SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-----------------
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1999 Commission File Number 0-24120
WESTERN OHIO FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 31-1403116
(State of jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
28 EAST MAIN STREET, SPRINGFIELD, OHIO 45501-0509
(Address of principal executive offices) (Zip Code)
(937) 325-9990
(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 [ ]
As of November 12, 1999 there were 2,075,064 shares of the Registrant's common
stock issued and outstanding.
<PAGE>
INDEX
WESTERN OHIO FINANCIAL CORPORATION
PART I. FINANCIAL INFORMATION PAGES
Item 1. Financial Statements:
Condensed Consolidated Statements of Financial Condition.. . . .3
Condensed Consolidated Statements of Income . . . . . . . . . .4
Condensed Consolidated Statements of Comprehensive Income . . .5
Condensed Consolidated Statements of Cash Flows . . . . . . . .6
Notes to Condensed Consolidated Financial Statements . . . . . .7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . . .8-15
Item 3. Quantitative and Qualitative Disclosures About Market Risk . . . .16
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . .17
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . .18
2
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WESTERN OHIO FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
(Dollars in thousands) 1999 1998
- ----------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 7,140 $ 13,854
Securities available for sale, at fair value 9,016 15,402
Mortgage-backed securities available for sale, at fair value 43,143 50,044
Federal Home Loan Bank stock, at cost 7,322 6,948
Loans receivable, net 252,148 234,812
Premises and equipment, net 3,292 3,241
Real estate owned -- 56
Other assets 4,897 3,371
- ----------------------------------------------------------------------------------------------------
Total Assets $ 326,958 $ 327,728
====================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits $ 200,949 $ 192,966
Advances from the Federal Home Loan Bank of Cincinnati 79,568 85,252
Other liabilities 2,523 1,916
- ----------------------------------------------------------------------------------------------------
Total Liabilities 283,040 280,134
- ----------------------------------------------------------------------------------------------------
Common stock 26 26
Additional paid-in-capital 40,446 40,452
Accumulated Other Comprehensive income (1,813) (120)
Unearned ESOP (1,131) (1,309)
Unearned MRP-Deferred (970) (1,092)
Treasury Stock; 569,936 and 476,317 shares at cost respectively (12,734) (10,714)
Retained earnings(substantially restricted) 20,094 20,351
- ----------------------------------------------------------------------------------------------------
Total Shareholders' equity 43,918 47,594
- ----------------------------------------------------------------------------------------------------
Total Liabilities And Shareholders' Equity $ 326,958 $ 327,728
====================================================================================================
</TABLE>
- ------------------------------
See Notes to Consolidated Financial Statements.
3
<PAGE>
WESTERN OHIO FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
For the Quarter Ended For the Nine Months Ended
September 30, September 30,
(Dollars in thousands except per share amounts) 1999 1998 1999 1998
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans $ 4,816 $ 4,871 $ 14,190 $ 15,514
Interest on mortgage-backed securities 713 230 2,199 923
Interest and dividends on investment securities 154 92 525 772
Interest on overnight and interest bearing deposits 36 998 215 2,018
Other interest and dividends 130 123 375 358
- ---------------------------------------------------------------------------------------------------------------------
Total Interest Income 5,849 6,314 17,504 19,585
- ---------------------------------------------------------------------------------------------------------------------
Interest expense:
Interest expense on deposits 2,424 3,308 7,217 9,747
Interest on borrowings 969 721 2,941 2,410
- ---------------------------------------------------------------------------------------------------------------------
Total Interest Expense 3,393 4,029 10,158 12,157
- ---------------------------------------------------------------------------------------------------------------------
Net Interest Income 2,456 2,285 7,346 7,428
Provision for losses on loans 74 -- 182 (261)
Net interest income after provision for losses 2,382 2,285 7,164 7,689
Gain/(Loss) on sale of loans and other assets (14) 85 162 494
Other income 288 297 807 762
- ---------------------------------------------------------------------------------------------------------------------
Other expenses (2,048) (2,331) (6,176) (7,140)
- ---------------------------------------------------------------------------------------------------------------------
Income before income taxes 608 336 1,957 1,805
- ---------------------------------------------------------------------------------------------------------------------
Income tax expense 229 150 727 714
- ---------------------------------------------------------------------------------------------------------------------
Net Income $ 379 $ 186 $ 1,230 $ 1,091
=====================================================================================================================
Earnings per share:
Basic $ 0.19 $ 0.09 $ 0.62 $ 0.49
Diluted $ 0.19 $ 0.08 $ 0.62 $ 0.48
=====================================================================================================================
</TABLE>
- ------------------------------
See Notes to Consolidated Financial Statements.
4
<PAGE>
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
<TABLE>
<CAPTION>
For the Quarter Ended For the Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
(Dollars in thousands)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income $ 379 $ 186 $ 1,230 $ 1,091
Other comprehensive income, net of tax:
Unrealized gains / (losses) arising during period (216) 62 (1,693) 82
Less: reclassification adjustment for accumulated
gains/losses included in net income -- -- -- (307)
- ---------------------------------------------------------------------------------------------------------------
Other comprehensive income (216) 62 (1,693) (225)
- ---------------------------------------------------------------------------------------------------------------
Comprehensive income/(Loss) $ 163 $ 248 $ (463) $ 866
===============================================================================================================
</TABLE>
5
<PAGE>
WESTERN OHIO FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30,
(Dollars in thousands) 1999 1998
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities $ 3,482 $ 1,672
- -----------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Loans:
Originations (55,757) (34,660)
Purchases (39,694) --
Collections 75,349 68,011
Sales 1,344 --
Mortgage-backed securities:
Collections 5,113 3,765
Purchases -- (20,073)
Sales -- 7,119
Investment securities:
Maturities 5,500 1,701
Sales -- 15,193
Property and equipment:
Additions (812) (369)
Sale proceeds 524 --
Real Estate Owned
Purchases (248)
Sales 56
- -----------------------------------------------------------------------------------------------------
Net cash provided (used) by investing activities (8,377) 40,439
- -----------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net increase in savings deposits 7,982 15,661
Net decrease in advances from borrowers for taxes and insurance (529) (435)
Treasury stock repurchase (2,172) (4,286)
Dividends paid (1,549) (1,629)
Stock options, net 132 --
Advances from Federal Home Loan Bank:
Net borrowings 64,375 45,690
Repayments (70,058) (36,266)
- -----------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities (1,819) 18,735
- -----------------------------------------------------------------------------------------------------
Net Increase (decrease) in cash and cash equivalents (6,714) 60,846
Cash and cash equivalents:
Beginning 13,854 31,239
- -----------------------------------------------------------------------------------------------------
Ending $ 7,140 $ 92,085
=====================================================================================================
</TABLE>
- ---------------------------------
See Notes to Consolidated Financial Statements.
6
<PAGE>
WESTERN OHIO FINANCIAL CORPORATION
Notes to Condensed Consolidated Financial Statements
PRINCIPLES OF CONSOLIDATION:
The financial statements include Western Ohio Financial Corporation (the
"Company") and its wholly owned subsidiary Cornerstone Bank ("Cornerstone"). The
financial statements of Cornerstone include the accounts of its wholly owned
subsidiaries, CornerstoneBanc Financial Services Corporation ("CBFS") formerly
West Central Mortgage Services, Inc., and West Central Financial Services, Inc.
("WCFS").
BASIS OF PRESENTATION:
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
reporting and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. These unaudited condensed financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's annual report on Form 10-K for the year ended December 31, 1998. The
financial data and results of operations for periods presented may not
necessarily reflect the results to be anticipated for the entire year.
EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE:
Basic earnings per share are computed by dividing income available to common
shareholders by the weighted-average number of common shares outstanding for the
period. Diluted earnings per share includes the dilutive effect of stock options
granted and unearned MRP shares using the treasury stock method. The basic
weighted average number of common shares outstanding during the three month and
nine month periods ended September 30, 1999 were 1,952,120 and 1,973,667,
respectively. The diluted weighted average number of common shares giving effect
to stock options and unearned MRP shares during the three month and nine month
periods ended September 30, 1999 were 1,970,373 and 1,998,462, respectively. The
basic weighted average number of common shares outstanding during the three
month and nine month periods ended September 30, 1998 were 2,153,351 and
2,210,308, respectively. The diluted weighted average number of common shares
giving effect to stock options and unearned MRP shares during the three month
and nine month periods ended September 30, 1998 were 2,193,673 and 2,264,011,
respectively.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS-When used in this filing and in future filings by the
Company with the Securities and Exchange Commission, in the Company's press
releases or other public or shareholder communications, or in oral statements
made with the approval of an authorized executive officer, the words or phrases
"would be", "will allow", "intends to", "will likely result", "are expected to",
"will continue", "is anticipated", "estimate", "project" or similar expressions
are intended to identify "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements are subject to
risks and uncertainties, including but not limited to changes in economic
conditions in the Company's market area, changes in policies by regulatory
agencies, fluctuations in interest rates, demand for loans in the Company's
market area and competition, all or some of which could cause actual results to
differ materially from historical earnings and those presently anticipated or
projected. The Company wishes to caution readers not to place undue reliance on
any such forward-looking statements, which speak only as of the date made and
advises readers that various factors, including regional and national economic
conditions, substantial changes in levels of market interest rates, credit and
other risks of lending and investment activities and competitive and regulatory
factors, could affect the Company's financial performance and could cause the
Company's actual results for future periods to differ materially from those
anticipated or projected.
The Company does not undertake, and specifically disclaims any obligation, to
update any forward-looking statements to reflect occurrences or unanticipated
events or circumstances after the date of such statements.
IMPACT OF THE YEAR 2000-The Company's lending and deposit activities are almost
entirely dependent upon computer systems which process and record transactions,
although the Company can effectively operate with manual systems for brief
periods when its electronic systems malfunction or cannot be accessed. The
Company utilizes the services of a nationally recognized data processing service
bureau that specializes in data processing for financial institutions. In
addition to its basic operating activities, the Company's facilities and
infrastructure, such as security systems and communications equipment, are
dependent, to varying degrees, upon computer systems.
The Company is aware of the potential Year 2000 related problems that may affect
the computers that control or operate the Company's operating systems,
facilities and infrastructure. In 1997, the Company began a process of
identifying any Year 2000 related problems that may be experienced by its
computer-operated or computer-dependent systems. The Company has contacted the
companies that supply or service the Company's computer-operated or
computer-dependent systems to obtain confirmation that each system that is
material to the operations of the Company is either currently Year 2000
compliant or is expected to be Year 2000 compliant. All of the identified
computer systems affected by the Year 2000 issue have been renovated, validated
or implemented in the process of becoming Year 2000 compliant. Other than public
utilities, the various companies whose services are deemed critical to the
mission of the Company have been tested or assurances received that such
companies will be Year 2000 compliant.
The Company has completed testing of its critical systems to ensure they will
perform as expected in the Year 2000. However, if unexpected system operating
problems should occur, or if electrical power necessary to operate the Company's
8
<PAGE>
systems is not available, contingency plans have been developed. The Company
would implement manual systems until such systems could be re-established. The
Company does not anticipate that such short-term manual systems would have a
material adverse effect on the Company's operations. The expense of any change
in suppliers or servicers is not expected to be material to the Company.
Currently, the Company has spent approximately $60,000 to test or renovate
mission critical systems. An additional expense of $4,000 for Year 2000 testing
will be incurred in the fourth quarter of 1999 for ongoing monitoring.
In addition to the possible expense related to its own systems, the Company
could incur losses if loan payments are delayed due to Year 2000 problems
affecting any of the Company's significant borrowers or impairing the payroll
systems of large employers in the Company's primary market area. Because the
Company's loan portfolio is highly diversified with regard to individual
borrowers and types of businesses and the Company's primary market area is not
significantly dependent on one employer or industry, the Company does not expect
any significant or prolonged Year 2000 related difficulties will affect net
earnings or cash flow.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
Western Ohio Financial Corporation ("the Company") is the holding company of
Cornerstone Bank. Consolidated assets of the Company totaled $327.0 million at
September 30, 1999, a decrease of $700,000 from the December 31, 1998 total of
$327.7 million.
Loans receivable increased $17.3 million to $252.1 million on September 30, 1999
from $234.8 million on December 31, 1998. This increase is primarily the result
of the Company purchasing approximately $39.7 million of loans in addition to
its own production to offset the amortization and prepayment of its mortgage and
investment loan portfolio. These loans are one-to-four and multi-family
residential loans located in Ohio and the northeastern part of the United
States. Management purchases loans only after evaluating credit quality,
liquidity, and internal loan production, and will continue to evaluate future
purchases accordingly.
Cash and cash equivalents decreased by $6.8 million to $7.1 million on September
30, 1999, from $13.9 million on December 31, 1998. Cash and cash equivalents
consist of cash, checking deposits and federal funds deposited at other
financial institutions. The excess cash and cash equivalents were used to reduce
advances from the Federal Home Loan Bank.
Securities available for sale decreased $6.4 million or 41.5% from $15.4 million
at December 31, 1998, to $9.0 million on September 30, 1999. The decrease is
primarily the result of securities maturing during March 1999. The Company's
mortgage-backed securities available for sale decreased by $6.9 million or 10.4%
from $50.0 million on December 31, 1998, to $43.1 million on September 30, 1999.
This was due to principal repayments on existing mortgage-backed securities and
the decline in market value of those securities available for sale. A portion of
these securities is often referred to as derivatives. The derivative securities
are all adjustable rate in nature and were not "high risk" securities under the
criteria set forth by the Federal Financial Institutions Examination Council
("FFIEC"). Proceeds from maturing securities were invested in loans in an effort
to improve yields on earning assets.
The investment in the stock of the Federal Home Loan Bank of Cincinnati
increased by $374,000 from $6.9 million at December 31, 1998, to $7.3 million at
September 30, 1999. The increase is due to the stock dividends paid by the
Federal Home Loan Bank. This investment is dictated by an institution's
membership in the Federal Home Loan Bank and is a factor of the institution's
borrowings and total assets. Currently, dividends on such stock are paid
primarily in the form of additional shares of stock.
Other assets increased $1.5 million from $3.4 million on December 31, 1998
compared to $4.9 million in the nine months ended September 30, 1999. This was
primarily due to an increase in deferred taxes associated with the fair value
adjustment of securities available for sale as well as an increase in prepaid
franchise tax and interest receivable.
10
<PAGE>
Deposits at September 30, 1999 totaled $200.9 million, an increase of $7.9
million from $193.0 million at December 31, 1998. This increase is generally due
to Cornerstone's aggressive attempt to increase deposits. Money fund accounts
increased $3.9 million from $49.1 million at December 31, 1998 to $53.0 million
at September 30, 1999. In addition, certificates of deposit increased $5.9
million or 5.0% from $117.5 million at December 31, 1998 to $123.4 million at
September 30, 1999.
Advances at September 30, 1999 totaled $79.6 million, a decrease of $5.7
million, or 6.7%, from $85.3 million at December 31, 1998. Advances were repaid
from excess cash and cash equivalents. The advances have fixed and variable
rates.
Other liabilities increased $607,000 from $1.9 million on December 31, 1998, to
$2.5 million on September 30, 1999. This increase is due to an increase in taxes
offset by a decrease in advance payments held in escrow due to real estate taxes
paid in the first and third quarter of 1999.
Total stockholders' equity decreased $3.7 million from $47.6 million at December
31, 1998, to $43.9 million at September 30, 1999. This decrease is primarily due
to the Company purchasing approximately $2.1 million of its own stock during the
first nine months of 1999 and a decrease in the market value of securities and
mortgage-backed securities held for sale.
As of September 30, 1999, the Company had commitments to make $1.3 million of
residential loans and no commitments to make nonresidential mortgage loans. It
is expected that these loans will be funded within 30 days. The Company also had
$3.4 million in commitments to fund loans on residential properties under
construction and $363,000 in commitments to fund other construction mortgage
loans. These commitments are anticipated to be filled within three to six
months. Unused commercial lines of credit were $1.1 million and unused home
equity lines of credit were $10.5 million.
11
<PAGE>
CAPITAL RESOURCES AND LIQUIDITY OF CORNERSTONE BANK
Cornerstone Bank is subject to various regulatory capital requirements
administered by the federal regulatory agencies. Failure to meet minimum capital
requirements can initiate certain mandatory actions that, if undertaken, could
have a direct material effect on Cornerstone's financial statements. Under
capital adequacy guidelines and the regulatory framework for prompt corrective
action, Cornerstone must meet specific guidelines that involve quantitative
measures of Cornerstone's assets, liabilities, and certain off-balance sheet
items as calculated under regulatory accounting practices. At September 30,
1999, management believes Cornerstone is in compliance with all regulatory
capital requirements. Cornerstone is considered well capitalized under the
Federal Deposit Insurance Act at September 30, 1999. The following is a summary
of the Bank's approximate regulatory capital position and minimum required
levels to be adequately capitalized under prompt corrective action regulations
in dollars (thousands) and as a percentage of regulatory assets, at September
30, 1999.
<TABLE>
<CAPTION>
ACTUAL REQUIRED EXCESS
------ -------- ------
<S> <C> <C> <C> <C> <C> <C>
Tangible Capital $42,539 12.99% $ 4,913 1.5% $37,626 11.49%
Core Capital $42,539 12.99% $13,103 4.0% $29,436 8.99%
Risk-Based Capital $43,918 21.43% $16,398 8.0% $27,520 13.43%
</TABLE>
Federal regulations require the Bank to maintain an average daily balance of
liquid assets including mortgage-backed securities, equal to at least 4% of the
sum of its average daily balance of net withdrawable deposit accounts and
borrowings payable in one year or less for the preceding calendar quarter.
Liquidity is measured by cash and certain investments that are not committed,
pledged, or required to liquidate specific liabilities. The following is a
summary of the Bank's regulatory liquidity ratio.
September 30, June 30, March 31, December 31,
1999 1999 1999 1998
------------- -------- --------- ------------
Liquid Assets 25.2% 29.2% 34.4% 36.3%
The above tables pertain only to Cornerstone. The resources of the Company are
not considered in meeting the above requirements.
12
<PAGE>
RESULTS OF OPERATIONS
GENERAL
For the nine months ended September 30, 1999, net income was $1.2 million an
increase of $140,000 compared to $1.1 million for the nine months ended
September 30, 1998. The increase was due primarily to a decrease in non-interest
expense of $964,000 offset by the decrease in gains of the sale of assets and an
increase in the loan loss provision in 1999. Compensation and employee benefits,
goodwill, and other expenses were all reduced in the nine months ended September
30, 1999 due to the Company exiting the Cincinnati market. The gain on sale of
loans and other assets is down $332,000 primarily due to the sale last year of
the Federal Home Loan Mortgage Corporation stock and mortgage-backed security.
For the quarter ended September 30, 1999, net income was $379,000 an increase of
$193,000 compared to $186,000 for the same period ended September 30, 1998. An
increase in the net interest income of $172,000 in addition to the net decrease
in non-interest expense was the primary reason for the additional income in the
quarter.
INTEREST INCOME
For the nine months ended September 30, 1999, interest income of $17.5 million,
decreased by $2.1 million compared to the nine months September 30, 1998 of
$19.6 million. Interest and fees on loans for the nine months ended September
30, 1999 of $14.2 million decreased by $1.3 million from $15.5 million for the
nine months ended September 30, 1998. The lower volume of loans over comparable
periods is the result of selling fixed rate loans in the secondary market rather
than maintaining the loans in the portfolio. Interest and dividends on
investment securities decreased $247,000 during the nine months ended September
30, 1999, over the nine months ended September 30, 1998 due to principal
payments on securities available for sale. Interest on mortgage-backed
securities increased $1.3 million resulting from additional mortgage-backed
securities available for sale. Interest on overnight fed funds decreased $1.8
million or 89.3% due to a lower volume of fed funds after funding the Cincinnati
area deposit sale in the fourth quarter of 1998. Interest income of $5.8 million
for the three months ended September 30, 1999 was down $464,000 from $6.3
million for the same period ended September 30, 1998. The major causes of the
decline are the lower volume of overnight deposits and other securities, again
attributed to the sale of the Cincinnati branches.
INTEREST EXPENSE
Interest expense decreased by $2.0 million to $10.2 million for the nine months
ended September 30, 1999 from $12.2 million for the nine months ended September
30, 1998. The decrease was primarily due to the sale of deposits in the
Cincinnati area completed in the fourth quarter of 1998. The interest on
borrowings increased $531,000 from $2.4 million for the nine months ended
September 30, 1998, to approximately $2.9 million for the nine months ended
September 30, 1999. Interest expense decreased $636,000 or 15.8% for the three
months ended September 30, 1999 as compared to September 30, 1998. Interest on
deposits decreased $884,000 or 26.7% from $3.3 million for the three months
ended September 30, 1998 to $2.4 million for the three months ended September
30, 1999. The interest on borrowings increased $248,000 or 34.4% from $721,000
for the three months ended September 30, 1998 to $969,000 for the same period
ended September 30, 1999.
13
<PAGE>
NET INTEREST INCOME
Net interest income decreased slightly by $82,000 to $7.3 million for the nine
months ended September 30, 1999 as compared to $7.4 million for the nine months
ended September 30, 1998. This decrease is due to the reduction in interest
expense from deposits being sold in the Cincinnati area offset by the decrease
in interest income from the reduction of loans, investment securities, and
overnight fed funds. Net interest income for the three months ended September
30, 1999 increased $171,000 or 7.5% from $2.3 million on September 30, 1998 to
$2.5 million for September 30, 1999. For the three months ending September 30,
1998, net interest income was reduced due to holding additional cash equivalents
for the sale of the Cincinnati branches.
PROVISION FOR LOSSES ON LOANS
The provision for loan losses is a result of management's periodic analysis of
the adequacy of the allowance for loan losses and any specific losses applied to
that allowance. There was a $182,000 additional provision for loan losses during
the nine months ended September 30, 1999 compared to a recapture of the loan
loss reserve of $261,000 for the nine months ended September 30, 1998. The
reduction of the loan loss provision in 1998 was due to the decreasing overall
loan portfolio and the successful resolution of a major loan of concern. The
increase in 1999 was due to an increase in the loan portfolio. For the three
months ended September 30, 1999, $74,000 was added to the loan loss provision
compared to no additional provision added in the three months ended September
30, 1998.
GAIN/(LOSS)ON SALE OF LOANS AND SECURITIES
Gain on sale of loans, securities, and other assets was $162,000 for the nine
months ended September 30, 1999 compared to $494,000 for the same period in
1998. The decrease is primarily due to selling a Federal Home Loan Mortgage
Corporation stock certificate and investment security last year for a gain of
$307,000. For the three months ended September 30, 1999, gains decreased by
$99,000, or 116.4%, compared to the same period last year.
OTHER INCOME
Other income increased $45,000 for the nine months ended September 30, 1999, to
$807,000 from $762,000 for the nine months ended September 30, 1998 due to
increases in deposit service charges. For the three months ended September 30,
1999, other income of $288,000 decreased a modest $9,000 from $297,000 for the
three months ended September 30, 1998 due to lower loan fees.
OTHER EXPENSE
Total other expense decreased by $964,000, from $7.1 million for the nine months
ended September 30, 1998, to $6.2 million for the nine months ended September
30, 1999. For the three months ended September 30, 1999, other expenses
decreased $283,000 or 12.1% from $2.3 million on September 30, 1998 to $2.0
million on September 30, 1999. The reduction is primarily due to lower operating
expenses and the elimination of goodwill amortization resulting from exiting the
Cincinnati area market.
INCOME TAX EXPENSE
Income tax expense increased $13,000 to $727,000 for the nine months ended
September 30, 1999 from $714,000 for the nine months ended September 30, 1998.
Income tax expense increased $79,000 to $229,000 for the three months ended
September 30, 1999 from $150,000 for the three months ended September 30, 1998.
This was a result of the additional net income for the quarter and the nine
months ended September 30, 1999.
14
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's primary market risk exposure is interest rate risk and, to a
lessor extent, liquidity risk. Interest rate risk is the risk that the Company's
financial condition will be adversely affected due to movements in interest
rates. The income of financial institutions is primarily derived from the excess
of interest earned on interest-earning assets over the interest paid on
interest-bearing liabilities. Accordingly, the Company places great importance
on monitoring and controlling interest rate risk. The measurement and analysis
of the exposure of the Company's primary operating subsidiary, Cornerstone Bank,
to changes in the interest rate environment are referred to as asset/liability
management. One method used to analyze the Company's sensitivity to changes in
interest rates is the "net portfolio value" ("NPV") methodology used by the OTS
as part of its capital regulations.
NPV is generally considered to be the present value of the difference between
expected incoming cash flows on interest-earning and other assets and expected
outgoing cash flows on interest-bearing and other liabilities. The application
attempts to quantify interest rate risk as the change in the NPV which would
result from a theoretical 200 basis point (1 basis point equals .01%) change in
market interest rates. Both a 200 basis point increase in market interest rates
and a 200 basis point decrease in market interest rates are considered. Based on
internal analysis, management believes Cornerstone's interest rate risk
sensitivity between December 31, 1998 and September 30, 1999 has increased due
to the rise in interest rates during the period. As of September 30, 1999, the
percentage change in NPV resulting from certain changes in interest rates remain
within the policy limits of the institution's Board of Directors.
The institution's NPV is more sensitive to rising rates than declining rates.
From an overall perspective, such difference in sensitivity occurs principally
because, as rates rise, borrowers do not prepay fixed-rate loans as quickly as
they do when interest rates are declining. Thus, in a rising interest rate
environment, because the Company has primarily fixed-rate loans in its loan
portfolio, the amount of interest the Company would receive on its loans would
increase relatively slowly as loans are slowly prepaid and new loans at higher
rates are made. However, the interest the Company would pay on its deposits
would increase rapidly because the Company's deposits generally have shorter
periods to repricing.
As with any method of measuring interest rate risk, certain shortcomings are
inherent in the NPV approach. For example, although certain assets and
liabilities may have similar maturities or periods of repricing, they may react
in different degrees to change in market interest rates. Also, the interest
rates on certain types of assets and liabilities may fluctuate in advance of
changes in market interest rates, while interest rates on other types may lag
behind changes in market rates. Further, in the event of a change in interest
rates, expected rates of prepayment on loans and mortgage-backed securities and
early withdrawal levels from certificates of deposit would likely deviate
significantly from those assumed in making risk calculations.
In the event that interest rates rise from the recent historically low levels,
Cornerstone's net interest income could be expected to be negatively affected.
Moreover, rising interest rates could negatively affect Cornerstone's earnings
and thereby the Company's earnings due to diminished loan demand. As part of its
interest rate risk strategy, Cornerstone has attempted to utilize adjustable
rate and short-term duration loans and investments.
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PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits - Exhibit 3(ii) - Amended and Restated By-Laws
- Exhibit 27 - Financial Data Schedule
b) Reports on Form 8-K - None
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SIGNATURES
Pursuant to the requirement 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.
WESTERN OHIO FINANCIAL CORPORATION
REGISTRANT
Date: NOVEMBER 12, 1999 /s/ John W. Raisbeck
---------------------------
John W. Raisbeck, President
and Chief Executive Officer
(DULY AUTHORIZED OFFICER)
Date: NOVEMBER 12, 1999 /s/ Craig F. Fortin
--------------------------------------------
Craig F. Fortin, Senior Vice President,
Treasurer and Chief Financial Officer
(PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)
WESTERN OHIO FINANCIAL CORPORATION
AMENDED AND RESTATED BY-LAWS
ARTICLE I
STOCKHOLDERS
Section 1. ANNUAL MEETING.
An annual meeting of the stockholders, for the election of directors to
succeed those whose terms expire and for the transaction of such other business
as may properly come before the meeting, shall be held at such place, on such
date, and at such time as the Board of Directors shall each year fix, which date
shall be within thirteen (13) months subsequent to the later of the date of
incorporation or the last annual meeting of stockholders.
Section 2. SPECIAL MEETINGS.
Subject to the rights of the holders of any class or series of
preferred stock of the Corporation, special meetings of stockholders of the
Corporation may be called only by the Board of Directors pursuant to a
resolution adopted by a majority of the total number of directors which the
Corporation would have if there were no vacancies on the Board of Directors
(hereinafter the "Whole Board").
Section 3. NOTICE OF MEETINGS.
Written notice of the place, date, and time of all meetings of the
stockholders shall be given, not less than ten (10) nor more than sixty (60)
days before the date on which the meeting is to be held, to each stockholder
entitled to vote at such meeting, except as otherwise provided herein or
required by law (meaning, here and hereinafter, as required from time to time,
by the Delaware General Corporation Law or the Certificate of Incorporation of
the Corporation).
When a meeting is adjourned to another place, date or time, written
notice need not be given of the adjourned meeting if the place, date and time
thereof are announced at the meeting at which the adjournment is taken;
provided, however, that if the date of any adjourned meeting is more than thirty
(30) days after the date for which the meeting was originally noticed, or if a
new record date is fixed for the adjourned meeting, written notice of the place,
date and time of the adjourned meeting shall be given in conformity herewith. At
any adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
Section 4. QUORUM.
At any meeting of the stockholders, the holders of at least one-third
of all of the shares of the stock entitled to vote at the meeting, present in
person or by proxy, shall constitute a quorum for all purposes, unless or except
to the extent that the presence of a larger number may be required by law.
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If a quorum shall fail to attend any meeting, the chairman of the
meeting or the holders of a majority of the shares of stock entitled to vote who
are present, in person or by proxy, may adjourn the meeting to another place,
date or time.
If a notice of any adjourned special meeting of stockholders is sent to
all stockholders entitled to vote thereat, stating that it will be held with
those present constituting a quorum, then except as otherwise required by law,
those present at such adjourned meeting shall constitute a quorum, and all
matters shall be determined by a majority of the votes cast at such meeting.
Section 5. ORGANIZATION.
Such person as the Board of Directors may have designated or, in the
absence of such a person, the Chairman of the Board of the Corporation or, in
his or her absence, such person as may be chosen by the holders of a majority of
the shares entitled to vote who are present, in person or by proxy, shall call
to order any meeting of the stockholders and act as chairman of the meeting. In
the absence of the Secretary of the Corporation, the secretary of the meeting
shall be such person as the chairman appoints.
Section 6. CONDUCT OF BUSINESS.
(a) The chairman of any meeting of stockholders shall
determine the order of business and the procedure at the meeting, including such
regulation of the manner of voting and the conduct of discussion as seem to him
or her in order. The polls for each matter upon which the stockholders will vote
at the meeting will be opened and closed in accordance with law.
(b) At any annual meeting of the stockholders, only such
business shall be conducted as shall have been brought before the meeting (i) by
or at the direction of the Board of Directors or (ii) by any stockholder of the
Corporation who is entitled to vote with respect thereto and who complies with
the notice procedures set forth in this Section 6(b). For business to be
properly brought before an annual meeting by a stockholder, the stockholder must
have given timely notice thereof in writing to the Secretary of the Corporation.
To be timely, a stockholder's notice must be delivered or mailed to and received
at the principal executive offices of the Corporation not less than sixty (60)
days prior to the anniversary of the preceding year's annual meeting; PROVIDED,
HOWEVER, that in the event that the date of the annual meeting is advanced by
more than twenty (20) days, or delayed by more than fifty (50) days from such
anniversary date, notice by the stockholder to be timely must be so delivered
not later than the close of business on the later of the sixtieth day prior to
such annual meeting or the tenth day following the day on which notice of the
date of the annual meeting was mailed or public announcement of the date of such
meeting is first made. A stockholder's notice to the Secretary shall set forth
as to each matter such stockholder proposes to bring before the annual meeting
(i) a brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting, (ii)
the name and address, as they appear on the Corporation's books, of the
stockholder who proposed such business, (iii) the class and number of shares of
the Corporation's capital stock that are beneficially owned by such stockholder
and (iv) any material interest of such stockholder in such business.
Notwithstanding anything in these By-laws to the contrary, no business shall be
brought before or conducted at an annual meeting except in accordance with the
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provisions of this Section 6(b). The officer of the Corporation or other person
presiding over the annual meeting shall, if the facts so warrant, determine and
declare to the meeting that business was not properly brought before the meeting
in accordance with the provisions of this Section 6(b) and, if he should so
determine, he shall so declare to the meeting and any such business so
determined to be not properly brought before the meeting shall not be
transacted.
At any special meeting of the stockholders, only such business shall be
conducted as shall have been brought before the meeting by or at the direction
of the Board of Directors.
(c) Only persons who are nominated in accordance with the
procedures set forth in these By-laws shall be eligible for election as
directors. Nominations of persons for election to the Board of Directors of the
Corporation may be made at a meeting of stockholders at which directors are to
be elected only (i) by or at the direction of the Board of Directors or (ii) by
any stockholder of the Corporation entitled to vote for the election of
directors at the meeting who complies with the notice procedures set forth in
this Section 6(c). Such nominations, other than those made by or at the
direction of the Board of Directors, shall be made by timely notice in writing
to the Secretary of the Corporation. To be timely, a stockholder's notice shall
be delivered or mailed to and received at the principal executive offices of the
Corporation not less than thirty (30) days prior to the date of the meeting;
provided, however, that in the event that less than forty (40) days' notice or
prior disclosure of the date of the meeting is given or made to stockholders, to
be timely, notice by the stockholder must be so received not later than the
close of business on the 10th day following the day on which such notice of the
date of the meeting was mailed or such public disclosure was made. Such
stockholder's notice shall set forth (i) as to each person whom such stockholder
proposes to nominate for election or re-election as a director, all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(including such person's written consent to being named in the proxy statement
as a nominee and to serving as a director if elected); and (ii) as to the
stockholder giving the notice, (x) the name and address, as they appear on the
Corporation's books, of such stockholder, and (y) the class and number of shares
of the Corporation's capital stock that are beneficially owned by such
stockholder. At the request of the Board of Directors, any person nominated by
the Board of Directors for election as a director shall furnish to the Secretary
of the Corporation that information required to be set forth in a stockholder's
notice of nomination which pertains to the nominee. No person shall be eligible
for election as a director of the Corporation unless nominated in accordance
with the provisions of this Section 6(c). The officer of the Corporation or
other person presiding at the meeting shall, if the facts so warrant, determine
that a nomination was not made in accordance with such provisions and, if he or
she should so determine, he or she shall so declare to the meeting and the
defective nomination shall be disregarded.
Section 7. PROXIES AND VOTING.
At all meetings of stockholders, every stockholder entitled to vote may
vote in person or by proxy executed in writing (or as otherwise permitted under
applicable law) by the stockholder or his duly authorized attorney-in-fact in
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accordance with the procedures established for the meeting. Proxies solicited on
behalf of the management shall be voted as directed by the stockholder or, in
the absence of such direction, as determined by a majority of the Board of
Directors. No proxy shall be valid after eleven months from the date of its
execution except for a proxy coupled with an interest.
Each stockholder shall have one (1) vote for every share of stock
entitled to vote which is registered in his or her name on the record date for
the meeting, except as otherwise provided herein or in the Certificate of
Incorporation of the Corporation or as required by law.
All voting, including the election of directors but excepting where
otherwise required by law, may be by a voice vote; provided, however, that the
Board of Directors, in its discretion, or the officer of the Corporation
presiding at the meeting of stockholders, in his discretion, may require that
any votes cast at such meeting shall be cast pursuant to a roll call. Every vote
taken by ballot shall be counted by an inspector or inspectors appointed by the
Board of Directors in advance of the meeting of stockholders and such inspector
or inspectors shall act at the meeting or any adjournment thereof and make a
written report thereof, in accordance with law.
All elections shall be determined by a plurality of the votes cast, and
except as otherwise required by law or as provided in the Certificate of
Incorporation, all other matters shall be determined by a majority of the votes
cast.
Section 8. STOCK LIST.
The officer who has charge of the stock transfer books of the
Corporation shall prepare and make, in the time and manner required by
applicable law, a list of stockholders entitled to vote and shall make such list
available for such purposes, at such places, at such times and to such persons
as required by law. The stock transfer books shall be the only evidence as to
the identity of the stockholders entitled to examine the stock transfer books or
to vote in person or by proxy at any meeting of stockholders.
Section 9. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING.
Subject to the rights of the holders of any class or series of
preferred stock of the Corporation, any action required or permitted to be taken
by the stockholders of the Corporation must be effected at a duly called annual
or special meeting of stockholders of the Corporation and may not be effected by
any consent in writing by such stockholders.
Section 10. INSPECTORS OF ELECTION.
The Board of Directors shall, in advance of any meeting of
stockholders, appoint one or more persons as inspectors of election to act at
the meeting or any adjournment thereof and make a written report thereof in
accordance with law.
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ARTICLE II
BOARD OF DIRECTORS
Section 1. GENERAL POWERS, NUMBER AND TERM OF OFFICE.
The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors. The number of directors shall be
set as provided for in the Certificate of Incorporation. The number of directors
who shall constitute the Whole Board shall be such number as the Board of
Directors shall from time to time have designated except that in the absence of
any such designation, such number shall be seven (7). The Board of Directors
shall annually elect a Chairman of the Board and a President from among its
members and shall designate, when present, either the Chairman of the Board or
the President to preside at its meetings.
The directors, other than those who may be elected by the holders of
any class or series of preferred stock, shall be divided into three classes, as
nearly equal in number as reasonably possible, with the term of office of the
first class to expire at the conclusion of the first annual meeting of
stockholders, the term of office of the second class to expire at the conclusion
of the annual meeting of stockholders one year thereafter and the term of office
of the third class to expire at the conclusion of the annual meeting of
stockholders two years thereafter, with each director to hold office until his
or her successor shall have been duly elected and qualified. At each annual
meeting of stockholders, commencing with the first annual meeting, directors
elected to succeed those directors whose terms expire shall be elected for a
term of office to expire at the conclusion of the third succeeding annual
meeting of stockholders after their election, with each director to hold office
until his or her successor shall have been duly elected and qualified.
Section 2. VACANCIES AND NEWLY CREATED DIRECTORSHIPS.
Subject to the rights of the holders of any class or series of
preferred stock then outstanding, and unless the Board of Directors otherwise
determines, newly created directorships resulting from any increase in the
authorized number of directors or any vacancies in the Board of Directors
resulting from death, resignation, retirement, disqualification, removal from
office or other cause may be filled only by a majority vote of the directors
then in office, though less than a quorum, and each director so chosen shall
hold office for a term expiring at the annual meeting of stockholders at which
the term of office of the class to which he or she has been elected expires, and
until such director's successor shall have been duly elected and qualified. No
decrease in the number of authorized directors constituting the Board shall
shorten the term of any incumbent director.
Section 3. REGULAR MEETINGS.
Regular meetings of the Board of Directors shall be held at such place
or places, on such date or dates, and at such time or times as shall have been
established by the Board of Directors and publicized among all directors. A
notice of each regular meeting shall not be required.
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Section 4. SPECIAL MEETINGS.
Special meetings of the Board of Directors may be called by one-third
(1/3) of the directors then in office (rounded up to the nearest whole number)
or by the Chairman of the Board and shall be held at such place, on such date,
and at such time as they or he or she shall fix. Notice of the place, date, and
time of each such special meeting shall be given to each director by whom it is
not waived by mailing written notice not less than five (5) days before the
meeting or by telegraphing or telexing or by facsimile transmission of the same
not less than twenty-four (24) hours before the meeting. Unless otherwise
indicated in the notice thereof, any and all business may be transacted at a
special meeting.
Section 5. QUORUM.
At any meeting of the Board of Directors, a majority of the authorized
number of directors then constituting the Board shall constitute a quorum for
all purposes. If a quorum shall fail to attend any meeting, a majority of those
present may adjourn the meeting to another place, date, or time, without further
notice or waiver thereof. Notwithstanding the above, at any adjourned meeting of
the Board of Directors, at least one-third of the authorized number of directors
then constituting the Board shall constitute a quorum for all purposes.
Section 6. PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE.
Members of the Board of Directors, or of any committee thereof, may
participate in a meeting of such Board or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other and such participation shall
constitute presence in person at such meeting.
Section 7. CONDUCT OF BUSINESS.
At any meeting of the Board of Directors, business shall be transacted
in such order and manner as the Board may from time to time determine, and all
matters shall be determined by the vote of a majority of the directors present,
except as otherwise provided herein or required by law. Action may be taken by
the Board of Directors without a meeting if all members thereof consent thereto
in writing, and the writing or writings are filed with the minutes of
proceedings of the Board of Directors.
Section 8. POWERS.
The Board of Directors may, except as otherwise required by law,
exercise all such powers and do all such acts and things as may be exercised or
done by the Corporation, including, without limiting the generality of the
foregoing, the unqualified power:
(1) To declare dividends from time to time in accordance with
law;
(2) To purchase or otherwise acquire any property, rights or
privileges on such terms as it shall determine;
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(3) To authorize the creation, making and issuance, in such
form as it may determine, of written obligations of every kind, negotiable or
non-negotiable, secured or unsecured, and to do all things necessary in
connection therewith;
(4) To remove any officer of the Corporation with or without
cause, and from time to time to devolve the powers and duties of any officer
upon any other person for the time being;
(5) To confer upon any officer of the Corporation the power to
appoint, remove and suspend subordinate officers, employees and agents;
(6) To adopt from time to time such stock, option, stock
purchase, bonus or other compensation plans for directors, officers, employees
and agents of the Corporation and its subsidiaries as it may determine;
(7) To adopt from time to time such insurance, retirement, and
other benefit plans for directors, officers, employees and agents of the
Corporation and its subsidiaries as it may determine; and,
(8) To adopt from time to time regulations, not inconsistent
with these By-laws, for the management of the Corporation's business and
affairs.
Section 9. COMPENSATION OF DIRECTORS.
Directors, as such, may receive, pursuant to resolution of the Board of
Directors, fixed fees and other compensation for their services as directors,
including, without limitation, their services as members of committees of the
Board of Directors.
Section 10. AGE LIMITATIONS.
No person age 75 or more shall be eligible for election, reelection,
appointment, or reappointment to the Board of Directors. No director shall serve
as such beyond the annual meeting of the stockholders of the Corporation
immediately following the director's becoming age 75.
Section 11. QUALIFICATIONS.
Any member of the Board of Directors shall, in order to qualify as
such, be domiciled in or have his or her primary place of business located in
any county, a portion of which is within a FIFTY mile radius of any office of
any financial institution subsidiary of the Corporation.
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ARTICLE III
COMMITTEES
Section 1. COMMITTEES OF THE BOARD OF DIRECTORS.
The Board of Directors, by a vote of a majority of the Whole Board of
Directors, may from time to time designate committees of the Board, with such
lawfully delegable powers and duties as it thereby confers, to serve at the
pleasure of the Board and shall, for those committees and any others provided
for herein, elect a director or directors to serve as the member or members,
designating, if it desires, other directors as alternate members who may replace
any absent or disqualified member at any meeting of the committee. Any committee
so designated may exercise the power and authority of the Board of Directors to
declare a dividend, to authorize the issuance of stock or to adopt a certificate
of ownership and merger pursuant to Section 253 of the Delaware General
Corporation Law if the resolution which designated the committee or a
supplemental resolution of the Board of Directors shall so provide. In the
absence or disqualification of any member of any committee and any alternate
member in his or her place, the member or members of the committee present at
the meeting and not disqualified from voting, whether or not he or she or they
constitute a quorum, may by unanimous vote appoint another member of the Board
of Directors to act at the meeting in the place of the absent or disqualified
member.
Section 2. CONDUCT OF BUSINESS.
Each committee may determine the procedural rules for meeting and
conducting its business and shall act in accordance therewith, except as
otherwise provided herein or required by law. Adequate provision shall be made
for notice to members of all meetings; one-third (1/3) of the members shall
constitute a quorum unless the committee shall consist of one (1) or two (2)
members, in which event one (1) member shall constitute a quorum; and all
matters shall be determined by a majority vote of the members present. Action
may be taken by any committee without a meeting if all members thereof consent
thereto in writing and the writing or writings are filed with the minutes of the
proceedings of such committee.
Section 3. NOMINATING COMMITTEE.
The Board of Directors shall appoint a Nominating Committee of the
Board, consisting of not less than three (3) members, one of which shall be the
Chairman of the Board. The Nominating Committee shall have authority (a) to
review any nominations for election to the Board of Directors made by a
stockholder of the Corporation pursuant to Section 6(c)(ii) of Article I of
these By-laws in order to determine compliance with such By-law, and (b) to
recommend to the Whole Board nominees for election to the Board of Directors to
replace those directors whose terms expire at the annual meeting of stockholders
next ensuing.
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ARTICLE IV
OFFICERS
Section 1. GENERALLY.
(a) As soon as may be practicable after the annual meeting of
stockholders, the Board of Directors shall choose a Chairman of the Board, a
President, one or more Vice Presidents, a Secretary and a Chief Financial
Officer and from time to time may choose such other officers as it may deem
proper. The Chairman of the Board and the President shall be chosen from among
the directors. Any number of offices may be held by the same person.
(b) The term of office of all officers shall be until the next
annual election of officers and until their respective successors are chosen,
but any officer may be removed from office at any time by the affirmative vote
of a majority of the authorized number of directors then constituting the Board
of Directors.
(c) All officers chosen by the Board of Directors shall each
have such powers and duties as generally pertain to their respective offices,
subject to the specific provisions of this Article IV. Such officers shall also
have such powers and duties as from time to time may be conferred by the Board
of Directors or by any committee thereof.
Section 2. CHAIRMAN OF THE BOARD OF DIRECTORS.
The Chairman of the Board of Directors of the Corporation shall have
general responsibility for the conduct of meetings of the Board of Directors,
subject to the direction of the Board of Directors, Section 3 herein and to
Article I, Section 6.
Section 3. PRESIDENT.
The President shall be the chief executive officer and, subject to the
control of the Board of Directors, shall have general power over the management
and oversight of the administration and operation of the Corporation's business
and general supervisory power and authority over its policies and affairs. He
shall see that all orders and resolutions of the Board of Directors and of any
committee thereof are carried into effect.
Each meeting of the stockholders and of the Board of Directors shall be
presided over by the Chairman of the Board, or, in his absence, the President,
or, in his absence, by such officer as has been designated by the Board of
Directors or, in his absence, by such officer or other person as is chosen at
the meeting. The Secretary or, in his absence, the General Counsel of the
Corporation or such officer as has been designated by the Board of Directors or,
in his absence, such officer or other person as is chosen by the person
presiding, shall act as secretary of each such meeting.
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Section 4. VICE PRESIDENT.
The Vice President or Vice Presidents, if any, shall perform the duties
of the President in his absence or during his disability to act. In addition,
the Vice Presidents shall perform the duties and exercise the powers usually
incident to their respective offices and/or such other duties and powers as may
be properly assigned to them from time to time by the Board of Directors, the
Chairman of the Board or the President.
Section 5. SECRETARY.
The Secretary or an Assistant Secretary shall issue notices of
meetings, shall keep their minutes, shall have charge of the seal and the
corporate books, shall perform such other duties and exercise such other powers
as are usually incident to such offices and/or such other duties and powers as
are properly assigned thereto by the Board of Directors, the Chairman of the
Board or the President.
Section 6. CHIEF FINANCIAL OFFICER.
The Chief Financial Officer shall have charge of all monies and
securities of the Corporation, other than monies and securities of any division
of the Corporation which has a treasurer or financial officer appointed by the
Board of Directors, and shall keep regular books of account. The funds of the
Corporation shall be deposited in the name of the Corporation by the Chief
Financial Officer with such banks or trust companies as the Board of Directors
from time to time shall designate. He or she shall sign or countersign such
instruments as require his or her signature, shall perform all such duties and
have all such powers as are usually incident to such office and/or such other
duties and powers as are properly assigned to him or her by the Board of
Directors, the Chairman of the Board or the President, and may be required to
give bond for the faithful performance of his or her duties in such sum and with
such surety as may be required by the Board of Directors.
Section 7. ASSISTANT SECRETARIES AND OTHER OFFICERS.
The Board of Directors may appoint one or more assistant secretaries
and one or more assistants to the Chief Financial Officer, or one appointee to
both such positions, which officers shall have such powers and shall perform
such duties as are provided in these By-laws or as may be assigned to them by
the Board of Directors, the Chairman of the Board or the President.
Section 8. ACTION WITH RESPECT TO SECURITIES OF OTHER CORPORATIONS.
Unless otherwise directed by the Board of Directors, the President or
any officer of the Corporation authorized by the President shall have power to
vote and otherwise act on behalf of the Corporation, in person or by proxy, at
any meeting of stockholders of or with respect to any action of stockholders of
any other corporation in which this Corporation may hold securities and
otherwise to exercise any and all rights and powers which this Corporation may
possess by reason of its ownership of securities in such other corporation.
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ARTICLE V
STOCK
Section 1. CERTIFICATES OF STOCK.
Each stockholder shall be entitled to a certificate signed by, or in
the name of the Corporation by, the President or a Vice President, and by the
Secretary or an Assistant Secretary, or the Chief Financial Officer or an
assistant to the Chief Financial Officer, certifying the number of shares owned
by him or her. Any or all of the signatures on the certificate may be by
facsimile.
Section 2. TRANSFERS OF STOCK.
Transfers of stock shall be made only upon the transfer books of the
Corporation kept at an office of the Corporation or by transfer agents
designated to transfer shares of the stock of the Corporation. Except where a
certificate is issued in accordance with Section 4 of Article V of these
By-laws, an outstanding certificate for the number of shares involved shall be
surrendered for cancellation before a new certificate is issued therefor.
Section 3. RECORD DATE.
In order that the Corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders, or to receive payment of
any dividend or other distribution or allotment of any rights or to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix a record
date, which record date shall not precede the date on which the resolution
fixing the record date is adopted and which record date shall not be more than
sixty (60) nor less than ten (10) days before the date of any meeting of
stockholders, nor more than sixty (60) days prior to the time for such other
action as hereinbefore described; provided, however, that if no record date is
fixed by the Board of Directors, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given or,
if notice is waived, at the close of business on the day next preceding the day
on which the meeting is held, and, for determining stockholders entitled to
receive payment of any dividend or other distribution or allotment of rights or
to exercise any rights of change, conversion or exchange of stock or for any
other purpose, the record date shall be at the close of business on the day on
which the Board of Directors adopts a resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
Section 4. LOST, STOLEN OR DESTROYED CERTIFICATES.
In the event of the loss, theft or destruction of any certificate of
stock, another may be issued in its place pursuant to such regulations as the
Board of Directors may establish concerning proof of such loss, theft or
destruction and concerning the giving of a satisfactory bond or bonds of
indemnity.
11
<PAGE>
Section 5. REGULATIONS.
The issue, transfer, conversion and registration of certificates of
stock shall be governed by such other regulations as the Board of Directors may
establish.
ARTICLE VI
NOTICES
Section 1. NOTICES.
Except as otherwise specifically provided herein or required by law,
all notices required to be given to any stockholder, director, officer, employee
or agent shall be in writing and may in every instance be given effectively by
hand delivery to the recipient thereof, by depositing such notice in the mail,
postage paid, by sending such notice by prepaid telegram or mailgram or by
sending such notice by facsimile machine or other electronic transmission. Any
such notice shall be addressed to such stockholder, director, officer, employee
or agent at his or her last known address as the same appears on the books of
the Corporation. The time when such notice is received, if hand delivered, or
dispatched, if delivered through the mail, by telegram or mailgram or by
facsimile machine or other electronic transmission, shall be the time of the
giving of the notice.
Section 2. WAIVERS.
A written waiver of any notice, signed by a stockholder, director,
officer, employee or agent, whether before or after the time of the event for
which notice is to be given, shall be deemed equivalent to the notice required
to be given to such stockholder, director, officer, employee or agent. Neither
the business nor the purpose of any meeting need be specified in such a waiver.
ARTICLE VII
MISCELLANEOUS
Section 1. FACSIMILE SIGNATURES.
In addition to the provisions for use of facsimile signatures elsewhere
specifically authorized in these By-laws, facsimile signatures of any officer or
officers of the Corporation may be used whenever and as authorized by the Board
of Directors or a committee thereof.
Section 2. CORPORATE SEAL.
The Board of Directors may provide a suitable seal, containing the name
of the Corporation, which seal shall be in the charge of the Secretary. If and
when so directed by the Board of Directors or a committee thereof, duplicates of
the seal may be kept and used by the Chief Financial Officer or by an Assistant
Secretary or an assistant to the Chief Financial Officer.
12
<PAGE>
Section 3. RELIANCE UPON BOOKS, REPORTS AND RECORDS.
Each director, each member of any committee designated by the Board of
Directors, and each officer of the Corporation shall, in the performance of his
or her duties, be fully protected in relying in good faith upon the books of
account or other records of the Corporation and upon such information, opinions,
reports or statements presented to the Corporation by any of its officers or
employees, or committees of the Board of Directors so designated, or by any
other person as to matters which such director or committee member reasonably
believes are within such other person's professional or expert competence and
who has been selected with reasonable care by or on behalf of the Corporation.
Section 4. FISCAL YEAR.
The fiscal year of the Corporation shall begin on January 1 of each
year.
Section 5. TIME PERIODS.
In applying any provision of these By-laws which requires that an act
be done or not be done a specified number of days prior to an event or that an
act be done during a period of a specified number of days prior to an event,
calendar days shall be used, the day of the doing of the act shall be excluded
and the day of the event shall be included.
ARTICLE VIII
AMENDMENTS
The By-laws of the Corporation may be adopted, amended or repealed as
provided in Article SEVENTH of the Certificate of Incorporation of the
Corporation.
13
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
QUARTERLY REPORT ON FORM 10-Q FOR QUARTER ENDED SEPTEMBER 30, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
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<INT-BEARING-DEPOSITS> 2,525
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 9,016
<INVESTMENTS-CARRYING> 9,016
<INVESTMENTS-MARKET> 9,016
<LOANS> 252,148
<ALLOWANCE> (2,811)
<TOTAL-ASSETS> 326,958
<DEPOSITS> 200,949
<SHORT-TERM> 10,000
<LIABILITIES-OTHER> 2,523
<LONG-TERM> 69,568
0
0
<COMMON> 26
<OTHER-SE> 43,892
<TOTAL-LIABILITIES-AND-EQUITY> 326,958
<INTEREST-LOAN> 4,816
<INTEREST-INVEST> 154
<INTEREST-OTHER> 879
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<INTEREST-DEPOSIT> 2,424
<INTEREST-EXPENSE> 969
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<LOAN-LOSSES> 74
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,048
<INCOME-PRETAX> 608
<INCOME-PRE-EXTRAORDINARY> 379
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<NET-INCOME> 379
<EPS-BASIC> 0.19
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<YIELD-ACTUAL> 3.15
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