherwise constituting indebtedness ranking on a parity with the
subordinated debentures shall not be deemed to prevent such
indebtedness from constituting indebtedness ranking on a parity
with the subordinated debentures.
Indebtedness ranking junior to the subordinated debentures means any
indebtedness for money borrowed, whether outstanding on the date the indenture
is executed or created, assumed or incurred after the date the indenture is
executed, to the extent the indebtedness for money borrowed by its terms ranks
junior to and not equal to or prior to the subordinated debentures (and any
other
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indebtedness ranking on a parity with the subordinated debentures) in right of
payment upon the happening of our dissolution or winding-up or liquidation or
reorganization. The securing of any indebtedness for money borrowed otherwise
constituting indebtedness ranking junior to the subordinated debentures shall
not be deemed to prevent the indebtedness for money borrowed from constituting
indebtedness ranking junior to the subordinated debentures.
Senior indebtedness means all indebtedness for money borrowed, whether
outstanding on the date the indenture is executed or created, assumed or
incurred after the date the indenture is executed, except indebtedness ranking
on a parity with the subordinated debentures or indebtedness ranking junior to
the subordinated debentures, and any deferrals, renewals or extensions of the
senior indebtedness.
For more information regarding the regulatory limitations applicable
to dividends and other payments by the Bank, you should read "Risk Factors--
Risks related to your investments in the capital securities -- We will depend
primarily on any dividends we may receive from our subsidiaries in making
payments under the subordinated debentures, which could affect the payments made
to you under the capital securities."
Governing Law
The indenture and the subordinated debentures will be governed by and
construed in accordance with the laws of the State of New York, without regard
to conflict of law principles.
Information Concerning the Debenture Trustee
The debenture trustee will have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the Trust
Indenture Act. Subject to these provisions, the debenture trustee is not
obligated to exercise any of the powers vested in it by the indenture at the
request of any holder of subordinated debentures, unless offered reasonable
indemnity by the holder against the costs, expenses and liabilities which might
be incurred thereby. The debenture trustee is not required to expend or risk its
own funds or otherwise incur personal financial liability in the performance of
its duties under the indenture if the debenture trustee reasonably believes that
repayment or adequate indemnity is not reasonably assured to it.
Description of Guarantee
The guarantee will be executed and delivered by us at the same time as
the capital securities. Wilmington Trust Company will act as guarantee trustee
under the guarantee to comply with the Trust Indenture Act. The guarantee will
be qualified as an indenture under the Trust Indenture Act. This summary of the
material provisions of the guarantee is not complete and you should refer to the
guarantee and the Trust Indenture Act for more information. The form of the
guarantee has been filed as an exhibit to the registration statement of which
this prospectus is part. The guarantee trustee will hold the guarantee for the
benefit of the holders of the capital securities.
General
We will irrevocably agree to pay in full on a subordinated basis, to
the extent set forth herein, the payments with respect to the capital securities
to the extent not paid by the Trust. The payments that will be subject to the
guarantee are:
. any accumulated and unpaid distributions required to be paid on
the capital securities, to the extent that the Trust has funds
legally available at that time;
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. the applicable redemption price with respect to the capital
securities called for redemption, to the extent that the Trust
has funds legally available at that time; and
. upon a voluntary or involuntary dissolution, winding-up or
liquidation of the Trust (other than in connection with the
distribution of the subordinated debentures to holders of the
capital securities or the redemption of all capital securities),
the lesser of (a) the liquidation distribution, to the extent the
Trust has funds legally available at that time, and (b) the
amount of assets of the Trust remaining available for
distribution to holders of capital securities after satisfying
the liabilities owed to the Trust's creditors as required by
applicable law.
The guarantee will rank subordinate and junior to all senior
indebtedness to the extent provided in the guarantee. See "--Status of the
Guarantee." Our obligation to make a guarantee payment may be satisfied by our
direct payment of the required amounts to the holders of the capital securities
or by causing the Trust to pay these amounts to the holders of the capital
securities.
The guarantee will be an irrevocable guarantee on a subordinated basis
of the Trust's obligations under the capital securities, but will apply only to
the extent that the Trust has funds sufficient to make these payments. If we do
not make interest payments on the subordinated debentures held by, the Trust
will not be able to pay you distributions on the capital securities and will not
have funds legally available. Please refer to the "Relationship Among the
Capital Securities, the Subordinated Debentures and the Guarantee" section of
this prospectus. The guarantee does not limit us from incurring or issuing other
secured or unsecured debt, including senior indebtedness, whether under the
indenture, any other indenture that we may enter into in the future or
otherwise.
The holders of at least a majority in aggregate liquidation amount of
the capital securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the guarantee trustee in
respect of our guarantee or to direct the exercise of any trust power conferred
upon the guarantee trustee under our guarantee. Any holder of the capital
securities may institute a legal proceeding directly against us to enforce their
rights under the guarantee without first instituting a legal proceeding against
the Trust, the guarantee trustee or any other person or entity.
If we default on our obligation to pay amounts payable under the
subordinated debentures, the Trust will lack funds for the payment of
distributions or amounts payable on redemption of the capital securities or
otherwise, and the holders of the capital securities will not be able to rely
upon the guarantee for payment of such amounts. Instead, if a debenture event of
default exists that is attributable to our failure to pay principal or interest
on the subordinated debentures on a payment date, then any holder of capital
securities may institute a direct action against us pursuant to the terms of the
indenture for enforcement of payment to that holder of the principal or interest
on such subordinated debentures having a principal amount equal to the aggregate
liquidation amount of the capital securities of that holder. In connection with
a direct action, we will have a right of set-off under the indenture to the
extent that we made any payment to the holder of capital securities in the
direct action. Except as described herein, holders of capital securities will
not be able to exercise directly any other remedy available to the holders of
the subordinated debentures or assert directly any other rights in respect of
the subordinated debentures. The trust agreement provides that each holder of
capital securities by accepting the capital securities agrees to the provisions
of the guarantee and the indenture.
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We will, through our guarantee, the trust agreement, the subordinated
debentures and the indenture, taken together, fully, irrevocably and
unconditionally guarantee all of the Trust's obligations under the capital
securities. No single document standing alone, or operating in conjunction with
fewer than all of the other documents, constitutes that guarantee. Only the
combined operation of these documents provides a full, irrevocable and
unconditional guarantee of the Trust's obligations under the capital securities.
You should refer to "Relationship Among the Capital Securities, the Subordinated
Debentures and the Guarantee" for more information about our guarantee.
Status of the Guarantee
Our guarantee will constitute an unsecured obligation and will rank
subordinate and junior to all senior indebtedness in the same manner as the
subordinated debentures. See "Description of Subordinated Debentures--
Subordination." In addition, because we are a savings and loan holding company,
our right to participate in any distribution of the Bank's assets upon the
Bank's liquidation or reorganization or otherwise is subject to the prior claims
of the Bank's creditors (including its depositors), except to the extent we may
be recognized as a creditor of the Bank. Accordingly, our obligations under the
guarantee effectively will be subordinated to all existing and future
liabilities of our present and future subsidiaries (including depositors of the
Bank). As a result, claimants should look only to our assets for payments under
the guarantee. See "Description of Subordinated Debentures--General."
Our guarantee will rank equal to all of our other guarantees with
respect to preferred beneficial interests issued by other trusts. Our guarantee
of the Trust's capital securities does not limit the amount of secured or
unsecured debt, including senior indebtedness, that we or any of our
subsidiaries may incur. We expect from time to time that we will incur
additional indebtedness and that our subsidiaries will also incur additional
liabilities. Our guarantee will constitute a guarantee of payment and not of
collection, enabling the guaranteed party to institute a legal proceeding
directly against us to enforce their rights under the guarantee without first
instituting a legal proceeding against any other person or entity. Our guarantee
will be held for the benefit of the holders of the capital securities. Our
guarantee will not be discharged, except by payment of the guarantee payments in
full to the extent that the Trust has not paid, or upon distribution of the
subordinated debentures to, the holders of the capital securities.
Events of Default
There will be an event of default under the guarantee if we fail to
perform any of our payment or other obligations under the guarantee; except that
with respect to a default in payment of any guarantee payment, we shall have
received notice of default and shall not have cured the default within 60 days
after receipt of the notice. The holders of at least a majority in liquidation
amount of the capital securities will have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the guarantee
trustee in respect of our guarantee or to direct the exercise of any trust or
power conferred upon the guarantee trustee under our guarantee.
Any holder of the capital securities may institute a legal proceeding
directly against us to enforce the rights of the holders of the capital
securities under the guarantee without first instituting a legal proceeding
against the Trust, the guarantee trustee or any other person or entity.
We, as guarantor, will be required to file annually with the guarantee
trustee a certificate regarding our compliance with the applicable conditions
and covenants under our guarantee.
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Amendments and Assignment
Except with respect to any changes that do not materially adversely
affect the rights of holders of the capital securities (in which case no vote
will be required), the guarantee may not be amended without the prior approval
of the holders of a majority of the liquidation amount of such outstanding
capital securities. You should read "Description of Capital Securities--Voting
Rights; Amendment of the Trust Agreement" for more information about the manner
of obtaining the holders' approval. All guarantees and agreements contained in
the guarantee agreement shall bind our successors, assigns, receivers, trustees
and representatives and shall inure to the benefit of the holders of the capital
securities then outstanding.
Termination of the Guarantee
Our guarantee will terminate and be of no further force and effect
upon:
. full payment of the applicable redemption price of all outstanding
capital securities,
. full payment of the liquidation amount payable upon liquidation of the
Trust or
. distribution of subordinated debentures to the holders of the capital
securities.
Our guarantee will continue to be effective or will be reinstated, as
the case may be, if at any time any holder of the capital securities must
restore payment of any sums paid under the capital securities or the guarantee.
Information Concerning the Guarantee Trustee
The Delaware trustee shall act as the guarantee, except if we default
under the guarantee, and will undertake to perform only such duties as are
specifically set forth in the guarantee and, in case a default with respect to
the guarantee has occurred, must exercise the same degree of care and skill as a
prudent person would exercise or use in the conduct of his or her own affairs.
Subject to this provision, the guarantee trustee will not be obligated to
exercise any of the powers vested in it by the guarantee at the request of any
holder of the capital securities unless it is offered reasonable indemnity
against the costs, expenses and liabilities that it might incur.
Governing Law
The guarantee will be governed by and construed in accordance with the
laws of the State of New York, without regard to conflict of law principles.
Relationship among the Capital Securities, the
Subordinated Debentures and the Guarantee
Full and Unconditional Guarantee to the extent that the Trust has Funds Legally
Available to Pay Distributions
We will irrevocably guarantee payments of distributions and other
amounts due on the capital securities to the extent the Trust has funds legally
available to pay distributions as and to the extent set forth under "Description
of Guarantee." Taken together, our obligations under the subordinated
debentures, the indenture, the trust agreement and the guarantee will provide, a
full, irrevocable and unconditional guarantee of the Trust's payments of
distributions and other amounts due on the capital securities. No single
document standing alone or operating in conjunction with
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fewer than all of the other documents constitutes this guarantee. Only the
combined operation of these documents effectively provides a full, irrevocable
and unconditional guarantee of the Trust's obligations under the capital
securities.
If and to the extent that we do not make the required payments on the
subordinated debentures, the Trust will not have sufficient funds to make its
related payments, including distributions on the capital securities. Our
guarantee will not cover any payments when the Trust does not have sufficient
funds legally available to make those payments. Your remedy, as a holder of
capital securities, is to institute a direct action. Our obligations under the
guarantee will be subordinate and junior to all senior indebtedness.
Sufficiency of Payments
As long as we pay the interest and other payments when due on the
subordinated debentures, the Trust will have sufficient funds to cover
distributions and other payments due on the capital securities, primarily
because:
. the aggregate principal amount or prepayment price of the
subordinated debentures will equal the sum of the liquidation
amount or redemption price, as applicable, of the securities;
. the interest rate and interest payment dates and other payment
dates on the subordinated debentures will match the
distribution rate and distribution payment dates and other
payment dates for the capital securities;
. as sponsor, we will pay for all and any costs, expenses and
liabilities of the Trust, except for the Trust's obligations
to holders of capital securities; and
. the trust agreement also provides that the Trust is not
authorized to engage in any activity that is not consistent
with its limited purposes.
Enforcement Rights of Holders of Capital Securities
You, as holder of capital securities, may institute a legal proceeding
directly against us to enforce your rights under our guarantee without first
instituting a legal proceeding against the guarantee trustee, the Trust or any
other person or entity.
A default or event of default under any senior indebtedness would not
constitute a default or event of default under the trust agreement. However, if
there are payment defaults under, or accelerations of, senior indebtedness, the
subordination provisions of the indenture provide that we cannot make payments
in respect of the subordinated debentures until we have paid the senior
indebtedness in full or we have cured any payment default or a payment default
has been waived. Our failure to make required payments on subordinated
debentures would constitute an event of default under the trust agreement.
Limited Purpose of the Trust
The capital securities will represent beneficial interests in the
Trust, and the Trust exists for the sole purpose of issuing and selling the
capital securities, using the proceeds from the sale of the capital securities
to acquire our subordinated debentures and engaging in only those other
activities necessary, advisable or incidental thereto. A principal difference
between the rights of a holder of a capital security and a holder of a
subordinated debenture
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will be entitled to receive from us the principal amount and interest on
subordinated debentures held, while a holder of capital securities is entitled
to receive distributions from the Trust (or, in certain circumstances, from us
under our guarantee) if and to the extent the Trust has funds legally available
to pay the distributions.
Rights Upon Dissolution
Unless the subordinated debentures are distributed to holders of
securities, if the Trust is voluntarily or involuntarily dissolved, wound-up or
liquidated, after satisfying the liabilities owed to the Trust's creditors as
required by applicable law, the holders of the capital securities will be
entitled to receive, out of assets held by the Trust, the liquidation
distribution in cash. See "Description of Capital Securities--Liquidation of the
Trust and Distribution of Subordinated Debentures."
If we are voluntarily or involuntarily liquidated or bankrupted, the
property trustee, as holder of the subordinated debentures, would be one of our
subordinated creditors, subordinated in right of payment to all senior
indebtedness, but entitled to receive payment in full of principal and interest,
before any of our stockholders receive payments or distributions. Since we will
be the guarantor under the guarantee and will agree to pay all costs, expenses
and liabilities of the Trust (other than the Trust's obligations to the holders
of its capital securities), the positions of a holder of capital securities and
a holder of subordinated debentures relative to other creditors and to our
stockholders in the event of our liquidation or bankruptcy are expected to be
substantially the same.
Certain Federal Income Tax Consequences
General
In the opinion of Thacher Proffitt & Wood, special federal income tax
counsel to us and the Trust, the following describes the material United States
federal income tax consequences of the purchase, ownership and disposition of a
capital security.
This summary addresses only the tax consequences to a person that acquires
a capital security on its original issuance at its original issue price and that
holds the security as a capital asset. This summary does not address all tax
consequences that may be applicable to a beneficial owner of a capital security
and does not address the tax consequences to holders subject to special tax
regimes (like banks, thrifts, real estate investment trusts, regulated
investment companies, insurance companies, dealers in securities or currencies,
tax-exempt investors or persons that will hold a capital security as a position
in a "straddle," as part of a "synthetic security" or "hedge" or as part of a
"conversion transaction" or other integrated investment). This summary does not
include any description of any alternative minimum tax consequences or the tax
laws of any state or local government or of any foreign government that may
apply to a capital security. Except as noted below in the discussion of Non-U.S.
Holders, this discussion is addressed to a U.S. Holder, which is defined as a
beneficial owner of a capital security that, for U.S. federal income tax
purposes, is (or is treated as)
(1) a citizen or individual resident of the United States,
(2) a corporation or partnership (or entity treated for federal income tax
purposes as a corporation or partnership) created or organized in or
under the laws of the United States or any political subdivision
thereof,
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(3) an estate the income of which is includible in gross income for U.S.
federal income tax purposes without regard to its source, or
(4) a trust if a court within the United States is able to exercise
primary supervision over the administration of the trust and one or
more U.S. persons have the ability to control all substantial
decisions of the trust.
This summary does not address the tax consequences to any shareholder,
partner or beneficiary of a holder of a capital security. This summary is based
on the Code, Treasury regulations thereunder and the administrative and judicial
interpretations thereof, as of the date hereof, all of which are subject to
change, possibly on a retroactive basis. An opinion of Thacher Proffitt & Wood
is not binding on the Internal Revenue Service (the "IRS") or the courts. No
rulings have been or are expected to be sought from the IRS with respect to any
of the matters described herein. We can give no assurance that the opinions
expressed herein will not be challenged by the IRS or, if challenged, that the
challenge will not be successful.
Classification of the Subordinated Debentures
We intend to take the position that the subordinated debentures will be
classified for U.S. federal income tax purposes as our indebtedness. Thacher
Proffitt & Wood will render its opinion that, under then current law, based on
the representations, facts and assumptions set forth in this prospectus and
certain assumptions and qualifications referenced in the opinion, and assuming
full compliance with the terms of the indenture (and other relevant documents),
the subordinated debentures will be characterized for U.S. federal income tax
purposes as our indebtedness. We, together with the Trust and the holders of the
capital securities (by acceptance of a beneficial interest in a capital
security) will agree to treat the subordinated debentures as our indebtedness
for all U.S. federal income tax purposes. We cannot be sure that this position
will not be challenged by the IRS or, if challenged, that the challenge will not
be successful. The remainder of this discussion assumes that the subordinated
debentures will be classified as our indebtedness for U.S. federal income tax
purposes.
Classification of the Trust
In connection with the issuance of the capital securities, Thacher Proffitt
& Wood will render its opinion that, under then current law and assuming full
compliance with the terms of the trust agreement and the indenture (and certain
other documents), and based on certain facts and assumptions contained in that
opinion, the Trust will not be classified for U.S. federal income tax purposes
as an association taxable as a corporation. Accordingly, for U.S. federal income
tax purposes, the Trust will not be subject to U.S. federal income tax, and each
holder of a capital security will be required to include in its gross income any
interest (or accrued original issue discount) with respect to its allocable
share of the subordinated debentures.
Interest Income and Original Issue Discount
Under the indenture, we have the right to defer the payment of interest on
the subordinated debentures at any time or from time to time for one or more
deferral periods not exceeding 20 consecutive quarterly periods each, provided
that no deferral period shall end on a date other than an interest payment date
or extend beyond , 2029. By reason of that right, the Treasury regulations will
subject the subordinated debentures to the rules in the Code and Treasury
regulations on debt instruments issued with original issue discount (the "OID
Rules"), unless the indenture or subordinated debentures contain terms or
conditions that make the likelihood of exercise of the deferral option remote.
Under the Treasury regulations, a "remote" contingency that
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stated interest will not be timely paid will be ignored in determining whether a
debt instrument is issued with original issue discount. Although there is no
authority directly on point, we believe that the likelihood that we would
exercise our option to defer payments of interest is "remote" since exercising
that option would, among other things, prevent us from declaring dividends on
any class of our equity securities. Accordingly, we intend to take the position
that the subordinated debentures will not be considered to be issued with
original issue discount and, accordingly, stated interest on the subordinated
debentures generally will be taxable to a holder as ordinary income at the time
it is paid or accrued in accordance with such holder's method of accounting.
Under the Treasury regulations, if we were to exercise our option to defer
payments of interest, the subordinated debentures would at that time be treated
as issued with original issue discount, and all stated interest on the
subordinated debentures would thereafter be treated as original issue discount
as long as the subordinated debentures remain outstanding. If this occurred, all
of a holder's interest income with respect to the subordinated debentures would
thereafter be accounted for on an economic accrual basis regardless of such
holder's method of tax accounting, and actual distributions of stated interest
would not be reported as taxable income. Consequently, a holder of a capital
security would be required to include in gross income original issue discount
even though we would not make actual cash payments during a deferral period. The
amount of such includible original issue discount could be significant. Also,
under the Treasury regulations, if the option to defer the payment of interest
were determined not to be "remote," the subordinated debentures would be treated
as having been originally issued with original issue discount. In such event, a
holder would be required to include in gross income an amount of original issue
discount each taxable year that approximates the amount of interest that accrues
on the subordinated debentures at the stated interest rate, regardless of such
holder's method of tax accounting, and actual cash payments of interest on the
subordinated debentures would not be separately includible in gross income.
These Treasury regulations have not yet been addressed in any rulings or other
interpretations by the IRS, and it is possible that the IRS could take a
position contrary to the interpretation described herein.
Because income on the capital securities will constitute interest or
original issue discount, corporate holders of the capital securities will not be
entitled to a dividends-received deduction with respect to any income recognized
with respect to the capital securities.
Receipt of Subordinated Debentures or Cash Upon Liquidation of the Trust
We will have the right at any time to liquidate the Trust and cause the
subordinated debentures to be distributed to the holders of the capital
securities. Under current law, the liquidation of the Trust and the distribution
of the subordinated debentures to trust security holders, for U.S. federal
income tax purposes, would be treated as a nontaxable event to each holder, and
the aggregate tax basis of each holder in the subordinated debentures received
by such holder would be equal to the holder's aggregate tax basis in those
capital securities surrendered. A holder's holding period in the subordinated
debentures received in liquidation of the Trust would be no shorter than the
period during which the capital securities were held by that holder.
The subordinated debentures may be prepaid in cash, and the proceeds of
that prepayment would be distributed to holders in redemption of their capital
securities. Under current law, that redemption would constitute, for U.S.
federal income tax purposes, a taxable disposition of the redeemed capital
securities, the tax consequences of which are described below under "--Sales or
Redemptions of Capital Securities."
Sales or Redemptions of Capital Securities
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On a sale or redemption of a capital security for cash, a holder will
recognize gain or loss equal to the difference between its adjusted tax basis in
the capital security and the amount realized on the sale or redemption of that
capital security. If the rules regarding original issue discount do not apply, a
holder's adjusted basis in a capital security generally will be its initial
purchase price, and if the holder uses an accrual method of accounting, the
holder will have a basis in any accrued but unpaid interest. If the rules
regarding original issue discount apply, a holder's adjusted basis in a capital
security generally will be its initial purchase price increased by any original
issue discount previously included in the holder's gross income to the date of
disposition and decreased by any payments received on the capital security. Gain
or loss recognized on a sale or redemption of a capital security will be capital
gain or loss. Capital gain recognized by an individual in respect of a capital
security held for more than one year as of the date of sale or redemption is
subject to a maximum U.S. federal income tax rate of 20 percent.
The capital securities may trade at a price that discounts any accrued but
unpaid interest on the subordinated debentures. Therefore, the amount realized
by a holder who disposes of a capital security between distribution payment
dates and whose adjusted basis in the capital security has been increased by the
amount of any accrued but unpaid original issue discount (or interest) may be
less than the holder's adjusted basis in the capital security. A holder's basis
in a capital security could be increased either under the rules regarding
original issue discount or, if those rules do not apply, in the case of a holder
that uses an accrual method of accounting, under the accrual accounting rules.
In that case, the holder will recognize a capital loss. Subject to a limited
exception in the case of individual taxpayers, capital losses cannot be applied
to offset ordinary income for U.S. federal income tax purposes.
Non-U.S. Holders
For purposes of this discussion, a "Non-U.S. Holder" generally is any
corporation, individual, partnership, estate or trust that is not a U.S. Holder
for U.S. federal income tax purposes.
Under current U.S. federal income tax laws, subject to the discussion below
of backup withholding, payments by the Trust or any of its paying agents to a
Non-U.S. Holder will not be subject to U.S. federal withholding tax, provided
that (a) the Non-U.S. Holder does not own, actually or constructively, ten
percent or more of the total combined voting power of all classes of our stock
entitled to vote, (b) the Non-U.S. Holder is not a controlled foreign
corporation that is related to us through stock ownership, (c) the Non-U.S.
Holder is not a bank whose receipt of interest on the subordinated debentures is
described in Section 881(c)(3)(A) of the Code, and (d) either (A) the Non-U.S.
Holder certifies to the Trust or its agent, under penalties of perjury, that it
is not a U.S. Holder and provides its name and address or (B) a securities
clearing organization, bank or other financial institution that holds customers?
securities in the ordinary course of business (a "Financial Institution") and
holds the capital security in that capacity certifies to the Trust or its agent,
under penalties of perjury, that the statement has been received from the Non-
U.S. Holder by it or by a Financial Institution between it and the Non-U.S.
Holder and furnishes the Trust or its agent with a copy thereof. New Treasury
regulations provide alternative methods for satisfying the certification
requirements described in clause (1)(d), effective for certain payments made
after December 31, 2000.
If a Non-U.S. Holder is engaged in a trade or business in the United States
and interest on the capital securities (or the subordinated debentures) is
effectively connected with the conduct of that trade or business, the Non-U.S.
Holder, although exempt from the withholding tax discussed above, will be
subject to U.S. federal income tax on that interest on a net income basis in
generally the same manner as if it were a U.S. Holder. In addition, if such Non-
U.S. Holder is a foreign corporation, it may be subject to a branch profits tax
equal to 30% of its effectively connected
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earnings and profits that are repatriated or treated as repatriated. For this
purpose, the interest income would be included in the foreign corporation's
earnings and profits. In the case of a Non-U.S. Holder entitled to the benefits
of a tax treaty with the United States, the foregoing discussion generally
applies only if the Non-U.S. Holder is engaged in business in the United States
through a U.S. permanent establishment and the income on the subordinated
debentures is attributable to that permanent establishment within the meaning of
the treaty, and the rate of the branch profits tax may be limited to a rate
prescribed by the treaty for the withholding of tax on dividends. New final
Treasury regulations generally prescribe new methods for certifying that a Non-
U.S. Holder is exempt from the withholding of U.S. federal income tax by reason
of being engaged in trade or business in the United States.
Any gain recognized upon a sale or other disposition of capital securities
(or subordinated debentures) generally will not be subject to U.S. federal
income tax unless (1) the gain is, or is treated as, effectively connected with
a U.S. trade or business of the Non-U.S. Holder or (2) in the case of a Non-U.S.
Holder who is an individual, that individual is present in the United States for
183 days or more in the taxable year of the sale or other disposition, and
certain other conditions are met.
Backup Withholding Tax and Information Reporting
The amount of interest, including original issue discount, accrued on
capital securities held of record by U.S. persons (other than corporations and
other exempt holders) will be reported to the IRS. "Backup" withholding at a
rate of 31% will apply to payments of interest to non-exempt U.S. persons unless
the holder furnishes its taxpayer identification number in the manner prescribed
in applicable Treasury regulations, certifies that the number is correct,
certifies as to no loss of exemption from backup withholding and meets certain
other conditions.
Payment of the proceeds from the disposition of capital securities to or
through the United States office of a broker is subject to information reporting
and backup withholding unless the holder or beneficial owner establishes an
exemption from information reporting and backup withholding.
Non-U.S. Holders are generally exempt from the information reporting and
backup withholding rules but may be required to comply with certain
certification and identification requirements to prove their exemption.
Any amount withheld from a holder under the backup withholding rules will
be allowed as a refund or a credit against such holder's U.S. federal income tax
liability, provided the required information is furnished to the IRS.
It is anticipated that income on capital securities will be reported to
holders on Form 1099 and mailed to holders of capital securities by January 31
following each calendar year.
THE U.S. FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR
GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S
PARTICULAR SITUATION. YOU SHOULD CONSULT YOUR TAX ADVISER WITH RESPECT TO THE
TAX CONSEQUENCES TO YOU OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF A CAPITAL
SECURITY, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER
TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN U.S. FEDERAL OR OTHER TAX LAWS.
ERISA Considerations
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The primary purpose of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") is to protect the interests of participants in employee
benefit plans by mandating standards of conduct, obligations and
responsibilities for the people who serve as the fiduciaries of these plans. A
person will be considered to be a fiduciary with respect to an employee benefit
plan under ERISA to the extent that he or she exercises discretionary authority
over the management or the investment of the plan's assets. Accordingly, before
investing the assets of an employee benefit plan in capital securities, a
fiduciary will be required to determine whether the investment satisfies the
prudence and diversification requirements of ERISA and whether the investment,
itself, is permitted under the plan's governing documents.
Section 406 of ERISA and Section 4975 of the Code prohibit plans, as well
as individual retirement accounts and Keogh plans subject to Section 4975 of the
Code, from engaging in certain transactions involving "plan assets" with persons
who are "parties-in-interest" under ERISA or "disqualified persons" under the
Code with respect to the plan. Violation of the "prohibited transaction" rules
will result in the imposition of an excise tax or other liabilities on the
"parties-in-interest" or the "disqualified persons," as applicable, unless
exemptive relief is available under a statutory or administrative exemption.
Employee benefit plans that are governmental plans (as defined in Section 3(32)
of ERISA), certain church plans (as defined in Section 3(33) of ERISA) and
foreign plans (as described in Section 4(b)(4) of ERISA) are not subject to the
requirements of ERISA or Section 4975 of the Code; however, governmental plans
may be subject to similar provisions under applicable state laws.
The U.S. Department of Labor has issued special regulations governing
certain investments by employee benefits plans covered by ERISA. These
regulations are known as the "Plan Asset Regulations." Under these Regulations,
the assets of the Trust will be deemed to be the assets of the employee benefit
plan for purposes of ERISA and Section 4975 of the Code if the plan's assets are
used to acquire an equity interest in the Trust and no exception under the Plan
Asset Regulations applies to the transaction. An "equity interest" is defined in
the Plan Asset Regulations to specifically include a beneficial interest in a
trust such as the Trust.
The Plan Asset Regulations do, however, contain certain exceptions to this
general rule. Under one exception, the assets of the Trust will not be deemed to
be the "plan assets" of the investing plans if, at all times, less than 25% of
the value of each class of equity interest in the Trust is held by all employee
benefit plans, including, for this purpose, employee benefit plans not subject
to ERISA or Section 4975 of the Code, such as governmental, church and foreign
plans, and any other plans whose assets qualify as "plan assets" under the Plan
Asset Regulations (collectively, the "Benefit Plan Investors"). Alternatively,
the assets of the Trust will not be deemed to be "plan assets" of the investing
plans if the capital securities constitute "publicly-offered securities" within
the meaning of the Plan Asset Regulations. Potential employee benefit plan
investors should be aware that although these exceptions exist, we cannot give
plan investors any assurance that the capital securities held by Benefit Plan
Investors will be less than 25% of the total value of the capital securities
either at the completion of this offering or at any subsequent time. In
addition, no assurance can be given that the capital securities offered in this
Prospectus constitute "publicly-offered securities" within the meaning of the
Plan Asset Regulations. We will purchase and initially hold all of the common
securities of the Trust.
By operation of the Plan Asset Regulations, certain transactions involving
the Trust and an employee benefit plan may be deemed to constitute direct or
indirect prohibited transactions under ERISA and Section 4975 of the Code. A
direct or indirect prohibited transaction may occur if the assets of the Trust
are deemed to be the "plan assets" of the plan investing in the Trust. For
example, if we were a party- in-interest with respect to a plan (either directly
or by reason of its
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ownership of the Bank or other subsidiaries), an extension of credit between us
and the Trust (as represented by the subordinated debentures and the guarantee)
would occur which is likely to be prohibited by Section 406(a)(1)(B) of ERISA
and Section 4975(c)(1)(B) of the Code, unless exemptive relief is available. In
addition, if we qualify as a fiduciary with respect to the Trust as a result of
certain powers it holds under the Trust Indenture (such as the powers to remove
and replace the property trustee and the administrative trustees), it is
possible that the optional redemption or acceleration of the subordinated
debentures would be considered to be prohibited transactions under Section
406(b) of ERISA and Section 4975(c)(1)(E) of the Code. In order to avoid
engaging in these prohibited transactions, each investing plan, by purchasing
capital securities, will be deemed to have directed the Trust to invest in the
subordinated debentures and to have appointed the property trustee.
The DOL has issued five separate prohibited transaction class exemptions
("PTCEs") that may provide exemptive relief to an employee benefit plan for
direct or indirect prohibited transactions that may arise from the purchase or
holding of the capital securities. The available PTCE's include:
. PTCE 96-23 which may be applicable for certain transactions involving
in-house asset managers;
. PTCE 95-60 which may be applicable for certain transactions involving
insurance company general accounts;
. PTCE 91-38 which may be applicable for certain transactions involving
bank collective investment funds;
. PTCE 90-1 which may be applicable for certain transactions involving
insurance company separate accounts; and
. PTCE 84-14 which may be applicable for certain transactions involving
independent qualified asset managers.
Because the capital securities may be deemed to be equity interests in NHTB
for us of applying ERISA and Section 4975 of the Code, these capital securities
may not be purchased or held by any employee benefit plan ("Plan"), any entity
whose underlying assets include "plan assets" by reason of any plan's investment
in the entity (a "Plan Asset Entity") or any person investing the "plan assets"
of any plan, unless the purchaser or holder is exempt from all of ERISA's
prohibited transaction rules because of the relief provided under one of the
PTCE's identified above or another applicable exemption. Any purchaser or holder
of capital securities (or any interest in such securities) will be deemed to
have represented, through the fact of the purchase and holding of the capital
securities, that the purchaser either (a) is not a Plan or a Plan Asset Entity
and is not purchasing the capital securities on behalf of, or with the "plan
assets" of, any Plan or (b) is exempt from ERISA's prohibited transaction rules
because of the relief provided under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14 or
another applicable exemption. If a Plan or Plan Asset Entity purchases or holds
capital securities and elects to rely on an exemption other than PTCE 96-23, 95-
60, 91-38, 90-1 or 84-14, we, together with the Trust, may require an opinion of
legal counsel or other satisfactory evidence that such exemption is available.
Due to the complexity of these rules and the penalties that may be imposed
on persons involved in non-exempt prohibited transactions, it is critical that
Plan fiduciaries consult with legal counsel regarding the consequences that may
result if the assets of the Trust are deemed to be the "plan assets" of the Plan
by operation of the Plan Asset Regulations and the exemptive relief, described
above, is not available.
66
<PAGE>
Underwriting
Subject to the terms and conditions set forth in the underwriting
agreement, dated , 1999, we, together with the Trust, have agreed that the
Trust will sell to Tucker Anthony Cleary Gull ("Tucker Cleary"), and Tucker
Cleary has agreed to purchase from the Trust, the respective number of capital
securities set forth opposite its name below:
Number of
Capital Securities
------------------
Tucker Anthony Cleary Gull
Total
=========
Under the terms and conditions of the underwriting agreement, Tucker Cleary
is committed to take and pay for all of the capital securities if any are taken.
Tucker Cleary proposes initially to offer the capital securities in part
directly to the public at the initial public offering price set forth on the
cover page of this prospectus. Tucker Cleary also proposes to offer the capital
securities in part to several securities dealers at the initial public offering
price less a concession of no more than $ for each capital security.
Tucker Cleary and dealers may allow and reallow, a concession of no more than $
for each capital security to other brokers and dealers. After the capital
securities are released for sale to the public, the initial public offering
price and other selling terms may from time to time be varied by Tucker Cleary.
Tucker Cleary will not execute any transaction in a discretionary account
without prior approval of the customer.
Because the proceeds from the sale of the capital securities will be used
to purchase our subordinated debentures, the underwriting agreement provides
that we will pay Tucker Cleary compensation for arranging the Trust's investment
in our subordinated debentures of $ for each capital security sold in the
offering.
Prior to the offering, there has been no public market for the capital
securities. Although Tucker Cleary has indicated to us and to the Trust that
they intend to make a market in the capital securities, they are not obligated
to do so and may discontinue any such market-making activities at any time
without notice. No assurance can be given as to the liquidity of the trading
markets for the capital securities.
We, together with the Trust, have agreed to indemnify Tucker Cleary against
certain liabilities, including liabilities under the Securities Act.
Until the distribution of the capital securities is completed, rules of the
SEC may limit the ability of Tucker Cleary to bid for and purchase the capital
securities. As an exception to these rules, Tucker Cleary is permitted to engage
in certain transactions that stabilize the price of the capital securities. Such
transactions consist of bids or purchases for the purpose of pegging, fixing or
maintaining the price of the capital securities.
67
<PAGE>
If Tucker Cleary creates a short position in the capital securities in
connection with the offering, i.e., if it sells a greater aggregate number of
capital securities than is set forth on the cover page of this prospectus,
Tucker Cleary may reduce the short position by purchasing capital securities in
the open market.
Tucker Cleary may also impose a penalty bid on certain selling group
members. This means that if Tucker Cleary purchases shares of capital securities
in the open market to reduce its short position or to stabilize the price of the
capital securities, it may reclaim the amount of the selling concession from the
selling group members who sold those shares as part of the offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.
Neither we nor Tucker Cleary makes any representations or prediction as to
the direction or magnitude of any effect that the transactions described above
may have on the price of the capital securities. In addition, neither we nor
Tucker Cleary makes any representation that Tucker Cleary will engage in such
transactions or that such transactions, once commenced, will not be discontinued
without notice.
During a period of 180 days from the date of this Prospectus, neither the
Trust nor NHTB will, subject to certain exceptions, without the prior written
consent of Tucker Cleary, directly or indirectly, sell, offer to sell, grant any
option for sale of, or otherwise dispose of, any capital securities, any
security convertible into or exchangeable into or exercisable for capital
securities or the subordinated debentures or any debt securities substantially
similar to the subordinated debentures or equity securities substantially
similar to the capital securities (except for the subordinated debentures and
the capital securities offered hereby).
Because the National Association of Securities Dealers, Inc, (the "NASD")
is expected to view the capital securities as interests in a direct
participation program, the offering of the capital securities is being made in
compliance with the applicable provisions of Rule 2810 of the NASD's Conduct
Rules.
It is expected that delivery of the capital securities will be made in
book-entry form only through the facilities of DTC in New York, New York against
payment therefor on or about , 1999, as agreed upon by us, the Trust and
Tucker Cleary in accordance with Rule 15c6-1 under the Exchange Act.
Tucker Cleary or its affiliates have provided from time to time, and expect
to provide in the future, investment services to us and our affiliates, for
which Tucker Cleary or its affiliates have received or will receive customary
fees and commissions.
Legal Matters
Certain legal matters will be passed upon for us by Thacher Proffitt & Wood
and for Tucker Cleary by Sullivan & Worcester LLP. Certain matters relating
to United States federal income tax considerations described in this prospectus
will be passed upon for us by Thacher Proffitt & Wood.
68
<PAGE>
Experts
Our consolidated financial statements as of December 31, 1998 and 1997, and
for each of the years in the three year period ended December 31, 1998,
incorporated in this prospectus by reference, have been incorporated in reliance
upon the report of Shatswell, MacLeod, & Company, P.C., independent auditors,
which is incorporated by reference in this prospectus and upon their authority
as experts in accounting and auditing.
Where you can find more information
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document in our public files
at the SEC's public reference rooms at 450 Fifth Street, N.W., Washington, D.C.
20549 and at the SEC's regional offices at 7 World Trade Center, 13/th/ Floor,
Suite 1300, New York, New York 10048 and Citicorp Center, 500 West Madison
Avenue, Suite 1400, Chicago, Illinois 60661. Please call the SEC at 1-800-SEC-
0330 for further information on the public reference rooms. Our SEC filings are
also available to the public from the SEC's web site at http://www.sec.gov
through the SEC's electronic data gathering, analysis and retrieval system,
EDGAR. Our common stock is listed on the Nasdaq National Market under the symbol
"NHTB." Information about us also is available from the NASD, 1735 K Street,
N.W., Washington, D.C. 20006.
This prospectus is part of a registration statement that we and the Trust
filed with the SEC. Because the SEC allows us to omit parts of the registration
statement from this prospectus, we did not include all the information in the
registration statement in this prospectus. You should review the registration
statement, including the exhibits, for additional information regarding the
Trust, the capital securities and us. The registration statement and its
exhibits may be inspected at the SEC's offices described in the previous
paragraph.
Additional information we have incorporated in the prospectus
The SEC allows us to "incorporate by reference" the information we file
with it, which means that we can disclose important information to you by
referring you to those documents that are considered part of this prospectus.
Information that we file with the SEC after the date of the registration
statement will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings made
with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange
Act of 1934 by us (1) after the date of the filing of our registration statement
and prior to its effectiveness and (2) until our offering of securities has been
completed.
. Annual Report on Form 10-KSB for the year ended December 31, 1998.
. Quarterly Report on Form 10-QSB for the three months ended March 31,
1999.
. Current Report on Form 8-K dated April 27, 1999.
. Definitive Proxy Statement on Schedule 14A dated March 5, 1999.
For your convenience, we have attached a copy of our Annual Report on Form
10-KSB for the year ended December 31, 1998 (without exhibits), and the
Quarterly Report on Form 10-QSB for the three months ended March 31, 1999 to
this prospectus as Appendix A and B. You may obtain a copy of our filings with
the SEC at no cost, by writing or telephoning us at the following address:
69
<PAGE>
New Hampshire Thrift Bancshares, Inc.
Attention: Linda L. Oldham, Secretary
9 Main Street
P.O. Box 9
Newport, NH 03773
(603) 863-0886
You should rely only on the information incorporated by reference or
provided in this prospectus or any supplement. We have not authorized anyone
else to provide you with different information. This prospectus is an offer to
sell only the capital securities referred to in this prospectus, and only under
circumstances and in jurisdictions where it is lawful to do so. The information
contained in this prospectus is current only as of the date of the prospectus.
70
<PAGE>
Appendix A
A COMMITMENT TO TRADITIONAL VALUES
================================================================================
WITH A VISION FOR CONTINUED GROWTH
While we have the technological resources and banking expertise to
effectively serve our customers into the next millennium, we recognize the
importance of maintaining the traditional values established by our forefathers.
Since 1868, we've been committed to serving our customers by offering sound
financial advice and investment strategies to help stimulate personal and
regional growth.
Our success and long-term stability are the result of a commitment to local
residents and businesses. Our underlying philosophy remains as set by our
forefathers...hard work, initiative, perseverance, and one-on-one personal
associations.
A-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Selected Financial Highlights............................................. 3
President's Letter........................................................ 4
Management's Discussion and Analysis...................................... 7
Report of Independent Auditors............................................ 20
Financial Statements...................................................... 21
Notes to Financial Statements............................................. 27
Form 10-KSB............................................................... 47
Board of Directors........................................................ 65
Officers and Managers..................................................... 65
Board of Advisors......................................................... 66
Shareholder Information................................................... 66
Information on Common Stock............................................... 66
</TABLE>
A-2
<PAGE>
_________________________________________________
SELECTED FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE PERIODS ENDED DECEMBER 31, 1998 1997 1996
- --------------------------------------------------------------------------------------------------------------------
($ in thousands, except per share data)
<S> <C> <C> <C>
Net Income $ 3,119 $ 2,771 $ 611
Earnings Per Common Share/1)/ $ 1.49 $ 1.36 $ .36
Earnings Per Common Share, Assuming Dilution/1)/ $ 1.47 $ 1.33 $ .35
Dividends Declared $ .60 $ .50 $ .50
Dividend Payout Ratio 40.27% 36.76% 138.89%
Return on Average Assets .96% .88% .24%
Return on Average Equity 11.76% 11.44% 3.15%
</TABLE>
<TABLE>
<C>
AS OF DECEMBER 31, 1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------------
($ in thousands, except book value data)
<S> <C> <C> <C>
Total Assets $ 323,408 $ 317,989 $ 264,385
Total Deposits $ 282,049 $ 271,227 $ 213,959
Total Securities/(2) $ 54,171 $ 32,167 $ 27,599
Net Loans $ 232,321 $ 255,224 $ 216,003
Federal Home Loan Bank Advances $ - $ 10,246 $ 20,174
Shareholders's Equity/(3) $ 27,780 $ 25,563 $ 19,194
Book Value of Shares Outstanding $ 13.20 $ 12.24 $ 11.26
Average Equity to Average Assets 8.19% 7.67% 7.51%
Shares Outstanding 2,104,285 2,088,097 1,704,982
Number of Branch Locations 12 12 10
</TABLE>
(1) See Note 1 to Consolidated Financial Statements regarding earnings per
share.
(2) Shown at fair value.
(3) See Note 14 to Consolidated Financial Statements regarding the issuance of
common stock.
A-3
<PAGE>
______________________________________________________________________________
PRESIDENT'S LETTER
- -------------------
...a concerted and
- -------------------
continued emphasis
- -------------------
on the "community"
- -------------------
part of community
- -------------------
banking...
- -------------------
1998...our best year ever... brought record earnings to the Bank and
the Company amid a backdrop of an exceptionally high level of residential
mortgage loan production and a resulting rebalancing of our mix of assets. It is
a concerted and continued emphasis on the `community' part of community banking
that has been the enabling factor behind our 1998 results and the focus on our
efforts to further refine our primary business lines.....consumer banking at the
retail level, commercial services for our growing number of small business
customers, and direct access to an associated family of financial products that
include both trust and investment services and, now, life insurance.
RECORD EARNINGS
Consecutive quarterly record earnings throughout the year resulted in
consolidated net income for the year-ended December 31, 1998 of $3,118,750, or
$1.49 per share of common stock. This compares favorably to the net income of
$2,770,932, or $1.36 per share, that was reported for year-end 1997. Net asset
growth, impacted by the substantial volume of secondary-market mortgage loan
production, resulted in total assets at year-end of $323,407,769, as compared to
$317,988,962 at December 31, 1997. While this increase appears particularly
modest, it must be noted that slightly more than $10,000,000 in advances from
the Federal Home Loan Bank of Boston that were part of the 1997 year-end numbers
were retired during 1998. Complete financial details of the year-ended December
31, 1998 are more fully covered in the Management Discussion and Analysis
section that immediately follows this report.
SHAREHOLDER VALUE
Consistent with the generally accepted economic forecast of slower
growth in 1999, the stock market's concerns about the financial services
industry now appears to over-shadow, and discount, financial stocks, with the
market price for the Company's stock ending the year at $15.50 per share.
However, the contribution of net earnings for 1998, after the payment of
dividends, brought about another steady year-end increase to shareholder's
equity from $25,563,125 to $27,779,606 and a book value that rose by $.96, from
$12.24 to $13.20 per share. The fundamental strength of the Company was
acknowledged by the Board of Directors at their January 1999 meeting when the
regular quarterly cash dividend was raised from $.15 to $.16 per share. This
reflects an increase of 6.66% over the most current prior period.
PRIMARY BUSINESS
In responding to the financial performance pressures of margins,
expenses and growth, the Company's operating emphasis must continue to be
focused on the core business lines that are the life-blood of community banking.
The standard products and services that banking customers have come to
expect....checking and savings accounts....mortgage and consumer lending....and
small business lending...must now be complemented by trust services, investment
brokerage and insurance products. As the defining lines between financial
service providers becomes increasingly blurred, community banks find themselves
in an interesting position. The `personal' banking role that has long sustained
the success of our business is being attacked and rewarded at the same time.
Attacked by the very nature of a society that desires to get things the quickest
and easiest way and rewarded by that very same society that continues to
recognize an inherent and continuing value in the more personalized services of
community banks. It is our primary goal to foster and expand our relationship
end-points, and in turn our business, through a dedicated
A-4
<PAGE>
______________________________________________________________________________
PRESIDENT'S LETTER (continued)
commitment to customer service .....responsive, knowledgeable, and professional.
The ability to spread costs and lower efficiency ratios beyond a certain level
is limited at smaller institutions by the dynamics of scale and scope. It
becomes, then, an almost continuous undertaking to identify areas for increased
profitability, refine and implement new pricing strategies, further develop
cross-selling techniques, and broaden the access to funding sources.
CHALLENGES AND OPPORTUNITIES
The demographics of generational change present us with a fast-
changing and highly-competitive business environment. The customer patterns of
the `Traditionalist' generation are far afield from that of the `Baby-Boomers'
and, in-turn, the `Generation X-ers' and `Millennium Kids' that will soon come
into their own as a growing economic force. Priority must be given not just to
customer retention, but also to new customer cultivation and development.
Successfully building financial-service bridges from one generation to the next
will be a major part of our effort going forward. The design and delivery of
products and services to not just meet a financial need, but first attract and
then retain the customer will be essential for the longer-term. From our newest
`Skipper Account' holder (for those under age sixteen) to our more seasoned
depositors with their `Navigator Club' accounts, our energy remains focused on
building customer relationships. Having assembled an effective team of managers
and supervisors, we feel confident that a strong footing has been laid that will
allow us to become ever-more adaptive and flexible without losing sight of the
uniquely-local identity that is so vitally important to community banking.
FUNDAMENTALS AND TECHNOLOGY
Our existing network of branch offices have continued to bring us greater
marketplace presence as we further expanded our commercial lending capabilities
and, at the same time, witnessed an unprecedented volume of residential mortgage
loan production. With a net loan portfolio at year end 1998 down some $20
million over year end 1997, these numbers belie the record level of activity
that resulted in gross loan origination of more than $140 million. In fact,
recent statistics reveal that, in the combined markets we serve, the Bank was
clearly the leading lender for purchase-money mortgages with a substantially
dominant position over both other financial institutions and mortgage companies.
And, as seller/servicer of fixed-rate mortgages for the secondary market, our
off-balance sheet sold loan portfolio grew to nearly $130 million by year end
December 31, 1998. This was truly a remarkable year for our lending team.
Asset quality, despite this record volume, remains high and a
continued emphasis in the areas of audit and compliance are an important part of
our daily operations. The importance of maintaining a concentration of effort in
this area should not be diminished by the current level of generally robust
economic conditions. The economic expansion that blessed the decade of the
1990's can not last forever and, although no significant signs of concern are
yet discernible on the horizon, a measure of caution is not inappropriate as we
embark upon a new decade...a new century...and a new millennium.
With an eye on new products and services...and customer retention...
1998 saw the introduction of debit cards and check imaging. Both part
- ------------------
...building
- ------------------
financial-service
- ------------------
bridges from one
- ------------------
generation to the
- ------------------
next...
A-5
<PAGE>
_______________________________________________________________________________
PRESIDENT'S LETTER (continued)
- --------------------
...the Bank was
- --------------------
clearly the leading
- --------------------
lender for
- --------------------
purchase- money
- --------------------
mortgages... This
- --------------------
was truly a
- --------------------
remarkable year for
- --------------------
our lending team...
of our longer-term strategic technology plan, these were viewed as important
tools that enabled our customers to better access and manage their personal
finances. Future enhancements will await the new year as the issues of Year 2000
preparedness take front-stage across the country. For our part, Year 2000
planning started in 1996 and will continue as an action item for the Bank and
Company right through year end 1999. While the importance of this issue must be
not under-estimated, we have, to date, met all of our major targets and have had
our regulators from the Office of Thrift Supervision conduct both Phase I and
Phase II on-site Year 2000 examinations.
LOOKING AHEAD
As in the past, we continue to be fully committed to the principles of
community banking for the benefit of our customers, our communities and our
shareholders. The underlying value of our banking franchise is comprised of a
balance between a modest growth in assets and a consistent enhancement in
earnings. Our organizational structure and balance sheet mix are designed to
provide safety and soundness over the long-term. We envision future marketplace
expansions that will complement our existing operations and recognize that the
costs of certain near-term investments in both people and technology will result
in greater returns in the years ahead.
IN CLOSING
Failing to make mention of the tremendous effort of all our employees
during the year just past would be a great injustice. We are fortunate to have a
highly dedicated and committed group of professionals working at all levels of
the institution. This has, indeed, been an exceptional year for the Bank and the
Company that simply could not have been accomplished without their loyalty and
support. On behalf of our Board of Directors and management team, we would like
to express our sincere appreciation for the continued confidence that is
evidenced by customers and shareholders alike. It is our mission to provide
exceptional banking services of the highest quality.....both now and in the
future.... for the benefit of all our constituencies.
/s/ Stephen W. Ensign
Stephen W. Ensign
Vice Chairman of the Board,
President and Chief Executive Officer
A-6
<PAGE>
-----------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
GENERAL
New Hampshire Thrift Bancshares, Inc.'s (the "Company") profitability is
derived from its only subsidiary, Lake Sunapee Bank, fsb (the "Bank"). The
Bank's earnings are primarily generated from the difference between the yield on
its loans and investments and the cost of its deposit accounts and borrowings.
Loan origination fees, retail banking service fees, and gains on security
transactions supplement these core earnings.
In 1998, the Company earned $3,118,750, or $1.47 per common share, assuming
dilution, compared to $2,770,932, or $1.33 per common share, assuming dilution,
in 1997. The increase in earnings can be primarily attributed to the overall
increase in loan production, an increase in investment securities, and a
decrease in advances from the Federal Home Loan Bank. In 1998, the Bank
originated a record $142 million in loans. Favorable interest rates coupled with
a dedicated loan origination team and support staff allowed existing and new
customers to refinance or seek new funding more easily. The Bank sells fixed
rate loans into the secondary market and retains the servicing. As a result,
fees from loan originations, mortgage servicing rights, and gains on the sale of
loans increased 19.93%. The increase in investment securities resulted from a
strategy implemented to offset the decrease in interest earned on loans. In
addition, during 1998, the Bank was able to prepay all of its FHLB advances. By
increasing the interest earned on investment securities and decreasing its
interest expense on advances, net interest income increased 2.76%.
YEAR 2000
Many companies continue to undertake projects to address the Year 2000
(Y2K). Companies must determine potential costs and uncertainties based on a
number of factors, including its software and hardware and the nature of its
business. Companies must also coordinate with other entities with which they do
business. Lake Sunapee Bank, through its technology committee and an outside
consultant, has implemented many hardware and software changes in 1998, in an
effort to become Y2K compliant. During 1998, the Bank installed a new data
processing mainframe computer, upgraded its mainframe software, and installed a
new proof of deposit and check imaging system. All of these Y2K compliant
systems have been in operation throughout most of 1998.
Y2K testing has been on going and will continue throughout 1999. Based on a
review of internal practices and communications with third party processors, the
Bank does not expect to encounter significant difficulties in connection with
the transition to the Year 2000. The status of the Bank's `Year 2000 Action
Plan' is reported to its Board of Directors monthly. A $50,000 annual provision
has been established to cover Y2K related expenses. In conjunction with the
`Action Plan', the Bank has developed a `Business Continuity Plan'. This Plan is
designed to allow the Bank to operate should a system it relies on fail. As part
of the `Business Continuity Plan', the Bank has arranged for power generators
and designed a manual accounting system. It is unlikely the Bank will need to
utilize these systems, but nevertheless, they are being developed and tested.
The Bank is subject to regulatory review concerning the Year 2000 from its
primary regulator, The Office of Thrift Supervision (OTS). The Bank has been
examined twice as part of the OTS's program to ensure Y2K compliance.
In addition, monitoring and managing the year 2000 project has and will
likely continue to result in additional direct and indirect costs to the Bank.
Direct costs include potential charges by third party software vendors for
product enhancements, costs involved in testing software for year 2000
compliance, and any resulting costs for developing and implementing contingency
plans for critical software products not enhanced. Indirect costs will
principally consist of the time devoted by existing employees in monitoring
software vendor progress, testing enhanced software products and implementing
necessary contingency plans. Both direct and indirect costs of addressing the
Year 2000 Issue will be charged to earnings incurred. Such costs have not been
material to date.
FINANCIAL CONDITION
Total assets increased by $5,418,807, or 1.70% from $317,988,962 to
$323,407,769. The increase in total assets resulted primarily from an increase
in investment securities and federal funds sold. Total loans decreased from
$259,060,873 to $239,116,440, or 7.70%. The decrease in loans is primarily
attributed to a change in the mix of the Bank's loan portfolio. As interest
rates fell during 1998, many consumers refinanced their loans into fixed rate
instruments. In order to protect against interest rate risk, the Bank
A-7
<PAGE>
------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
sells fixed rate loans into the secondary market, retaining the servicing. To
offset the decrease in loans, the Bank invested proceeds from the sale of loans
into corporate bonds and government agency securities. As mentioned, this
practice also enabled the Bank to maintain its interest rate spread. The table
on page 16 illustrates the maturities of the loan portfolio at December 31,
1998. Real estate loans decreased by $17,569,384, or 8.37% from $209,951,326 to
$192,381,942. The net level of loans sold into the secondary market increased by
approximately $60 million. At December 31, 1998, the Bank had approximately $130
million in its servicing portfolio. The Bank expects to continue to sell fixed
rate loans into the secondary market in order to manage interest rate risk.
Adjustable rate mortgages comprise approximately 80% of the Bank's real
estate mortgage loan portfolio. This is consistent with prior years.
Total investment securities increased by $21,722,129, or 67.81% from
$32,033,122 to $53,755,251 (at amortized cost). As mentioned, the Bank used
proceeds from the sale of loans to purchase investment securities. This strategy
provided an increase in interest and dividends on investment of $1,067,737,
which primarily offset the $1,190,531 decrease in interest on loans. The Bank's
net unrealized gain of $415,501 at December 31, 1998 compares to $134,112 for
the same period in 1997. This change of $281,389 in market value reflects the
decrease in interest rates during 1998 and the resultant rise in bond values.
Real estate owned and property acquired in settlement of loans
increased by a net $154,000, or 29.84% to $670,153. The total reflects $315,153,
or 47.03% in market value for the remaining five lots at Blye Hill Landing in
Newbury, NH. During 1998, six real estate owned properties totaling $163,076, in
carrying value, were sold.
Deposits increased by $10,822,196, or 3.99% to $282,049,156 from
$271,226,960. During 1998, the Bank introduced the Navigator Club. Customers
with combined account balances of $5,000 or more are eligible to join. During
1998, the Bank opened approximately 1,500 of these accounts. Customers also took
advantage of the Bank's favorable Money Market Deposit Account interest rate. As
a result, this account increased 15% to approximately $27 million. During 1998,
Certificates of Deposit (CDs) decreased $12,000,676 from $133,097,650 to
$121,096,974. The decrease was primarily attributed to the maturity of brokered
and non-personal CD's that were acquired from Landmark Bank during 1997. Lake
Sunapee Bank elected not to renew these high costing brokered deposits. In
addition, 1998 was the final year for the `Apple' CD program the Bank offered 10
years ago. Still, many customers continued to place funds in CDs, with CDs
comprising 42.93% of total deposits versus 49.07% last year.
Advances from the Federal Home Loan Bank (FHLB) decreased by
$10,246,318, or 100.00% as the Bank used its increase in deposits and repurchase
agreements to prepay its FHLB advances in order to reduce interest expense.
Repurchase agreements increased $3,455,924 as businesses sought investment
alternatives through the Bank. The Bank was able to fund its loan production
through its growth in deposits and repurchase agreements.
LIQUIDITY AND CAPITAL RESOURCES
The Bank is required by its regulator, the OTS, to maintain a 4% ratio
of liquid assets to net withdrawable funds. At year-end 1998, the Bank's ratio
of 12.88% exceeded regulatory requirements for long-term liquidity.
The Bank's source of funds comes primarily from net deposit inflows,
loan amortizations, principal pay downs from loans, sold loan proceeds, and
advances from the FHLB. At December 31, 1998, the Bank had approximately $96
million in additional borrowing capacity from the FHLB.
At December 31, 1998, the Company's shareholders' equity totaled
$27,779,606, or 8.59% of total assets, compared to $25,563,125, or 8.04% at
year-end 1997. The increase of $2,216,481 reflects net income of $3,118,750, the
payment of $1,257,015 in common stock dividends, the cashless exchange of 4,650
shares of stock at an amount of $73,975, the exercise of 20,780 stock options in
the amount of $41,535, a gain of $156,406 on the sale of treasury stock, a tax
benefit on stock options of $58,064, and the change of $172,716 in net
unrealized holding gains on securities classified as available-for-sale. As
interest rates continued to move downward throughout 1998, the Bank's bond
portfolio increased in value.
During 1998, the Bank upstreamed $500,000 to its parent company New
Hampshire Thrift Bancshares, Inc. (NHTB). The purpose of the upstream was to
help offset the payment of dividends to NHTB shareholders.
A-8
<PAGE>
------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Net cash provided by operating activities increased $378,035 to
$3,225,318 in 1998 from $2,847,283 in 1997. The change in gains and losses on
other investments and deferred taxes accounted for the majority of the change.
Net cash flows used in investing activities decreased by $1,109,552
from negative $3,955,691 in 1997 to negative $2,846,139 in 1998. The change in
net cash flows used for securities activity of $18,787,981 was offset by a
decrease in loans held in portfolio of $19,847,490.
In 1998, net cash provided by financing activities was $2,598,753
compared to $3,412,285 in 1997. During 1998, the Bank made principal payments on
FHLB advances of $10,246,318 bringing the balance in FHLB advances to zero. Time
deposits decreased $12,000,676. The Bank was able to repay all of its FHLB
advances and cover its outflow of certificates of deposit by using cash inflows
of $26,278,796 provided by an increase in other deposits and repurchase
agreements.
The Bank expects to be able to fund loan demand and other investing
during 1999 by continuing to use funds provided from customer deposits, as well
as the FHLB's advance program. Management is not aware of any trends, events, or
uncertainties that will have or that are reasonably likely to have a material
effect in the Company's liquidity, capital resources or results of operations.
The Bank is required to maintain tangible, Tier I core, and risk-based
capital ratios of 1.50%, 3.00%, and 8.00%, respectively. As of December 31,
1998, the Bank's ratios were 7.31%, 7.31%, and 12.63%, respectively, well in
excess of the regulators' requirements.
Book value per share was $13.20 at December 31, 1998 versus $12.24 per
share at December 31, 1997. The change in the market value of the Bank's
investment security portfolio and the increase in paid-in capital and retained
earnings provided the increase in book value per share.
IMPACT OF INFLATION
The financial statements and related data presented elsewhere herein
are prepared in accordance with generally accepted accounting principles (GAAP)
which require the measurement of the Company's financial position and operating
results generally in terms of historical dollars and current market value, for
certain loans and investments, without considering changes in the relative
purchasing power of money over time due to inflation. The impact of inflation is
reflected in the increased cost of operations.
Unlike other companies, nearly all of the assets and liabilities of a
bank are monetary in nature. As a result, interest rates have a far greater
impact on a bank's performance than the effects of the general level of
inflation. Interest rates do not necessarily move in the same direction or to
the same extent as the price of goods and services, since such prices are
affected by inflation. In the current interest rate environment, liquidity and
the maturity structure of the Bank's assets and liabilities are important to the
maintenance of acceptable performance levels.
INTEREST RATE SENSITIVITY
The principal objective of the Bank's interest rate management function
is to evaluate the interest rate risk inherent in certain balance sheet accounts
and determine the appropriate level of risk given the Bank's business
strategies, operating environment, capital and liquidity requirements and
performance objectives and to manage the risk consistent with the Board of
Director's approved guidelines. The Bank's Board of Directors has established an
Asset/Liability Committee (ALCO) to review its asset/liability policies and
interest rate position monthly. Trends and interest rate positions are reported
to the Board of Directors quarterly.
Gap analysis is used to examine the extent to which assets and
liabilities are "rate sensitive". An assets or liability is said to be interest
rate sensitive within a specific time-period if it will mature or reprice within
that time. The interest rate sensitivity gap is defined as the difference
between the amount of interest-earning assets maturing or repricing within a
specified period of time and the amount of interest-bearing liabilities maturing
or repricing within the same specified period of time. The strategy of matching
rate sensitive assets with similar liabilities stabilizes profitability during
periods of interest rate fluctuations.
The Bank's one-year gap at December 31, 1998, was - 6.78%, (see the
table on page 11) compared to the December 31, 1997 gap of -7.28%. The Bank
continues to offer adjustable rate mortgages, which reprice at one, three, and
five-year intervals. In addition, the Bank sells fixed-rate mortgages into the
secondary market in order to minimize interest rate risk.
A-9
<PAGE>
------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
The Bank's gap, of approximately negative seven percent at December 31,
1998, means net interest income would increase if interest rates trended
downward. The opposite would occur if interest rates were to rise. Management
feels that maintaining the gap within ten points of the parity line provides
adequate protection against severe interest rate swings. In an effort to
maintain the gap within ten points of parity, the Bank may utilize the Federal
Home Loan Bank advance program to control the repricing of a segment of
liabilities.
As another part of its interest rate risk analysis, the Bank uses an
interest rate sensitivity model, which generates estimates of the change in the
Bank's net portfolio value (NPV) over a range of interest rate scenarios (see
the table on page 11). The OTS produces the data quarterly using its own model
and data submitted by the Bank.
NPV is the present value of expected cash flows from assets,
liabilities and off-balance sheet contracts. The NPV ratio, under any rate
scenario, is defined as the NPV in that scenario divided by the market value of
assets in the same scenario. Modeling changes requires making certain
assumptions, which may or may not reflect the manner in which actual yields and
costs respond to the changes in market interest rates. In this regard, the NPV
model assumes that the composition of the Bank's interest sensitive assets and
liabilities existing at the beginning of a period remain constant over the
period being measured and that a particular change in interest rates is
reflected uniformly across the yield curve. Accordingly, although the NPV
measurements and net interest income models provide an indication of the Bank's
interest rate risk exposure at a particular point in time, such measurements are
not intended to and do not provide a precise forecast of the effect of changes
in market rates on the Bank's net interest income and will likely differ from
actual results.
RESULTS OF OPERATIONS
NET INTEREST INCOME
Net interest income for the year ended December 31, 1998 increased by
$297,542, or 2.76%, to $11,078,822. This increase can be primarily attributed to
the decrease in interest expense on FHLB advances and the increased volume in
the Bank's investment portfolio.
Total interest income decreased by $122,794, or .53%, the decrease is
primarily related to the change in interest rates. Interest on loans decreased
$1,190,531 while interest and dividends on investments increased $1,067,737.
During 1998, the Bank's yield on interest earning assets decreased to 7.75% from
7.97% in 1997.
Total interest expense decreased $420,336, or 3.33%, with 129.21%
attributed to a volume related decrease in interest expense on borrowings. The
Bank's overall cost of funds decreased from 4.54% to 4.32% in 1998. The Bank's
average deposits as a percentage of total interest bearing liabilities increased
from 91.89% in 1997 to 93.22% in 1998. Total deposit costs in 1998 were 4.29%
versus 4.46% in 1997. This decrease was a result of lower balances in higher
costing instruments. As mentioned above, the Bank elected not to renew the
brokered CD's acquired from Landmark Bank, which matured in January of 1998.
FHLB advances typically are higher costing funding instruments. In an effort to
reduce the Bank's overall cost of funds, the Bank repaid all of its outstanding
advances as of December 31, 1998. During 1998, the Bank's cost of advances
decreased from 5.90% to 5.53%.
The Bank's interest rate spread, which represents the difference
between the weighted average yield on interest-earning assets and the weighted
average cost of interest-bearing liabilities, was 3.43% for both 1998 and 1997.
The Bank's net interest margin, representing net interest income as a percentage
of average interest-earning assets, increased slightly to 3.69% from 3.67%.
------------------------------------------------------------
The following table sets forth the average yield on loans and investments, the
average interest rate paid on deposits and borrowings, the interest rate spread,
and the net interest rate margin:
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Yield on loans 8.13% 8.20% 7.86% 7.71% 7.10%
Yield on investment securities 6.03% 6.23% 6.35% 6.53% 6.14%
Combined yield on loans and investments 7.75% 7.97% 7.67% 7.58% 7.00%
Cost of deposits 4.29% 4.46% 4.36% 4.27% 3.63%
Cost of other borrowed funds 5.53% 5.90% 5.86% 6.42% 4.29%
Combined cost of deposits and borrowings 4.32% 4.54% 4.54% 4.50% 3.67%
Interest rate spread 3.43% 3.43% 3.13% 3.08% 3.33%
Net interest margin 3.69% 3.67% 3.44% 3.42% 3.61%
</TABLE>
The following table shows the Bank's interest rate sensitivity (gap) table at
December 31, 1998:
A-10
<PAGE>
------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
<TABLE>
<CAPTION>
0-3 3-6 6 MONTHS- 1-3 BEYOND
MONTHS MONTHS 1 YEAR YEARS 3 YEARS TOTAL
---------------------------------------------------------------------------------------------------
($ in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest earning assets:
Loans/(1)/ $ 24,659 $ 24,652 $ 51,288 $ 86,922 $ 49,745 $ 237,266
Investments and federal
funds sold 15,667 4,636 7,087 17,522 16,842 61,754
---------------------------------------------------------------------------------------------------
Total 40,326 29,288 58,375 104,444 66,587 299,020
---------------------------------------------------------------------------------------------------
Interest bearing liabilities:
Deposits 53,596 39,414 43,403 72,475 56,640 265,528
Repurchase agreements 11,849 - - - - 11,849
Borrowings - - - - - -
---------------------------------------------------------------------------------------------------
Total 65,445 39,414 43,403 72,475 56,640 277,377
---------------------------------------------------------------------------------------------------
Period sensitivity gap (25,119) (10,126) 14,972 31,969 9,947 21,643
Cumulative sensitivity gap $ (25,119) $ (35,245) $ (20,273) $ 11,696 $ 21,643
Cumulative sensitivity gap as a percentage
of interest-earning assets -8.40% -11.79% -6.78% 3.91% 7.24%
</TABLE>
Note: The Bank has used industry decay formulae in establishing repricing
periods for savings and NOW accounts.
(1) Excludes non accrual loans
The following table sets forth the Bank's NPV as of September 30, 1998 (the
latest NPV analysis prepared by the OTS), as calculated by the OTS.
<TABLE>
<CAPTION>
Change Net Portfolio Value NPV as % of PV Assets
in Rates $ Amount $ Change % Change NPV Ratio Change
- ---------------------- -------------------------------------------------- ----------------------------
<S> <C> <C> <C> <C> <C>
+400 bp.......... 21,300 - 7,706 -27% 6.59% -211 bp
+300 bp.......... 24,350 - 4,655 -16% 7.46% -125 bp
+200 bp.......... 26,727 - 2,278 - 8% 8.11% - 60 bp
+100 bp.......... 28,221 - 785 - 3% 8.51% - 20 bp
0 bp.......... 29,006 -- -- 8.71% --
- 100 bp.......... 29,712 706 + 2% 8.88% + 17 bp
- 200 bp.......... 30,987 1,982 + 7% 9.20% + 49 bp
- 300 bp.......... 33,492 4,486 +15% 9.84% +114 bp
- 400 bp.......... 36,682 7,676 +26% 10.65% +195 bp
</TABLE>
A-11
<PAGE>
_______________________________________________
MANAGEMENT'S DISCUSSION AND ANALSIS (continued)
The following table presents, for the periods indicated, the total dollar amount
of interest income from interest earning assets and the resultant yields as well
as the interest paid on interest bearing liabilities, and the resultant costs:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 1998 1997 1996
------------------------------ --------------------------------- ---------------------------------
AVERAGE/(1)/ YIELD/ AVERAGE/(1)/ YIELD/ AVERAGE/(1)/ YIELD/
BALANCE INTEREST COST BALANCE INTEREST COST BALANCE INTEREST COST
-------------------------------------- -------------------------------- --------------------------------
($ in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Interest earning assets:
Loans/(2)/ $ 246,373 $ 20,023 8.13% $ 258,704 $ 21,214 8.20% $ 213,473 $ 16,776 7.86%
Investment securities and
other/(3)/ 53,732 3,240 6.03% 34,841 2,172 6.23% 30,348 1,928 6.35%
----------------------- ----------------------- -------------------------
Total interest earning
Assets 300,105 23,263 7.75% 293,545 23,386 7.97% 243,821 18,704 7.67%
----------------------- ----------------------- -------------------------
Non-interest earning assets
Cash 8,283 7,766 5,964
Other non-interest earning
assets/(4)/ 15,437 14,537 8,425
------------- ------------ --------------
Total non-interest earning
Assets 23,720 22,303 14,389
------------- ------------
Total $ 323,825 $ 315,848 $ 258,210
============= ============ ==============
Liabilities and Shareholders' Equity
Interest bearing liabilities:
Savings deposits $ 136,137 $ 3,233 2.37% $ 119,911 $ 3,159 2.63% $ 96,062 $ 2,607 2.71%
Time deposits 127,065 7,978 6.28% 135,224 8,214 6.07% 98,248 5,877 5.98%
Repurchase agreements 12,775 621 4.86% 5,989 257 4.29% 4,922 203 4.12%
Other borrowed funds 6,365 352 5.53% 16,535 975 5.90% 27,960 1,638 5.86%
----------------------- ----------------------- -------------------------
Total interest bearing
Liabilities 282,342 12,184 4.32% 277,659 12,605 4.54% 227,192 10,325 4.54%
----------------------- ----------------------- -------------------------
Non-interest bearing
Liabilities:
Demand deposits 11,672 10,406 6,983
Other 3,285 3,555 4,656
------------- ------------ --------------
Total non-interest bearing
Liabilities 14,957 13,961 11,639
------------- ------------ --------------
Shareholders' equity 26,526 24,228 19,379
------------- ------------
Total $ 323,825 $ 315,848 $ 258,210
============= ============ ==============
Net interest rate spread $ 11,079 3.44% $ 10,781 3.43% $ 8,379 3.13%
===================== =================== ====================
Net interest margin 3.69% 3.67% 3.44%
=========== =========== ==========
Ratio of interest-earning assets
to interest bearing
liabilities 106.29% 105.72% 107.32%
=========== =========== ==========
</TABLE>
/(1)/ Monthly average balances have been used for all periods. Management does
not believe that the use of month-end balances instead of daily average balances
caused any material difference in the information presented.
/(2)/ Loans include 90-day delinquent loans, which have been placed on a
non-accruing status. Management does not believe that including the 90-day
delinquent loans in loans caused any material difference in the information
presented.
/(3)/ Investment securities and other includes tax-exempt investment securities.
Management does not believe that including tax-exempt investment securities in
investment securities and other caused any material difference in the
information presented.
/(4)/ Other non-interest earning assets includes non-earning assets and real
estate owned.
A-12
<PAGE>
_______________________________________________
MANAGEMENT'S DISCUSSION AND ANALSIS (continued)
The following table sets forth, for the periods indicated, a summary of the
changes in interest earned and interest paid resulting from changes in volume
and rates. The net change attributable to changes in both volume and rate, which
cannot be segregated, has been allocated proportionately to the change due to
volume and the change due to rate.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 VS. 1997
INCREASE (DECREASE)
DUE TO
VOLUME RATE TOTAL
----------------------------------------
($ in thousands)
<S> <C> <C> <C>
Interest income on loans $ (1,157) $ (34) $ (1,191)
Interest income on investments 1,178 (110) 1,068
---------------------------------------------
Total interest income 21 (144) (123)
---------------------------------------------
Interest expense on savings deposits 252 (178) 74
Interest expense on time deposits (371) 135 (236)
Interest expense on repurchase agreements 312 52 364
Interest expense on borrowings (805) 183 (622)
---------------------------------------------
Total interest expense (612) 192 (420)
---------------------------------------------
Net interest income $ 633 $ (336) $ 297
---------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 VS. 1996
INCREASE (DECREASE)
DUE TO
VOLUME RATE TOTAL
----------------------------------------
($ in thousands)
<S> <C> <C> <C>
Interest income on loans $ 4,140 $ 298 $ 4,438
Interest income on investments 237 7 244
---------------------------------------------
Total interest income 4,377 305 4,682
---------------------------------------------
Interest expense on savings deposits 542 9 551
Interest expense on time deposits 2,784 (446) 2,338
Interest expense on repurchase agreements 297 (243) 54
Interest expense on borrowings (591) (72) (663)
---------------------------------------------
Total interest expense 3,032 (752) 2,280
---------------------------------------------
Net interest income $ 1,345 $ 1,057 $ 2,402
---------------------------------------------
</TABLE>
A-13
<PAGE>
_______________________________________________
MANAGEMENT'S DISCUSSION AND ANALSIS (continued)
PROVISION FOR LOAN LOSSES
The Bank considers many factors in determining the allowance for loan
losses. These include the risk and size characteristics of loans, the prior
years' loss experience, the levels of delinquencies, the prevailing economic
conditions, the number of foreclosures, unemployment rates, interest rates, and
the value of collateral securing the loans. No changes were made to the Bank's
procedures with respect to maintaining the loan loss allowances as a result of
any regulatory examinations.
Additionally, the Bank's commercial loan officers review the financial
condition of commercial loan customers on a monthly basis and perform visual
inspections of facilities and inventories. The Bank also has an internal audit
and compliance program. Results of the audit and compliance programs are
reported directly to the Audit Committee of the Bank's Board of Directors.
The allowance for loan losses at December 31, 1998 was $3,117,068,
compared to $3,061,451 at year-end 1997. The allowance in 1998 includes
$2,731,374 in general reserves as compared to $2,783,484 in 1997. During 1998,
the Bank had net charge-offs of $112,726 compared to $879,340 in 1997. Due to
the general improvement of the quality of the loan portfolio and a reduction in
risk, the provision for loan losses was reduced by $812,304 to $120,167 in 1998
from $932,471 in 1997. In addition, net charged-off loans during 1998 amounted
to 0.03% of average loans, as compared to 0.35% in 1997. The allowance
represented 1.30% of total loans at year-end 1998 versus 1.18% at year-end 1997.
The allowance for loan losses as a percentage of total non-performing
assets was 115.82% at December 31, 1998 compared to 171.40% at December 31,
1997. Please refer to Note 4 "Loans receivable", in the Consolidated Financial
Statements for information regarding SFAS No. 114 and 118.
Loans classified for regulatory purposes as loss, doubtful,
substandard or special mention do not result from trends or uncertainties which
the Bank reasonably expects will materially impact future operating results,
liquidity, or capital resources.
As of December 31, 1998 there were no other loans not included in the
tables below or discussed above where known information about the possible
credit problems of borrowers caused management to have doubts as to the ability
of the borrower to comply with present loan repayment terms and which may result
in disclosure of such loans in the future.
Total classified loans, excluding special mention, as of December 31,
1998 and 1997 were $5,356,046 and $4,859,402, respectively. Total non-performing
assets amounted to $2,691,366 and $1,786,107 for the respective years. As of
December 31, 1998, non-earning assets includes impaired loans. At December 31,
1998, loans classified as 90-day delinquent were $170,999 compared to $691,567
at December 31, 1997.
------------------------------------
The following table sets forth the breakdown of non-performing assets:
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
90 day delinquent loans/(1)/ $ 170,999 $ 691,567 $ 787,930 $ 1,144,293 $ 23,825
Non-earning assets/(2)/ 1,850,214 578,387 848,942 297,172 1,692,608
Real estate owned 670,153 516,153 707,026 984,185 1,504,880
----------------------------------------------------------------------------------------
Total non-performing assets $ 2,691,366 $ 1,786,107 $ 2,343,898 $ 2,425,650 $ 3,221,313
========================================================================================
Troubled debt restructured $ 114,110 $ 297,926 $ N/A $ 445,417 $ 2,337,058
========================================================================================
Impaired loans $ 1,850,214 $ 1,942,320 $ 1,188,183 $ N/A $ N/A
========================================================================================
</TABLE>
/(1)/ All loans 90 days or more delinquent are placed on a non-accruing status.
/(2)/ Loans considered to be uncollectible, pending foreclosure, or in
bankruptcy proceeding, are classified as impaired.
A-14
<PAGE>
_______________________________________________
MANAGEMENT'S DISCUSSION AND ANALSIS (continued)
The following table sets forth 90 day delinquent loans by category:
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Real estate loans -
Conventional $ 136,699 $ 679,356 $ 723,595 $ 1,132,475 $
Construction 23,825
Consumer loans 4,300 11,347 64,335 3,983
Commercial and municipal loans 30,000 636 7,835
Other loans 228
-------------------------------------------------------------------------------------------
Total $ 170,999 $ 691,567 $ 787,930 $ 1,144,293 $ 23,825
===========================================================================================
</TABLE>
The following table sets forth the allocation of the loan loss valuation
allowance and the percentage of loans in each category to total loans as of
December 31:
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate loans -
Conventional $ 1,473,248 79% $ 1,561,632 80% $ 1,603,860 84% $ 687,547 83% $ 726,959 81%
Construction 122,587 2% 111,604 1% 83,750 201,257 1,598,266 2%
Collateral and
consumer loans 68,283 11% 59,225 11% 36,873 12% 8,067 12% 5,464 12%
Commercial and
municipal loans 1,007,256 8% 1,006,335 8% 294,034 4% 276,526 4% 422,196 4%
Impaired loans 385,694 322,655 139,509 654,663 1%
Other 60,000 1%
-----------------------------------------------------------------------------------------------------------
Valuation allowance $ 3,117,068 100% $ 3,061,451 100% $ 2,158,026 100% $ 1,828,060 100% $ 2,752,885 100%
===========================================================================================================
Valuation allowance
as a percentage of
total loans 1.30% 1.18% .98% .87% 1.38%
===========================================================================================================
</TABLE>
A-15
<PAGE>
________________________________________________
MANAGEMENTS'S DISCUSSION AND ANALYSIS (continued)
The following sets forth the maturities of the loan portfolio at December 31,
1998:
<TABLE>
<CAPTION>
ONE YEAR ONE THRU OVER
MATURITIES: OR LESS FIVE YEARS FIVE YEARS TOTAL
<S> <C> <C> <C> <C>
Real Estate Loans - $ 11,312,719 $ 26,672,876 $ 154,396,347 $ 192,381,942
------------------------------------------------------------------------------
Real Estate Loans with:
Predetermined interest rates 2,274,117 6,718,958 26,498,852 35,491,927
Adjustable interest rates 9,038,602 19,953,918 127,897,495 156,890,015
------------------------------------------------------------------------------
11,312,719 26,672,876 154,396,347 192,381,942
------------------------------------------------------------------------------
Collateral Loans - 11,323,445 5,692,281 3,319,704 20,335,430
------------------------------------------------------------------------------
Collateral Loans with:
Predetermined interest rates 10,200,594 3,915,236 828,940 14,944,770
Adjustable interest rates 1,122,851 1,777,045 2,490,764 5,390,660
------------------------------------------------------------------------------
11,323,445 5,692,281 3,319,704 20,335,430
------------------------------------------------------------------------------
Consumer Loans - 7,089,760 35,210 - 7,124,970
------------------------------------------------------------------------------
Consumer Loans with:
Predetermined interest rates 138,595 35,210 - 173,805
Adjustable interest rates 6,951,165 - - 6,951,165
------------------------------------------------------------------------------
7,089,760 35,210 - 7,124,970
------------------------------------------------------------------------------
Commercial/Municipal Loans- 6,024,903 7,460,892 5,771,945 19,257,740
------------------------------------------------------------------------------
Commercial/Municipal Loans with:
Predetermined interest rates 1,711,959 1,492,412 260,266 3,464,637
Adjustable interest rates 4,312,944 5,968,480 5,511,679 15,793,103
------------------------------------------------------------------------------
6,024,903 7,460,892 5,771,945 19,257,740
------------------------------------------------------------------------------
Other Loans - 4,493 7,701 4,164 16,358
------------------------------------------------------------------------------
Other Loans with:
Predetermined interest rates 3,652 3,732 - 7,384
Adjustable interest rates 841 3,969 4,164 8,974
------------------------------------------------------------------------------
4,493 7,701 4,164 16,358
------------------------------------------------------------------------------
TOTALS $ 35,755,320 $ 39,868,960 $ 163,492,160 $ 239,116,440
==============================================================================
</TABLE>
The preceding schedule includes $2,691,366 of non-performing loans and
$3,775,802 of loans held for sale, categorized within the respective loan types.
A-16
<PAGE>
________________________________________________
MANAGEMENTS'S DISCUSSION AND ANALYSIS (continued)
OTHER INCOME AND EXPENSE
Total non-interest income increased by $89,927, or 3.52% to $2,642,801.
Net gains on the sale of securities, loans and bank property totaled $531,946 at
year-end 1998 compared to $750,517 for the same period in 1997. The change was
primarily attributed to a $397,878, or 72.16% decrease in investment security
gains. In 1997, the Bank sold a majority of its one-sixth ownership in Charter
Trust Company. This transaction produced an after-tax gain of approximately
$300,000. Gains on the sale of loans were $371,991 in 1998 compared to $267,925
for 1997, an increase of 38.84%. The 23.33% increase in customer service fees
was primarily due to an increase in transaction-type accounts. Rental income
increased by 15.09% as the Bank leased some of its previously unoccupied
property.
Total operating expenses increased $481,731, or 5.74% to $8,879,742.
The increase was due to many factors. Salaries and benefits increased $175,481,
or 4.34% due to normal wage increases and rising health insurance costs.
Occupancy costs increased $155,466, or 9.82% as the Bank realized twelve months
of costs associated with its newest branch at Centerra Market Place. In
addition, depreciation costs increased approximately 22% during 1998 as new
computer hardware and software was capitalized as part of the Bank's Y2K
efforts. Outside services increased $150,374, or 30.74%. Included in outside
services is an increase of $34,309 for loan processing services that were
outsourced during 1998 and an increase in consulting fees of $61,160 as the Bank
hired a Y2K consultant and outsourced some of its internal audit functions.
IMPACT OF NEW ACCOUNTING STANDARDS
In July 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive
Income." Statement No. 130 establishes standards for reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements. The Statement is effective for fiscal years beginning
after December 15, 1997 with earlier application permitted.
In July 1997, the FASB issued SFAS No. 131 "Disclosure about Segments
of an Enterprise and Related Information." Statement No. 131 requires
disclosures for each segment that are similar to those required under current
standards with the addition of quarterly disclosure requirements and a finer
partitioning of geographic disclosures. The Statement is effective for fiscal
years beginning after December 15, 1997 with earlier application permitted.
In February 1998, the FASB issued SFAS No. 132 "Employers' Disclosures
about Pensions and Other Postretirement Benefits." Statement No. 132 revises
employers' disclosures about pension and other postretirement benefit plans. It
does not change the measurement or recognition of those plans. The Statement is
effective for fiscal years beginning after December 15, 1997.
In management's opinion, SFAS Nos. 130, 131, and 132 did not have a
material effect on the Bank's financial statements.
In June 1998, the FASB issued SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities." Statement No. 132 establishes accounting
and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts and for hedging activities. The
Statement is effective for all fiscal quarters of fiscal years beginning after
June 15, 1999.
In management's opinion, SFAS Nos. 133 when adopted will not have a
material effect on the Bank's financial statements.
ACCOUNTING FOR INCOME TAXES
The provision for income taxes for the years ended December 31, 1998,
1997 and 1996 includes net deferred income tax expense (benefit) of $364,723,
$(575,835), and $(120,481), respectively. These amounts were determined by the
deferred method in accordance with generally accepted accounting principles for
each year.
The Bank has provided deferred income taxes on the difference between
the provision for loan losses permitted for income tax purposes and the
provision recorded for financial reporting purposes.
COMPARISON OF YEARS ENDED DECEMBER 31, 1997 AND 1996
In 1997, the Company earned $2,770,932, or $1.33 per common share,
assuming dilution, compared to $610,711, or $.35, assuming dilution, per common
share in 1996. The increase in earnings was attributable to three factors. In
February 1997, Lake
A-17
<PAGE>
________________________________________________
MANAGEMENTS'S DISCUSSION AND ANALYSIS (continued)
Sunapee Bank completed its acquisition of Landmark Bank of Lebanon, NH. This
transaction increased the Bank's assets by approximately $52 million and
provided Lake Sunapee Bank with increased yields on its loan portfolio. As a
result, the Bank's net interest income increased 28.66%. Second, the Bank's
deposit insurance premium was approximately $850,000 less than 1996. This was
due to the Bank paying a one-time premium assessment in 1996 of $995,000 to the
Federal Deposits Insurance Corporation (FDIC). The payment was part of the
recapitalization of the savings association insurance fund (SAIF). Third, during
the third quarter of 1997, Lake Sunapee Bank sold a majority of its one-sixth
ownership in Charter Trust Company. This transaction produced an after-tax gain
of approximately $300,000.
FINANCIAL CONDITION
Total assets increased by $53,603,618, or 20.27% from $264,385,344 to
$317,988,962. Total loans increased from $218,461,279 to $258,386,923, or
18.27%. Real estate loans increased by $24,968,975, or 13.50% from $184,982,351
to $209,951,326. The Bank also increased the net level of loans sold into the
secondary market by approximately $20 million. At December 31, 1997, the Bank
had $71,551,925 in its servicing portfolio. The majority of the increases were
attributable to the acquisition of Landmark Bank.
Investments securities increased by $4,242,385, or 15.27% from
$27,790,737 to $32,033,122 (at amortized cost). The Bank's net unrealized gain
of $134,112 at December 31, 1997 compares to 1996's net unrealized loss of
$192,179. This change of $326,291 in market value reflects the decrease in
interest rates during 1997 and the resultant rise in bond values.
Real estate owned and property acquired in settlement of loans
decreased by $207,325, or 28.66% to $516,153. This total reflected $309,153, or
59.89%, in market value for the remaining five lots at Blye Hill Landing in
Newbury, NH. During 1997, twelve real estate owned properties totaling $537,389,
in carrying value were sold.
Deposits increased by $57,268,065, or 26.77% to $271,226,960 from
$213,958,895. The acquisition of Landmark Bank accounted for the majority of the
increase. In addition, customers took advantage of the Bank's favorable Money
Market rates. As a result, this account increased 111% to approximately $24
million. Customers continued to place funds in Certificates of Deposit (CDs)
with CDs comprising 49.10% of total deposits versus 49.89% last year. Total CDs
increased by $26,357,185, or 24.69% to $133,097,650.
Advances from the FHLB decreased by $9,927,707, or 49.21% to
$10,246,318 from $20,174,025. The Bank was able to fund its loan growth through
deposit growth and utilize excess funds to pay-down FHLB advances.
LIQUIDITY AND CAPITAL RESOURCES
The Bank is required by its regulator, the OTS, to maintain a 4% ratio
of liquid assets to net withdrawable funds. At year-end 1997, the Bank's ratio
of 12.81% exceeded regulatory requirements for long-term liquidity.
At December 31, 1997, the Company's shareholders' equity totaled
$25,563,125, or 8.04% of total assets, compared to $19,193,690, or 7.26% of
total assets at year-end 1996. The increase of $6,369,435 reflects net income of
$2,770,932, $3,931,801 as a result of the Landmark Bank acquisition, the payment
of $987,032 in common stock dividends, the cashless exchange of 13,928 shares of
stock at an amount of $255,316, the exercise of 64,525 stock options in the
amount of $209,706, a gain of $489,847 on the sale of treasury stock, and the
change of $209,497 in net unrealized holding gains on securities classified as
available-for-sale. As interest rates moved downward throughout 1997, the Bank's
bond portfolio increased in value.
During 1997, the Bank upstreamed $3,000,000 to its parent company New
Hampshire Thrift Bancshares, Inc. The purposes of the upstreams were to fund the
cash portion of the Landmark acquisition and to pay dividends to NHTB
shareholders.
Net cash provided by operating activities was $2,847,283 in 1997 versus
$3,985,360 in 1996. The decrease in accrued expenses and other liabilities
accounted for the majority of the change.
Net cash flows from investing activities amounted to negative
$3,955,691 in 1997 compared to negative $9,546,320 in 1996. The $3,315,519 net
change in security activity and the $9,862,090 change in loans, accounted for
the change.
In 1997, net cash provided by financing activities was $3,412,285
compared to $5,570,412 in 1996. The decrease in advances from the Federal Home
Loan Bank accounted for the majority of the change.
The Bank was able to fund loan demand and other investing during 1998
by using funds provided by customer deposits.
A-18
<PAGE>
________________________________________________
MANAGEMENTS'S DISCUSSION AND ANALYSIS (continued)
As part of the Financial Institution Reform, Recovery, and Enforcement
Act of 1989 (FIRREA), banks are required to maintain core capital, leverage
ratio, and total risk based capital of 1.50%, 3.00%, and 8.00%, respectively. As
of December 31, 1997,the Bank's ratios were 6.47%, 6.47%, and 11.86%,
respectively, well in excess of the regulators' requirements.
Book value per share was $12.24 at December 31, 1997 versus $11.26 per
share at December 31, 1996. The change in the market value of the Bank's
investment security portfolio and the increase in paid-in capital and retained
earnings provided the increase in book value per share.
NET INTEREST INCOME
Net interest income for the year ended December 31, 1997 increased by
$2,401,573, or 28.66%, to $10,781,280. The increase can be attributed to the
increased volume in the Bank's loan portfolio that resulted primarily from the
acquisition of Landmark Bank.
Total interest income increased by $4,681,733, or 25.03%, with 93.49%
attributed to the increase in volume, and 6.51% related to the change in
interest rates. During 1997, the Bank's yield on interest earning assets
increased to 7.97% from 7.67% in 1996.
Total interest expense increased $2,280,160, or 22.08%, with 145.88%
attributed to the increased volume in deposits. The Bank's overall cost of funds
remained the same at 4.54%. The Bank's average deposits as a percentage of total
interest bearing liabilities increased from 85.53% in 1996 to 91.89% in 1997.
Deposits' cost in 1997 was 4.46% versus 4.36% in 1996. This increase was a
result of an increase in higher costing deposits such as brokered CD's acquired
from Landmark Bank. These brokered CD's matured in January of 1998 and were not
renewed. Federal Home Loan Bank advances typically are higher costing funding
instruments. In an effort to reduce the Bank's overall cost of funds, the Bank
reduced its average balance in Federal Home Loan Bank advances during 1997 to
$16.5 million from $27.9 million in 1996 by paying off higher costing advances
as they came due. As a result, the Bank's spread increased to 3.43% at December
31, 1997 compared to 3.13% at December 31, 1996.
PROVISION FOR LOAN LOSSES
The allowance for loan losses at December 31, 1997 was $3,061,451,
compared to $2,158,026 at year-end 1996. The allowance in 1997 includes
$2,783,484 in general reserves as compared to $1,801,589 in 1996. During 1997,
the Bank had net charge-offs of $879,340 compared to $1,330,775 in 1996. Due to
the general improvement of the quality of the loan portfolio and a reduction in
risk, the provision for loan losses was reduced by $728,270 from $1,660,741 in
1996 to $932,471 in 1997. Net charged-off loans during 1997 amounted to 0.35% of
average loans, as compared to 0.63% in 1996. The allowance represented 1.18% of
total loans at year-end 1997 versus 0.98% at year-end 1996.
The allowance for loan losses as a percentage of non-performing assets
was 171.40% at December 31, 1997 compared to 92.07% at December 31, 1996.
Total classified loans, excluding special mention, as of December 31,
1997 and 1996 were $4,859,402 and $5,254,069, respectively. Total nonperforming
assets amounted to $1,786,107 and $2,343,898 for the respective years. At
December 31, 1997, loans classified as 90-day delinquent were $691,567 compared
to $787,930 at December 31, 1996.
OTHER INCOME AND EXPENSE
Total non-interest income increased by $629,635, or 32.74% to
$2,552,874. Net gains on the sale of securities and loans totaled $819,282. The
majority is attributable to the gain realized on the Charter Trust transaction.
Net losses on the sales of premises and equipment totaled $68,765 as the Bank
sold two investment properties.
Total operating expense increased $652,680, or 8.43% to $8,398,011. The
increase was primarily associated with the integration of Landmark Bank and
start-up costs associated with the Bank's newest office located in the Centerra
Marketplace. Additional staffing, occupancy and marketing expenses were realized
as the Bank expanded into these new locations.
A-19
<PAGE>
[LETTERHEAD OF SHATSWELL, MACLEOD & COMPANY, P.C. APPEARS HERE]
The Board of Directors
New Hampshire Thrift Bancshares, Inc.
Newport, New Hampshire
INDEPENDENT AUDITORS' REPORT
----------------------------
We have audited the accompanying consolidated statements of financial condition
of New Hampshire Thrift Bancshares, Inc. and Subsidiary as of December 31, 1998
and 1997 and the related consolidated statements of income, changes in
shareholders' equity, cash flows and comprehensive income for each of the years
in the three-year period ended December 31, 1998. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the 1998 and 1997 consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of New Hampshire Thrift Bancshares, Inc. and Subsidiary as of December
31, 1998 and 1997 and the consolidated results of their operations and their
cash flows for each of the years in the three-year period ended December 31,
1998, in conformity with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, the Company
adopted the provisions of the Financial Accounting Standards Board's Statement
of Financial Accounting Standards No. 123 "Accounting for Stock-Based
Compensation," effective January 1, 1996.
/s/ Shatswell, MacLeod & Company, P.C.
SHATSWELL, MacLEOD & COMPANY, P.C.
West Peabody, Massachusetts
January 25, 1999
A-20
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES INC. AND SUBSIDIARY
---------------------------------------------------
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998 1997
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 8,701,558 $ 9,196,626
Federal funds sold 7,583,000 4,110,000
---------------------------
Cash and cash equivalents 16,284,558 13,306,626
Securities available-for-sale 52,137,753 30,104,674
Securities held-to-maturity - 75,000
Other investments 2,032,999 1,987,560
Loans held-for-sale 3,775,802 673,950
Loans receivable, net 232,321,171 255,223,525
Accrued interest receivable 1,725,235 1,556,194
Bank premises and equipment, net 8,416,182 8,178,335
Investments in real estate 531,729 548,257
Real estate owned and property acquired in settlement of loans 670,153 516,153
Goodwill 3,213,028 3,460,184
Other assets 2,299,159 2,358,504
---------------------------
Total assets $323,407,769 $317,988,962
===========================
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Demand deposits $ 16,521,820 $ 15,105,900
Savings deposits 76,837,104 65,883,386
NOW and MMDA deposits 67,593,258 57,140,024
Time deposits 121,096,974 133,097,650
---------------------------
Total deposits 282,049,156 271,226,960
Other borrowed funds - 300,000
Securities sold under agreement to repurchase 11,849,116 8,393,192
Advances from Federal Home Loan Bank - 10,246,318
Accrued expenses and other liabilities 1,729,891 2,259,367
---------------------------
Total liabilities 295,628,163 292,425,837
---------------------------
SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value per share: 2,500,000 shares authorized, - -
no shares issued or outstanding
Common stock, $.01 par value, per share: 5,000,000 shares authorized,
2,479,858 shares issued and 2,104,285 shares outstanding at
December 31, 1998 and 2,479,858 shares issued and 2,088,155 shares
outstanding at December 31, 1997 24,798 24,798
Paid-in capital 17,874,567 17,660,097
Retained earnings 12,082,784 10,221,049
Accumulated other comprehensive income 255,034 82,318
---------------------------
30,237,183 27,988,262
Treasury stock, at cost, 375,573 shares as of December 31, 1998 and
391,703 shares as of December 31, 1997 (2,457,577) (2,425,137)
---------------------------
Total shareholders' equity 27,779,606 25,563,125
---------------------------
Total liabilities and shareholders' equity $323,407,769 $317,988,962
===========================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
A-21
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1998 1997 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST INCOME
Interest on loans $20,023,493 $21,214,024 $16,775,792
Interest and dividends on investments 3,239,693 2,171,956 1,928,455
--------------------------------------
Total interest income 23,263,186 23,385,980 18,704,247
--------------------------------------
INTEREST EXPENSE
Interest on deposits:
Savings deposits 3,233,429 3,158,505 2,432,150
NOW accounts and MMDA deposits 621,132 256,717 615,849
Time deposits 7,977,963 8,214,548 5,638,679
--------------------------------------
Total interest on deposits 11,832,524 11,629,770 8,686,678
Interest on advances and other borrowed money 351,840 974,930 1,637,862
--------------------------------------
Total interest expense 12,184,364 12,604,700 10,324,540
--------------------------------------
Net interest income 11,078,822 10,781,280 8,379,707
PROVISION FOR LOAN LOSSES 120,167 932,471 1,660,741
--------------------------------------
Net interest income after provision for loan losses 10,958,655 9,848,809 6,718,966
--------------------------------------
OTHER INCOME
Loan origination fees 90,186 96,510 75,564
Customer service fees 1,558,886 1,263,989 1,190,726
Net gain (loss) on sale and writedowns of securities 153,479 551,357 (26,500)
Net gain (loss) on sale of premises, equipment and other
real estate owned 6,476 (68,765) 251,770
Net gain on sale of loans 371,991 267,925 51,716
Rental income 335,255 291,308 223,673
Brokerage service income 126,528 148,341 153,261
Other income - 2,209 3,029
--------------------------------------
Total other income 2,642,801 2,552,874 1,923,239
--------------------------------------
OTHER EXPENSES
Salaries and employee benefits 4,222,206 4,046,725 3,039,929
Occupancy expenses 1,738,055 1,582,589 1,242,216
Advertising and promotion 253,883 344,714 188,512
Depositors' insurance 139,214 123,487 1,448,801
Outside services 639,628 489,254 364,101
Provision for other real estate owned losses - - 229,970
Amortization of goodwill 247,156 242,271 -
Other expenses 1,639,600 1,568,971 1,231,802
--------------------------------------
Total other expenses 8,879,742 8,398,011 7,745,331
--------------------------------------
INCOME BEFORE PROVISION FOR INCOME TAXES 4,721,714 4,003,672 896,874
PROVISION FOR INCOME TAXES 1,602,964 1,232,740 286,163
--------------------------------------
NET INCOME $ 3,118,750 $ 2,770,932 $ 610,711
======================================
Earnings per common share $ 1.49 $ 1.36 $ .36
======================================
Earnings per common share, assuming dilution $ 1.47 $ 1.33 $ .35
======================================
Dividends declared per common share $ .60 $ .50 $ .50
======================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
A-22
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK
Balance, beginning of year $ 24,798 $ 21,473 $ 21,473
Shares issued in acquisition of Landmark Bank - 3,325 -
-----------------------------------------
Balance, end of year $ 24,798 $ 24,798 $ 21,473
=========================================
PAID-IN CAPITAL
Balance, beginning of year $17,660,097 $13,241,774 $13,160,382
Gain on issuance of treasury stock for the exercise
of stock options 156,406 489,847 81,392
Tax benefit for stock options 58,064 - -
Acquisition of Landmark Bank - 3,928,476 -
-----------------------------------------
Balance, end of year $17,874,567 $17,660,097 $13,241,774
=========================================
RETAINED EARNINGS
Balance, beginning of year $10,221,049 $ 8,437,149 $ 8,673,504
Net income 3,118,750 2,770,932 610,711
Cash dividends paid (1,257,015) (987,032) (847,066)
-----------------------------------------
Balance, end of year $12,082,784 $10,221,049 $ 8,437,149
=========================================
ACCUMULATED OTHER COMPREHENSIVE INCOME
Net unrealized holding gain (loss) on securities
available-for-sale
Balance, beginning of year $ 82,318 $ (127,179) $ 97,594
Net change 172,716 209,497 (224,773)
-----------------------------------------
Balance, end of year $ 255,034 $ 82,318 $ (127,179)
=========================================
TREASURY STOCK
Balance, beginning of year $(2,425,137) $(2,379,527) $(2,408,948)
Shares repurchased, (4,650 shares in 1998, 13,928 shares
in 1997 and 3,251 shares in 1996) (73,975) (255,316) (43,482)
Exercise of stock options, (20,780 shares in 1998, 64,525
shares in 1997 and 18,730 shares in 1996) 41,535 209,706 72,903
-----------------------------------------
Balance, end of year $(2,457,577) $(2,425,137) $(2,379,527)
=========================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
A-23
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
For the years ended December 31,
1996
- ----
<S> <C>
Net income $ 610,711
Other comprehensive income
Net unrealized holding loss on
securities available-for-sale, net of tax
effect of $116,000 (224,773)
----------
Comprehensive income $ 385,938
==========
1997
- ----
Net income $2,770,932
Other comprehensive income
Net unrealized holding gain on
securities available-for-sale, net of tax
effect of $116,794 209,497
----------
Comprehensive income $2,980,429
==========
1998
- ----
Net income $3,118,750
Other comprehensive income
Net unrealized holding gain on
securities available-for-sale, net of tax
effect 172,716
----------
Comprehensive income $3,291,466
==========
Reclassification disclosure for the year ended December 31, 1998:
Net unrealized gains on available-for-sale securities $ 436,429
Less reclassification adjustment for realized gains in net income 155,040
----------
Other comprehensive income before income tax effect 281,389
Income tax expense (108,673)
----------
Other comprehensive income, net of tax $ 172,716
==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
A-24
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 3,118,750 $ 2,770,932 $ 610,711
Depreciation and amortization 788,529 579,452 455,910
Amortization of goodwill 247,156 242,271 -
Loans originated for sale (73,567,590) (26,395,222) (14,233,140)
Proceeds from sales of loans 73,939,581 26,663,447 14,284,856
Gain from sales of loans (371,991) (267,925) (51,716)
(Gain) loss from sales of premises, equipment and other
real estate owned (6,476) 68,765 (251,770)
(Gain) loss from sales of debt securities available-for-sale
and writedowns (155,040) (62,010) 667
Loss from sales of equity securities available-for-sale
and writedowns, net - 10,653 25,833
(Gain) loss on sales of other investments 1,561 (500,000) -
Provision for other real estate owned losses - - 229,970
Writedowns of other real estate owned - - 144,350
Provision for loan losses 120,167 932,471 1,660,741
Deferred tax expense (benefit) 364,723 (575,835) (120,481)
(Increase) decrease in accrued interest and other assets (109,696) 178,486 861,580
Decrease in deferred loan origination fees, net (199,548) (121,484) (81,550)
Increase (decrease) in accrued expenses and other liabilities (944,808) (676,718) 449,399
------------------------------------------
Net cash provided by operating activities 3,225,318 2,847,283 3,985,360
------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of premises and equipment 9,145 108,149 344,387
Proceeds from sales of other real estate owned 163,076 219,389 182,830
Capital expenditures - premises and equipment (890,414) (1,079,184) (316,986)
Capital expenditures - other real estate owned (6,000) (27,043) (25,188)
Proceeds from sales of debt securities available-for-sale 27,592,324 20,579,199 2,468,275
Proceeds from sales of equity securities available-for-sale - 1,192,719 450,642
Proceeds from sales of other investments 30,000 820,000 -
Principal reduction on securities held-to-maturity 75,000 25,000 52,778
Purchases of securities available-for-sale (50,877,553) (25,726,166) (9,063,424)
Maturities of securities available-for-sale 1,560,000 200,000 6,498,000
Purchases of other investments (77,000) - (5,000)
Net (increase) decrease in loans 19,527,107 (320,383) (10,182,473)
Recoveries of previously charged off loans 48,176 52,629 49,839
------------------------------------------
Net cash used in investing activities (2,846,139) (3,955,691) (9,546,320)
------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
A-25
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
<TABLE>
<CAPTION>
1998 1997 1996
- ---------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
<S> <C> <C> <C>
Net increase in demand deposits, savings and NOW accounts 22,822,872 11,487,757 458,741
Net increase (decrease) in time deposits (12,000,676) (2,411,055) 13,529,233
Net increase (decrease) in repurchase agreements 3,455,924 (453,344) (890,089)
Advances from Federal Home Loan Bank - - 21,600,000
Principal payments of advances from Federal Home Loan Bank (10,246,318) (9,927,707) (28,362,143)
Net increase (decrease) in other borrowed funds (300,000) 295,000 (29,077)
Cash and cash equivalents of $7,559,731 acquired in the
acquisition of Landmark Bank, less cash of $2,275,000 paid
for the common stock of Landmark Bank and less $320,302
for acquisition costs - 4,964,429 -
Repurchase of treasury stock (73,975) (255,316) (43,482)
Dividends paid (1,257,015) (987,032) (847,066)
Proceeds from exercise of stock options 197,941 699,553 154,295
------------ ----------- ------------
Net cash provided by financing activities 2,598,753 3,412,285 5,570,412
------------ ----------- ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 2,977,932 2,303,877 9,452
CASH AND CASH EQUIVALENTS, beginning of year 13,306,626 11,002,749 10,993,297
------------ ----------- ------------
CASH AND CASH EQUIVALENTS, end of year $ 16,284,558 $13,306,626 $ 11,002,749
============ =========== ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Interest paid $ 12,220,262 $12,750,892 $ 10,379,699
============ =========== ============
Income taxes paid $ 1,376,990 $ 1,545,183 $ 331,763
============ =========== ============
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
AND FINANCING ACTIVITIES
Loans originated for sales of other real estate owned $ 130,000 $ 318,000 $ 207,500
============ =========== ============
Transfers from loans to real estate acquired through
foreclosure $ 434,600 $ 303,021 $ 478,755
============ =========== ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
A-26
<PAGE>
_______________________________________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. Summary of significant accounting policies:
NATURE OF OPERATIONS - New Hampshire Thrift Bancshares, Inc. (Company) is a
savings association holding company headquartered in Newport, New Hampshire.
The Company's subsidiary, Lake Sunapee Bank, fsb (Bank), a federal stock savings
bank operates twelve branches primarily in Grafton, Sullivan, and Merrimack
Counties in west central New Hampshire. Although the Company has a diversified
portfolio, a substantial portion of its debtors' abilities to honor their
contracts is dependent on the economic health of the region. Its primary source
of revenue is providing loans to customers who are predominately small and
middle-market businesses and individuals.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS - The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include
the accounts of the Company, the Bank, Lake Sunapee Group, Inc. (LSGI) which
owns and maintains all buildings, and Lake Sunapee Financial Services Corp.
(LSFSC) which was formed to handle the flow of funds from the brokerage and
trust services. LSGI and LSFSC are wholly-owned subsidiaries of the Bank. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
CASH AND CASH EQUIVALENTS - For purposes of reporting cash flows, the
Company considers federal funds sold and due from banks to be cash equivalents.
SECURITIES AVAILABLE-FOR-SALE - Available-for-sale securities consist of
bonds, notes, debentures, and certain equity securities. Unrealized holding
gains and losses, net of tax, on available-for-sale securities are reported as a
net amount in a separate component of shareholders' equity until realized.
Gains and losses on the sale of available-for-sale securities are determined
using the specific-identification method. Declines that are other than
temporary in the fair value of individual available-for-sale securities below
their cost have resulted in write-downs of the individual securities to their
fair value. The related write-downs of $0, $68,750 and $728 have been included
in earnings as realized losses for the years ended 1998, 1997 and 1996,
respectively.
SECURITIES HELD-TO-MATURITY - Bonds, notes and debentures which the Company
has the positive intent and ability to hold to maturity are reported at cost,
adjusted for premiums and discounts recognized in interest income using the
interest method over the period to maturity. Declines that are other than
temporary in the fair value of individual held-to-maturity securities below
their cost result in write-downs of the individual securities to their fair
value. No write-downs have occurred for securities held-to-maturity.
OTHER INVESTMENTS - Other investments are investments which do not have
readily determinable fair values. These types of investments are reported at
cost and are evaluated for other than a temporary decline in value. Other than
temporary declines in value result in write-downs of the individual security.
No write-downs have occurred for securities which are classified as other
investments.
LOANS HELD-FOR-SALE - Mortgage loans originated and intended for sale in
the secondary market are carried at the lower of cost or estimated market value
in the aggregate. Net unrealized losses are recognized through a valuation
allowance by charges to income. No losses have been recorded.
A-27
<PAGE>
_______________________________________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (continued)
LOANS RECEIVABLE - Loans receivable that management has the intent and
ability to hold until maturity or pay-off are reported at their outstanding
principal adjusted for any charge-offs, the allowance for loan losses, and any
deferred fees or costs on originated loans. Loan origination fees and certain
direct origination costs are capitalized and recognized as an adjustment to the
yield of the related loan. When the interest accrual is discontinued, all
unpaid accrued interest is reversed. The allowance for loan losses is increased
by charges to expense and decreased by charge-offs (net of recoveries).
Management's periodic evaluation of the adequacy of the allowance is an estimate
based on the Company's past loan loss experience, known and inherent risks in
the portfolio, adverse situations that may affect the borrower's ability to
repay, the estimated value of any underlying collateral, and current economic
conditions. This material estimate and the estimate of real estate acquired in
connection with foreclosures are particularly susceptible to significant change
in the near term. In connection with the determination of the allowance for
loan losses and the carrying value of real estate owned, management obtains
independent appraisals for significant properties to arrive at its evaluation.
Impaired loans are measured based on the present value of expected future
cash flows discounted at the loan's effective interest rate or, as a practical
expedient, at the loan's observable market price or the fair value of the
collateral, if the loan is collateral dependent. Interest income on impaired
loans is recognized on an accrual basis when the impaired loan is less than 90
days past due and has not been reclassified to non-accrual status. Interest
income on impaired loans over 90 days past due, and on loans placed on non-
accrual status, is recognized using a cash basis accounting method. Cash
receipts on impaired loans are recorded as both interest income and a reduction
in the impaired loan balance consistent with the terms of the underlying
contractual agreements.
A loan becomes impaired when it appears probable the Company will be unable
to collect all amounts due, including principal and interest, under the
contractual terms of the loan agreement. A loan is placed on non-accrual status
when it appears likely interest income will not be received. Non-accrual loans
are reviewed for possible impairment.
Impaired loans are written-down or charged-off when it has been determined
the asset has such little value that it no longer warrants remaining on the
books. The decision to charge-off is made on a case-by-case basis.
Factors considered by management in determining impairment include payment
status, net worth and collateral value. An insignificant payment delay or an
insignificant shortfall in payment does not in itself result in the review of a
loan for impairment. The Company reviews its loans for impairment on a loan-by-
loan basis. Homogeneous groups of loans such as consumer installment loans and
residential mortgage loans are collectively evaluated for impairment. The
Company does not review for impairment aggregations of loans that have risk
characteristics in common with other impaired loans. Substantially all of the
Company's loans that have been identified as impaired have been measured by the
fair value of existing collateral.
BANK PREMISES AND EQUIPMENT - Company premises and equipment are stated at
cost, less accumulated depreciation. Depreciation is computed using straight-
line and accelerated methods over the estimated useful lives of the assets.
Expenditures for replacements or major improvements are capitalized;
expenditures for normal maintenance and repairs are charged to expense as
incurred. Upon the sale or retirement of company premises and equipment, the
cost and accumulated depreciation are removed from the respective accounts and
any gain or loss is included in income.
A-28
<PAGE>
_______________________________________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (continued)
INVESTMENT IN REAL ESTATE - Investment in real estate is carried at the
lower of cost or estimated fair value. The buildings are being depreciated over
their useful lives. The properties consist of a condominium that the Company
rents to the public and three buildings that the Company rents for commercial
purposes. Rental income is recorded in income when received and expenses for
maintaining these assets are charged to expense as incurred.
REAL ESTATE OWNED AND PROPERTY ACQUIRED IN SETTLEMENT OF LOANS - The
Company classifies loans as in-substance, repossessed or foreclosed if the
Company receives physical possession of the debtor's assets regardless of
whether formal foreclosure proceedings take place. At the time of foreclosure
or possession, the Company records the property at the lower of fair value minus
estimated costs to sell or the outstanding balance of the loan. All properties
are periodically reviewed and declines in the value of the property are charged
against income.
EARNINGS PER SHARE - In the year ended December 31, 1997, the Company
adopted Statement of Financial Accounting Standards No. 128 (SFAS No. 128)
"Earnings per Share" (EPS) issued by the Financial Accounting Standards Board.
SFAS No. 128 required restatement of 1996 EPS presented in accordance with SFAS
No. 128. This statement simplifies the standards for computing earnings per
share. It replaces the presentation of primary EPS with a presentation of Basic
EPS which excludes dilution and is computed by dividing income available to
common stockholders by the weighted-average number of common shares outstanding
for the period. Diluted EPS, if applicable, reflects the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the entity. The adoption of SFAS No.
128 had no material effect on the Bank's 1997 financial statements and EPS for
1996 financial statements was restated in accordance with SFAS No. 128.
INCOME TAXES - Deferred income taxes are provided in amounts sufficient to
give effect to temporary differences between financial and tax reporting for
deferred loan origination fees, unrealized loss on securities available-for-
sale, provision for loan losses and depreciation.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The following methods and assumptions
were used by the Company in estimating fair values of financial instruments as
disclosed herein:
Cash and short-term instruments - The carrying amounts of cash and short-term
instruments approximate their fair value.
Available-for-sale and held-to-maturity securities - Fair values for
available-for-sale securities, are based on quoted market prices. The
carrying values of held-to-maturity and other investments approximate fair
values.
Loans receivable - For variable-rate loans that reprice frequently and have
no significant change in credit risk, fair values are based on carrying
values. Fair values for all other loans are estimated using discounted cash
flow analyses, using interest rates currently being offered for loans with
similar terms to borrowers of similar credit quality. Fair values for
impaired loans are estimated using discounted cash flow analyses or
underlying collateral values, where applicable.
Loans held-for-sale - Fair values of loans held for sale are based on
estimated market values.
Deposit liabilities - The fair values disclosed for demand deposits are, by
definition, equal to the amount payable on demand at the reporting date (that
is, their carrying amounts). The carrying amounts of variable-rate, fixed
term money-market accounts and certificates of deposits (CD's) approximate
their fair values at the reporting date. Fair values for fixed-rate CD's are
estimated using a discounted cash flow calculation that applies interest
rates currently being offered on certificates to a schedule of aggregated
expected monthly maturities on time deposits.
A-29
<PAGE>
_______________________________________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (continued)
Borrowings - The carrying amounts of securities sold under agreements to
repurchase and other borrowings approximate their fair values.
Federal Home Loan Bank Advances - Fair values for FHLB advances are estimated
using a discounted cash flow technique that applies interest rates currently
being offered on advances to a schedule of aggregated expected monthly
maturities on FHLB advances.
Accrued interest - The carrying amounts of accrued interest approximate their
fair values.
Off-balance sheet instruments - Fair values for loan commitments have not
been presented as the future revenue derived from such financial instruments
is not significant.
DEFERRED LOAN ORIGINATION FEES - Loan origination, commitment fees and
certain direct origination costs are deferred, and the net amount is being
amortized as an adjustment of the related loan's yield. The Company is
amortizing these amounts over the contractual life of the related loans.
STOCK BASED COMPENSATION - Prior to 1996, the Company recognized stock-
based compensation using the intrinsic value approach set forth in APB Opinion
No. 25. As of January 1, 1996, the Company had the option, under SFAS No. 123,
of changing its accounting method for stock-based compensation from the APB No.
25 method to the fair value method introduced in SFAS No. 123. The Company
elected to continue using the APB No. 25 method. Entities electing to continue
to follow the provisions of APB No. 25 must make pro forma disclosure of net
income and earnings per share, as if the fair value method of accounting defined
in SFAS No. 123 had been applied. The Company has made the pro forma
disclosures required by SFAS No. 123.
LOAN SERVICING - Effective January 1, 1996, the Company adopted Statement
of Financial Accounting Standards No. 122, (SFAS No. 122) "Accounting for
Mortgage Servicing Rights, an amendment of FASB Statement No. 65." Effective
January 1, 1997, the Company adopted Statement of Financial Accounting Standards
No. 125 (SFAS No. 125) which supersedes SFAS No. 122. These statements require
the Company to recognize as separate assets from their related loans the rights
to service mortgage loans for others, either through acquisition of those rights
or from the sale or securitization of loans with the servicing rights retained
on those loans, based on their relative fair values. To determine the fair
value of the servicing rights created, the Company uses the market prices under
comparable servicing sale contracts, when available, or alternatively uses a
valuation model that calculates the present value of future cash flows to
determine the fair value of the servicing rights. In using this valuation
method, the Company incorporates assumptions that market participants would use
in estimating future net servicing income, which includes estimates of the cost
of servicing loans, the discount rate, ancillary income, prepayment speeds and
default rates.
The cost of mortgage servicing rights is amortized on a straight-line basis
which has substantially the same effect as amortizing the rights in proportion
to, and over the period of, estimated net servicing revenues. Impairment of
mortgage servicing rights is assessed based on the fair value of those rights.
Fair values are estimated using discounted cash flows based on a current market
interest rate. For purposes of measuring impairment, the rights are stratified
based on the interest rate risk characteristics of the underlying loans. The
amount of impairment recognized is the amount by which the capitalized mortgage
servicing rights for a stratum exceed their fair value.
CONCENTRATION OF CREDIT RISK - Most of the Company's business activity is
with customers located within the state. There are no concentrations of credit
to borrowers that have similar economic characteristics. The majority of the
Company's loan portfolio is comprised of loans collateralized by real estate
located in the state of New Hampshire.
RECLASSIFICATIONS - Certain amounts in the 1997 and 1996 consolidated
financial statements have been reclassified to conform to the current year's
presentation.
A-30
<PAGE>
_______________________________________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. ACQUISITION OF LANDMARK BANK:
On July 26, 1996, the Company entered into an agreement and plan of
reorganization (the "Merger Agreement") with Landmark Bank. Pursuant to the
Merger Agreement, the Company acquired all of the outstanding shares of Landmark
Bank for total consideration of $7,030,974. The Merger Agreement was approved
by the shareholders of the Company, shareholders of Landmark Bank, and various
regulatory agencies. On January 22, 1997, the Company completed the acquisition
of Landmark Bank.
The purchase method of accounting was used to account for the merger.
Under the terms of the merger agreement, holders of Landmark Bank's stock
could elect to receive $12.00 in cash per share, or exchange their stock for
stock in the Company at a ratio of 1.1707 shares of the common stock of the
Company per Landmark share, subject to 60% of Landmark's stock being converted
to stock and 40% to cash.
Included in the total cost of acquiring Landmark Bank was $2,275,000
representing the fair value of the Company's shares issued to Landmark Bank
shareholders who elected to receive cash.
The results of operations of Landmark Bank from January 22, 1997 to
December 31, 1997 are included in the 1997 consolidated statement of income of
the Company.
Goodwill recorded in the acquisition transaction is being amortized over
fifteen years on the straight-line method.
Results of operations for 1997 as though the Company and Landmark Bank had
combined as of January 1, 1997 are not presented because the acquisition was so
close to the beginning of 1997.
Results of operations for 1996 as though the Company and Landmark Bank had
combined as of January 1, 1996 are as follows:
<TABLE>
<CAPTION>
<S> <C>
Net interest income after provision for loan losses $ 8,292,025
Noninterest income 2,324,330
-----------
Total 10,616,355
Noninterest expense 10,625,213
-----------
Loss before income taxes (8,858)
Income taxes 131,163
-----------
Net loss $ (140,021)
===========
Loss per common share $ (.07)
===========
</TABLE>
The above results of operations reflect adjustments of Landmark Bank's
financial statements to reflect purchase accounting adjustments, including
goodwill.
A-31
<PAGE>
_______________________________________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3. SECURITIES:
The amortized cost and approximate market value of securities are
summarized as follows:
<TABLE>
<CAPTION>
December 31, 1998
-----------------
Gross Gross
Unrealized Unrealized
Fair Holding Holding Amortized
Value Gain Loss Cost
-------------------------------------------------
<S> <C> <C> <C> <C>
Available-for-sale:
Bonds and notes -
U. S. Treasury Notes $12,226,872 $163,412 $ - $12,063,460
U. S. Government, including agencies 14,398,276 24,132 64,521 14,438,665
Mortgage-backed securities 358,052 - 5,930 363,982
Other bonds and debentures 24,900,303 409,634 91,251 24,581,920
Equity securities 254,250 - 19,975 274,225
------------------------------------------------
Total available-for-sale 52,137,753 597,178 181,677 51,722,252
------------------------------------------------
Other investments:
Federal Home Loan Bank stock 1,938,000 - - 1,938,000
Other securities 94,999 - - 94,999
------------------------------------------------
Total other investments 2,032,999 - - 2,032,999
------------------------------------------------
Total securities $54,170,752 $597,178 $181,677 $53,755,251
================================================
</TABLE>
<TABLE>
<CAPTION>
December 31, 1997
-----------------
<S> <C> <C> <C> <C>
Held-to-maturity:
Bonds and notes -
Municipal bonds $ 75,000 $ - $ - $ 75,000
------------------------------------------------
Total held-to-maturity 75,000 - - 75,000
------------------------------------------------
Available-for-sale:
Bonds and notes -
U. S. Treasury Notes 20,196,281 119,295 10,726 20,087,712
U. S. Government, including agencies 3,777,080 9,681 1,721 3,769,120
Mortgage-backed securities 149,997 128 - 149,869
Other bonds and debentures 5,981,316 23,780 6,325 5,963,861
------------------------------------------------
Total available-for-sale 30,104,674 152,884 18,772 29,970,562
------------------------------------------------
Other investments:
Federal Home Loan Bank stock 1,861,000 - - 1,861,000
Other securities 126,560 - - 126,560
------------------------------------------------
Total other investments 1,987,560 - - 1,987,560
------------------------------------------------
Total securities $32,167,234 $152,884 $ 18,772 $32,033,122
================================================
</TABLE>
Gross gains of $161,193, $105,627 and $810, and gross losses of $6,153,
$36,097 and $807, were realized during 1998, 1997 and 1996, respectively, on
sales of available-for-sale debt securities. There were no sales of available-
for-sale equity securities during 1998. Gross gains of $63,164 and gross losses
of $10,277 were realized during 1997 on sales of available-for-sale equity
securities. Gross gains of $0 and $500,000 and gross losses of $1,561 and $0
were realized on sales of other investments during 1998 and 1997, respectively.
A-32
<PAGE>
_______________________________________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3. SECURITIES: (continued)
Maturities of debt securities, excluding mortgage-backed securities,
classified as available-for-sale are as follows as of December 31, 1998:
<TABLE>
<CAPTION>
Weighted
Amortized Fair Average
Cost Value Yield
-----------------------------------
<S> <C> <C> <C>
U.S. Treasury Notes $ 1,015,966 $ 1,030,000 7.628%
Other bonds and debentures 695,365 697,008 7.309
------------------------
Total due in one year or less 1,711,331 1,727,008 7.592
------------------------
U.S. Treasury Notes 11,047,494 11,196,872 5.857
U.S. Government, including agencies 2,498,937 2,519,374 5.636
Other bonds and debentures 2,011,925 2,047,290 7.066
------------------------
Total due after one year through five years 15,558,356 15,763,536 6.045
------------------------
U.S. Government, including agencies 4,402,952 4,395,468 6.304
Other bonds and debentures 1,274,192 1,301,187 6.667
------------------------
Total due after five years through ten years 5,677,144 5,696,655 6.419
------------------------
U.S. Government, including agencies 7,536,776 7,483,434 6.918
Other bonds and debentures 20,600,438 20,854,818 7.267
------------------------
Total due after ten years 28,137,214 28,338,252 7.205
------------------------
$51,084,045 $51,525,451 7.109%
========================
</TABLE>
There were no issuers of securities whose aggregate book value exceeded 10%
of shareholders' equity as of December 31, 1998.
Securities, carried at $1,016,562 were pledged to secure the treasury, tax
and loan account as of
December 31, 1998.
NOTE 4. LOANS RECEIVABLE:
Loans receivable consisted of the following as of December 31:
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Real estate loans
Conventional $188,609,359 $207,311,314 $183,550,150 $175,130,966 $161,091,563
Construction 5,461,451 3,540,870 2,702,613 2,456,763 7,793,601
------------------------------------------------------------------------
194,070,810 210,852,184 186,252,763 177,587,729 168,885,164
Less - Unadvanced portion 1,688,868 900,858 1,270,412 1,434,258 2,841,500
------------------------------------------------------------------------
192,381,942 209,951,326 184,982,351 176,153,471 166,043,664
Collateral loans 20,335,430 20,635,457 20,574,710 19,524,706 18,776,523
Consumer loans 7,124,970 7,792,874 4,860,325 5,025,818 5,264,449
Commercial and municipal loans 19,257,740 20,026,574 8,352,789 9,301,028 8,066,390
Other loans 16,358 654,642 436,754 671,302 625,006
------------------------------------------------------------------------
Total loans 239,116,440 259,060,873 219,206,929 210,676,325 198,776,032
Less - Loans held for sale 3,775,802 673,950 745,650 3,095,971 3,753,657
------------------------------------------------------------------------
235,340,638 258,386,923 218,461,279 207,580,354 195,022,375
Allowance for loan losses (3,117,068) (3,061,451) (2,158,026) (1,828,060) (2,752,885)
Deferred loan origination costs
(fees), net 97,601 (101,947) (300,492) (382,042) (520,438)
------------------------------------------------------------------------
Loans receivable, net $232,321,171 $255,223,525 $216,002,761 $205,370,252 $191,749,052
========================================================================
</TABLE>
A-33
<PAGE>
___________________________________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. LOANS RECEIVABLE: (continued)
The following is a summary of activity in the allowance for loan loss
account for the years ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE, beginning of year $3,061,451 $2,158,026 $1,828,060 $2,752,885 $2,374,001
---------- ---------- ---------- ---------- ----------
Loans charged-off:
Real estate loans
Conventional 71,077 291,437 628,107 141,541 252,258
Construction 30,000 85,000 614,355 1,014,670 2,871
Collateral and consumer loans 2,229 226,710 36,721 25,568 612
Commercial and municipal loans 9,420 328,822 101,431 913,441 140,375
--------------------------------------------------------------
Total charged-off loans 112,726 931,969 1,380,614 2,095,220 396,116
--------------------------------------------------------------
Recoveries on loans:
Real estate loans
Conventional 28,549 6,786 19,063 3,300 11,666
Collateral and consumer loans 2,796 22,257 22,105 2,099 1,779
Commercial and municipal loans 16,831 23,586 8,671 1,286 -
--------------------------------------------------------------
Total recoveries 48,176 52,629 49,839 6,685 13,445
--------------------------------------------------------------
Net charged-off loans: 64,550 879,340 1,330,775 2,088,535 382,671
--------------------------------------------------------------
Balance relating to acquisition
of Landmark Bank: - 850,294 - - -
--------------------------------------------------------------
Provision for loan losses charged
to income: 120,167 932,471 1,660,741 1,163,710 761,555
--------------------------------------------------------------
BALANCE, end of year $3,117,068 $3,061,451 $2,158,026 $1,828,060 $2,752,885
==============================================================
Ratios of net charged-off loans during
the period to average loans
outstanding during the period .03% .35% .63% 1.02% .20%
==============================================================
</TABLE>
The Company had no extensions of credit to related parties in excess of 5%
of shareholders' equity at any time during the year ended December 31, 1998 and
1997. Certain directors and executive officers of the Bank and companies in
which they have significant ownership interest were customers of the Bank during
1998. Total loans to such persons and their companies amounted to $809,180 as
of December 31, 1998. During 1998 advances of $81,224 were made and repayments
totaled $400,931.
<TABLE>
<CAPTION>
Impaired loans as of December 31, 1998 1997
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Average recorded investment in impaired loans $1,925,907 $1,766,918
Recorded investment in impaired loans at December 31 $1,850,214 $1,942,320
Portion of valuation allowance allocated to impaired loans $ 385,694 $ 322,655
Net balance of impaired loans $1,464,520 $1,619,665
Interest income recognized on impaired loans $ 100,683 $ 84,154
Interest income on impaired loans on cash basis $ 100,683 $ 7,702
Recorded investment in impaired loans with related allowance for credit losses $1,676,226 $1,562,949
Recorded investment in impaired loans with no related allowance for credit losses $ 173,988 $ 379,371
</TABLE>
A-34
<PAGE>
___________________________________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. LOANS RECEIVABLE: (continued)
In addition to total loans previously shown, the Company services loans for
other financial institutions.
Participation loans are loans originated by the Company for a group of banks.
Sold loans are loans originated by the Company and sold to the secondary market.
The Company services these loans and remits the payments received to the buyer.
The Company specifically originates long-term, fixed-rate loans to sell. The
amount of loans sold and participated out which are serviced by the Company are
as follows as of December 31:
<TABLE>
<CAPTION>
1998 1997
-------------------------
<S> <C> <C>
Sold loans $128,115,971 $71,551,925
=========================
Participation loans $ 2,788,528 $ 4,601,826
========================
</TABLE>
Servicing assets of $798,758 and $374,533 wer e capitalized in 1998 and
1997, respectively. Amortization of servicing ass ets was $186,841 in 1998 and
$63,805 in 1997.
The fair value of servicing assets was $995,5 96 and $390,340 as of
December 31, 1998 and 1997, respectively. Following is an analysis of the
aggregate changes in the valuation allowances for servicing assets:
<TABLE>
<CAPTION>
1998 1997
-------------------
<S> <C> <C>
Balance, beginning of year $ 57,422 $ 0
Additions 72,116 57,422
------------------
Balance, end of year $129,538 $57,422
==================
</TABLE>
The Company has issued letters of credit and has approved lines of credit
loans to specific individuals and companies. The unused portions are as follows
as of December 31:
<TABLE>
<CAPTION>
1998 1997
-----------------------
<S> <C> <C>
Letters of credit $ 694,098 $ 665,850
=======================
Lines of credit $7,632,913 $16,187,526
=======================
</TABLE>
NOTE 5. BANK PREMISES AND EQUIPMENT:
Bank premises and equipment are shown on the consolidated statements of
financial condition at cost, net of accumulated depreciation, as follows as of
December 31:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Land $ 1,043,586 $ 1,043,586
Landdings and premises 7,256,000 7,171,794
Furniture, fixtures and equipment 5,462,370 4,681,710
------------------------
13,761,956 12,897,090
Less - Accumulated depreciation 5,345,774 4,718,755
------------------------
$ 8,416,182 $ 8,178,335
========================
</TABLE>
NOTE 6. REAL ESTATE OWNED AND PROPERTY ACQUIRED:
As of December 31, 1998 and 1997, the Company owned property acquired by
foreclosure. The balances consisted of the following:
<TABLE>
<CAPTION>
1998 1997
-------------------
<S> <C> <C>
Residential real estate $ 72,000 $144,000
Commercial real estate 598,153 372,153
-------------------
$670,153 $516,153
===================
</TABLE>
A-35
<PAGE>
___________________________________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6. REAL ESTATE OWNED AND PROPERTY ACQUIRED: (continued)
It is the policy of the Company, upon the acquisition of real estate by
foreclosure, to evaluate the condition of the property, make any appropriate or
necessary structural and/or cosmetic improvements and place the property as an
open listing with all area real estate agents. Company employees are also
encouraged to participate in the selling of these properties.
For 1998, 1997 and 1996, $70,646, $84,832 and $179,443, respectively, of
net operating cost of other real estate is included in net income.
NOTE 7. DEPOSITS:
Deposits consisted of the following as of December 31:
<TABLE>
<CAPTION>
1998 1997
-------------------------------------------
<S> <C> <C> <C> <C>
Checking accounts (non-interest-bearing) $ 16,521,820 5.9% $ 15,105,900 5.6%
NOW accounts 40,431,129 14.3 33,488,870 12.3
Ever-Ready Money Market 27,162,129 9.6 23,651,154 8.7
Regular savings accounts 13,146,531 4.7 7,901,726 2.9
Treasury savings accounts 63,608,465 22.6 57,915,167 21.4
Club deposits 82,108 .0 66,493 .0
------------------------------------------
160,952,182 57.1 138,129,310 50.9
------------------------------------------
Time deposits
2.00% - 2.99% 41,956 .0 250,790 .1
3.00% - 3.99% 1,912,878 .7 - -
4.00% - 4.99% 19,668,581 7.0 2,931,518 1.1
5.00% - 5.99% 84,160,709 29.8 98,425,330 36.3
6.00% - 6.99% 6,268,060 2.2 14,837,481 5.5
7.00% - 7.99% 9,044,790 3.2 14,461,393 5.3
8.00% - 8.99% - - 2,191,138 .8
------------------------------------------
121,096,974 42.9 133,097,650 49.1
------------------------------------------
$282,049,156 100.0% $271,226,960 100.0%
==========================================
</TABLE>
The following is a summary of maturities of time deposits as of December 31,
1998:
<TABLE>
<S> <C>
1999 $101,425,326
2000 14,993,066
2001 2,890,222
2002 766,317
2003 852,539
Thereafter 169,504
------------
$121,096,974
============
</TABLE>
As of December 31, 1998, time deposits include $13,810,657 of certificates
of deposit with a minimum balance of $100,000. Maturities of these certificates
are as follows:
<TABLE>
<S> <C>
Less than 3 months $ 3,187,364
Over 3 months and less than 6 months 4,068,224
Over 6 months and less than 12 months 4,731,903
Over 12 months 1,823,166
------------
$ 13,810,657
============
</TABLE>
A-36
<PAGE>
___________________________________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE:
The purchasers of the securities under agreements to repurchase have agreed
to resell to the Company substantially identical securities at the maturities of
the agreements.
The maturity dates of the repurchase agreements are from January 15, 1999
to October 30, 1999 on the anniversary date of the repurchase agreement. The
securities are under control of the Bank.
NOTE 9. ADVANCES FROM FEDERAL HOME LOAN BANK:
Advances consisted of funds borrowed from the Federal Home Loan Bank of
Boston (FHLB).
These advances were secured by Federal Home Loan Bank stock (Note 2) and
unspecified first mortgage loans. The Company is able to borrow up to
$96,349,000 of Federal Home Loan Bank advances.
In addition to the above advances, the Company has credit available up to
$6,411,000 under a revolving loan agreement with the Federal Home Loan Bank.
There was no outstanding balance as of December 31, 1998. There was an
outstanding balance of $300,000 as of December 31, 1997. Interest is payable
monthly as funds are borrowed.
NOTE 10. INCOME TAXES:
The components of income tax expense are as follows for the years ended
December 31:
<TABLE>
<CAPTION>
1998 1997 1996
-----------------------------------
<S> <C> <C> <C>
Current tax expense $1,238,241 $1,808,575 $ 406,644
Deferred tax expense (benefit) 364,723 (575,835) (120,481)
-----------------------------------
Total income tax expense $1,602,964 $1,232,740 $ 286,163
===================================
</TABLE>
The reasons for the differences between the statutory federal income tax
rates and the effective tax rates are summarized as follows for the years ended
December 31:
<TABLE>
<CAPTION>
1998 1997 1996
-------------------
<S> <C> <C> <C>
Federal income tax at statutory rate 34.0% 34.0% 34.0%
Increase (decrease) in tax resulting from:
Tax-exempt income (.2) (.3) (1.6)
Dividends received deduction (.2) (.4) (3.0)
Goodwill amortization 1.8 2.1 -
Other, net (1.5) (4.6) 2.5
-------------------
33.9% 30.8% 31.9%
===================
</TABLE>
A-37
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10. INCOME TAXES: (continued)
The Company had gross deferred tax assets and gross deferred tax
liabilities as follows as of December 31:
<TABLE>
<CAPTION>
1998 1997
----------- ----------
<S> <C> <C>
Deferred tax assets:
Interest on non-performing loans $ 5,412 $ 11,598
Allowance for loan losses 930,260 953,119
Loan origination fees, net of costs - 39,371
Deferred compensation 20,011 -
Deferred retirement expense 10,443 -
Mark to market loans available-for-sale - 81
Accrued directors fees 34,005 29,564
---------- ----------
Gross deferred tax assets 1,000,131 1,033,733
---------- ----------
Deferred tax liabilities:
Deferred loan costs, net of fees 37,694 -
Prepaid pension 189,762 144,229
Accelerated depreciation 279,392 239,969
Mortgage servicing rights 346,088 137,617
Unrealized holding gain on securities available-for-sale 160,467 51,794
---------- ----------
Gross deferred tax liabilities 1,013,403 573,609
---------- ----------
Net deferred tax asset (liability) $ (13,272) $ 460,124
========== ==========
</TABLE>
Deferred tax assets as of December 31, 1998 have not been reduced by a
valuation allowance because management believes that it is more likely than not
that the full amount of deferred tax assets will be realized.
As of December 31, 1998, the Company had no operating loss and tax credit
carryover for tax purposes.
NOTE 11. STOCK COMPENSATION PLANS:
As of December 31, 1998, the Company had three fixed option, stock-based
compensation plans, which are described below. The Company has adopted the
disclosure only provisions of SFAS No. 123 "Accounting for Stock-Based
Compensation" but applies APB Opinion 25 and related Interpretations in
accounting for its plans. Accordingly, no compensation cost has been recognized
for its fixed stock option plans. Had compensation cost for the Company's
stock-based compensation plans been determined based on the fair value at the
grant dates for awards under those plans consistent with the method of FASB
Statement 123, the Company's net income and earnings per share would have been
reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- --------
<S> <C> <C> <C> <C>
Net income As reported $3,118,750 $2,770,932 $610,711
Pro forma $2,876,087 $2,770,932 $500,828
Earnings per common share As reported $ 1.49 $ 1.36 $ .36
Pro forma $ 1.37 $ 1.36 $ .30
Earnings per common share, As reported $ 1.47 $ 1.33 $ .35
assuming dilution Pro forma $ 1.36 $ 1.33 $ .29
</TABLE>
Under the 1986 plan, the Company may grant options to its employees for up
to 57,880 additional shares of common stock. Under the 1987 plan, the Company
may grant options to its employees for up to 27,666 additional shares of common
stock. Under both plans, the exercise price of each option equals the market
price of the Company's stock on the date of grant and an option's maximum term
is 10 years. Options are exercisable immediately.
A-38
<PAGE>
NOTE 11. STOCK COMPENSATION PLANS: (continued)
On April 10, 1996, the shareholders approved the adoption of the "1996
Stock Option Plan." Under this plan, an amount equal to 10% of the issued and
outstanding common stock of the Company has been reserved for future issuance.
On December 2, 1996 48,000 options were granted from the 1996 stock option plan
at an exercise price of $12.50 per share, the fair market value on that date.
The fair value of each option was estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions:
<TABLE>
<CAPTION>
1998 1996
------------- -------------
<S> <C> <C>
Weighted risk-free interest rate 5.80% 6.37%
Weighted expected life 8 years 9 years
Weighted expected volatility 23.74% 17.33%
Weighted expected dividend yield 4.0% per year 5.0% per year
</TABLE>
No options were granted in 1997.
No modifications have been made to the terms of the option agreements.
A summary of the status of the Company's fixed stock option plans as of
December 31, 1998, 1997 and 1996 and changes during the years ending on those
dates is presented below:
<TABLE>
<CAPTION>
1998 1997 1996
----------------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year 75,435 $ 10.99 141,760 $ 10.34 62,590 $ 8.22
Granted 60,000 21.00 0 - 97,900 11.29
Exercised (20,780) 10.78 (64,525) 9.58 (18,730) 8.24
Forfeited - (1,800) 10.125 -
-------- ------- --------
Outstanding at
end of year 114,655 $ 16.27 75,435 $ 10.99 141,760 $10.34
======== ======= ========
Options exercisable
at year-end 114,655 75,435 141,760
Weighted-average
fair value of
options granted
during the year $ 4.82 N/A $ 1.84
</TABLE>
The following table summarizes information about fixed stock options
outstanding as of December 31, 1998:
Options Outstanding and Exercisable
----------------------------------------------------------
Number
Outstanding Remaining
Exercise Prices as of 12/31/98 Contractual Life
--------------- --------------- ----------------
$9.00 8,855 6 years
10.125 19,800 7 years
12.50 26,000 8 years
21.00 60,000 9 years
-------
114,655
-------
A-39
<PAGE>
__________________________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12. EMPLOYEE BENEFIT PLANS:
Defined benefit pension plan - The Company has a defined benefit pension
plan covering substantially all full-time employees who have attained age 21 and
have completed one year of service. Annual contributions to the plan are based
on actuarial estimates.
The following tables set forth information about the plan as of December 31
and the years then ended:
<TABLE>
<CAPTION>
1998 1997
-----------------------
<S> <C> <C>
Change in projected benefit obligation:
Benefit obligation at beginning of year $1,636,696 $1,516,431
Service cost 148,182 91,465
Interest cost 124,942 112,553
Actuarial loss 253,262 93,031
Benefits paid (180,946) (176,784)
-----------------------
Benefit obligation at end of year 1,982,136 1,636,696
------------------------
Change in plan assets:
Plan assets at estimated fair value at beginning of year 1,852,640 1,636,404
Actual return on plan assets 179,212 229,694
Employer contribution 224,912 163,326
Benefits paid (180,946) (176,784)
-----------------------
Fair value of plan assets at end of year 2,075,818 1,852,640
-----------------------
Funded status 93,682 215,944
Unrecognized net actuarial loss 424,948 239,357
Unrecognized prior service cost (27,272) (29,965)
-----------------------
Prepaid benefit cost included in other assets $ 491,358 $ 425,336
=======================
</TABLE>
The weighted-average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation were 7% and 4% for 1998, and 7% and 3% for 1997 and
1996, respectively. The weighted-average expected long-term rate of return on
assets was 7% for 1998, 1997 and 1996.
Components of net periodic benefit cost:
<TABLE>
<CAPTION>
1998 1997 1996
---------------------------------
<S> <C> <C> <C>
Service cost $ 148,182 $ 91,465 $ 84,057
Interest cost on benefit obligation 124,942 112,553 109,326
Expected return on assets (135,624) (115,361) (97,664)
Amortization of prior service cost (2,693) (2,693) (2,693)
Recognized net actuarial cost 24,083 25,485 29,224
--------------------------------
Net periodic benefit cost $ 158,890 $ 111,449 $122,250
================================
</TABLE>
The amounts and types of securities of the Company included in plan assets
as of December 31, 1998 and 1997 consist of 7,500 shares of New Hampshire Thrift
Bancshares, Inc.
A-40
<PAGE>
__________________________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12. EMPLOYEE BENEFIT PLANS: (continued)
Profit Sharing - Stock Ownership Plan - Lake Sunapee Bank, fsb, sponsors
a Profit Sharing - Stock Ownership Plan. Lake Sunapee Bank, fsb may elect, but
is not required, to make discretionary and/or matching contributions to the
Plan.
For 1998, 1997 and 1996, participating employees' contributions totaled
$170,048, $139,992 and $118,346, respectively. The Bank made a matching
contribution of $10,000 for 1998, $14,000 for 1997 and $10,000 for 1996. A
participant's retirement benefit will depend on the amount of the contributions
to the Plan together with the gains or losses on the investments.
NOTE 13. COMMITMENTS AND CONTINGENCIES:
In the normal course of business, the Company has outstanding various
commitments and contingent liabilities, such as legal claims, which are not
reflected in the consolidated financial statements. Management does not
anticipate any material loss as a result of these transactions. As of December
31, 1998, the Company had entered into commitments to fund loans totaling
$12,235,700. The majority of these loans will have fixed rates.
The following is a schedule, by interest rate, of loan commitments
outstanding as of December 31:
<TABLE>
<CAPTION>
1998 1997
---------------------------
<S> <C> <C>
5.00% - 5.99% $ 118,500 $ -
6.00% - 6.99% 7,930,600 2,187,875
7.00% - 7.99% 3,459,200 5,799,460
8.00% - 8.99% 662,400 240,000
9.00% - 9.99% - 74,000
10.00% - 10.99% 65,000 16,100
---------------------------
$12,235,700 $8,317,435
===========================
</TABLE>
As of December 31, 1998, the Company was obligated under non-cancelable
operating leases for bank premises expiring between 1999 and 2007. The total
minimum rental due in future periods under these existing agreements is as
follows as of December 31, 1998:
1999 $140,481
2000 103,656
2001 98,781
2002 98,781
2003 98,781
Years thereafter 262,784
--------
Total minimum lease payments $803,264
========
Certain leases contain provisions for escalation of minimum lease payments
contingent upon increases in real estate taxes and percentage increases in the
consumer price index. The total rental expense amounted to $141,456 and $96,481
for the years ended December 31, 1998 and 1997, respectively.
A-41
<PAGE>
__________________________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14. SHAREHOLDERS' EQUITY:
Liquidation account - On May 22, 1986, Lake Sunapee Bank, fsb received
approval from the Federal Home Loan Bank Board and converted from a federally-
chartered mutual savings bank to a federally-chartered stock savings bank. At
the time of conversion, the Bank established a liquidation account in an amount
of $4,292,510 (equal to the Bank's net worth as of the date of the latest
financial statement included in the final offering circular used in connection
with the conversion). The liquidation account will be maintained for the
benefit of eligible account holders who maintain their deposit accounts in the
Bank after conversion. In the event of a complete liquidation of the Bank
subsequent to conversion (and only in such event), each eligible account holder
will be entitled to receive a liquidation distribution from the liquidation
account before any liquidation distribution may be made with respect to capital
stock. The amount of the liquidation account is reduced to the extent that the
balances of eligible deposit accounts are reduced on any year-end closing date
subsequent to the conversion. Company management believes the balance in the
liquidation account would be immaterial to the consolidated financial statements
as of December 31, 1998.
Dividends - The Bank may not declare or pay a cash dividend on or purchase
any of its stock if the effect would be to reduce the net worth of the Bank
below either the amount of the liquidation account or the net worth requirements
of the banking regulators.
Treasury stock - On July 15, 1993, the Company announced a buy back program
whereby the Company intends to repurchase, on the open market, 10% of its
currently outstanding common stock. As of December 31, 1998, 103,854 shares
remained to be purchased from the 1993 buy back program.
Treasury stock is recorded at cost, as purchased. Treasury stock sold is
accounted for on a first-in, first-out basis.
Special bad debts deduction - In prior years, Lake Sunapee Bank, fsb, a
wholly-owned subsidiary of the Company, was allowed a special tax-basis under
certain provisions of the Internal Revenue Code. As a result, retained income
of Lake Sunapee Bank, fsb, as of December 31, 1998 includes approximately
$2,069,898 for which federal and state income taxes have not been provided. If
the Bank no longer qualifies as a bank as defined in certain provisions of the
Internal Revenue Code, this amount will be subject to recapture in taxable
income ratably over six (6) years, subject to a combined federal and state tax
rate of approximately 39%.
A-42
<PAGE>
_____________________________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15. EARNINGS PER SHARE (EPS)
Reconciliation of the numerators and the denominators of the basic and
diluted per share computations for net income are as follows:
<TABLE>
<CAPTION>
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
<S> <C> <C> <C>
Year ended December 31, 1998
Basic EPS
Net income and income available to common stockholders $3,118,750 2,095,305 $1.49
Effect of dilutive securities, options 26,128
-------------------------
Diluted EPS
Income available to common stockholders and assumed
conversions $3,118,750 2,121,433 $1.47
=========================
Year ended December 31, 1997
Basic EPS
Net income and income available to common stockholders $2,770,932 2,037,706 $1.36
Effect of dilutive securities, options 41,254
-------------------------
Diluted EPS
Income available to common stockholders and assumed
conversions $2,770,932 2,078,960 $1.33
=========================
Year ended December 31, 1996
Basic EPS
Net income and income available to common stockholders $ 610,711 1,694,410 $ .36
Effect of dilutive securities, options 28,573
-------------------------
Diluted EPS
Income available to common stockholders and assumed
conversion $ 610,711 1,722,983 $ .35
=========================
</TABLE>
NOTE 16. Regulatory matters:
The Company and the Bank are subject to various capital requirements
administered by their primary federal regulator, the Office of Thrift
Supervision (OTS). Failure to meet minimum regulatory requirements can initiate
mandatory, and possible additional discretionary actions by regulators, that if
undertaken, could have a direct material effect on the Company's and the
consolidated financial statements. Under the regulatory capital adequacy
guidelines and the regulatory framework for prompt corrective action, the Bank
must meet specific capital guidelines involving quantitative measures of the
Bank's assets, liabilities, and certain off-balance-sheet items as calculated
under regulatory accounting practices. The Bank's capital amounts and
classifications under the prompt corrective action guidelines are also subject
to qualitative judgments by the regulators about components, risk weightings and
other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the table
below) of total risk-based capital and Tier 1 capital to risk-weighted assets
(as defined in the regulations), Tier 1 capital to adjusted total assets (as
defined) and tangible capital to adjusted total assets (as defined).
Management believes, as of December 31, 1998, that the Bank meets all
capital requirements to which it is subject.
A-43
<PAGE>
NOTE 16. REGULATORY MATTERS: (continued)
As of December 31, 1998, the most recent notification from the Office of
Thrift Supervision categorized the Bank as well capitalized under the regulatory
frame work for prompt corrective action. To be categorized as well capitalized
the Bank must maintain minimum total risk-based, Tier 1 risk-based and Tier 1
leverage ratios as set forth in the table. There are no conditions or events
since that notification that management believes have changed the Bank's
category.
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes: Action Provisions:
------------------ ------------------- ------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
(Dollar amounts in Thousands)
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1998:
Total Capital (to Risk Weighted Assets) $24,571 12.63% $15,564 *8.0% $19,455 10.0%
Core Capital (to Adjusted Tangible Assets) 23,398 7.31 12,801 *4.0 16,002 5.0
Tangible Capital (to Tangible Assets) 23,398 7.31 4,801 *1.5 N/A N/A
Tier 1 Capital (to Risk Weighted Assets) 23,398 12.03 N/A N/A 11,673 6.0
As of December 31, 1997:
Total Capital (to Risk Weighted Assets) 21,611 11.86 14,577 *8.0 18,222 *10.0
Core Capital (to Adjusted Tangible Assets) 20,341 6.47 12,569 *4.0 15,711 *5.0
Tangible Capital (to Tangible Assets) 20,341 6.47 4,713 *1.5 N/A N/A
Tier 1 Capital (to Risk Weighted Assets) 20,341 11.12 N/A N/A 10,979 *16.0
</TABLE>
* Greater than and equal to
NOTE 17. FAIR VALUE OF FINANCIAL INSTRUMENTS:
The estimated fair values of the Company's financial instruments, all of
which are held or issued for purposes other than trading, were as follows
December 31:
<TABLE>
<CAPTION>
1998
-------------------------- --------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents $ 16,284,558 $ 16,284,558 $ 13,306,626 $ 13,306,626
Securities available-for-sale 52,137,753 52,137,753 30,104,674 30,104,674
Securities held-to-maturity - - 75,000 75,000
Other investments 2,032,999 2,032,999 1,987,560 1,987,560
Loans 232,321,171 235,730,000 255,223,525 256,938,000
Loans held-for-sale 3,775,802 3,775,802 673,950 673,950
Accrued interest receivable 1,725,235 1,725,235 1,556,194 1,556,194
Financial liabilities:
Regular savings, NOW, demand and
money market deposits 160,952,182 160,952,182 138,129,310 138,129,310
Time deposits 121,096,974 121,492,000 133,097,650 133,535,000
Other borrowed funds - - 300,000 300,000
Securities sold under agreements to repurchase 11,849,116 11,849,116 8,393,192 8,393,192
Advances from Federal Home Loan Bank - - 10,246,318 10,237,000
</TABLE>
The carrying amounts of financial instruments shown in the above table are
included in the consolidated statements of financial condition under the
indicated captions.
A-44
<PAGE>
_____________________________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17. FAIR VALUE OF FINANCIAL INSTRUMENTS: (continued)
The Company has no derivative financial instruments subject to the
provisions of SFAS No. 119 "Disclosure About Derivative Financial Instruments
and Fair Value of Financial Instruments." Accounting policies related to
financial instruments are described in Note 1.
NOTE 18. CONDENSED PARENT COMPANY FINANCIAL STATEMENTS:
The following are condensed statements of financial condition, income and
cash flows for New Hampshire Thrift Bancshares, Inc. ("Parent Company") for the
years ended December 31:
CONDENSED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
1998 1997
------------------------
ASSETS
<S> <C> <C>
Investment in subsidiary, Lake Sunapee Bank $26,932,719 $24,128,876
Advances to Lake Sunapee Bank 848,778 1,434,249
------------------------
Total assets $27,781,497 $25,563,125
========================
OTHER LIABILITY $ 1,891 $ -
SHAREHOLDERS' EQUITY 27,779,606 25,563,125
------------------------
Total liabilities and shareholders' equity $27,781,497 $25,563,125
========================
</TABLE>
CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
1998 1997 1996
--------------------------------------
<S> <C> <C> <C>
Dividends from subsidiary $ 500,000 $3,000,000 $1,000,000
Operating expenses 12,377 4,380 13,874
-------------------------------------
Income before equity in earnings of subsidiary 487,623 2,995,620 986,126
Equity in undistributed earnings (loss) of subsidiary 2,631,127 (224,688) (375,415)
-------------------------------------
Net income 3,118,750 2,770,932 610,711
Other comprehensive income, net of taxes
Unrealized holding gains (losses) on available-for-sale securities,
Lake Sunapee Bank 172,716 209,497 (224,773)
-------------------------------------
Comprehensive income $3,291,466 $2,980,429 $ 385,938
=====================================
</TABLE>
A-45
<PAGE>
_____________________________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18. Condensed parent company financial statements: (continued)
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
1998 1997 1996
-------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 3,118,750 $ 2,770,932 $ 610,711
Increase in taxes payable 1,891 - -
Equity in undistributed (earnings) loss of subsidiary (2,631,127) 224,688 375,415
-------------------------------------
Net cash provided by operating activities 489,514 2,995,620 986,126
-------------------------------------
Cash flows from investing activities:
Additional investment in subsidiary - (81,547) -
Net change in advances to subsidiary 643,535 (96,278) (249,873)
-------------------------------------
Net cash provided by (used in) investing activities 643,535 (177,825) (249,873)
-------------------------------------
Cash flows from financing activities:
Proceeds from stock options exercised 197,941 699,553 154,295
Dividends paid (1,257,015) (987,032) (847,066)
Acquisition of Landmark Bank - (2,275,000) -
Repurchase of treasury stock (73,975) (255,316) (43,482)
-------------------------------------
Net cash used in financing activities (1,133,049) (2,817,795) (736,253)
-------------------------------------
Cash, end of year $ - $ - $ -
=========================== =========
</TABLE>
The Parent Only Statements of Changes in Shareholders' Equity are identical
to the Consolidated Statements of Changes in Shareholders' Equity for the years
ended December 31, 1998, 1997 and 1996, and therefore are not reprinted here.
A-46
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
SEC Commission Number 17859
For the fiscal year ended:
DECEMBER 31, 1998
NEW HAMPSHIRE THRIFT BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 02-0430695
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
9 MAIN STREET, PO BOX 9
NEWPORT, NEW HAMPSHIRE 03773-0009
(Address)
Registrant's telephone number, including area code: (603) 863-0886
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.01 PAR VALUE
Title of Class
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. X
-----
The issuer's revenues for its most recent fiscal year were $25,905,987
The aggregate market value of the voting stock held by non-affiliates of the
registrant is between $32,016,752 and $31,016,229 based on a $16.00 average bid
and a $15.50 average asked price, respectively, as of December 31, 1998.
Number of shares of Common Stock Outstanding as of February 9, 1999 were
2,104,285
Transitional Small Business Disclosure Format. Yes _______ No X
-----
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NEW HAMPSHIRE THRIFT BANCSHARES, INC.
INDEX
<TABLE>
<S> <C>
PART I
Item 1. Business.............................................................................................. 49
Item 2. Properties............................................................................................ 60
Item 3. Legal Proceedings..................................................................................... 61
Item 4. Submission of Matters to a Vote of Security Holders................................................... 61
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters.............................. 61
Item 6. Management's Discussion and Analysis of Financial Condition and Results of Operations................. 61
Item 7. Financial Statements and Supplementary Information Report of Independent Auditors..................... 61
Consolidated Statements of Financial Condition........................................................ 61
Consolidated Statements of Income..................................................................... 61
Consolidated Statements of Changes in Shareholders' Equity............................................ 61
Consolidated Statements of Cash Flows................................................................. 61
Notes to Consolidated Financial Statements............................................................ 61
Item 8. Disagreements on Accounting and Financial Disclosure.................................................. 62
PART III
Item 9. Directors and Executive Officers of the Registrant.................................................... 62
Item 10. Executive Compensation................................................................................ 62
Item 11. Security Ownership of Certain Beneficial Owners and Management........................................ 62
Item 12. Certain Relationships and Related Transactions........................................................ 62
Item 13. Exhibits and Reports on Form 8-K Exhibits............................................................. 62
Reports on Form 8-K................................................................................... 63
Signatures............................................................................................ 64
</TABLE>
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PART I.
ITEM 1. BUSINESS
GENERAL
ORGANIZATION
New Hampshire Thrift Bancshares, Inc. (NHTB), a Delaware holding
company organized on July 5, 1989, is the parent company of Lake Sunapee Bank,
fsb (LSB), a federally chartered savings bank. The Bank was originally chartered
by the State of New Hampshire in 1868 as the Newport Savings Bank. The Bank
became a member of the Federal Deposit Insurance Corporation (FDIC) in 1959 and
a member of the Federal Home Loan Bank of Boston in 1978. On December 1, 1980,
the Bank was the first bank in the United States to convert from a
state-chartered mutual savings bank to a federally-chartered mutual savings bank
and its deposits became insured by the Federal Savings and Loan Insurance
Corporation (FSLIC). In 1981, the Bank changed its name to "Lake Sunapee Savings
Bank, fsb" and in 1994, refined its name to "Lake Sunapee Bank, fsb." In 1989,
as a result of the Financial Institution Reform, Recovery, and Enforcement Act
(FIRREA), the Bank's deposits were insured by the Savings Association Insurance
Fund (SAIF).
Lake Sunapee Bank, fsb is a thrift institution established for the
purposes of providing the public with a convenient and safe place to invest
funds, for the financing of housing, consumer-oriented products and commercial
loans, and for providing a variety of other consumer-oriented financial
services. The Bank is a full-service community institution promoting the ideals
of thrift, security, home ownership and financial independence for its
customers. The Bank's operations are conducted from its home office located in
Newport, New Hampshire and its branch offices located in Sunapee, New London,
Bradford, Grantham, Guild, Lebanon, West Lebanon, Hillsboro, and Andover, New
Hampshire. The Bank had assets of approximately $324 million as of December 31,
1998.
Through its subsidiary, Lake Sunapee Financial Services Corporation
(LSFSC), the Bank offers brokerage services to its customers.
MARKET AREA
The Bank's market area consists of west-central New Hampshire in the
counties of Merrimack, Sullivan, Hillsboro, and Grafton. This area is best known
for its recreational facilities and its resort/retirement environment. Within
the market area are two major ski areas, several lakes, retirement communities,
a four-season recreational development center designed to support 3,500
families, Colby Sawyer, New England, and Dartmouth Colleges and several
industrial manufacturing employers.
In addition to the year-round regional population, the Upper
Valley-Kearsarge-Lake Sunapee area has a sizable number of seasonal residents.
In 1990, a total of over 3,600 seasonal dwellings were listed by the Census
Bureau. Based on an occupancy rate of five persons per seasonal unit, the
regional seasonal population can be estimated to be over 18,000 persons.
LENDING ACTIVITIES
The Bank's loan portfolio totaled $239,116,440, including $3,775,802 of
loans held for sale at December 31, 1998, representing approximately 75% of
total assets. As of December 31, 1998, approximately 80% of the mortgage loan
portfolio had adjustable rates. As of December 31, 1998, the Bank had sold
$128,115,971 in fixed rate mortgage loans in an effort to meet customer demands
for fixed rate loans, minimize interest rate risk, and build a servicing
portfolio.
RESIDENTIAL LOANS. The Bank's loan origination team solicits
residential mortgage loans in the local real estate marketplace. Residential
borrowers are frequently referred to the Bank by its existing customers or real
estate agents. Generally, the Bank makes conventional mortgage loans (loans of
80% of value or less that are neither insured nor partially guaranteed by
government agencies) on one- to four-family owner occupied dwellings. The Bank
also makes residential loans up to 95% of the appraised value if the top 20% of
the loan is covered by private mortgage insurance. Residential mortgage loans
typically have terms up to 30 years and are amortized on a monthly basis with
principal and interest due each month. Currently, the Bank offers one-year,
three-year and five-year adjustable-rate mortgage loans and long-term fixed rate
loans. Borrowers may prepay loans at their option or refinance their loans on
terms agreeable to the
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Bank. The Bank's management believes that due to prepayments in connection with
refinancing and sales of property, the average length of the Bank's long-term
residential loans is approximately nine years.
Since the middle of the 1960's, the terms of conventional residential
mortgage loans granted by the Bank have contained a "due-on-sale" clause which
permits the Bank to accelerate the indebtedness of a loan upon the sale or other
disposition of the mortgaged property. Due-on-sale clauses are an important
means of increasing the turnover of mortgage loans in the Bank's portfolio.
CONSUMER LOANS. The Bank makes various types of secured and unsecured
consumer loans, including home improvement loans. The Bank offers loans secured
by automobiles, boats and other recreational vehicles. The Bank believes that
the shorter terms and the normally higher interest rates available on various
types of consumer loans is helpful in maintaining a more profitable spread
between the Bank's average loan yield and its cost of funds.
COMMERCIAL LOANS. The Bank offers commercial loans in accordance with
regulatory requirements. Under current regulation the bank is limited to 20% of
total assets. The Bank currently has approximately 8.50% commercial loans.
MUNICIPAL LOANS. The Bank's activity in the municipal lending market is
limited to those towns and school districts located within our primary lending
area and such loans are extended for the purposes of either tax anticipation,
building improvements or other capital spending requirements. Municipal lending
is considered to be an area of accommodation and part of the Bank's continuing
involvement with the communities it serves.
HOME EQUITY LOANS. The Bank provides Home Equity Loans secured by liens
on residential real estate located within the Bank's market area. These include
loans with regularly scheduled principal and interest payments as well as
revolving credit agreements. The interest rate on these loans is adjusted
quarterly and tied to the movement of the Prime Rate.
ORIGINATION, PURCHASE AND SALE OF LOANS
The primary lending activity of the Bank is the origination of
conventional loans (i.e., loans that are neither insured nor guaranteed in whole
or in part by governmental agencies) secured by first mortgage liens on
residential properties, principally single-family residences, substantially all
of which are located in the west-central area of New Hampshire.
The Bank appraises the security for each new loan made. Appraisals are
made for the Bank by qualified sub-contracted appraisers. The appraisal of the
real property upon which the Bank makes a mortgage loan is of particular
significance to the Bank in the event that the loan is foreclosed, since an
improper appraisal may contribute to a loss by or other financial detriment to
the Bank in the disposition of the loan.
Detailed applications for mortgage loans are verified through the use
of credit reports, financial statements and confirmations. Depending upon the
size of the loan involved, a varying number of senior officers of the Bank must
approve the application before the loan can be granted. At times, the Executive
Committee of the Bank is called together to review particularly large loans.
The Bank requires title certification on all first mortgage loans and
the borrower is required to maintain hazard insurance on the security property.
SERVICE CORPORATIONS
The Bank has an expanded service corporation authority because of its
conversion from a state-chartered mutual savings bank to a federal institution
in 1980. This authority, grandfathered in that conversion, permits the Bank to
invest 15% of its deposits, plus an amount of approximately $825,000, in service
corporation activities permitted by New Hampshire law. However, the first 3% of
these activities is subject to federal regulation and the remainder is subject
to state law. This permits a 3% investment in activities not permitted by state
law.
As of December 31, 1998, the Bank had two service corporations, the
Lake Sunapee Group, Inc., and the Lake Sunapee Financial Services Corporation.
The Lake Sunapee Group owns and maintains the Bank's buildings and investment
properties.
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COMPETITION
The Bank faces strong competition in the attraction of deposits. Its
most direct competition for deposits comes from the other thrifts and commercial
banks located in its primary market area. The Bank faces additional significant
competition for investors' funds from mutual funds and other corporate and
government securities.
The Bank competes for deposits principally by offering depositors a
wide variety of savings programs, a market rate of return, tax-deferred
retirement programs and other related services. The Bank does not rely upon any
individual, group or entity for a material portion of its deposits.
The Bank's competition for real estate loans comes from mortgage
banking companies, other thrift institutions and commercial banks. The Bank
competes for loan originations primarily through the interest rates and loan
fees it charges and the efficiency and quality of services it provides
borrowers, real estate brokers and builders. The Bank's competition for loans
varies from time to time depending upon the general availability of lendable
funds and credit, general and local economic conditions, current interest rate
levels, volatility in the mortgage markets and other factors which are not
readily predictable. During 1994, the Bank increased its outside origination
staff to four loan officers. These officers call on real estate agents, follow
leads, and are available seven days a week to service the mortgage loan market.
REGULATION
GENERAL
The Bank is subject to extensive regulation, examination, and
supervision by the OTS, as its chartering agency, and the FDIC, as its deposit
insurer. The Bank's deposit accounts are insured up to applicable limits by the
SAIF administered by the FDIC, and the Bank is a member of the FHLB of Boston.
The Bank must file reports with the OTS and the FDIC concerning its activities
and financial condition, and it must obtain regulatory approvals prior to
entering into certain transactions, such as mergers with, or acquisitions of
other depository institutions. The OTS and the FDIC conduct periodic
examinations to assess the Bank's compliance with various regulatory
requirements. This regulation and supervision establishes a comprehensive
framework of activities in which a savings association can engage and is
intended primarily for the protection of the insurance fund and depositors. The
Company, as a savings association holding company, is also required to file
certain reports with, and otherwise comply with, the rules and regulations of
the OTS and of the Securities and Exchange Commission (the "SEC") under the
federal securities laws.
The OTS and the FDIC have a significant discretion in connection with
their supervisory and enforcement activities and examination policies, including
policies with respect to the classification of assets and the establishment of
adequate loan loss reserves for regulatory purposes. Any change in such
policies, whether by the OTS, the FDIC or the Congress, could have a material
adverse impact on the Company, the Bank and the operations of both.
The following discussion is intended to be a summary of the material
statutes and regulations applicable to savings associations and their holding
companies, and it does not purport to be a comprehensive description of all such
statutes and regulations.
REGULATIONS OF FEDERAL SAVINGS ASSOCIATIONS
BUSINESS ACTIVITIES. The Bank derives its lending and investment powers
from the Home Owners' Loan Act, as amended (the "HOLA"), and the regulations of
the OTS thereunder. Under these laws and regulations, the Bank may invest in
mortgage loans secured by residential and commercial real estate, commercial and
consumer loans, certain types of debt securities, and certain other assets. The
Bank may also establish service corporations that may engage in activities not
otherwise permissible for the Bank, including certain real estate equity
investments and securities and insurance brokerage. These investment powers are
subject to various limitations, including (a) a prohibition against the
acquisition of any corporate debt security that is not rated in one of the four
highest rating categories; (b) a limit of 20% of an association's assets on the
aggregate amount of commercial loans; (d) a limit of 35% of an association's
assets on the aggregate amount of consumer loans and acquisitions of certain
debt securities; (e) a limit of 5% of assets or an association's capital on
certain construction loans made for the purpose of financing what is or is
expected to become residential property.
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LOANS TO BORROWER. Under the HOLA, savings associations are generally
subject to the same limits on loans to one borrower as are imposed on national
banks. Generally, under these limits, a savings association may not make a loan
or extend credit to a single or related group of borrowers in excess of 15% of
the association's unimpaired capital and surplus. Additional amounts may be
lent, not in excess of 10% of impaired capital and surplus, if such loans or
extensions of credit are fully secured by readily marketable collateral. Such
collateral is defined to include certain debt and equity securities and bullion
but generally does not include real estate. At December 31, 1998, the Bank's
regulatory limit on loans to one borrower was approximately $4.2 million. At
December 31, 1998, the Bank's largest aggregate amount of loans to one borrower
was $1,857,186, and the second largest borrower had an aggregate balance of
$1,836,455. The Bank is in compliance with all applicable limitations on loans
to one borrower.
QTL TEST. The HOLA requires a savings association to meet a qualified
thrift leader, or "QTL" test. Under the QTL test, a savings association is
required to maintain at least 65% of its "portfolio assets" in certain
"qualified thrift investments" in at least nine months of the most recent
12-month period. "Portfolio assets" means in general, an association's total
assets less the sum of (a) specified liquid assets up to 20% of total assets,
(b) certain intangibles, including goodwill and credit card and purchased
mortgage servicing rights, and (c) the value of property used to conduct the
association's business. "Qualified thrift investments" includes various types of
loans made for residential and housing purposed, investments related to such
purposes, including certain mortgage-backed and related securities, consumer
loans, small business loans, educational loans, and credit card loans. At
December 31, 1998, the Bank maintained 81.29% of its portfolio assets in
qualified thrift investments. The Bank had also met the QTL test in each of the
prior 12 months and was, therefore, a qualified thrift leader. A savings
association may also satisfy the QTL test by qualifying as a "domestic building
and loan association" as defined in the Internal Revenue Code of 1986.
A savings association that fails the QTL test must either operate under
certain restrictions on its activities or convert to a bank charter. The initial
restrictions include prohibitions against (a) engaging in any new activity not
permissible for a national bank, (b) paying dividends not permissible under
national bank regulations, (c) obtaining new advances from any federal Home Loan
Bank and (d) establishing any new branch office in a location not permissible
for a national bank in the association's home state. In addition, within one
year of the date that a savings association ceases to meet the QTL test, any
company controlling the association would have to register under, and become
subject to the requirements of, the Bank Holding Company Act of 1956, as amended
(the"BHC Act"). If the savings association does not requalify under the QTL test
within the three-year period after it failed the QTL test, it would be required
to terminate any activity and to dispose of any investment not permissible for a
national bank and would have to repay as promptly as possible any outstanding
advances from a Federal Home Loan Bank. A savings association that has failed
the QTL test may requalify under the QTL test and be free of such limitations,
but it may only do so once.
CAPITAL REQUIREMENTS. The OTS regulations require savings associations
to meet three minimum capital standards: a tangible capital to such adjusted
total assets as adjusted under the OTS regulations, a leverage ratio requirement
of 3% of core capital to such adjusted assets and a risk-based capital ratio
requirement of 8% of total risk-based capital to total risk-weighted assets. In
determining compliance with the risk-based capital requirement, a savings
association must compute its risk-weighted assets by multiplying its assets and
certain off balance sheet items by risk weights, which range from 0% for cash
and obligations issued by the United States Government or its agencies to 100%
for consumer and commercial loans, as assigned by the OTS capital regulation
based on the risks OTS believes are inherent in the type of asset. Tangible
capital is defined, generally, as common stockholders' equity (including
retained earnings), certain noncumulative perpetual preferred stock and related
earnings), certain noncumulative perpetual preferred stock and related earnings
and minority interests in equity accounts of fully consolidated subsidiaries,
less intangibles (other than certain purchased mortgage servicing rights) and
investments in and loans to subsidiaries engaged in activities not permissible
for a national bank. Core capital is defined similarly to tangible capital, but
core capital also includes certain qualifying supervisory goodwill and certain
purchased credit card relationships. Supplementary capital currency includes
cumulative and other perpetual preferred stock, mandatory convertible
securities, subordinated debt and intermediate preferred stock and the allowance
for loan and lease losses. The allowance for loan and lease losses includable in
supplementary capital is limited to a maximum of 1.25% of risk-weighted assets,
and the amount of supplementary capital that may be included as total capital
cannot exceed the amount of core capital. The OTS has promulgated a regulation
that requires a savings association with "above normal" interest rate risk, when
determining compliance with its risk-based capital requirement, to hold
additional capital to account for its "above normal" interest rate risk. Pending
resolution of related regulatory issues, the OTS has deferred enforcement of
this regulation. A savings association's assets as calculated in accordance with
guidelines set forth by the OTS. At the times when the 3 month Treasury bond
equivalent yield falls below 4% an association may compute its interest rate
risk on the basis of a decrease equal to one-half of that Treasury rate rather
than on the basis of 2%. A savings association whose measured interest rate risk
exposure exceeds 2% would be considered to have "above normal"
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risk. The interest rate risk and 2% multiplied by the estimated economic value o
the association's assets. That dollar amount is deducted from an association's
total capital in calculating compliance with its risk based capital requirement.
Any required deduction for interest rate risk becomes effective on the last day
of the third quarter following the reporting date of the association's financial
data on which the interest rate risk was computed. An institution with assets of
less than $300 million and risk-based capital ratio in excess of 12% is not
subject to the interest rate risk component, unless the OTS determines
otherwise. The rule also provides the Director of the OTS may waive or defer an
institution's interest rate risk component on a case-by case basis. The OTS has
indefinitely deferred the implementation of the interest rate component in the
computation of an institution's risk-based capital requirements. The OTS
continues to monitor the interest rate risk of individual institutions and
retains the right to impose additional capital requirements on individual
institutions. For information pertaining to capital requirements, please see
Note 16 of the Financial Statements.
LIMITATIONS ON CAPITAL DISTRIBUTIONS. OTS regulations currently impose
limitations upon capital distributions by savings associations, such as cash
dividends, payments to repurchase or otherwise acquire it shares, payments to
shareholders of another institution in a cash cut merger and other distributions
charged against capital. At least 30-days written notice must be given to the
OTS of a proposed capital distribution by a savings association, and capital
distributions in excess of specified earnings or by certain institutions are
subject to approval by the OTS. An association that has capital in excess of all
fully phased-in regulatory capital requirements before and after a proposed
capital distribution may, after prior notice but without the approval of the
OTS, make capital distributions during a calendar year equal to the greater of
(a) 100% of its net earnings to date during the calendar year plus the amount
that would reduce by its "surplus capital ratio" (the excess capital over its
fully phased-in capital requirements) at the beginning of the calendar year, or
(b) 75% of its net earnings for the previous four quarters. Any additional
capital distributions would require prior OTS approval. In addition, the OTS can
prohibit a proposed capital distribution, otherwise permissible under the
regulation, if the OTS has determined that the association is in need of more
than normal supervision or if it determines that a proposed distribution by an
association would constitute an unsafe or unsound practice. Furthermore, under
the OTS prompt corrective action regulations, the Bank would be prohibited from
making any capital distribution; the Bank failed to meet its minimum capital
requirements, as described above.
ASSESSMENTS. Savings associations are required by OTS regulators to pay
assessments to the OTS to find the operations of the OTS. The general
assessment, paid on a semiannual basis, is computed upon the savings
association's total assets, including consolidated subsidiaries, as reported in
the association's latest quarterly Thrift Financial Report. During July 1998,
the Bank paid the semiannual assessment of $40,959.
BRANCHING. Subject to certain limitations, the HOLA and the OTS
regulations permit federally chartered savings associations to establish
branches in any state of the United States. The authority to establish such
branches is available (a) in states that expressly authorize branches of savings
associations located in another state or (b) to an association that either
satisfies the "QTL" test for a qualified thrift leader or qualifies as a
"domestic building and loan association" under the Internal Revenue Code of
1986, which composes qualification requirements similar to those for a
"qualified thrift leader" under the HOLA. See "QTL" Test. The authority for a
federal savings association to establish an interstate branch network would
facilitate a geographic diversification of the association's activities. This
authority under the HOLA and the OTS regulations preempts any state law
purporting to regulate branching by federal savings associations.
COMMUNITY REINVESTMENT. Under the Community Reinvestment Act (the
"CRA"), as implemented by OTS regulations, a savings association has a
continuing and affirmative obligation consistent with its safe and sound
operation to help meet the credit needs of its entire community, including low
and moderate income neighborhoods. The CRA does not establish specific lending
requirements or programs for financial institutions nor does it limit an
institution's discretion to develop the types of products and services that it
believes are best suited to its particular community, consistent with the CRA.
The CRA requires the OTS, in connection with it examination of a savings
association, to asses the association's record of meeting the credit needs of
its community and to take such record into account in its evaluation of certain
applications by such association. The CRA also requires all institutions to make
public disclosure of their CRA ratings. The Bank received a "Satisfactory" CRA
rating in its most recent examinations.
In April 1995, the OTS and the other federal banking agencies adopted
amendments revising their CRA regulations. Among other things, the amended CRA
regulations substitute for the prior process-based assessment factors a new
evaluation system that would rate an institution based on its actual performance
in meeting community needs. In particular, the system will focus on three tests:
(a) a lending test, to evaluate the institution's record of making loans in its
assessment areas; (b) an investment test, to evaluate the institutions record of
investing in community
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development projects, affordable housing, and programs benefiting low or
moderate income individuals and businesses; and (c) a service test, to evaluate
the institution's delivery of services through its branches, ATMs and other
offices. The amended CRA regulations also clarify how an institution's CRA
performance would be considered in the application process.
TRANSACTIONS WITH RELATED PARTIES. The Bank's authority to engage in
transactions with its "affiliates" is limited by the OTS regulations and by
Sections 23A and 23B of the Federal Reserve Act (the "FRA"). In general, an
affiliate of the Bank is any company that controls the Bank or any other company
that is controlled by a company that controls the Bank or any other company that
is controlled by a company that controls the Bank, excluding the Banks'
subsidiaries other than those that are insured depository institutions. The OTS
regulations prohibit a savings association (a) from lending to any of its
affiliates that is engaged in activities that are not permissible for bank
holding companies under Section 4(c) at the BHC Act and (b) from purchasing the
securities of any affiliates other than a subsidiary. Section 23A limits the
aggregate amount of transactions with all affiliates to 20% of the savings
association's capital and surplus. Extensions of credit to affiliates are
required to be secured by collateral in an amount and of a type described in
Section 23A, and the purchase of low quality assets from affiliates is generally
prohibited. Section 23B provides that certain transactions with affiliates,
including loans and asset purchases, must be on terms and under circumstances,
including credit standards, that are substantially the same or at least as
favorable to the association as those prevailing at the time for comparable
transactions with nonaffiliated companies. In the absence of comparable
truncations, such truncations may only occur under terms and circumstances,
including credit standards, which in good faith would be offered to or would
apply to nonaffiliated companies.
The Bank's authority to extend credit to its directors, executive
officers, and 10% shareholders, as well as to entities controlled by such
persons, is currently governed by the requirements of Section 22(g) and 22(h) of
the FRA and Regulation O of the FRB thereunder. Among other things, these
provisions require that extensions of credit to insiders (a) be made on terms
that are substantially the same as, and follow credit underwriting procedures
that are not less stringent than, those prevailing for comparable transactions
with unaffiliated persons and that do not involve more than the normal risk of
repayment or present other unfavorable features and (b) not exceed certain
limitations on the amount of credit extended to such persons, individually and
in the aggregate, which limits are based, in part, on the amount of the
association's capital. In addition, extensions of credit in excess of certain
limits must be approved by the association's board of directors.
ENFORCEMENT. Under the Federal Deposit Insurance Act (the "FDIC Act),
the OTS has primary enforcement responsibility over savings associations and has
the authority to bring enforcement action against all "institution affiliated
parties," including any controlling stockholder, attorney, appraiser or
accountant who knowingly or recklessly participates in any violation of
applicable law or regulation or regulation or breach of fiduciary duty or
certain other wrongful actions that causes or is likely to cause more than a
minimal loss or other significant adverse effect on an insured savings
association. Civil penalties cover a wide range of violations and actions and
range from $5,000 for each day during which violations of law, regulations,
orders, and certain written agreements and conditions continue, up to $1 million
per day for such violations if the person obtained a substantial pecuniary gain
as a result of such violation or knowingly or recklessly caused a substantial
loss to the institution. Criminal penalties for certain financial institution
crimes include fines up to $1 million and imprisonment for up to 30 years. In
addition, regulators have substantial discretion to take enforcement action
against an institution that fails to comply with its regulatory requirements,
particularly with respect to its capital requirements. Possible enforcement
actions range from the imposition of a capital plan and capital directive to
receivership, conservatorship, of the termination of deposit insurance. Under
the FDI Act, the FDIC has the authority to recommend to the Director of OTS the
enforcement action be taken with respect to a particular savings association. If
action is not taken by the Director of OTS the enforcement action be taken with
respect to a particular savings association. If action is not taken by the
Director of the OTS, the FDIC has authority to take such action under certain
circumstances.
STANDARDS FOR SAFETY AND SOUNDNESS. Pursuant to the FDI Act, as amended
by FDICIA and the Riegle Community Development and Regulatory Improvement Act of
1994 (the "Community Development Act"), the OTS and the federal bank regulatory
agencies have adopted, a set of guidelines prescribing safety and soundness
standards pursuant to FDIC, as amended. The guidelines establish general
standards relating to internal controls and information systems, internal audit
systems, loan documentation, credit underwriting, interest rate exposure, asset
growth, asset quality, earnings standards, and compensation, fees and benefits.
In general, the guidelines require, among other things, appropriate systems and
practices to identify and manage the risks and exposures specified in the
guidelines. The guidelines prohibit excessive compensation as an unsafe and
unsound practice and describe compensation as excessive when the amounts paid
are unreasonable or disappropriate to the services performed by an executive
officer,
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employee, director or principal stockholder. In addition, the OTS adopted
regulations that authorize, but do not require, the OTS to order an institution
that has been given notice by the OTS that it is not satisfying any of such
safety and soundness standards to submit a compliance plan. If, after being so
notified, an institution fails to submit an acceptable compliance plan or fails
in any material respect to implement an accepted compliance plan, the OTS must
issue an order directing action to correct the deficiency and may issue an order
directing other actions of the types to which an undercapitalized association is
subject under the "prompt corrective action" provisions of FDICIA. If an
institution fails to comply with such an order, the OTS may seek to enforce such
order in judicial proceedings and to impose civil money penalties.
REAL ESTATE LENDING STANDARDS. The OTS and other federal banking
agencies adopted regulations to prescribe standards for extensions of credit
that (a) are secured by real estate or (b) are made for the purpose of financing
the construction of improvements on real estate. The OTS regulations require
each savings association to establish and maintain written internal real estate
lending standards that are consistent with safe and sound banking practices and
appropriate to the size of the association and the nature and scope of its real
estate lending activities. The standards also must be consistent with
accompanying OTS guidelines, which include loan-to-value ratios for the
different types of real estate loans. Associations are also permitted to make a
limited amount of loans that do not conform to proposed loan-to-value
limitations so long as such exemptions are reviewed and justified appropriately.
The guidelines also list a number of lending situations in which exceptions to
the loan-to-value standards are justified.
PROMPT CORRECTIVE REGULATORY ACTION. Under the OTS prompt corrective
action regulations, the OTS is required to take certain, and is authorized to
take other, supervisory actions against undercapitalized savings associations.
For this purpose, a savings association would be placed in one of five
categories based on the association's capital.
Generally, a savings association is treated as "well capitalized" if
its ratio of total risk-based capital to risk-weighted assets is at least 10.0%,
its ratio of Tier I capital to risk weighted assets is at least 6.0%, its ratio
of leverage (core) capital to adjusted total assets is at least 5.0%, and it is
not subject to any order or directive by the OTS to meet a specified capital
level. A savings association will be treated as "adequately capitalized" if its
ratio of total risk-based capital to risk-weighted assets is at least 8.0%, its
ratio of Tier I capital to risk weighted assets is at least 4.0%, and its ratio
of leverage (core) capital to adjusted total assets is at least 4.0%, (3.0%
leverage ratio if the association receives the highest rating on the CAMELS
financial institution rating system). A savings association that has a total
risk based capital to risk-weighted assets of less than 8.0% or a leverage
(core) ratio of or a Tier 1 capital ratio that is less than 4.0% (3.0% leverage
ratio if the association receives the highest rating on the CAMELS: financial
institutions rating system) is considered to be "undercapitalized." A savings
association that has a total risk based capital to risk-weighted assets of less
than 6.0% or a Tier 1 risk based capital ratio or a leverage (core) of less than
3.0% is considered to be "significantly undercapitalized". A savings association
that has tangible capital to assets ratio equal to or less than 2% is deemed to
be "critically undercapitalized." The elements of an association's capital for
purposes of the prompt corrective action regulations are defined generally as
they are under the regulations for minimum capital requirements.
The severity of the action authorized or required to be taken under the
prompt corrective action regulations increases as an association's capital
deteriorates within the three undercapitalized categories. All associations are
prohibited from paying dividends or other capital distributions or paying
management fees to any controlling person if, following such distribution, the
association would be undercapitalized. An undercapitalized association is
required to file a capital distribution or paying management fees to any
controlling person if, following such distribution, the association would be
undercapitalized. An undercapitalized association is required to file a capital
restoration plan within 45 days of the date the association receives notice that
it is within any of the three undercapitalized categories. The OTS is required
to monitor closely the condition of an undercapitalized association and to
restrict the asset growth, acquisitions, branching, and new lines of business of
such an association. Significantly undercapitalized associations are subject to
restrictions on compensation of senior executive officers; such an association.
Significantly undercapitalized associations are subject to restrictions on
compensation of senior executive officers; such an association may not, without
OTS consent, pay any bonus or provide compensation to any senior executive
officer at a rate exceeding the officer's average rate of compensation
(excluding bonuses, stock options and profit-sharing) during the 12 months
preceding the month when the association became undercapitalized. A
significantly undercapitalized association may also be subject, among other
things, to forced changes in the composition of its board of directors or senior
management, additional restrictions on transactions with affiliates,
restrictions on acceptance of deposits from correspondence associations, further
restrictions on asset growth, restrictions on rates paid on deposits, forced
termination or reduction of activities deemed risky, and any further operational
restrictions deemed necessary by the OTS.
A-55
<PAGE>
If one or more grounds exist for appointing a conserver or receiver for
an association, the OTS may require the association to issue additional debt or
stock, sell assets; be acquired by a depository association holding company or
combine with another depository association. The OTS and the FDIC have a broad
range of grounds under which they may appoint a receiver or conservator for an
insured depository association holding company or combine with another
depository association. The OTS and the FDIC have a broad range of grounds under
which they may appoint a receiver or conservator for an insured depository
association. Under FDICIA, the OTS is required to appoint a receiver (or with
the concurrence of the FDIC, a conservator) for a critically undercapitalized
association within 90 days after the association becomes critically
undercapitalized or, with the concurrence of the FDIC, to take such other action
that would better achieve the purposes of the prompt corrective action
provisions. Such alternative action can be renewed for successive 90-day
periods. However, if the association continues to be critically undercapitalized
on average during the quarter that begins 270 days after it first became
critically undercapitalized, a receiver must be appointed, unless the OTS makes
certain findings with which the FDIC concurs and the Director of the OTS and the
Chairman of the FDIC certify that the association is viable. In addition, an
association that is critically undercapitalized is subject to more severe
restrictions on its activities, and is prohibited, without prior approval of the
FDIC from, among other things, entering into certain material transactions or
paying interest on new or renewed liabilities at a rate that would significantly
increase the association's weighted average cost of funds.
When appropriate, the OTS can require corrective action by a savings
association holding company under the "prompt corrective action" provisions of
FDICIA.
INSURANCE OF DEPOSIT ACCOUNTS
The Bank is a member of the SAIF, and the Bank pays its deposit
insurance assessments to the SAIF. The FDIC also maintains another insurance
fund, the BIF, which primarily insures the deposits of banks and state chartered
savings banks.
Pursuant to FDICIA, the FDIC established a new risk-based assessment
system for determining the deposit insurance assessments to be paid by insured
depository institutions. Under the new assessment system, which began in 1993,
the FDIC assigns an institution to one of three capital categories based on the
institution's financial information of the reporting period ending seven months
before the assessment period. The three capital categories consist of (a)
well-capitalized, (b) adequately capitalized or (c) undercapitalized. The FDIC
also assigns an institution to one of three supervisory subcategories within
each capital group. The supervisory subgroup to which an institution is assigned
is based on a supervisory evaluation provided to the FDIC by the institution's
primary federal regulator and information that the FDIC determines to be
relevant to the institution's financial condition and the risk posed to the
deposit insurance funds. An institution's assessment rate depends on the capital
category and supervisory category to which it is assigned. Under the regulation,
there are nine assessment risk classifications (i.e., combinations of capital
groups and supervisory subgroups) to which different assessment rates are
applied. Assessment rates for both the BIF and the SAIF had ranged from 0% of
deposits for an institution in the highest category (i.e., well-capitalized and
financially sound, with no more than a few minor weaknesses) to 0.27% of
deposits for an institution in the lowest category (i.e., undercapitalized and
substantial supervisory concern).
On September 30, 1996, the Deposit Insurance Funds Act of 1996 (the
"1996 Act") was enacted into law, and it amended the FDI Act in several ways to
recapitalize the SAIF and reduce the disparity in the assessment rates for the
BIF and the SAIF. The 1996 Act authorized the FDIC to impose a special
assessment on all institutions with SAIF-assessable deposits in the amount
necessary to recapitalize the SAIF. As required by the Funds Act, the FDIC
imposed a special assessment of 65.7 basis points on SAIF-assessable deposits
held as of March 31, 1995. The special assessment was paid on November 27, 1996.
The special SAIF assessment was paid on November 27, 1996. The SAIF Special
Assessment paid by the Bank amounted to $994,025. The impact on operations net
of related tax effects; reduced reported earnings by approximately $350,000 for
the year ended December 31, 1996.
The 1996 Act also provides, that the FDIC cannot assess regular
insurance assessments for an insurance fund unless required to maintain or to
achieve the designated reserve ratio of 1.25%, except on those of its member
institutions that are not classified as "well capitalized" or that have been
found to have "moderately severe" or "unsatisfactory" financial, operational or
compliance weakness. The Bank has not been so classified by the FDIC or the OTS.
Accordingly, assuming that the designated reserve ratio is maintained by the BIF
and by the SAIF after the collection of the special SAIF assessment and the Bank
maintains its regulatory status, the Bank will have to pay substantially lower
regular assessments on its deposits compared to those paid in recent years.
A-56
<PAGE>
In addition, the 1996 Act expanded the assessment base for the payments
on the FICO bonds to include, beginning January 1, 1997, the deposits of both
BIF-and SAIF-insured institutions. Until December 31, 1999, or such earlier date
on which the last savings association ceases to exist, the rate of assessment
for BIF-assessable deposits shall be one-fifth of the rate imposed on SAIF-
assessable deposits. It has been estimated that the rate of assessments for the
payment of interest on the FICO bonds will be approximately 1.3 basis points for
BIF assessable deposits and approximately 6.4 basis points for SAIF-assessable
deposits beginning on January 1, 1997.
The 1996 Act also provides for the merger of the BIF and SAIF, with
such merger being conditioned upon the prior elimination of the thrift charter.
The Secretary of the Treasury is required to conduct a study of relevant factors
with respect to the development of a common charter for all insured depository
institutions and abolition of separate chargers for banks and thrift and to
report the Secretary's conclusions and findings to the Congress.
Under the FDI Act, insurance of deposits may be terminated by the FDIC
upon a finding that the institution has engaged in unsafe or unsound practices,
is in an unsafe or unsound condition to continue operations or has violated any
applicable law, regulation, rule, order or condition imposed by the FDIC or the
OTS. The management of the Bank does not know of any practice, condition, or
violation that might lead to termination of deposit insurance.
REGULATIONS OF SAVINGS ASSOCIATION HOLDING COMPANIES
NHTB is a non-diversified unitary savings association holding company
within the meaning of the HOLA. As such, NHTB is required to register with the
OTS and is subject to OTS regulations, examinations, supervision and reporting
requirements. In addition, the OTS has enforcement authority of NHTB and its
non-savings association subsidiaries, if any. Among other things, this authority
permits the OTS to restrict or prohibit activities that are determined to be a
serious risk to the financial safety, soundness, or stability of a subsidiary
savings association.
The HOLA prohibits a savings association holding company, directly or
indirectly, or through one or more subsidiaries, from acquiring another savings
association or holding company thereof, without prior written approval of the
OTS; acquiring or retaining, with certain exceptions, more than 5% of a
non-subsidiary savings association, a non-subsidiary holding company, or a
non-subsidiary company engaged in activities other than those permitted by the
HOLA; or acquiring or retaining control of a depository institution that is not
insured by the FDIC. In evaluating an application by a holding company to
acquire a savings association, the OTS must consider the financial and
managerial resources and future prospects of the company and savings association
involved, the effect of the acquisition on the risk to the insurance funds, the
convenience and needs of the community and competitive factors.
As a unitary savings association holding company, NHTB is not
restricted under existing laws as to the types of business activities in which
it may engage, provided that the Bank continues to satisfy the QTL test. See
"--Regulation of Federal Savings Associations--QTL Test" for a discussion of the
QTL requirements. Upon any non-supervisory acquisition by NHTB of another
savings association or savings bank that meets the QTL test and is deemed to be
a savings association by the OTS and that will be held as a separate subsidiary,
NHTB would become a multiple savings association holding company and would be
subject to limitations on the types of business activities in which it could
engage. The HOLA limits the activities of a multiple savings association holding
company and its non-insured association subsidiaries primarily to activities
permissible for bank holding companies under Section 4(c)(8) of the BHC Act,
subject to the prior approval of the OTS, and to other activities authorized by
OTS regulation.
The OTS is prohibited from approving any acquisition that would result
in a multiple savings association holding company controlling savings
associations in more than one state, subject to two exceptions: an acquisition
of a savings association in another state (a) in a supervisory transaction or
(b) pursuant to authority under the laws of the state of the association to be
acquired that specifically permit such acquisitions. The conditions imposed upon
interstate acquisitions by those states that have enacted authorizing
legislation vary. Some states impose conditions of reciprocity, which have the
effect of requiring that the laws of both the state in which the acquiring
holding company is located (as determined by the location of its subsidiary
savings association) and the state in which the association to be acquired is
located, have each enacted legislation allowing its savings associations to be
acquired to out-of-state holding companies on the condition that the laws of the
other state authorize such transactions on terms no more restrictive than those
imposed on the acquiror by the state of the target association. Some of these
states also impose regional limitations, which restrict such acquisitions to
states within a defined geographic region. Other states allow full nationwide
banking without any condition of reciprocity. Some states do not authorize
interstate acquisitions of savings associations.
A-57
<PAGE>
FEDERAL HOME LOAN BANK SYSTEM
The Bank is a member of the FHLB of Boston, which is one of the
regional Federal Home Loan Banks composing the Federal Home Loan Bank System.
Each Federal Home Loan Bank provides a central credit facility primarily for its
member institutions. The Bank, as a member of the FHLB of Boston, is required to
acquire and hold shares of capital stock in the FHLB of Boston in an amount at
least equal to the greater of 1% of the aggregate principal amount of its unpaid
residential mortgage loans and similar obligations at the beginning of each year
or 1/20 of its advances (borrowings) from the FHLB of Boston. The Bank was in
compliance with this requirement with an investment in the capital stock of the
FHLB of Boston at December 31, 1998, of $1.9 million. Any advance from a Federal
Home Loan Bank must be secured by specified types of collateral, and all
long-term advances may be obtained only for the purpose of providing funds for
residential housing finance.
The Federal Home Loan Banks are required to provide funds for the
resolution of insolvent thrifts and to contribute funds for affordable housing
programs. These requirements could reduce the amount of earnings that the
Federal Home Loan Banks can pay as dividends to their members and could also
result in the Federal Home Loan Banks imposing a higher rate of interest on
advances to their members. The Bank earned dividends on the FHLB of Boston
capital stock in amounts equal to $122,911, $119,109, and $120,506 during the
years ended December 31, 1998, 1997, and 1996, respectively. If dividends were
reduced, or interest on future Federal Home Loan Bank advances increased, the
Bank's net interest income would likely also be reduced.
LIQUIDITY
The Bank is required to maintain an average daily balance of liquid
assets (cash, certain time deposits, bankers' acceptances, specified United
States Government, state or federal agency obligations, shares of certain mutual
funds and certain corporate debt securities and commercial paper) equal to a
monthly average of not less than a specified percentage of its net withdrawable
deposit accounts plus short-term borrowings. This liquidity requirement may be
changed from time to time by the OTS to any amount within the range of 4% to 10%
depending upon economic conditions and the savings flows of member institutions,
and is currently 4%. Monetary penalties may be imposed for failure to meet these
liquidity requirements. The Bank's average long-term liquidity ratio for the
month ended December 31, 1998 was 12.88% which exceeded the applicable
requirements. The Bank has never been subject to monetary penalties for failure
to meet its liquidity requirements.
YEAR 2000
Certain computer equipment, computer programs and systems that are
controlled by computer programs were originally programmed with six digit dates
that provided only two digits for the calendar year. With the impending
millennium, these programs and computers will recognize "00" as the year 1900
rather than the year 2000. Therefore, if the problem is not adequately
addressed, this software could produce inaccurate or unpredictable results on
January 1, 2000. The Company, like most financial services providers, may be
significantly affected by the "Year 2000 Issue" due to the nature of financial
information. Software, hardware, and equipment both within and outside the
Company's direct control and with whom the Company electronically or
operationally interfaces (e.g. vendors providing credit bureau information) are
likely to be affected. As a result, many calculations which rely on the date
field information, such as interest, payment or due dates and other operating
functions, will generate results which could be significantly misstated.
Financial institution regulators have recently increased their focus
upon Year 2000 Issues, issuing guidance concerning the responsibilities of
senior management and directors. Year 2000 testing and certification is being
addressed as a key safety and soundness issue in conjunction with regulatory
exams. Each federal regulated financial institution is under a mandate to survey
its exposure, measure the risk and to prepare a plan in order to solve the Year
2000 Issue.
In order to address the Year 2000 Issue and to minimize its potential
adverse impact, management, in 1996, began the process to identify areas that
will be affected by the Year 2000 Issue assess its potential; impact on the
operations of the Bank, monitor the progress of third party software vendors in
addressing the matter, test changes provided by these vendors, and develop
contingency plans for any critical systems which are not effectively
reprogrammed.
A-58
<PAGE>
Because the Company outsources its data processing and item processing
operations, a significant component of the Year 2000 plan has been working with
external vendors to test and certify their systems as Year 2000 compliant. The
Company's vendors have surveyed their programs to inventory the necessary
changes and have upgraded and corrected the applicable computer programs and
replaced equipment so that the Company's information systems were Year 2000
compliant prior to the end of 1998. This will enable the Company to devote
substantial time to the testing of the upgraded systems prior to the arrival of
the millennium in order to comply with all applicable regulations.
TAXATION
A thrift institution organized in stock form which utilizes the bad
debt reserve method for bad debt will be subject to certain recapture taxes on
such reserves in the event it makes certain types of distributions to its
stockholders. Dividends may be paid out of appropriated retained income without
the imposition of any tax on an institution to the extent that the amounts paid
as dividends do not exceed such current and accumulated earnings and profits as
calculated for federal income tax purposes. Stock redemptions, dividends paid in
excess of an institution's current and accumulated earnings and profits as
calculated for tax purposes, and partial or complete liquidation distributions
made with respect to an institution's stock, however, are deemed under
applicable provisions of the Code to be made from the institution's bad debt
reserve, to the extent that such reserve exceeds the amount that could have been
accumulated under the actual experience method. In the event a thrift
institution makes a distribution that is treated as having been made from the
tax bad debt reserve, the distribution is treated as an after tax distribution
and the institution will be liable for tax on the gross amount before tax at the
then current tax rate. Amounts added to the bad debt reserves for federal income
tax purposes are also used by the Bank to meet the OTS reserve requirements
described under "Regulation-Insurance of Accounts."
The Bank's tax returns have been audited and accepted through December
31, 1996 by the Internal Revenue Service.
STATE INCOME TAX
The Bank is subject to an annual Business Profits Tax (BPT) imposed by
the State of New Hampshire at the rate of 7.00% of the total amount of federal
taxable income, less deductions for interest earned on United States government
securities. During 1993, the State of New Hampshire instituted a Business
Enterprise Tax (BET), which places a tax on certain expense items. Interest,
dividends, wages, benefits and pensions are taxed at a rate of 0.25%. Business
Enterprise Taxes are allowed as a credit against the Business Profits Tax.
Upon conversion to a holding company, NHTB became subject to a state
franchise tax imposed by Delaware. For the year ended 1998, the tax amounted to
$16,860.
At December 31, 1998, LSB had a total of 113 full-time employees and 21
part-time employees. These employees are not represented by collective
bargaining agents. LSB believes that its relationship with its employees is
good.
FEDERAL SECURITIES LAWS
The Company's common stock is registered with the SEC under Section 12
(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The
company is subject to information, proxy solicitation, insider trading
restrictions and other requirements of the Exchange Act.
A-59
<PAGE>
ITEM 2. PROPERTIES
The following table sets forth the location of the LSB offices and certain
additional information relating to these offices at December 31, 1998:
<TABLE>
<CAPTION>
YEAR NET BOOK VALUE EXPIRATION LEASE RENEWAL
LOCATION OPENED LEASED OWNED DATE OF LEASE OPTION
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Corporate Office
9 Main Street
Newport, NH 1868 $ 1,430,731
Guild Office
300 Sunapee Street
Newport, NH 1978 $ 99,741
Bradford Office
115 East Main Street
Bradford, NH 1975 $ 74,672
Grantham Office
165 Route 10 South
Grantham, NH 1980 $ 305,148.
Hanover Street Office
106 Hanover Street
Lebanon, NH 1997 $ 2,101,621.
Lebanon Office
200 Heater Road
Lebanon, NH 1986 $ 569,859
New London Office
24 Newport Road
New London, NH 1981 $ 394,329
Sunapee Office
565 Route 11
Sunapee, NH 1965 $ 82,938
Andover Office /(1)/
720 Main Street
Andover, NH 1987 $ 32,571
Centerra Office /(1)/
12 Centerra Pkwy.
Lebanon, NH 1997 $ 188,949 2007 5 Years
Hillsboro Office /(1)/
15 Antrim Road
Hillsboro, NH 1994 $ 17,123 2000 4 Years
West Lebanon Office /(1)/
83 Main Street
West Lebanon, NH 1994 $ 123,171 1999 15 Years
</TABLE>
/(1)/ Operating lease, value of improvements.
A-60
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
There is no material litigation pending in which the Company is a party or which
the property of the Company is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to the security holders of the company during the
fourth quarter.
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The following table shows the market range for the Company's Common Stock based
on reported sales prices on the NASDAQ Market System. New Hampshire Thrift
Bancshares, Inc. is traded under the symbol NHTB.
<TABLE>
<CAPTION>
PERIOD HIGH LOW
-----------------------------------------------------------------------
<S> <C> <C> <C>
1998 First Quarter $ 20 1/2 $ 17
Second Quarter 22 17 1/2
Third Quarter 18 3/4 12 7/8
Fourth Quarter 19 12
1997 First Quarter $ 12 3/4 $ 11 3/4
Second Quarter 15 1/2 11 3/4
Third Quarter 21 1/4 15 3/8
Fourth Quarter 22 3/4 18 1/4
</TABLE>
The bid quotations set forth above represent prices between dealers and do not
include retail mark-ups, mark-downs or commissions and may not represent actual
transactions. As of December 31, 1998, New Hampshire Thrift Bancshares, Inc. had
approximately 740 stockholders of record. The number of stockholders does not
reflect the number of persons or entities who held their stock in nominee or
"street" name through various brokerage firms.
The following table sets forth certain information regarding per share dividends
declared on the Company's Common Stock:
<TABLE>
<CAPTION>
1998 1997
------------------------
<S> <C> <C>
First Quarter $ .15 $ .125
Second Quarter .15 .125
Third Quarter .15 .125
Fourth Quarter .15 .125
</TABLE>
For information regarding limitations of the declaration and payment of
dividends by New Hampshire Thrift Bancshares, Inc., see Note 14 of the Notes to
Consolidated Financial Statements.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
OPERATING RESULTS
The information called for by this item is contained on pages 7 through 19 of
this document.
ITEM 7. FINANCIAL STATEMENTS
The report of independent accountants and the financial information called for
by this item are contained on pages 20 through 46 of this document.
A-61
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III.
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Certain information relating to directors and executive officers of the Company,
executive compensation, security ownership of certain beneficial owners and
management, and certain relationships and related transactions is incorporated
by reference herein from the Company's definitive proxy statement in connection
with its Annual Meeting of Shareholders to be held on April 8, 1999, which proxy
statement will be filed with the Securities and Exchange Commission not later
than 120 days after the close of the fiscal year.
ITEM 10. EXECUTIVE COMPENSATION
Certain information relating to directors and executive officers of the Company,
executive compensation, security ownership of certain beneficial owners and
management, and certain relationships and related transactions is incorporated
by reference herein from the Company's definitive proxy statement in connection
with its Annual Meeting of Shareholders to be held on April 8, 1999, which proxy
statement will be filed with the Securities and Exchange Commission not later
than 120 days after the close of the fiscal year.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Certain information relating to directors and executive officers of the Company,
executive compensation, security ownership of certain beneficial owners and
management, and certain relationships and related transactions is incorporated
by reference herein from the Company's definitive proxy statement in connection
with its Annual Meeting of Shareholders to be held on April 8, 1999, which proxy
statement will be filed with the Securities and Exchange Commission not later
than 120 days after the close of the fiscal year.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain information relating to directors and executive officers of the Company,
executive compensation, security ownership of certain beneficial owners and
management, and certain relationships and related transactions is incorporated
by reference herein from the Company's definitive proxy statement in connection
with its Annual Meeting of Shareholders to be held on April 8, 1999, which proxy
statement will be filed with the Securities and Exchange Commission not later
than 120 days after the close of the fiscal year.
ITEM 13. EXHIBITS, LISTS AND REPORTS ON FORM 8-K
The exhibits filed as a part of this Registration Statement are as
follows:
(a). LIST OF EXHIBITS. (Filed herewith unless otherwise noted.)
EXHIBIT NO. DESCRIPTION
- ----------- -----------
2.1 Agreement as Plan of Reorganization, dated
as of July 26, 1996, by and among New
Hampshire Thrift Bancshares, Inc. ("NHTB"),
Lake Sunapee Bank, fsb (the "Bank") and
Landmark Bank. ("Landmark"), including Annex
A, Agreement and Plan of Merger, dated as of
July 26, 1996, by and between Landmark and
the Bank, and joined in by NHTB (previously
filed as an Exhibit to the Company's Form
S-4 (No. 333-12645) filed with the
Securities and Exchange Commission (the
"Commission") on November 5, 1996 (the
"November 5, 1996 S-4"))
A-62
<PAGE>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
3.1 Amended and Restated Certificate of
Incorporation of NHTB (previously filed as
an exhibit to the November 5, 1996 S-4).
3.2 Amended and Restated Bylaws of NHTB.
4.1 Stock Certificate of New Hampshire Thrift
Bancshares, Inc. (previously filed as an
exhibit to the Company's Form S-4 (file No.
33-27192) filed with the Commission on March
1, 1989).
10.1 Profit Sharing-Stock Ownership Plan of Lake
Sunapee Bank, fsb (previously filed as an
exhibit to the November 5, 1996 S-4).
10.2 New Hampshire Thrift Bancshares, Inc. 1996
Stock Option Plan (previously filed as an
exhibit in the November 5, 1996 S-4).
10.3 Lake Sunapee Bank, fsb 1987 Incentive Stock
Option Plan (previously filed as an exhibit
to the Company's Form S-4 (file No.
33-27192), filed with the Commission on
March 1, 1989).
10.4 New Hampshire Thrift Bancshares, Inc. 1996
Incentive Stock Option Plan (previously
filed as an exhibit to the Company's Form S-
4 (file No. 33-27192), filed with the
Commission on March 1, 1989).
10.5 Employment Agreement between NHTB and
Stephen W. Ensign (previously filed as an
exhibit to the November 5, 1996 S-4).
10.6 Employment Agreement between the Bank and
Stephen R. Theroux (previously filed as an
exhibit to the November 5, 1996 S-4).
10.7 Stock Option Agreement, dated as of July 26,
1996, between NHTB and Landmark, (previously
filed as an exhibit to the November 5, 1996
S-4).
11.1 Computation of Per Share Earnings (see Note
1 to Consolidated Financial Statements).
16.1 Letter on Change in Certifying Accountant
(previously filed as an exhibit to the
Company's Current Report on Form 8-K dated
July 10, 1996).
21.1 Subsidiaries of the Company (previously
filed as an exhibit to the November 5, 1996
S-4).
27.1 Financial Data Schedule (submitted only with
filing in electronic format).
99.1 Proxy Statement for the 1997 Annual Meeting
of Shareholders of the Company (to be filed
pursuant to Rule 14a-6 under the Securities
and Exchange Act of 1934, as amended).
(b) REPORTS OF FORM 8-K.
None.
A-63
<PAGE>
__________
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
New Hampshire Thrift Bancshares, Inc.
By: /s/ John J. Kiernan Chairman of the Board March 11, 1999
-------------------
(John J. Kiernan)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
<S> <C> <C>
/s/ John J. Kiernan Chairman of the Board March 11, 1999
-------------------
(John J. Kiernan)
/s/ Stephen W. Ensign Vice Chairman of the Board, March 11, 1999
---------------------
(Stephen W. Ensign) President and Chief Executive Officer
/s/ Stephen R. Theroux Director, Executive Vice President March 11, 1999
----------------------
(Stephen R. Theroux) and Chief Operating Officer
/s/ Leonard R. Cashman Director March 11, 1999
----------------------
(Leonard R. Cashman)
/s/ Ralph B. Fifield, Jr. Director March 11, 1999
-------------------------
(Ralph B. Fifield, Jr.)
/s/ John A. Kelley, Jr. Director March 11, 1999
-----------------------
(John A. Kelley, Jr.)
/s/ Peter R. Lovely Director March 11, 1999
-------------------
(Peter R. Lovely)
/s/ Dennis A. Morrow Director March 11, 1999
--------------------
(Dennis A. Morrow)
/s/ Jack H. Nelson Director March 11, 1999
------------------
(Jack H. Nelson)
/s/ Priscilla W. Ohler Director March 11, 1999
----------------------
(Priscilla W. Ohler)
/s/ Kenneth D. Weed Director March 11, 1999
-------------------
(Kenneth D. Weed)
/s/ Joseph B. Willey Director March 11, 1999
--------------------
(Joseph B. Willey)
/s/ Daryl J. Cady Senior Vice President and March 11, 1999
-----------------
(Daryl J. Cady) Chief Financial Officer
(Principal Accounting Officer)
</TABLE>
A-64
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
NEW HAMPSHIRE THRIFT BANCSHARES, INC.
DIRECTORS OFFICERS
--------- --------
<S> <C> <C>
John J. Kiernan, Chairman John J. Kiernan Daryl J. Cady, CPA
Stephen W. Ensign, Vice Chairman Chairman of the Board Senior Vice President and
Stephen R. Theroux Chief Financial Officer
Leonard R. Cashman Stephen W. Ensign
Ralph B. Fifield, Jr. Vice Chairman of the Board, Linda L. Oldham
John A. Kelley, Jr. President and Chief Executive Senior Vice President and
Peter R. Lovely Officer Secretary
Dennis A. Morrow
Jack H. Nelson Stephen R. Theroux Sandra M. Blackington
Priscilla W. Ohler Executive Vice President and Assistant Secretary
Kenneth D. Weed Chief Operating Officer
Joseph B. Willey
----------------------------------------------------------------------------------------
LAKE SUNAPEE BANK, FSB
DIRECTORS
---------
John J. Kiernan, Chairman Robert C. O'Brien Erik C. Cinquemani
Stephen W. Ensign, Vice Chairman Loan Origination Commercial Lending
Stephen R. Theroux
Leonard R. Cashman Linda L. Oldham Frances E. Clow
Ralph B. Fifield, Jr. Shareholder Relations Human Resources
John E. Johannessen
John A. Kelley, Jr. VICE PRESIDENTS Stephen B. Ellis
---------------
Peter R. Lovely Douglas S. Baxter Loan Origination
Dennis A. Morrow Marketing
Jack H. Nelson Gail A. Fraser
Priscilla W. Ohler Colin S. Campbell Deposit Operations
Kenneth D. Weed Loan Origination
Joseph B. Willey Ann M. Howard
H. Bliss Dayton Retail Manager
EXECUTIVE OFFICERS Compliance and Internal Audit
------------------
John J. Kiernan Peter N. Jennings
Chairman of the Board Dana C. Favor Loan Origination
Loan Review
Stephen W. Ensign Sandra J. Luckury
Vice Chairman of the Board, Scott W. Laughinghouse Information Technology
President and Chief Executive Commercial Lending
Officer Arthur W. Phillips
William J. McIver Loan Review
Stephen R. Theroux Commercial Lending
Executive Vice President and Francetta Raymond
Chief Operating Officer Theodore M. Thompson Loan Operations
Commercial Lending
Sandra M. Blackington Louis A. Shelzi, Jr.
Assistant Secretary Scott B. Walters Commercial Lending
Commercial Lending
SENIOR VICE PRESIDENTS Terri G. Spanos
----------------------
Daryl J. Cady, CPA Sharon L. Whitaker Retail Manager
Chief Financial Officer Mortgage Lending
W. Grant MacEwan ASSISTANT VICE PRESIDENTS
-------------------------
Commercial Lending Richard G. Biron
Retail Manager
</TABLE>
A-65
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------ ----------------------------------------------------------------
BOARD OF ADVISORS SHAREHOLDER INFORMATION
<S> <C> <C>
Philip D. Allen/(1)/ Victor W. Laro CORPORATE HEADQUARTERS
Prunella O. Anastos Paul J. Linehan New Hampshire Thrift Bancshares, Inc.
Benjamin K. Barton Robert MacNeil 9 Main Street
Kenneth O. Barton Elizabeth W. Maiola PO Box 9
George O. Binzel Raymond A. Manning Newport, NH 03773-0009
William A. Bittinger John J. Marcotte Tel: 1-603-863-0886
Paul R. Boucher Jerry N. Mathis Fax: 1-603-863-9571
James F. Briggs Thomas F. McCormick
Robert S. Burgess J. David McCrillis TRANSFER AGENT
Walton W. Chadwick John C. McCrillis ChaseMellon Shareholder Services, L.L.C.
Earle W. Chandler Paul Olsen Overpeck Centre
F. Read Clarke Daniel P. O'Neill 85 Challenger Road
Jacqueline C. Cote Betty H. Ramspott Ridgefield Park, NJ 07660
Robert J. Cricenti David N. Reney Tel: Domestic Holders 1-800-851-9677
Richard F. Curtis Everett R. Reney Tel: Foreign Holders 1-201-329-8660
Ernest G. Dennis, Jr. Genelle M. Richards Tel: Hearing Impaired 1-800-231-5469
William J. Faccone, Sr. J. Barrie Sellers Website: www.chasemellon.com
Gordon B. Flint, Sr. Edwin G. Sielewicz
John W. Flynn, Jr. Fredric M. Smith INDEPENDENT AUDITORS
John W. Flynn, Sr. Herbert N. Smith Shatswell, MacLeod & Company, P.C.
Sam N. Hale Fred F. Stockwell 83 Pine Street
Sheffield J. Halsey Earl F. Strout West Peabody, MA 01960-3635
Louise K. Hastings James R. Therrien
Douglas J. Homan Janis H. Wallace
----------------------------------------------------------------
Rita M. Hurd James P. Wheeler INFORMATION ON COMMON STOCK
Lisa S. Hustis Bradford C. White
Alf E. Jacobson John W. Wiggins, Sr. The common stock is traded over-the-counter and
Robert B. Jennings Peter Wittman quoted on the NASDAQ National Market System
Michael D. Johnson Thomas B. Woodger under the symbol NHTB. There were approximately
Edward T. Kerrigan Michael J. Work 740 shareholders of record on December 31, 1998.
John J. Kiernan, Jr. (1)Honorary
The following table sets forth the Company's high And low prices
for the common stock as reported by NASDAQ for the periods
indicated:
1998 HIGH LOW
----------------------------------------------------------------
First Quarter $ 20 1/2 $ 17
Second Quarter 22 17 1/2
Third Quarter 18 3/4 12 7/8
Fourth Quarter 19 12
</TABLE>
This Annual Report has been written by the Bank's staff.
A-66
<PAGE>
Appendix B
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarter Ended March 31, 1999
--------------
Commission File Number 0-17859
-------
NEW HAMPSHIRE THRIFT
BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
State of Delaware 02-0430695
(State of Incorporation) (IRS Employer I.D. Number)
9 Main St., PO Box 9, Newport, NH 03773
(Address of principal executive offices) (Zip Code)
603-863-0886
(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
----- -----
The number of shares outstanding of each of the issuer's classes of common
stock, $.01 par value per share, as of May 4, 1999, was 2,104,285.
----------
Transitional small business disclosure format:
Yes No X
----- -----
B-1
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES, INC.
INDEX TO FORM 10-QSB
<TABLE>
<CAPTION>
<S> <C>
PART I. FINANCIAL INFORMATION PAGE
Item 1 Financial Statements:
Consolidated Statements of
Financial Condition - 1
March 31, 1999 and December 31, 1998
Consolidated Statements of Income 2
For the Three Months Ended March 31, 1999 and 1998
Consolidated Statements of Cash Flows - 3
For the Three Months Ended March 31, 1999 and 1998
Notes To Consolidated Financial Statements - 5
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations - 6
Independent Accountants' Report 13
PART II. OTHER INFORMATION
Item 1 Legal Proceedings 14
Item 2 Changes in Securities 14
Item 3 Defaults Upon Senior Securities 14
Item 4 Submission of Matters to a Vote of Common Shareholders 14
Item 5 Other Information 14
Item 6 Exhibits and Reports on Form 8-K 14
Signatures 15
</TABLE>
B-2
<PAGE>
Part I. Item I. NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
March 31, 1999 and December 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
--------------- ---------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 6,369,784 $ 8,701,558
Federal funds sold - 7,583,000
--------------- ---------------
Cash and cash equivalents 6,369,784 16,284,558
Securities available for sale 51,266,027 52,137,753
Other investments 2,032,999 2,032,999
Loans held for sale - 3,775,802
Loans receivable, net 240,618,954 232,321,171
Accrued interest receivable 1,946,539 1,725,235
Bank premises and equipment, net 8,327,446 8,416,182
Investments in real estate 527,922 531,729
Real estate owned and property acquired in settlement of loans 687,403 670,153
Goodwill 3,151,239 3,213,028
Other assets 2,649,658 2,299,159
--------------- ---------------
Total assets $ 317,577,971 $ 323,407,769
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Checking accounts (non-interest-bearing) $ 14,318,913 $ 16,521,820
Savings and interest-bearing checking accounts 143,535,766 144,430,362
Time deposits 117,587,036 121,096,974
--------------- ---------------
Total deposits 275,441,715 282,049,156
Other borrowed funds 848,000 -
Securities sold under agreements to repurchase 7,085,092 11,849,116
Advances from Federal Home Loan Bank 3,000,000 -
Accrued expenses and other liabilities 3,599,513 1,729,891
--------------- ---------------
Total liabilities 289,974,320 295,628,163
--------------- ---------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY - -
Preferred stock, $.01 par value per share: 2,500,000 shares authorized,
no shares issued or outstanding
Common stock, $.01 par value per share: 5,000,000 shares authorized,
2,479,858 shares issued and 2,104,285 shares outstanding at
March 31, 1999 and December 31, 1998 24,798 24,798
Paid-in capital 17,874,567 17,874,567
Retained earnings 12,456,705 12,082,784
Net unrealized gain (loss) on securities available for sale (294,842) 255,034
--------------- ---------------
30,061,228 30,237,183
Treasury stock, at cost, 375,573 shares as of March 31, 1999
and December 31, 1998 (2,457,577) (2,457,577)
--------------- ---------------
Total shareholders' equity 27,603,651 27,779,606
--------------- ---------------
Total liabilities and shareholders' equity $ 317,577,971 $ 323,407,769
=============== ===============
</TABLE>
B-3
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended March 31, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
March 31, March 31,
1999 1998
----------------- -----------------
<S> <C> <C>
Interest income
Interest on loans $ 4,614,301 $ 5,227,961
Interest and dividends on investments 918,967 586,362
------------ ------------
Total interest income 5,533,268 5,814,323
------------ ------------
Interest expense
Interest on deposits 2,630,363 2,916,693
Interest on advances and other borrowed money 53,994 145,659
------------ ------------
Total interest expense 2,684,357 3,062,352
------------ ------------
Net interest income 2,848,911 2,751,971
Provision for loan losses 30,000 14,520
------------ ------------
Net interest income after provision for loan losses 2,818,911 2,737,451
------------ ------------
Other income
Loan origination and customer service fees 407,051 273,059
Net gain on sale of securities 45,409 2,066
Gain on sale of property acquired in settlement of loan 23 -
Net gain (loss) on sale of loans 40,229 (7,644)
Net gain on sale of bank property and equipment - 6,762
Rental income 85,512 79,360
Brokerage service income 35,405 37,219
------------ ------------
Total other income 613,629 390,822
------------ ------------
Other expenses
Salaries and employee benefits 1,201,526 928,042
Occupancy expenses 469,879 414,922
Advertising and promotion 83,083 75,622
Depositors' insurance 35,327 35,506
Outside services 125,277 139,170
Amortization of goodwill 61,789 61,789
Other expenses 426,003 435,396
------------ ------------
Total other expenses 2,402,884 2,090,447
------------ ------------
Income before provision for income taxes 1,029,656 1,037,826
Provision for income taxes 319,048 335,000
------------ ------------
Net income $ 710,608 $ 702,826
============ ============
Comprehensive net income $ 152,734 $ 662,429
============ ============
Earnings per common share, basic $ .34 $ .34
============ ============
Earnings per common share, assuming dilution $ .34 $ .33
============ ============
Dividends declared per common share $ .16 $ .15
============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
B-4
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31,
1999 and 1998 (Unaudited )
<TABLE>
<CAPTION>
March 31, March 31,
1999 1998
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 710,608 $ 702,826
Depreciation and amortization 180,967 151,270
Amortization of goodwill 61,789 61,789
Loans originated for sale (13,245,698) (13,074,642)
Proceeds from sale of loans 13,285,927 13,066,998
(Gain) loss from sale of loans (40,229) 7,644
Gain from sale of debt securities available for sale (45,409) (2,066)
Gain from sale of bank premises and equipment - (6,762)
Provision for loan losses and other real estate owned losses 30,000 14,520
Gain on sale of property acquired in settlement of loan (23) -
(Increase) decrease in accrued interest and other assets (766,453) 252,585
Decrease in deferred loan fees (118,624) (9,693)
Increase in accrued expenses and other liabilities 2,215,599 984,631
-------------- ---------------
Net cash provided by operating activities 2,268,454 2,149,100
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (96,420) (190,771)
Proceeds from sale of bank premises and equipment 7,995 9,145
Proceeds from sale of debt securities available for sale 7,017,524 6,009,649
Purchase of securities available for sale (7,017,816) (9,421,750)
Purchase of Federal Home Loan Bank stock - (77,000)
Maturities of securities available for sale - 560,000
Net (increase) decrease in loans to customers (4,217,133) 4,736,593
(Increase) decrease in real estate owned (17,227) 84,762
--------------- ---------------
Net cash provided by (used in) investing activities (4,323,077) 1,710,628
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits (6,607,441) 1,080,011
Net increase (decrease) in repurchase agreements (4,764,024) 530,852
Increase (decrease) in advances from Federal Home Loan Bank
and other borrowings 3,848,000 (369,160)
Dividends paid (336,686) (313,283)
Proceeds from exercise of stock options - 27,340
--------------- ---------------
Net cash provided by (used in) financing activities (7,860,151) 955,760
--------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (9,914,774) 4,815,488
CASH AND CASH EQUIVALENTS, beginning of period 16,284,558 13,306,626
--------------- ---------------
CASH AND CASH EQUIVALENTS, end of period $ 6,369,784 $ 18,122,114
--------------- ---------------
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
B-5
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND
SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH
FLOWS -(continued) For the Three Months
Ended March 31, 1999 and 1998 (Unaudited )
<TABLE>
<CAPTION>
March 31, March 31,
1999 1998
----------------- -----------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest on deposit accounts $ 2,646,650 $ 2,918,840
Interest on advances and other borrowed money 46,542 146,372
----------------- -----------------
Total interest paid $ 2,693,192 $ 3,065,212
----------------- -----------------
Income taxes, net $ 400 $ 400
----------------- -----------------
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Transfers from loans to real estate acquired through foreclosure $ 17,250 $ 60,000
----------------- -----------------
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
B-6
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999 and December 31, 1998
Note A - Basis of Presentation
- ------------------------------
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-QSB and, accordingly, do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of the
management of New Hampshire Thrift Bancshares, Inc., all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three months ended March 31, 1999 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1999.
Note B - Accounting Policies
- ----------------------------
The accounting principles followed by New Hampshire Thrift Bancshares, Inc. and
Subsidiary and the methods of applying these principles which materially affect
the determination of financial position, results of operations, or changes in
financial position are consistent with those used for the year 1998.
The consolidated financial statements of New Hampshire Thrift Bancshares, Inc.
include its wholly owned subsidiary, Lake Sunapee Bank, fsb, and its
subsidiaries Lake Sunapee Group, Inc., and Lake Sunapee Financial Services Corp.
All significant intercompany balances have been eliminated.
Note C - Subsequent Event
- -------------------------
On April 12, 1999, Lake Sunapee Bank, fsb signed a definitive agreement to
acquire three branch offices of New London Trust, New London, NH. Under the
terms of the agreement, Lake Sunapee Bank, fsb will acquire the Main Office of
New London Trust, as well as, the Andover and Newbury branches.
The transaction, which is subject to regulatory approval, is expected to
close during the fourth quarter of this year. This transaction will include
approximately $103 million in deposits and $88 million in loans. It is
anticipated that this in-market acquisition will increase Company assets to over
$440 million and be accretive to shareholders beginning in the year 2000.
B-7
<PAGE>
Part I. Item II.
NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
New Hampshire Thrift Bancshares, Inc. (The Company), a Delaware holding
company organized on July 5, 1989, is the parent company of Lake Sunapee Bank,
fsb (The Bank), a federally chartered savings bank. The Bank is a member of the
Federal Deposit Insurance Corporation (FDIC) and its deposits are insured
through the Savings Association Insurance Fund (SAIF). The Bank is regulated by
the Office of Thrift Supervision (OTS).
The Company's profitability is derived from its only subsidiary, Lake Sunapee
Bank, fsb. The Bank's earnings in turn are generated from the net income from
the yield on its loan and investment portfolios less the cost of its deposit
accounts and borrowings. These core revenues are supplemented by loan
origination fees, retail banking service fees, gains on the sale of investment
securities, and brokerage fees. The Bank passes its earnings to the Company to
the extent allowed by OTS regulations. Current regulations enable the Bank to
pay to the Company the higher of an amount equal to seventy-five per cent of the
Bank's prior four quarter earnings or up to fifty per cent of excess capital
plus total current year earnings. As of March 31, 1999, the Company had
$1,005,247 available, which it plans to use to continue its annual dividend
payout of $0.64 per share.
Year 2000
Many companies continue to undertake projects to address the Year 2000 (Y2K).
Companies have determined potential costs and uncertainties based on a number of
factors, including its software and hardware and the nature of its business.
Companies must also coordinate with other entities with which they do business.
Lake Sunapee Bank, through its technology committee and an outside consultant,
implemented many hardware and software changes during 1998, in an effort to
become Y2K compliant. During 1998, the Bank installed a new data processing
mainframe computer, upgraded its mainframe software, and installed a new proof
of deposit and check imaging system. All of these Y2K compliant systems were in
operation throughout most of 1998.
Y2K testing has been on going and will continue throughout 1999. Based on a
review of internal practices and communications with third party processors, the
Bank does not expect to encounter significant difficulties in connection with
the transition to the Year 2000. The status of the Bank's `Year 2000 Action
Plan' is reported to its Board of Directors monthly. A $50,000 annual provision
has been established to cover Y2K related expenses. In conjunction with the
`Action Plan', the Bank has developed a `Business Continuity Plan'. This Plan
is designed to allow the Bank to operate should a system it relies on fail. As
part of the `Business Continuity Plan', the Bank has purchased power generators
and designed a manual accounting system. It is unlikely the Bank will need to
utilize these systems, but nevertheless, they are developed and being tested.
The Bank is subject to regulatory review concerning the Year 2000 from its
primary regulator, The Office of Thrift Supervision (OTS). During 1998, the
Bank had both its Phase I and Phase II examinations. The Bank expects its final
Phase III exam within the next few weeks.
B-8
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Monitoring and managing the Year 2000 project has and will likely continue to
result in additional direct and indirect costs to the Bank. Direct costs
include potential charges by third party software vendors for product
enhancements, costs involved in testing software for Year 2000 compliance, and
any resulting costs for developing and implementing contingency plans for
critical software products not enhanced. Indirect costs will principally
consist of the time devoted by existing employees in monitoring software vendor
progress, testing enhanced software products and implementing necessary
contingency plans. Both direct and indirect costs of addressing the Year 2000
Issue will be charged to earnings as incurred. Such costs have not been
material to date.
Financial Condition
During the first three months of 1999, total assets decreased by $5,829,798,
or 1.80% from $323,407,769 to $317,577,971. Cash and cash equivalents were used
to fund a $4.3 million increase in net portfolio loans and to cover seasonal
deposit outflows of $6.6 million resulting in a reduction in cash and cash
equivalents of approximately $9.9 million during the first three months of 1999.
Total gross loans increased $4,435,418 from $239,116,440 to $243,551,858, or
1.85%. During the first quarter of 1999, the Bank originated a record $35.6
million in loans, had pay-offs of approximately $17.6 million, normal
amortization of approximately $3.5 million and loans sold of approximately $13.2
million. Due to continued favorable fixed interest rates, many of the Bank's
variable rate loan customers refinanced into fixed rate products. The Bank sold
much of the fixed rate product into the secondary market, retaining the
servicing. Selling fixed rate loans into the secondary market helps protect the
Bank against interest rate risk and provides the Bank with a consistent fee
income stream. The proceeds from the sale of loans are then available to lend
back into the Bank's market area and to purchase investment securities. At
March 31, 1999, the Bank had $137,619,734 in its servicing portfolio. The Bank
expects to exceed $185 million in serviced loans by the end of 1999. The Bank
expects to continue to sell fixed rate loans into the secondary market in order
to manage interest rate risk. Market risk exposure during the production cycle
is managed through the use of secondary market forward commitments. At March
31, 1999, adjustable rate mortgages comprised approximately 80% of the Bank's
real estate mortgage loan portfolio. This is consistent with prior years.
As of March 31, 1999, total investment securities increased slightly by
$24,128, or .04% from $53,755,251 to $53,779,379 (at amortized cost). During
the first three months of 1999, the Bank purchased approximately $7.0 million of
investment securities to offset the calls and sales of securities that occurred
during that same time. The Bank continues to use proceeds from sold loans and
paid loans to purchase investment securities in order to increase yields,
thereby mitigating the reduction in the Bank's interest rate spread that might
otherwise occur. The Bank's net unrealized gain was $415,501 at December 31,
1998 compared to a net unrealized loss of $480,353 at March 31, 1999. This
change of $895,854 reflects the rise in interest rates during the first quarter
and the corresponding decrease in investment security market values.
Real estate owned and property acquired in settlement of loans increased by
$17,250, or 2.57% to $687,403. This total reflects $315,153 in market value for
the remaining five lots at Blye Hill Landing in Newbury, NH. There were no sales
of real estate property owned, during the first three months of 1999.
B-9
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Deposits decreased by $6,607,441, or 2.34% to $275,441,715 from $282,049,156
at year-end. Non-interest bearing checking accounts decreased 13.33% as many
business customers settled seasonal transactions. Savings and interest-bearing
checking accounts decreased slightly by .62%. Certificates of deposit decreased
2.90% as many higher balance customers sought investment alternatives.
Securities sold under agreement to repurchase decreased by $4,764,024, to
$7,085,092 from $11,849,116. As mentioned above, many business customers settled
seasonal transactions during the first quarter of 1999. Repurchase agreements
are collateralized by the Bank's government and agency investment securities.
Overnight and long-term advances from the Federal Home Loan Bank (FHLB)
increased to $3,848,000 from zero at year-end. During the first three months of
1999, the Bank funded a net $4.2 million increase in loans and an $11.4 million
decrease in deposits and repurchase agreements using approximately $9.9 million
in cash and cash equivalents and $3.8 million from FHLB advances.
Accrued expenses and other liabilities increased $1,869,622, to $3,599,513
from $1,729,891. The majority of the increase was attributable to a $1 million
payable recorded for an investment security trade booked at the end of March
that settled in April.
Liquidity and Capital Resources
The Bank is required to maintain a 4% ratio of liquid assets to net
withdrawable funds. At March 31, 1999, the Bank's ratio of 9.61% exceeded
regulatory requirements for long-term liquidity.
The Bank's source of funds comes primarily from net deposit inflows, loan
amortizations, principal pay downs from loans, sold loan proceeds, and advances
from the FHLB. At March 31, 1999, the Bank had approximately $92,000,000 in
additional borrowing capacity from the FHLB.
At March 31, 1999, the Company's shareholders' equity totaled $27,603,651, or
8.69% of total assets, compared to $27,779,606, or 8.59% of total assets at
year-end 1998. The decrease of $175,955 reflects net income of $710,608, the
payment of $336,686 in common stock dividends and the change of $549,877 in the
net unrealized holding gain (loss) on securities classified as available-for-
sale. This change reflects the rise in interest rates during the first three
months of 1999 and the corresponding decrease in investment security market
values during the same period.
For the three months ended March 31, 1999, net cash provided by operating
activities was $2,268,454, versus $2,149,100 for the same period in 1998. A net
change in other assets and other liabilities accounted for the majority of the
change as accrued interest, other assets, accrued expenses and other liabilities
increased. A security purchased and booked as a payable at the end of the first
quarter was settled in April.
Net cash flows used in investing activities amounted to $4,323,077 for the
three months ended March 31, 1999, compared to net cash flows provided by
investing activities of $1,710,628 for the same period in 1998, a change of
approximately $6 million. A net increase in loans to customers used cash flows
of $4,217,133 compared to a decrease in loans that provided cash flows of
$4,736,593 for the same period in 1998. During the first three months of 1999,
purchases of investment securities were approximately $7.0 million and sales and
calls of investment securities were also $7.0 million. Investment security
activity during the first quarter of 1998 used net cash flows of approximately
$3.4 million.
B-10
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
At March 31, 1999, net cash flows used in financing activities was $7,860,151
compared to net cash provided by financing activities of $955,760 for the same
period in 1998, a change of approximately $8.8 million. A decrease in deposits
and repurchase agreements of $11,371,465 was partially offset by an increase in
advances from the FHLB and other borrowings of $3,848,000. During the same time
period in 1998, deposits and repurchase agreements increased $1,610,863 while
FHLB advances decreased $369,160.
The Bank expects to be able to fund loan demand and other investing during
1999 by continuing to use funds provided from customer deposits, as well as the
FHLB's advance program. Management is not aware of any trends, events, or
uncertainties that will have or that are reasonably likely to have a material
effect in the Company's liquidity, capital resources or results of operations.
Banks are required to maintain tangible capital, core leverage capital, and
total risk based capital of 1.50%, 4.00%, and 8.00%, respectively. As of March
31, 1999, the Bank's ratios were 7.32%, 7.32%, and 12.32%, respectively, well in
excess of the regulators' requirements.
Book value per share was $13.12 at March 31, 1999, versus $12.41 per share at
March 31, 1998. The increase in paid-in capital and retained earnings provided
the increase in book value per share.
Interest Rate Sensitivity
The principal objective of the Bank's interest rate management function is to
evaluate the interest rate risk inherent in certain balance sheet accounts and
determine the appropriate level of risk given the Bank's business strategies,
operating environment, capital and liquidity requirements and performance
objectives and to manage the risk consistent with the Board of Directors'
approved guidelines. The Bank's Board of Directors has established an
Asset/Liability Committee (ALCO) to review its asset/liability policies and
interest rate position monthly. Trends and interest rate positions are reported
to the Board of Directors quarterly.
Gap analysis is used to examine the extent to which assets and liabilities are
"rate sensitive". An asset or liability is said to be interest rate sensitive
within a specific time-period if it will mature or reprice within that time.
The interest rate sensitivity gap is defined as the difference between the
amount of interest-earning assets maturing or repricing within a specified
period of time and the amount of interest-bearing liabilities maturing or
repricing within the same specified period of time. The strategy of matching
rate sensitive assets with similar liabilities stabilizes profitability during
periods of interest rate fluctuations.
The Bank's one-year gap at March 31, 1999, was 6.42%, compared to the December
31, 1998 gap of 6.78%. The Bank continues to hold in portfolio adjustable rate
mortgages, which reprice at one, three, and five-year intervals. The Bank sells
fixed-rate mortgages into the secondary market in order to minimize interest
rate risk.
The Bank's gap, of approximately negative six percent at March 31, 1999, means
net interest income would increase if interest rates trended downward. The
opposite would occur if interest rates were to rise. Management feels that
maintaining the gap within ten points of the parity line provides adequate
protection against severe interest rate swings. In an effort to maintain the
gap within ten points of parity, the Bank may utilize the FHLB advance program
to control the repricing of a segment of liabilities.
B-11
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
As another part of its interest rate risk analysis, the Bank uses an interest
rate sensitivity model, which generates estimates of the change in the Bank's
net portfolio value (NPV) over a range of interest rate scenarios. The OTS
produces the data quarterly using its own model and data submitted by the Bank.
NPV is the present value of expected cash flows from assets, liabilities and
off-balance sheet contracts. The NPV ratio, under any rate scenario, is defined
as the NPV in that scenario divided by the market value of assets in the same
scenario. Modeling changes requires making certain assumptions, which may or
may not reflect the manner in which actual yields and costs respond to the
changes in market interest rates. In this regard, the NPV model assumes that
the composition of the Bank's interest sensitive assets and liabilities existing
at the beginning of a period remain constant over the period being measured and
that a particular change in interest rates is reflected uniformly across the
yield curve. Accordingly, although the NPV measurements and net interest income
models provide an indication of the Bank's interest rate risk exposure at a
particular point in time, such measurements are not intended to and do not
provide a precise forecast of the effect of changes in market rates on the
Bank's net interest income and will likely differ from actual results.
The following table sets forth the Bank's NPV as of December 31, 1998 (the
latest NPV analysis prepared by the OTS), as calculated by the OTS.
<TABLE>
<CAPTION>
Change Net Portfolio Value NPV as % of PV Assets
in Rates $ Amount $ Change % Change NPV Ratio Change
- ---------------- --------------------------------------------------- -------------------------------------
<S> <C> <C> <C> <C> <C> <C>
+400 bp .......... 18,272 -17,343 - 49% 5.81% - 489 bp
+300 bp .......... 23,397 -12,218 - 34% 7.32% - 339 bp
+200 bp .......... 28,105 - 7,511 - 21% 8.66% - 205 bp
+100 bp .......... 32,240 - 3,375 - 9% 9.80% - 91 bp
0 bp .......... 35,615 -- -- 10.70% --
- -100 bp .......... 38,660 3,045 + 9% 11.50% + 79 bp
- -200 bp .......... 42,441 6,826 + 19% 12.46% + 175 bp
- -300 bp .......... 48,474 12,859 + 36% 13.96% + 325 bp
- -400 bp .......... 56,124 20,508 + 58% 15.78% + 508 bp
</TABLE>
Allowance for Loan Losses and Asset Quality
The Bank considers many factors in determining the allowance for loan losses.
These include the risk and size characteristics of loans, the prior years' loss
experience, the levels of delinquencies, the prevailing economic conditions, the
number of foreclosures, unemployment rates, interest rates, and the value of
collateral securing the loans. No changes were made to the Bank's procedures
with respect to maintaining the loan loss allowances as a result of any
regulatory examinations.
Additionally, the Bank's commercial loan officers review the financial
condition of commercial loan customers on a regular basis and perform visual
inspections of facilities and inventories. The Bank also has an internal audit
and compliance program. Results of the audit and compliance programs are
reported directly to the Audit Committee of the Bank's Board of Directors.
B-12
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
The allowance for loan losses at March 31, 1999 was $3,149,129, compared to
$3,117,068 at year-end 1998. As of March 31, 1999, the allowance included
$2,763,435 in general reserves compared to $2,731,484 at year-end 1998. The
total allowance represented 1.29% of total loans at March 31, 1999 versus 1.30%
at year-end 1998. The allowance for loan losses as a percentage of non-
performing assets was 103.69% at March 31, 1999, compared to 115.82% at December
31, 1998. During the first three months of 1999, the Bank had net charge-offs
of $117 compared to $34,833 for the same period in 1998.
Loans classified for regulatory purposes as loss, doubtful, substandard or
special mention do not result from trends or uncertainties which the Bank
reasonably expects will materially impact future operating results, liquidity,
or capital resources. As of March 31, 1999, there were no other loans not
included in the table below or discussed where known information about the
possible credit problems of borrowers caused management to have doubts as to the
ability of the borrower to comply with present loan repayment terms and which
may result in disclosure of such loans in the future.
Total classified loans, excluding special mention, as of March 31, 1999 were
$5,198,223 compared to $5,356,046 at December 31, 1998. At March 31, 1999, loans
classified as 90 days delinquent were $1,290,849 compared to $170,999 at
December 31, 1998. At March 31, 1999, non-earning assets were $1,058,999
compared to $1,850,214 at year-end 1998. Total non-performing assets amounted to
$3,037,251 and $2,691,366, for March 31, 1999 and December 31, 1998,
respectively.
The following table shows the breakdown of non-performing assets and non-
performing assets as a percentage of total assets (dollars in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------------------- -------------------------
<S> <C> <C> <C> <C>
90 day delinquent loans /1/ $ 1,291 0.41% $ 171 0.05%
Non-earning assets /2/ 1,059 0.33% 1,850 0.57%
Other real estate owned 687 0.22% 670 0.21%
------------------------- -------------------------
Total non-performing assets $ 3,037 0.96% $ 2,691 0.83%
------------------------- -------------------------
Troubled debt restructured $ - - $ 114 0.04%
========================= =========================
</TABLE>
/1/ All loans 90 days or more delinquent are placed on a non-accruing status.
/2/ Loans considered to be uncollectible, pending foreclosure, impaired, or in
bankruptcy proceeding, are placed on a non-earning status.
The following table sets forth the allocation of the loan loss valuation
allowance and the percentage of loans in each category to total loans (dollars
in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
-------------------------- --------------------------
<S> <C> <C> <C> <C>
Real estate loans -
Conventional $ 1,485 79% $ 1,473 79%
Construction 125 1% 123 2%
Collateral and Consumer 76 12% 68 11%
Commercial and Municipal 1,011 8% 1,007 8%
Other loans 66 - 60 -
Impaired Loans 386 - 386 -
-------------------------- -------------------------
Valuation allowance $ 3,149 100% $ 3,117 100%
========================== ==========================
Total valuation allowance as a
percentage of total loans 1.29% 1.30%
================ ================
</TABLE>
B-13
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Results of Operations
Net income for the three months ended March 31, 1999, was $710,608, or $0.34
per common share (assuming dilution) compared to $702,826, or $0.33 per common
share (assuming dilution) for the same period in 1998.
Net interest income increased $96,940, or 3.52%, from $2,751,971 for the
first three months of 1998 to $2,848,911 for the first three months of 1999.
The increase was due primarily to a decrease in the cost of deposits and a
decrease in the average outstanding balance of FHLB advances.
Total interest income for the quarter ended March 31, 1999 decreased by
$281,055, or 4.83%, to $5,533,268 from $5,814,323 for the same period in 1998.
For the three months ended March 31, 1999, interest on loans decreased $613,660,
or 11.74% to $4,614,301 from $5,227,961 for the same period in 1998. Total
loans held in portfolio decreased from $250,582,342 at March 31, 1998 to
$243,551,858 at March 31, 1999. The decrease in loan interest income was
primarily attributable to lower yields on loans and a decrease in loans held in
portfolio. As customers refinanced from variable rate into fixed rate loans,
the Bank sold the loans into the secondary market in order to reduce interest
rate risk. Fee income associated with the sales is recorded in other income.
Somewhat offsetting the decrease in interest on loans, was a $332,605 increase
in interest and dividends on investments. As mentioned above, proceeds from
sold loans may be used to purchase investment securities. Total investment
securities, including federal funds, increased $6,076,436 from $47,222,590 at
March 31, 1998 to $53,299,026 for the same period in 1999.
For the three months ended March 31, 1999, total interest expense decreased
$377,995, or 12.34%. The decrease was a result of lower interest expense
associated with deposits and FHLB advances. Higher balances in transaction-type
accounts and lower balances in certificates of deposit accounts reduced the
Bank's cost of deposits to 3.81% at March 31, 1999 from 4.27% for the same
period in 1998. At March 31, 1999, advances from FHLB and other borrowed funds
totaled $3,848,000 compared to $10,177,158 for the same period in 1998. During
the same period, the Bank's cost of advances fell to 4.05% from 4.33%.
Due to lower loan portfolio balances combined with management's assessment
that reserve levels are adequate, the provision for loan losses remained
consistent with 1998 levels. As of March 31, 1999, the net provision for loan
losses totaled $30,000 compared to $14,520 for the same period in 1998. The
total allowance represented 1.29% of total loans at March 31, 1999 versus 1.20%
for the same period in 1998.
For the quarter ended March 31, 1999, total other income increased by
$222,807, or 57.01% from $390,822 in 1998 to $613,629 for the same period in
1999. The change was primarily a result of a $133,992, or 49.07% increase in
loan origination and customer service fees. In addition, net gains on the sale
of loans accounted for $47,873 of the increase. As mentioned above, the Bank
originated a record $35.6 million of loans during the first quarter compared to
$26.9 for the same period in 1998 and sold $13.1 million.
Total operating expenses increased $312,437, or 14.95% for the three months
ended March 31, 1999. Additional staffing and occupancy costs were realized as
the Bank managed its increased loan volume through increased staffing and
outsourcing. The Bank also recorded additional depreciation expense associated
with system upgrades done throughout 1998.
B-14
<PAGE>
SHATSWELL, MacLEOD & COMPANY, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
83 PINE STREET
WEST PEABODY, MASSACHUSETTS 01960-3635
TELEPHONE (978)535-0206
FACSIMILE (978)535-9908
The Board of Directors
New Hampshire Thrift Bancshares, Inc.
Newport, New Hampshire
Independent Accountants' Report
-------------------------------
We have reviewed the accompanying consolidated statement of financial condition
of New Hampshire Thrift Bancshares, Inc. and Subsidiary as of March 31, 1999,
and the related consolidated statements of income and cash flows for the three-
month period then ended. These consolidated financial statements are the
responsibility of the company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquires of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the consolidated statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
/s/ Shatswell, MacLeod & Company, P.C.
SHATSWELL, MACLEOD & COMPANY, P.C.
May 12, 1999
B-15
<PAGE>
PART II. NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARY
OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
There is no material litigation pending in which the Company or its
subsidiary is a party or which the property of the Company or its
subsidiary is subject.
Item 2. Changes in Securities
---------------------
None
Item 3. Defaults Upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters to a Vote of Common Shareholders
------------------------------------------------------
At the Annual Meeting of Shareholders held on April 8, 1999, the
following was voted:
Directors of New Hampshire Thrift Bancshares, Inc. were re-elected for
terms of three years, each expiring at the Annual Meeting 2002.
<TABLE>
<CAPTION>
For Withheld
- ------------------------------------------------------------------------
<S> <C> <C>
Leonard R. Cashman 1,680,822 30,776
Stephen W. Ensign 1,680,758 30,840
Dennis A. Morrow 1,680,322 31,276
Kenneth D. Weed 1,679,422 32,176
</TABLE>
The appointment of Shatswell, MacLeod & Company, P.C. as independent
auditors was ratified.
<TABLE>
<CAPTION>
For Against Withheld
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
1,687,251 7,310 10,912
</TABLE>
Item 5. Other Information
-----------------
None
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
A.) Exhibits:
Exhibit 10.8 Stock Purchase Agreement dated April 12, 1999
Exhibit 10.9 Purchase and Assumption Agreement dated April 12,
1999
Exhibit 10.10 Asset and Liability Allocation Agreement dated
April 12, 1999
Exhibit 27 Financial Data Schedules (EDGAR filing only)
B.) Reports on Form 8-K:
A report on Form 8-K was filed on April 27, 1999, reporting the signing
of an agreement for Lake Sunapee Bank to acquire three branch offices
of New London Trust Company.
B-16
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARY
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.
NEW HAMPSHIRE THRIFT BANCSHARES, INC.
-------------------------------------
(Registrant)
Date: May 14, 1999 /s/ Stephen W. Ensign
-------------------- -------------------------------------------
Stephen W. Ensign
Vice Chairman of the Board, President
and Chief Executive Officer
Date: May 14, 1999 /s/ Stephen R. Theroux
-------------------- -------------------------------------------
Stephen R. Theroux
Executive Vice President and
Chief Operating Officer
Date: May 14, 1999 /s/ Daryl J. Cady
-------------------- -------------------------------------------
Daryl J. Cady
Senior Vice President and
Chief Financial Officer
(Principal Accounting Officer)
B-17
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[LOGO OF THRIFT BANCSHARES, INC. APPEARS HERE]
Tucker Anthony Cleary Gull
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
-------------------------------------------
The Corporation will pay all of the expenses incurred in connection with
the offering described in this registration statement. Such expenses, other
than underwriting commissions and discounts, are estimated to be as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee................... $ 4,868
Legal fees and expenses............................................... 150,000
Underwriters' Management Fee.......................................... 50,000
Accounting fees and expenses.......................................... 30,000
Blue Sky fees and expenses............................................ 5,000
Printing and engraving fees........................................... 100,000
Fees and expenses of registrars, transfer agents, paying agents and
trustees............................................................. 10,000
Listing fees.......................................................... 13,750
NASD Fairness Fees.................................................... 3,500
Miscellaneous......................................................... 7,882
--------
Total........................................................... $375,000
========
</TABLE>
Item 15. Indemnification of Directors and Officers.
------------------------------------------
Section 145 of the Delaware General Corporation Law, inter alia, empowers a
Delaware corporation to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding (other than an action by or in the right of the corporation)
by reason of the fact that such person is or was a director, officer, employee
or agent of another corporation or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interest of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. Similar indemnity is authorized for such person against expenses
(including attorneys' fees) actually and reasonably incurred in connection with
the defense or settlement of any such threatened, pending or completed action or
suit if such person acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the corporation, and provided
further that (unless a court of competent jurisdiction otherwise provides) such
person shall not have been adjudged liable to the corporation. Any such
indemnification may be made only as authorized in each specific case upon a
determination by the stockholders or disinterested directors or by independent
legal counsel in a written opinion that indemnification is proper because the
indemnitee has met the applicable standard of conduct.
Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation or enterprise,
against any liability asserted against him, and incurred by him in any such
capacity, or arising out of his status as such, whether or not the corporation
would otherwise have the power to indemnify him under Section 145.
The Corporation's certificate of incorporation contains provisions
indemnifying directors and officers to the fullest extent permitted by law.
The Corporation has also entered into employment agreements with certain
executive officers, which agreements require that the Corporation maintain a
directors' and officers' liability policy for the benefit of such officers and
that the Corporation will indemnify such officers to the fullest extent
permitted by law.
The Corporation has obtained directors' and officers' liability insurance
policies which insure its directors and officers and the directors and officers
of its subsidiaries in certain instances.
The Amended and Restated Declaration of Trust (the "Declaration") for NHTB
Capital Trust I (the "Trust") provides that to the full extent permitted by law,
the Corporation shall indemnify any Administrative Trustee or affiliate of an
Administrative Trustee, any officers, directors, stockholders, members,
partners, employees or representatives or agents of any Administrative Trustee
or any employee or agent of the Trust or its affiliates (each, a "Company
Indemnified Person") who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of any such Trust) by reason of the fact that he is or was a Company
Indemnified Person against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best interests of
any such Trust, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The Declaration also
provides that to the full extent permitted by law, the Corporation shall
indemnify any Company Indemnified Person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action or suit by or
in the right of any such trust to procure a judgment in its favor by reason of
the fact that he is or was a Company Indemnified Person against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if
II-1
<PAGE>
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of any such trust and except that no such
indemnification shall be made in respect of any claim, issue or matter as to
which such Company Indemnified Person shall have been adjudged to be liable to
the Trust unless and only to the extent that the Court of Chancery of Delaware
or the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which such Court of Chancery or such other court
shall deem proper. The Declaration further provides that expenses (including
attorneys' fees) incurred by a Company Indemnified Person in defending a civil,
criminal, administrative or investigative action, suit or proceeding referred to
in the immediately preceding two sentences shall be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such Company Indemnified Person to repay
such amount if it shall ultimately be determined that he is not entitled to be
indemnified by the Corporation as authorized in any such Declaration.
The Declaration for the Trust also provides that the Corporation shall
indemnify the Property Trustee and the Delaware Trustee, any affiliate of the
Property Trustee and the Delaware Trustee, and any officers, directors,
stockholders, members, partners, employees, representatives, nominees,
custodians or agents of the Property Trustee and the Delaware Trustee against
any loss, liability or expense incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or administration of
the trust or trusts under the Trust, including the costs and expenses (including
reasonable legal fees and expenses) of defending itself against or investigating
any claim or liability in connection with the exercise or performance of any of
its powers or duties thereunder.
Item 16. Exhibits.
--------
Exhibit
Number Description
------ -----------
1.1 Form of Underwriting Agreement.*
4.1 Certificate of Trust for NHTB Capital Trust I.*
4.2 Declaration of Trust for NHTB Capital Trust I.*
4.3 Form of Amended and Restated Declaration of Trust.*
4.4 Form of Subordinated Debenture.*
4.5 Form of Capital Security.*
4.6 Form of Capital Securities Guarantee Agreement.*
4.7 Form of Indenture.*
5.1 Form of Opinion of Thacher Proffitt & Wood as to the
legality of the Capital Securities, Subordinated Debentures
and the Guarantee to be issued by the Corporation.*
8.1 Form of Opinion of Thacher Proffitt & Wood as to certain tax
matters.
10.1 Profit Sharing-Stock Ownership Plan of Lake Sunapee Bank,
fsb (previously filed as an exhibit to the Form S-4, filed
on November 5, 1996).
10.2 New Hampshire Thrift Bancshares, Inc. 1996 Stock Option Plan
(previously filed as an exhibit to the Form S-4, filed on
November 5, 1996).
10.3 Lake Sunapee Bank, fsb 1987 Incentive Stock Option Plan
(previously filed as an exhibit to the Company's Form S-4
(file no. 33-27192), filed on March 1, 1989).
10.4 New Hampshire Thrift Bancshares, Inc. 1996 Incentive Stock
Option Plan (previously filed as an exhibit to the Company's
Form S-4 (file no. 33-27192), filed on March 1, 1989).
10.5 Employment Agreement between New Hampshire Thrift
Bancshares, Inc. and Stephen W. Ensign (previously filed as
an exhibit to the Form S-4, filed on November 5, 1996).
10.6 Employment Agreement between New Hampshire Thrift
Bancshares, Inc. and Stephen R. Theroux (previously filed as
an exhibit to the Form S-4, filed on November 5, 1996).
10.7 Stock Option Agreement dated as of July 26, 1996, between
New Hampshire Thrift Bancshares, Inc. and Landmark
(previously filed as an exhibit to the Form S-4, filed on
November 5, 1996).
10.8 Stock Purchase Agreement dated April 12, 1999 (previously
filed as an exhibit to the Form 10-Q for the quarter ended
March 31, 1999).
10.9 Purchase and Assumption Agreement dated April 12, 1999
(previously filed as an exhibit to the May 14, 1999 Form 10-
Q for the quarter ended March 31, 1999).
10.10 Asset and Liability Allocation dated April 12, 1999
(previously filed as an exhibit to the May 14, 1999 Form 10-
Q for the quarter ended March 31, 1999).
II-2
<PAGE>
Exhibit
Number Description
------ -----------
23.1 Consent of Shatswell, MacLeod & Company, P.C.
23.2 Consent of Thacher Proffitt & Wood (included in Exhibit
5.1).*
25.1 Form T-1 Statement of Eligibility of Wilmington Trust
Company to act as trustee under the Declaration of Trust of
NHTB Capital Trust I.
25.2 Form T-1 Statement of Eligibility of Wilmington Trust
Company to act as trustee under the Indenture.
25.3 Form T-1 Statement of Eligibility of Wilmington Trust
Company to act as trustee under the Guarantee for the
benefit of the holders of Capital Securities of NHTB Capital
Trust I.
27.1 Financial Data Schedule.
* Previously Filed
Item 17. Undertakings.
(a) Each of the undersigned registrants hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933, each
filing of a registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, and controlling
persons of each registrant pursuant to the foregoing provisions, or otherwise,
each registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by a registrant of expenses incurred or paid by a director, officer, or
controlling person of a registrant in the successful defense of any action, suit
or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the respective registrant will,
unless in the opinion of counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
(c) The undersigned registrants hereby undertake to provide to the
Underwriters at the closing specified in the Underwriting Agreement,
certificates in such denominations and registered in such names as required by
the Underwriters to permit the prompt delivery to each purchaser.
(d) The undersigned registrants hereby undertake that:
(1) For the purpose of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon
Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-2 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Newport, State of New Hampshire, on July 23, 1999.
NEW HAMPSHIRE THRIFT
BANCSHARES, INC.
By: /s/ Stephen W. Ensign
------------------------
Stephen W. Ensign
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
amendment no. 1 to the Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman of the Board July 23, 1999
- ----------------------------------
John J. Kiernan
* Vice Chairman of the Board, President July 23, 1999
- ----------------------------------
Stephen W. Ensign and Chief Executive Officer (Principal
executive officer)
* Director, Executive Vice President July 23, 1999
- ----------------------------------
Stephen R. Theroux and Chief Operating Officer
* Senior Vice President and Chief July 23, 1999
- ----------------------------------
Daryl J. Cady Financial Officer (Principal
accounting officer)
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Director July 23, 1999
- ------------------------------------
Ralph B. Fifield, Jr.
* Director July 23, 1999
- ------------------------------------
Leonard R. Cashman
* Director July 23, 1999
- ------------------------------------
John A. Kelly, Jr.
* Director July 23, 1999
- ------------------------------------
Peter R. Lovely
* Director July 23, 1999
- ------------------------------------
Dennis A. Morrow
* Director July 23, 1999
- ------------------------------------
Jack H. Nelson
* Director July 23, 1999
- ------------------------------------
Priscilla W. Ohler
* Director July 23, 1999
- ------------------------------------
Kenneth D. Weed
* Director July 23, 1999
- ------------------------------------
Joseph B. Willey
</TABLE>
* /s/ Stephen W. Ensign as Attorney-in-Fact by Power of-Attorney
filed on July 8, 1999
II-5
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-2 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Newport, State of New Hampshire, on July 23, 1999.
NHTB CAPITAL TRUST I
By: /s/ Stephen W. Ensign
-------------------------------------
Stephen W. Ensign
Administrative Trustee
By: /s/ Stephen R. Theroux
-------------------------------------
Stephen R. Theroux
Administrative Trustee
By: /s/ Daryl J. Cady
-------------------------------------
Daryl J. Cady
Administrative Trustee
II-6
<PAGE>
EXHIBIT 8.1
July 23, 1999
Tucker Anthony Cleary Gull
One Beacon Street
Boston, Massachusetts 02108
Re: NHTB Capital Trust I
--------------------
Ladies and Gentlemen:
We have acted as special tax counsel to New Hampshire Thrift Bancshares,
Inc., a Delaware corporation (the "Corporation"), and NHTB Capital Trust I, a
business trust formed under the Business Trust Act of the State of Delaware (the
"Trust"), in connection with the Underwriting Agreement (the "Underwriting
Agreement"), among you, as Underwriter, the Corporation and the Trust, relating
to the offering of an aggregate of 1,750,000 of the Trust's Capital Securities,
liquidation amount of $10.00 per capital security (the "Capital Securities").
In connection with the issuance of the Capital Securities, the Trust is also
issuing Common Securities, liquidation amount of $10.00 per common security (the
"Common Securities" and, together with the Capital Securities, the "Trust
Securities").
The Trust Securities are to be issued pursuant to the Amended and
Restated Declaration of Trust (the "Declaration") among the Corporation, as
Sponsor, Wilmington Trust Company, as Property Trustee and as Delaware Trustee,
and Stephan W. Ensign, Stephan R. Theroux and Daryl J. Cady (collectively, as
the "Administrative Trustees"). The sole assets of the Trust will be the Junior
Subordinated Deferrable Interest Debentures due 2029 (the "Junior Subordinated
Debentures") of the Corporation issued pursuant to an indenture (the
"Indenture"), between the Corporation and Wilmington Trust Company, as Debenture
Trustee. Capitalized terms used and not defined herein shall have the respective
meanings set forth in the Underwriting Agreement.
In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of (i) the Registration
Statement as filed by the Company and the Trust with the Securities and Exchange
Commission on July 8, 1999, as amended (the "Registration Statement"); (ii) the
certificate of trust of the Trust filed with the Secretary of State of the State
of Delaware on July 7, 1999; (iii) the Declaration (including the designations
of the terms of the Trust Securities annexed thereto); (iv) the form of
certificates evidencing the Capital Securities and the Common Securities, in
each case annexed
<PAGE>
Tucker Anthony Cleary Gull
, 1999 Page 2.
to the Declaration; (v) the Underwriting Agreement; (vi) the Indenture and the
form of certificate evidencing the Junior Subordinated Debentures annexed
thereto; (vii) the Debenture Subscription Agreement between the Corporation and
the Trust; (viii) the Common Securities Subscription Agreement between the
Corporation and the Trust; (ix) the Capital Securities Guarantee Agreement
between the Corporation as guarantor and Wilmington Trust Company for the
benefit of the Holders of the Capital Securities; and (x) the Common Securities
Guarantee Agreement by the Corporation as guarantor for the benefit of the
Holders of the Common Securities. Furthermore, we have relied upon the letter of
[July __, 1999] from the Corporation to us containing certain representations
and upon certain statements and representations made by officers of the
Corporation and others. We have also examined originals or copies, certified or
otherwise identified to our satisfaction, of such other documents, certificates
and records as we have deemed necessary or appropriate as a basis for the
opinion set forth herein.
In rendering the opinions expressed below, we have participated in the
preparation of the Registration Statement. Our opinion is conditioned on, among
other things, the initial and continuing accuracy of the facts, information,
covenants and representations set forth in the documents referred to above and
the statements and representations made by officers of the Corporation and
others. In our examination, we have assumed the genuineness of all signatures,
the legal capacity of natural persons, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such documents. We also have assumed that the
transactions related to the issuance of the Capital Securities, the Common
Securities, and the Junior Subordinated Debentures will be consummated in the
manner contemplated by the Registration Statement.
In rendering our opinion, we have considered the current provisions of
the Internal Revenue Code of 1986, as amended, Treasury regulations promulgated
thereunder, judicial decisions and Internal Revenue Service rulings, all of
which are subject to change, which changes may be retroactively applied. A
change in the authorities upon which our opinion is based could affect our
conclusions. There can be no assurances, moreover, that any of the opinions
expressed herein will be accepted by the Internal Revenue Service or, if
challenged, by a court.
Based solely upon the foregoing, we are of the opinion that under
current United States federal income tax law, as of the date hereof:
(i) The Junior Subordinated Debentures will be classified for United
States federal income tax purposes as indebtedness of the
Corporation.
(ii) The Trust will not be classified for United States federal income
tax purposes as an association taxable as a corporation.
(iii) Although the discussion set forth in the prospectus included in
the Registration Statement under the heading "CERTAIN FEDERAL
INCOME TAX CONSEQUENCES" does not purport to discuss all possible
United States federal income tax consequences of the purchase,
ownership and disposition of Capital Securities, such discussion
constitutes, in all material respects, a fair and accurate summary
under current law of the material United States federal income tax
<PAGE>
Tucker Anthony Cleary Gull
, 1999 Page 3.
consequences of the purchase, ownership and disposition of Capital
Securities by a holder who purchases Capital Securities upon
original issuance.
For purposes of this letter, we do not express any opinion concerning
any law other than the federal income tax law of the United States. Furthermore,
our opinions are limited solely to the specific questions and conclusions set
forth herein and we express no opinion to any party as to the tax consequences,
whether federal, state, local or foreign, of the issuance of the Junior
Subordinated Debentures, the Capital Securities, the Common Securities or of any
transaction related to or contemplated by such issuance. This opinion is
furnished to you solely for your benefit in connection with the offering of the
Capital Securities and the Junior Subordinated Debentures and is not to be used,
circulated, quoted or otherwise referred to for any other purpose or relied upon
by any other person without our prior written consent. We consent to the filing
of this opinion as an exhibit to the Registration Statement and to the reference
thereto under the heading "Certain Federal Income Tax Consequences" in the
prospectus which is a part of the Registration Statement. We disclaim any
undertaking to advise you of any subsequent changes of the facts stated or
assumed herein or any subsequent changes in applicable law.
Very truly yours,
THACHER PROFFITT & WOOD
By:
____________________
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the registration statement
on Form S-2 of NHTB Capital Trust I of our report dated January 25, 1999,
relating to the consolidated balance sheets of New Hampshire Thrift Bancshares,
Inc. and Subsidiary as of December 31, 1998 and 1997, and the related
consolidated statements of income, changes in the stockholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1998,
which report is included in the December 31, 1998 annual report on Form 10-KSB
of New Hampshire Thrift Bancshares, Inc.
/s/ Shatswell, MacLeod & Company, P.C.
SHATSWELL, MacLEOD & COMPANY, P.C.
West Peabody, Massachusetts
July 28, 1999
<PAGE>
Exhibit 25.1
Registration No.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)_____
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
NEW HAMPSHIRE THRIFT BANCSHARES, INC.
NHTB CAPITAL TRUST I
(Exact name of obligor as specified in its charter)
Delaware 02-0430695
Delaware Pending
(State of incorporation) (I.R.S. employer identification no.)
9 Main Street
Newport, New Hampshire 03773
(Address of principal executive offices) (Zip Code)
Capital Securities of NHTB Capital Trust
(Title of the indenture securities)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the trustee
and upon information furnished by the obligor, the obligor is not an
affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which includes
the certificate of authority of Wilmington Trust Company to
commence business and the authorization of Wilmington Trust
Company to exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section 321(b) of
Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust
Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 26th day
of July, 1999.
WILMINGTON TRUST COMPANY
[SEAL]
Attest: /s/ Patricia A. Evans By: /s/ Norma P. Closs
--------------------------- ---------------------------
Assistant Secretary Name: Norma P. Closs
Title: Vice President
2
<PAGE>
EXHIBIT A
AMENDED CHARTER
Wilmington Trust Company
Wilmington, Delaware
As existing on May 9, 1987
<PAGE>
Amended Charter
or
Act of Incorporation
of
Wilmington Trust Company
Wilmington Trust Company, originally incorporated by an Act of the General
Assembly of the State of Delaware, entitled "An Act to Incorporate the Delaware
Guarantee and Trust Company", approved March 2, A.D. 1901, and the name of which
company was changed to "Wilmington Trust Company" by an amendment filed in the
Office of the Secretary of State on March 18, A.D. 1903, and the Charter or Act
of Incorporation of which company has been from time to time amended and changed
by merger agreements pursuant to the corporation law for state banks and trust
companies of the State of Delaware, does hereby alter and amend its Charter or
Act of Incorporation so that the same as so altered and amended shall in its
entirety read as follows:
First: - The name of this corporation is Wilmington Trust Company.
Second: - The location of its principal office in the State of Delaware is
at Rodney Square North, in the City of Wilmington, County of New Castle;
the name of its resident agent is Wilmington Trust Company whose address
is Rodney Square North, in said City. In addition to such principal
office, the said corporation maintains and operates branch offices in the
City of Newark, New Castle County, Delaware, the Town of Newport, New
Castle County, Delaware, at Claymont, New Castle County, Delaware, at
Greenville, New Castle County Delaware, and at Milford Cross Roads, New
Castle County, Delaware, and shall be empowered to open, maintain and
operate branch offices at Ninth and Shipley Streets, 418 Delaware Avenue,
2120 Market Street, and 3605 Market Street, all in the City of Wilmington,
New Castle County, Delaware, and such other branch offices or places of
business as may be authorized from time to time by the agency or agencies
of the government of the State of Delaware empowered to confer such
authority.
Third: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this Corporation are
to do any or all of the things herein mentioned as fully and to the same
extent as natural persons might or could do and in any part of the world,
viz.:
(1) To sue and be sued, complain and defend in any Court of law or
equity and to make and use a common seal, and alter the seal at
pleasure, to hold,
<PAGE>
purchase, convey, mortgage or otherwise deal in real and personal
estate and property, and to appoint such officers and agents as the
business of the Corporation shall require, to make by-laws not
inconsistent with the Constitution or laws of the United States or of
this State, to discount bills, notes or other evidences of debt, to
receive deposits of money, or securities for money, to buy gold and
silver bullion and foreign coins, to buy and sell bills of exchange,
and generally to use, exercise and enjoy all the powers, rights,
privileges and franchises incident to a corporation which are proper
or necessary for the transaction of the business of the Corporation
hereby created.
(2) To insure titles to real and personal property, or any estate or
interests therein, and to guarantee the holder of such property, real
or personal, against any claim or claims, adverse to his interest
therein, and to prepare and give certificates of title for any lands
or premises in the State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the receipt,
collection, custody, investment and management of funds, and the
purchase, sale, management and disposal of property of all
descriptions, and to prepare and execute all papers which may be
necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds, leases,
conveyances, mortgages, bonds and legal papers of every description,
and to carry on the business of conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry, plate,
deeds, bonds and any and all other personal property of every sort and
kind, from executors, administrators, guardians, public officers,
courts, receivers, assignees, trustees, and from all fiduciaries, and
from all other persons and individuals, and from all corporations
whether state, municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of registering,
issuing, certificating, countersigning, transferring or underwriting
the stock, bonds or other obligations of any corporation, association,
state or municipality, and may receive and manage any sinking fund
therefor on such terms as may be agreed upon between the two parties,
and in like manner may act as Treasurer of any corporation or
municipality.
(7) To act as Trustee under any deed of trust, mortgage, bond or
other
2
<PAGE>
instrument issued by any state, municipality, body politic,
corporation, association or person, either alone or in conjunction
with any other person or persons, corporation or corporations.
(8) To guarantee the validity, performance or effect of any contract
or agreement, and the fidelity of persons holding places of
responsibility or trust; to become surety for any person, or persons,
for the faithful performance of any trust, office, duty, contract or
agreement, either by itself or in conjunction with any other person,
or persons, corporation, or corporations, or in like manner become
surety upon any bond, recognizance, obligation, judgment, suit, order,
or decree to be entered in any court of record within the State of
Delaware or elsewhere, or which may now or hereafter be required by
any law, judge, officer or court in the State of Delaware or
elsewhere.
(9) To act by any and every method of appointment as trustee, trustee
in bankruptcy, receiver, assignee, assignee in bankruptcy, executor,
administrator, guardian, bailee, or in any other trust capacity in the
receiving, holding, managing, and disposing of any and all estates and
property, real, personal or mixed, and to be appointed as such
trustee, trustee in bankruptcy, receiver, assignee, assignee in
bankruptcy, executor, administrator, guardian or bailee by any
persons, corporations, court, officer, or authority, in the State of
Delaware or elsewhere; and whenever this Corporation is so appointed
by any person, corporation, court, officer or authority such trustee,
trustee in bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other trust
capacity, it shall not be required to give bond with surety, but its
capital stock shall be taken and held as security for the performance
of the duties devolving upon it by such appointment.
(10) And for its care, management and trouble, and the exercise of
any of its powers hereby given, or for the performance of any of the
duties which it may undertake or be called upon to perform, or for the
assumption of any responsibility the said Corporation may be entitled
to receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages, debentures,
shares of capital stock, and other securities, obligations, contracts
and evidences of indebtedness, of any private, public or municipal
corporation within and without the State of Delaware, or of the
Government of the United States, or of any state, territory, colony,
or possession thereof, or of any foreign government or country; to
receive, collect, receipt for, and dispose of
3
<PAGE>
interest, dividends and income upon and from any of the bonds,
mortgages, debentures, notes, shares of capital stock, securities,
obligations, contracts, evidences of indebtedness and other property
held and owned by it, and to exercise in respect of all such bonds,
mortgages, debentures, notes, shares of capital stock, securities,
obligations, contracts, evidences of indebtedness and other property,
any and all the rights, powers and privileges of individual owners
thereof, including the right to vote thereon; to invest and deal in
and with any of the moneys of the Corporation upon such securities and
in such manner as it may think fit and proper, and from time to time
to vary or realize such investments; to issue bonds and secure the
same by pledges or deeds of trust or mortgages of or upon the whole or
any part of the property held or owned by the Corporation, and to sell
and pledge such bonds, as and when the Board of Directors shall
determine, and in the promotion of its said corporate business of
investment and to the extent authorized by law, to lease, purchase,
hold, sell, assign, transfer, pledge, mortgage and convey real and
personal property of any name and nature and any estate or interest
therein.
(b) In furtherance of, and not in limitation, of the powers conferred by
the laws of the State of Delaware, it is hereby expressly provided that the
said Corporation shall also have the following powers:
(1) To do any or all of the things herein set forth, to the same
extent as natural persons might or could do, and in any part of the
world.
(2) To acquire the good will, rights, property and franchises and to
undertake the whole or any part of the assets and liabilities of any
person, firm, association or corporation, and to pay for the same in
cash, stock of this Corporation, bonds or otherwise; to hold or in any
manner to dispose of the whole or any part of the property so
purchased; to conduct in any lawful manner the whole or any part of
any business so acquired, and to exercise all the powers necessary or
convenient in and about the conduct and management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien, and to
lease, sell, exchange, transfer, or in any manner whatever dispose of
property, real, personal or mixed, wherever situated.
(4) To enter into, make, perform and carry out contracts of every
kind with any person, firm, association or corporation, and, without
limit as to amount, to draw, make, accept, endorse, discount, execute
and issue promissory notes, drafts, bills of exchange, warrants,
bonds, debentures, and other negotiable or
4
<PAGE>
transferable instruments.
(5) To have one or more offices, to carry on all or any of its
operations and businesses, without restriction to the same extent as
natural persons might or could do, to purchase or otherwise acquire,
to hold, own, to mortgage, sell, convey or otherwise dispose of, real
and personal property, of every class and description, in any State,
District, Territory or Colony of the United States, and in any foreign
country or place.
(6) It is the intention that the objects, purposes and powers
specified and clauses contained in this paragraph shall (except where
otherwise expressed in said paragraph) be nowise limited or restricted
by reference to or inference from the terms of any other clause of
this or any other paragraph in this charter, but that the objects,
purposes and powers specified in each of the clauses of this paragraph
shall be regarded as independent objects, purposes and powers.
Fourth: - (a) The total number of shares of all classes of stock which the
Corporation shall have authority to issue is forty-one million (41,000,000)
shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par value
$10.00 per share (hereinafter referred to as "Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par value
$1.00 per share (hereinafter referred to as "Common Stock").
(b) Shares of Preferred Stock may be issued from time to time in one or
more series as may from time to time be determined by the Board of
Directors each of said series to be distinctly designated. All shares of
any one series of Preferred Stock shall be alike in every particular,
except that there may be different dates from which dividends, if any,
thereon shall be cumulative, if made cumulative. The voting powers and the
preferences and relative, participating, optional and other special rights
of each such series, and the qualifications, limitations or restrictions
thereof, if any, may differ from those of any and all other series at any
time outstanding; and, subject to the provisions of subparagraph 1 of
Paragraph (c) of this Article Fourth, the Board of Directors of the
Corporation is hereby expressly granted authority to fix by resolution or
resolutions adopted prior to the issuance of any shares of a particular
series of Preferred Stock, the voting powers and the designations,
preferences and relative, optional and other special rights, and the
qualifications, limitations and restrictions of such series, including, but
without limiting the generality of the
5
<PAGE>
foregoing, the following:
(1) The distinctive designation of, and the number of shares of
Preferred Stock which shall constitute such series, which number may
be increased (except where otherwise provided by the Board of
Directors) or decreased (but not below the number of shares thereof
then outstanding) from time to time by like action of the Board of
Directors;
(2) The rate and times at which, and the terms and conditions on
which, dividends, if any, on Preferred Stock of such series shall be
paid, the extent of the preference or relation, if any, of such
dividends to the dividends payable on any other class or classes, or
series of the same or other class of stock and whether such dividends
shall be cumulative or non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of such
series to convert the same into or exchange the same for, shares of
any other class or classes or of any series of the same or any other
class or classes of stock of the Corporation and the terms and
conditions of such conversion or exchange;
(4) Whether or not Preferred Stock of such series shall be subject to
redemption, and the redemption price or prices and the time or times
at which, and the terms and conditions on which, Preferred Stock of
such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of such
series upon the voluntary or involuntary liquidation, merger,
consolidation, distribution or sale of assets, dissolution or winding-
up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase account,
if any, to be provided for the Preferred Stock of such series; and
(7) The voting powers, if any, of the holders of such series of
Preferred Stock which may, without limiting the generality of the
foregoing include the right, voting as a series or by itself or
together with other series of Preferred Stock or all series of
Preferred Stock as a class, to elect one or more directors of the
Corporation if there shall have been a default in the payment of
dividends on any one or more series of Preferred Stock or under such
circumstances and on such conditions as the Board of Directors may
determine.
(c) (1) After the requirements with respect to preferential dividends on
the Preferred Stock (fixed in accordance with the provisions of section (b)
of this Article
6
<PAGE>
Fourth), if any, shall have been met and after the Corporation shall have
complied with all the requirements, if any, with respect to the setting
aside of sums as sinking funds or redemption or purchase accounts (fixed in
accordance with the provisions of section (b) of this Article Fourth), and
subject further to any conditions which may be fixed in accordance with the
provisions of section (b) of this Article Fourth, then and not otherwise
the holders of Common Stock shall be entitled to receive such dividends as
may be declared from time to time by the Board of Directors.
(2) After distribution in full of the preferential amount, if any,
(fixed in accordance with the provisions of section (b) of this
Article Fourth), to be distributed to the holders of Preferred Stock
in the event of voluntary or involuntary liquidation, distribution or
sale of assets, dissolution or winding-up, of the Corporation, the
holders of the Common Stock shall be entitled to receive all of the
remaining assets of the Corporation, tangible and intangible, of
whatever kind available for distribution to stockholders ratably in
proportion to the number of shares of Common Stock held by them
respectively.
(3) Except as may otherwise be required by law or by the provisions
of such resolution or resolutions as may be adopted by the Board of
Directors pursuant to section (b) of this Article Fourth, each holder
of Common Stock shall have one vote in respect of each share of Common
Stock held on all matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock or of
options, warrants or other rights to purchase shares of any class or series
of stock or of other securities of the Corporation shall have any
preemptive right to purchase or subscribe for any unissued stock of any
class or series or any additional shares of any class or series to be
issued by reason of any increase of the authorized capital stock of the
Corporation of any class or series, or bonds, certificates of indebtedness,
debentures or other securities convertible into or exchangeable for stock
of the Corporation of any class or series, or carrying any right to
purchase stock of any class or series, but any such unissued stock,
additional authorized issue of shares of any class or series of stock or
securities convertible into or exchangeable for stock, or carrying any
right to purchase stock, may be issued and disposed of pursuant to
resolution of the Board of Directors to such persons, firms, corporations
or associations, whether such holders or others, and upon such terms as may
be deemed advisable by the Board of Directors in the exercise of its sole
discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and rights
of each other series of Preferred Stock shall, in each case, be as fixed
from time to time by the Board of
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Directors in the resolution or resolutions adopted pursuant to authority
granted in section (b) of this Article Fourth and the consent, by class or
series vote or otherwise, of the holders of such of the series of Preferred
Stock as are from time to time outstanding shall not be required for the
issuance by the Board of Directors of any other series of Preferred Stock
whether or not the powers, preferences and rights of such other series
shall be fixed by the Board of Directors as senior to, or on a parity with,
the powers, preferences and rights of such outstanding series, or any of
them; provided, however, that the Board of Directors may provide in the
resolution or resolutions as to any series of Preferred Stock adopted
pursuant to section (b) of this Article Fourth that the consent of the
holders of a majority (or such greater proportion as shall be therein
fixed) of the outstanding shares of such series voting thereon shall be
required for the issuance of any or all other series of Preferred Stock.
(f) Subject to the provisions of section (e), shares of any series of
Preferred Stock may be issued from time to time as the Board of Directors
of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(h) The authorized amount of shares of Common Stock and of Preferred Stock
may, without a class or series vote, be increased or decreased from time to
time by the affirmative vote of the holders of a majority of the stock of
the Corporation entitled to vote thereon.
Fifth: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of directors
constituting the entire Board shall be not less than five nor more than
twenty-five as fixed from time to time by vote of a majority of the whole
Board, provided, however, that the number of directors shall not be reduced
so as to shorten the term of any director at the time in office, and
provided further, that the number of directors constituting the whole Board
shall be twenty-four until otherwise fixed by a majority of the whole
Board.
(b) The Board of Directors shall be divided into three classes, as nearly
equal in number as the then total number of directors constituting the
whole Board permits, with the term of office of one class expiring each
year. At the annual meeting of stockholders in 1982, directors of the
first class shall be elected to hold office for a term expiring at the next
succeeding annual meeting, directors of the second class
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<PAGE>
shall be elected to hold office for a term expiring at the second
succeeding annual meeting and directors of the third class shall be elected
to hold office for a term expiring at the third succeeding annual meeting.
Any vacancies in the Board of Directors for any reason, and any newly
created directorships resulting from any increase in the directors, may be
filled by the Board of Directors, acting by a majority of the directors
then in office, although less than a quorum, and any directors so chosen
shall hold office until the next annual election of directors. At such
election, the stockholders shall elect a successor to such director to hold
office until the next election of the class for which such director shall
have been chosen and until his successor shall be elected and qualified. No
decrease in the number of directors shall shorten the term of any incumbent
director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding the
fact that some lesser percentage may be specified by law, this Charter or
Act of Incorporation or the By-Laws of the Corporation), any director or
the entire Board of Directors of the Corporation may be removed at any time
without cause, but only by the affirmative vote of the holders of two-
thirds or more of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) cast at a meeting of the
stockholders called for that purpose.
(d) Nominations for the election of directors may be made by the Board of
Directors or by any stockholder entitled to vote for the election of
directors. Such nominations shall be made by notice in writing, delivered
or mailed by first class United States mail, postage prepaid, to the
Secretary of the Corporation not less than 14 days nor more than 50 days
prior to any meeting of the stockholders called for the election of
directors; provided, however, that if less than 21 days' notice of the
meeting is given to stockholders, such written notice shall be delivered or
mailed, as prescribed, to the Secretary of the Corporation not later than
the close of the seventh day following the day on which notice of the
meeting was mailed to stockholders. Notice of nominations which are
proposed by the Board of Directors shall be given by the Chairman on behalf
of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name, age,
business address and, if known, residence address of each nominee proposed
in such notice, (ii) the principal occupation or employment of such nominee
and (iii) the number of shares of stock of the Corporation which are
beneficially owned by each such nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine and
declare to
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the meeting that a nomination was not made in accordance with the foregoing
procedure, and if he should so determine, he shall so declare to the
meeting and the defective nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any annual or
special meeting of stockholders of the Corporation may be taken without a
meeting, and the power of stockholders to consent in writing, without a
meeting, to the taking of any action is specifically denied.
Sixth: - The Directors shall choose such officers, agent and servants as
may be provided in the By-Laws as they may from time to time find necessary
or proper.
Seventh: - The Corporation hereby created is hereby given the same powers,
rights and privileges as may be conferred upon corporations organized under
the Act entitled "An Act Providing a General Corporation Law", approved
March 10, 1899, as from time to time amended.
Eighth: - This Act shall be deemed and taken to be a private Act.
Ninth: - This Corporation is to have perpetual existence.
Tenth: - The Board of Directors, by resolution passed by a majority of the
whole Board, may designate any of their number to constitute an Executive
Committee, which Committee, to the extent provided in said resolution, or
in the By-Laws of the Company, shall have and may exercise all of the
powers of the Board of Directors in the management of the business and
affairs of the Corporation, and shall have power to authorize the seal of
the Corporation to be affixed to all papers which may require it.
Eleventh: - The private property of the stockholders shall not be liable
for the payment of corporate debts to any extent whatever.
Twelfth: - The Corporation may transact business in any part of the world.
Thirteenth: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation by a
vote of the majority of the entire Board. The stockholders may make, alter
or repeal any By-Law whether or not adopted by them, provided however, that
any such additional By-Laws, alterations or repeal may be adopted only by
the affirmative vote of the holders of two-thirds or more of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as
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one class).
Fourteenth: - Meetings of the Directors may be held outside
of the State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be from time
to time designated by them.
Fifteenth: - (a) (1) In addition to any affirmative vote required by law,
and except as otherwise expressly provided in sections (b) and (c) of this
Article Fifteenth:
(A) any merger or consolidation of the Corporation or any Subsidiary
(as hereinafter defined) with or into (i) any Interested Stockholder
(as hereinafter defined) or (ii) any other corporation (whether or not
itself an Interested Stockholder), which, after such merger or
consolidation, would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of related transactions)
to or with any Interested Stockholder or any Affiliate of any
Interested Stockholder of any assets of the Corporation or any
Subsidiary having an aggregate fair market value of $1,000,000 or
more, or
(C) the issuance or transfer by the Corporation or any Subsidiary (in
one transaction or a series of related transactions) of any securities
of the Corporation or any Subsidiary to any Interested Stockholder or
any Affiliate of any Interested Stockholder in exchange for cash,
securities or other property (or a combination thereof) having an
aggregate fair market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation, or
(E) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any
similar transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect, directly or
indirectly, of increasing the proportionate share of the outstanding
shares of any class of equity or convertible securities of the
Corporation or any Subsidiary which is directly or indirectly owned by
any Interested Stockholder, or any Affiliate of any Interested
Stockholder,
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shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article Fifteenth as one class ("Voting Shares"). Such affirmative vote shall
be required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
(2) The term "business combination" as used in this Article
Fifteenth shall mean any transaction which is referred to any one
or more of clauses (A) through (E) of paragraph 1 of the section
(a).
(b) The provisions of section (a) of this Article Fifteenth shall not
be applicable to any particular business combination and such business
combination shall require only such affirmative vote as is required by
law and any other provisions of the Charter or Act of Incorporation of
By-Laws if such business combination has been approved by a majority
of the whole Board.
(c) For the purposes of this Article Fifteenth:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any Subsidiary) who
or which as of the record date for the determination of stockholders
entitled to notice of and to vote on such business combination, or
immediately prior to the consummation of any such transaction:
(A) is the beneficial owner, directly or indirectly, of more than 10%
of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time within two
years prior thereto was the beneficial owner, directly or indirectly,
of not less than 10% of the then outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in any share of
capital stock of the Corporation which were at any time within two
years prior thereto beneficially owned by any Interested Stockholder,
and such assignment or succession shall have occurred in the course of
a transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
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(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and Associates (as
hereafter defined) beneficially own, directly or indirectly, or
(B) which such person or any of its Affiliates or Associates has (i)
the right to acquire (whether such right is exercisable immediately
or only after the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (ii)
the right to vote pursuant to any agreement, arrangement or
understanding, or
(C) which are beneficially owned, directly or indirectly, by any
other person with which such first mentioned person or any of its
Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any other
Voting Shares which may be issuable pursuant to any agreement, or upon
exercise of conversion rights, warrants or options or otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings given
those terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect on December 31, 1981.
(6) "Subsidiary" shall mean any corporation of which a majority of any
class of equity security (as defined in Rule 3a11-1 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as in effect in
December 31, 1981) is owned, directly or indirectly, by the Corporation;
provided, however, that for the purposes of the definition of Investment
Stockholder set forth in paragraph (2) of this section (c), the term
"Subsidiary" shall mean only a corporation of which a majority of each
class of equity security is owned, directly or indirectly, by the
Corporation.
(d) majority of the directors shall have the power and duty to
determine for the purposes of this Article Fifteenth on the basis of
information known to them, (1) the number of Voting Shares
beneficially owned by any person (2) whether a person is an
Affiliate or Associate of another, (3) whether a person has an
agreement, arrangement or understanding with another as to the
matters referred to in paragraph (3) of section (c), or (4) whether
the assets subject to any business combination or the consideration
received for the issuance or
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transfer of securities by the Corporation, or any Subsidiary has an
aggregate fair market value of $1,000,000 or more.
(e) Nothing contained in this Article Fifteenth shall be construed to
relieve any Interested Stockholder from any fiduciary obligation imposed
by law.
Sixteenth: Notwithstanding any other provision of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and in addition to any
other vote that may be required by law, this Charter or Act of
Incorporation by the By-Laws), the affirmative vote of the holders of at
least two-thirds of the outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) shall be required to amend,
alter or repeal any provision of Articles Fifth, Thirteenth, Fifteenth or
Sixteenth of this Charter or Act of Incorporation.
Seventeenth: (a) a Director of this Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director, except to the extent such exemption from
liability or limitation thereof is not permitted under the Delaware General
Corporation Laws as the same exists or may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph shall not
adversely affect any right or protection of a Director of the
Corporation existing hereunder with respect to any act or omission
occurring prior to the time of such repeal or modification."
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EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
As existing on January 16, 1997
<PAGE>
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
Stockholders' Meetings
Section 1. The Annual Meeting of Stockholders shall be held on the third
Thursday in April each year at the principal office at the Company or at such
other date, time, or place as may be designated by resolution by the Board of
Directors.
Section 2. Special meetings of all stockholders may be called at any time
by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given by
mailing to each stockholder at least ten (10) days before said meeting, at his
last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the Company
issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
Directors
Section 1. The number and classification of the Board of Directors shall
be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72) years
shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for three
years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed and
conducted by the Board of Directors.
<PAGE>
Section 5. The Board of Directors shall meet at the principal office of
the Company or elsewhere in its discretion at such times to be determined by a
majority of its members, or at the call of the Chairman of the Board of
Directors or the President.
Section 6. Special meetings of the Board of Directors may be called at
any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall be
necessary to constitute a quorum for the transaction of business at any meeting
of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of any
special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal, inability to
act, or disqualification of any director, the Board of Directors, although less
than a quorum, shall have the right to elect the successor who shall hold office
for the remainder of the full term of the class of directors in which the
vacancy occurred, and until such director's successor shall have been duly
elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect from
its own members a Chairman of the Board of Directors and a President who may be
the same person. The Board of Directors shall also elect at such meeting a
Secretary and a Treasurer, who may be the same person, may appoint at any time
such other committees and elect or appoint such other officers as it may deem
advisable. The Board of Directors may also elect at such meeting one or more
Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
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ARTICLE III
Committees
Section 1. Executive Committee
(A) The Executive Committee shall be composed of not more than nine
members who shall be selected by the Board of Directors from its own members and
who shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of the Board of
Directors when it is not in session to transact all business for and in behalf
of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal office of the
Company or elsewhere in its discretion at such times to be determined by a
majority of its members, or at the call of the Chairman of the Executive
Committee or at the call of the Chairman of the Board of Directors. The
majority of its members shall be necessary to constitute a quorum for the
transaction of business. Special meetings of the Executive Committee may be
held at any time when a quorum is present.
(D) Minutes of each meeting of the Executive Committee shall be kept
and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend all
investments that may be made of the funds of the Company, and shall direct the
disposal of the same, in accordance with such rules and regulations as the Board
of Directors from time to time make.
(F) In the event of a state of disaster of sufficient severity to
prevent the conduct and management of the affairs and business of the Company by
its directors and officers as contemplated by these By-Laws any two available
members of the Executive Committee as constituted immediately prior to such
disaster shall constitute a quorum of that Committee for the full conduct and
management of the affairs and business of the Company in accordance with the
provisions of Article III of these By-Laws; and if less than three members of
the Trust Committee is constituted immediately prior to such disaster shall be
available for the transaction of its business, such Executive Committee shall
also be empowered to exercise all of the powers reserved to the Trust Committee
under Article III Section 2 hereof. In the event of the unavailability, at such
time, of a minimum of two members of such Executive Committee, any three
available directors shall constitute the Executive Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the foregoing provisions of this Section. This By-Law shall be subject to
implementation by Resolutions of the Board of Directors presently existing or
hereafter passed from time to time
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for that purpose, and any provisions of these By-Laws (other than this Section)
and any resolutions which are contrary to the provisions of this Section or to
the provisions of any such implementary Resolutions shall be suspended during
such a disaster period until it shall be determined by any interim Executive
Committee acting under this section that it shall be to the advantage of the
Company to resume the conduct and management of its affairs and business under
all of the other provisions of these By-Laws.
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more than thirteen
members who shall be selected by the Board of Directors, a majority of whom
shall be members of the Board of Directors and who shall hold office during the
pleasure of the Board.
(B) The Trust Committee shall have general supervision over the Trust
Department and the investment of trust funds, in all matters, however, being
subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal office of the
Company or elsewhere in its discretion at such times to be determined by a
majority of its members or at the call of its chairman. A majority of its
members shall be necessary to constitute a quorum for the transaction of
business.
(D) Minutes of each meeting of the Trust Committee shall be kept
and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint Committees
and/or designate officers or employees of the Company to whom supervision over
the investment of trust funds may be delegated when the Trust Committee is not
in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five members who shall
be selected by the Board of Directors from its own members, none of whom shall
be an officer of the Company, and shall hold office at the pleasure of the
Board.
(B) The Audit Committee shall have general supervision over the Audit
Division in all matters however subject to the approval of the Board of
Directors; it shall consider all matters brought to its attention by the officer
in charge of the Audit Division, review all reports of examination of the
Company made by any governmental agency or such independent auditor employed for
that purpose, and make such recommendations to the Board of Directors with
respect thereto or with respect to any other matters pertaining to auditing the
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Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever the majority
of its members shall deem it to be proper for the transaction of its business,
and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not more than
five (5) members who shall be selected by the Board of Directors from its own
members who are not officers of the Company and who shall hold office during the
pleasure of the Board.
(B) The Compensation Committee shall in general advise upon all
matters of policy concerning the Company brought to its attention by the
management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called at any time
by the Chairman of the Compensation Committee, the Chairman of the Board of
Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be elected by the
Board of Directors as an associate director, to serve during the pleasure of the
Board.
(B) An associate director shall be entitled to attend all directors
meetings and participate in the discussion of all matters brought to the Board,
with the exception that he would have no right to vote. An associate director
will be eligible for appointment to Committees of the Company, with the
exception of the Executive Committee, Audit Committee and Compensation
Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of any Committee
created under Article III of the By-Laws of this Company, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
he or they constitute a quorum, may unanimously appoint another member of the
Board of Directors to act at the meeting in the place of any such absence or
disqualified member.
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ARTICLE IV
Officers
Section 1. The Chairman of the Board of Directors shall preside at all
meetings of the Board and shall have such further authority and powers and shall
perform such duties as the Board of Directors may from time to time confer and
direct. He shall also exercise such powers and perform such duties as may from
time to time be agreed upon between himself and the President of the Company.
Section 2. The Vice Chairman of the Board. The Vice Chairman of the
-------------------------------
Board of Directors shall preside at all meetings of the Board of Directors at
which the Chairman of the Board shall not be present and shall have such further
authority and powers and shall perform such duties as the Board of Directors or
the Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties pertaining to
the office of the President conferred or imposed upon him by statute or assigned
to him by the Board of Directors in the absence of the Chairman of the Board the
President shall have the powers and duties of the Chairman of the Board.
Section 4. The Chairman of the Board of Directors or the President as
designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however denominated
by the Board of Directors, who may at any time perform all the duties of the
Chairman of the Board of Directors and/or the President and such other powers
and duties as may from time to time be assigned to them by the Board of
Directors, the Executive Committee, the Chairman of the Board or the President
and by the officer in charge of the department or division to which they are
assigned.
Section 6. The Secretary shall attend to the giving of notice of meetings
of the stockholders and the Board of Directors, as well as the Committees
thereof, to the keeping of accurate minutes of all such meetings and to
recording the same in the minute books of the Company. In addition to the other
notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
6
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Section 7. The Treasurer shall have general supervision over all assets
and liabilities of the Company. He shall be custodian of and responsible for
all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all the transactions
of the Company. He shall have general supervision of the expenditures of the
Company and shall report to the Board of Directors at each regular meeting of
the condition of the Company, and perform such other duties as may be assigned
to him from time to time by the Board of Directors of the Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
There may be one or more subordinate accounting or controller officers
however denominated, who may perform the duties of the Controller and such
duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit Officers,
however denominated, who may perform all the duties of the Auditor and such
duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank to all
Vice Presidents with such functional titles as shall be determined from time to
time by the Board of Directors, who shall ex officio hold the office Assistant
Secretary of this Company and who may perform such duties as may be prescribed
by the officer in charge of the department or division to whom they are
assigned.
Section 11. The powers and duties of all other officers of the Company
shall be those usually pertaining to their respective offices, subject to the
direction of the Board of Directors, the Executive Committee, Chairman of the
Board of Directors or the President and the officer in charge of the department
or division to which they are assigned.
ARTICLE V
Stock and Stock Certificates
Section 1. Shares of stock shall be transferrable on the books of the
Company and a
7
<PAGE>
transfer book shall be kept in which all transfers of stock shall be recorded.
Section 2. Certificate of stock shall bear the signature of the President
or any Vice President, however denominated by the Board of Directors and
countersigned by the Secretary or Treasurer or an Assistant Secretary, and the
seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new certificate
or certificates shall be issued in lieu thereof. Duplicate certificates of
stock shall be issued only upon giving such security as may be satisfactory to
the Board of Directors or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to fix in
advance a record date for the determination of the stockholders entitled to
notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of any dividend, or to any allotment or
rights, or to exercise any rights in respect of any change, conversion or
exchange of capital stock, or in connection with obtaining the consent of
stockholders for any purpose, which record date shall not be more than 60 nor
less than 10 days proceeding the date of any meeting of stockholders or the date
for the payment of any dividend, or the date for the allotment of rights, or the
date when any change or conversion or exchange of capital stock shall go into
effect, or a date in connection with obtaining such consent.
ARTICLE VI
Seal
Section 1. The corporate seal of the Company shall be in the following
form:
Between two concentric circles the words
"Wilmington Trust Company" within the inner
circle the words "Wilmington, Delaware."
ARTICLE VII
Fiscal Year
Section 1. The fiscal year of the Company shall be the calendar year.
8
<PAGE>
ARTICLE VIII
Execution of Instruments of the Company
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full power
and authority to enter into, make, sign, execute, acknowledge and/or deliver and
the Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as though
expressly authorized by the Board of Directors and/or the Executive Committee.
ARTICLE IX
Compensation of Directors and Members of Committees
Section 1. Directors and associate directors of the Company, other than
salaried officers of the Company, shall be paid such reasonable honoraria or
fees for attending meetings of the Board of Directors as the Board of Directors
may from time to time determine. Directors and associate directors who serve as
members of committees, other than salaried employees of the Company, shall be
paid such reasonable honoraria or fees for services as members of committees as
the Board of Directors shall from time to time determine and directors and
associate directors may be employed by the Company for such special services as
the Board of Directors may from time to time determine and shall be paid for
such special services so performed reasonable compensation as may be determined
by the Board of Directors.
ARTICLE X
Indemnification
Section 1. (A) The Corporation shall indemnify and hold harmless, to the
fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director, officer, employee or agent of the Corporation or is or was
9
<PAGE>
serving at the request of the Corporation as a director, officer, employee,
fiduciary or agent of another corporation or of a partnership, joint venture,
trust, enterprise or non-profit entity, including service with respect to
employee benefit plans, against all liability and loss suffered and expenses
reasonably incurred by such person. The Corporation shall indemnify a person in
connection with a proceeding initiated by such person only if the proceeding was
authorized by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in defending any
proceeding in advance of its final disposition, provided, however, that the
-------- -------
payment of expenses incurred by a Director officer in his capacity as a Director
or officer in advance of the final disposition of the proceeding shall be made
only upon receipt of an undertaking by the Director or officer to repay all
amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of expenses, under this
Article X is not paid in full within ninety days after a written claim therefor
has been received by the Corporation the claimant may file suit to recover the
unpaid amount of such claim and, if successful in whole or in part, shall be
entitled to be paid the expense of prosecuting such claim. In any such action
the Corporation shall have the burden of proving that the claimant was not
entitled to the requested indemnification of payment of expenses under
applicable law.
(D) The rights conferred on any person by this Article X shall not be
exclusive of any other rights which such person may have or hereafter acquire
under any statute, provision of the Charter or Act of Incorporation, these By-
Laws, agreement, vote of stockholders or disinterested Directors or otherwise.
(E) Any repeal or modification of the foregoing provisions of this
Article X shall not adversely affect any right or protection hereunder of any
person in respect of any act or omission occurring prior to the time of such
repeal or modification.
ARTICLE XI
Amendments to the By-Laws
Section 1. These By-Laws may be altered, amended or repealed, in whole or
in part, and any new By-Law or By-Laws adopted at any regular or special meeting
of the Board of Directors by a vote of the majority of all the members of the
Board of Directors then in office.
10
<PAGE>
EXHIBIT C
Section 321(b) Consent
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as amended,
Wilmington Trust Company hereby consents that reports of examinations by
Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: July 26, 1999 By: /s/ Norma P. Closs
-----------------------
Name: Norma P. Closs
Title: Vice President
<PAGE>
EXHIBIT D
NOTICE
This form is intended to assist state nonmember
banks and savings banks with state publication
requirements. It has not been approved by any
state banking authorities. Refer to your
appropriate state banking authorities for your
state publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- -------------------------------------------- --------------
Name of Bank City
in the State of DELAWARE , at the close of business on March 31, 1999.
------------
<TABLE>
<CAPTION>
ASSETS
Thousands of dollars
Cash and balances due from depository institutions:
<S> <C>
Noninterest-bearing balances and currency and coins..................... 196,035
Interest-bearing balances............................................... 0
Held-to-maturity securities.................................................. 44,909
Available-for-sale securities................................................ 1,396,028
Federal funds sold and securities purchased under agreements to resell....... 127,340
Loans and lease financing receivables:
Loans and leases, net of unearned income............ 4,176,290
LESS: Allowance for loan and lease losses.......... 68,543
LESS: Allocated transfer risk reserve.............. 0
Loans and leases, net of unearned income, allowance, and reserve........ 4,107,747
Assets held in trading accounts.............................................. 0
Premises and fixed assets (including capitalized leases)..................... 139,843
Other real estate owned...................................................... 1,055
Investments in unconsolidated subsidiaries and associated companies.......... 1,225
Customers' liability to this bank on acceptances outstanding................. 0
Intangible assets............................................................ 5,265
Other assets................................................................. 99,075
Total assets................................................................. 6,118,520
</TABLE>
CONTINUED ON NEXT PAGE
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES
<S> <C>
Deposits:
In domestic offices......................................................... 4,332,124
Noninterest-bearing............... 959,777
Interest-bearing.................. 3,372,347
Federal funds purchased and Securities sold under agreements to repurchase.. 432,395
Demand notes issued to the U.S. Treasury.................................... 28,906
Trading liabilities (from Schedule RC-D).................................... 0
Other borrowed money:....................................................... ///////
With original maturity of one year or less............................. 715,000
With original maturity of more than one year........................... 43,000
Bank's liability on acceptances executed and outstanding.................... 0
Subordinated notes and debentures........................................... 0
Other liabilities (from Schedule RC-G)...................................... 93,311
Total liabilities........................................................... 5,644,736
EQUITY CAPITAL
Perpetual preferred stock and related surplus............................... 0
Common Stock................................................................ 500
Surplus (exclude all surplus related to preferred stock).................... 62,118
Undivided profits and capital reserves...................................... 408,053
Net unrealized holding gains (losses) on available-for-sale securities...... 3,113
Total equity capital........................................................ 473,784
Total liabilities, limited-life preferred stock, and equity capital......... 6,118,520
</TABLE>
2
<PAGE>
Exhibit 25.2
Registration No.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)_____
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
NEW HAMPSHIRE THRIFT BANCSHARES, INC.
(Exact name of obligor as specified in its charter)
Delaware 02-0430695
(State of incorporation) (I.R.S. employer identification no.)
9 Main Street
Newport, New Hampshire 03773
(Address of principal executive offices) (Zip Code)
Junior Subordinated Deferrable Interest Debentures of New Hampshire Thrift
Bancshares, Inc.
(Title of the indenture securities)
================================================================================
<PAGE>
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the
trustee and upon information furnished by the obligor, the obligor is
not an affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which includes
the certificate of authority of Wilmington Trust Company to
commence business and the authorization of Wilmington Trust
Company to exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section 321(b) of
Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust
Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 26th day
of July, 1999.
WILMINGTON TRUST COMPANY
[SEAL]
Attest: /s/ Patricia A. Evans By: /s/ Norma P. Closs
----------------------- -------------------------
Assistant Secretary Name: Norma P. Closs
Title: Vice President
2
<PAGE>
EXHIBIT A
AMENDED CHARTER
Wilmington Trust Company
Wilmington, Delaware
As existing on May 9, 1987
<PAGE>
Amended Charter
or
Act of Incorporation
of
Wilmington Trust Company
Wilmington Trust Company, originally incorporated by an Act of the General
Assembly of the State of Delaware, entitled "An Act to Incorporate the Delaware
Guarantee and Trust Company", approved March 2, A.D. 1901, and the name of which
company was changed to "Wilmington Trust Company" by an amendment filed in the
Office of the Secretary of State on March 18, A.D. 1903, and the Charter or Act
of Incorporation of which company has been from time to time amended and changed
by merger agreements pursuant to the corporation law for state banks and trust
companies of the State of Delaware, does hereby alter and amend its Charter or
Act of Incorporation so that the same as so altered and amended shall in its
entirety read as follows:
First: - The name of this corporation is Wilmington Trust Company.
Second: - The location of its principal office in the State of Delaware is
at Rodney Square North, in the City of Wilmington, County of New Castle;
the name of its resident agent is Wilmington Trust Company whose address
is Rodney Square North, in said City. In addition to such principal
office, the said corporation maintains and operates branch offices in the
City of Newark, New Castle County, Delaware, the Town of Newport, New
Castle County, Delaware, at Claymont, New Castle County, Delaware, at
Greenville, New Castle County Delaware, and at Milford Cross Roads, New
Castle County, Delaware, and shall be empowered to open, maintain and
operate branch offices at Ninth and Shipley Streets, 418 Delaware Avenue,
2120 Market Street, and 3605 Market Street, all in the City of Wilmington,
New Castle County, Delaware, and such other branch offices or places of
business as may be authorized from time to time by the agency or agencies
of the government of the State of Delaware empowered to confer such
authority.
Third: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this Corporation are
to do any or all of the things herein mentioned as fully and to the same
extent as natural persons might or could do and in any part of the world,
viz.:
(1) To sue and be sued, complain and defend in any Court of law or
equity and to make and use a common seal, and alter the seal at
pleasure, to hold,
<PAGE>
purchase, convey, mortgage or otherwise deal in real and personal
estate and property, and to appoint such officers and agents as the
business of the Corporation shall require, to make by-laws not
inconsistent with the Constitution or laws of the United States or of
this State, to discount bills, notes or other evidences of debt, to
receive deposits of money, or securities for money, to buy gold and
silver bullion and foreign coins, to buy and sell bills of exchange,
and generally to use, exercise and enjoy all the powers, rights,
privileges and franchises incident to a corporation which are proper
or necessary for the transaction of the business of the Corporation
hereby created.
(2) To insure titles to real and personal property, or any estate or
interests therein, and to guarantee the holder of such property, real
or personal, against any claim or claims, adverse to his interest
therein, and to prepare and give certificates of title for any lands
or premises in the State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the receipt,
collection, custody, investment and management of funds, and the
purchase, sale, management and disposal of property of all
descriptions, and to prepare and execute all papers which may be
necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds, leases,
conveyances, mortgages, bonds and legal papers of every description,
and to carry on the business of conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry, plate,
deeds, bonds and any and all other personal property of every sort and
kind, from executors, administrators, guardians, public officers,
courts, receivers, assignees, trustees, and from all fiduciaries, and
from all other persons and individuals, and from all corporations
whether state, municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of registering,
issuing, certificating, countersigning, transferring or underwriting
the stock, bonds or other obligations of any corporation, association,
state or municipality, and may receive and manage any sinking fund
therefor on such terms as may be agreed upon between the two parties,
and in like manner may act as Treasurer of any corporation or
municipality.
(7) To act as Trustee under any deed of trust, mortgage, bond or
other
2
<PAGE>
instrument issued by any state, municipality, body politic,
corporation, association or person, either alone or in conjunction
with any other person or persons, corporation or corporations.
(8) To guarantee the validity, performance or effect of any contract
or agreement, and the fidelity of persons holding places of
responsibility or trust; to become surety for any person, or persons,
for the faithful performance of any trust, office, duty, contract or
agreement, either by itself or in conjunction with any other person,
or persons, corporation, or corporations, or in like manner become
surety upon any bond, recognizance, obligation, judgment, suit, order,
or decree to be entered in any court of record within the State of
Delaware or elsewhere, or which may now or hereafter be required by
any law, judge, officer or court in the State of Delaware or
elsewhere.
(9) To act by any and every method of appointment as trustee, trustee
in bankruptcy, receiver, assignee, assignee in bankruptcy, executor,
administrator, guardian, bailee, or in any other trust capacity in the
receiving, holding, managing, and disposing of any and all estates and
property, real, personal or mixed, and to be appointed as such
trustee, trustee in bankruptcy, receiver, assignee, assignee in
bankruptcy, executor, administrator, guardian or bailee by any
persons, corporations, court, officer, or authority, in the State of
Delaware or elsewhere; and whenever this Corporation is so appointed
by any person, corporation, court, officer or authority such trustee,
trustee in bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other trust
capacity, it shall not be required to give bond with surety, but its
capital stock shall be taken and held as security for the performance
of the duties devolving upon it by such appointment.
(10) And for its care, management and trouble, and the exercise of
any of its powers hereby given, or for the performance of any of the
duties which it may undertake or be called upon to perform, or for the
assumption of any responsibility the said Corporation may be entitled
to receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages, debentures,
shares of capital stock, and other securities, obligations, contracts
and evidences of indebtedness, of any private, public or municipal
corporation within and without the State of Delaware, or of the
Government of the United States, or of any state, territory, colony,
or possession thereof, or of any foreign government or country; to
receive, collect, receipt for, and dispose of
3
<PAGE>
interest, dividends and income upon and from any of the bonds,
mortgages, debentures, notes, shares of capital stock, securities,
obligations, contracts, evidences of indebtedness and other property
held and owned by it, and to exercise in respect of all such bonds,
mortgages, debentures, notes, shares of capital stock, securities,
obligations, contracts, evidences of indebtedness and other property,
any and all the rights, powers and privileges of individual owners
thereof, including the right to vote thereon; to invest and deal in
and with any of the moneys of the Corporation upon such securities and
in such manner as it may think fit and proper, and from time to time
to vary or realize such investments; to issue bonds and secure the
same by pledges or deeds of trust or mortgages of or upon the whole or
any part of the property held or owned by the Corporation, and to sell
and pledge such bonds, as and when the Board of Directors shall
determine, and in the promotion of its said corporate business of
investment and to the extent authorized by law, to lease, purchase,
hold, sell, assign, transfer, pledge, mortgage and convey real and
personal property of any name and nature and any estate or interest
therein.
(b) In furtherance of, and not in limitation, of the powers conferred by
the laws of the State of Delaware, it is hereby expressly provided that the
said Corporation shall also have the following powers:
(1) To do any or all of the things herein set forth, to the same
extent as natural persons might or could do, and in any part of the
world.
(2) To acquire the good will, rights, property and franchises and to
undertake the whole or any part of the assets and liabilities of any
person, firm, association or corporation, and to pay for the same in
cash, stock of this Corporation, bonds or otherwise; to hold or in any
manner to dispose of the whole or any part of the property so
purchased; to conduct in any lawful manner the whole or any part of
any business so acquired, and to exercise all the powers necessary or
convenient in and about the conduct and management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien, and to
lease, sell, exchange, transfer, or in any manner whatever dispose of
property, real, personal or mixed, wherever situated.
(4) To enter into, make, perform and carry out contracts of every
kind with any person, firm, association or corporation, and, without
limit as to amount, to draw, make, accept, endorse, discount, execute
and issue promissory notes, drafts, bills of exchange, warrants,
bonds, debentures, and other negotiable or
4
<PAGE>
transferable instruments.
(5) To have one or more offices, to carry on all or any of its
operations and businesses, without restriction to the same extent as
natural persons might or could do, to purchase or otherwise acquire,
to hold, own, to mortgage, sell, convey or otherwise dispose of, real
and personal property, of every class and description, in any State,
District, Territory or Colony of the United States, and in any foreign
country or place.
(6) It is the intention that the objects, purposes and powers
specified and clauses contained in this paragraph shall (except where
otherwise expressed in said paragraph) be nowise limited or restricted
by reference to or inference from the terms of any other clause of
this or any other paragraph in this charter, but that the objects,
purposes and powers specified in each of the clauses of this paragraph
shall be regarded as independent objects, purposes and powers.
Fourth: - (a) The total number of shares of all classes of stock which the
Corporation shall have authority to issue is forty-one million (41,000,000)
shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par value
$10.00 per share (hereinafter referred to as "Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par value
$1.00 per share (hereinafter referred to as "Common Stock").
(b) Shares of Preferred Stock may be issued from time to time in one or
more series as may from time to time be determined by the Board of
Directors each of said series to be distinctly designated. All shares of
any one series of Preferred Stock shall be alike in every particular,
except that there may be different dates from which dividends, if any,
thereon shall be cumulative, if made cumulative. The voting powers and the
preferences and relative, participating, optional and other special rights
of each such series, and the qualifications, limitations or restrictions
thereof, if any, may differ from those of any and all other series at any
time outstanding; and, subject to the provisions of subparagraph 1 of
Paragraph (c) of this Article Fourth, the Board of Directors of the
Corporation is hereby expressly granted authority to fix by resolution or
resolutions adopted prior to the issuance of any shares of a particular
series of Preferred Stock, the voting powers and the designations,
preferences and relative, optional and other special rights, and the
qualifications, limitations and restrictions of such series, including, but
without limiting the generality of the
5
<PAGE>
foregoing, the following:
(1) The distinctive designation of, and the number of shares of
Preferred Stock which shall constitute such series, which number may
be increased (except where otherwise provided by the Board of
Directors) or decreased (but not below the number of shares thereof
then outstanding) from time to time by like action of the Board of
Directors;
(2) The rate and times at which, and the terms and conditions on
which, dividends, if any, on Preferred Stock of such series shall be
paid, the extent of the preference or relation, if any, of such
dividends to the dividends payable on any other class or classes, or
series of the same or other class of stock and whether such dividends
shall be cumulative or non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of such
series to convert the same into or exchange the same for, shares of
any other class or classes or of any series of the same or any other
class or classes of stock of the Corporation and the terms and
conditions of such conversion or exchange;
(4) Whether or not Preferred Stock of such series shall be subject to
redemption, and the redemption price or prices and the time or times
at which, and the terms and conditions on which, Preferred Stock of
such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of such
series upon the voluntary or involuntary liquidation, merger,
consolidation, distribution or sale of assets, dissolution or winding-
up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase account,
if any, to be provided for the Preferred Stock of such series; and
(7) The voting powers, if any, of the holders of such series of
Preferred Stock which may, without limiting the generality of the
foregoing include the right, voting as a series or by itself or
together with other series of Preferred Stock or all series of
Preferred Stock as a class, to elect one or more directors of the
Corporation if there shall have been a default in the payment of
dividends on any one or more series of Preferred Stock or under such
circumstances and on such conditions as the Board of Directors may
determine.
(c) (1) After the requirements with respect to preferential dividends on
the Preferred Stock (fixed in accordance with the provisions of section (b)
of this Article
6
<PAGE>
Fourth), if any, shall have been met and after the Corporation shall have
complied with all the requirements, if any, with respect to the setting
aside of sums as sinking funds or redemption or purchase accounts (fixed in
accordance with the provisions of section (b) of this Article Fourth), and
subject further to any conditions which may be fixed in accordance with the
provisions of section (b) of this Article Fourth, then and not otherwise
the holders of Common Stock shall be entitled to receive such dividends as
may be declared from time to time by the Board of Directors.
(2) After distribution in full of the preferential amount, if any,
(fixed in accordance with the provisions of section (b) of this
Article Fourth), to be distributed to the holders of Preferred Stock
in the event of voluntary or involuntary liquidation, distribution or
sale of assets, dissolution or winding-up, of the Corporation, the
holders of the Common Stock shall be entitled to receive all of the
remaining assets of the Corporation, tangible and intangible, of
whatever kind available for distribution to stockholders ratably in
proportion to the number of shares of Common Stock held by them
respectively.
(3) Except as may otherwise be required by law or by the provisions
of such resolution or resolutions as may be adopted by the Board of
Directors pursuant to section (b) of this Article Fourth, each holder
of Common Stock shall have one vote in respect of each share of Common
Stock held on all matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock or of
options, warrants or other rights to purchase shares of any class or series
of stock or of other securities of the Corporation shall have any
preemptive right to purchase or subscribe for any unissued stock of any
class or series or any additional shares of any class or series to be
issued by reason of any increase of the authorized capital stock of the
Corporation of any class or series, or bonds, certificates of indebtedness,
debentures or other securities convertible into or exchangeable for stock
of the Corporation of any class or series, or carrying any right to
purchase stock of any class or series, but any such unissued stock,
additional authorized issue of shares of any class or series of stock or
securities convertible into or exchangeable for stock, or carrying any
right to purchase stock, may be issued and disposed of pursuant to
resolution of the Board of Directors to such persons, firms, corporations
or associations, whether such holders or others, and upon such terms as may
be deemed advisable by the Board of Directors in the exercise of its sole
discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and rights
of each other series of Preferred Stock shall, in each case, be as fixed
from time to time by the Board of
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Directors in the resolution or resolutions adopted pursuant to authority
granted in section (b) of this Article Fourth and the consent, by class or
series vote or otherwise, of the holders of such of the series of Preferred
Stock as are from time to time outstanding shall not be required for the
issuance by the Board of Directors of any other series of Preferred Stock
whether or not the powers, preferences and rights of such other series
shall be fixed by the Board of Directors as senior to, or on a parity with,
the powers, preferences and rights of such outstanding series, or any of
them; provided, however, that the Board of Directors may provide in the
resolution or resolutions as to any series of Preferred Stock adopted
pursuant to section (b) of this Article Fourth that the consent of the
holders of a majority (or such greater proportion as shall be therein
fixed) of the outstanding shares of such series voting thereon shall be
required for the issuance of any or all other series of Preferred Stock.
(f) Subject to the provisions of section (e), shares of any series of
Preferred Stock may be issued from time to time as the Board of Directors
of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(h) The authorized amount of shares of Common Stock and of Preferred Stock
may, without a class or series vote, be increased or decreased from time to
time by the affirmative vote of the holders of a majority of the stock of
the Corporation entitled to vote thereon.
Fifth: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of directors
constituting the entire Board shall be not less than five nor more than
twenty-five as fixed from time to time by vote of a majority of the whole
Board, provided, however, that the number of directors shall not be reduced
so as to shorten the term of any director at the time in office, and
provided further, that the number of directors constituting the whole Board
shall be twenty-four until otherwise fixed by a majority of the whole
Board.
(b) The Board of Directors shall be divided into three classes, as nearly
equal in number as the then total number of directors constituting the
whole Board permits, with the term of office of one class expiring each
year. At the annual meeting of stockholders in 1982, directors of the
first class shall be elected to hold office for a term expiring at the next
succeeding annual meeting, directors of the second class
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shall be elected to hold office for a term expiring at the second
succeeding annual meeting and directors of the third class shall be elected
to hold office for a term expiring at the third succeeding annual meeting.
Any vacancies in the Board of Directors for any reason, and any newly
created directorships resulting from any increase in the directors, may be
filled by the Board of Directors, acting by a majority of the directors
then in office, although less than a quorum, and any directors so chosen
shall hold office until the next annual election of directors. At such
election, the stockholders shall elect a successor to such director to hold
office until the next election of the class for which such director shall
have been chosen and until his successor shall be elected and qualified. No
decrease in the number of directors shall shorten the term of any incumbent
director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding the
fact that some lesser percentage may be specified by law, this Charter or
Act of Incorporation or the By-Laws of the Corporation), any director or
the entire Board of Directors of the Corporation may be removed at any time
without cause, but only by the affirmative vote of the holders of two-
thirds or more of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) cast at a meeting of the
stockholders called for that purpose.
(d) Nominations for the election of directors may be made by the Board of
Directors or by any stockholder entitled to vote for the election of
directors. Such nominations shall be made by notice in writing, delivered
or mailed by first class United States mail, postage prepaid, to the
Secretary of the Corporation not less than 14 days nor more than 50 days
prior to any meeting of the stockholders called for the election of
directors; provided, however, that if less than 21 days' notice of the
meeting is given to stockholders, such written notice shall be delivered or
mailed, as prescribed, to the Secretary of the Corporation not later than
the close of the seventh day following the day on which notice of the
meeting was mailed to stockholders. Notice of nominations which are
proposed by the Board of Directors shall be given by the Chairman on behalf
of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name, age,
business address and, if known, residence address of each nominee proposed
in such notice, (ii) the principal occupation or employment of such nominee
and (iii) the number of shares of stock of the Corporation which are
beneficially owned by each such nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine and
declare to
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the meeting that a nomination was not made in accordance with the foregoing
procedure, and if he should so determine, he shall so declare to the
meeting and the defective nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any annual or
special meeting of stockholders of the Corporation may be taken without a
meeting, and the power of stockholders to consent in writing, without a
meeting, to the taking of any action is specifically denied.
Sixth: - The Directors shall choose such officers, agent and servants as
may be provided in the By-Laws as they may from time to time find necessary
or proper.
Seventh: - The Corporation hereby created is hereby given the same powers,
rights and privileges as may be conferred upon corporations organized under
the Act entitled "An Act Providing a General Corporation Law", approved
March 10, 1899, as from time to time amended.
Eighth: - This Act shall be deemed and taken to be a private Act.
Ninth: - This Corporation is to have perpetual existence.
Tenth: - The Board of Directors, by resolution passed by a majority of the
whole Board, may designate any of their number to constitute an Executive
Committee, which Committee, to the extent provided in said resolution, or
in the By-Laws of the Company, shall have and may exercise all of the
powers of the Board of Directors in the management of the business and
affairs of the Corporation, and shall have power to authorize the seal of
the Corporation to be affixed to all papers which may require it.
Eleventh: - The private property of the stockholders shall not be liable
for the payment of corporate debts to any extent whatever.
Twelfth: - The Corporation may transact business in any part of the world.
Thirteenth: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation by a
vote of the majority of the entire Board. The stockholders may make, alter
or repeal any By-Law whether or not adopted by them, provided however, that
any such additional By-Laws, alterations or repeal may be adopted only by
the affirmative vote of the holders of two-thirds or more of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as
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one class).
Fourteenth: - Meetings of the Directors may be held outside of the State of
Delaware at such places as may be from time to time designated by the
Board, and the Directors may keep the books of the Company outside of the
State of Delaware at such places as may be from time to time designated by
them.
Fifteenth: - (a) (1) In addition to any affirmative vote required by law,
and except as otherwise expressly provided in sections (b) and (c) of this
Article Fifteenth:
(A) any merger or consolidation of the Corporation or any Subsidiary
(as hereinafter defined) with or into (i) any Interested Stockholder
(as hereinafter defined) or (ii) any other corporation (whether or not
itself an Interested Stockholder), which, after such merger or
consolidation, would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of related transactions)
to or with any Interested Stockholder or any Affiliate of any
Interested Stockholder of any assets of the Corporation or any
Subsidiary having an aggregate fair market value of $1,000,000 or
more, or
(C) the issuance or transfer by the Corporation or any Subsidiary (in
one transaction or a series of related transactions) of any securities
of the Corporation or any Subsidiary to any Interested Stockholder or
any Affiliate of any Interested Stockholder in exchange for cash,
securities or other property (or a combination thereof) having an
aggregate fair market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation, or
(E) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any
similar transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect, directly or
indirectly, of increasing the proportionate share of the outstanding
shares of any class of equity or convertible securities of the
Corporation or any Subsidiary which is directly or indirectly owned by
any Interested Stockholder, or any Affiliate of any Interested
Stockholder,
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shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article Fifteenth as one class ("Voting Shares"). Such affirmative vote shall
be required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
(2) The term "business combination" as used in this Article
Fifteenth shall mean any transaction which is referred to any one
or more of clauses (A) through (E) of paragraph 1 of the section
(a).
(b) The provisions of section (a) of this Article Fifteenth shall not
be applicable to any particular business combination and such business
combination shall require only such affirmative vote as is required by
law and any other provisions of the Charter or Act of Incorporation of
By-Laws if such business combination has been approved by a majority
of the whole Board.
(c) For the purposes of this Article Fifteenth:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any Subsidiary) who
or which as of the record date for the determination of stockholders
entitled to notice of and to vote on such business combination, or
immediately prior to the consummation of any such transaction:
(A) is the beneficial owner, directly or indirectly, of more than 10%
of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time within two
years prior thereto was the beneficial owner, directly or indirectly,
of not less than 10% of the then outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in any share of
capital stock of the Corporation which were at any time within two
years prior thereto beneficially owned by any Interested Stockholder,
and such assignment or succession shall have occurred in the course of
a transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
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(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and Associates (as
hereafter defined) beneficially own, directly or indirectly, or
(B) which such person or any of its Affiliates or Associates has (i)
the right to acquire (whether such right is exercisable immediately or
only after the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (ii)
the right to vote pursuant to any agreement, arrangement or
understanding, or
(C) which are beneficially owned, directly or indirectly, by any
other person with which such first mentioned person or any of its
Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any other
Voting Shares which may be issuable pursuant to any agreement, or upon
exercise of conversion rights, warrants or options or otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings given
those terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect on December 31, 1981.
(6) "Subsidiary" shall mean any corporation of which a majority of any
class of equity security (as defined in Rule 3a11-1 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as in effect in
December 31, 1981) is owned, directly or indirectly, by the Corporation;
provided, however, that for the purposes of the definition of Investment
Stockholder set forth in paragraph (2) of this section (c), the term
"Subsidiary" shall mean only a corporation of which a majority of each
class of equity security is owned, directly or indirectly, by the
Corporation.
(d) majority of the directors shall have the power and duty to
determine for the purposes of this Article Fifteenth on the basis of
information known to them, (1) the number of Voting Shares
beneficially owned by any person (2) whether a person is an Affiliate
or Associate of another, (3) whether a person has an agreement,
arrangement or understanding with another as to the matters referred
to in paragraph (3) of section (c), or (4) whether the assets subject
to any business combination or the consideration received for the
issuance or
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transfer of securities by the Corporation, or any Subsidiary has an
aggregate fair market value of $1,000,000 or more.
(e) Nothing contained in this Article Fifteenth shall be construed to
relieve any Interested Stockholder from any fiduciary obligation
imposed by law.
Sixteenth: Notwithstanding any other provision of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and in addition to any
other vote that may be required by law, this Charter or Act of
Incorporation by the By-Laws), the affirmative vote of the holders of at
least two-thirds of the outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) shall be required to amend,
alter or repeal any provision of Articles Fifth, Thirteenth, Fifteenth or
Sixteenth of this Charter or Act of Incorporation.
Seventeenth: (a) a Director of this Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director, except to the extent such exemption from
liability or limitation thereof is not permitted under the Delaware General
Corporation Laws as the same exists or may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph shall not
adversely affect any right or protection of a Director of the
Corporation existing hereunder with respect to any act or omission
occurring prior to the time of such repeal or modification."
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EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
As existing on January 16, 1997
<PAGE>
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
Stockholders' Meetings
Section 1. The Annual Meeting of Stockholders shall be held on the third
Thursday in April each year at the principal office at the Company or at such
other date, time, or place as may be designated by resolution by the Board of
Directors.
Section 2. Special meetings of all stockholders may be called at any time
by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given by
mailing to each stockholder at least ten (10) days before said meeting, at his
last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the Company
issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
Directors
Section 1. The number and classification of the Board of Directors shall
be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72) years
shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for three
years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed and
conducted by the Board of Directors.
<PAGE>
Section 5. The Board of Directors shall meet at the principal office of
the Company or elsewhere in its discretion at such times to be determined by a
majority of its members, or at the call of the Chairman of the Board of
Directors or the President.
Section 6. Special meetings of the Board of Directors may be called at
any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall be
necessary to constitute a quorum for the transaction of business at any meeting
of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of any
special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal, inability to
act, or disqualification of any director, the Board of Directors, although less
than a quorum, shall have the right to elect the successor who shall hold office
for the remainder of the full term of the class of directors in which the
vacancy occurred, and until such director's successor shall have been duly
elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect from
its own members a Chairman of the Board of Directors and a President who may be
the same person. The Board of Directors shall also elect at such meeting a
Secretary and a Treasurer, who may be the same person, may appoint at any time
such other committees and elect or appoint such other officers as it may deem
advisable. The Board of Directors may also elect at such meeting one or more
Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
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ARTICLE III
Committees
Section 1. Executive Committee
(A) The Executive Committee shall be composed of not more than nine
members who shall be selected by the Board of Directors from its own members and
who shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of the Board of
Directors when it is not in session to transact all business for and in behalf
of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal office of the
Company or elsewhere in its discretion at such times to be determined by a
majority of its members, or at the call of the Chairman of the Executive
Committee or at the call of the Chairman of the Board of Directors. The
majority of its members shall be necessary to constitute a quorum for the
transaction of business. Special meetings of the Executive Committee may be
held at any time when a quorum is present.
(D) Minutes of each meeting of the Executive Committee shall be kept
and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend all
investments that may be made of the funds of the Company, and shall direct the
disposal of the same, in accordance with such rules and regulations as the Board
of Directors from time to time make.
(F) In the event of a state of disaster of sufficient severity to
prevent the conduct and management of the affairs and business of the Company by
its directors and officers as contemplated by these By-Laws any two available
members of the Executive Committee as constituted immediately prior to such
disaster shall constitute a quorum of that Committee for the full conduct and
management of the affairs and business of the Company in accordance with the
provisions of Article III of these By-Laws; and if less than three members of
the Trust Committee is constituted immediately prior to such disaster shall be
available for the transaction of its business, such Executive Committee shall
also be empowered to exercise all of the powers reserved to the Trust Committee
under Article III Section 2 hereof. In the event of the unavailability, at such
time, of a minimum of two members of such Executive Committee, any three
available directors shall constitute the Executive Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the foregoing provisions of this Section. This By-Law shall be subject to
implementation by Resolutions of the Board of Directors presently existing or
hereafter passed from time to time
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for that purpose, and any provisions of these By-Laws (other than this Section)
and any resolutions which are contrary to the provisions of this Section or to
the provisions of any such implementary Resolutions shall be suspended during
such a disaster period until it shall be determined by any interim Executive
Committee acting under this section that it shall be to the advantage of the
Company to resume the conduct and management of its affairs and business under
all of the other provisions of these By-Laws.
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more than thirteen
members who shall be selected by the Board of Directors, a majority of whom
shall be members of the Board of Directors and who shall hold office during the
pleasure of the Board.
(B) The Trust Committee shall have general supervision over the Trust
Department and the investment of trust funds, in all matters, however, being
subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal office of the
Company or elsewhere in its discretion at such times to be determined by a
majority of its members or at the call of its chairman. A majority of its
members shall be necessary to constitute a quorum for the transaction of
business.
(D) Minutes of each meeting of the Trust Committee shall be kept and
promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint Committees
and/or designate officers or employees of the Company to whom supervision over
the investment of trust funds may be delegated when the Trust Committee is not
in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five members who shall
be selected by the Board of Directors from its own members, none of whom shall
be an officer of the Company, and shall hold office at the pleasure of the
Board.
(B) The Audit Committee shall have general supervision over the Audit
Division in all matters however subject to the approval of the Board of
Directors; it shall consider all matters brought to its attention by the officer
in charge of the Audit Division, review all reports of examination of the
Company made by any governmental agency or such independent auditor employed for
that purpose, and make such recommendations to the Board of Directors with
respect thereto or with respect to any other matters pertaining to auditing the
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Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever the majority
of its members shall deem it to be proper for the transaction of its business,
and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not more than
five (5) members who shall be selected by the Board of Directors from its own
members who are not officers of the Company and who shall hold office during the
pleasure of the Board.
(B) The Compensation Committee shall in general advise upon all
matters of policy concerning the Company brought to its attention by the
management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called at any time
by the Chairman of the Compensation Committee, the Chairman of the Board of
Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be elected by the
Board of Directors as an associate director, to serve during the pleasure of the
Board.
(B) An associate director shall be entitled to attend all directors
meetings and participate in the discussion of all matters brought to the Board,
with the exception that he would have no right to vote. An associate director
will be eligible for appointment to Committees of the Company, with the
exception of the Executive Committee, Audit Committee and Compensation
Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of any Committee
created under Article III of the By-Laws of this Company, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
he or they constitute a quorum, may unanimously appoint another member of the
Board of Directors to act at the meeting in the place of any such absence or
disqualified member.
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ARTICLE IV
Officers
Section 1. The Chairman of the Board of Directors shall preside at all
meetings of the Board and shall have such further authority and powers and shall
perform such duties as the Board of Directors may from time to time confer and
direct. He shall also exercise such powers and perform such duties as may from
time to time be agreed upon between himself and the President of the Company.
Section 2. The Vice Chairman of the Board. The Vice Chairman of the
-------------------------------
Board of Directors shall preside at all meetings of the Board of Directors at
which the Chairman of the Board shall not be present and shall have such further
authority and powers and shall perform such duties as the Board of Directors or
the Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties pertaining to
the office of the President conferred or imposed upon him by statute or assigned
to him by the Board of Directors in the absence of the Chairman of the Board the
President shall have the powers and duties of the Chairman of the Board.
Section 4. The Chairman of the Board of Directors or the President as
designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however denominated
by the Board of Directors, who may at any time perform all the duties of the
Chairman of the Board of Directors and/or the President and such other powers
and duties as may from time to time be assigned to them by the Board of
Directors, the Executive Committee, the Chairman of the Board or the President
and by the officer in charge of the department or division to which they are
assigned.
Section 6. The Secretary shall attend to the giving of notice of meetings
of the stockholders and the Board of Directors, as well as the Committees
thereof, to the keeping of accurate minutes of all such meetings and to
recording the same in the minute books of the Company. In addition to the other
notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
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Section 7. The Treasurer shall have general supervision over all assets
and liabilities of the Company. He shall be custodian of and responsible for
all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all the transactions
of the Company. He shall have general supervision of the expenditures of the
Company and shall report to the Board of Directors at each regular meeting of
the condition of the Company, and perform such other duties as may be assigned
to him from time to time by the Board of Directors of the Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
There may be one or more subordinate accounting or controller officers
however denominated, who may perform the duties of the Controller and such
duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit Officers,
however denominated, who may perform all the duties of the Auditor and such
duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank to all
Vice Presidents with such functional titles as shall be determined from time to
time by the Board of Directors, who shall ex officio hold the office Assistant
Secretary of this Company and who may perform such duties as may be prescribed
by the officer in charge of the department or division to whom they are
assigned.
Section 11. The powers and duties of all other officers of the Company
shall be those usually pertaining to their respective offices, subject to the
direction of the Board of Directors, the Executive Committee, Chairman of the
Board of Directors or the President and the officer in charge of the department
or division to which they are assigned.
ARTICLE V
Stock and Stock Certificates
Section 1. Shares of stock shall be transferrable on the books of the
Company and a
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transfer book shall be kept in which all transfers of stock shall be recorded.
Section 2. Certificate of stock shall bear the signature of the President
or any Vice President, however denominated by the Board of Directors and
countersigned by the Secretary or Treasurer or an Assistant Secretary, and the
seal of the corporation shall be engraved thereon. Each certificate shall recite
that the stock represented thereby is transferrable only upon the books of the
Company by the holder thereof or his attorney, upon surrender of the certificate
properly endorsed. Any certificate of stock surrendered to the Company shall be
cancelled at the time of transfer, and before a new certificate or certificates
shall be issued in lieu thereof. Duplicate certificates of stock shall be issued
only upon giving such security as may be satisfactory to the Board of Directors
or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to fix in
advance a record date for the determination of the stockholders entitled to
notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of any dividend, or to any allotment or
rights, or to exercise any rights in respect of any change, conversion or
exchange of capital stock, or in connection with obtaining the consent of
stockholders for any purpose, which record date shall not be more than 60 nor
less than 10 days proceeding the date of any meeting of stockholders or the date
for the payment of any dividend, or the date for the allotment of rights, or the
date when any change or conversion or exchange of capital stock shall go into
effect, or a date in connection with obtaining such consent.
ARTICLE VI
Seal
Section 1. The corporate seal of the Company shall be in the following
form:
Between two concentric circles the words
"Wilmington Trust Company" within the inner
circle the words "Wilmington, Delaware."
ARTICLE VII
Fiscal Year
Section 1. The fiscal year of the Company shall be the calendar year.
8
<PAGE>
ARTICLE VIII
Execution of Instruments of the Company
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full power
and authority to enter into, make, sign, execute, acknowledge and/or deliver and
the Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as though
expressly authorized by the Board of Directors and/or the Executive Committee.
ARTICLE IX
Compensation of Directors and Members of Committees
Section 1. Directors and associate directors of the Company, other than
salaried officers of the Company, shall be paid such reasonable honoraria or
fees for attending meetings of the Board of Directors as the Board of Directors
may from time to time determine. Directors and associate directors who serve as
members of committees, other than salaried employees of the Company, shall be
paid such reasonable honoraria or fees for services as members of committees as
the Board of Directors shall from time to time determine and directors and
associate directors may be employed by the Company for such special services as
the Board of Directors may from time to time determine and shall be paid for
such special services so performed reasonable compensation as may be determined
by the Board of Directors.
ARTICLE X
Indemnification
Section 1. (A) The Corporation shall indemnify and hold harmless, to the
fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director, officer, employee or agent of the Corporation or is or was
9
<PAGE>
serving at the request of the Corporation as a director, officer, employee,
fiduciary or agent of another corporation or of a partnership, joint venture,
trust, enterprise or non-profit entity, including service with respect to
employee benefit plans, against all liability and loss suffered and expenses
reasonably incurred by such person. The Corporation shall indemnify a person in
connection with a proceeding initiated by such person only if the proceeding was
authorized by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in defending any
proceeding in advance of its final disposition, provided, however, that the
-------- -------
payment of expenses incurred by a Director officer in his capacity as a Director
or officer in advance of the final disposition of the proceeding shall be made
only upon receipt of an undertaking by the Director or officer to repay all
amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of expenses, under this
Article X is not paid in full within ninety days after a written claim therefor
has been received by the Corporation the claimant may file suit to recover the
unpaid amount of such claim and, if successful in whole or in part, shall be
entitled to be paid the expense of prosecuting such claim. In any such action
the Corporation shall have the burden of proving that the claimant was not
entitled to the requested indemnification of payment of expenses under
applicable law.
(D) The rights conferred on any person by this Article X shall not be
exclusive of any other rights which such person may have or hereafter acquire
under any statute, provision of the Charter or Act of Incorporation, these By-
Laws, agreement, vote of stockholders or disinterested Directors or otherwise.
(E) Any repeal or modification of the foregoing provisions of this
Article X shall not adversely affect any right or protection hereunder of any
person in respect of any act or omission occurring prior to the time of such
repeal or modification.
ARTICLE XI
Amendments to the By-Laws
Section 1. These By-Laws may be altered, amended or repealed, in whole or
in part, and any new By-Law or By-Laws adopted at any regular or special meeting
of the Board of Directors by a vote of the majority of all the members of the
Board of Directors then in office.
10
<PAGE>
EXHIBIT C
Section 321(b) Consent
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as amended,
Wilmington Trust Company hereby consents that reports of examinations by
Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: July 26, 1999 By: /s/ Norma P. Closs
-----------------------------
Name: Norma P. Closs
Title: Vice President
<PAGE>
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and
savings banks with state publication requirements. It has not
been approved by any state banking authorities. Refer to your
appropriate state banking authorities for your state publication
requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- -------------------------------------- -------------------------
Name of Bank City
in the State of DELAWARE, at the close of business on March 31, 1999.
--------
<TABLE>
<CAPTION>
ASSETS
Thousands of dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins................... 196,035
Interest-bearing balances............................................. 0
Held-to-maturity securities.................................................. 44,909
Available-for-sale securities................................................ 1,396,028
Federal funds sold and securities purchased under agreements to resell....... 127,340
Loans and lease financing receivables:
Loans and leases, net of unearned income........... 4,176,290
LESS: Allowance for loan and lease losses......... 68,543
LESS: Allocated transfer risk reserve............. 0
Loans and leases, net of unearned income, allowance, and reserve...... 4,107,747
Assets held in trading accounts.............................................. 0
Premises and fixed assets (including capitalized leases)..................... 139,843
Other real estate owned...................................................... 1,055
Investments in unconsolidated subsidiaries and associated companies.......... 1,225
Customers' liability to this bank on acceptances outstanding................. 0
Intangible assets............................................................ 5,265
Other assets................................................................. 99,075
Total assets................................................................. 6,118,520
</TABLE>
CONTINUED ON NEXT PAGE
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES
<S> <C>
Deposits:
In domestic offices......................................................... 4,332,124
Noninterest-bearing............ 959,777
Interest-bearing............... 3,372,347
Federal funds purchased and Securities sold under agreements to repurchase.. 432,395
Demand notes issued to the U.S. Treasury.................................... 28,906
Trading liabilities (from Schedule RC-D).................................... 0
Other borrowed money:....................................................... ///////
With original maturity of one year or less............................. 715,000
With original maturity of more than one year........................... 43,000
Bank's liability on acceptances executed and outstanding.................... 0
Subordinated notes and debentures........................................... 0
Other liabilities (from Schedule RC-G)...................................... 93,311
Total liabilities........................................................... 5,644,736
<CAPTION>
EQUITY CAPITAL
<S> <C>
Perpetual preferred stock and related surplus............................... 0
Common Stock................................................................ 500
Surplus (exclude all surplus related to preferred stock).................... 62,118
Undivided profits and capital reserves...................................... 408,053
Net unrealized holding gains (losses) on available-for-sale securities...... 3,113
Total equity capital........................................................ 473,784
Total liabilities, limited-life preferred stock, and equity capital......... 6,118,520
</TABLE>
2
<PAGE>
EXHIBIT 25.3
Registration No.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)_____
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
NEW HAMPSHIRE THRIFT BANCSHARES, INC.
(Exact name of obligor as specified in its charter)
Delaware 02-0430695
(State of incorporation) (I.R.S. employer identification no.)
9 Main Street
Newport, New Hampshire 03773
(Address of principal executive offices) (Zip Code)
The New Hampshire Thrift Bancshares, Inc. Guarantee with respect to Capital
Securities
(Title of the indenture securities)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the trustee
and upon information furnished by the obligor, the obligor is not an
affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which includes
the certificate of authority of Wilmington Trust Company to
commence business and the authorization of Wilmington Trust
Company to exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section 321(b) of
Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust
Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 26th day
of July, 1999.
WILMINGTON TRUST COMPANY
[SEAL]
Attest: /s/ Patricia A. Evans By: /s/ Norma P. Closs
----------------------------- -------------------------------
Assistant Secretary Name: Norma P. Closs
Title: Vice President
2
<PAGE>
EXHIBIT A
AMENDED CHARTER
Wilmington Trust Company
Wilmington, Delaware
As existing on May 9, 1987
<PAGE>
Amended Charter
or
Act of Incorporation
of
Wilmington Trust Company
Wilmington Trust Company, originally incorporated by an Act of the General
Assembly of the State of Delaware, entitled "An Act to Incorporate the Delaware
Guarantee and Trust Company", approved March 2, A.D. 1901, and the name of which
company was changed to "Wilmington Trust Company" by an amendment filed in the
Office of the Secretary of State on March 18, A.D. 1903, and the Charter or Act
of Incorporation of which company has been from time to time amended and changed
by merger agreements pursuant to the corporation law for state banks and trust
companies of the State of Delaware, does hereby alter and amend its Charter or
Act of Incorporation so that the same as so altered and amended shall in its
entirety read as follows:
First: - The name of this corporation is Wilmington Trust Company.
Second: - The location of its principal office in the State of Delaware is
at Rodney Square North, in the City of Wilmington, County of New Castle;
the name of its resident agent is Wilmington Trust Company whose address
is Rodney Square North, in said City. In addition to such principal
office, the said corporation maintains and operates branch offices in the
City of Newark, New Castle County, Delaware, the Town of Newport, New
Castle County, Delaware, at Claymont, New Castle County, Delaware, at
Greenville, New Castle County Delaware, and at Milford Cross Roads, New
Castle County, Delaware, and shall be empowered to open, maintain and
operate branch offices at Ninth and Shipley Streets, 418 Delaware Avenue,
2120 Market Street, and 3605 Market Street, all in the City of Wilmington,
New Castle County, Delaware, and such other branch offices or places of
business as may be authorized from time to time by the agency or agencies
of the government of the State of Delaware empowered to confer such
authority.
Third: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this Corporation are
to do any or all of the things herein mentioned as fully and to the same
extent as natural persons might or could do and in any part of the world,
viz.:
(1) To sue and be sued, complain and defend in any Court of law or
equity and to make and use a common seal, and alter the seal at
pleasure, to hold,
<PAGE>
purchase, convey, mortgage or otherwise deal in real and personal
estate and property, and to appoint such officers and agents as the
business of the Corporation shall require, to make by-laws not
inconsistent with the Constitution or laws of the United States or of
this State, to discount bills, notes or other evidences of debt, to
receive deposits of money, or securities for money, to buy gold and
silver bullion and foreign coins, to buy and sell bills of exchange,
and generally to use, exercise and enjoy all the powers, rights,
privileges and franchises incident to a corporation which are proper
or necessary for the transaction of the business of the Corporation
hereby created.
(2) To insure titles to real and personal property, or any estate or
interests therein, and to guarantee the holder of such property, real
or personal, against any claim or claims, adverse to his interest
therein, and to prepare and give certificates of title for any lands
or premises in the State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the receipt,
collection, custody, investment and management of funds, and the
purchase, sale, management and disposal of property of all
descriptions, and to prepare and execute all papers which may be
necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds, leases,
conveyances, mortgages, bonds and legal papers of every description,
and to carry on the business of conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry, plate,
deeds, bonds and any and all other personal property of every sort and
kind, from executors, administrators, guardians, public officers,
courts, receivers, assignees, trustees, and from all fiduciaries, and
from all other persons and individuals, and from all corporations
whether state, municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of registering,
issuing, certificating, countersigning, transferring or underwriting
the stock, bonds or other obligations of any corporation, association,
state or municipality, and may receive and manage any sinking fund
therefor on such terms as may be agreed upon between the two parties,
and in like manner may act as Treasurer of any corporation or
municipality.
(7) To act as Trustee under any deed of trust, mortgage, bond or
other
2
<PAGE>
instrument issued by any state, municipality, body politic,
corporation, association or person, either alone or in conjunction
with any other person or persons, corporation or corporations.
(8) To guarantee the validity, performance or effect of any contract
or agreement, and the fidelity of persons holding places of
responsibility or trust; to become surety for any person, or persons,
for the faithful performance of any trust, office, duty, contract or
agreement, either by itself or in conjunction with any other person,
or persons, corporation, or corporations, or in like manner become
surety upon any bond, recognizance, obligation, judgment, suit, order,
or decree to be entered in any court of record within the State of
Delaware or elsewhere, or which may now or hereafter be required by
any law, judge, officer or court in the State of Delaware or
elsewhere.
(9) To act by any and every method of appointment as trustee, trustee
in bankruptcy, receiver, assignee, assignee in bankruptcy, executor,
administrator, guardian, bailee, or in any other trust capacity in the
receiving, holding, managing, and disposing of any and all estates and
property, real, personal or mixed, and to be appointed as such
trustee, trustee in bankruptcy, receiver, assignee, assignee in
bankruptcy, executor, administrator, guardian or bailee by any
persons, corporations, court, officer, or authority, in the State of
Delaware or elsewhere; and whenever this Corporation is so appointed
by any person, corporation, court, officer or authority such trustee,
trustee in bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other trust
capacity, it shall not be required to give bond with surety, but its
capital stock shall be taken and held as security for the performance
of the duties devolving upon it by such appointment.
(10) And for its care, management and trouble, and the exercise of
any of its powers hereby given, or for the performance of any of the
duties which it may undertake or be called upon to perform, or for the
assumption of any responsibility the said Corporation may be entitled
to receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages, debentures,
shares of capital stock, and other securities, obligations, contracts
and evidences of indebtedness, of any private, public or municipal
corporation within and without the State of Delaware, or of the
Government of the United States, or of any state, territory, colony,
or possession thereof, or of any foreign government or country; to
receive, collect, receipt for, and dispose of
3
<PAGE>
interest, dividends and income upon and from any of the bonds,
mortgages, debentures, notes, shares of capital stock, securities,
obligations, contracts, evidences of indebtedness and other property
held and owned by it, and to exercise in respect of all such bonds,
mortgages, debentures, notes, shares of capital stock, securities,
obligations, contracts, evidences of indebtedness and other property,
any and all the rights, powers and privileges of individual owners
thereof, including the right to vote thereon; to invest and deal in
and with any of the moneys of the Corporation upon such securities and
in such manner as it may think fit and proper, and from time to time
to vary or realize such investments; to issue bonds and secure the
same by pledges or deeds of trust or mortgages of or upon the whole or
any part of the property held or owned by the Corporation, and to sell
and pledge such bonds, as and when the Board of Directors shall
determine, and in the promotion of its said corporate business of
investment and to the extent authorized by law, to lease, purchase,
hold, sell, assign, transfer, pledge, mortgage and convey real and
personal property of any name and nature and any estate or interest
therein.
(b) In furtherance of, and not in limitation, of the powers conferred by
the laws of the State of Delaware, it is hereby expressly provided that the
said Corporation shall also have the following powers:
(1) To do any or all of the things herein set forth, to the same
extent as natural persons might or could do, and in any part of the
world.
(2) To acquire the good will, rights, property and franchises and to
undertake the whole or any part of the assets and liabilities of any
person, firm, association or corporation, and to pay for the same in
cash, stock of this Corporation, bonds or otherwise; to hold or in any
manner to dispose of the whole or any part of the property so
purchased; to conduct in any lawful manner the whole or any part of
any business so acquired, and to exercise all the powers necessary or
convenient in and about the conduct and management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien, and to
lease, sell, exchange, transfer, or in any manner whatever dispose of
property, real, personal or mixed, wherever situated.
(4) To enter into, make, perform and carry out contracts of every
kind with any person, firm, association or corporation, and, without
limit as to amount, to draw, make, accept, endorse, discount, execute
and issue promissory notes, drafts, bills of exchange, warrants,
bonds, debentures, and other negotiable or
4
<PAGE>
transferable instruments.
(5) To have one or more offices, to carry on all or any of its
operations and businesses, without restriction to the same extent as
natural persons might or could do, to purchase or otherwise acquire,
to hold, own, to mortgage, sell, convey or otherwise dispose of, real
and personal property, of every class and description, in any State,
District, Territory or Colony of the United States, and in any foreign
country or place.
(6) It is the intention that the objects, purposes and powers
specified and clauses contained in this paragraph shall (except where
otherwise expressed in said paragraph) be nowise limited or restricted
by reference to or inference from the terms of any other clause of
this or any other paragraph in this charter, but that the objects,
purposes and powers specified in each of the clauses of this paragraph
shall be regarded as independent objects, purposes and powers.
Fourth: - (a) The total number of shares of all classes of stock which the
Corporation shall have authority to issue is forty-one million (41,000,000)
shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par value
$10.00 per share (hereinafter referred to as "Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par value
$1.00 per share (hereinafter referred to as "Common Stock").
(b) Shares of Preferred Stock may be issued from time to time in one or
more series as may from time to time be determined by the Board of
Directors each of said series to be distinctly designated. All shares of
any one series of Preferred Stock shall be alike in every particular,
except that there may be different dates from which dividends, if any,
thereon shall be cumulative, if made cumulative. The voting powers and the
preferences and relative, participating, optional and other special rights
of each such series, and the qualifications, limitations or restrictions
thereof, if any, may differ from those of any and all other series at any
time outstanding; and, subject to the provisions of subparagraph 1 of
Paragraph (c) of this Article Fourth, the Board of Directors of the
Corporation is hereby expressly granted authority to fix by resolution or
resolutions adopted prior to the issuance of any shares of a particular
series of Preferred Stock, the voting powers and the designations,
preferences and relative, optional and other special rights, and the
qualifications, limitations and restrictions of such series, including, but
without limiting the generality of the
5
<PAGE>
foregoing, the following:
(1) The distinctive designation of, and the number of shares of
Preferred Stock which shall constitute such series, which number may
be increased (except where otherwise provided by the Board of
Directors) or decreased (but not below the number of shares thereof
then outstanding) from time to time by like action of the Board of
Directors;
(2) The rate and times at which, and the terms and conditions on
which, dividends, if any, on Preferred Stock of such series shall be
paid, the extent of the preference or relation, if any, of such
dividends to the dividends payable on any other class or classes, or
series of the same or other class of stock and whether such dividends
shall be cumulative or non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of such
series to convert the same into or exchange the same for, shares of
any other class or classes or of any series of the same or any other
class or classes of stock of the Corporation and the terms and
conditions of such conversion or exchange;
(4) Whether or not Preferred Stock of such series shall be subject to
redemption, and the redemption price or prices and the time or times
at which, and the terms and conditions on which, Preferred Stock of
such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of such
series upon the voluntary or involuntary liquidation, merger,
consolidation, distribution or sale of assets, dissolution or winding-
up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase account,
if any, to be provided for the Preferred Stock of such series; and
(7) The voting powers, if any, of the holders of such series of
Preferred Stock which may, without limiting the generality of the
foregoing include the right, voting as a series or by itself or
together with other series of Preferred Stock or all series of
Preferred Stock as a class, to elect one or more directors of the
Corporation if there shall have been a default in the payment of
dividends on any one or more series of Preferred Stock or under such
circumstances and on such conditions as the Board of Directors may
determine.
(c) (1) After the requirements with respect to preferential dividends on
the Preferred Stock (fixed in accordance with the provisions of section (b)
of this Article
6
<PAGE>
Fourth), if any, shall have been met and after the Corporation shall have
complied with all the requirements, if any, with respect to the setting
aside of sums as sinking funds or redemption or purchase accounts (fixed in
accordance with the provisions of section (b) of this Article Fourth), and
subject further to any conditions which may be fixed in accordance with the
provisions of section (b) of this Article Fourth, then and not otherwise
the holders of Common Stock shall be entitled to receive such dividends as
may be declared from time to time by the Board of Directors.
(2) After distribution in full of the preferential amount, if any,
(fixed in accordance with the provisions of section (b) of this
Article Fourth), to be distributed to the holders of Preferred Stock
in the event of voluntary or involuntary liquidation, distribution or
sale of assets, dissolution or winding-up, of the Corporation, the
holders of the Common Stock shall be entitled to receive all of the
remaining assets of the Corporation, tangible and intangible, of
whatever kind available for distribution to stockholders ratably in
proportion to the number of shares of Common Stock held by them
respectively.
(3) Except as may otherwise be required by law or by the provisions
of such resolution or resolutions as may be adopted by the Board of
Directors pursuant to section (b) of this Article Fourth, each holder
of Common Stock shall have one vote in respect of each share of Common
Stock held on all matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock or of
options, warrants or other rights to purchase shares of any class or series
of stock or of other securities of the Corporation shall have any
preemptive right to purchase or subscribe for any unissued stock of any
class or series or any additional shares of any class or series to be
issued by reason of any increase of the authorized capital stock of the
Corporation of any class or series, or bonds, certificates of indebtedness,
debentures or other securities convertible into or exchangeable for stock
of the Corporation of any class or series, or carrying any right to
purchase stock of any class or series, but any such unissued stock,
additional authorized issue of shares of any class or series of stock or
securities convertible into or exchangeable for stock, or carrying any
right to purchase stock, may be issued and disposed of pursuant to
resolution of the Board of Directors to such persons, firms, corporations
or associations, whether such holders or others, and upon such terms as may
be deemed advisable by the Board of Directors in the exercise of its sole
discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and rights
of each other series of Preferred Stock shall, in each case, be as fixed
from time to time by the Board of
7
<PAGE>
Directors in the resolution or resolutions adopted pursuant to authority
granted in section (b) of this Article Fourth and the consent, by class or
series vote or otherwise, of the holders of such of the series of Preferred
Stock as are from time to time outstanding shall not be required for the
issuance by the Board of Directors of any other series of Preferred Stock
whether or not the powers, preferences and rights of such other series
shall be fixed by the Board of Directors as senior to, or on a parity with,
the powers, preferences and rights of such outstanding series, or any of
them; provided, however, that the Board of Directors may provide in the
resolution or resolutions as to any series of Preferred Stock adopted
pursuant to section (b) of this Article Fourth that the consent of the
holders of a majority (or such greater proportion as shall be therein
fixed) of the outstanding shares of such series voting thereon shall be
required for the issuance of any or all other series of Preferred Stock.
(f) Subject to the provisions of section (e), shares of any series of
Preferred Stock may be issued from time to time as the Board of Directors
of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(h) The authorized amount of shares of Common Stock and of Preferred Stock
may, without a class or series vote, be increased or decreased from time to
time by the affirmative vote of the holders of a majority of the stock of
the Corporation entitled to vote thereon.
Fifth: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of directors
constituting the entire Board shall be not less than five nor more than
twenty-five as fixed from time to time by vote of a majority of the whole
Board, provided, however, that the number of directors shall not be reduced
so as to shorten the term of any director at the time in office, and
provided further, that the number of directors constituting the whole Board
shall be twenty-four until otherwise fixed by a majority of the whole
Board.
(b) The Board of Directors shall be divided into three classes, as nearly
equal in number as the then total number of directors constituting the
whole Board permits, with the term of office of one class expiring each
year. At the annual meeting of stockholders in 1982, directors of the first
class shall be elected to hold office for a term expiring at the next
succeeding annual meeting, directors of the second class
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shall be elected to hold office for a term expiring at the second
succeeding annual meeting and directors of the third class shall be elected
to hold office for a term expiring at the third succeeding annual meeting.
Any vacancies in the Board of Directors for any reason, and any newly
created directorships resulting from any increase in the directors, may be
filled by the Board of Directors, acting by a majority of the directors
then in office, although less than a quorum, and any directors so chosen
shall hold office until the next annual election of directors. At such
election, the stockholders shall elect a successor to such director to hold
office until the next election of the class for which such director shall
have been chosen and until his successor shall be elected and qualified. No
decrease in the number of directors shall shorten the term of any incumbent
director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding the
fact that some lesser percentage may be specified by law, this Charter or
Act of Incorporation or the By-Laws of the Corporation), any director or
the entire Board of Directors of the Corporation may be removed at any time
without cause, but only by the affirmative vote of the holders of two-
thirds or more of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) cast at a meeting of the
stockholders called for that purpose.
(d) Nominations for the election of directors may be made by the Board of
Directors or by any stockholder entitled to vote for the election of
directors. Such nominations shall be made by notice in writing, delivered
or mailed by first class United States mail, postage prepaid, to the
Secretary of the Corporation not less than 14 days nor more than 50 days
prior to any meeting of the stockholders called for the election of
directors; provided, however, that if less than 21 days' notice of the
meeting is given to stockholders, such written notice shall be delivered or
mailed, as prescribed, to the Secretary of the Corporation not later than
the close of the seventh day following the day on which notice of the
meeting was mailed to stockholders. Notice of nominations which are
proposed by the Board of Directors shall be given by the Chairman on behalf
of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name, age,
business address and, if known, residence address of each nominee proposed
in such notice, (ii) the principal occupation or employment of such nominee
and (iii) the number of shares of stock of the Corporation which are
beneficially owned by each such nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine and
declare to
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the meeting that a nomination was not made in accordance with the foregoing
procedure, and if he should so determine, he shall so declare to the
meeting and the defective nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any annual or
special meeting of stockholders of the Corporation may be taken without a
meeting, and the power of stockholders to consent in writing, without a
meeting, to the taking of any action is specifically denied.
Sixth: - The Directors shall choose such officers, agent and servants as
may be provided in the By-Laws as they may from time to time find necessary
or proper.
Seventh: - The Corporation hereby created is hereby given the same powers,
rights and privileges as may be conferred upon corporations organized under
the Act entitled "An Act Providing a General Corporation Law", approved
March 10, 1899, as from time to time amended.
Eighth: - This Act shall be deemed and taken to be a private Act.
Ninth: - This Corporation is to have perpetual existence.
Tenth: - The Board of Directors, by resolution passed by a majority of the
whole Board, may designate any of their number to constitute an Executive
Committee, which Committee, to the extent provided in said resolution, or
in the By-Laws of the Company, shall have and may exercise all of the
powers of the Board of Directors in the management of the business and
affairs of the Corporation, and shall have power to authorize the seal of
the Corporation to be affixed to all papers which may require it.
Eleventh: - The private property of the stockholders shall not be liable
for the payment of corporate debts to any extent whatever.
Twelfth: - The Corporation may transact business in any part of the world.
Thirteenth: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation by a
vote of the majority of the entire Board. The stockholders may make, alter
or repeal any By-Law whether or not adopted by them, provided however, that
any such additional By-Laws, alterations or repeal may be adopted only by
the affirmative vote of the holders of two-thirds or more of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as
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one class).
Fourteenth: - Meetings of the Directors may be held outside
of the State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be from time
to time designated by them.
Fifteenth: - (a) (1) In addition to any affirmative vote required by law,
and except as otherwise expressly provided in sections (b) and (c) of this
Article Fifteenth:
(A) any merger or consolidation of the Corporation or any Subsidiary
(as hereinafter defined) with or into (i) any Interested Stockholder
(as hereinafter defined) or (ii) any other corporation (whether or not
itself an Interested Stockholder), which, after such merger or
consolidation, would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of related transactions)
to or with any Interested Stockholder or any Affiliate of any
Interested Stockholder of any assets of the Corporation or any
Subsidiary having an aggregate fair market value of $1,000,000 or
more, or
(C) the issuance or transfer by the Corporation or any Subsidiary (in
one transaction or a series of related transactions) of any securities
of the Corporation or any Subsidiary to any Interested Stockholder or
any Affiliate of any Interested Stockholder in exchange for cash,
securities or other property (or a combination thereof) having an
aggregate fair market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation, or
(E) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any
similar transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect, directly or
indirectly, of increasing the proportionate share of the outstanding
shares of any class of equity or convertible securities of the
Corporation or any Subsidiary which is directly or indirectly owned by
any Interested Stockholder, or any Affiliate of any Interested
Stockholder,
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shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article Fifteenth as one class ("Voting Shares"). Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
(2) The term "business combination" as used in this Article
Fifteenth shall mean any transaction which is referred to any one
or more of clauses (A) through (E) of paragraph 1 of the section
(a).
(b) The provisions of section (a) of this Article Fifteenth shall not
be applicable to any particular business combination and such business
combination shall require only such affirmative vote as is required by
law and any other provisions of the Charter or Act of Incorporation of
By-Laws if such business combination has been approved by a majority
of the whole Board.
(c) For the purposes of this Article Fifteenth:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any Subsidiary) who
or which as of the record date for the determination of stockholders
entitled to notice of and to vote on such business combination, or
immediately prior to the consummation of any such transaction:
(A) is the beneficial owner, directly or indirectly, of more than 10%
of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time within two
years prior thereto was the beneficial owner, directly or indirectly,
of not less than 10% of the then outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in any share of
capital stock of the Corporation which were at any time within two
years prior thereto beneficially owned by any Interested Stockholder,
and such assignment or succession shall have occurred in the course of
a transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
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(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and Associates (as
hereafter defined) beneficially own, directly or indirectly, or
(B) which such person or any of its Affiliates or Associates has (i)
the right to acquire (whether such right is exercisable immediately or
only after the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (ii)
the right to vote pursuant to any agreement, arrangement or
understanding, or
(C) which are beneficially owned, directly or indirectly, by any
other person with which such first mentioned person or any of its
Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any other
Voting Shares which may be issuable pursuant to any agreement, or upon
exercise of conversion rights, warrants or options or otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings given
those terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect on December 31, 1981.
(6) "Subsidiary" shall mean any corporation of which a majority of any
class of equity security (as defined in Rule 3a11-1 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as in effect in
December 31, 1981) is owned, directly or indirectly, by the Corporation;
provided, however, that for the purposes of the definition of Investment
Stockholder set forth in paragraph (2) of this section (c), the term
"Subsidiary" shall mean only a corporation of which a majority of each
class of equity security is owned, directly or indirectly, by the
Corporation.
(d) majority of the directors shall have the power and duty to
determine for the purposes of this Article Fifteenth on the basis of
information known to them, (1) the number of Voting Shares
beneficially owned by any person (2) whether a person is an Affiliate
or Associate of another, (3) whether a person has an agreement,
arrangement or understanding with another as to the matters referred
to in paragraph (3) of section (c), or (4) whether the assets subject
to any business combination or the consideration received for the
issuance or
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transfer of securities by the Corporation, or any Subsidiary has an
aggregate fair market value of $1,000,000 or more.
(e) Nothing contained in this Article Fifteenth shall be construed to
relieve any Interested Stockholder from any fiduciary obligation
imposed by law.
Sixteenth: Notwithstanding any other provision of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and in addition to any
other vote that may be required by law, this Charter or Act of
Incorporation by the By-Laws), the affirmative vote of the holders of at
least two-thirds of the outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) shall be required to amend,
alter or repeal any provision of Articles Fifth, Thirteenth, Fifteenth or
Sixteenth of this Charter or Act of Incorporation.
Seventeenth: (a) a Director of this Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director, except to the extent such exemption from
liability or limitation thereof is not permitted under the Delaware General
Corporation Laws as the same exists or may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph shall not
adversely affect any right or protection of a Director of the
Corporation existing hereunder with respect to any act or omission
occurring prior to the time of such repeal or modification."
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EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
As existing on January 16, 1997
<PAGE>
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
Stockholders' Meetings
Section 1. The Annual Meeting of Stockholders shall be held on the third
Thursday in April each year at the principal office at the Company or at such
other date, time, or place as may be designated by resolution by the Board of
Directors.
Section 2. Special meetings of all stockholders may be called at any time
by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given by
mailing to each stockholder at least ten (10) days before said meeting, at his
last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the Company
issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
Directors
Section 1. The number and classification of the Board of Directors shall
be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72) years
shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for three
years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed and
conducted by the Board of Directors.
<PAGE>
Section 5. The Board of Directors shall meet at the principal office of
the Company or elsewhere in its discretion at such times to be determined by a
majority of its members, or at the call of the Chairman of the Board of
Directors or the President.
Section 6. Special meetings of the Board of Directors may be called at
any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall be
necessary to constitute a quorum for the transaction of business at any meeting
of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of any
special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal, inability to
act, or disqualification of any director, the Board of Directors, although less
than a quorum, shall have the right to elect the successor who shall hold office
for the remainder of the full term of the class of directors in which the
vacancy occurred, and until such director's successor shall have been duly
elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect from
its own members a Chairman of the Board of Directors and a President who may be
the same person. The Board of Directors shall also elect at such meeting a
Secretary and a Treasurer, who may be the same person, may appoint at any time
such other committees and elect or appoint such other officers as it may deem
advisable. The Board of Directors may also elect at such meeting one or more
Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
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ARTICLE III
Committees
Section 1. Executive Committee
(A) The Executive Committee shall be composed of not more than
nine members who shall be selected by the Board of Directors from its own
members and who shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of the
Board of Directors when it is not in session to transact all business for and in
behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined by
a majority of its members, or at the call of the Chairman of the Executive
Committee or at the call of the Chairman of the Board of Directors. The majority
of its members shall be necessary to constitute a quorum for the transaction of
business. Special meetings of the Executive Committee may be held at any time
when a quorum is present.
(D) Minutes of each meeting of the Executive Committee shall be
kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend all
investments that may be made of the funds of the Company, and shall direct the
disposal of the same, in accordance with such rules and regulations as the Board
of Directors from time to time make.
(F) In the event of a state of disaster of sufficient severity
to prevent the conduct and management of the affairs and business of the Company
by its directors and officers as contemplated by these By-Laws any two available
members of the Executive Committee as constituted immediately prior to such
disaster shall constitute a quorum of that Committee for the full conduct and
management of the affairs and business of the Company in accordance with the
provisions of Article III of these By-Laws; and if less than three members of
the Trust Committee is constituted immediately prior to such disaster shall be
available for the transaction of its business, such Executive Committee shall
also be empowered to exercise all of the powers reserved to the Trust Committee
under Article III Section 2 hereof. In the event of the unavailability, at such
time, of a minimum of two members of such Executive Committee, any three
available directors shall constitute the Executive Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the foregoing provisions of this Section. This By-Law shall be subject to
implementation by Resolutions of the Board of Directors presently existing or
hereafter passed from time to time
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for that purpose, and any provisions of these By-Laws (other than this Section)
and any resolutions which are contrary to the provisions of this Section or to
the provisions of any such implementary Resolutions shall be suspended during
such a disaster period until it shall be determined by any interim Executive
Committee acting under this section that it shall be to the advantage of the
Company to resume the conduct and management of its affairs and business under
all of the other provisions of these By-Laws.
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more than
thirteen members who shall be selected by the Board of Directors, a majority of
whom shall be members of the Board of Directors and who shall hold office during
the pleasure of the Board.
(B) The Trust Committee shall have general supervision over the
Trust Department and the investment of trust funds, in all matters, however,
being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal office of
the Company or elsewhere in its discretion at such times to be determined by a
majority of its members or at the call of its chairman. A majority of its
members shall be necessary to constitute a quorum for the transaction of
business.
(D) Minutes of each meeting of the Trust Committee shall be
kept and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint
Committees and/or designate officers or employees of the Company to whom
supervision over the investment of trust funds may be delegated when the Trust
Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five members who
shall be selected by the Board of Directors from its own members, none of whom
shall be an officer of the Company, and shall hold office at the pleasure of the
Board.
(B) The Audit Committee shall have general supervision over the
Audit Division in all matters however subject to the approval of the Board of
Directors; it shall consider all matters brought to its attention by the officer
in charge of the Audit Division, review all reports of examination of the
Company made by any governmental agency or such independent auditor employed for
that purpose, and make such recommendations to the Board of Directors with
respect thereto or with respect to any other matters pertaining to auditing the
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Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever the
majority of its members shall deem it to be proper for the transaction of its
business, and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not more
than five (5) members who shall be selected by the Board of Directors from its
own members who are not officers of the Company and who shall hold office during
the pleasure of the Board.
(B) The Compensation Committee shall in general advise upon all
matters of policy concerning the Company brought to its attention by the
management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called at any
time by the Chairman of the Compensation Committee, the Chairman of the Board of
Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be elected by
the Board of Directors as an associate director, to serve during the pleasure of
the Board.
(B) An associate director shall be entitled to attend all
directors meetings and participate in the discussion of all matters brought to
the Board, with the exception that he would have no right to vote. An associate
director will be eligible for appointment to Committees of the Company, with the
exception of the Executive Committee, Audit Committee and Compensation
Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of any
Committee created under Article III of the By-Laws of this Company, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absence or disqualified member.
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ARTICLE IV
Officers
Section 1. The Chairman of the Board of Directors shall preside at all
meetings of the Board and shall have such further authority and powers and shall
perform such duties as the Board of Directors may from time to time confer and
direct. He shall also exercise such powers and perform such duties as may from
time to time be agreed upon between himself and the President of the Company.
Section 2. The Vice Chairman of the Board. The Vice Chairman of the
-------------------------------
Board of Directors shall preside at all meetings of the Board of Directors at
which the Chairman of the Board shall not be present and shall have such further
authority and powers and shall perform such duties as the Board of Directors or
the Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties pertaining to
the office of the President conferred or imposed upon him by statute or assigned
to him by the Board of Directors in the absence of the Chairman of the Board the
President shall have the powers and duties of the Chairman of the Board.
Section 4. The Chairman of the Board of Directors or the President as
designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however denominated
by the Board of Directors, who may at any time perform all the duties of the
Chairman of the Board of Directors and/or the President and such other powers
and duties as may from time to time be assigned to them by the Board of
Directors, the Executive Committee, the Chairman of the Board or the President
and by the officer in charge of the department or division to which they are
assigned.
Section 6. The Secretary shall attend to the giving of notice of meetings
of the stockholders and the Board of Directors, as well as the Committees
thereof, to the keeping of accurate minutes of all such meetings and to
recording the same in the minute books of the Company. In addition to the other
notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
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Section 7. The Treasurer shall have general supervision over all assets
and liabilities of the Company. He shall be custodian of and responsible for
all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all the transactions
of the Company. He shall have general supervision of the expenditures of the
Company and shall report to the Board of Directors at each regular meeting of
the condition of the Company, and perform such other duties as may be assigned
to him from time to time by the Board of Directors of the Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
There may be one or more subordinate accounting or controller officers
however denominated, who may perform the duties of the Controller and such
duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit Officers,
however denominated, who may perform all the duties of the Auditor and such
duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank to all
Vice Presidents with such functional titles as shall be determined from time to
time by the Board of Directors, who shall ex officio hold the office Assistant
Secretary of this Company and who may perform such duties as may be prescribed
by the officer in charge of the department or division to whom they are
assigned.
Section 11. The powers and duties of all other officers of the Company
shall be those usually pertaining to their respective offices, subject to the
direction of the Board of Directors, the Executive Committee, Chairman of the
Board of Directors or the President and the officer in charge of the department
or division to which they are assigned.
ARTICLE V
Stock and Stock Certificates
Section 1. Shares of stock shall be transferrable on the books of the
Company and a
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transfer book shall be kept in which all transfers of stock shall be recorded.
Section 2. Certificate of stock shall bear the signature of the President
or any Vice President, however denominated by the Board of Directors and
countersigned by the Secretary or Treasurer or an Assistant Secretary, and the
seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new certificate
or certificates shall be issued in lieu thereof. Duplicate certificates of
stock shall be issued only upon giving such security as may be satisfactory to
the Board of Directors or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to fix in
advance a record date for the determination of the stockholders entitled to
notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of any dividend, or to any allotment or
rights, or to exercise any rights in respect of any change, conversion or
exchange of capital stock, or in connection with obtaining the consent of
stockholders for any purpose, which record date shall not be more than 60 nor
less than 10 days proceeding the date of any meeting of stockholders or the date
for the payment of any dividend, or the date for the allotment of rights, or the
date when any change or conversion or exchange of capital stock shall go into
effect, or a date in connection with obtaining such consent.
ARTICLE VI
Seal
Section 1. The corporate seal of the Company shall be in the following
form:
Between two concentric circles the words
"Wilmington Trust Company" within the inner
circle the words "Wilmington, Delaware."
ARTICLE VII
Fiscal Year
Section 1. The fiscal year of the Company shall be the calendar year.
8
<PAGE>
ARTICLE VIII
Execution of Instruments of the Company
Section 1. The Chairman of the Board, the President or any Vice President,
however denominated by the Board of Directors, shall have full power and
authority to enter into, make, sign, execute, acknowledge and/or deliver and the
Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as though
expressly authorized by the Board of Directors and/or the Executive Committee.
ARTICLE IX
Compensation of Directors and Members of Committees
Section 1. Directors and associate directors of the Company, other than
salaried officers of the Company, shall be paid such reasonable honoraria or
fees for attending meetings of the Board of Directors as the Board of Directors
may from time to time determine. Directors and associate directors who serve as
members of committees, other than salaried employees of the Company, shall be
paid such reasonable honoraria or fees for services as members of committees as
the Board of Directors shall from time to time determine and directors and
associate directors may be employed by the Company for such special services as
the Board of Directors may from time to time determine and shall be paid for
such special services so performed reasonable compensation as may be determined
by the Board of Directors.
ARTICLE X
Indemnification
Section 1. (A) The Corporation shall indemnify and hold harmless, to the
fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director, officer, employee or agent of the Corporation or is or was
9
<PAGE>
serving at the request of the Corporation as a director, officer, employee,
fiduciary or agent of another corporation or of a partnership, joint venture,
trust, enterprise or non-profit entity, including service with respect to
employee benefit plans, against all liability and loss suffered and expenses
reasonably incurred by such person. The Corporation shall indemnify a person in
connection with a proceeding initiated by such person only if the proceeding was
authorized by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in
defending any proceeding in advance of its final disposition, provided, however,
-------- -------
that the payment of expenses incurred by a Director officer in his capacity as a
Director or officer in advance of the final disposition of the proceeding shall
be made only upon receipt of an undertaking by the Director or officer to repay
all amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of expenses,
under this Article X is not paid in full within ninety days after a written
claim therefor has been received by the Corporation the claimant may file suit
to recover the unpaid amount of such claim and, if successful in whole or in
part, shall be entitled to be paid the expense of prosecuting such claim. In any
such action the Corporation shall have the burden of proving that the claimant
was not entitled to the requested indemnification of payment of expenses under
applicable law.
(D) The rights conferred on any person by this Article X
shall not be exclusive of any other rights which such person may have or
hereafter acquire under any statute, provision of the Charter or Act of
Incorporation, these By-Laws, agreement, vote of stockholders or disinterested
Directors or otherwise.
(E) Any repeal or modification of the foregoing provisions of
this Article X shall not adversely affect any right or protection hereunder of
any person in respect of any act or omission occurring prior to the time of such
repeal or modification.
ARTICLE XI
Amendments to the By-Laws
Section 1. These By-Laws may be altered, amended or repealed, in whole or
in part, and any new By-Law or By-Laws adopted at any regular or special meeting
of the Board of Directors by a vote of the majority of all the members of the
Board of Directors then in office.
10
<PAGE>
EXHIBIT C
Section 321(b) Consent
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as amended,
Wilmington Trust Company hereby consents that reports of examinations by
Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: July 26, 1999 By: /s/ Norma P. Closs
--------------------------------------
Name: Norma P. Closs
Title: Vice President
<PAGE>
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and
savings banks with state publication requirements. It has
not been approved by any state banking authorities. Refer to
your appropriate state banking authorities for your state
publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- ----------------------------------- -------------
Name of Bank City
in the State of DELAWARE, at the close of business on March 31, 1999.
--------
<TABLE>
<CAPTION>
ASSETS
Thousands of dollars
Cash and balances due from depository institutions:
<S> <C>
Noninterest-bearing balances and currency and coins.................................... 196,035
Interest-bearing balances.............................................................. 0
Held-to-maturity securities................................................................. 44,909
Available-for-sale securities............................................................... 1,396,028
Federal funds sold and securities purchased under agreements to resell...................... 127,340
Loans and lease financing receivables:
Loans and leases, net of unearned income............ 4,176,290
LESS: Allowance for loan and lease losses.......... 68,543
LESS: Allocated transfer risk reserve.............. 0
Loans and leases, net of unearned income, allowance, and reserve................ 4,107,747
Assets held in trading accounts............................................................. 0
Premises and fixed assets (including capitalized leases).................................... 139,843
Other real estate owned..................................................................... 1,055
Investments in unconsolidated subsidiaries and associated companies......................... 1,225
Customers' liability to this bank on acceptances outstanding................................ 0
Intangible assets........................................................................... 5,265
Other assets................................................................................ 99,075
Total assets................................................................................ 6,118,520
</TABLE>
CONTINUED ON NEXT PAGE
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES
<S> <C>
Deposits:
In domestic offices......................................................................... 4,332,124
Noninterest-bearing............. 959,777
Interest-bearing................ 3,372,347
Federal funds purchased and Securities sold under agreements to repurchase.................. 432,395
Demand notes issued to the U.S. Treasury.................................................... 28,906
Trading liabilities (from Schedule RC-D).................................................... 0
Other borrowed money:....................................................................... ///////
With original maturity of one year or less...................................... 715,000
With original maturity of more than one year.................................... 43,000
Bank's liability on acceptances executed and outstanding.................................... 0
Subordinated notes and debentures........................................................... 0
Other liabilities (from Schedule RC-G)...................................................... 93,311
Total liabilities........................................................................... 5,644,736
EQUITY CAPITAL
Perpetual preferred stock and related surplus............................................... 0
Common Stock................................................................................ 500
Surplus (exclude all surplus related to preferred stock).................................... 62,118
Undivided profits and capital reserves...................................................... 408,053
Net unrealized holding gains (losses) on available-for-sale securities...................... 3,113
Total equity capital........................................................................ 473,784
Total liabilities, limited-life preferred stock, and equity capital......................... 6,118,520
</TABLE>
2
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 6,369,784
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 51,266,027
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 243,551,858
<ALLOWANCE> 3,149,129
<TOTAL-ASSETS> 317,577,971
<DEPOSITS> 275,441,715
<SHORT-TERM> 3,000,000
<LIABILITIES-OTHER> 11,532,605
<LONG-TERM> 0
0
0
<COMMON> 24,798
<OTHER-SE> 27,578,853
<TOTAL-LIABILITIES-AND-EQUITY> 27,603,651
<INTEREST-LOAN> 4,614,301
<INTEREST-INVEST> 918,967
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 5,533,268
<INTEREST-DEPOSIT> 2,630,363
<INTEREST-EXPENSE> 2,684,357
<INTEREST-INCOME-NET> 2,848,911
<LOAN-LOSSES> 30,000
<SECURITIES-GAINS> 45,409
<EXPENSE-OTHER> 2,402,884
<INCOME-PRETAX> 1,029,656
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 710,608
<EPS-BASIC> 0.34
<EPS-DILUTED> 0.34
<YIELD-ACTUAL> 7.37
<LOANS-NON> 1,058,999
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,117,068
<CHARGE-OFFS> 117
<RECOVERIES> 2,178
<ALLOWANCE-CLOSE> 3,149,129
<ALLOWANCE-DOMESTIC> 3,149,129
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
