ITEM 6. AVERAGE BALANCE SHEETS [CAPTION]
NOTES TO AVERAGE BALANCE SHEET
1. Tax-exempt income is calculated at coupon rate, no adjusted on a tax equivalent basis.
2. At December 31, 1995, loans on non-accrual status totaled $3,359,857. These loans are included in the loan category on the preceding Average Balance Sheet. If interest had been accrued on such loans, interest income on loans would have been $416,342 higher in 1995.
3. Interest on loans includes loan fees pursuant to FASB91 in the following amounts:
4. The Bank s net interest margin remains above the national average, but has remained at higher than average levels for a number of years. The Bank is a community bank which focuses its efforts on customer relationships and good service while remaining competitive in the demand for loans both in the commercial and consumer sectors. The spread and margin for the Bank have been decreasing gradually over the past three years, as competition for the same customers within the Bank s market area continues to grow. The average rate on earning assets increased by 63 basis points in 1995 when compared to 1994; however, the average rate on interest bearing liabilities increased by 85 basis points. The Bank continues to seek quality loans, broadening its customer base as the spread tightens. The effect of rates and volumes is exemplified further in the Rate Volume Analysis found on page 12 of this report.
RATE VOLUME ANALYSIS
The following table represents a summary of the changes in interest earned and interest paid as a result of changes in rates and changes in volumes. For each category of earning assets and interest-bearing liabilities, information is provided with respect to changes attributable to change in rate (change in rate multiplied by old volume) and change in volume (change in volume multiplied by old rate). The change in interest due to both volume and rate has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each.
INTEREST RATE SENSITIVITY ANALYSIS AS OF DECEMBER 31, 1995 Amounts in Thousands
The following table sets forth the amounts of interest-earning assets and interest-bearing liabilities outstanding at December 31, 1995 which are anticipated by the Bank, based upon certain assumptions, to reprice or mature in each of the future time periods shown.
Except as stated below, the amounts of assets and liabilities shown which reprice or mature during a particular period were determined in accordance with the earlier of term to repricing or the contractual terms of the asset or liability. The Bank has assumed that 3% of its savings is more rate sensitive and will react to rate changes, and has therefore categorized it in the one-year time horizon. The remainder is stable and is listed in the greater than five year category. NOW accounts, other than seasonal fluctuations approximating $4,000,000, are stable and are listed in the greater than five year category. Money market accounts are assumed to reprice in three months or less. Certificates of deposit are assumed to reprice at the date of contractual maturity. Fixed rate mortgages, totaling $35,000,000 are amortized using a 6% rate, which approximates the Bank s prior experience.
SUMMARY OF INVESTMENT PORTFOLIO
The information presented below is to facilitate the analysis and comparison of sources of income and exposure to risks.
MATURITY SCHEDULE FOR INVESTMENTS HELD TO MATURITY AT DECEMBER, 1995
MATURITY SCHEDULE FOR INVESTMENTS AVAILABLE FOR SALE AT DECEMBER 31, 1995
The maturity schedule for securities available for sale excludes marketable equity securities totaling $5,421,086 and other investments of $240,483.
Yield on tax exempt bonds were not computed on a tax equivalent basis
The bank does not hold any securities for a single issuer where the aggregate book value of the securities exceed 10% of the Bank s stockholders equity.
The maturities for the mortgage-backed securities are shown at the stated maturity. If the Bank presented mortgage-backed securities by average expected life, the breakdown would be:
In 1987, the Bank purchased adjustable rate preferred (ARPS) securities totaling $1,319,000. As the economy entered into its recessionary cycle in the late 1980s, these ARPS, which were issued by other banks, were impacted by concerns of investors in the banking industry. The Bank elected to recognize a permanent write down on the ARPS totaling $387,000 beginning in 1990.
The ARPS portfolio began increasing in market value during 1991 as banks showed stronger earnings. Since this upward market trend continued in 1992, the Bank elected to sell its holdings of ARPS and by year end had a remaining balance of $463,000 in ARPS with minimum loss to the Bank. The remaining ARPS were sold in early 1993.
Changes in the market value of the investment portfolio follow national interest rate fluctuations. As national interest rates dropped, the value of the portfolio has increased. The Bank does not hold any IOs or POs, nor does it hold any securities whose market value could change to a greater degree than traditional debt. The Bank does hold one 10-year government agency backed step up which has a fixed rate of interest for the first three years and which then increases incrementally each year until maturity. This debenture is callable one year from issuance date.
SUMMARY OF LOAN PORTFOLIO
PAST DUE LOANS (Amounts in Thousands)
The figures below represent loans past due 30 days or more (% is percentage of loans outstanding for a specific category of loans).
Loans which were non-performing as of December 31, 1994 and for which the real estate was acquired by the Bank in 1995 totaled $181,000.
MATURITY SCHEDULE - LOAN PORTFOLIO As of December 31,
The Bank makes construction loans on the basis of: a) permanent financing from another financial institution, or b)approval at the time of origination for permanent financing by our own Bank. In addition, a number of large commercial real estate loans are written and priced on the basis of fixed rates with a three to five year balloon payment. It is generally the intent of the Bank to renegotiate the rate and term of the loan at the balloon maturity. Lines of credit are renewed annually. There are consumer construction loans that will either be sold to the secondary market upon completion of construction or rolled into permanent portfolio residential mortgage loans on the Bank s books.
The total amount of commercial, financial and agricultural, construction, and land development loans with adjustable interest rates and maturities of greater than one year is $10,676,789 and with fixed interest rates and maturities of greater than one year is $7,730,755.
RISK ELEMENTS
It is the policy of management to review past due loans on a monthly basis. Those loans 90 days or more past due which are not well secured or in the process of collection are designated as non-accruing. This includes government guaranteed loans unless the guaranteed portion has been sold. If interest had been accruing on such loans, interest income on loans would have been $416,342 higher in 1995. Interest collected on these loans totaled $184,983 in 1995 and was included in net income. Non-accrual loans represent 1.7% of average loans for 1995 and 1994.
Management is not aware of any potential problems loans which are not included in the above table.
The Bank makes single-family residential loans, commercial real estate loans, commercial loans, and a variety of consumer loans. The Bank s lending activities are conducted in north coastal Maine. Because of the Bank s proximity to Acadia National Park, a large part of the economic activity in the area is generated from the hospitality business associated with tourism. At December 31, 1995, approximately $25,500,000 of loans were mde to companies in the hospitality industry. Of this total indebtedness, 1.8% were 30 days or more delinquent as of December 31, 1995. Loans to real estate investors and developers totaled $14,100,000 in 1995. In the fishing industry, loans decreased from $10,000,000 in 1994 to $7,500,000 in 1995. This decrease was attributable to the paydown of several aquaculture loans and a lesser need at year end for Bank support for the lobster pounding industry.
From the standpoint of large loans to single borrowers, loans of $700,000 or more to one borrower decreased as a percentage of capital from 95% in 1994 to 90% in 1995. As most loans granted by the Bank are collateralized by real estate, the ability of the Bank s borrowers to repay is dependent on the level of economic activity and the level of real estate values in the Bank s market area. Because of the increasing health of the tourist industry and other industries in its market area, the Bank has benefited from the economic well-being of its customers.
SUMMARY OF LOAN LOSSES
Delinquencies are reviewed on a monthly and quarterly basis by senior management as well as the Board of Directors. Information reviewed is used in determining if and when loans represent potential losses to the Bank. A determination of a potential loss could result in a charge to the provision for loan losses, with an increase to the reserve for possible loans so that risks in the portfolio can be identified on a timely basis and an appropriate reserve can be maintained.
Historically, the amount allocated for the allowance for possible loan losses has been based on management s evaluation of the loan portfolio. Considerations used in this evaluation included past and anticipated loan loss experience, the character and size of the loan portfolio, the value of collateral, general economic conditions, and maintenance of the allowance at a level adequate to absorb anticipated losses. With net charge offs remaining under one-half of one percent of average loans outstanding for 1990, the above method and review was adequate.
Since 1991, the Bank has utilized the methodology for the review of the allowance for loan losses to be in accordance with the approach suggested by bank regulators through FDIC Fil-34-91, dated June 28, 1992. The reserve includes specific reserves based on the review of specific credits, pool reserves based on historical charge offs by loan types and supplementary reserves reflecting concerns and loan concentrations by industry, by customer and by general economic conditions. The allocation has changed based on concentration of loans in the fishing and tourist related industries.
In 1992, the Bank continued to concentrate on resolving loan problems, focusing on the reduction of non-earning assets and resolution of troubled debt situations. With continued softness in the economy, the Bank aggressively charged off problem loans, and, at the same time provided more reserves for possible loan losses in the future. Building on the prior year s program of measuring adequacy, the Bank continued to build reserves to ensure that future earnings were not hurt by unforseen problems in the loan area.
The Bank experienced its greatest percentage of charge offs when compared to average loans outstanding in 1991 when the ratio was .74%. This ratio reached a low point in 1994 with charge offs representing only .25% of average loans. The percentage of charge offs to average loans in 1995 totals .41%. During the past five years, the majority of charge offs have been commercial loans secured by real estate. In 1992, increases in charge offs were attributable to an account where faulty documentation resulted in loss of collateral. The Bank real estate charge offs in 1994 represent charge down of loan balances on troubled loans based on updated fair value appraisals, or highest third party bids at auction.
In 1994 there were two writedowns of REO charged directly to earnings. A property in Northeast Harbor was sold at a loss of $74,000 after paying all expenses, and property on Main Street in Ellsworth was written down by $100,000 to more closely reflect a liquidation. In 1994, the same property
in Ellsworth was written down by additional $23,500. This property was sold in 1995 for $120,000. Additionally in 1994, three residential properties owned by the Bank were written down by a total of $58,000 to more closely reflect their market values.
Approximately 28% of the chargeoffs in 1995 represented loans secured by real estate, and 39% represented commercial credits. The increase in commercial loan chargeoffs in 1995 included a chargedown of a large commercial loan. Recoveries offset losses totaling $97,000, $141,000 and $264,900 for the years ended 1995, 1994 and 1993, respectively.
Softness in the economy in the early 1990s, reduction of collateral value, and, in some cases, poor management by the owners of the business have caused the major losses in the commercial area.
Based on past experience and management s assessment of the present loan portfolio, it is expected that loan charge offs for 1996 will not exceed $840,000.
A breakdown of the allowance for possible loan losses is as follows:
SUMMARY OF LOAN LOSS EXPERIENCE (In thousands)
% = Percentage of Loans Outstanding for a Specific Category of Loans
SUMMARY OF DEPOSIT PORTFOLIO
MATURITY SCHEDULE FOR TIME DEPOSITS $100,000 OR MORE
RETURN ON EQUITY AND ASSETS
As of January 1, 1996, there were approximately 974 holders of record of Bar Harbor Bankshares common stock.
Dividends have been paid semi-annually during 1994 and 1995, as follows:
In 1996 the Company will pay dividends on a quarterly basis.
SHORT TERM BORROWINGS
The terms for short-term FHLB advances taken in 1995 ranged from 5 days to 200 days and averaged 49 days. The terms for wholesale repurchase agreements taken in 1995 ranged from 4 days to 90 days and averaged 24 days.
The terms for short-term FHLB advances taken in 1994 ranged from 14 days to 257 days and averaged 82 days. The terms for wholesale repurchase agreements taken in 1994 ranged from four days to 90 days and averaged 25 days.
The terms for short-term FHLB advances taken in 1993 ranged from 17 days to 260 days and averaged 82 days. The terms for wholesale repurchase agreements taken in 1993 ranged from 6 days to 140 days and averaged 31 days.
The following data represents selected year end financial information for the past five years. All information is unaudited. (In thousands, except per share data)
SUPPLEMENTARY FINANCIAL DATA BY QUARTERS (In thousands except per share data)
ITEM 7.
ITEM 7. MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information contained in the section captioned Management s Discussion and Analysis of Financial Condition and Results of Operations in the Company s Annual Report is incorporated herein by reference.
ITEM 8.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements required are contained on pages 10 through 25 of the Company s Annual Report for the year ended December 31, 1995 and are incorporated herein by reference.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
Not applicable.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
The following statements pertain to all individuals listed below:
1. There are no arrangements or understandings between any director or officer listed below and any other person pursuant to which such director or officer was selected as an officer or director.
2. There is no family relationship among any of the directors and officers listed below.
3. None of the directors and officers listed below have been involved in any bankruptcy, criminal, or other proceeding set forth or described in sub-section (f) of Item 401 of Regulation S-K as promulgated by the Securities and Exchange Commission.
4. Each of the directors listed below has been elected to a three year term, except where the mandatory retirement age of 75 years precluded an election of a shorter term, with one third of the Board of Directors, as nearly as may be, standing for election each year. Each director of the Company also serves as a director of the Bank, and references below to the year in which an individual was first elected refer to the year in which s/he was first elected a director of the Bank.
[1] Robert H. Avery. Director, Age 67. Mr. Avery is retired. He first was elected as a Director on November 2, 1965. He was elected as President and Chief Executive Officer of the Bank in 1971 and retired as of June 30, 1986. He currently serves as Director and Treasurer of the Bar Harbor Water Company.
[2] Frederick F. Brown, Director, Age 69. Mr. Brown s principal occupation during the past five years has been as proprietor and owner of F. T. Brown Company, which owns and operates a hardware store in Northeast Harbor and as one-third owner of Island Plumbing & Heating in Northeast Harbor. He also serves as President of Northeast Harbor Water Company. Mr. Brown first was elected as a director on October 2, 1979.
[3] Thomas A. Colwell, Director. Age 51. Mr. Colwell s principal occupation during the past five years has been as owner of Colwell Brothers, Inc. He also serves as a member of the Board of Directors of the Maine Lobster Pound Association. Mr. Colwell was first elected as a director on October 1, 1991.
[4] Bernard K. Cough, Director, Age 68. Mr. Cough s principal occupation during the past five years has been owner/operator of several motels, including the Atlantic Oakes Motel, Atlantic Eyrie Lodge, Inc., Brookside Motel, Bay View, Inc., and Ocean Gate, Inc. Mr. Cough is also Treasurer of Cough Bros., Inc. And President of Downeast Inns, Inc. Mr. Cough was first elected as a director on October 1, 1985.
[5] Peter Dodge, Director, Age 52. Mr. Dodge is President of the Peter Dodge Agency (a Maine corporation) d/b/a the Merle B. Grindle Insurance Agency in Blue Hill, Maine. He is also Director and Treasurer of Coastal Holdings, Inc., Trustee of George Stevens Academy, and Director, Bagaduce Music Lending Library. He was first elected as a director on October 6, 1987.
[6] Lawrence L. Dorr, Director, Age 74. Mr Dorr is retired. Prior to his retirement, Mr. Dorr was the principal stockholder and administrator of Oceanview Nursing Home, Inc. Of Lubec. Mr. Dorr first was elected as a director on October 2, 1973.
[7] Dwight L. Eaton, Senior Vice President and Trust Officer, Age 60. Mr. Eaton s principal occupation during the past five years has been as Senior Vice President and Trust Officer of Bar Harbor Banking and Trust Company. He serves as Chairman and Director of the Acadia Corporation. Mr. Eaton first was elected as a Director on October 4, 1988.
[8] Ruth S. Foster, Director, Age 66. Mrs. Foster s principal occupation is the President and principal stockholder of Ruth Foster s, a children s clothing store in Ellsworth, Maine. Mrs. Foster first was elected as a director on October 7, 1986.
[9] Robert L. Gilfillan, Chairman of the Board of Directors, Age 68. Mr. Gilfillan s principal occupation during the past five years has been as the owner and President of the West End Drug Company in Bar Harbor. Mr. Gilfillan first was elected as a director on November 5, 1957.
[10] Sheldon F. Goldthwait, Jr., President and Chief Executive Officer, Age 57. He was appointed President and Chief Executive Officer of Bar Harbor Banking and Trust Company January 1, 1995. Prior to that he served as Executive Vice President of Bar Harbor Banking and Trust Company. He serves as Treasurer and Director of the Acadia Corporation. Mr. Goldthwait first was elected as a director on October 4, 1988.
[11] James C. MacLeod, Director, Age 71. Mr. MacLeod is retired. Mr. MacLeod served as Vice President of the Bank until his retirement in December of 1987. He was appointed as a Vice president of the Bank in 1972 and was first elected as a director of the Bank on November 7, 1961.
[12] John P. McCurdy, Director, Age 64. Prior to his retirement in 1991. Mr. McCurdy s principal occupation was the owner and operator of McCurdy Fish Company of Lubec, a processor of smoked herring. Mr. McCurdy first was elected as a director on October 2, 1979.
[13] Jarvis W. Newman, Director, Age 60. Mr. Newman is the owner of Newman Marine, a boat brokerage in Southwest Harbor. Mr. Newman first was elected as a Director on October 5, 1971.
[14] Robert M. Phillips, Director, Age 54. Mr. Phillips is Vice President and Chief Operating Officer of Jasper Wyman and Son (blueberry processors), Milbridge, Maine. He was first elected as a director on October 5, 1993.
[15] John P. Reeves. Director, Age 61. Mr. Reeves is retired. He was elected as President and Chief Executive Officer of Bar Harbor Banking and Trust Company in 1986 and retired in 1994. He first was elected as a director on October 6, 1970.
[16] Abner L. Sargent, Director, Age 71. Mr. Sargent is former owner and designated broker of High Street Real Estate and Vice President and Treasurer of Sargent s Mobile Homes, Inc., of Ellsworth. He first was elected as a director on October 6, 1981.
[17] Lynda Z. Tyson, Director, Age 40. Mrs. Tyson is Chief Operating Officer and Marketing Director of Tyson & Partners, Inc., a marketing communications consulting firm in Bar Harbor. Mrs. Tyson was first elected as a director on October 5, 1993.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
Officers of the Company do not, as such, receive compensation. The following table sets forth cash compensation received during the Bank s last fiscal year by the executive officers for whom such compensation exceeded $100,000.
The Bank has an incentive plan in which all employees who were on the payroll as of January 1st of a calendar year and who worked through December 31st are eligible. The computation is based on earnings per share growing by 10% each year with 1992 being the base year. Once the 10% growth is attained, a pool is created in which all eligible employees receive the same percentage of their salary in the form of an incentive payment.
COMPENSATION OF DIRECTORS
Each of the directors of the Company is a director of the Bank and as such receives a fee of $250.00 for each meeting attended. The fee paid for the Annual Meeting is $500.00 per member of the Board of Directors. Meetings of the Board of Directors of the Bank are held monthly. No directors fees are paid to the directors of the Company as such. Those directors of the Bank who are also officers do not receive directors fees.
EMPLOYEE BENEFIT PLANS
Effective August 31, 1993, the Board of Directors ratified the termination of the Company s noncontributory defined benefit pension plan, which covered all eligible employees.
At December 31, 1994, the plan s projected benefit obligation was essentially equivalent to the plan s net assets available for benefits of approximately $2,150,000, and such assets were invested in U.S. Government obligations and cash equivalents. The settlement of the vested benefit obligation by the purchase of nonparticipating annuity contracts for, or the lump sum payments to, each covered employee was completed in 1994, upon receipt of certain regulatory approvals. The Company recognized no curtailment gain or loss in 1993 as a result of the plan termination and no gain or loss was recognized when the plan s benefit obligation was settled in 1994.
Prior to the plan termination, pension benefits were based on years of service, and the Company s policy was to fund, at a minimum, the amount required under the Employee Retirement Income Security Act of 1974. Net pension income of $51,000 in 1993 has been included in operating results. The weighted average discount rate and increase in salary levels used in determining the projected benefit obligation were 8% in 1993. The expected long-term rate of return on assets was 9%.
The Bank offers a 401(k) plan to all employees who have completed one year of service and who have attained the age of 21. Employees may elect to defer from 1% to 15% of their salaries subject to a maximum amount determined by a formula annually, which amount was $9,240 in 1994 and 1995. In 1995, the bank matched employee contributions to the 401(k) plan to the extend of 25% of the first 6% of salary for a total of contribution by the bank of $46,637. The bank match for 1994 and 1993 was $42,590 and $37,195, respectively. On December 31, 1995, the Company contributed to each participating employee an additional 3% of the employee s salary, which represented a non-contributory plan replacing the Bank s contribution to the former defined benefit plan. The total contribution made for the non-contributory plan was $122,486. This non-contributory
plan was established in 1994 with a contribution made by the Bank totalling $113,432. Any future contributions by the bank will be determined annually by the vote of the Board of Directors.
In 1995 and 1994, the Bank provided a restricted stock purchase plan through which each employee having one year of service may purchase up to 100 shares of Bar Harbor Bankshares stock at the current fair market price as of a date determined by the Board of Directors. These shares may be purchased through a direct purchase or through the employees 401(k) accounts.
At December 31, 1995, employees exercised their right to purchase 4,632 shares at $28.00 per share, with the actual purchase transpiring in January of 1996. At December 31, 1994, employees exercised their right to purchase 3,770 shares at $16.40 per share, with the actual purchase transpiring in January of 1995.
The Bank provides certain of its officers with individual memberships in local civic organizations and clubs. The aggregate value of these benefits with respect to any individual officer did not exceed $5,000 during the Bank s last fiscal year.
The Bank has entered into agreements with Messrs: Avery, Reeves, Goldthwait, and Eaton whereby those individuals or their beneficiaries will receive upon death or retirement an annual supplemental pension benefit over a period of 10 years in the amount of $15,000 (in the case of Messrs. Avery and Reeves) and in the amount of $10,000 (in the case of Messrs. Goldthwait and Eaton). This plan is unfunded and benefits will be paid out of Bank earnings. As of January 1, 1987, Mr. Avery began drawing his annual installment of $15,000 pursuant to this deferred compensation arrangement. Mr. Reeves began drawing his annual installment of $5,300.04 (reduced for early retirement) as of January 1, 1995.
In 1993, the Company established a non-qualified supplemental retirement plan for Messrs. Reeves, Eaton, Goldthwait and MacDonald. The agreements provide supplemental retirement benefits payable in installments over twenty years upon retirement or death. The Company recognizes the costs associated with the agreements over the service lives of the participating officers. The cost relative to the supplemental plan was $98,273, $368,898, and $181,415 for 1995, 1994, and 1993 respectively. The agreements with Messrs. Reeves, Eaton, Goldthwait and MacDonald are in the amounts of $49,020, $22,600, $37,400 and $7,700 respectively. Mr Reeves began drawing his annual installment of $49,020 as of January 1, 1995.
Officers of the Bank are entitled to participate in certain group insurance benefits. In accordance with Bank policy, all such benefits are available generally to employees of the Bank.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of December 31, 1995, to the knowledge of the Company, there are not any beneficial owners of more than five percent of the Company s common stock.
The following table lists, as of December 31, 1995, the number of shares of Common Stock and the percentage of the Common Stock represented thereby, beneficially owned by each director and nominee for director, and by all principal officers and directors of the Company as a group.
For purposes of this table, beneficial ownership has been determined in accordance with the provisions of Rule 13-d-3 promulgated under the Securities Exchange Act of 1934 as amended. Direct beneficial ownership includes shares held outright or jointly with others. Indirect beneficial ownership includes shares held in the same name of a director s spouse or minor children or in trust for the benefit of a director or member of his or her family. Indirect beneficial ownership does not include, in the case of each director, one seventeenth (2,864 shares) of the 48,680 shares (2.84%) of the Common Stock held by two trusts which shares, for purposes of voting, are allocated equally among the directors of the bank under the terms of the respective trust instruments. No director has any other
beneficial interest in such shares. Ownership figures for directors and nominees include directors qualifying shares owned by each person named.
Management is not aware of any arrangement which could, at a subsequent date, result in a change in control of the company.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Bank retains the firm of Tyson & Partners, Inc. to assist with its marketing program. Lynda Z. Tyson, who was elected to the Board of the Company and the Bank on October 4, 1993, serves as that firm s Chief Operating Officer as well as Director of Marketing. Management believes that the fees charged by Tyson & Partners, Inc. are at least as favorable as any which could have been obtained from persons not affiliated with the Bank.
The Bank has had, and expects to have in the future, banking transactions in the ordinary course of its business with directors, officers, principal stockholders and their associates upon substantially the same terms, including interest rates and collateral on the loans, as those prevailing at the same time for comparable transactions with others. Such loans have not and will not involve more than normal risk of collectibility or present other unfavorable features.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) The following financial statements are incorporated by reference from Item 8 hereof: [Annual Report to Stockholders included herein as Exhibit 13].