PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as
permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c)
or Rule 14a-12
PATRIOT BANK CORP.
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement
if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No Fee Required
[ ] Fee computed on table below per Exchange Act
Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction
applies:
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applies:
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computed pursuant to Exchange Act Rule 0-11 (set forth
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state how it was determined):
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[ ] Fee paid previously with preliminary materials.
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by Exchange Act Rule 0-11(a)(2) and identify the filing
for which the offsetting fee was paid previously.
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number, or the Form or Schedule and the date of its
filing.
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PATRIOT BANK CORP.
High & Hanover Streets
Pottstown, Pennsylvania 19464
(610) 323-1500
March 20, 2003
Fellow Shareholders:
You are cordially invited to attend the annual meeting of
shareholders (the "Annual Meeting") of Patriot Bank Corp. (the
"Company") that will be held on April 24, 2003, at 3:30 p.m.,
Eastern Standard Time, at Brookside, Prospect and Adams Streets,
Pottstown, Pennsylvania.
The matters to be acted upon at the meeting are:
(a) The election of one director (Matter No. 1).
(b) The ratification of the appointment of KPMG LLP as
independent auditors of the Company for the fiscal year
ending December 31, 2003 (Matter No. 2).
(c) To transact any other business properly coming before
the meeting and any adjournments, including whether or
not to adjourn the meeting.
Directors and officers of the Company, as well as a
representative of KPMG LLP, the Company's independent auditors
for 2002, will be present at the Annual Meeting to respond to
any questions that you may have regarding the business to be
transacted.
For the reasons set forth in the proxy statement, the Board
unanimously recommends that you vote "FOR" the nominee for
director specified under Matter No. 1 and "FOR" ratification of
the appointment of KPMG LLP as specified under Matter No. 2.
Please sign and return the enclosed proxy card promptly. Your
cooperation is appreciated because a majority of the common
stock must be represented, either in person or by proxy, to
constitute a quorum for the transaction of business.
On behalf of the Board of Directors and all of the employees of
the Company, we thank you for your continued interest and
support. We look forward to seeing you at the Annual Meeting.
Sincerely yours,
/s/ James B. Elliott
----------------------------------
James B. Elliott
Chairman of the Board
/s/ Richard A. Elko
---------------------------------
Richard A. Elko
President and
Chief Executive Officer
PATRIOT BANK CORP.
High & Hanover Streets
Pottstown, Pennsylvania 19464
(610) 323-1500
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on April 24, 2003
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders
(the "Annual Meeting") of Patriot Bank Corp. (the "Company")
will be held on April 24, 2003, at 3:30 p.m., Eastern Standard
Time, at Brookside, Prospect and Adams Streets, Pottstown,
Pennsylvania.
The purpose of the Annual Meeting is to consider and vote upon
the following matters:
1. The election of one director for a term of three years or
until his successor is elected and qualified (Matter
No. 1).
2. The ratification of the appointment of KPMG LLP as
independent auditors of the Company for the fiscal year
ending December 31, 2003 (Matter No. 2).
3. Any other business properly coming before the meeting and
any adjournments, including whether or not to adjourn the
meeting.
The Board of Directors has established March 3, 2003, as the
record date for the determination of shareholders entitled to
receive notice of and to vote at the Annual Meeting and at any
adjournments thereof. Only recordholders of the common stock of
the Company as of the close of business on the record date will
be entitled to vote at the Annual Meeting or any adjournments
thereof. In the event there are not sufficient votes for a
quorum or to approve or ratify any of the foregoing proposals at
the time of the Annual Meeting, the Annual Meeting may be
adjourned in order to permit further solicitation of proxies by
the Company. A list of shareholders entitled to vote at the
Annual Meeting will be available at Patriot Bank (the "Bank"),
High & Hanover Streets, Pottstown, Pennsylvania, for a period of
ten days prior to the Annual Meeting and also will be available
at the Annual Meeting.
By Order of the Board of Directors
/s/ Diane M. Davidheiser
--------------------------
Diane M. Davidheiser
Secretary
Pottstown, Pennsylvania
March 20, 2003
PATRIOT BANK CORP.
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
APRIL 24, 2003
Solicitation and Voting of Proxies
This proxy statement is being furnished to shareholders of
Patriot Bank Corp. (the "Company" or "Patriot") in connection
with the solicitation by the Board of Directors ("Board of
Directors" or "Board") of proxies to be used at the annual
meeting of shareholders (the "Annual Meeting"), to be held on
April 24, 2003, at 3:30 p.m. at Brookside, Prospect and Adams
Streets, Pottstown, Pennsylvania, and at any adjournments
thereof. The 2002 Annual Report to Shareholders, including
consolidated financial statements for the year ended
December 31, 2002, accompanies this proxy statement, which is
first being mailed to recordholders on or about March 20, 2003.
A majority of the outstanding shares of the Company must be
present in person or by proxy at the Annual Meeting in order to
have a quorum for the transaction of business. Shareholders are
requested to vote by completing the enclosed proxy card and
returning it signed and dated in the enclosed postage-paid
envelope. Proxies solicited by the Board of Directors of the
Company will be voted in accordance with the directions given
therein. Where no instructions are indicated, signed proxy
cards will be voted "FOR" the election of the nominee for
director named in this proxy statement and "FOR" the
ratification of KPMG LLP as independent auditors of the Company
for the fiscal year ending December 31, 2003.
Other than the matters set forth on the attached Notice of
Annual Meeting of Shareholders, the Board of Directors knows of
no additional matters that will be presented for consideration
at the Annual Meeting. Execution of a proxy, however, confers
on the designated proxy holders discretionary authority to vote
the shares in accordance with their best judgment on such other
business, if any, that may properly come before the Annual
Meeting and at any adjournments thereof, including whether or
not to adjourn the Annual Meeting.
A proxy may be revoked at any time prior to its exercise by
filing a written notice of revocation with the Secretary of the
Company, by delivering to the Company a duly executed proxy
bearing a later date, or by attending the Annual Meeting and
voting in person. However, if you are a shareholder whose
shares are not registered in your own name, you will need
appropriate documentation from your recordholder to vote
personally at the Annual Meeting.
The Company will pay the cost of solicitation of proxies on
behalf of management. Proxies also may be solicited personally
or by telephone by directors, officers and other employees of
the Company without additional compensation therefor. The
Company also will request persons, firms and corporations
holding shares in their names, or in the name of their nominees,
which are beneficially owned by others, to send proxy material
to and obtain proxies from such beneficial owners, and will
reimburse such holders for their reasonable expenses in doing
so.
Voting Securities
The securities that may be voted at the Annual Meeting consist
of shares of common stock of the Company ("Common Stock").
Except as described below regarding voting by holders of more
than 10% of the outstanding Common Stock, each share entitles
its owner to one vote on all matters to be voted on at the
Annual Meeting. There is no cumulative voting for the election
of directors.
The close of business on March 3, 2003, has been fixed by the
Board of Directors as the record date (the "Record Date") for
the determination of shareholders of record entitled to notice
of and to vote at the Annual Meeting and at any adjournments
thereof. The total number of shares of Common Stock outstanding
on the Record Date was 6,136,577 shares.
As provided in the Company's articles of incorporation,
recordholders of Common Stock who beneficially own in excess of
10% of the outstanding shares of Common Stock (the "Limit") are
not entitled to any vote in respect of the shares held in excess
of the Limit. A person or entity is deemed to beneficially own
shares owned by an affiliate of, or persons acting in concert
with, such person or entity. The Company's articles of
incorporation authorize the Board of Directors to make all
determinations necessary to implement and apply the Limit,
including determining whether persons or entities are acting in
concert.
The presence, in person or by proxy, of the holders of at least
a majority of the total number of shares of Common Stock
entitled to vote (after subtracting any shares in excess of the
Limit pursuant to the Company's articles of incorporation) is
necessary to constitute a quorum at the Annual Meeting. In the
event there are not sufficient votes for a quorum or to approve
or ratify any proposal at the time of the Annual Meeting, the
Annual Meeting may be adjourned in order to permit further
solicitation of proxies.
As to the election of the director, the proxy card provided by
the Board of Directors enables a shareholder to vote "FOR" the
election of the nominee proposed by the Board of Directors, or
to "WITHHOLD" authority to vote for the nominee proposed. Under
Pennsylvania law and the Company's bylaws, directors are elected
by a plurality of votes cast, without regard to either:
(i) broker non-votes, or (ii) proxies as to which authority to
vote for the nominee proposed is withheld.
As to the approval of KPMG LLP as independent auditors of the
Company, by checking the appropriate box, you may: (i) vote
"FOR" the item; (ii) vote "AGAINST" the item; or (iii) "ABSTAIN"
from voting on such item. Under the Company's bylaws, unless
otherwise required by law, this matter and all other matters
that may properly come before the Annual Meeting shall be
determined by a majority of the votes cast, without regard to
either: (a) broker non-votes, or (b) proxies marked "ABSTAIN"
as to that matter.
Proxies solicited hereby will be returned to the Company's
transfer agent, Registrar and Transfer Company, and will be
tabulated by inspectors of election designated by the Board of
Directors, who will not be employed by, or be a director of, the
Company or any of its affiliates. After the final adjournment
of the Annual Meeting, the proxies will be returned to the
Company for safekeeping.
Information Concerning Patriot's Governance Policies, Practices
and Procedures
In order to proactively comply with the requirements of the
Sarbanes-Oxley Act of 2002 and the proposed new listing
standards of the National Association of Securities Dealers,
Inc., applicable to its subsidiary, the Nasdaq Stock Market,
Inc. (the "NASDAQ"), in advance of any requirement to do so,
Patriot took the following actions to further enhance its
corporate governance:
- The Board of Directors reduced to writing and formalized
Patriot's Corporate Governance Guidelines, which
Patriot's Board had historically operated under, and
has posted the Guidelines on Patriot's website at
www.patriotbank.com.
- The Board of Directors, with the assistance of outside
legal counsel, evaluated the independence of each of its
members under the NASDAQ's current and proposed listing
standards, and concluded that each non-management
director is independent.
- The Board of Directors, with the assistance of outside
legal counsel, evaluated the independence of each member
of the Audit Committee of the Board under the
Sarbanes-Oxley Act and the NASDAQ's current and proposed
listing standards applicable to Audit Committee members,
and concluded that each member of the Committee is
independent.
- The Board of Directors, with the assistance of outside
legal counsel, determined that Russell J. Kunkel
qualifies as an Audit Committee "financial expert" as
contemplated under the Sarbanes-Oxley Act of 2002.
- The Board of Directors adopted a revised Code of Conduct
and Ethics.
- The Board of Directors, in an effort to assure that its
senior officers who are primarily responsible for
gathering and compiling financial information and
presenting it to the public on a full, fair and timely
basis recognize and accept their responsibility, adopted
a new Code of Ethics for Senior Financial Officers,
and those officers have pledged to observe the
requirements of the Code.
- Each of Patriot's Audit Committee, Nominating Committee,
Personnel Compensation/Benefits Committee and Corporate
Governance and Ethics Committee either reviewed and
updated or adopted a new charter.
- Patriot's Audit Committee reaffirmed its responsibility
of retaining, compensating, evaluating and overseeing
Patriot's independent auditors and approving all audit
and non-audit services.
- The Audit Committee expanded its policy regarding the
review of earnings releases and the release of financial
information provided to analysts or investors.
- The Audit Committee adopted a policy regarding the
anonymous and confidential submission of auditing and
accounting concerns.
Patriot's Corporate Governance Guidelines formalized a number of
Board policies that were in effect for many years, enhanced
these policies and adopted new policies in an effort to
proactively comply with the NASDAQ's proposed listing standards
and the Sarbanes-Oxley Act of 2002, including the following:
- The Board is composed of at least a majority of
directors who, in the business judgment of the Board,
meet the criteria for independence required by
NASDAQ and all other applicable legal requirements.
- No director may be nominated to a new term if he or she
would be age 70 or older at the time of the election.
- Board members are not subject to term limits.
- Directors are not entitled to tenure rights.
- Directors who materially change non-Patriot
responsibilities they held when they were elected to the
Board should volunteer to resign from the Board, and the
Board through the Corporate Governance and Ethics
Committee should review the continued appropriateness of
Board membership under the circumstances.
- No director may serve on any other public company boards
unless such service is approved by the Board.
- Directors are expected to attend Board meetings and
meetings of committees on which they serve, and to spend
the time needed and meet as frequently as necessary to
properly discharge their responsibilities.
- Board members are expected to review in advance of any
meeting the information and data distributed in writing
to members before the meeting.
- Patriot's non-management directors meet in executive
sessions.
- The Board meets at least once each year, over a two-day
period, in addition to regular board meetings, with
Patriot's executive management team to review Patriot's
business plans, discuss corporate strategy and evaluate
Patriot's position in the market.
- Committee members are ratified by the Board.
- Directors have full and free access to officers and
employees of Patriot.
- The Audit Committee has the power to hire independent
legal, accounting, financial or other advisors, as
applicable, at Patriot's expense, without the approval
of management.
- All directors participate in continuing education
programs sponsored by Patriot throughout the year,
including programs addressing legal, financial,
regulatory and industry specific topics.
- The Nominating Committee is required to receive comments
from all directors and report annually to the Board with
an assessment of the Board's performance, which will be
discussed with the full Board following the end of each
year.
Descriptions of Patriot's Board committees which possess
significant corporate governance responsibilities are set forth
below.
- Patriot's Audit Committee consists of four (4)
directors, each of whom has been determined to be
independent by Patriot's Board of Directors. The
Committee is responsible for the appointment,
compensation, oversight and termination of Patriot
independent auditors. The Committee is required to
pre-approve audit and all permissible non-audit services
performed by the independent auditors. The Committee
also assists the Board in providing oversight over the
integrity of Patriot's financial statements, Patriot's
compliance with applicable legal and regulatory
requirements and the performance of Patriot's internal
audit function. The Audit Committee is also responsible
for, among other things, reporting to Patriot's Board on
the results of the annual audit and reviewing the
financial statements and related financial and
non-financial disclosures included in Patriot's Annual
Reports on Form 10-K and Quarterly Reports on Form 10-Q.
Importantly, from a corporate governance perspective,
the Audit Committee also regularly evaluates the
independent auditors' independence from Patriot and
Patriot's management, including approving consulting
and other legally permitted, non-audit services provided
by Patriot's auditors and the potential impact of the
services on the auditors' independence. The Committee
also meets periodically with Patriot's independent
auditors and Patriot's internal auditors outside of the
presence of Patriot's management, and possess the
authority to retain professionals to assist it with
meeting its responsibilities without consulting with
management. The Committee also reviews and discusses
with management earnings releases, including the use of
pro forma information, and financial information
provided to analysts or investors. The Committee also
discusses with management and the independent auditors
the effect of accounting initiatives and off-balance
sheet transactions. The Committee is also responsible
for receiving and retaining complaints and concerns
relating to accounting and auditing matters.
- Patriot's Nominating Committee consists of four (4)
directors, each of whom has been determined to be
independent by Patriot's Board of Directors. Patriot's
bylaws provide for both shareholder and Board nomination
of director candidates. The Committee is required to
develop and recommend criteria for the selection of new
directors to the Board, including but not limited to,
diversity, age, skills, experience, time availability
(including the number of other boards a director
candidate sits on), NASDAQ listing standards and
applicable federal and state laws and regulations, in
the context of the needs of the Board and Patriot and
such other criteria as the Committee shall determine to
be relevant. The Committee is authorized to identify
and recommend to the Board, consistent with Patriot's
Corporate Governance Guidelines and Board determined
criteria, potential nominees for submission to Patriot's
shareholders for election as directors of Patriot or for
election to fill vacancies on the Board. The Committee
strives to identify, review and recommend only those
nominees who appear to possess: (i) the highest personal
and professional ethics, integrity and values;
(ii) sufficient education and breadth of experience to
understand, evaluate and suggest solutions to the many
problems facing financial institutions in an
increasingly competitive environment; (iii) a reasoned
and balanced commitment to Patriot's social
responsibilities; (iv) an interest in and the
availability of time to be involved in Patriot's affairs
over a sustained period; (v) the reputation and stature
required to represent Patriot in the communities Patriot
serves, as well as before Patriot's shareholders and
other stakeholders; (vi) a willingness to objectively
appraise management performance in the interest of
Patriot and its stakeholders; (vii) an open mind on all
policy issues affecting the overall interests of Patriot
and its stakeholders; and (viii) willingness to
participate only in other activities or interests that
do not create a conflict, or the appearance of a
conflict, with the director's responsibilities to
Patriot and its stakeholders. The Committee's review of
candidates is performed without regard to gender, race
or religious affiliation. One of the objectives of this
review is to have a Board that consists of members with
a mix of skills, experiences and personalities that will
foster, not only good decision making, but also the
chemistry to create an environment encouraging active,
constructive and informed participation among Board
members. The Committee is required to annually
recommend to the Board nominees for appointment to the
committees of the Board.
- Patriot's Corporate Governance and Ethics Committee,
consists of four (4) directors, each of whom has been
determined to be independent by Patriot's Board of
Directors. The Committee monitors, oversees and reviews
compliance by Patriot's directors, officers and
employees with Patriot's Code of Conduct and Ethics, as
well as certain other corporate governance related
policies. Patriot's Code of Conduct and Ethics
regulates potential conflicts of interest and
transactions between Patriot and its affiliates, the
possible misuse or abuse of confidential information by
Patriot affiliates, and trading in Patriot's stock by
Patriot affiliates. When exercising its authority, the
Committee is required to consider Patriot's mission,
vision and values, including the impact of its actions
on Patriot's shareholders, customers, employees, the
communities Patriot serves and its stakeholders. The
Committee also is required to annually review Patriot's
Code of Conduct and Ethics and to make recommendations
to the Board with respect to modification. The Board
adopted the Corporate Governance Guidelines in
December 2002.
- Patriot's Personnel Compensation/Benefits Committee
consists of three (3) directors, each of whom has been
determined to be independent by Patriot's Board of
Directors. The Committee reviews and approves
corporate goals and objectives regarding Chief Executive
Officer (the "CEO") compensation, evaluates the CEO's
performance in light of those goals and objectives,
determines the CEO's compensation based on this
evaluation, and, with respect to determining the
long-term incentive component of CEO compensation,
considers Patriot's performance and relative shareholder
return, the value of similar incentive awards to CEOs at
comparable companies, the awards given to the CEO in
past years, and other factors the Committee deems
appropriate. The Committee also reviews and determines
director compensation. In addition, the Committee
reviews Patriot's executive compensation structure in an
effort to ensure that executive compensation is:
(i) competitive, and (ii) closely linked to Patriot's
goals and objectives. The Committee also attempts to
assure that such goals and objectives are clearly
defined for Patriot's management team and that the
interests of executive management are aligned, to the
extent practicable, with the interests of Patriot's
shareholders.
Security Ownership of Certain Beneficial Owners
The following table sets forth information as to those persons
believed by management to be beneficial owners of more than 5%
of the Common Stock on the Record Date or as disclosed in
reports regarding ownership filed by persons with the Company
and with the Securities and Exchange Commission ("SEC"), in
accordance with Sections 13(d) and 13(g) of the Securities
Exchange Act of 1934, as amended ("Exchange Act"). Other than
those persons listed below, the Company is not aware of any
person, as such term is defined in the Exchange Act, that owns
more than 5% of the Common Stock as of the Record Date.
<table>
<caption>
Name and Address of Amount and Nature of Percent
Title of Class Beneficial Owner Beneficial Ownership of Class
- -------------- ------------------- -------------------- --------
<s> <c> <c> <c>
Common Stock Patriot Bank 524,162(1) 8.5%
Employee Stock Ownership
Plan ("ESOP")
High & Hanover Streets
Pottstown, PA 19464
Common Stock James L. Leuthe 369,079(2) 6.0%
3730 Golf Course Road
Allentown, PA 18104
Common Stock Jeffrey L. Gendell 357,700 5.8%
55 Railroad Avenue, 3rd Floor
Greenwich, CT 06830
</table>
(1) Shares of Common Stock were acquired by the ESOP in the
1995 conversion of Patriot Savings Bank (a predecessor of
the Bank) from mutual to stock form. The Personnel
Compensation/Benefits Committee of the Board of Directors
administers the ESOP. Investors Trust Company is the
corporate trustee for the ESOP ("ESOP Trustee"). The ESOP
Trustee, subject to its fiduciary duty, must vote all
allocated shares held in the ESOP in accordance with the
instructions of the participants. At December 31, 2002,
215,649 shares had been allocated under the ESOP and
308,513 shares remain unallocated. Unallocated shares will
be voted by the ESOP Trustee in a manner calculated to most
accurately reflect the instructions received from
participants regarding the allocated stock so long as such
vote is in accordance with the provisions of the Employee
Retirement Income Security Act of 1974, as amended
("ERISA").
(2) James L. Leuthe has executed an irrevocable proxy granting
the Board of Directors the right to vote all shares of
Common Stock beneficially owned by him. The Company has
agreed with the Federal Deposit Insurance Corporation that
it will vote such shares "FOR" and "AGAINST" each matter in
the same percentage as all other outstanding shares of
Common Stock are voted.
PROPOSALS TO BE VOTED ON AT THE MEETING
MATTER NO. 1
ELECTION OF DIRECTORS
The Board of Directors of the Company currently consists of five
directors and is divided into three classes. Each of the five
members of the Board of Directors of the Company also presently
serves as a director of the Bank. The Board of Directors has
reviewed all relationships between the Company and each director
including any affiliate or immediate family member of the
director. This review included a review of all deposit and
borrowing relationships with the Bank and a consulting
arrangement between the Company and one director. Based on this
review, the Board of Directors has determined that each non-
employee director is independent of management.
Directors are elected for staggered terms of three years each,
with the term of office of only one of the three classes of
directors expiring each year. Directors serve until their
successors are elected and qualified.
The nominee proposed for election at this Annual Meeting is
Russell J. Kunkel. No person being nominated as a director is
being proposed for election pursuant to any agreement or
understanding between that person and the Company.
In the event that any nominee is unable to serve or declines to
serve for any reason, the proxies will be voted for the election
of such other person as may be designated by the present Board
of Directors. The Board of Directors has no reason to believe
that the person named will be unable or unwilling to serve.
Unless authority to vote for the nominee is withheld, it is
intended that the shares represented by the enclosed proxy card,
if executed and returned, will be voted "FOR" the election of
the nominee proposed by the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE
ELECTION OF THE NOMINEE NAMED IN THIS PROXY STATEMENT.
Information with Respect to the Nominee, Continuing Directors
and Executive Officers
The following table sets forth, as of the Record Date, the names
of the Nominee, Continuing Directors and Named Executive
Officers (as defined below) as well as their ages, a brief
description of their recent business experience, including
present occupations and employment, certain directorships held
by each, the year in which each director became a director of
the Company and the year in which their terms (or in the case of
the nominee, his proposed term) as director of the Company
expire. The table also sets forth the amount of Common Stock
and the percent thereof beneficially owned by each Director and
Named Executive Officer and all directors and executive officers
as a group as of the Record Date.
<table>
<caption>
Shares of
Expiration Common Stock
Name and Principal Occupation Director of Term as Beneficially Percent
at Present and for Past Five Years Age Since(1) Director Owned(2)(3)(4) of Class
- ---------------------------------- --- -------- ---------- -------------- --------
<s> <c> <c> <c> <c> <c>
NOMINEE
Russell J. Kunkel 60 2000 2006 9,000 *
Director of the Company and the Bank. Vice Chairman
of National Penn Bank from April 1996 to September
1997. Vice Chairman of Meridian Bancorp, Inc. and
Meridian Bank from 1985 to 1995.
CONTINUING DIRECTORS
James A. Bentley, Jr. 44 1998 2005 44,540 *
Director of the Company and the Bank. President,
Chief Executive Officer and owner of Bentley Graphic
Communications since 1989.
Richard A. Elko 41 1999 2005 182,430 2.9%
Director of the Company and the Bank. President and
Chief Executive Officer of the Company and the Bank
since November 3, 2000. Prior thereto, Executive
Vice President since December 1999 and Chief Financial
Officer of the Company and the Bank from January 1996
to December 1999.
James B. Elliott 62 1990 2004 68,285 1.1%
Chairman of the Board of the Company and the Bank
since July 1998. President of Strategic Business
Concepts, Inc. Prior thereto, Director of
Communications and Marketing for St. Joseph Medical
Center from 1994 to 1997.
Larry V. Thren 60 1992 2004 92,485 1.5%
Director of the Company and the Bank. Vice President
of Human Resources and Support Services, Pottstown
Memorial Medical Center since 1988.
<caption>
Shares of
Expiration Common Stock
Name and Principal Occupation Director of Term as Beneficially Percent
at Present and for Past Five Years Age Since(1) Director Owned(2)(3)(4) of Class
- ---------------------------------- --- -------- ---------- -------------- --------
<s> <c> <c> <c> <c> <c>
NAMED EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Kevin R. Pyle 36 -- -- 61,108 1.0%
Executive Vice President and Chief Lending Officer of
the Company and the Bank since February 2001. Prior
thereto, Chief Credit Officer of the Bank since March
1996.
Joni S. Naugle 43 -- -- 30,258 *
Executive Vice President and Chief Operating Officer
of the Company and the Bank since February 2001.
Prior thereto, Chief Operating Officer of the
Company and the Bank since December 1998, Senior
Vice President for Marketing and Retail Sales at
Sovereign Bank from 1979 to April 1998 and a
consultant from April 1998 to December 1998.
James G. Blume 37 -- -- 21,680 *
Senior Vice President and Chief Financial Officer of
the Company and the Bank since February 2001. Prior
thereto, Chief Financial Officer of the Company and
the Bank since December 1999, Corporate Controller of
the Company and the Bank from March 1997 to December
1999.
Stock ownership of all
Directors and Executive Officers
as a Group (9 persons) -- -- -- 518,041 8.4%
</table>
* Represents less than one percent of the outstanding Common
Stock.
(1) Includes years of service as a director of the Company's
predecessor, the Bank.
(2) Each person effectively exercises sole (or shares with his
spouse or other immediate family member) voting or
dispositive power as to shares reported herein (except as
noted).
(3) Includes 2,524, 704, 1,000 and 5,000 shares awarded to
Messrs. Bentley and Pyle, Ms. Naugle and Mr. Blume,
respectively, under the Patriot Bank Corp. 1996 Stock-Based
Incentive Plan (the "1996 Incentive Plan"). Stock awards
granted under the 1996 Incentive Plan vest in five equal
annual installments. However, recipients have the right to
direct the voting of all awarded shares.
(4) Includes 2,000, 15,538, 28,921 and 33,921 shares subject to
options granted to directors Kunkel, Bentley, Elliott and
Thren, respectively, that are exercisable within 60 days.
Includes 108,112, 11,389, 13,833, 5,250 and 1,250 shares
subject to options granted to officers Elko, Pyle, Naugle,
Blume and Davidheiser, respectively, that are exercisable
within 60 days.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires
the Company's officers and directors, and any persons owning ten
percent or more of the Common Stock, to file in their personal
capacity initial statements of beneficial ownership, statements
of change in beneficial ownership and annual statements of
beneficial ownership with the Securities and Exchange
Commission. Persons filing such beneficial ownership statements
are required by SEC regulation to furnish the Company with
copies of all such statements filed with the SEC. The rules of
the SEC regarding the filing of such statements require that
"late filings" of such statements be disclosed in the Company's
proxy statement. To the best of the Company's knowledge, there
were no late filings during 2002.
Meetings of the Board of Directors and Committees of the Board
of Directors
The Company conducts its business through meetings of the Board
of Directors and through activities of its committees. The
Board of Directors of the Company meets monthly and may have
additional meetings as needed. During 2002, the Board of
Directors of the Company held fourteen (14) meetings. All of
the directors of the Company attended at least 75% of the total
number of the Company's Board meetings held and committee
meetings on which such directors served during 2002. The Board
of Directors of the Company maintains committees, the
composition of which are described below. For a more detailed
description of the responsibilities of each committee see
"Information Concerning Patriot's Governance Polices, Practices
and Procedures."
Audit Committee. The Audit Committee of the Company consists of
Messrs. Bentley, Elliott, Kunkel and Thren. The Audit Committee
met five (5) times in 2002.
Nominating Committee. The Nominating Committee of the Company
consists of Messrs. Bentley, Elliott, Elko and Thren. The
Nominating Committee met one (1) time in 2002.
Personnel Compensation/Benefits Committee. The Personnel
Compensation/Benefits Committee of the Company consists of
Messrs. Bentley, Elliott and Thren. The Personnel
Compensation/Benefits Committee met four (4) times in 2002.
Corporate Governance and Ethics Committee. The Corporate
Governance and Ethics Committee consists of Messrs. Bentley,
Elliott, Kunkel and Thren. The Committee was formed in 2002,
and will hold its first meeting during the first quarter of
2003.
Executive Committee. The Executive Committee of the Company
consists of Messrs. Bentley, Elliott, Elko and Thren. The
Executive Committee is responsible for conducting the business
of the Company in the absence of the entire Board of Directors.
The Executive Committee met one (1) time in 2002.
Directors' Compensation
Outside director compensation is based on accepted practices of
the banking industry, the Company's current size and scope of
operation, level of personal risk, liability associated with
directorship responsibilities and the need to pay a comparable
remuneration to retain and attract qualified individuals.
Outside directors are paid an annual retainer of $18,000, in
addition to $500 to attend each Board meeting and $100 to attend
each committee meeting. The committee chairperson retainer is
$3,000. Mr. Elliott receives an additional $25,000 annually as
Chairman of the Board.
On November 1, 2000, James B. Elliott, the Company and the Bank
entered into a Consultant Agreement. The Consultant Agreement
was for a term of one year, and was extended for one additional
six month term ending April 30, 2002. Mr. Elliott provided up to
twenty (20) hours of consulting services per week and was paid at
the rate of eighty-five dollars ($85.00) per hour.
On June 7, 1996, shareholders approved the 1996 Incentive Plan,
under which all directors who are not also employees of the
Company are eligible to receive stock awards and options to
purchase Common Stock. Under the 1996 Incentive Plan, Messrs.
Elliott and Thren were each granted non-statutory options to
purchase 33,921 shares of Common Stock at an exercise price of
$7.184, which was the fair market value of shares on the date of
the grant, as adjusted for subsequent stock splits and stock
dividends. On January 1, 1999, Mr. Bentley was awarded a non-
statutory option to purchase 10,000 shares of Common Stock at an
exercise price of $11.75 per share and on November 27, 2000, he
was awarded a non-statutory option to purchase 18,845 shares of
Common Stock at an exercise price of $6.1875 per share. On
December 28, 2000, Mr. Kunkel was granted a non-statutory option
to purchase 10,000 shares of Common Stock at an exercise price
of $6.53 per share. On April 23, 2002, shareholders approved
the 2002 Stock Option Plan, which provides that all non-employee
directors are eligible to receive stock options to purchase
Common Stock. Under the 2002 Stock Option Plan, Messrs.
Bentley, Elliott, Kunkel and Thren were each granted non-
statutory options to purchase 10,000 shares of Common Stock at
an exercise price of $14.10. All options become exercisable in
five equal annual installments, commencing one year from the
date of grant, except that upon a change in control of the
Company, all options immediately vest.
Compensation Committee Report on Executive Compensation
This report of the Personnel Compensation Benefits Committee
(the "Committee") and the stock performance graph shall not be
deemed incorporated by reference by any general statement
incorporating by reference this proxy statement into any filing
under the Securities Act of 1933, as amended (the "Securities
Act") or the Exchange Act, except to the extent that the Company
specifically incorporates this information by reference, and
shall not otherwise be deemed filed under such Acts.
Under rules established by the SEC, the Company is required to
provide certain information regarding the compensation and
benefits provided to the Company's CEO and other executive
officers of the Company. The disclosure requirements for the
CEO and other executive officers include the use of tables and a
report explaining the rationale and considerations that led to
fundamental compensation decisions affecting those individuals.
In fulfillment of this requirement, the Committee, at the
direction of the Board of Directors, has prepared the following
report for inclusion in this proxy statement.
Compensation Policies
The Committee has established a policy for executive
compensation, taking into account both subjective performance
criteria and selected objective performance measures. The
purpose of the policy is to: (i) provide compensation programs
and opportunities which are competitive with other similar
financial services companies; (ii) support the Company's goal
setting and strategic planning process; (iii) motivate the
executive management of the Company to achieve profit and other
key goals of the institution, including but not limited to the
Company's commitment to the communities it serves and to its
employees, customers and investors; (iv) motivate the executive
management to operate the Company in a safe and sound manner and
in compliance with all pertinent governmental and regulatory
requirements; and (v) minimize potential overhead by designating
a significant portion of the annual compensation of executives
as variable and performance oriented rather than fixed.
In determining an Executive Compensation Plan for 2002, the
Committee of the Company established certain objectives for
executive management which included the creation and execution
of a strategic business plan, attaining certain financial goals
based on net income, earnings per share, return on equity,
return on assets, strengthening senior management, reaching
certain volume goals for loans and core deposits, achieving
certain asset quality targets, achieving certain customer
satisfaction criteria, initiating several business objectives,
and maintaining positive relationships with external
constituents.
Additionally, the Company utilized a number of subjective
elements as part of the decision making process regarding
executive compensation. The individual skills and talents of
the executive managers of the Company, including but not limited
to, experience, leadership ability, planning and organizational
skills, administrative talent, vision for the future and work
ethic were given consideration in establishing executive
compensation.
The performance of the Company for 2002 resulted in the
following variable payments for Mr. Elko, as President and CEO.
In May of 2002, the Committee granted a 51,347 share stock
option to Mr. Elko, which vests over a five year period. As a
result of the Company's 2002 financial performance and
Mr. Elko's individual performance and achievement of certain
specified goals within the strategic plan, the Committee awarded
Mr. Elko a bonus payment of $116,566.
In the latter part of 2002, the Committee decided to undertake a
complete review and analysis of the components of executive
compensation at the Company. Working with a third-party
executive compensation consultant, the committee reviewed the
peer marketplace for similar financial services companies,
reviewed base pay in this peer group, reviewed annual bonus
formats, plans and formulas in this peer group, reviewed stock
option programs and other types of long-term incentive and
variable plans within the peer group, as well as a review of
other components of executive compensation packages, including
supplemental executive retirement plans and compensation
deferral features. The Committee met several times and
determined several items which were consistent with the policy
for executive compensation. These items included a new
compensation peer group of financial service companies which
were similar in size and business models to Patriot and located
in the mid-Atlantic region, a new base salary for Mr. Elko for
2003, a redesigned annual bonus program for Mr. Elko, including
a threshold, target, and optimal Company performance targets for
2003, an affirmation of the 2002 Stock Option Plan with no
anticipated grant to be made for Mr. Elko during 2003 and an
affirmation of the current appropriateness of Mr. Elko's
supplemental executive retirement plan benefit. Also included
for future compensation opportunities is an optional deferral
feature of base pay and annual bonus for Mr. Elko.
The Committee set Mr. Elko's 2003 base salary at $300,000 and
established specific Company financial performance objectives
and individual performance objectives under the 2003 Annual
Bonus Plan for Mr. Elko. Mr. Elko's total base compensation
target for 2003 will be at 100% of the total compensation peer
for 2002 for the CEO position within the newly designed peer
group. This peer group is not necessarily comprised of the same
institutions used in the peer group for the stock performance
graph.
THE PERSONNEL COMPENSATION/
BENEFITS COMMITTEE
Larry V. Thren, Chairman
James A. Bentley, Jr.
James B. Elliott
Stock Performance Graph. The following graph shows a comparison
of total shareholder return on the Common Stock, based on the
market price of the Common Stock, with the cumulative total
return of companies on The Nasdaq Stock Market (U.S.) Index and
The Nasdaq Banking Index for the period beginning on January 1,
1998, through December 31, 2002.
[Graphic]
In the printed version of the document, a line graph appears
that depicts the following plot points:
COMPARISON OF CUMULATIVE TOTAL RETURNS FOR PATRIOT BANK CORP.
COMMON STOCK, THE NASDAQ STOCK MARKET (U.S.) INDEX AND THE
NASDAQ BANKING INDEX.
[Summary]
<table>
<caption>
Company/Index/Market 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02
- -------------------- -------- -------- -------- -------- -------- --------
<s> <c> <c> <c> <c> <c> <c>
Patriot Bank Corp. Common Stock.............. $100.00 $ 70.52 $ 66.58 $ 43.77 $ 71.83 $106.74
The Nasdaq Stock Market (U.S.) Index
(Broad Market)............................. $100.00 $140.99 $261.48 $157.42 $124.89 $ 86.33
The Nasdaq Banking Index
(Industry Index)........................... $100.00 $ 99.36 $ 95.51 $108.95 $117.97 $120.61
</table>
Notes:
A. The lines represent annual index levels derived from
compounded daily returns that include all dividends.
B. The indexes are reweighed daily, using the market
capitalization on the previous trading day.
C. If the year-end is not a trading day, the preceding
trading day is used.
D. The index level for all the series was set to $100.00 on
December 31, 1997.
Summary Compensation Table. The following table shows, for the
years ended December 31, 2002, 2001 and 2000, the cash
compensation paid by the Company, as well as certain other
compensation paid or accrued for those years, to the President
and Chief Executive Officer, the Executive Vice President and
Chief Lending Officer, the Executive Vice President and Chief
Operating Officer and Senior Vice President and Chief Financial
Officer ("Named Executive Officers").
Summary Compensation Table
<table>
<caption>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------- -------------------------------
Awards Payouts
-------------------- ---------
Other
Annual Restricted Securities
Compen- Stock Underlying LTIP All Other
Salary Bonus ation Awards Options/SARs Payouts Compensation
Name and Principal Position(1) Year ($)(2) ($) ($)(3) ($)(4) (#)(4) ($)(5) ($)(6)
- ------------------------------ ---- ------ ----- ------- ---------- ------- ------- ------------
<s> <c> <c> <c> <c> <c> <c> <c> <c>
Richard A. Elko 2002 $253,885 $116,566 -- -- 51,347 -- $24,956
President, Chief Executive 2001 $233,269 $128,968 -- -- -- -- $15,893
Officer and Director 2000 $214,904 -- -- -- -- -- $12,458
Kevin R. Pyle 2002 $175,000 $ 52,247 -- -- 26,589 -- $23,395
Executive Vice President and 2001 $155,000 $ 60,397 -- -- 5,000 -- $17,621
Chief Lending Officer 2000 $140,192 $ 8,498 -- -- -- -- $12,753
Joni S. Naugle 2002 $175,000 $ 52,247 -- -- 28,833 -- $22,520
Executive Vice President and 2001 $175,000 $ 39,843 -- -- 5,000 -- $12,985
Chief Operating Officer 2000 $169,231 -- -- -- -- -- $10,090
James G. Blume 2002 $124,068 $ 39,392 -- $70,500 20,000 -- $17,969
Senior Vice President and 2001 $102,654 $ 38,128 -- -- 10,000 -- $13,857
Chief Financial Officer 2000 $100,000 $ 4,386 -- -- -- -- $10,841
</table>
(1) Mr. Elko was appointed President and Chief Executive
Officer of the Company and the Bank on November 3, 2000.
Mr. Pyle was appointed Chief Lending Officer of the Company
and the Bank in March 1996. Ms. Naugle was appointed Chief
Operating Officer of the Company and the Bank in December
1998. Mr. Blume was appointed Chief Financial Officer of
the Company and the Bank in December 1999.
(2) Includes compensation deferred at the election of
Messrs. Elko and Pyle, Ms. Naugle and Mr. Blume through the
Company's 401(k) plan.
(3) There were no: (a) perquisites in excess of the lesser of
$50,000 or 10% of the individual's total salary and bonus
for the last 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 maturation, (d) tax
payment reimbursements, or (e) preferential discounts on
stock.
(4) In 2002, pursuant to the 1996 Incentive Plan, Mr. Blume was
awarded 5,000 shares that had a market value of $70,500 on
the date of grant and a market value of $76,850 at
December 31, 2002. Stock awarded under the Incentive Plan
vest in five equal annual installments on each anniversary
of the effective date of the stock award.
5) Includes 51,347, 26,589, 28,833 and 500 shares subject
to options granted to Messrs. Elko, Pyle, Ms. Naugle and
Mr. Blume, respectively, under the 2002 Stock Option Plan
in 2002; of those amounts 6,347 of Mr. Elko's shares,
1,589 of Mr. Pyle's shares and 3,833 of Ms. Naugle's shares
were immediately exercisable upon their grant. Includes
19,500 shares subject to options granted to Mr. Blume under
the 1996 Incentive Plan in 2002. Includes 5,000, 5,000 and
10,000 shares subject to options granted to Mr. Pyle,
Ms. Naugle and Mr. Blume, respectively, under the 1996
Incentive Plan in 2001. Except for those options described
above which vest immediately, all options granted under
both Plans become exercisable in five equal annual
installments on each anniversary of the effective date of
the grant.
(6) For 2002, 2001 and 2000, the Company had no long-term
incentive plans in existence. Accordingly, there were no
payments or awards under any long-term incentive plan.
(7) Includes 908, 888, 798, and 691 shares allocated to
Messrs. Elko and Pyle, Ms. Naugle and Mr. Blume,
respectively, for 2002 pursuant to the ESOP with a market
value of $13,956, $13,649, $12,265 and $10,621,
respectively. Includes $11,000, $9,746, $10,255 and $7,348
in matching and discretionary contributions by the Company
to the Company's 401(k) plan during 2002 for Messrs. Elko
and Pyle, Ms. Naugle and Mr. Blume, respectively. Includes
1,086, 1,050, 884 and 653 shares allocated to Messrs. Elko
and Pyle, Ms. Naugle and Mr. Blume, respectively, for 2001
pursuant to the ESOP with a market value of $11,566,
$11,183, $9,415 and $6,954, respectively. Includes $4,327,
$6,438, $4,442 and $6,031 in matching and discretionary
contributions by the Company to the Company's 401(k) plan
during 2001 for Messrs. Elko and Pyle, Ms. Naugle and
Mr. Blume, respectively. Includes 835, 815, 717 and
606 shares allocated to Messrs. Elko and Pyle, Ms. Naugle
and Mr. Blume, respectively, for 2000 pursuant to the ESOP
with a market value of $5,636, $5,501, $4,840 and $4,091,
respectively. Includes $6,822, $7,252, $5,250 and $6,750
in matching and discretionary contributions by the Company
and the Company's 401(k) plan during 2000 for Messrs. Elko
and Pyle, Ms. Naugle, and Mr. Blume, respectively.
EMPLOYMENT AGREEMENTS
The Company and the Bank have entered into separate employment
agreements with Mr. Elko. The employment agreements are
intended to ensure that the Company and the Bank will be able to
maintain a stable and competent management base. The continued
success of the Company and the Bank depends to a significant
degree on the skills and competence of Mr. Elko.
The employment agreements provide for a three-year term for
Mr. Elko. The terms of the Company's employment agreement shall
be extended on a daily basis unless written notice of nonrenewal
is given by the Board of the Company. The employment agreements
provide that Mr. Elko's base salary will be reviewed annually.
The current base salary for Mr. Elko is $300,000. In addition
to the base salary, the employment agreements provide for, among
other things, participation in stock benefits plans and other
fringe benefits applicable to executive personnel. The
employment agreements provide for termination by the Company or
the Bank for cause, as defined in the employment agreements, at
any time. In the event the Company or the Bank chooses to
terminate Mr. Elko's employment for reasons other than for
cause, or in the event of Mr. Elko's resignation from the
Company and the Bank upon: (i) failure to re-elect Mr. Elko to
his current offices; (ii) a material change in Mr. Elko's
functions, duties or responsibilities; (iii) a relocation of
Mr. Elko's principal place of employment by more than 20 miles;
(iv) a material reduction in the benefits and perquisites
provided to Mr. Elko; (v) liquidation or dissolution of the
Company or the Bank; (vi) a breach of the agreement by the
Company or the Bank; (vii) the refusal of the Company or the
Bank to extend the agreement as described above; or (viii) the
voluntary or involuntary termination following a change in
control of the Company or the Bank, Mr. Elko or, in the event of
death, his beneficiary, would be entitled to receive an amount
equal to the greater of: (a) the remaining payments due to
Mr. Elko, or (b) three times Mr. Elko's average annual
compensation as defined in the employment agreements. The
Company and the Bank also would continue and pay for Mr. Elko's
life, health and disability coverage for the remaining term of
the agreement.
Any payments under the employment agreements in the event of a
change in control may constitute some portion of an excess
parachute payment under Section 280G of the Internal Revenue
Code (the "Code") for executive officers, resulting in the
imposition of an excise tax on the recipient and denial of the
deduction for such excess amounts to the Company and the Bank.
Under the employment agreements the Company and the Bank has
agreed to pay to Mr. Elko such additional amount, if any, as is
necessary, after the deduction of any applicable taxes, to pay
any such excise tax imposed on Mr. Elko.
Payments to Mr. Elko under the Bank's agreement will be
guaranteed by the Company in the event that payments or benefits
are not paid by the Bank. Payments to Mr. Elko under the
Company's agreement would be made by the Company. All
reasonable costs and legal fees paid or incurred by Mr. Elko
pursuant to any dispute or question of interpretation relating
to the employment agreements shall be paid by the Company or the
Bank, respectively, if Mr. Elko is successful pursuant to a
legal judgment, arbitration or settlement. The employment
agreements also provide that the Company and the Bank shall
indemnify Mr. Elko to the fullest extent allowable under federal
and Pennsylvania law.
In February 2001, the Bank entered into employment agreements
with Mr. Pyle, Ms. Naugle and Mr. Blume (individually, the
"Executive") each having a term of three years (individually, an
"Employment Agreement"). The Employment Agreement provides that,
commencing on the first anniversary date and continuing on each
anniversary date thereafter, the disinterested members of the
Board of Directors of the Bank may extend the Employment
Agreement for an additional year so that the remaining term
shall be three years, unless written notice of nonrenewal is
given by the Board of Directors after conducting a performance
evaluation of the Executive. The current base salaries for
Mr. Pyle, Ms. Naugle and Mr. Blume are $185,000, $185,000 and
$150,000, respectively. In addition to the base salary, the
Employment Agreement provides for, among other things,
participation in stock benefit plans and other fringe benefits
applicable to executive personnel.
The Employment Agreements of Mr. Pyle, Ms. Naugle and Mr. Blume
provide for termination by the Bank for cause, as defined in the
Employment Agreement, at any time. In the event the Bank
chooses to terminate the Executive's full-time employment for
reasons other than for cause, or in the event of the Executive's
resignation from the Bank upon: (i) failure to re-elect,
appoint or reappoint the Executive to office; (ii) material
change in the Executive's functions, duties or responsibilities
which change would cause the Executive's position to become one
of lesser responsibility, importance or scope, unless consented
to by the Executive; (iii) a relocation of the Executive's
principal place of employment by more than 20 miles; (iv) a
material reduction in the benefits and perquisites provided to
the Executive; (v) liquidation or dissolution of the Company or
the Bank; (vi) a breach of the Employment Agreement by the Bank;
(vii) the refusal of the Bank to extend the term of the
Employment Agreement; or (viii) the voluntary or involuntary
termination of the Executive's employment following a change in
control of the Company or the Bank, the Executive, or the
Executive's beneficiary in the event of the Executive's death,
would be entitled to receive an amount equal to the greater of:
(a) the remaining payments due to the Executive, or (b) three
times the Executive's average annual compensation as defined in
the Employment Agreement. The Bank also would continue and pay
for the Executive's life, health and disability coverage for
three years following the date of termination. Any amounts
payable under the Employment Agreement resulting from
termination of employment following a change in control would be
reduced to the extent necessary to avoid such payments
constituting an excess parachute payment under the Code.
1996 Incentive Plan. In 1996, shareholders approved the 1996
Stock-Based Incentive Plan under which directors and employees
of the Company are eligible to receive stock option grants or
restricted stock awards. The Company maintains the 1996 Stock-
Based Incentive Plan, which provides discretionary awards to
officers and key employees as determined by a committee of
non-employee directors.
2002 Stock Option Plan. In 2002, the directors and shareholders
approved the Patriot Bank Corp. 2002 Stock Option Plan. The
2002 Stock Option Plan will provide certain employees of the
Company and its subsidiaries with an opportunity to acquire
Common Stock of the Company. The 2002 Stock Option Plan is
designed to help the Company attract, retain and motivate
certain employees and directors to make substantial
contributions to the success of the Company's business and the
businesses of its subsidiaries. Options will be granted under
the 2002 Stock Option Plan based, among other things, on the
participant's level of responsibility and performance within the
Company and its affiliated companies.
The following table provides certain information with respect to
the number of options to acquire shares of Common Stock granted
to the Named Executive Officers in the year ended December 31,
2002.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<table>
<caption>
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation
Individual Grants for Option Term
-----------------------------------------------------------
Number of % of
Securities Total Options/
Underlying SARs Granted Exercise or
Name Options/SARs to Employees Base Price Expiration
Granted (#) in Fiscal Year ($/sh) Date 5%($) 10%($)
<s> <c> <c> <c> <c> <c> <c>
Richard A. Elko 51,347 40.5% $14.10 May 2012 $455,315 $1,153,858
Kevin R. Pyle 26,589 21.0% $14.10 May 2012 $235,776 $ 597,502
Joni S. Naugle 28,833 22.7% $14.10 May 2012 $255,674 $ 647,929
James G. Blume 20,000 15.8% $14.10 May 2012 $177,348 $ 449,435
</table>
The following table provides certain information with respect to
the number of shares of Common Stock represented by outstanding
options held by the Named Executive Officers at December 31,
2002. Also reported are the values for "in-the-money" options
that represent the positive difference between the exercise
price of any such options and the closing sale price of the
Common Stock at December 31, 2002.
FISCAL YEAR END OPTION/SAR VALUES
<table>
<caption>
Number of Securities Underlying Value of Unexercised
Unexercised Options/SARS In-the-Money Option/SARS
at Fiscal Year End(#)(1) at Fiscal Year End($)(2)
------------------------------- ---------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<s> <c> <c> <c> <c>
Richard A. Elko 108,112 45,000 $841,109 $57,150
Kevin R. Pyle 11,389 30,200 $ 74,427 $69,048
Joni S. Naugle 13,833 30,000 $ 48,128 $62,940
James G. Blume 5,250 26,000 $ 34,688 $74,300
</table>
(1) The 101,765 and 4,500 options granted to Messrs. Elko and
Pyle, respectively, on June 7, 1996, have an exercise price
of $7.184 and become exercisable at an annual rate of 20%
beginning June 7, 1997. The 5,500 options granted to
Mr. Pyle on June 7, 1999, have an exercise price of $9.53
and become exercisable at an annual rate of 20% beginning
June 7, 2000. The 10,000 options granted to Ms. Naugle on
December 1, 1998 have an exercise price of $12.00 and
become exercisable at an annual rate of 20% beginning
December 1, 1999. The 1,250 options granted to Mr. Blume
on January 9, 1998, have an exercise price of $13.70 and
become exercisable at an annual rate of 20% beginning
January 9, 1999. The 5,000, 5,000 and 10,000 options
granted to Mr. Pyle, Ms. Naugle and Mr. Blume,
respectively, on February 22, 2001, have an exercise price
of $7.22 and become exercisable at an annual rate of 20%
beginning February 22, 2002. The 45,000, 25,000, 25,000
and 20,000 options granted to Messrs. Elko and Pyle and
Ms. Naugle and Mr. Blume, respectively, on May 15, 2002,
have an exercise price of $14.10 and become exercisable at
an annual rate of 20% beginning May 15, 2003. The 6,347,
1,589 and 3,833 options granted to Messrs. Elko and Pyle
and Ms. Naugle, respectively, on May 15, 2002, have an
exercise price of $14.10 and were immediately vested on
May 15, 2002, the date of the grant.
(2) Based on market value of the Common Stock at year end,
minus the exercise price. The market price on
December 31, 2002, was $15.37.
Supplemental Retirement Plan. The Company maintains a
nonqualified Supplemental Retirement Plan ("SRP") for the
benefit of certain executive officers and directors. The SRP
has been adopted by the Company to provide supplemental
retirement benefits to selected executives and directors of the
Company. The participants under the SRP are Messrs. Bentley,
Elko, Elliott and Thren. Benefits under the SRP for Mr. Elko
vest on a five-year schedule, while benefits for all other
participants vest on a seven-year schedule subject to
acceleration upon a change in control. The SRP provides a
defined benefit payable to Mr. Elko in twenty (20) annual
installments, and in fifteen (15) annual installments for all
other Participants, of an amount that is determined at the
discretion of the Board. The SRP provides for an early start to
payment of the installments in the event of disability, death
prior to retirement or a change in control. The SRP is
unfunded; however, the Company has entered into certain life
insurance contracts, the proceeds of which could be used to fund
the SRP in the future.
Transactions with Certain Related Persons
The Company's current policy provides that all loans made by the
Company to its directors and officers are made in the ordinary
course of business on substantially the same terms, including
interest rates and collateral, as those prevailing at the time
for comparable transactions with other persons and do not
involve more than the normal risk of collectibility or present
other unfavorable features.
MATTER NO. 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Company's independent auditor for the year ended
December 31, 2002, was KPMG LLP. The Audit Committee of the
Company's Board of Directors has appointed KPMG LLP as
independent auditor for the Company for the year ending
December 31, 2003, subject to ratification of such appointment
by the shareholders.
Representatives of KPMG LLP will be present at the Annual
Meeting. They will be given an opportunity to make a statement
if they desire to do so and will be available to respond to
appropriate questions from shareholders present at the Annual
Meeting.
Unless marked to the contrary, the shares represented by the
enclosed proxy card will be voted "FOR" ratification of the
appointment of KPMG LLP as the independent auditors of the
Company.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR"
RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS THE INDEPENDENT
AUDITOR OF THE COMPANY.
Audit Committee Report and Related Matters
Pursuant to rules adopted by the SEC designed to improve
disclosures related to the functioning of corporate audit
committees and to enhance the reliability and credibility of
financial statements of public companies, the Audit Committee of
Company's Board of Directors submits the following report:
Audit Committee Report to Shareholders
The Audit Committee of the Board of Directors is responsible for
providing independent, objective oversight of the Company's
accounting functions and internal controls. The Audit Committee
is composed of directors Bentley, Elliott, Kunkel and Thren,
each of whom is independent. The Audit Committee operates under
a written charter approved by the Board of Directors. Revisions
to the charter were adopted in December 2002 to strengthen the
role of the Committee and assure compliance with the Sarbanes-
Oxley Act of 2002. A copy of the charter is attached to this
proxy statement as Exhibit A.
Management is responsible for the Company's internal controls
and financial reporting process. The independent accountants
are responsible for performing an independent audit of the
Company's consolidated financial statements in accordance with
generally accepted auditing standards and to issue a report
thereon. The Audit Committee's responsibility is to monitor and
oversee these processes.
In connection with these responsibilities, the Audit Committee
met with management and the independent accountants to review
and discuss the December 31, 2002, financial statements. The
Audit Committee also discussed with the independent accountants
the matters required by Statement on Auditing Standards No. 61
(Communication with Audit Committees). The Audit Committee also
received written disclosures from the independent accountants
required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), and the Audit
Committee discussed with the independent accountants that firm's
independence.
Based upon the Audit Committee's discussions with management and
the independent accountants, and the Audit Committee's review of
the representations of management and the independent
accountants, the Audit Committee recommended that the Board of
Directors include the audited consolidated financial statements
in the Company's Annual Report on Form 10-K for the year ended
December 31, 2002, to be filed with the SEC.
THE AUDIT COMMITTEE
Russell J. Kunkel, Chairman
James A. Bentley, Jr.
James B. Elliott
Larry V. Thren
Consideration of Non-audit Services Provided by the Independent
Accountant
The Audit Committee has considered whether the services provided
under other non-audit services are compatible with maintaining
the auditor's independence.
Audit Fees
Audit fees paid by the Company to KPMG LLP during the 2002 year
for the audit of the Company's annual financial statements and
the SAS No. 71 reviews of the financial statements included in
the Company's quarterly reports on Form 10-Q totaled $160,847.
Financial Information Systems Design and Implementation Fees
The Company did not engage KPMG LLP to provide advice regarding
financial information systems design and implementation during
the year ended December 31, 2002.
All Other Fees
Fees billed by KPMG LLP during the Company's 2002 year for all
other non-audit services rendered to the Company, including tax-
related services, totaled $45,475.
ADDITIONAL INFORMATION
Shareholder Proposals
To be considered for inclusion in the Company's proxy statement
and form of proxy relating to the 2004 Annual Meeting of
Shareholders, a shareholder proposal must be received by the
Secretary of the Company at the address set forth on the Notice
of Annual Meeting of Shareholders not later than November 20,
2003. Any such proposal will be subject to 17 C.F.R.
ss.240.14a-8 of the Rules and Regulations under the Exchange
Act.
Notice of Business to be Conducted at an Annual Meeting
The bylaws of the Company provide an advance notice procedure
for a shareholder to properly bring business before an Annual
Meeting. The shareholder must give written advance notice to
the Secretary of the Company not less than ninety (90) days
before the date originally fixed for such meeting; provided,
however, that in the event that less than twenty-one (21) days
notice of the date of the meeting is given or made to
shareholders, notice by the shareholder to be timely must be
received not later than the close of business on the seventh day
following the date on which the Company's notice to shareholders
of the annual meeting date was mailed. Nominations for
directors by shareholders must be received by the Secretary of
the Company no later than the close of business on the 90th day
preceding the date of the annual meeting. In the case of
nominations to the Board of Directors, certain information
regarding the nominee must be provided. Nothing in this
paragraph shall be deemed to require the Company to include in
its proxy statement or the proxy relating to an annual meeting
any shareholder proposal that does not meet all of the
requirements for inclusion established by the SEC in effect at
the time such proposal is received.
Corporate Governance Documents
A copy of Patriot's Code of Conduct and Ethics, Patriot's
Corporate Governance Guidelines, Patriot's Code of Ethics for
Senior Financial Officers and the charters of Patriot's Audit
Committee, Nominating Committee, Corporate Governance and Ethics
Committee and Personnel Compensation/Benefits Committee are
available on Patriot's website at www.patriotbank.com and any
shareholder may obtain a printed copy of these documents by
writing to Ms. Diane M. Davidheiser, Secretary, Patriot Bank
Corp., High and Hanover Streets, Pottstown, PA 19646.
Waivers of Provisions of Codes of Conduct
There were no waivers of the provisions of Patriot's Code of
Conduct and Ethics or Patriot's Code of Ethics for Senior
Financial Officers for any Patriot director, senior financial
officer or any other executive officer in 2002 or through the
date of this proxy statement during 2003.
Complaints and Concerns
Shareholders and other interested parties who desire to
communicate directly with Patriot's independent, non-management
directors should submit such communication in writing addressed
to the Audit Committee Chairman, Patriot Bank Corp., High and
Hanover Streets, Pottstown, PA 19646.
Shareholders, employees and other interested parties who desire
to express a concern relating to accounting or auditing matters
should communicate directly with Patriot's Audit Committee in
writing addressed to the Audit Committee Chairman, Patriot Bank
Corp., High and Hanover Streets, Pottstown, PA 19646.
Other Matters
The Board of Directors knows of no business that will be
presented for consideration at the Annual Meeting other than as
stated in the Notice of Annual Meeting of Shareholders. If,
however, other matters are properly brought before the Annual
Meeting, it is the intention of the persons named in the
accompanying proxy to vote the shares represented thereby on
such matters in accordance with their best judgment. Whether or
not you intend to be present at the Annual Meeting, you are
urged to return your proxy card promptly. If you are present at
the Annual Meeting and wish to vote your shares in person, your
original proxy may be revoked by voting at the Annual Meeting.
By Order of the Board of Directors
/s/ Diane M. Davidheiser
--------------------------------
Diane M. Davidheiser
Secretary
Pottstown, Pennsylvania
March 20, 2003
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED
TO SIGN, DATE AND PROMPTLY RETURN THE ACCOMPANYING PROXY CARD IN
THE ENCLOSED POSTAGE-PAID ENVELOPE.
/X/ PLEASE MARK VOTES REVOCABLE PROXY
AS IN THIS EXAMPLE PATRIOT BANK CORP.
ANNUAL MEETING OF SHAREHOLDERS
April 24, 2003
The undersigned hereby appoints the official proxy committee of
the Board of Directors of Patriot Bank Corp. (the "Company"),
each with full power of substitution, to act as attorneys and
proxies for the undersigned, and to vote all shares of Common
Stock of the Company (the "Common Stock") which the undersigned
is entitled to vote only at the Annual Meeting of Shareholders,
to be held on April 24, 2003 at 3:30 p.m. Eastern Standard Time,
at Brookside, Prospect and Adams Streets, Pottstown,
Pennsylvania, and at any and all adjournments thereof, as
follows:
1. The election as director of the nominee listed (except as
marked to the contrary below):
Russell J. Kunkel
FOR WITHHOLD
/ / / /
2. The ratification of the appointment of KPMG LLP as
independent auditors of Patriot Bank Corp. for the
year ending December 31, 2003.
FOR AGAINST ABSTAIN
/ / / / / /
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" EACH OF
THE LISTED PROPOSALS.
Please be sure to sign and date Date
this Proxy below.
Shareholder sign above ------ Co-holder (if any) sign above
Detach above card, sign, date, and mail in postage paid envelope
provided.
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF THE COMPANY
This proxy is revocable and will be voted as directed, but if no
instructions are specified, this proxy will be voted "FOR" each
of the proposals listed. If any other business is presented at
the Annual Meeting, including whether or not to adjourn the
meeting, this proxy will be voted by those named in this proxy
in their best judgment. At the present time, the Board of
Directors knows of no other business to be presented at the
Annual Meeting.
The undersigned acknowledges receipt from the Company prior to
the execution of this proxy of a Notice of Annual Meeting of
Shareholders and of a Proxy Statement dated March 20, 2003 and
of the Annual Report to Shareholders.
Please sign exactly as your name appears on this card. When
signing as attorney, executor, administrator, trustee or
guardian, please give your full title. If shares are held
jointly, each holder may sign but only one signature is
required.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY
IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
EXHIBIT A
PATRIOT BANK CORP.
AUDIT COMMITTEE CHARTER AND POLICY
AUDIT COMMITTEE MISSION
The Audit Committee is appointed by the Board of Directors (the
"Board") to assist the Board in fulfilling its oversight
responsibilities. The Audit Committee's primary duties and
responsibilities are to:
- Monitor the integrity of the Patriot Bank Corp.'s (the
"Company") financial reporting process and systems of
internal controls regarding finance, accounting and
regulatory compliance.
- Monitor the independence and performance of the
Company's independent auditors and individuals or
entities performing the internal audit function
("internal auditors").
- Provide an avenue of communication among the independent
auditors, management, the internal auditors and the
Board.
To effectively perform his or her role, each Audit Committee
member will obtain an understanding of the detailed
responsibilities of Audit Committee membership.
AUDIT COMMITTEE ORGANIZATION
Audit Committee members shall meet the requirements of the
Nasdaq listing standards, and the Securities and Exchange
Commission (the "SEC"). The Audit Committee shall be comprised
of three or more directors as determined by the Board, each of
whom shall be independent, non-executive directors, free from
any relationship that would interfere with the exercise of his
or her independent judgment. All members must be able to read
and understand fundamental financial statements, including a
balance sheet, income statement, and cash flow statement at the
time of their appointment to the Audit Committee. Except under
extraordinary and limited circumstances, at least one member of
the Audit Committee shall be a financial expert. One of the
members shall be designated Chairman.
The Audit Committee shall meet quarterly, or more frequently, as
circumstances dictate.
The Audit Committee believes that the above mission statement
sets forth its primary roles and responsibilities. In that
context, the following is meant to serve as a guide in achieving
that mission.
ROLES AND RESPONSIBILITIES
Audit Committee Authority and Responsibilities
- Responsibilities Relating to Retention of Public
Accounting Firms - The Audit Committee shall be directly
responsible for the appointment, compensation, oversight
of the work, evaluation and termination of any
accounting firm employed by the Company (including
resolving disagreements between management and the
auditor regarding financial reporting) for the purpose
of preparing or issuing an audit report and related
work. The accounting firm shall report directly to the
Audit Committee.
- Pre-approval of Services - All auditing services (which
may entail providing comfort letters in connection with
securities underwritings) and all non-audit services,
provided to the Company by the Company's auditors that
are not prohibited by law shall be pre-approved by the
Audit Committee pursuant to such processes as are
determined to be advisable. Pre-approved services shall
include blanket pre-approval of tax compliance and
general tax consulting services for limited dollar
amounts that the Audit Committee, in its business
judgment, does not believe possess the potential for
abuse or conflict.
- Complaints - The Audit Committee shall establish
procedures to facilitate:
(i) the receipt, retention, and treatment of
complaints received by the Company from third parties
regarding accounting, internal accounting controls or
auditing matters; and
(ii) the confidential, anonymous submission by
employees of the Company of concerns regarding
questionable accounting or auditing matters.
- Related Party Transactions - The Audit Committee, or a
comparable body of the Board, must review and approve
all related-party transactions.
- Funding - The Audit Committee shall have the authority
to engage and determine funding for independent legal
counsel, accountants, and other advisors if the Audit
Committee deems it necessary to carry out its duties.
Review Procedures
- Review the Company's annual audited financial statements
prior to filing or distribution. Review should include
discussion with management and independent auditors of
significant issues regarding accounting principles,
practices and judgments. Discuss with the independent
auditor its judgment about the quality, not just
acceptability, of the Company's accounting principles as
applied in its financial reporting.
- In consultation with management, independent auditors
and internal auditors, consider the integrity of the
Company's financial reporting processes and controls.
Discuss significant financial risk exposures and the
steps taken to monitor, control, and report such
exposures.
- Review significant findings prepared by the independent
auditors and the internal auditors together with
management's responses. Gain an understanding of
whether internal control recommendations made by
internal and independent auditors have been implemented
by management.
Independent Auditors
- The independent auditors are ultimately accountable to
the Audit Committee and the Board. The Audit Committee
shall review the independence and performance of the
auditors and solely determine the appointment of the
independent auditors or approve the discharge of the
independent auditors.
- Review the independent auditors' timetable, scope and
approach of the quarterly reviews and annual examination
of the financial statements.
- Obtain from the independent auditors their annual letter
to the Audit Committee in satisfaction of SAS 60 and 61
regarding Reportable Conditions and Report to the Audit
Committee.
- Review and discuss with the independent auditors all
significant relationships they have with the Company
that could impair the auditors' independence.
Internal Auditors
- Approve an Annual Risk Assessment and Audit Plan
developed by the internal auditors.
- Meet quarterly with the internal auditors to gain an
understanding of the effectiveness of the internal audit
function in evaluating their performance.
- Review significant reports prepared by the internal
auditors together with management's response and follow-
up to these reports.
- The Audit Committee shall contract or hire for internal
audit services as necessary to assess the adequacy and
effectiveness of internal controls, the accuracy of
management reporting and compliance with laws,
regulations and bank policy. The Audit Committee will
set forth the outsourcing vendor's responsibilities in a
written contract, the terms of which comply with the
"Interagency Policy Statement on Internal Audit and
Internal Audit Outsourcing."
- Provide an internal controls report to be included in
each annual report. The report shall state management's
responsibility for establishing and maintaining internal
controls and financial reporting procedures and contain
an assessment by management of the effectiveness of the
internal control structure and procedures for financial
reporting.
Compliance with Laws and Regulations
- Periodically obtain updates from management and the
Compliance Officer regarding compliance with laws and
regulations.
- Review the finding of any examination by regulatory
agencies such as the Federal Reserve, the Federal
Deposit Insurance Corporation ("FDIC"), the Department
of Banking or other bank regulatory authority.
- Be familiar with management's response to regulatory
examinations.
Other Audit Committee Responsibilities
- Review and update the Audit Charter annually and submit
the Charter to the Board for approval. Ensure that the
Charter is included in the Corporation's Form 10-K once
every three years.
- Prepare an annual Audit Committee Report for inclusion
in the Corporation's Annual Proxy Statement that states
a formal audit charter has been approved and that the
Audit Committee has satisfied its responsibility during
the year.
- Perform other oversight functions as requested by the
full Board.
- Maintain minutes of meetings and periodically report to
the Board on significant results of the foregoing
activities.
Financial Statement and Disclosure Matters
- Review and discuss with management and the independent
auditor the annual audited financial statements,
including disclosures made in management's discussion
and analysis of financial condition and results of
operation, and recommend to the Board whether the
audited financial statements should be included in the
Company's Form 10-K.
- Review and discuss with management and the independent
auditor the Company's quarterly financial statements,
including the disclosures made in management's
discussion and analysis of financial condition and
results of operations prior to the filing of the
Company's Form 10-Q, including the results of the
independent auditors' reviews of the quarterly financial
statements.
- Discuss with management and the independent auditor
significant financial reporting issues and judgments
made in connection with the preparation of the Company's
financial statements, including (i) any significant
changes in the Company's selection or application of
accounting principles, (ii) any major issues as to the
adequacy of the Company's internal controls, (iii) the
development, selection and disclosure of critical
accounting estimates, (iv) analyses of the effect of
alternative assumptions, estimates or GAAP methods on
the Company's financial statements, (v) analyses and
disclosure of financial trends, and (vi) presentation of
the financial statements and notes thereto.
- Discuss with management and the independent auditor that
all material off-balance sheet transactions,
arrangements, obligations (including contingent
obligations), and other relationships of the Company
with unconsolidated entities or other persons, that may
have a material current or future effect on financial
condition, changes in financial condition, results of
operations, liquidity, capital expenditures, capital
resources, or significant components of revenues or
expenses have been disclosed in the annual and quarterly
financial reports.
- Discuss with management and the independent auditor the
effect of accounting initiatives as well as off-balance
sheet structures on the Company's financial statements.
- Discuss with management, the internal auditors and the
Compliance Officer the effect of regulatory initiatives
on the Company's financial statements.
- Discuss with management and the independent auditor that
all pro forma financial information to be included in
any SEC filing, public disclosure, or press release
comply with the anti-fraud rules and is reconciled with
the financial statements prepared in accordance with
GAAP.
Oversight of the Company's Relationship with the Independent
Auditor
- Review the experience and qualifications of the senior
members of the independent auditor team.
- Discuss with the independent auditor issues on which the
independent auditor communicated with its national
office regarding auditing or accounting issues.
- Meet with the independent auditor prior to the audit to
discuss the planning and staffing of the audit.
- Recommend to the Board policies for the Company's hiring
of employees or former employees of the independent
auditor who were engaged on the Company's account.
Oversight of the Company's Internal Audit Function
- Review the experience and qualifications of the senior
members of the internal auditors.
- Review the significant reports to management prepared by
the internal auditor and management's responses.
- Discuss with the independent auditor the internal audit
function, budget and staffing and any recommended
changes in the planned scope of the internal audit.
Compliance Oversight
- Obtain from the independent auditor such assurance as it
deems adequate that such auditor has fulfilled its
responsibilities under Section 10A of the Securities
Exchange Act of 1934.
- Obtain reports from management, internal auditors and
the Compliance Officer relating to the Company's
conformity with applicable legal and regulatory
requirements. Review reports and disclosures of insider
and affiliated party transactions.
- Review with management, internal auditors and the
Compliance Officer compliance with laws and regulations.
Advise the Board with respect to the Company's
compliance with applicable laws and regulations.
- Review with the counsel, pending material litigation and
compliance matters.
- The Audit Committee will address and take action, as it
deems necessary or appropriate, with respect to any
issues regarding the provisions of paragraphs 2 and 3 of
the Company's Code of Ethics for Senior Financial
Officers to the extent the issue relates to accounting
and disclosure and regulations of the SEC, Nasdaq, the
Federal Reserve, the FDIC, the Department of Banking or
other bank regulatory authority, and paragraph 4 of such
Code to the extent such misrepresentation or omission
relates to financial statements or related financial
information.
- The Audit Committee will address and take any action, as
it deems necessary or appropriate, with respect to any
issues relating to inquiries or investigations regarding
the quality of financial reports filed by the Company
with the SEC or otherwise distributed to the public.
Miscellaneous Powers and Responsibilities
- The Audit Committee shall have the power to investigate
any matter brought to its attention within the scope of
its duties, with the power to retain outside counsel for
this purpose if, in its judgment, that is appropriate.
- The Audit Committee shall approve, in advance, the
provision by the auditor of all permissible non-audit
services.
- The Audit Committee shall have the responsibility to
submit the minutes of all meetings of the Committee to
the Board.
- The Audit Committee shall require that a going concern
qualification in an audit opinion be disclosed through
the issuance of a press release.
- The Audit Committee shall have the responsibility of
reviewing and assessing the adequacy of this Charter at
least annually.
- The Audit Committee shall have the responsibility to
prepare the report required to be included in the
Company's annual proxy statement by the rules of the
SEC.
- The Audit Committee shall have the power to access the
Company's counsel without the approval of management, as
it determines necessary to carry out its duties.
- The Audit Committee shall have the responsibility of
discussing with management and the independent auditor
any significant or material correspondence with
regulators or governmental agencies, including all
examination reports received from the various
supervisory authorities, and any employee complaints or
published reports that raise material issues regarding
the Company's financial statements or accounting
policies and review management's replies to such
correspondence, complaints, or reports.
- The Audit Committee shall have the responsibility to
discuss with the Company's counsel legal matters that
may have a material impact on the financial statements
or the Company's compliance policies.
Meetings
- The Audit Committee shall meet as often as it
determines, but not less frequently than quarterly. The
Audit Committee may form and delegate authority to Audit
Committee members when appropriate, including
specifically the pre-approval of non-audit services and
the review of earnings releases, and earnings guidance.
- The Audit Committee must regularly convene executive
sessions.
- Minutes of each meeting will be compiled by the Company
Corporate Secretary who shall act as Secretary to the
Audit Committee, or in the absence of the Corporate
Secretary, by an Assistant Corporate Secretary of the
Company or any other person designated by the Audit
Committee.