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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-K
(Annual Report Under Section 13 of the Securities Exchange Act of 1934)
For the fiscal year ended December 31, 2000
Commission File No. 001-16101
BANCORP RHODE ISLAND, INC.
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(Exact Name of Registrant as Specified in Its Charter)
Rhode Island 05-0509802
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(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
ONE TURKS HEAD PLACE, PROVIDENCE, RI 02903
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(Address of Principal Executive Offices)
(401) 456-5000
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(Issuer's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.01 per share
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(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by checkmark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statement incorporated by reference in Part III of this Form 10-
K or any amendment to this Form 10-K. [X]
The aggregate market value of the voting stock of the Registrant held
by non-affiliates of the Registrant, based on the closing price on The
Nasdaq Stock Market on March 26, 2001 was $49,230,325.
As of March 26, 2001, there were 3,736,650 shares of common stock (par
value $0.01 per share) of the Registrant issued and outstanding.
Documents incorporated by reference:
Portions of Bancorp Rhode Island's 2000 Annual Report to Shareholders
and Definitive Proxy Statement for the 2001 Annual Meeting of Shareholders
are incorporated by reference into Parts II and III of this Form 10-K.
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Bancorp Rhode Island, Inc.
Annual Report on Form 10-K
Table of Contents
Description Page Number
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Part I. Item 1 -- Business 3
Item 2 -- Properties 14
Item 3 -- Legal Proceedings 14
Item 4 -- Submission of Matters to a Vote of Security Holders 14
Part II. Item 5 -- Market for the Company's Common Stock and Related
Stockholder Matters 15
Item 6 -- Selected Consolidated Financial Data 15
Item 7 -- Management's Discussion and Analysis of Financial
Condition and Results of Operations 15
Item 8 -- Financial Statements and Supplementary Data 15
Item 9 -- Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 15
Part III. Item 10 -- Directors and Executive Officers of the Company 16
Item 11 -- Executive Compensation 16
Item 12 -- Security Ownership of Certain Beneficial Owners and
Management 16
Item 13 -- Certain Relationships and Related Transactions 17
Part IV. Item 14 -- Exhibits, Financial Statement Schedules and Reports
on Form 8-K 17
Signatures 19
PART I
Cautionary Statement
Certain statements contained herein are "Forward Looking Statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
Forward Looking Statements may be identified by reference to a future period
or periods or by the use of forward looking terminology such as "may,"
"believes," "intends," "expects," and "anticipates" or similar terms or
variations of these terms. Actual results may differ materially from those
set forth in Forward Looking Statements as a result of certain risks and
uncertainties, including but not limited to, changes in political and
economic conditions, interest rate fluctuations, competitive product and
pricing pressures, equity and bond market fluctuations, credit risk,
inflation, as well as other risks and uncertainties detailed from time to
time in filings with the Securities and Exchange Commission ("SEC").
ITEM 1. BUSINESS
General
Bancorp Rhode Island, Inc. (the "Company"), a Rhode Island
corporation, was organized by Bank Rhode Island (the "Bank") on February 15,
2000, to be a bank holding company and to acquire all of the capital stock
of the Bank. The reorganization of the Bank into the holding company form
of ownership was completed on September 1, 2000. The Company has no
significant assets other than the common stock of the Bank. For this
reason, substantially all of the discussion in this document relates to the
operations of the Bank and its subsidiaries.
The Company's wholly-owned subsidiary, the Bank, is a commercial bank
chartered as a financial institution in the State of Rhode Island. The Bank
was formed in 1996 as a result of the acquisition of certain assets and
liabilities divested in connection with the merger of Fleet Financial Group,
Inc. and Shawmut National Corporation. Headquartered in Providence, Rhode
Island, the Bank conducts business through 13 full service branches, with
nine located in Providence County and four located in Kent County.
The Bank provides a community banking alternative in the greater
Providence market which is dominated by three large regional banking
institutions. Based on total deposits as of June 30, 2000, the Bank is the
fifth largest bank in Rhode Island and the only mid-sized commercial bank in
the greater Providence and Warwick, Rhode Island areas. The Bank offers a
wide variety of deposit products, commercial, residential and consumer
loans, nondeposit investment products, on-line banking services and other
traditional banking products and services, designed to meet the needs of
individuals and small- to mid-sized businesses. As a full service community
bank, the Bank seeks to differentiate itself from its competitors through
superior personal service, responsiveness and local decision-making. The
Bank's deposits are insured by the Federal Deposit Insurance Corporation
("FDIC"), subject to regulatory limits.
The Bank's wholly-owned subsidiary, BRI Investment Corp., a Rhode
Island corporation, engages in the maintenance and management of intangible
investments and the collection and distribution of the income from such
investments.
The Company's headquarters and executive management are located at One
Turks Head Place, Providence, Rhode Island 02903 and its telephone number is
(401) 456-5000. The Bank also maintains an internet web site at
http://www.bankri.com.
Lending Activities
General. At its formation, the Bank acquired $85.4 million of
commercial loans and $32.1 million of consumer loans that were in-market
loans largely associated with acquired branches. To provide sufficient
assets to operate profitably, the Bank also purchased $276.4 million of
residential mortgage loans, resulting in an asset mix more characteristic of
a thrift institution than that of a commercial bank. The Bank's business
strategy has been to grow its commercial loan portfolio and to allow the
residential mortgage loan portfolio to decline gradually as the Bank is able
to replace residential mortgage loans with higher yielding commercial loans.
The Bank has allocated substantial resources to its commercial lending
function to facilitate and promote such growth. From March 22, 1996, when
the Bank commenced operations, until December 31, 2000, commercial loan
outstandings have increased from $85.4 million to $212.8 million, an
increase of $127.4 million, or 149.2%.
The Bank offers a variety of loan facilities to serve both commercial
and consumer borrowers primarily within the State of Rhode Island and nearby
areas of Massachusetts. Commercial and industrial loan products include
revolving lines of credit and term loans offered at fixed and variable
rates. The Bank's real estate lending activities include originating loans
secured by commercial and residential properties and also purchasing
residential mortgage loans. Loans are made on existing properties and, to a
lesser extent, on properties under construction. The Bank satisfies a
variety of consumer credit needs by providing home equity term loans, home
equity lines of credit, direct automobile loans, savings secured loans and
personal loans, in addition to residential mortgage loans. The Bank also
recently has begun purchasing packages of automobile loans.
The Bank has tiered lending authorities. Loan commitments up to $1.0
million per customer relationship may be approved by the Chief Lending
Officer. All extensions of credit of more than $1.0 million (up to the
Bank's house lending limit) per customer relationship requires the approval
of the Credit Committee, which consists of members of the Bank's senior
management and one outside director. Department heads in the Bank's
Business Lending, Commercial Real Estate Lending and Retail Lending units
have lending authority up to $500,000 per customer relationship. Other
officers have limited lending authorities that can be exercised subject to
strict lending policy guidelines to facilitate volume production and process
flow.
The Bank issues loan commitments to prospective borrowers subject to
various conditions. Commitments generally are issued in conjunction with
commercial loans and residential mortgage loans and typically are for
periods up to 90 days. The proportion of the total value of commitments
derived from any particular category of loan varies from time to time and
depends upon market conditions. At December 31, 2000, the Bank had $5.4
million of aggregate loan commitments outstanding to originate a variety of
loans.
Commercial Real Estate and Multi-Family Loans. The Bank originates
loans secured by mortgages on owner-occupied and nonowner-occupied
commercial and multi-family residential properties. At December 31, 2000,
owner-occupied commercial real estate loans totaled $38.3 million, or 7.4%
of the total loan portfolio. Many of these customers have other commercial
borrowing relationships with the Bank, as the Bank finances their other
business needs. Nonowner-occupied commercial real estate loans totaled
$69.3 million, or 13.4% of the total loan portfolio, and multi-family
residential loans totaled $15.9 million, or 3.1% of the total loan
portfolio. The majority of real estate secured commercial loans are
originated on a three-, or five-year adjustable rate basis. Interest rates
typically charged on these loans are higher than those charged on adjustable
rate loans secured by one- to four-family residential units. Additionally,
origination fees may be charged on these loans.
The Bank's underwriting practices for commercial real estate and
multi-family residential loans are intended to ensure that the property
securing these loans will generate a positive cash flow after operating
expenses and debt service payments. The Bank requires appraisals before
making a loan and generally requires the personal guarantee of the borrower.
Permanent loans on commercial real estate and multi-family properties
generally are made at a loan-to-value ratio of no more than 80%.
Loans secured by nonowner-occupied commercial real estate and multi-
family properties involve greater risks than owner-occupied properties
because repayment generally depends on the rental income generated by the
property. In addition, because the payment experience on loans secured by
nonowner-occupied properties is often dependent on successful operation and
management of the property, repayment of the loan is usually more subject to
adverse conditions in the real estate market or the general economy than is
the case with owner-occupied real estate loans. Also, the nonowner-occupied
commercial real estate and multi-family residential business is cyclical and
subject to downturns, over-building and local economic conditions.
Commercial and Industrial Loans. The Bank originates non-real estate
commercial loans that, in most instances, are secured by equipment, accounts
receivable or inventory, as well as the personal guarantees of the principal
owners of the borrower. Unlike many community banks, the Bank is able to
offer asset-based commercial loan facilities that monitor advances against
receivables and inventories on a formula basis. A number of commercial and
industrial loans are granted in conjunction with the Small Business
Administration's (''SBA'') loan programs and include some form of SBA credit
enhancement. Commercial lending activities are supported by noncredit
products and services, such as letters of credit and cash management
services, that are responsive to the needs of the Bank's commercial
customers.
Approximately 75% of Rhode Island businesses are in Providence and
Kent counties. The vast majority of these businesses are small- to mid-
sized and have fewer than 50 employees. The Bank believes the financing
needs of these businesses generally match the Bank's lending profile and
that the Bank's branches are well positioned to generate loans from this
customer base. At December 31, 2000, commercial and industrial loans
(including leases) totaled $63.2 million, or 12.2% of the total loan
portfolio. Generally, commercial and industrial loans are granted at higher
rates than residential mortgage loans, with relatively short-term
maturities, or are at adjustable rates without interest rate caps.
Unlike residential and commercial real estate loans, which generally
are based on the borrower's ability to make repayment from employment and
rental income and which are secured by real property whose value tends to be
relatively easily ascertainable, commercial and industrial loans are
typically made on the basis of the borrower's ability to make repayment from
the cash flow of the business and are generally secured by business assets,
such as accounts receivable, equipment and inventory. As a result, the
availability of funds for the repayment of commercial and industrial loans
may be significantly dependent on the success of the business itself.
Further, the collateral securing the loans may be difficult to value,
fluctuate in value based on the success of the business and deteriorate over
time.
Small Business Loans. The Bank originates loans of $250,000 or less
to small business customers through its branch network and business
development officers. These loans are generally secured by the assets of
the business, as well as the personal guarantees of the principal owners of
the borrower. A number of these loans are granted in conjunction with the
SBA's Low-Doc and Express programs and include some form of SBA credit
enhancement. At December 31, 2000, small business loans totaled $19.2
million, or 3.7% of the total loan portfolio. Generally, small business
loans are granted at higher rates than commercial and industrial loans.
These loans have relatively short-term maturities or are at adjustable rates
without interest rate caps.
The Bank's underwriting practices for small business loans are
designed to provide quick turn-around and minimize the fees and expenses to
the customer. Accordingly, the Bank utilizes a credit scoring process to
assist in evaluating potential borrowers. In many cases traditional
underwriting practices, similar to those for commercial and industrial
loans, are also employed to provide a more balanced and judgmentally-based
credit decision. The Bank distinguishes itself from larger financial
institutions by providing personalized service through a loan officer
(usually a branch manager) assigned to the customer relationships. Lending
to small businesses may involve additional risks as a result of their more
limited financial resources and more niche-based operations.
Construction Loans. The Bank originates residential construction
loans to individuals and professional builders to construct one- to four-
family residential units, either as primary residences or for resale. The
Bank also makes construction loans for the purpose of constructing multi-
family or commercial properties. At December 31, 2000, outstanding
construction loans totaled $7.1 million, or 1.4% of the total loan
portfolio. Currently, the Bank offers interest-only construction loans
during the construction period.
The Bank's underwriting practices for construction loans are similar
to those for commercial real estate loans, but they also are intended to
ensure completion of the project and take into account the feasibility of
the project, among other things. As a matter of practice, the Bank
generally lends an amount sufficient to pay a percentage of the property's
acquisition costs and a majority of the construction costs but requires that
the borrower have equity in the project. Property appraisals and generally
the personal guarantee of the borrower are required, as is the case with
commercial real estate loans.
The risks associated with construction lending are greater than those
with commercial real estate lending and multi-family lending on existing
properties for a variety of reasons. The Bank seeks to minimize these risks
by, among other things, often using the services of a consulting engineer
for commercial construction loans, advancing money only as the project is
completed and generally lending for construction of properties within its
market area to borrowers who are experienced in the type of construction for
which the loan is made, as well as by adhering to the lending standards
described above. In addition, the Bank does not usually lend to fund the
construction of property being built for speculative purposes.
Residential Mortgage Loans. The Bank's one- to four-family
residential mortgage loan portfolio consists primarily of whole loans
purchased from other financial institutions. Currently, the Bank purchases
new ARM whole loans from other financial institutions both in New England
and elsewhere in the country. The Bank anticipates continuing to purchase
residential mortgage loans until such time as its commercial and consumer
loan originations are sufficient to utilize available cash flows. Servicing
rights related to the whole loan mortgage portfolio are retained by the
mortgage servicing companies. The Bank pays a servicing fee ranging from
.25% to .375% to the mortgage servicing companies for administration of the
loan portfolios. Some of the loans purchased subsequent to the formation of
the Bank were originated outside of New England. As of December 31, 2000,
approximately 10.7% of the residential mortgage loan portfolio consisted of
loans secured by real estate outside of New England.
Additionally, but to a lesser extent, the Bank originates ARMs for its
own portfolio. The Bank also originates fixed rate mortgage loans and sells
these mortgages to its correspondents at the time of the loan's closing.
While the Bank anticipates that its residential mortgage loan portfolio will
decline long-term as it focuses its resources on commercial lending, the
Bank plans to continue its own origination of one- to four-family
residential mortgage loans, primarily in its market area. Such activity
would decrease the Bank's need to purchase residential mortgage loans in
order to enhance profitability while it increases its commercial loan
portfolio, as well as facilitate overall growth of customer relationships.
At December 31, 2000, one- to four-family residential mortgage loans
totaled $247.9 million, or 47.8% of the total loan portfolio. The fixed
rate portion of this portfolio totaled $34.6 million and had original
maturities of 15 and 30 years. The adjustable rate portion of this
portfolio totaled $212.2 million and had original maturities of 30 years.
Interest rates on adjustable rate loans are set for an initial period of
either one, three, five, seven or ten years with annual adjustments for the
remainder of the loan. These loans have periodic rate adjustment caps of
primarily 2% and lifetime rate adjustment caps of either 5% or 6%. There
are no prepayment penalties for the one- to four-family residential mortgage
loans.
Although adjustable rate mortgage loans allow the Bank to increase the
sensitivity of its assets to changes in market interest rates, the terms of
such loans include limitations on upward and downward rate adjustments.
These limitations increase the likelihood of prepayments due to refinancings
during periods of falling interest rates, particularly if rate adjustment
caps keep the loan rate above market rates. Additionally, these limitations
could keep the market value of the portfolio below market during periods of
rising interest rates, particularly if rate adjustment caps keep the loan
rate below market rates.
Consumer and Other Loans. The Bank originates a variety of term loans
and line of credit loans for consumers. At December 31, 2000, the consumer
loan portfolio totaled $58.1 million, or 11.2% of the total loan portfolio,
and is comprised primarily of home equity term loans and home equity lines
of credit. These loans and lines of credit are generally offered for up to
80% of the appraised value of the borrower's home, less the amount of the
remaining balance of the borrower's first mortgage. The Bank also offers
direct automobile loans, savings secured loans and personal loans. During
2000, the Bank for the first time purchased a package of automobile loans
from another New England institution. The Bank currently anticipates
continued automobile loan purchases to further diversify its consumer and
other loan portfolio.
Investment Activities
Investments, an important component of the Company's diversified asset
structure, are a source of earnings in the form of interest and dividends,
and provide a source of liquidity to meet lending demands and fluctuations
in deposit flows. Overall, the portfolio, comprised of U.S. Treasury and
federal agency securities, mortgage-backed securities, Federal Home Loan
Bank of Boston (''FHLB'') stock and federal funds sold, represents 23.5% of
total assets, or $174.0 million, as of December 31, 2000.
Loans receivable generally provide a better return than investments,
and accordingly, the Company seeks to emphasize the generation of loans,
rather than increasing its investment portfolio. The investments are
managed by the Chief Financial Officer, subject to the supervision and
review of the Asset/Liability Committee and in compliance with the
Investment Policy established by the Bank's board of directors.
Overall, investments produced total interest and dividend income of
$9.8 million, or 19.7% of total interest and dividend income, in 2000 and
$8.4 million, or 20.1% of total interest and dividend income, during 1999.
Deposits
Deposits are the principal source of funds for use in lending and for
other general business purposes. The Bank attracts deposits from businesses
and the general public by offering a variety of deposit products ranging in
maturity from demand-type accounts to certificates of deposit with
maturities of up to ten years. The Bank relies mainly on quality customer
service and diversified products, as well as competitive pricing policies
and advertising, to attract and retain deposits. The Bank emphasizes retail
deposits obtained locally in contrast to wholesale deposits obtained from
national or regional deposit brokers.
The Bank seeks to develop relationships with its customers in order to
become their primary bank. In order to achieve this, the Bank has stressed
growing its "core" account base, namely its checking and savings accounts.
While the Bank prices certificate of deposit accounts competitively, and
from time to time will run special offers, the Bank does not ordinarily
solicit high cost certificates of deposit.
The Bank generally charges early withdrawal penalties on its
certificates of deposit in an amount equal to three months' interest on
accounts with original maturities of one year or less and six months'
interest on accounts with original maturities longer than one year.
Interest credited to an account during any term may be withdrawn without
penalty at any time during the term. Upon renewal of a certificate of
deposit, only interest credited during the renewal term may be withdrawn
without penalty during the renewal term. The Bank's withdrawal penalties
are intended to offset the potentially adverse effects of the withdrawal of
funds during periods of rising interest rates.
As a general policy, the Bank systematically reviews the deposit
accounts it offers to determine whether the accounts continue to meet
customers' needs and the Bank's asset/liability management goals. This
review is the responsibility of the Pricing Committee which meets weekly to
determine, implement and monitor pricing policies and practices consistent
with the Bank's overall earnings and growth goals. The Pricing Committee
analyzes the cost of funds and also reviews all sources of fee income.
The Bank also derives funds from loan repayments, sales of investment
securities, and FHLB and other borrowings. Loan repayments and deposit
inflows and outflows are significantly influenced by prevailing interest
rates, competition and general economic conditions. Borrowings may be used
on a short-term basis to compensate for reductions in normal sources of
funds, or on a longer term basis to support expanded lending activities.
Nondeposit Investment Products and Services
In October 1997, the Bank introduced a nondeposit investment program
through which it made available to its customers a variety of mutual funds
and fixed and variable annuities. These investment products were offered
through an arrangement with a national wholesaler of mutual funds and
annuities. In December of 2000, the Bank terminated this agreement and
entered into a new agreement with Commonwealth Equity Services, Inc., of
Waltham, MA. The Bank will now make mutual funds and annuities available to
its customers through Commonwealth, but will assume direct management
responsibility for the program.
In 1998, the Bank began offering trust services through a referral
arrangement with a well-known, local trust company. At year-end 2000, the
Bank severed this relationship and now makes investment management services
available to its high net worth customers through two sources. The first is
a national firm, PNC Advisors, a division of PNC Financial Services Group.
The other is Baldwin Brothers, a boutique investment management firm with
offices in Providence, RI and Marion, MA.
Employees
At December 31, 2000, the Company had 167 full-time and 40 part-time
employees. The Company's employees are not represented by any collective
bargaining unit, and the Company believes its employee relations are good.
The Company maintains a benefit program which includes health and dental
insurance, life and long-term disability insurance and a 401(k) plan.
Competition and Marketplace
The Company's primary operating subsidiary, the Bank, is headquartered
in Providence, Rhode Island, and operates in Providence and Kent counties.
The Bank faces significant competition both in making loans and generating
deposits. In the past, the Bank's most direct competition has come from
three large regional banks which have dominated the Rhode Island market.
Currently, these regional banks are FleetBoston, Citizens and Sovereign.
These regional banks have well-established distribution networks and greater
financial resources than the Bank, which have enabled them to market their
products and services extensively, offer access to a greater number of
locations and products, and price competitively. In addition, the Bank
faces competition for loans from out-of-state financial institutions which
have established loan production offices as well as from non-bank
competitors. Competition for deposits also comes from short-term money
market funds, other corporation and government securities funds and other
non-bank financial institutions such as brokerage firms and insurance
companies. Many of the Bank's non-bank competitors are not subject to the
same degree of regulation as that imposed on federally insured state
chartered banks. As a result, such non-bank competitors have advantages
over the Bank in providing certain services.
The population in the Bank's market area is not growing and economic
growth in the Rhode Island area has been slow to moderate over the past
several years, lagging behind other parts of New England and the United
States. Accordingly, the Bank's future growth depends largely upon its
ability to increase its market penetration. Moreover, economic conditions
beyond the Bank's control may have a significant impact on the Bank's
operations. Examples of such conditions include the strength of credit
demand by customers and changes in the general levels of interest rates.
Furthermore, the Bank's commercial and consumer lending activities are
conducted principally in Rhode Island and, to a lesser extent, Southeastern
Massachusetts. Its borrowers' ability to honor their repayment commitments
is generally dependent upon the level of economic activity and general
health of the regional economy, and any economic recession in the Bank's
market area adversely affecting growth could cause significant increases in
nonperforming assets, thereby causing operating losses, impairing liquidity
and eroding capital.
Supervision and Regulation
Overview. The Company and the Bank are subject to extensive
governmental regulation and supervision. Federal and state laws and
regulations govern numerous matters affecting the Bank and/or the Company,
including changes in the ownership or control, maintenance of adequate
capital, financial condition, permissible types, amounts and terms of
extensions of credit and investments, permissible non-banking activities,
the level of reserves against deposits and restrictions on dividend
payments. These regulations are intended primarily for the protection of
depositors and customers, rather than for the benefit of shareholders.
Compliance with such regulation involves significant costs to the Company
and the Bank and may restrict their activities. In addition, the passage of
new or amended federal and state legislation could result in additional
regulation of, and restrictions on, the operations of the Company and/or the
Bank. It cannot be predicted whether any legislation currently under
consideration will be adopted or how such legislation or any other
legislation that might be enacted in the future would affect the business of
either the Company or the Bank. The following descriptions of applicable
statutes and regulations are not intended to be complete descriptions of
these provisions or their effects on the Company and the Bank, but are brief
summaries which are qualified in their entirety by reference to such
statutes and regulations.
The Company and the Bank are subject to extensive periodic reporting
requirements concerning financial and other information. In addition, the
Bank and the Company must file such additional reports as the regulatory and
supervisory authorities may require. The Company also is subject to the
reporting and other dictates of the Securities Exchange Act of 1934, as
amended.
The Company is a bank holding company registered under the Bank
Holding Company Act of 1956, as amended (the "BHC Act"). As a bank holding
company, the Company is regulated by the Board of Governors of the Federal
Reserve System (the "FRB"), and also is subject to certain laws of the State
of Rhode Island.
The Bank is a Rhode Island chartered non-member bank of the Federal
Reserve System. The Bank's deposits are insured by the Bank Insurance Fund
(the "BIF") of the FDIC. Accordingly, the Bank is subject to the
supervision and regulation of the FDIC and the Rhode Island Department of
Business Regulation (the "Department of Business Regulation").
Rhode Island Regulation
As a state chartered financial institution, the Bank is subject to the
continued regulation and supervision and periodic examination by the
Department of Business Regulation. Rhode Island law also imposes reporting
requirements on the Bank. Rhode Island statutes and regulations govern
among other things, investment powers, deposit activity, trust powers and
borrowings. The approval of the Department of Business Regulation is
required to establish, close or relocate a branch, merge with other banks,
amend the Bank's Charter or By-laws and undertake certain other enumerated
activities.
If it appears to the Department of Business Regulation that a Rhode
Island bank has violated its charter, or any law or regulation, or is
conducting its business in an unauthorized or unsafe manner, or that the
bank has been notified by its federal insurer of such insurer's intent to
terminate deposit insurance, the director may, under certain circumstances,
restrict the withdrawal of deposits, order any person to cease violating any
Rhode Island statutes or rules and regulations or cease engaging in any
unsafe, unsound or deceptive banking practice, order that capital be
restored, or suspend or remove directors, committee members, officers or
employees who have violated the Rhode Island banking statutes, or a rule or
regulation or order thereunder, or who are reckless or incompetent in the
conduct of the bank's business.
Rhode Island law also requires any person or persons desiring to
acquire control of any Rhode Island financial institution in any manner to
make an application with the Director of the Department of Business
Regulation. For the purposes of the statute, "Control" has the meaning set
forth in the BHC Act. The application requires, among other things,
information regarding the financial condition of the bank, personal business
history of the persons involved in the transaction, terms and conditions of
the proposed transaction, the source of funds used in the acquisition and
any plans to liquidate the bank after the acquisition. The Director may
disapprove the acquisition if the proposed transaction would result in a
monopoly, the financial condition of any acquiring person might jeopardize
the financial stability of the institution, the competence of the proposed
management indicates that it would not be in the interest of the depositors,
or the acquisition would not promote public convenience and advantage.
In addition, whenever the Department of Business Regulation considers
it advisable, an examination of a Rhode Island bank holding company, such as
the Company, may be conducted. Every Rhode Island bank holding company also
must file an annual financial report with the Department of Business
Regulation which may be a copy of the annual report prepared for the FRB.
The Company also is subject to the Rhode Island Business Combination
Act.
Federal Supervision: FDIC
Overview. The FDIC issues rules and regulations, conducts periodic
inspections, requires the filing of certain reports and generally supervises
the operations of its insured state chartered banks, that, like the Bank,
are not members of the Federal Reserve System. The FDIC's powers have been
enhanced in recent years by federal legislation. With the passage of the
Financial Institutions Reform, Recovery and Enforcement Act of 1989, the
Crime Control Act of 1990, and the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA"), federal bank regulatory agencies,
including the FDIC, were granted substantially broader enforcement powers to
restrict the activities of financial institutions and to impose or seek the
imposition of increased civil and/or criminal penalties upon financial
institutions and the individuals who manage or control such institutions.
The Bank is subject to the FDIC regulatory capital requirements. An
FDIC-insured bank also must conform to certain standards, limitations, and
collateral requirements with respect to certain transactions with affiliates
such as the Company. Further, an FDIC-insured bank is subject to laws and
regulations that limit the amount of, and establish required approval
procedures, reporting requirements and credit standards with respect to,
loans and other extensions of credit to officers, directors and principal
shareholders of the Company, the Bank, and any subsidiary of the Bank, and
to their related interests. FDIC approval also is required prior to the
Bank's redemption of any stock. The prior approval of the FDIC or, in some
circumstances another regulatory agency, is required for mergers and
consolidations. In addition, notice to the FDIC is required prior to the
closing of any branch office, and the approval of the FDIC is required in
order to establish or relocate a branch facility.
Proceedings may be instituted against any FDIC-insured bank, or any
officer or director or employee of such bank and any other institution
affiliated parties who engage in unsafe and unsound practices, breaches of
any fiduciary duty, or violation of applicable laws, regulations, regulatory
orders and agreements. The FDIC has the authority to terminate insurance of
accounts, to issue orders to cease and desist, to remove officers, directors
and other institution affiliated parties, and to impose substantial civil
money penalties.
Deposit Insurance. The Bank's deposits are insured by the BIF of the
FDIC to the legal maximum of $100,000 for each separately insured depositor.
The Federal Deposit Insurance Act provides that the FDIC shall set deposit
insurance assessment rates on a semiannual basis and requires the FDIC to
increase deposit insurance assessments whenever the ratio of BIF reserves to
insured deposits in the BIF is less than 1.25%.
The FDIC has established a risk-based bank assessment system the rates
of which are determined on the basis of a particular institution's
supervisory rating and capital level. The assessment system is based upon
three supervisory categories and three capital categories, resulting in
risk-based premiums which range from the current 0 basis points (subject to
a $2,000 minimum annual fee) for the most highly-rated, well-capitalized
banks to 27 basis points per $100 of domestic deposits for troubled banks
which are undercapitalized (as discussed below). The Bank currently pays
the minimum assessment.
The FDIC may terminate the deposit insurance of any insured depository
institution if the FDIC determines that the institution had engaged in or is
engaging in unsafe or unsound practices, is in an unsafe or unsound
condition to continue operations, or has violated any applicable law,
regulation, order or any condition imposed in writing by, or written
agreement with, the FDIC.
Capital Adequacy. FDIC-insured institutions must meet specified
minimal capital requirements and are subject to varying regulatory
restrictions based upon their capital levels. All banks are subject to
restrictions on capital distributions (such as dividends, stock repurchases
and redemptions) and payment of management fees if, after making such
distributions or payment, the institution would be undercapitalized. FDIC-
insured banks that have the highest regulatory rating and are not
anticipating or experiencing significant growth are required to maintain a
leverage capital ratio (calculated using Tier 1 capital, as defined below,
to total assets) of at least 3.0%. All other banks are required to maintain
a minimum leverage capital ratio of 1.0% to 2.0% above 3.0%, with a minimum
of 4.0%.
In addition, the FDIC has adopted capital guidelines based upon ratios
of a bank's capital to total assets adjusted for risk, which require FDIC-
insured banks to maintain a total capital-to-risk weighted assets ratio
("Risk-Based Capital Ratio") of at least 8.0% and a Tier 1 Risk-Based
Capital Ratio of at least 4.0%. The guidelines provide a general framework
for assigning assets and off-balance sheet items (such as standby letters of
credit) to broad risk categories and provide procedures for the calculation
of the Risk-Based Capital Ratio. Tier 1 (sometimes referred to as "core")
capital consists of common shareholders' equity, qualifying, non- cumulative
perpetual preferred stock, and minority interests in the equity accounts of
consolidated subsidiaries. "Supplementary" or Tier 2 capital includes
perpetual debt, mandatory convertible debt securities, a limited amount of
subordinated debt, other preferred stock, and a limited amount of loan loss
reserves. Certain intangible assets, including goodwill, are deducted in
computing the Capital Ratios.
Prompt Corrective Action Provisions. In order to resolve the problems
of undercapitalized institutions, FDICIA established a system known as
"prompt corrective action." Under prompt corrective action provisions and
implementing regulations, every institution is classified into one of five
categories reflecting the institution's capitalization. These categories
are the following: well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized. For an institution to be well capitalized, it must have a
total Risk-Based Capital Ratio of at least 10%, a Tier 1 Risk-Based Capital
Ratio of at least 6% and a Tier 1 leverage ratio of at least 5% and not be
subject to any specific capital order or directive. In contrast, an
institution will be deemed to be significantly undercapitalized if it has a
total Risk-Based Capital Ratio that is less than 6%, or a Tier 1 Risk-Based
Capital Ratio that is less than 3%, or a leverage ratio that is less than
3%, and will be deemed to be critically undercapitalized if the bank has a
ratio of tangible equity to total assets that is equal to or less than 2%.
As of December 31, 2000, the Bank's Tier 1 leverage ratio was 5.85%, its
total Risk-Based Capital Ratio was 10.66% and its Tier 1 Risk-Based Capital
Ratio was 9.41%. Based upon the above ratios, the Bank is considered "well
capitalized" for regulatory capital purposes.
The activities in which a depository institution may engage and the
remedies available to federal regulators vary depending upon the category
described above into which an institution's level of capital falls. At each
successive downward capital level, institutions are subject to more
restrictions on their activities. For example, only "well capitalized"
institutions may accept brokered deposits without prior regulatory approval
(brokered deposits are defined to include deposits with an interest rate
which is 75 basis points above prevailing rates paid on similar deposits in
an institution's normal market area).
The FDIC has broad powers to take prompt corrective action to resolve
problems of insured depository institutions, depending upon a particular
institution's level of capital. A bank which does not meet applicable
minimum capital requirements or is deemed to be in a "troubled" condition
may be subject to additional restrictions, including a requirement of
written notice to federal regulatory authorities prior to certain proposed
changes in senior management or directors of the institutions, and a general
prohibition on acceptance, renewal or rollover of brokered deposits. Also,
undercapitalized, significantly undercapitalized and critically
undercapitalized institutions are subject to a number of other requirements
and restrictions. Such institutions also are required to submit and
implement capital restoration plans acceptable to the appropriate federal
banking regulator and are subject to increased regulatory monitoring. Once
an institution becomes significantly undercapitalized, regulators must take
certain actions. A critically undercapitalized institution must be placed
in conservatorship or receivership unless certain stringent conditions are
satisfied. Failure to meet the minimum regulatory capital requirements
could subject a banking institution to a variety of enforcement remedies,
including the termination of deposit insurance by the FDIC and seizure of
the institution.
Safety and Soundness Standards. The Federal Deposit Insurance Act, as
amended, directs each federal banking agency to prescribe standards for
safety and soundness for insured depository institutions and their holding
companies relating to operations, management, asset quality, earnings and
stock valuation.
Examination. FDIC requires that nearly all insured depository
institutions have annual, on-site regulatory examinations and annual audits
by an independent public accountant. Management must prepare an annual
report, attested to by the independent public accountant, confirming
management's responsibility in preparing financial statements, maintaining
internal controls for financial reporting and complying with safety and
soundness standards. The audit process must be overseen by an independent
audit committee composed of outside directors, provided that the federal
banking agencies may permit the committee to include inside directors if the
bank is unable to find competent outside directors, so long as outside
directors comprise a majority of the committee.
Federal Supervision: FRB
The BHC Act mandates that the prior approval of the FRB must be
obtained in order for the Company to engage in certain activities such as
acquiring or establishing additional banks or non-banking subsidiaries or
merging with other institutions.
In addition to the need for obtaining the approval of the FRB for
particular kinds of transactions, a bank holding company is required by the
FRB to adhere to certain capital adequacy standards. It is the position of
the FRB that a bank holding company, such as the Company, should be a source
of financial strength to its subsidiary banks such as the Bank. In general,
the FRB has adopted substantially identical capital adequacy guidelines as
the FDIC. Such standards are applicable to bank holding companies and their
bank subsidiaries on a consolidated basis for holding companies, like the
Company, with consolidated assets in excess of $150 million. If a bank
holding company's capital levels fall below the minimum requirements
established by the capital adequacy guidelines, the holding company will be
expected to develop and implement a plan, acceptable to the FRB, to achieve
adequate levels of capital within a reasonable time. Until such capital
levels are achieved, the holding company may be denied approval by the FRB
for certain activities such as those described in the preceding paragraph.
As of December 31, 2000, on a consolidated basis, the Company's Tier 1
Leverage Ratio was 5.91%, its total Risk-Based Capital Ratio was 10.76% and
its Tier 1 Risk-Based Capital Ratio was 9.50%. Based upon the above ratios,
the Company is considered "well capitalized" for regulatory capital
purposes.
Restrictions on Transactions with Affiliates and Insiders
The Bank is subject to certain federal statutes limiting transactions
with non-banking affiliates and insiders. Section 23A of the Federal
Reserve Act limits loans or other extensions of credit to, asset purchases
with and investments in affiliates of the Bank, such as the Company, to ten
percent (10%) of the Bank's capital and surplus. Further, such loans and
extensions of credit, as well as certain other transactions, are required to
be secured in specified amounts. Section 23B of the Federal Reserve Act,
among other things, requires that certain transactions between the Bank and
its affiliates must be on terms substantially the same, or at least as
favorable to the Bank, as those prevailing at the time for comparable
transactions with or involving other nonaffiliated persons. In the absence
of comparable transactions, any transaction between the Bank and its
affiliates must be on terms and under circumstances, including credit
standards that in good faith would be offered to or would apply to
nonaffiliated persons.
The restrictions on loans to officers, directors, principal
shareholders and their related interests (collectively referred to herein as
"insiders") contained in the Federal Reserve Act and Regulation O apply to
all institutions and their subsidiaries. These restrictions include limits
on loans to one borrower and conditions that must be met before such loans
can be made. Loans made to insiders and their related interests cannot
exceed the institution's total unimpaired capital and surplus. Insiders are
subject to enforcement actions for knowingly accepting loans in violation of
applicable restrictions. All extensions of credit by the Bank to its
insiders are in compliance with these restrictions and limitations.
Loans outstanding to executive officers and directors of the Bank,
including their immediate families and affiliated companies ("related
parties"), aggregated $6.4 million at December 31, 2000 and $3.8 million at
December 31, 1999. Loans to related parties are made in the ordinary course
of business under normal credit terms, including interest rates and
collateral, prevailing at the time of origination for comparable
transactions with other persons, and do not represent more than normal
credit risk.
Interstate Banking
The Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994 facilitates the interstate expansion and consolidation of banking
organizations by permitting (i) bank holding companies such as the Company,
that are adequately capitalized and managed, to acquire banks located in
states outside their home states regardless of whether such acquisitions are
authorized under the law of the host state, (ii) the interstate merger of
banks after June 1, 1997, subject to the right of individual states to "opt
in" early or "opt out" of this authority prior to such date, (iii) banks to
establish new branches on an interstate basis provided that such action is
specifically authorized by the law of the host state, (iv) foreign banks to
establish, with approval of the appropriate regulators in the United States,
branches outside their home states to the same extent that national or state
banks located in such state would be authorized to do so and (v) banks to
receive deposits, renew time deposits, close loans and receive payments on
loans and other obligations as agent for any bank or thrift affiliate,
whether the affiliate is located in the same or different state. Rhode
Island adopted "opt in" legislation, which permits full interstate banking
acquisition and branching.
Gramm-Leach-Bliley Act
On November 12, 1999 the Gramm-Leach-Bliley Act (the "G-L-B Act")
became law, repealing the 1933 Glass-Steagall Act's separation of the
commercial and investment banking industries. The G-L-B Act could have a
far-reaching impact on the financial services industry. The G-L-B Act
expands the range of non-banking activities that certain bank holding
companies may engage in while preserving existing authority for bank holding
companies to engage in activities that are closely related to banking. In
order to engage in these new non-banking activities, a bank holding company
must qualify and register with the FRB as a "financial holding company" by
demonstrating that each of its banking subsidiaries is "well capitalized"
and "well managed" and has a rating of "Satisfactory" or better under the
Community Reinvestment Act of 1977.
Under the G-L-B Act and its implementing regulations, financial
holding companies may engage in any activity that (i) is financial in nature
or incidental to a financial activity under the G-L-B Act or (ii) is
complementary to a financial activity and does not impose a substantial risk
to the safety and soundness of depository institutions or the financial
system generally. The G-B-L Act and its accompanying regulations specify
certain activities that are financial in nature such as acting as principal,
agent or broker for insurance; underwriting, dealing in or making a market
in securities; and providing financial and investment advice. The new
financial activities authorized by the G-L-B Act may also be engaged in by a
"financial subsidiary" of a national or state bank, except for insurance or
annuity underwriting, insurance company portfolio investments, real estate
investments and development and merchant banking, which must be conducted in
a financial holding company. The FRB and the Secretary of the Treasury have
the authority to decide whether other activities are also financial in
nature or incidental thereto, taking into account changes in technology,
changes in the banking marketplace, competition for banking services and
other pertinent factors. Although the Company may meet the qualifications
to become a financial holding company, it has no current plans to elect such
status.
The G-L-B Act establishes a system of functional regulation, under
which the federal banking agencies will regulate the banking activities of
financial holding companies and banks' financial subsidiaries, the U.S.
Securities and Exchange Commission will regulate their securities activities
and state insurance regulators will regulate their insurance activities. In
addition, the G-L-B Act provides new protections against the transfer and
use by financial institutions of consumers' nonpublic, personal information.
The G-L-B Act also contains a variety of additional provisions, which, among
others, impose additional regulatory requirements on certain depository
institutions and reduce certain other regulatory burdens, modify the laws
governing the Community Reinvestment Act of 1977, and address a variety of
other legal and regulatory issues affecting both day-to-day operations and
long-term activities of financial institutions.
At this time, the Company is unable to predict the impact of the G-L-B
Act on its future operations. In granting other types of financial
institutions more flexibility, the G-L-B Act may increase the number and
type of institutions engaging in the same or similar activities as those of
the Company and the Bank, thereby creating a more competitive atmosphere.
However, management believes legislation and implementing regulations are
likely to have a more immediate impact on regional and national holding
companies and banks than on community-based institutions engaged principally
in traditional banking activities.
Other Aspects of Federal and State Laws
Community Reinvestment Act. The Community Reinvestment Act of 1977
("CRA") and the regulations issued thereunder are intended to encourage
banks to help meet the credit needs of their service area, including low and
moderate income neighborhoods, consistent with the safe and sound operations
of the banks. Under CRA, banks are rated on their performance in meeting
these credit needs and the rating of a bank's performance is public. In
connection with the filing of an application to conduct certain
transactions, the CRA performance record of the banks involved are reviewed.
Under the Bank's last CRA examination, the Bank received a "Satisfactory"
rating.
Insurance Sales. Rhode Island legislation enacted in 1996 permits
financial institutions to participate in the sale of insurance products,
subject to certain restrictions and license requirements. The regulatory
approvals required from the Department of Business Regulation and the FDIC
depend upon the form and structure used to engage in such activities.
Miscellaneous. The Company and/or the Bank also are subject to
federal and state statutory and regulatory provisions covering, among other
things, reserve requirements, security procedures, currency and foreign
transactions reporting, insider and affiliated party transactions,
management interlocks, loan interest rate limitations, truth-in-lending,
electronic funds transfers, funds availability, truth-in-savings, home
mortgage disclosure, and equal credit opportunity.
Effect of Governmental Policy
The Company's revenues consist of cash dividends paid to it by the
Bank. Such payments are restricted pursuant to various state and federal
regulatory limitations. Banking is a business that depends heavily on
interest rate differentials. One of the most significant factors affecting
the Bank's earnings is the difference between the interest rates paid by the
Bank on its deposits and its other borrowings, on the one hand, and, on the
other hand, the interest rates received by the Bank on loans extended to its
customers and on securities held in the Bank's portfolio. The value and
yields of its assets and the rates paid on its liabilities are sensitive to
changes in prevailing market rates of interest. Thus, the earnings and
growth of the Bank will be influenced by general economic conditions, the
monetary and fiscal policies of the federal government, and policies of
regulatory agencies, particularly the FRB, which implement national monetary
policy. The nature and impact on the Bank of any future changes in such
policies cannot be predicted.
ITEM 2. PROPERTIES
The Bank presently has a network of 13 branch offices located in
Providence and Kent counties. Five of these office facilities are owned and
eight are leased. Facilities are generally leased for a period of one to
ten years with renewal options. The termination of any short-term lease
would not have a material adverse effect on the operations of the Bank. The
Company is currently renovating an additional 3,500 square feet of office
space at One Turks Head Place, which will become administrative offices of
the Company and the Bank. The Company's offices are in good physical
condition and are considered adequate to meet the banking needs of the
Bank's customers.
The following are the locations of the Bank's offices:
Size Year Opened Owned or Lease
Location (Square feet) or Acquired Leased Expiration Date
-------- ------------- ----------- -------- ---------------
1047 Park Avenue, Cranston, RI 4,700 1996 Owned N.A.
383 Atwood Avenue, Cranston, RI 4,700 1996 Owned N.A.
999 South Broadway, East Providence, RI 10,500 1996 Owned N.A.
195 Taunton Avenue, East Providence, RI 3,100 1996 Leased 2/28/03
1440 Hartford Avenue, Johnston, RI 4,700 1996 Land Leased 12/31/02
One Turks Head Place, Providence, RI (branch) 5,000 1996 Leased 4/30/09
One Turks Head Place, Providence, RI (offices) 14,900 1999 Leased 6/30/09
165 Pitman Street, Providence, RI 3,300 1998 Leased 10/18/08
445 Putnam Pike, Smithfield, RI 3,500 1996 Leased 7/31/09
1062 Centerville Road, Warwick, RI 2,600 1996 Owned N.A.
1300 Warwick Avenue, Warwick, RI 4,200 1996 Leased 6/30/04
233 Lambert Lind Highway, Warwick, RI (a) 4,800 1996 Leased 4/01/01
233 Lambert Lind Highway, Warwick, RI (a) 600 2001 Leased 3/31/10
2975 West Shore Road, Warwick, RI 3,500 2000 Leased 3/31/10
1175 Cumberland Hill Road, Woonsocket, RI 3,100 1998 Owned N.A.
(a) Existing free-standing facility to be replaced with a new store front
facility on adjacent parcel. Estimated occupancy date of new facility
is late summer 2001.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved only in routine litigation incidental to the
business of banking, none of which the Company's management expects to have
a material adverse effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders in the
fourth quarter of 2000.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The information required by this item is incorporated herein by
reference to the Section entitled "Market for the Company's Common Stock and
Related Stockholder Matters" contained on the inside back cover of the
Company's 2000 Annual Report to Shareholders filed as Exhibit 13 to this
Annual Report on Form 10-K.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The information required by this item is incorporated herein by
reference to the Section entitled "Selected Consolidated Financial Data"
contained on pages 18 through 19 of the Company's 2000 Annual Report to
Shareholders filed as Exhibit 13 to this Annual Report on Form 10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this item is incorporated herein by
reference to the Section entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations" contained on pages 20 through
37 of the Company's 2000 Annual Report to Shareholders filed as Exhibit 13
to this Annual Report on Form 10-K.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is incorporated herein by
reference to the Consolidated Balance Sheets as of December 31, 2000 and
1999 and the Consolidated Statements of Operations, Consolidated Statements
of Changes in Shareholders' Equity and Consolidated Statements of Cash Flows
for each of the years in the three-year period ended December 31, 2000,
together with the accompanying notes and the Independent Auditors' Report
contained on pages 39 through 64 of the Company's 2000 Annual Report to
Shareholders filed as Exhibit 13 to this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING OR
FINANCIAL DISCLOSURE
There were no changes in, or disagreements with, accountants on
accounting or financial disclosure as defined by Item 304 of Regulation S-K.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The director information required by this item is incorporated herein
by reference to the Sections entitled "Election of Directors" and "Section
16(a) Beneficial Ownership Reporting Compliance" in the Company's Definitive
Proxy Statement for the 2001 Annual Meeting of Shareholders to be filed with
the SEC.
The following table sets forth the executive officers of the Company
as of the date hereof.
Name Age Position
---- --- --------
Merrill W. Sherman 52 President and Chief Executive Officer
Albert R. Rietheimer 44 Chief Financial Officer and Treasurer
Donald C. McQueen 44 Vice President and Assistant Secretary
Margaret D. Farrell 51 Secretary
James V. DeRentis 39 Bank Senior Vice President - Retail Banking
Merrill W. Sherman. Ms. Sherman has served as President and Chief
Executive Officer of the Company and Bank since their formation. From 1993
through 1995, when she became associated with EFC, Inc. (the Bank's agent in
connection with its formation), she was a member of the law firm of Brown
Rudnick Freed & Gesmer, Ltd. Ms. Sherman is also a director of the
Providence and Worcester Railroad Company.
Albert R. Rietheimer. Mr. Rietheimer has served as Chief Financial
Officer and Treasurer of the Company since its formation and of the Bank
since September 1996. Prior to joining the Bank, he served as Senior Vice
President and Chief Financial Officer of Boston Private Bancorp, Inc. from
August 1995 to September 1996. Mr. Rietheimer is a certified public
accountant.
Donald C. McQueen. Mr. McQueen has served as Vice President and
Assistant Secretary of the Company since its formation and as the Bank's
Executive Vice President and Chief Lending Officer since May 1998. From
1996 through May 1998, Mr. McQueen served as the Bank's Senior Vice
President - Credit Administration. From 1993 to 1995, he served as Vice
President of Fleet Bank, where he was responsible for commercial
relationship management, including commercial and industrial, real estate
and problem loans.
Margaret D. Farrell. Ms. Farrell has served as Secretary of the
Company and Bank since their formation. Ms. Farrell has been a partner of
the law firm of Hinckley, Allen & Snyder LLP since 1981.
James V. DeRentis. Mr. DeRentis has served as the Bank's Senior Vice
President - Retail Banking since December 1998. From 1996 through 1998, Mr.
DeRentis was a Vice President in the Bank's Retail Group. Subsequent to
1993 and prior to joining the Bank, Mr. DeRentis held a number of officer
positions with Northeast Mortgage, Citizens Bank and NationsBank in their
retail sales areas.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated herein by
reference to the Section entitled "Executive Compensation" in the Company's
Definitive Proxy Statement for the 2001 Annual Meeting of Shareholders to be
filed with the SEC.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated herein by
reference to the Section entitled "Common Stock Ownership of Certain
Beneficial Owners and Management" in the Company's Definitive Proxy
Statement for the 2001 Annual Meeting of Shareholders to be filed with the
SEC.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated herein by
reference to the Section entitled "Transactions with Management" in the
Company's Definitive Proxy Statement for the 2001 Annual Meeting of
Shareholders to be filed with the SEC.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) Financial Statements
The following consolidated financial statements contained within the
Company's 2000 Annual Report to Shareholders are incorporated herein
by reference in Item 8.
1. Independent Auditors' Report
2. Consolidated Balance Sheets as of December 31, 2000 and
1999
3. Consolidated Statements of Operations for the Years Ended
December 31, 2000, 1999 and 1998
4. Consolidated Statements of Changes in Shareholders' Equity
for the Years Ended December 31, 2000, 1999 and 1998
5. Consolidated Statements of Cash Flows for the Years Ended
December 31, 2000, 1999 and 1998
6. Notes to Consolidated Financial Statements
(2) Financial Statement Schedules
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable, and therefore have
been omitted.
(3) Exhibits
Exhibit No. Description
----------- -----------
3.1 Articles of Incorporation of the Company, as amended (1)
3.2 By-laws of the Company (1)
10.1 Employment Agreement of Merrill W. Sherman dated December 18, 2000 +
10.2 Employment Agreement of Albert R. Rietheimer dated December 18, 2000 +
10.3 Employment Agreement of Donald C. McQueen dated December 18, 2000 +
10.4 Employment Agreement of James V. DeRentis dated December 18, 2000 +
10.5 Amended and Restated 1996 Incentive and Nonqualified Stock Option Plan +
10.6 Amended and Restated Non-Employee Director Stock Plan (2) +
10.7(a) Bank Rhode Island Supplemental Executive Retirement Plan, as amended by
Amendments No. 1 and No. 2 (1) +
10.7(b) Amendment No. 3 to Bank Rhode Island Supplemental Executive Retirement Plan +
10.8 Bank Rhode Island Nonqualified Deferred Compensation Plan, as amended by
Amendment No. 1 (1) +
10.9 Warrant for 136,315 shares of Common Stock issued to Fleet Financial
Group, Inc. (1)
11 Computation of earnings per share (3)
13 Annual Report to Shareholders for 2000, portions of which have been
incorporated by reference herein are filed with the Commission. Those
portions which have not been incorporated by reference herein are provided
for information purposes only.
21 List of Subsidiaries
23 Consent of KPMG LLP, as accountants for the Company
--------------------
Incorporated by reference from the Company's Registration Statement on
Form S-4, SEC File No. 333-33182
Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the period ended September 30, 2000.
The calculation of earnings per share is set forth as Note 19 to the
Company's audited consolidated financial statements. The Company's
audited consolidated financial statements are filed herewith as part
of Exhibit 13.
(+) Management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K
None.
BANCORP RHODE ISLAND, INC.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
BANCORP RHODE ISLAND, INC.
Date: March 27, 2001 By: /s/ Merrill W. Sherman
---------------------------
Merrill W. Sherman
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ Merrill W. Sherman /s/ Albert R. Rietheimer
------------------------------ -------------------------------
Merrill W. Sherman, Albert R. Rietheimer,
President, Chief Executive Officer Chief Financial Officer and
and Director (Principal Executive Treasurer (Principal Financial and
Officer) Accounting Officer)
Date: March 27, 2001 Date: March 27, 2001
/s/ John R. Berger
------------------------------ -------------------------------
Anthony F. Andrade, Director John R. Berger, Director
Date: Date: March 27, 2001
/s/ Malcolm G. Chace /s/ Ernest J. Chornyei, Jr.
------------------------------ -------------------------------
Malcolm G. Chace, Director and Ernest J. Chornyei, Jr., Director
Chairman of the Board Date: March 27, 2001
Date: March 27, 2001
/s/ Karl F. Ericson /s/ Margaret D. Farrell
------------------------------ -------------------------------
Karl F. Ericson, Director Margaret D. Farrell, Director
Date: March 27, 2001 Date: March 27, 2001
/s/ Mark R. Feinstein /s/ F. James Hodges, Jr.
------------------------------ -------------------------------
Mark R. Feinstein, Director F. James Hodges, Jr., Director
Date: March 27, 2001 Date: March , 2001
/s/ Cheryl W. Snead
------------------------------ -------------------------------
Donald J. Reaves, Director Cheryl W. Snead, Director
Date: Date: March 27, 2001
/s/ John A. Yena
------------------------------
John A. Yena, Director
Date: March 27, 2001