Item 1. Business - -----------------
General
Little Falls Bancorp, Inc. (the "Company") is a New Jersey corporation organized in August 1995 at the direction of Little Falls Bank (the "Bank") for the purpose of becoming a savings and loan holding company and to acquire all of the capital stock issued by the Bank in its conversion from the mutual to stock form of ownership (the "Conversion"). On January 5, 1996, the Registrant sold 3,041,750 shares of its common stock, par value $0.10 per share (the "Common Stock") in a subscription offering as part of the Conversion. The Company is a unitary savings and loan holding company which, under existing laws, generally is not restricted in the types of business activities in which it may engage provided that the Bank retains a specified amount of its assets in housing-related investments. References to the "Bank" herein, unless the context required otherwise, refer to the Company on a consolidated basis. The net conversion proceeds totaled approximately $26.8 million of which $14.6 million was invested in the Bank.
On November 5, 1998, Little Falls and Skylands Community Bank terminated the proposed merger between the two companies, which had been announced on August 12, 1998. This merger was terminated by mutual agreement as both companies recognized the possibility that certain conditions to the closing of the merger might not be satisfied. Accordingly, the boards of directors of both companies concluded that it was in the mutual interest of both companies to terminate the merger, and avoid any additional expense.
The Bank is a federally chartered stock savings bank headquartered in Little Falls, New Jersey. The Bank was originally chartered in 1887 as the Little Falls Building and Loan Association. On December 2, 1993, the Bank converted its mutual charter from a federally chartered savings association to a New Jersey chartered savings bank, changing its name to Little Falls Savings Bank. Effective October 1995, the Bank converted its New Jersey mutual charter to a federal mutual charter and changed its name to "Little Falls Bank." The Bank's deposits are federally insured and the Bank is a member of the Federal Home Loan Bank ("FHLB") System.
The Company and the Bank are subject to regulation by the Office of Thrift Supervision ("OTS"), the Federal Deposit Insurance Corporation ("FDIC") and the Securities and Exchange Commission ("SEC").
The Bank is a community oriented savings institution offering a variety of financial services to meet the needs of the communities it serves. The Bank conducts its business from its main office in Little Falls, New Jersey and five branch offices located in Passaic and Hunterdon Counties, New Jersey. The Bank attracts deposits from the general public and has historically used such deposits primarily to originate loans secured by first mortgages on owner-occupied one- to four-family residences in its market area and to purchase mortgage-backed securities. To a lesser extent, the Bank also originates a limited number of commercial real estate, residential construction and consumer loans, which mainly consist of home equity lines of credit. Further, the Bank also invests in mortgage-backed securities and investment securities.
The principal sources of funds for the Bank's lending activities are deposits, the amortization, repayment and maturity of loans, mortgage-backed securities and investment securities. Principal sources of income are interest and fees on loans, mortgage-backed securities and investment securities. The Bank's principal expense is interest paid on deposits.
Market Area and Competition
The Bank focuses on serving its customers located in the New Jersey community of Little Falls and surrounding communities in Passaic and Hunterdon Counties, New Jersey. Economic growth in the Bank's market area remains dependent upon the local economy. The economy of the greater New York - New Jersey market has historically benefitted from having a large number of corporate headquarters and concentration of financial services-related industries. It also has a well-educated employment base and a large number of industrial, service and high technology businesses. Over the past few years, New Jersey's economy has slowly begun to recover from the effects of a prolonged decline in the national and regional economy, layoffs in the financial services industry and corporate relocations. Employment levels and real estate markets in the Bank's market area have stabilized and in some instances begun to improve. Whether such improvement will continue is dependent, in large part, upon the general economic health of the United States and other factors beyond the Bank's control and, therefore, cannot be estimated. In addition, the deposit and loan activity of the Bank is significantly affected by economic conditions in its
market area. The Bank's principal competitors are financial institutions and mortgage banking companies, many of which are significantly larger and have greater financial resources than the Bank. The Bank's competition for loans on a retail and wholesale basis comes principally from commercial banks, mortgage brokers, banking and insurance companies. The Bank's competition for deposits has historically come from commercial banks, thrift institutions and credit unions. In addition, the Bank faces increasing competition for deposits from non-bank institutions, such as brokerage firms and insurance companies in such areas as short-term money market funds, corporate and government securities funds, mutual funds and annuities.
Lending Activities
Analysis of Loan Portfolio. The following table sets forth information concerning the composition of the Bank's loan portfolio in dollar amounts and in percentages of the loan portfolio as of the dates indicated.
Loan Maturity Tables
The following table sets forth the contractual maturity of the Bank's loan portfolio at December 31, 1998. The table does not include prepayments or scheduled principal repayments. Prepayments and scheduled principal repayments on loans totaled $______ million for the year ended December 31, 1998. Adjustable-rate mortgage loans are shown as maturing based on contractual maturities rather than the period in which interest rates are next scheduled to adjust.
The following table sets forth the dollar amount at December 31, 1998 of all loans due after December 31, 1999, which have pre-determined interest rates and which have floating or adjustable interest rates.
Floating or Fixed Rates Adjustable Rates Total ----------- ---------------- ----- (In Thousands) One- to four-family................ $45,201 $72,162 $117,363 Multi-family and commercial real estate........... 1,600 15,401 17,001 Consumer........................... 12,265 2,571 14,836 ------ ------ ------- Total............................ $59,066 $17,972 $149,200 ====== ====== =======
One- to Four-Family Residential Loans. The Bank's primary lending activity consists of the origination of single-family residential mortgage loans secured by owner-occupied property. The Bank originates one- to four-family residential mortgage loans in amounts up to 80% of the appraised value of the mortgaged property and in amounts up to 70% of the appraised value on loans which exceed $200,000. No private mortgage insurance is obtained since loan to value ratios do not exceed 80%. All loans are held in the Bank's portfolio.
The Bank has an agreement with a mortgage solicitation firm pursuant to which the Bank receives one- to four-family mortgage applications on a state-wide basis. The Bank then submits bids on the mortgage applications on which it is interested prior to making the final loan. The submission of a bid to provide the mortgage loan is not a firm commitment on the Bank's part, as the Bank applies its own underwriting standards before committing to the loan. All loans must be documented, including an original appraisal. This agreement has provided the majority of loan applications received by the Bank in the past year.
Loan referrals are also obtained from local realtors or builders, existing or past customers and members of the local community. Mortgage loans generally include due-on sale clauses which provide the Bank with the contractual right to deem the loan immediately due and payable in the event that the borrower transfers ownership of the property without the Bank's consent.
The Bank primarily originates adjustable-rate mortgage loans with a guaranteed renewal for a thirty-year term. These loans adjust after one, three, five or ten years. The Bank's ARM loans are originated for its portfolio and do not conform to FNMA or FHLMC standards. Although the Bank's ARM loans have a 6% lifetime cap, at the adjustment period, interest rate changes are discretionary. Generally, ARM loans pose credit risks somewhat greater than the risk inherent in fixed-rate loans primarily because, as interest rates rise, the underlying payments of the borrower rise, increasing the potential for default. The Bank also offers fixed-rate loans with terms of 15 and 30 years. The Bank offers various loan programs with varying interest rates and fees which are competitively priced based on market conditions and the Bank's cost of funds.
Multi-Family and Commercial Real Estate Loans. The Bank also originates and purchases multi-family and commercial real estate loans. These loans are generally adjustable-rate loans with maturities up to 25 years and are made in amounts up to 75% of the appraised value of the mortgaged property. In purchasing such loans, the Bank evaluates the mortgage primarily on the net operating income generated by the real estate to support the debt service. The Bank also considers the financial resources and income level of the borrower, the borrower's experience in owning or managing similar property, the marketability of the property and the Bank's prior lending experience with the borrower. The typical multi-family property in the Bank's multi-family lending portfolio has between 11 and 110 dwelling units with an average loan balance of approximately $550,000. Most loans originated or purchased are located in New Jersey and New York.
To a lesser extent, the Bank's policy has been to originate commercial real estate loans. The loans are generally made in amounts up to 65% of the appraised value of the property. The Bank's commercial real estate loans primarily have rates equal to the prime rate plus a margin. In making such loans, the Bank primarily considers the net operating income generated by the real estate to support the debt service, the financial resources and income level and managerial resources of the borrower, the marketability of the property and the Bank's lending experience with the borrower.
The Bank's commercial real estate loans typically are secured by properties such as mixed-use properties, retail stores, office buildings and strip shopping centers. The Bank's commercial real estate
portfolio includes multi-family loans. For a discussion of the Bank's largest commercial real estate loan, see "- Loans to One Borrower."
Loans secured by multi-family and commercial real estate generally involve a greater degree of risk than one- to four-family residential mortgage loans and carry larger loan balances. This increased credit risk is a result of several factors, including the concentration of principal in a limited number of loans and borrowers, the effects of general economic conditions on income producing properties, and the increased difficulty of evaluating and monitoring these types of loans. Furthermore, the repayment of loans secured by commercial real estate is typically dependent upon the successful operation of the related real estate. If the cash flow from the property is reduced, the borrower's ability to repay the loan may be impaired.
Residential Construction Loans. The Bank's policy has been to originate residential construction loans to a lesser extent than other types of mortgages. Residential construction loans are made up to a maximum of 80% of the appraised value of the home, based upon the builder's plans. The rate charged is generally the prime rate plus 1% and one point. The loan proceeds are disbursed based upon work completed.
Consumer Loans. The Bank's consumer loans primarily consist of home equity loans, and, to a much lesser extent, student loans, personal loans and loans secured by savings deposits. The home equity lines of credit are made with loan to value ratios of up to 80% on either a fixed or adjustable rate basis.
The underwriting standards employed by the Bank for consumer loans include a determination of the applicant's payment history on other debts and an assessment of the borrower's ability to make payments on the proposed loan and other indebtedness. In addition to the creditworthiness of the applicant, the underwriting process also includes a comparison of the value of the security, if any, in relation to the proposed loan amount. The Bank's consumer loans tend to have higher interest rates and shorter maturities than one- to four-family mortgage loans, but are considered to entail a greater risk of default than mortgage loans.
Loan Approval Authority and Underwriting. The Board of Directors generally approves all mortgage loans although the Bank's President has the authority to approve loans up to $500,000. Any loans exceeding that amount must be approved by the Board of Directors.
The Bank uses board approved independent fee appraisers on real estate loans. It is the Bank's policy to obtain title insurance on all properties securing real estate loans and to obtain fire, flood and casualty insurance on all loans that require security.
Loan Commitments. The Bank issues written commitments to prospective borrowers on all real estate approved loans. Generally, the commitment requires the loan to be closed within sixty days of issuance. At December 31, 1998, the Bank had $5.1 million of commitments to fund new mortgage loans and commitments on unused lines of credit relating to home equity loans of $4.6 million.
Loan Purchases. The Bank has purchased and participated in loans, primarily in its market area. At December 31, 1998, the Bank had $3.9 million of purchased loans and $15.4 million in loan participations. The Bank purchases and participates in loans after applying its own underwriting standards. The Bank typically does not service the loans that it purchases or participates in with other financial institutions.
Loans to One Borrower. Savings associations are subject to the same limits as those applicable to national banks, which under current regulations limit loans-to-one borrower in an amount equal to 15% of unimpaired capital and retained income on an unsecured basis and an additional amount equal to 10% of unimpaired capital and retained income if the loan is secured by readily marketable collateral (generally, financial instruments, not real estate) or $500,000, whichever is higher. The Bank's maximum loan-to-one borrower limit was approximately $4.5 million as of December 31, 1998.
At December 31, 1998, the Bank's three largest lending relationships ranged from $1.0 million to $1.1 million. They are all performing loans on apartment buildings in New Jersey and New York in which the Bank has a participating interest. See also "-- Multi-Family and Commercial Real Estate."
Non-Performing Loans and Classified Assets
Loan Delinquencies. The Bank's collection procedures provide that when a mortgage loan is 15 days past due, a notice of nonpayment is sent. If payment is still delinquent after 30 days past due, the customer will receive a letter from the Bank. If the delinquency continues, similar subsequent efforts are made to eliminate the delinquency. If the loan continues in a delinquent status for 60 days or more and no repayment plan is in effect, the Bank's attorney will send a letter to the customer. After 90 days past due, the Board of Directors typically approves the initiation of foreclosure proceedings as soon as possible. Loans are reviewed on a monthly basis and are placed on a non-accrual and non-performing status when the loan becomes more than 90 days delinquent.
The following table sets forth information regarding non-performing loans and real estate owned. During the periods indicated, the Bank had no restructured loans within the meaning of SFAS No. 15.
Interest income that would have been recorded on nonaccrual loans had they been current under the original terms of such loans was approximately $89,000 and $111,000 for the years ended December 31, 1998 and 1997, respectively. Amounts included in the Bank's interest income attributable to non-performing loans for the years ended December 31, 1998 and 1997 were approximately $60,000 and $50,000, respectively.
Classified and Criticized Assets. OTS regulations provide for a classification system for problem assets of insured institutions which covers all problem assets. Under this classification system, problem assets of insured institutions are classified as "substandard," "doubtful," or "loss." An asset is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard assets include those characterized by the "distinct possibility" that the insured institution may sustain "some loss" if the deficiencies are not corrected. Loans classified as substandard may or may not be considered impaired under generally accepted accounting principals. Assets classified as doubtful have all of the weaknesses inherent in those classified substandard, with the added characteristic that the weaknesses present make "collection or liquidation in full," on the basis of currently existing facts, conditions and values, "highly questionable and improbable." Assets classified as loss are those considered "uncollectible" and as such, are charged off by the Bank. Assets which do not currently expose the Bank to sufficient risk to warrant classification in one of the aforementioned categories but possess weaknesses are designated "special mention" by management.
When the Bank classifies problem assets as either substandard or doubtful, it may establish general allowances for loan and lease losses in an amount deemed prudent by management. General allowances represent loss allowances which have been established to recognize the inherent risk associated with lending activities. When the Bank classifies problem assets as loss, it is considered uncollectible and the Bank charges off such amount. The Bank's determination as to the classification of its assets and the amount of its valuation allowances is subject to review by the OTS, which may order the establishment of additional general or specific loss allowances. A portion of general loss allowances established to cover possible losses related to assets classified as substandard or doubtful may be included in determining an institution's regulatory capital, while specific valuation allowances for loan losses generally do not qualify as regulatory capital.
The following table provides further information about the Bank's classified assets as of the dates indicated.
At December 31, -------------------------------------------------- 1998 1997 1996 1995 1994 ------ ------ ------ ------ ------- (In Thousands) Criticized: Special Mention........ $1,573 $3,912 $2,931 $2,639 $2,094 Classified: Substandard............ 1,645 1,637 3,665 3,925 5,901 Doubtful............... -- -- -- -- -- Loss................... -- -- -- -- 123 ------ ------ ------ ------ ------ $3,218 $5,549 $6,596 $6,564 $8,118 ===== ===== ===== ===== =====
Real Estate Owned. Real estate acquired by the Bank as a result of foreclosure or by deed in lieu of foreclosure is classified as real estate owned until it is sold. When property is acquired it is carried at the lower of the cost or fair value less selling costs. It is the policy of the Bank to obtain an appraisal on all real estate acquired through foreclosure as soon as practicable after it takes possession of the property. The Bank generally reassesses the value of real estate owned at least every eighteen months. These properties are subsequently evaluated and carried at the lower of the "new" cost or fair value minus selling costs of the underlying collateral. The Bank's real estate owned totaled approximately $297,000 at December 31, 1998.
Allowance for Loan Losses. A provision for loan losses is charged to operations based on management's evaluation of the potential losses that may be incurred in the Bank's loan portfolio. Such evaluation, which includes a review of certain loans of which full collectibility of interest and principal may not be reasonably assured, considers the Bank's past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower's ability to repay, estimated value of any underlying collateral and current economic conditions.
Management will continue to review its loan portfolio to determine the extent, if any, to which further additional loss provisions may be deemed necessary. There can be no assurance that the allowance for losses will be adequate to cover losses which may in fact be realized in the future and that additional provisions for losses will not be required.
As a result of the declines in regional real estate market values and the significant losses experienced by many financial institutions, there has been a greater level of scrutiny by regulatory authorities of the loan portfolios of financial institutions undertaken as part of the examination of the institution by the FDIC, OTS or other federal or state regulators. Results of recent examinations indicate that these regulators may be applying more conservative criteria in evaluating real estate market values, requiring significantly increased provisions for potential loan losses. While the Bank believes it has established an adequate allowance for loan losses, there can be no assurance that regulators, in reviewing the Bank's loan portfolio, will not request the Bank to significantly increase its allowance for loan losses, thereby negatively affecting the Bank's financial condition and earnings or that the Bank may not have to increase its level of loan loss allowance in the future.
Analysis of the Allowance for Loan Losses. The following table sets forth information with respect to the Bank's allowance for loan losses at the dates indicated.
- ------------------------ (1) Includes residential construction loans.
Allocation of Allowance for Loan Losses. The following table sets forth the allocation of the Bank's allowance for loan and lease losses by loan category and the percentage of loans in each category to net loans receivable at the dates indicated. The portion of the loan loss allowance allocated to each loan category does not represent the total available for future losses which may occur within the loan category since the total loan loss allowance is a valuation reserve applicable to the entire loan portfolio.
(1) Includes residential construction loans.
Investment Activities
General. The investment policy of the Bank, which is approved by the Board of Directors and implemented by certain officers as authorized by the Board, is designed primarily to provide and maintain liquidity and to manage the interest rate sensitivity of its overall assets and liabilities, to generate a favorable return without incurring undue interest rate and credit risk, to provide a flow of earnings and a countercyclical balance to earnings and to provide a balance of quality and diversification of the Bank's assets. In establishing its investment strategies, the Bank considers its business and growth plans, the economic environment, its interest rate sensitivity position, the types of securities to be held, and other factors. Federally chartered savings institutions have authority to invest in various types of assets, including U.S. Treasury obligations, securities of various federal agencies, mortgage-backed and mortgage-related securities, certain certificates of deposit of insured banks and savings institutions, certain bankers acceptances, repurchase agreements, loans of federal funds, and, subject to certain limits, corporate securities, commercial paper and mutual funds.
Current regulatory and accounting guidelines regarding investment portfolio policy require insured institutions to categorize securities as held for "investment," "sale," or "trading." At December 31, 1998, the Bank had no securities held available for sale or trading. The Bank's securities portfolio, which the Bank has the ability and intent to hold to maturity, are accounted for on an amortized cost basis. The Bank may purchase securities in the future to be held available for sale or trading.
At December 31, 1998, the Bank's investment securities portfolio primarily consisted primarily of short and medium term agency securities, corporate bonds, trust preferred securities and preferred stock. In addition, at December 31, 1998, the Bank had federal funds sold of $23.0 million, repurchase agreements of $4.0 million and FHLB stock of $3.8 million.
To supplement lending activities and to utilize excess liquidity, the Bank invests in residential mortgage-backed securities. Mortgage-backed securities can serve as collateral for borrowings and, through repayments, as a source of liquidity. The mortgage-backed securities portfolio at December 31, 1998 consisted of both fixed-rate and adjustable rate certificates issued by the FHLMC, GNMA and FNMA. The fixed rate certificates provide the certificate holder principal payments while the adjustable rate securities provide protection against rising interest rates.
Mortgage-backed securities represent a participation interest in a pool of single-family or multi-family mortgages, the principal and interest payments on which are passed from the mortgage originators, through intermediaries (generally quasi-governmental agencies) that pool and repackage the participation interests in the form of securities, to investors such as the Bank. Such quasi-governmental agencies, which guarantee the payment of principal and interest to investors, primarily include FHLMC, FNMA, and GNMA.
Mortgage-backed securities typically are issued with stated principal amounts, and the securities are backed by pools of mortgages that have loans with interest rates that are within a range and have varying maturities. The underlying pool of mortgages can be composed of either fixed-rate mortgages or adjustable-rate mortgage loans. Mortgage-backed securities are generally referred to as mortgage participation certificates or pass-through certificates. As a result, the interest rate risk characteristics of the underlying pool of mortgages, fixed rate or adjustable rate, as well as prepayment risk, are passed on to the certificate holder. The life of a mortgage-backed pass-through security is equal to the life of the underlying mortgages.
All of the securities have a cap rate of either 9.0%, or 10.0% and all of the products meet the current FFIEC tests. The securities are tested on a quarterly basis.
Investment and Mortgage-backed Securities Portfolio. The following table sets forth the carrying value of the Bank's investment and mortgage-backed securities portfolio.
At December 31, --------------------------------------------- 1998(1) 1997 1996 ---------- ----------- ----------- (In Thousands)
Investment Securities: U.S. Government securities................. $ -- $ -- $ 6,006
U.S. Agency securities....... 53,419 57,988 45,022 Corporate bonds.............. 1,990 -- -- Trust preferred securities... 11,496 -- -- Preferred stock.............. 13,095 -- -- Other securities............. -- -- 342 ------- ------ ------ Total investment securities............... 80,000 57,988 51,370 ------- ------ ------ Federal funds sold............ 23,000 3,500 5,000 Repurchase agreements......... 4,000 -- -- FHLB Stock.................... 3,768 2,518 2,076 ------- ------ ------ Total investment securities, federal funds sold and FHLB stock................... $110,768 $64,006 $58,446 ======= ====== ======
- -------------------- (1) Includes held to maturity and available for sale (available for sale issues are reflected net of an unrealized loss of approximately $493,000).
At December 31, --------------------------------------- 1998(2) 1997(2) 1996 -------- -------- -------- (Dollars in Thousands) Mortgage-backed securities: GNMA........................... $17,293 $ 26,337 $ 33,675 FNMA........................... 36,953 42,393 49,434 FHLMC.......................... 20,158 34,932 28,297 ------ ------- ------- Total...................... 74,404 103,662 111,406 Net premiums................... 941 1,224 1,067 ------- -------- ------- Net mortgage-backed securities..................... $75,345 $104,886 $112,473 ====== ======= =======
- --------------------- (2) Includes held to maturity and available for sale (available for sale issues are reflected net of unrealized losses of $16,600 and $111,500 for 1998 and 1997, respectively).
Investment and Mortgage-backed Securities' Portfolios Maturities. The following table sets forth certain information regarding the carrying values, weighted average yields and maturities of the Bank's investment and mortgage-backed securities portfolios at December 31, 1998.
- ---------------------- (1) Includes securities held to maturity and available for sale.
Sources of Funds
General. Deposits are the major source of the Bank's funds for lending and other investment purposes. The Bank derives funds from amortization and prepayment of loans and maturities of investment securities, mortgage-backed securities and operations. Scheduled loan principal repayments are a relatively stable source of funds, while deposit inflows and outflows and loan prepayments are significantly influenced by general interest rates and market conditions. The Bank can obtain advances from the FHLB as an alternative to retail deposit funds. FHLB advances may also be used to acquire certain other assets as may be deemed appropriate for investment purposes. These advances are collateralized by the capital stock of the FHLB held by the Bank and by certain of the Bank's mortgage loans and mortgage-backed securities.
Deposits. The Bank currently offers NOW Accounts, Super NOW accounts, regular passbook statement savings accounts and savings accounts, money market deposit accounts and term certificate accounts, primarily to consumers within its primary market area. Deposit account terms vary according to the minimum balance required, the time period the funds must remain on deposit and the interest rate, among other factors.
Although the Bank partially relies on customer service and relationships with customers to attract and retain deposits, market interest rates and rates offered by competing financial institutions significantly affect the Bank's ability to attract and retain deposits.
The interest rates paid by the Bank on deposits are monitored regularly and are set as needed at the direction of the Board of Directors. The interest rates on deposit account products are determined by evaluating the interest rates offered by other local institutions, and the degree of competition the Bank wishes to maintain; the Bank's anticipated need for cash and the timing of that desired cash flow; the cost of borrowing from other sources versus the cost of acquiring funds through customer deposits; and the Bank's anticipation of future economic conditions and related interest rates. The Bank's interest rates typically are competitive with those offered by competitors in the Bank's primary market area.
Regular savings accounts, money market accounts and NOW accounts including non-interest bearing deposits constituted $41.4 million, $7.0 million and $29.1 million, respectively, or 17.05%, 2.87%, and 11.98%, respectively. Certificates of deposit constituted $165.5 million or 68.10% of the deposit portfolio. As of December 31, 1998, the Bank had no brokered deposits.
Jumbo Certificate Accounts. The following table indicates the amount of the Bank's certificates of deposit of greater than $100,000 by time remaining until maturity as of December 31, 1998.
Certificates Maturity Period of Deposits - --------------- -------------- (In Thousands) Within three months................................. $ 1,971 Three through six months............................ 2,684 Six through twelve months........................... 6,468 Over twelve months.................................. 3,419 ------ $14,542
Savings Deposit Activity. The following table sets forth the savings activities of the Bank for the periods indicated.
Year Ended December 31, ------------------------------------ 1998 1997 1996 ---- ---- ---- (In Thousands) Net increase (decrease) before interest credited, deposits purchased and deposits sold............ $ 2,411 $(8,507) $ (21,401) Deposits purchased....................... -- -- -- Deposits sold............................ -- -- (9,221) Interest credited........................ 10,504 10,328 11,083 ------ ------ -------- Net increase (decrease) in savings deposits....................... $12,915 $ 1,821 $ (19,539) ====== ====== ========
Borrowings
At December 31, 1998, the Bank had $68.5 million of borrowings with the Federal Home Loan Bank. These consist of the following:
(a) $9.0 million repurchase agreement with a rate of 5.82%, maturing December, 1999 and is callable quarterly on interest payment dates. As of March 6, the borrowing was still in place.
(b) $25.0 million advance maturing March 2008, and with a rate of 5.35%. On March 12, 2001 and quarterly thereafter, the borrowing can be called with four days notice.
(c) $25.0 million advance maturing November 2003, and with a rate of 4.93%. On November 19, 2001 and quarterly thereafter, the borrowing can be called with four days notice.
(d) $9.5 million, 30 day repurchase agreement with a rate of 5.29%. This repurchase agreement was subsequently rolled over in January 1999 at a rate of 4.95%. In February, the repurchase agreement was paid down to $9.0 million and the rate became 4.92%.
Subsidiary Activities
As of December 31, 1998, the Bank was the sole subsidiary of the Company. The Bank has no active subsidiaries.
Personnel
As of December 31, 1998, the Bank had 37 full-time and 12 part-time employees. None of the Bank's employees are represented by a collective bargaining group. The Bank believes that its relationship with its employees is good.
Regulation
Set forth below is a brief description of all materials laws and regulations which relate to the regulation of the Bank and the Company. The description does not purport to be complete and is qualified in its entirety by reference to applicable laws and regulations.
Company Regulation
General. The Company is a unitary savings and loan holding company subject to regulatory oversight by the OTS. As such, the Company is required to register and file reports with the OTS and is subject to regulation and examination by the OTS. In addition, the OTS has enforcement authority over the Company and its non-savings association subsidiaries, should such subsidiaries be formed, which also permits the OTS to restrict or prohibit activities that are determined to be a serious risk to the subsidiary savings association. This regulation and oversight is intended primarily for the protection of the depositors of the Bank and not for the benefit of stockholders of the Company. The Company is also required to file certain reports with, and otherwise comply with, the rules and regulations of the OTS and the SEC.
Qualified Thrift Lender Test. As a unitary savings and loan holding company, the Company generally is not subject to activity restrictions, provided the Bank satisfies the Qualified Thrift Lender ("QTL") test. If the Company acquires control of another savings association as a separate subsidiary, it would become a multiple savings and loan holding company, and the activities of the Company and any of its subsidiaries (other than the Bank or any other Savings Association Insurance Fund ("SAIF") insured savings association) would become subject to restrictions applicable to bank holding companies unless such other associations each also qualify as a QTL and were acquired in a supervisory acquisition. See "Regulation of the Bank -- Qualified Thrift Lender Test."
Restrictions on Acquisitions. The Company must obtain approval from the OTS before acquiring control of any other SAIF-insured association. Such acquisitions are generally prohibited if they result in a multiple savings and loan holding company controlling savings associations in more than one state. However, such interstate acquisitions are permitted based on specific state authorization or in a supervisory acquisition of a failing savings association.
Federal law generally provides that no "person," acting directly or indirectly or through or in concert with one or more other persons, may acquire "control," as that term is defined in OTS regulations, of a federally insured savings institution without giving at least 60 days' written notice to the OTS and providing the OTS an opportunity to disapprove the proposed acquisition. In addition, no company may acquire control of such an institution without prior OTS approval.
Federal Securities Law. The Company is subject to filing and reporting requirements by virtue of having its common stock registered under the Securities Exchange Act of 1934. Furthermore, Company stock held by persons who are affiliates (generally officers, directors and principal stockholders) of the Company may not be resold without registration or unless sold in accordance with certain resale restrictions. If the Company meets specified current public information requirements, each affiliate of the Company is able to sell in the public market, without registration, a limited number of shares in any three-month period.
Regulation of the Bank
General. As a federally chartered, SAIF-insured savings association, the Bank is subject to extensive regulation by the OTS and the FDIC. Lending activities and other investments must comply with various federal statutory and regulatory requirements. The Bank is also subject to certain reserve requirements promulgated by the Federal Reserve Board.
The OTS, in conjunction with the FDIC, regularly examines the Bank and prepares reports for the consideration of the Bank's Board of Directors on any deficiencies that they find in the Bank's operations. The Bank's relationship with its depositors and borrowers is also regulated to a great extent by federal law, especially in such matters as the ownership of savings accounts and the form and content of the Bank's mortgage documents.
The Bank must file reports with the OTS and the FDIC concerning its activities and financial condition, in addition to obtaining regulatory approvals prior to entering into certain transactions such as mergers with or acquisitions of other savings institutions. This regulation and supervision establishes a comprehensive framework of activities in which an institution can engage and is intended primarily for the protection of the SAIF and depositors. The regulatory structure also gives the regulatory authorities extensive 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 regulations, whether by the OTS, the FDIC or the Congress could have a material adverse impact on the Company, the Bank and their operations.
Deposit Insurance. The FDIC is an independent federal agency that insures the deposits, up to prescribed statutory limits, of federally insured banks and savings institutions and safeguards the safety and soundness of the banking and savings industries. Two separate insurance funds, the Bank Insurance Fund ("BIF") for commercial banks, state savings banks and some federal savings banks, and the SAIF for savings associations, are maintained and administered by the FDIC. The Bank is a member of the SAIF and its deposit accounts are insured by the FDIC, up to the prescribed limits. The FDIC has examination authority over all insured depository institutions, including the Bank, and has under certain circumstances, authority to initiate enforcement actions against federally insured savings institutions to safeguard safety and soundness and the deposit insurance fund.
Assessments. The FDIC is authorized to establish separate annual assessment rates for deposit insurance for members of the BIF and the SAIF. The FDIC may increase assessment rates for either fund if necessary to restore the fund's ratio of reserves to insured deposits to its target level within a reasonable time and may decrease such assessment rates if such target level has been met. The FDIC has established a risk-based assessment system for both SAIF and BIF members. Under this system, assessments are set within a range, based on the risk the institution poses to its deposit insurance fund. This risk level is determined based on the institution's capital level and the FDIC's level of supervisory concern about the institution.
FDIC assessments on SAIF institutions currently range from 0 to 27 basis points. In addition, legislation requires the cost of prior thrift failures to be shared by both the SAIF and the Bank Insurance Fund ("BIF") (Fico Bond payments). The Fico Bond assessment for savings institutions in 1998 was approximately $0.61 per $100 in deposits.
Examination Fees. In addition to federal deposit insurance premiums, savings institutions like the Bank are required by OTS regulations to pay assessments to the OTS to fund the operations of the
OTS. The general assessment is paid on a semi-annual basis and is computed based on total assets of the institution, including subsidiaries.
Regulatory Capital Requirements. OTS capital regulations require savings institutions to meet three capital standards: (1) tangible capital equal to 1.5% of total adjusted assets, (2) a leverage ratio (core capital) equal to at least 4% of total adjusted assets, and (3) a risk-based capital requirement equal to 8.0% of total risk-weighted assets.
Savings associations with a greater than "normal" level of interest rate exposure will, in the future, be subject to a deduction for an interest rate risk ("IRR") component which may be from capital for purposes of calculating their risk-based capital requirement. See "-- Net Portfolio Value Analysis."
Tangible capital is defined as core capital less all intangible assets (including supervisory goodwill), plus purchased mortgage servicing rights valued at the lower of the maximum percentage established by the OTS or the amount includable in core capital. Core capital is defined as common stockholders' equity (including retained earnings), noncumulative perpetual preferred stock and minority interests in the equity accounts of consolidated subsidiaries, and qualifying supervisory goodwill, less nonqualifying intangible assets.
The OTS requires a core capital ratio of at least 3% for those savings associations in the strongest financial and managerial condition. All other savings associations are required to maintain minimum core capital of at least 4% of total adjusted assets, with a maximum core capital ratio requirement of 5%. In determining the required minimum core capital ratio, the OTS assesses the quality of risk management and the level of risk in each savings association on a case-by-case basis.
The risk-based capital standard for savings institutions requires the maintenance of total risk-based capital (which is defined as core capital plus supplementary capital) of 8% of risk-weighted assets. The components of supplementary capital include, among other items, cumulative perpetual preferred stock, perpetual subordinated debt, mandatory convertible subordinated debt, intermediate-term preferred stock and the portion of the allowance for loan losses not designated for specific loan losses. The portion of the allowance for loan and lease losses includable in supplementary capital is limited to a maximum of 1.25% of risk-weighted assets. Overall, supplementary capital is limited to 100% of core capital. A savings association must calculate its risk-weighted assets by multiplying each asset and off-balance sheet item by various risk factors as determined by the OTS, which range from 0% for cash to 100% for delinquent loans, property acquired through foreclosure, commercial loans and other assets.
As shown below, the Bank's regulatory capital exceeded all minimum regulatory capital requirements applicable to it as of December 31, 1998:
Percent of Adjusted Amount Assets ------ ---------- (Dollars in Thousands) Tangible Capital: Actual capital................................ $28,740 8.33% Regulatory requirement........................ 5,176 1.50 ------- ---- Excess...................................... $23,564 6.83% ====== ====
Core Capital: Actual capital................................ $28,740 8.33% Regulatory requirement........................ 13,801 4.00 ------ ---- Excess...................................... $14,939 4.33% ====== ====
Risk-Based Capital: Actual capital................................ $29,988 20.45% Regulatory requirement........................ 11,729 8.00 ------ ----- Excess...................................... $18,259 12.45% ====== =====
The Bank is not under any agreement with regulatory authorities nor is it aware of any current recommendations by the regulatory authorities which, if they were to be implemented, would have a material effect on liquidity, capital resources or operations of the Bank or the Company.
Prompt Corrective Action. The FDICIA also established a system of prompt corrective action to resolve the problems of undercapitalized institutions. Under this system, which became effective December 19, 1992, the banking regulators are required to take certain supervisory actions against undercapitalized institutions, the severity of which depends upon the institution's degree of capitalization. Under the OTS final rule implementing the prompt corrective action provisions, an institution is deemed to be (i) "well capitalized", (ii) "adequately capitalized", (iii) "undercapitalized", (iv) "significantly undercapitalized", or (v) "critically undercapitalized". In addition, under certain circumstances, a federal banking agency may reclassify a well capitalized institution as adequately capitalized and may require an adequately capitalized institution or an undercapitalized institution to comply with supervisory actions as if it were in the next lower category (except that the FDIC may not reclassify a significantly undercapitalized institution as critically undercapitalized). Immediately upon becoming undercapitalized, an institution shall become subject to various restrictions and could be subject to additional supervisory actions.
As of December 31, 1998, the Bank was a "well capitalized institution" as defined in the prompt corrective action regulations and as such is not subject to any prompt corrective action measures.
Dividend and Other Capital Distribution Limitations. Federal law requires the Bank to give the OTS 30 days' advance notice of any proposed declaration of dividends to the Company, and the OTS has the authority under its supervisory powers to prohibit the payment of dividends to the Company. In addition, the Bank may not declare or pay a cash dividend on its capital stock if the effect thereof would
be to reduce the regulatory capital of the Bank below the amount required for the liquidation account to be established in connection with the Conversion.
Finally, a savings association is prohibited from making a capital distribution if, after making the distribution, the savings association would be "undercapitalized" (not meet any one of its minimum regulatory capital requirements). OTS regulations also prohibit the Bank from declaring or paying any dividends or from repurchasing any of its stock if, as a result, the regulatory (or total) capital of the Bank would be reduced below the amount required to be maintained for the liquidation account established by it for certain depositors in connection with its conversion from mutual to stock form. In addition, such regulations prohibit an institution from repurchasing any of its stock for a period of at least one year from the date of its conversion without a waiver of such prohibition by the OTS.
Qualified Thrift Lender Test. Savings institutions are to meet a QTL test. If the Bank maintains an appropriate level of Qualified Thrift Investments (primarily residential mortgages and related investments, including certain mortgage-backed securities) ("QTIs") and otherwise qualifies as a QTL, it will continue to enjoy full borrowing privileges from the FHLB of New York. The required percentage of QTIs is 65% of portfolio assets (defined as all assets minus intangible assets, property used by the institution in conducting its business and liquid assets equal to 10% of total assets). Certain assets are subject to a percentage limitation of 20% of portfolio assets. In addition, savings associations may include shares of stock of the FHLBs, FNMA and FHLMC as qualifying QTIs. The method for measuring compliance with the QTL test is on a monthly basis in nine out of every 12 months. As of December 31, 1998, the Bank was in compliance with its QTL requirement.
A savings association that does not meet a QTL test must either convert to a bank charter or comply with the following restrictions on its operations: (i) the savings association may not engage in any new activity or make any new investment, directly or indirectly, unless such activity or investment is permissible for a national bank; (ii) the branching powers of the savings association shall be restricted to those of a national bank; (iii) the savings association shall not be eligible to obtain any advances from its FHLB; and (iv) payment of dividends by the savings association shall be subject to the rules regarding payment of dividends by a national bank. Upon the expiration of three years from the date the savings association ceases to be a QTL, it must cease any activity and not retain any investment not permissible for a national bank and immediately repay any outstanding FHLB advances (subject to safety and soundness considerations).
Loans-to-One Borrower. See "Business -- Lending Activities -- Loans-to-One Borrower."
Community Reinvestment. Under the Community Reinvestment Act ("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 its examination of a savings institution, to assess the institution'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 institution. Current law requires public disclosure of an institution's CRA rating and requires the OTS to provide a written evaluation of an institution's CRA performance utilizing a four-tiered descriptive rating system in lieu of the existing five-tiered numerical rating system. The Bank received a satisfactory rating as a result of its last evaluation in March, 1998.
Transactions With Affiliates. Generally, restrictions on transactions with affiliates require that transactions between a savings association or its subsidiaries and its affiliates be on terms as favorable to the Bank as comparable transactions with non-affiliates. In addition, certain of these transactions are restricted to an aggregate percentage of the Bank's capital; collateral in specified amounts must usually be provided by affiliates to receive loans from the Bank. Affiliates of the Bank include the Company and any company which would be under common control with the Bank. In addition, a savings association may not lend to any affiliate engaged in activities not permissible for a bank holding company or acquire the securities of any affiliate which is not a subsidiary. The OTS has the discretion to treat subsidiaries of savings associations as affiliates on a case-by-case basis.
The Bank's authority to extend credit to its officers, directors and 10% shareholders, as well as to entities that such persons control is currently governed by Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O promulgated by the Federal Reserve Board. Among other things, these regulations require such loans to be made on terms substantially similar to those offered to unaffiliated individuals, place limits on the amount of loans the Bank may make to such persons based, in part, on the Bank's capital position, and require certain approval procedures to be followed. Recent legislation permits savings institutions to make loans to executive officers, trustees and principal shareholders ("insiders") on preferential terms, provided the extension of credit is made pursuant to a benefit or compensation program of the Bank that is widely available to employees of the Bank or its affiliates and does not give preference to any insider over other employees of the Bank or affiliate.
Liquidity Requirements. All savings associations are required to maintain an average daily balance of liquid assets equal to a certain percentage of the sum of its average daily balance of net withdrawable deposit accounts and borrowings payable in one year or less. The liquidity requirement may vary from time to time (between 4% and 10%) depending upon economic conditions and savings flows of all savings associations. At the present time, the required liquid asset ratio is 4%. At December 31, 1998 the Bank's liquidity ratio was 36.11%.
Federal Home Loan Bank System. The Bank is a member of the FHLB of New York, which is one of 12 regional FHLBs that administer the home financing credit function of savings associations. Each FHLB serves as a reserve or central bank for its members within its assigned region. It is funded primarily from proceeds derived from the sale of consolidated obligations of the FHLB System. It makes loans to members (i.e., advances) in accordance with policies and procedures established by the Board of Directors of the FHLB.
As a member, the Bank is required to purchase and maintain stock in the FHLB of New York in an amount equal to at least 1% of its aggregate unpaid residential mortgage loans, home purchase contracts, or similar obligations at the beginning of each year. As of December 31, 1998, the Bank had $2.5 million in FHLB stock, which was in compliance with this requirement. For the fiscal year ended December 31, 1998, dividends paid by the FHLB of New York to the Bank totaled $256,000.
Federal Reserve System. The Federal Reserve Board requires all depository institutions to maintain non-interest bearing reserves at specified levels against their transaction accounts (primarily checking, NOW and Super NOW checking accounts) and non-personal time deposits. The balances maintained to meet the reserve requirements imposed by the Federal Reserve Board may be used to satisfy the liquidity requirements that are imposed by the OTS.
Item 2.
Item 2. Properties - --------------------
The Bank operates from its main office located at 86 Main Street, Little Falls, New Jersey and five branch offices, one of which is leased. This includes three branches purchased from an unaffiliated commercial bank in December 1996. The Bank's total investment in office property and equipment is $4.2 million with a net book value of $2.6 million at December 31, 1998.
Item 3.
Item 3. Legal Proceedings - --------------------------
Neither the Company nor its subsidiaries are involved in any pending legal proceedings, other than routine legal matters occurring in the ordinary course of business, which in the aggregate involve amounts which are believed by management to be immaterial to the consolidated financial condition or results of operations of the Company.
Item 4.
Item 4. Submission of Matters to a Vote of Security-Holders - ------------------------------------------------------------
Not applicable.
PART II
Item 5.
Item 5. Market for Common Equity and Related Stockholder Matters - -----------------------------------------------------------------
Information relating to the market for Registrant's common equity and related stockholder matters appears under "Stock Market Information" in the Registrant's 1998 Annual Report to Stockholders ("Annual Report") on page 2, and is incorporated herein by reference.
Item 6.
Item 6. Selected Financial Data - --------------------------------
The above-captioned information appears in the Annual Report on pages 3 and 4, and is incorporated herein by reference.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Conditions and Results of Operations - --------------------------------------------------------------------------------
The above-captioned information appears under Management's Discussion and Analysis of Financial Condition and Results of Operations in the Annual Report on pages 5 through 10 and is incorporated herein by reference.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk - -------------------------------------------------------------------
The information contained in the Section captioned "Risk Management" in the Annual Report on page 10 is incorporated herein by reference.
Item 8.
Item 8. Financial Statements and Supplementary Data - ----------------------------------------------------
The Financial Statements of the Bank, together with the report thereon by Radics & Co., LLC, appear in the Annual Report on pages 18 through 58 and are incorporated herein by reference.
Item 9.
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure - --------------------------------------------------------------------------------
Not applicable.
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant - ------------------------------------------------------------
The Certificate of Incorporation requires that the Board of Directors be divided into three classes, each of which contains approximately one-third of the members of the Board. The directors are elected by the stockholders of the Company for staggered three-year terms, or until their successors are elected and qualified. The Board of Directors currently consists of seven members.
The following table sets forth the directors continuing in office, their name, age, the year they first became a director of the Company or the Bank, the expiration date of their current term as a director, and the number and percentage of shares of the Common Stock beneficially owned as of the March 22, 1999. Each director of the Company is also a member of the Board of Directors of the Bank.
- ------------------------ * Less than 1.0%. (1) As of December 31, 1998. (2) As of the March 22, 1999. (3) Pursuant to rules promulgated under the 1934 Act, an individual is considered to beneficially own shares of Common Stock if he or she directly or indirectly has or shares (1) voting power, which includes the power to vote or to direct the voting of the shares; or (2) investment power, which includes the power to dispose or direct the disposition of the shares. Unless otherwise indicated, a director has sole voting power and sole investment power with respect to the indicated shares. (4) Includes 6,083 shares of Common Stock that have been awarded under the Management Stock Bonus Plan ("MSBP"), 3,500 shares of Common Stock under the 1997 Directors Stock Compensation Plan ("1997 DSCP") and 3,500 shares of Common Stock under the 1998 Directors Stock Compensation Plan ("1998 DSCP") which are subject to forfeiture under certain circumstances. Shares awarded under the MSBP, 1997 DSCP and the 1998 DSCP vest equally over five year periods beginning July 9, 1997, April 17, 1998 and April 21, 1999, respectively. (5) Includes options to purchase 6,083 shares of Common Stock pursuant to the Little Falls Bancorp, Inc. 1996 Stock Option Plan Options ("1996 Stock Option Plan") which are immediately exercisable within 60 days of the Voting Record Date. See "Item 12. Director and Executive Officer Compensation - Director Compensation - Stock awards." (6) Excludes 241,979 unallocated shares of Common Stock held under the ESOP for which such individual serves as one of three ESOP trustees. Beneficial ownership is disclaimed with respect to such ESOP shares held in a fiduciary capacity. (7) Includes 4,190 shares held by Mr. Barton's IRA, 4,894 shares held by the IRA of Mr. Barton's wife and 118 shares held by Mr. Barton's wife, which Mr. Barton may be deemed to beneficially own. (8) Includes 14,000 shares held jointly with Mr. Weite's wife, with whom voting and dispositive power is shared, and 3,000 shares held by Mr. Weite's IRA and 2,500 shares held by the IRA of Mr. Weite's wife, which Mr. Weite may be deemed to beneficially own. Does not include 6,000 shares owned by DOB&K, LLC, a partnership between Mr. Weite's children, of which Mr. Weite disclaims beneficial ownership. (9) Includes options to purchase 12,167 shares of Common Stock pursuant to the Little Falls Bancorp, Inc. 1996 Stock Option Plan Options ("1996 Stock Option Plan") which are immediately exercisable within 60 days of the Voting Record Date. See "Item 12. Director and Executive Officer Compensation - Director Compensation - Stock Awards." (10) Includes 15,000 shares held jointly with Mr. Pullara's wife, with whom voting and dispositive power is shared. Includes options to purchase 12,167 shares of Common Stock pursuant to the 1996 Stock Option Plan which are immediately exercisable within 60 days of the Voting Record Date. Also includes 18,250 and 3,500 shares of restricted stock awarded pursuant to the MSBP, 1997 DSCP and 1998 DSCP, and awards vest equally over five year periods beginning July 9, 1997, April 17, 1998 and April 21, 1999, respectively. (11) Includes 1,000 shares owned by Mr. Kuiken's wife, which Mr. Kuiken may be deemed to beneficially own. (12) Includes 15,000 shares held in trust, which Mr. Parker may be deemed to beneficially own, and 200 shares held jointly with Mr. Parker's wife, with whom voting and dispositive power is shared. (13) Includes 7,390 shares held by Mr. Seugling's IRA and 110 shares held by Custom Graphics & Design, Inc., which Mr. Seugling may be deemed to beneficially own. (14) Includes 4,265 allocated shares of Common Stock held for individual employee participants under the ESOP. Excludes unallocated shares of Common stock held under the ESOP. See note (6). (15) Includes options to purchase 63,548 shares of Common Stock which are immediately exercisable within 60 days of the Voting Record Date. (16) Excludes 241,979 unallocated shares of Common Stock held under the ESOP for which such individual serves as two of three members of the ESOP Committee. Beneficial ownership is disclaimed with respect to such ESOP shares held in a fiduciary capacity.
The following table sets forth the non-director executive officers of the Company, their name, age, the year they first became an officer of the Company or the Bank, and their current position with
the Company. Executive officers serve for a one-year term at the determination of the Board of Directors.
Year First Appointed as Position with Name of Individual Age(1) Officer(2) the Company or Bank - ------------------ ------ ------------ ---------------------- Leonard G. Romaine 52 1967 President and Chief Executive Officer Richard A. Capone 49 1995 Vice President, Chief Financial Officer Anne Bracchitta 59 1997 Corporate Secretary
- ------------------------ (1) As of December 31, 1998. (2) Refers to the year the individual first became an officer of the Company or the Bank.
Biographical Information
The business experience of each director and executive officer of the Company is set forth below. All persons have held their present positions for five years unless otherwise stated.
Directors ---------
Raoul G. Barton was elected Director of the Bank in 1970 and served as Chairman from 1982 to 1994. Mr. Barton is a member of the Little Falls Masonic Lodge. In 1990, Mr. Barton retired as owner of Barton Jewelers which he founded in 1949.
George Kuiken has served as Director of the Bank since 1954. Mr. Kuiken retired as President of New Jersey Rental Equipment, Inc.
Norman A. Parker has served as a Director since 1953. Mr. Parker was Chairman of the Board of the Bank from 1973 to 1981 and President of the Bank from 1965 to 1977. Mr. Parker is a retired funeral director. Mr. Parker is also past President of the Passaic County Funeral Directors Association, past President and charter member of the Passaic Valley Rotary Club, past member of the Passaic Valley School Board, Elder of the First Reformed Church, charter member of the Little Falls Parking Authority, charter member of the Mayor's Committee for Senior Citizens and member of the Little Falls Masonic Lodge.
John P. Pullara was with the Bank from March 1955, serving as its President from 1977 until his retirement on October 5, 1997. Mr. Pullara was elected Director of the Bank in June of 1995. Mr. Pullara is also Director and Treasurer of the Passaic County Historical Society, Director of the Garden State Concert Band, Treasurer of the Little Falls Historical Society, Chairman of the Little Falls Parking Authority and a member of the Little Falls Business Association.
Edward J. Seugling has served as a Director of the Bank since 1970 and became the Vice Chairman of the Board of Directors in 1994. Mr. Seugling is a retired teacher at Passaic Valley High School and the sole owner of the Little Falls Journal. He is a member of the Little Falls Business Association, the Little Falls Masonic Lodge, the Little Falls Historical Society, and the New Jersey Education Association. He is a member of the First Reformed Church of Little Falls, and he has served as an elder and deacon of the First Reformed Church. He was formerly Chairman of the Little Falls Rent Leveling Board and was an associate member of the Little Falls Main Street Development Corp.
Albert J. Weite has served as Chairman of the Board of Directors of the Bank since 1994 and as a Director since 1976. Mr. Weite is a real estate investor.
Executive Officers who are not Directors ----------------------------------------
Leonard G. Romaine has been employed by the Bank since 1967. He served as Treasurer and Secretary of the Company and as Senior Vice President, Secretary and Treasurer of the Bank until he was appointed President of the Bank and Company on October 6, 1997. Mr. Romaine is a member of the Passaic County Attorney Ethics Committee.
Richard A. Capone became employed by the Bank and Company in November 1995 as Chief Financial Officer. Prior to that, Mr. Capone was controller or Treasurer at four different local financial institutions over the past 20 years.
Anne Bracchitta has been employed by the Bank since 1980. She was appointed Corporate Secretary in 1997.
Item 11.
Item 11. Executive Compensation - --------------------------------
Director Compensation
Directors Fees. For fiscal year 1998, each member of the Board of Directors received an attendance fee of $1,450 per regular meeting. Committee members received an additional $725 per Asset-Liability Committee meeting attended. No Committee fees are paid to Board members who are employees. For the year ended December 31, 1998, total fees paid by the Company and the Bank to directors were $141,000. Directors are also provided with broad medical insurance coverage.
Directors Retirement and Consultation Plan. The Bank's Board adopted a Directors' Consultation and Retirement Plan (the "Consultation Plan") on May 9, 1995. Such Consultation Plan provides retirement benefits to directors. Management believes the Consultation Plan will help to insure that the Bank has the continued services of these persons as directors to assist in the conduct of the Bank's business affairs in the future. A director who has served as a director for at least twenty years shall be a participant in the Consultation Plan. A consulting director shall be paid a monthly retirement benefit under the Consultation Plan equal to half of the director fee in effect at the time of such retirement until the month following the date of death of the consulting director. At the expiration of the period for which the participant is entitled to benefits, his status as a consulting director shall cease. All benefits payable under the plan will be paid by the Bank from current assets. There are no tax consequences to either the director or the Bank prior to payment of benefits. Upon receipt of payment of benefits, the director will recognize taxable ordinary income in the amount of such payment received and the Bank will be entitled to recognize a tax-deductible compensation expense. In addition, the Bank has a policy of continuing medical benefits for its retired directors. For the year ended December 31, 1998, no benefits were paid under the Consultation Plan and approximately $45,000 was accrued as an expense for the Consultation Plan and the continuation of such medical benefits.
Stock Awards. On July 9, 1996, the stockholders of the Company approved the Little Falls Bancorp 1996 Stock Option ("1996 Stock Option Plan") and the Little Falls Bank Management Stock Bonus Plan ("MSBP"). Pursuant to the terms of the 1996 Stock Option Plan, each non-employee director received, on the date of stockholder approval options to purchase 15,208 shares of Common Stock. Under the MSBP, the same non-employee directors received 6,083 shares of restricted stock on the date
of stockholder approval. The options granted to these non-employee directors become first exercisable at a rate of 20% one year from the date of grant and 20% annually thereafter. Restricted stock granted to these non-employee directors will vest 20% one year from the date awarded and an additional 20% annually, thereafter. In April 1997, the Company adopted the 1997 Directors Stock Compensation Plan authorizing the granting of up to 24,500 shares of Common Stock in the aggregate (representing less than 1% of total shares outstanding at such time). Each non-employee director (seven persons) was awarded 3,500 shares of Common Stock which shall vest over a five year period beginning April 17, 1997. In April 1998, the Company adopted the 1998 Directors Stock Compensation Plan authorizing the granting of up to 24,500 shares of Common Stock in the aggregate (representing less than 1% of total shares outstanding at such time). During 1998, all 24,500 shares were granted under the plan (3,500 shares to each non-employee director).
Executive Compensation
Summary Compensation Table. The following table sets forth the compensation paid to the chief executive officer during the fiscal year ended December 31, 1998. All compensation paid to directors, officers and employees is paid by the Bank. Except as listed below, no other executive officer received cash compensation in excess of $100,000 during the fiscal year ended December 31, 1998.
- ------------------------ (1) All compensation set forth above was paid by the Bank. (2) Consists of Board of Director's fees. For fiscal year 1998, there were no (a) perquisites over the lesser of $50,000 or 10% of the named executive officer's total salary and bonuses for the year; (b) payments of above-market preferential earnings on deferred compensation; (c) payments of earnings with respect to long term incentive plans prior to settlement or maturity: (d) tax payment reimbursements; or (e) preferential discounts on stock. (3) Options vest equally over a five year period beginning December 9, 1998. (4) Based upon 12,167 shares of restricted stock granted pursuant to the MSBP (fair market value on date of grant of $10.625). Restricted stock vest equally over a five year period beginning July 9, 1997. Dividends are paid on the restricted stock and are accrued and held in arrears until the restricted stock for which dividends were paid become vested. (5) Options vest equally over a five year period beginning July 9, 1997. (6) Includes 1,472 and 2,133 shares of stock held by the ESOP and allocated to Mr. Romaine's account for 1996 and 1997, respectively. Based on the closing price of the Common Stock ($20.00 per share) at December 31, 1998. As of the date of this proxy statement, shares had not yet been allocated for fiscal 1998.
Employment Agreement. The Bank is a party to an employment agreement with President and Chief Executive Officer Leonard G. Romaine. The employment agreement is for a term of three years. Under the agreement, Mr. Romaine's employment is terminable by the Bank for "just cause" as defined in the agreement. If the Bank terminates Mr. Romaine without just cause, he will be entitled to a continuation of his salary from the date of termination through the remaining term of the agreement. The agreement contains a provision stating that in the event of termination of employment or diminution of employment in connection with, or within one year after, any change in control of the Bank, Mr. Romaine will be paid in a lump sum an amount equal to 2.99 times his five year average cash compensation. Had a change in control been deemed to have occurred at completion of the last fiscal
year, Mr. Romaine would have been entitled to a lump sum payment of approximately $388,000. The payment that would be made would be an expense to the Bank, thereby reducing net income and the Bank's capital by that amount. The agreement is reviewed annually by the Board of Directors and may be extended for additional one-year periods upon a determination of the Board and satisfactory job performance within the Board's sole discretion.
The Bank also entered into similar employment agreements with eight officers of the Bank, with terms of three, two and one years and severance protection upon a termination of employment or diminution of employment following a change in control with such payment equalling between one and three times the current annual compensation of such individuals. Upon a change in control, payment to all executive officers as a group (seven persons), excluding Mr. Romaine, as of December 31, 1998, would have equalled approximately $1.0 million.
Other Compensation
Employee Stock Ownership Plan. The Bank maintains an ESOP for the exclusive benefit of participating employees. Participating employees are employees who have completed one year of service with the Bank or its subsidiary and have attained the age 21.
The ESOP be funded by contributions made by the Bank in cash or the Common Stock. Benefits may be paid either in shares of the Common Stock or in cash. The ESOP borrowed funds with which to acquire 243,340 shares of the Common Stock issued in the Conversion, representing 8.0% of the Common Stock then outstanding. The loan is secured by the shares purchased and earnings of ESOP assets. Shares purchased with such loan proceeds will be held in a suspense account for allocation among participants as the loan is repaid. This loan is expected to be fully repaid in approximately 15 years. For the 1998 fiscal year, the Bank recognized an expense of $299,000 regarding the ESOP.
1996 Stock Option Plan. The Company's Board of Directors adopted a 1996 Stock Option Plan, which was approved by the Company's stockholders on July 9, 1996. Pursuant to the 1996 Stock Option Plan, a number of shares equal to 10% of the Common Stock issued in the Company's initial public offering (304,175 shares of Common Stock) were reserved for issuance by the Company upon exercise of stock options to be granted to officers, directors, and key employees of the Company (or any present of future parent or subsidiary of the Company), from time to time under the 1996 Stock Option Plan. The purpose of the 1996 Stock Option Plan is to provide additional incentive to certain officers, directors, and key employees by facilitating their purchase of a stock interest in the Company. The 1996 Stock Option Plan became effective on July 9, 1996 and provides for a term of ten years, after which no awards may be made, unless earlier terminated by the Board of Directors pursuant to the terms of the 1996 Stock Option Plan.
An initial grant of stock options under the 1996 Stock Option Plan was made to officers, directors, and key employees upon the Company's receipt of stockholder approval on July 9, 1996, and the option exercise price is the closing price of the Common Stock on the date of stockholder approval. The initial grant of stock options were the only options granted to officers, directors, and key employees during the fiscal year ended December 31, 1996. In December 1997, certain officers and key employees were granted an aggregate of 16,000 additional options under the 1996 Stock Option Plan. The option exercise price is the closing price of the Company's Common Stock on the date of the grant. No options were granted to officers, directors and key employees during the fiscal year ended December 31, 1998. As of the Record Date, 15,208 stock options have been exercised pursuant to the 1996 Stock Option Plan.
(1) Based on an exercise price of $10.625 for options granted in the fiscal year ended December 31, 1996, and $20.00 for options granted in the fiscal year ended December 31, 1996 and the closing price of the Common Stock on December 31, 1998 of $20.00.
Management Stock Bonus Plan. The board of directors of the Bank has adopted the MSBP as a method of providing directors, executive officers and key employees of the Bank with a proprietary interest in the Company in a manner designed to encourage such persons to remain in the employment or service with the Bank. Awards under the MSBP were made in recognition of prior and expected future services to the Bank to those directors, executive officers and key employees of the Bank responsible for implementation of the policies adopted by the board of directors of the Bank, the profitable operation of the Bank, and as a means of providing a further retention incentive and direct link between compensation and the profitability of the Bank. Awards under the MSBP vest at a rate of 20% per year beginning on the anniversary date of the date of grant. An initial grant of 82,732 shares of restricted stock was made on July 9, 1997, the date of stockholder approval of the MSBP. No awards were granted under the MSBP in 1998.
Defined Benefit Plan. The Bank has a defined benefit pension plan covering substantially all of its employees. The benefits are based on years of service and employees' compensation. The Bank's funding policy is to fund pension costs accrued. Contributions are intended to provide not only for benefits attributed to service to date but also for those expected to be earned in the future.
All full-time employees of the Bank are eligible to participate after one year of service and attainment of age 21. A qualifying employee becomes fully vested in the Pension Plan upon completion of five years service or when the normal retirement age of 65 is attained. The Pension Plan is intended to comply with the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
The Pension Plan provides for monthly payments to each participating employee at normal retirement age. The annual allowance payable under the Pension Plan is equal to 25% of an employee's average monthly salary, up to $650, plus 40% of average monthly salary in excess of $650, reduced for less than 25 years of service, plus 1/4 of 1% of average monthly salary times years of service. If benefits are paid prior to age 65, the benefit specified will be reduced by 1/15 for each of the first five years and 1/30 for each of the next five years and reduced actuarially for each additional year by which the starting date of such benefit precedes age 65. There is a minimum monthly benefit equal to 2% of monthly salary, times years of service up to 10 years. The Pension Plan also provides for payments in the event of disability or death. At December 31, 1998, Mr. Romaine had 29 years of credited service under the Pension Plan. The Bank had a pension expense of $244,000 for the fiscal year 1998. At December 31, 1998, the Pension Plan had projected benefit obligations greater than plan assets of approximately $1.2 million.
The following table shows the estimated annual benefits payable under the Pension Plan in calendar year 1998 based on the respective employee's years of benefit service and applicable average annual salary, as calculated under the Pension Plan. Benefits under the Pension Plan are not subject to offset for Social Security benefits.
Years of Benefit Service ------------------------ 15 20 25 30 35 -- -- -- -- --
$ 20,000.................. $ 4,848 $ 6,464 $ 8,080 $ 8,330 $ 8,680 40,000.................. 10,398 13,864 17,330 17,830 18,330 60,000.................. 15,948 21,264 26,580 27,330 28,080 80,000.................. 21,498 28,664 35,830 36,830 37,830 100,000.................. 27,048 36,064 45,080 46,330 47,580 120,000.................. 32,598 43,464 54,330 55,830 57,330 150,000.................. 40,823 54,564 68,205 70,080 71,955
Report of the Compensation Committee on Executive Compensation
The Bank Compensation Committee meets annually to review compensation paid to the chief executive officer. The Committee reviews various published surveys of compensation paid to employees performing similar duties for depository institutions and their holding companies, with a particular focus on the level of compensation paid by comparable stockholder institutions in and around the Bank's market area, including institutions with total assets of between $100 million and $300 million. Although the Committee does not specifically set compensation levels for executive officers based on whether particular financial goals have been achieved by the Bank, the Committee does consider the overall profitability of the Bank when making these decisions.
During the year ended December 31, 1998, Leonard G. Romaine, President received an increase in his base salary from $115,000 to $125,400. The Committee will consider the annual compensation paid to the presidents and chief executive officers of publicly owned financial institutions nationally, in the State of New Jersey and surrounding Northeastern states with assets of between $100 million and $500 million and the individual job performance of such individual in consideration of its specific salary increase decision with respect to compensation to be paid to the president and chief executive officers in the future.
Compensation Committee:
Albert J. Weite Edward J. Seugling Raoul G. Barton
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Bank during the year ended December 31, 1998 consisted of Directors Weite, Barton and Seugling, all members of the Board of Directors of the Company. Romaine was a member of the Compensation Committee during fiscal 1998 but did not participate in matters involving his personal compensation.
Performance Graph
Set forth below is a stock performance graph comparing the cumulative total shareholder return on the Common Stock with (a) the cumulative total stockholder return on stocks included in the Nasdaq Stock Market index and (b) the cumulative total stockholder return on stocks included in the Nasdaq Bank index, as prepared for Nasdaq by the Center for Research in Securities Prices ("CRSP") at the University of Chicago. All three investment comparisons assume the investment of $100 as of the close of January 5, 1996 (the closing date of initial issuance of the Common Stock). All of these cumulative total returns are computed assuming the reinvestment of dividends. In the graph below, the periods compared were January 5, 1996 and the Company's fiscal years ending of December 31, 1996, 1997 and 1998.
There can be no assurance that the Company's future stock performance will be the same or similar to the historical stock performance shown in the graph below. The Company neither makes nor endorses any predictions as to stock performance.
[GRAPHIC OMITTED]
========================================================================== 1/5/96 12/31/96 12/31/97 12/31/98 - -------------------------------------------------------------------------- CRSP Nasdaq U.S. Index $100 $126 $161 $227 - -------------------------------------------------------------------------- CRSP Nasdaq Bank Index $100 $134 $224 $222 - -------------------------------------------------------------------------- Little Falls Bancorp, Inc. $100 $113 $184 $181 ==========================================================================
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management - ------------------------------------------------------------------------
(a) Security Ownership of Certain Beneficial Owners.
Persons and groups owning in excess of 5% of the Common Stock are required to file certain reports regarding such ownership pursuant to the Securities Exchange Act of 1934, as amended (the "1934 Act"). The following table sets forth, as of the March 22, 1999, persons or groups who own more than 5% of the Common Stock and the ownership of all executive officers and directors of the Company as a group. The information provided is based upon documents supplied to the Company by the persons providing such information pursuant to the 1934 Act. The Company does not verify this information. Other than as noted below, management knows of no person or group that owns more than 5% of the outstanding shares of Common Stock at the Voting Record Date.
Percent of Shares of Name and Address Amount and Nature of Common Stock of Beneficial Owner Beneficial Ownership Outstanding - ------------------- -------------------- -----------
First Manhattan Co. 437 Madison Avenue New York, NY 10022 198,000(1) 7.99%
Wellington Management Co. LLP 75 State Street Boston, MA 02109 126,100(2) 5.09%
Little Falls Bank Employee Stock Ownership Plan 86 Main Street Little Falls, NJ 07424 241,979(3) 9.77%
John Hancock Advisors, Inc. Post Office Box 111 Boston, MA 02117 225,000(4) 9.49%
- -------------------------------
(1) Information provided is based on a Schedule 13G/A dated February 11, 1999. (2) Information provided is based on a Schedule 13G/A dated February 8, 1999 filed by Wellington Management Co. LLP. (3) The ESOP purchased such shares for the exclusive benefit of plan participants with funds borrowed from the Company. These shares are held in a suspense account and will be allocated among ESOP participants annually on the basis of compensation as the ESOP debt is repaid. The Board of Directors has appointed a committee consisting of John P. Pullara, Leonard G. Romaine and Della Talerico to serve as the ESOP administrative committee ("ESOP Committee") and Directors Barton, Parker and Seugling to serve as the ESOP trustees ("ESOP Trustees"). The ESOP Committee or the Board instructs the ESOP Trustees regarding investment of ESOP plan assets. The ESOP Trustees must vote all shares allocated to participant accounts under the ESOP as directed by participants. Unallocated shares and shares for which no timely voting direction is received will be voted by the ESOP Trustees as directed by the ESOP Committee. As of March 11, 1999, 33,927 shares had been allocated under the ESOP to participant accounts. (4) Information provided is based on a Schedule 13G/A dated January 13, 1999. JHA has direct beneficial ownership of 225,000 shares of common stock. Through separate Advisory Agreements, JHA has sole power to vote 120,000 shares for the John Hancock Regional Fund and 105,000 shares for the John Hancock and Thrift Opportunity Fund.
(b) Security Ownership of Management.
Included under Item 10 of this report.
(c) Changes in Control.
On January 26, 1999, the Registrant entered into a definitive merger agreement that will result in the acquisition of the Registrant by HUBCO, Inc. This acquisition is expected to occur during the third fiscal quarters of the Registrant's 1999 fiscal year. The Registrant has executed a stock option agreement with HUBCO, Inc. that provides HUBCO, Inc. with options that may be exercised for approximately 19.9% of the common stock of the Registrant at an exercise price of $19.25 per share in the event the planned acquisition does not occur. The planned acquisition is subject to numerous conditions.
Item 13.
Item 13. Certain Relationships and Related Transactions - --------------------------------------------------------
No directors, executive officers, or immediate family members of such individuals were engaged in transactions with the Bank or any subsidiary involving more than $60,000 during the year ended December 31, 1998. Furthermore, the Bank had no "interlocking" relationships existing during the year ended December 31, 1998 in which (i) any executive officer is a member of the Board of Directors/Trustees of another entity, one of whose executive officers is a member of the Bank's Board of Directors, or where (ii) any executive officer is a member of the compensation committee of another entity, one of whose executive officers is a member of the Bank's Board of Directors.
The Bank, like many financial institutions, has followed a policy of granting various types of loans to officers, directors, and employees. All loans to executive officers and directors of the Bank have been made in the ordinary course of business and on substantially the same terms and conditions, including interest rates and collateral, as those prevailing at the time for comparable transactions with the Bank's other customers, and do not involve more than the normal risk of collectibility nor present other unfavorable features. Recent legislation permits savings institutions to make loans to executive officers, trustees and principal shareholders ("insiders") on preferential terms, provided the extension of credit is made pursuant to a benefit or compensation program of the Bank that is widely available to employees of the Bank or its affiliates and does not give preference to any insider over other employees of the Bank or affiliate. All loans by the Bank to its directors and executive officers are subject to OTS regulations restricting loans and other transactions with affiliated persons of the Bank. Loans to executive officers and directors of the Bank, the Company and their affiliates amounted to approximately $684,000 or 2.19% of the Bank's retained earnings at December 31, 1998.
Item 14.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K - -------------------------------------------------------------------------
(a) The following documents are filed as a part of this report:
(1) Financial Statements of the Company are incorporated by reference to the following indicated pages of the Annual Report.
PAGE ----
Independent Auditors' Report......................................... 18 Consolidated Statements of Financial Condition as of December 31, 1998 and 1997......................................... 19 Consolidated Statements of Income for the Years Ended December 31, 1998, 1997 and 1996................................... 20 Consolidated Statements of Comprehensive Income for the Years Ended December 31, 1998, 1997 and 1996............... 21 Consolidated Statements of Changes in Stockholders' Equity for the Years Ended December 31, 1998, 1997 and 1996............... 22-23 Consolidated Statements of Cash Flows for the Years Ended December 31, 1998, 1997 and 1996................................... 24-25 Notes to Consolidated Financial Statements........................... 26-58
The remaining information appearing in the Annual Report is not deemed to be filed as part of this report, except as expressly provided herein.
(2) All schedules are omitted because they are not required or applicable, or the required information is shown in the consolidated financial statements or the notes thereto.
(3) Exhibits
(a) The following exhibits are filed as part of this report.
2.0 Branch Sale Agreement** 3.1 Articles of Incorporation of Little Falls Bancorp, Inc.* 3.2 Bylaws of Little Falls Bancorp, Inc.* 4.0 Form of Stock Certificate of Little Falls Bancorp, Inc.* 10.1 Employment Agreement between the Bank and John P. Pullara** 10.2 Employment Agreement between the Bank and Leonard G. Romaine** 10.4 Form of Employment Agreement with Eight Employees of the Bank*** 10.6 1996 Management Stock Bonus Plan*** 10.7 1996 Stock Option Plan*** 10.8 1997 Directors Stock Compensation Plan 10.9 1998 Directors Stock Compensation Plan 10.10 Directors Retirement and Consultation Plan 13.0 1998 Annual Report to Stockholders 21.0 Subsidiary of the Registrant (See Item 1 - Business-Subsidiary Activities) 23.0 Consent of Accountants 27.0 Financial Data Schedule****
(b) Reports on Form 8-K.
On November 12, 1998 the Registrant filed a Current Report on Form 8-K (Items 5 and 7), announcing the termination of the Agreement of Merger between the Registrant and Skylands Community Bank.
- ------------------------ * Incorporated herein by reference into this document from the Exhibits to Form S-1, Registration Statement, initially filed with the Securities and Exchange Commission on September 25, 1995 (Registration No. 33-97316).
** Incorporated by reference into this document from the Exhibits to Registrant's Annual Report on Form 10-K for the Year Ended December 31, 1995 (File No. 0-27010).
*** Incorporated by reference into this document from the Exhibits to Registrant's Annual Report on Form 10-K for the year ended December 31, 1996 (File No. 0-27010).
**** In electronic filing only.
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.
LITTLE FALLS BANCORP, INC.
Dated: __________ ___, 1999 By: /s/ Leonard G. Romaine ------------------------------------ Leonard G. Romaine President and Director (Duly Authorized Representative)
Pursuant to the requirement 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.
By: /s/ Albert J. Weite By: /s/ Richard A. Capone --------------------------------- ---------------------------------- Albert J. Weite Richard A. Capone Chairman of the Board Chief Financial Officer and Director (Principal Financial and Accounting Officer) Date: March 19, 1999 Date: March 19, 1999
By: /s/ Edward J. Seugling By: --------------------------------- ---------------------------------- Edward J. Seugling John P. Pullara Vice Chairman of the Board Director and Director
Date: March 19, 1999 Date: __________ ___, 1999
By: /s/ George Kuiken By: /s/ Norman A. Parker --------------------------------- --------------------------------- George Kuiken Norman A. Parker Director Director
Date: March 19, 1999 Date: March 19, 1999
By: --------------------------------- Raoul G. Barton Director
Date: __________ ___, 1999