OFFERING CIRCULAR
| DELHI
BANK CORP. |
TIER
1 OFFERING |
| 124 Main Street |
212,012 Shares of Common Stock |
| Delhi, New York 13753 |
|
| (855) 413-3544 |
|
We are offering to our
stockholders residing in the State of New York and certain other states shares of our common stock through participation in a Dividend
Reinvestment and Optional Cash Purchase Plan (the “Plan”).
We are authorized to issue
up to 393,750 shares of our common stock under the Plan. The number of shares authorized under the Plan increased from 262,500
to 393,750 upon completion of a three-for-two stock split of Delhi Bank Corp. common stock, declared by Delhi Bank Corp
on December 18, 2009 and paid on December 30, 2009. The maximum amount of common stock that we may issue or sell, from time to
time, under the Plan, is subject to a maximum limitation which limits the aggregate consideration that we receive for all securities
sold pursuant to this offering, and for the sale of any other securities which we are required to integrate with this offering
under the rules of the Securities and Exchange Commission, to no more than $20 million. On March 25, 2015, the Securities and Exchange
Commission adopted amendments to Regulation A pursuant to Section 401 of the Jumpstart Our Business Startups Act (“Regulation
A+”). Regulation A+ permits two types of offerings: Tier 1, under which an issuer may offer and sell up to $20 million of
eligible securities annually; and Tier 2, under which an issuer may offer and sell up to $50 million of eligible securities annually.
The aggregate offering price for all securities sold under the Plan over the 12 month period prior to the date of this offering
circular was approximately $551,172. In order to comply with the Tier 1 requirements and taking into account the number of shares
that have been sold over the prior 12 month period under the Plan, the number of shares that we are authorized to issue under the
Plan is currently 212,012 shares. The Plan provides our stockholders with a convenient and economical way to purchase additional
shares of our common stock by reinvesting the dividends paid on such shares. Stockholders may also make voluntary quarterly cash
payments to purchase additional shares of common stock under the Plan. The Plan is intended to benefit long-term investors who
wish to increase their investment in our common stock.
The Delaware National
Bank of Delhi, a wholly owned subsidiary of Delhi Bank Corp. and our transfer agent, will act as the Plan Administrator and purchase
shares of our common stock directly from us at fair market value, in the open market, or in negotiated transactions to fund the
Plan. Our common stock is quoted on the OTC Markets under the symbol “DWNX.” As of March 14, 2016, the market price
per share of the common stock was $27.50.
| | |
Price to Public (1) | | |
Proceeds to
Issuer (2)(3)(4) | |
| Per Share of Common Stock, Par Value $1.00 Per Share | |
$ | 27.50 | | |
$ | 27.50 | |
| Total (212,012 shares) | |
$ | 5,830,330 | | |
$ | 5,830,330 | |
| (1) | Price per share is based upon the market
price per share ($27.50) as of March 14, 2016. Actual price of shares purchased under the Plan will depend on the market price
of our shares on the dividend investment date. |
| (2) | The proceeds to the issuer are subject to a maximum limitation so that the aggregate consideration
that we receive for all securities sold pursuant to this offering, and for the sale of any other securities, which we are required
to integrate with this offering under the rules of the Securities and Exchange Commission, shall not exceed $20 million in any
12 month period. As of the date of this offering circular, we have sold 181,738 shares under the Plan and received gross proceeds
of $4,151,709 for securities sold pursuant to this offering. |
(3) There are no underwriters in connection
with the Plan.
| (4) | Does not include expenses of the Plan incurred and paid by us since implementation of the Plan
in the amount of approximately $392,087. |
Investment in our common stock involves risk.
See “Risk Factors,” beginning on page 3.
The United States Securities
and Exchange Commission (the “Commission”) or any state securities regulator does not pass upon the merits of or give
its approval to any securities offered or the terms of the offering, nor does it pass upon the accuracy or completeness of any
offering circular or other selling literature. These securities are offered pursuant to an exemption from registration with the
Commission; however, the Commission has not made an independent determination that the securities offered hereunder are exempt
from registration. Any representation to the contrary is a criminal offense.
The securities offered
hereby are not savings or deposit accounts and are not insured by the Federal Deposit Insurance Corporation or any other governmental
agency.
This Offering Circular follows the Form 1-A
disclosure format.
The date of this offering circular is March
16, 2016.
Table of Contents
Summary
The following information
is a summary of the significant terms of the Plan. You should carefully read this offering circular and the consolidated financial
statements and the notes thereto, to understand fully the terms of the Plan, as well as the other considerations that are important
to you in making a decision about whether to participate in the Plan. You should pay special attention to the “Risk Factors”
section of this offering circular to determine whether participation in the Plan is appropriate for you. As used in this offering
circular, “we,” “us” and “our” refer to Delhi Bank Corp. and our wholly owned subsidiary, The
Delaware National Bank of Delhi (referred to herein as The Delaware National Bank), depending on the context.
The Companies
|
Delhi
Bank Corp.
124 Main Street
Delhi, New York 13753
(855) 413-3544 |
We are a registered bank holding company, which
owns 100% of the outstanding capital stock of The Delaware National Bank. Our primary business is that of The Delaware National
Bank.
|
| |
|
|
The Delaware National Bank
of Delhi
124 Main Street
Delhi, New York 13753
(855) 413-3544 |
The Delaware National Bank, a national bank, was originally chartered as a New York state bank in 1839 and converted to a national bank in 1865. We are a full-service commercial bank. We attract deposits from the general public and use those funds to originate one- to four-family residential mortgage loans and commercial real estate mortgage loans, commercial loans and consumer loans in Delaware County, New York. Additionally, we provide trust services through The Delaware National Bank’s trust department. The Delaware National Bank currently operates out of its offices in Delhi, New York, Margaretville, New York, Davenport, New York and Hobart, New York and a loan production office in Oneonta, New York. |
The Dividend
Reinvestment and Optional Cash Purchase Plan
| Securities Offered |
Up to $5.8 million in aggregate principal
amount of Delhi Bank Corp. common stock, par value $1.00 or a total of 212,012 shares. To date we have sold 181,738 shares
under the Plan for gross proceeds of $4,151,709.
|
| The Dividend Reinvestment and Optional Cash Purchase Plan |
We are offering shares of our common stock
through participation in the Plan. In order to participate in the Plan, you must be a stockholder of the Company and a resident
of one of the following states: Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Kentucky, Maryland,
Massachusetts, New Hampshire, New Mexico, New Jersey, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Texas, Vermont,
Virginia and Washington.
|
| Administration of the Plan |
The Delaware National Bank, a wholly owned
subsidiary of Delhi Bank Corp., will administer the Plan.
|
| Eligibility |
All holders of record of at least one (1) whole
share of our common stock who are residents of Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii,
Kentucky, Maryland, Massachusetts, New Hampshire, New Mexico, New Jersey, New York, North Carolina, Ohio, Pennsylvania, South Carolina,
Texas, Vermont, Virginia and Washington are eligible to participate in the Plan.
|
| Participation |
Participation in the Plan is entirely voluntary.
To participate in the Plan, a stockholder must complete the Authorization Form and return it to us. It is important that you read
carefully “Delhi Bank Corp. Dividend Reinvestment and Optional Cash Purchase Plan.”
|
| Reinvestment Dividends |
Dividends will be reinvested in those months
in which regular cash dividends are paid on our common stock. Shares purchased directly from Delhi Bank Corp. with reinvested dividends
will be purchased on the dividend investment date.
|
| Dividend Investment Date |
The dividend investment date is the dividend
payment date of our regular dividend. If the dividend investment date falls on a day that is not a trading day, the dividend investment
date is deemed to be the prior trading day.
|
| Optional Purchases |
Any optional cash payment you wish to make
must not be less than $25 per investment nor may your payments total more than $5,000 per calendar quarter. You may send cash payments
on a quarterly basis, however, payments must be received by the Plan Administrator no later than ten (10) calendar days, but no
more than thirty (30) calendar days, prior to the dividend payment date. Optional cash payments will be invested on the dividend
investment date, which is the same date as the dividend payment date. You need not participate in the reinvestment option to make
optional cash payments.
|
|
Source of Common Stock
Purchased Under the Plan
|
Shares of common stock will be purchased directly
from Delhi Bank Corp. and will be either authorized but unissued shares or shares held in treasury of Delhi Bank Corp. To date,
all shares purchased under the Plan have been from authorized shares and shares held in our treasury.
|
|
Price of Common Stock
Purchased Under the Plan |
The price of the shares of our common stock
purchased under the Plan from us will be the average of the high and low sales prices of our common stock as quoted on the OTC
Markets for the four (4) weeks preceding the applicable dividend investment date.
|
|
Certificates for Shares Held
Under the Plan |
The Plan Administrator will hold all shares
purchased for the benefit of plan participants in non-certificated (book-entry) form. Plan participants will receive an account
statement showing the number of shares purchased for their account under the Plan.
|
|
Termination of Participation
|
Plan participants may withdraw from
the Plan completely at any time by notifying the Plan Administrator in writing to that effect. If you cease to be a stockholder
of Delhi Bank Corp., you will no longer be eligible to participate in the Plan.
|
Risk Factors
An investment in our
common stock involves a high degree of risk, including the possible loss of principal invested. You
should carefully consider the following risk factors, in addition to the information contained elsewhere in this offering circular,
before investing in our common stock.
Risks
Related to Our Business
Our commercial real estate loan portfolio may expose us to
increased lending risks.
At December 31, 2015, $30.6
million, or 30.36%, of our loan portfolio consisted of commercial real estate loans. These types of loans generally expose a lender
to greater risk of non-payment and loss than one- to four-family residential mortgage loans because repayment of the loans often
depends on the successful operation of the property and the income stream of the borrowers. Such loans typically involve larger
loan balances to single borrowers or groups of related borrowers compared to one- to four-family residential mortgage loans. In
addition, since such loans generally entail greater credit risk than one- to four-family residential mortgage loans, we may need
to increase our allowance for loan losses in the future to account for the likely increase in probable incurred credit losses associated
with the growth of such loans. Also, our commercial real estate loan borrowers may have more than one loan outstanding with us.
Consequently, an adverse development with respect to one loan or one credit relationship could expose us to a significantly greater
risk of loss compared to an adverse development with respect to a one- to four-family residential mortgage loan.
Our business is subject to interest rate
risk and variations in interest rates may negatively affect our financial performance.
Changes in the interest
rate environment may reduce profits. The primary source of our income is the differential or “spread” between the interest
earned on loans, securities and other interest-earning assets, and interest paid on deposits, borrowings and other interest-bearing
liabilities. Our net interest income is the interest we earn on loans and investments less the interest we pay on our deposits
and borrowings. Our net interest spread is the difference between the yield we earn on our assets and the interest rate we pay
for deposits and our other sources of funding. Changes in interest rates—up or down—could adversely affect our net
interest spread and, as a result, our net interest income and net interest margin. Although the yield we earn on our assets and
our funding costs tend to move in the same direction in response to changes in interest rates, one can rise or fall faster than
the other, causing our net interest margin to expand or contract. Our liabilities tend to be shorter in duration than our assets,
so they may adjust faster in response to changes in interest rates. As a result, when interest rates rise, our funding costs may
rise faster than the yield we earn on our assets, causing our net interest margin to contract. This contraction could be more severe
following a prolonged period of lower interest rates, as a larger proportion of our fixed rate residential loan portfolio will
have been originated at those lower rates and borrowers may be more reluctant or unable to sell their homes in a higher interest
rate environment. Changes in the slope of the “yield curve”—or the spread between short-term and long-term interest
rates—could also reduce our net interest margin. Normally, the yield curve is upward sloping, meaning short-term rates are
lower than long-term rates. Because our liabilities tend to be shorter in duration than our assets, when the yield curve flattens
or even inverts, we could experience pressure on our net interest margin as our cost of funds increases relative to the yield we
can earn on our assets.
In addition, loan volume
and yields are affected by market interest rates on loans, and rising interest rates generally are associated with a lower volume
of loan originations. An increase in the general level of interest rates may also adversely affect the ability of certain borrowers
to pay the interest on and principal of their obligations. Accordingly, changes in levels of market interest rates could materially
adversely affect our net interest spread, asset quality, loan origination volume and overall profitability.
Because most of our borrowers are located
in Delaware County, New York, a downturn in the local economy or a decline in local real estate values could cause increases in
nonperforming loans, which could hurt our profits.
A majority of our loans
are secured by real estate or made to businesses in Delaware County, New York. As a result of this concentration, a downturn in
the local economy could cause increases in nonperforming loans, which could hurt our profits. A sharp decline in real estate values
could cause some of our mortgage loans to become inadequately collateralized, which would expose us to a greater risk of loss.
Additionally, a decline in the economy of Delaware County could have a material adverse effect on our business, including the demand
for new loans, refinancing activity, the ability of borrowers to repay outstanding loans and the value of loan collateral, and
could adversely affect our asset quality and net income.
Our allowance for loan losses may not
be sufficient to cover actual loan losses which could adversely impact our earnings.
When borrowers default
and do not repay the loans that we make to them, we may lose money. The allowance for loan losses is the amount estimated by management
as necessary to cover probable losses in the loan portfolio at the balance sheet date. The allowance is established through the
provision for loan losses, which is charged to income. Determining the amount of the allowance for loan losses necessarily involves
a high degree of judgment. Among the material estimates required to establish the allowance are: loss exposure at default; the
amount and timing of future cash flows on impacted loans; value of collateral; and determination of loss factors to be applied
to the various elements of the portfolio. If our estimates and judgments regarding such matters prove to be incorrect, our allowance
for loan losses might not be sufficient, and additional loan loss provisions might need to be made. Depending on the amount of
such loan loss provisions, the adverse impact on our earnings could be material. Our allowance for loan losses at December 31,
2015 may not be sufficient to cover future loan losses. A large loss or series of losses could deplete the allowance and require
increased provisions to replenish the allowance, which would negatively affect earnings.
In addition, bank regulators
periodically review our allowance for loans losses and may require us to increase our provision for loan losses or recognize further
loan charge-offs. Any significant increase in our allowance for loan losses or loan charge-offs that may be required by these regulatory
authorities could have a material adverse effect on our financial condition and results of operations.
A return of recessionary conditions could
result in increases in our level of non-performing loans and/or reduce demand for our products and services, which would lead to
lower revenue, higher loan losses and lower earnings.
Our business activities
and earnings are affected by general business conditions in the United States and in our local market area. These conditions include
short-term and long-term interest rates, inflation, unemployment levels, monetary supply, consumer confidence and spending, fluctuations
in both debt and equity capital markets, and the strength of the economy in the United States generally and in our market area
in particular. The national economy experienced a recession from 2007 to 2011, with rising unemployment levels, declines in real
estate values and erosion in consumer confidence. Dramatic declines in the U.S. housing market over the past few years, with falling
home prices and increasing foreclosures, have negatively affected the credit performance of mortgage loans and resulted in significant
write-downs of asset values by many financial institutions. Our local economy has mirrored the overall economy. A return of recessionary
conditions or another economic downturn, an increase in levels of unemployment, further declines in the values of real estate,
or other events that affect household and/or corporate incomes could impair the ability of our borrowers to repay their loans in
accordance with their terms. Most of our loans are secured by real estate or made to businesses within Delaware County, New York.
As a result of this concentration, a return of recessionary conditions or another economic downturn in the local economy could
result in significant increases in nonperforming loans, which would negatively impact our interest income and result in higher
provisions for loan losses, which would hurt our earnings. The economic downturn could also result in reduced demand for credit
or fee-based products and services, which would negatively impact our revenues.
Strong competition within our market area could hurt our profits
and slow growth.
We face intense
competition both in making loans and attracting deposits. Price competition for loans and deposits might result in us earning less
on our loans and paying more on our deposits, which reduces net interest income. Some of the institutions with which we compete
have substantially greater resources and lending limits than we have and may offer services that we do not provide. We expect competition
to increase in the future as a result of legislative, regulatory and technological changes and the continuing trend of consolidation
in the financial services industry. Our profitability depends upon our continued ability to compete successfully in our market
area.
We operate in a highly regulated environment
and we may be adversely affected by changes in laws and regulations.
We are subject to
extensive regulation, supervision and examination by the Federal Reserve Board, with respect to the Company, the Office of the
Comptroller of the Currency, our chartering authority and by the Federal Deposit Insurance Corporation, as insurer of our deposits.
Such regulation and supervision govern the activities in which an institution and its holding company may engage, and are intended
primarily for the protection of the insurance fund and depositors. Regulatory authorities have extensive discretion in their supervisory
and enforcement activities, including the imposition of restrictions on our operations, the classification of our assets and determination
of the level of our allowance for loan losses. Any change in such regulation and oversight, whether in the form of regulatory policy,
regulations, legislation or supervisory action, may have a material impact on our operations. In addition to governmental supervision
and regulation, we will be subject to changes in federal and state laws, including changes in tax laws applicable to real estate
investment trusts, which could affect our net operating results.
Regulation of the financial services industry has undergone
major changes, and future legislation could increase our cost of doing business or harm our competitive position.
The Dodd-Frank Wall Street
Reform and Consumer Protection Act (the “Dodd-Frank Act”) enacted in 2010 has created a significant shift in the way
financial institutions operate and restructured the regulation of depository institutions. The Dodd-Frank Act created a new Consumer
Financial Protection Bureau with broad powers to supervise and enforce consumer protection laws. The Consumer Financial Protection
Bureau has broad rule-making authority for a wide range of consumer protection laws that apply to all banks and savings institutions
including the authority to prohibit “unfair, deceptive or abusive” acts and practices.
As required by the Dodd-Frank
Act, the federal banking regulators have adopted new consolidated capital requirements, which limit our ability to borrow at the
holding company level and invest the proceeds from such borrowings as capital in the Bank that could be leveraged to support additional
growth. The Dodd-Frank Act contains various other provisions designed to enhance the regulation of depository institutions and
prevent the recurrence of a financial crisis such as occurred in 2008-2009. The Dodd-Frank Act may have a material impact on our
operations, particularly through increased regulatory burden and compliance costs.
Any future legislative
changes could have a material impact on our profitability, the value of assets held for investment or collateral for loans. Future
legislative changes could require changes to business practices or force us to discontinue businesses and potentially expose us
to additional costs, liabilities, enforcement action and reputational risk.
New capital rules that
were recently issued generally require insured depository institutions and their holding companies to hold more capital. The impact
of the new rules on our financial condition and operations is uncertain but could be materially adverse.
New capital rules adopted
by the Federal Reserve and the OCC substantially amend the regulatory risk-based capital rules applicable to us. The rules phase
in over time beginning in 2015 and will become fully effective in 2019. Our minimum capital requirements became (i) a common Tier
1 equity ratio of 4.5%, (ii) a Tier 1 capital (common Tier 1 capital plus Additional Tier 1 capital) of 6% (up from 4%) and (iii)
a total capital ratio of 8% (the current requirement). Beginning in 2016, a capital conservation buffer will phase in over three
years, ultimately resulting in a requirement of 2.5% on top of the common Tier 1, Tier 1 and total capital requirements, resulting
in a required common Tier 1 equity ratio of 7%, a Tier 1 ratio of 8.5%, and a total capital ratio of 10.5%. Failure to satisfy
any of these three capital requirements will result in limits on paying dividends, engaging in share repurchases and paying discretionary
bonuses. These limitations will establish a maximum percentage of eligible retained income that could be utilized for such actions.
We are dependent on our information technology
and telecommunications systems and third-party servicers, and systems failures, interruptions or breaches of security could have
a material adverse effect on us.
Our business is dependent
on the successful and uninterrupted functioning of our information technology and telecommunications systems and third-party servicers.
The failure of these systems, or the termination of a third-party software license or service agreement on which any of these systems
is based, could interrupt our operations. Because our information technology and telecommunications systems interface with and
depend on third-party systems, we could experience service denials if demand for such services exceeds capacity or such third-party
systems fail or experience interruptions. If significant, sustained or repeated, a system failure or service denial could compromise
our ability to operate effectively, damage our reputation, result in a loss of customer business, and/or subject us to additional
regulatory scrutiny and possible financial liability, any of which could have a material adverse effect on us.
In addition, we provide
our customers with the ability to bank remotely, including over the Internet. The secure transmission of confidential information
over the Internet is a critical element of remote banking. We may be required to spend significant capital and other resources
to protect against the threat of security breaches and computer viruses, or to alleviate problems caused by security breaches or
viruses. To the extent that our activities or the activities of our customers involve the storage and transmission of confidential
information, security breaches and viruses could expose us to claims, regulatory scrutiny, litigation and other possible liabilities.
Any inability to prevent security breaches or computer viruses could also cause existing customers to lose confidence in our systems
and could materially and adversely affect us.
Additionally, financial
products and services have become increasingly technology-driven. Our ability to meet the needs of our customers competitively,
and in a cost-efficient manner, is dependent on the ability to keep pace with technological advances and to invest in new technology
as it becomes available. The ability to keep pace with technological change is important, and the failure to do so could have a
material adverse impact on our business and therefore on our financial condition and results of operations.
Security breaches and other disruptions
could compromise our information and expose us to liability, which would cause our business and reputation to suffer.
In the ordinary course
of our business, we collect and store sensitive data, including our proprietary business information and that of our customers,
suppliers and business partners; and personally identifiable information of our customers and employees. The secure processing,
maintenance and transmission of this information is critical to our operations and business strategy. We, our customers, and other
financial institutions with which we interact, are subject to ongoing, continuous attempts to penetrate key systems by individual
hackers, organized criminals, and in some cases, state-sponsored organizations. Despite our security measures, our information
technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions.
Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen.
Any such unauthorized access, disclosure or other loss of information could result in legal claims or proceedings, liability under
laws that protect the privacy of personal information, and regulatory penalties; disrupt our operations and the services we provide
to customers; damage our reputation; and cause a loss of confidence in our products and services, all of which could adversely
affect our business, revenues and competitive position. We may be required to spend significant capital and other resources to
protect against the threat of security breaches and computer viruses, or to alleviate problems caused by security breaches or viruses.
To remain competitive, we must keep pace
with technological change.
Financial products and
services have become increasingly technology-driven. Our ability to meet the needs of our customers competitively, and in a cost-efficient
manner, is dependent on the ability to keep pace with technological advances and to invest in new technology as it becomes available.
Many of our competitors have greater resources to invest in technology than we do and may be better equipped to market new technology-driven
products and services. The ability to keep pace with technological change is important, and the failure to do so could have a material
adverse impact on our business and therefore on our financial condition and results of operations.
We face a risk of noncompliance and enforcement
action with the Bank Secrecy Act and other anti-money laundering statutes and regulations.
The federal Bank Secrecy
Act, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001
(the “PATRIOT Act”) and other laws and regulations require financial institutions, among other duties, to institute
and maintain effective anti-money laundering programs and file suspicious activity and currency transaction reports as appropriate.
The federal Financial Crimes Enforcement Network, established by the U.S. Treasury Department to administer the Bank Secrecy Act,
is authorized to impose significant civil money penalties for violations of those requirements and has recently engaged in coordinated
enforcement efforts with the individual federal banking regulators, as well as the U.S. Department of Justice, Drug Enforcement
Administration and Internal Revenue Service. Federal and state bank regulators also have begun to focus on compliance with Bank
Secrecy Act and anti-money laundering regulations. If our policies, procedures and systems are deemed deficient or the policies,
procedures and systems of the financial institutions that we may acquire in the future are deficient, we would be subject to liability,
including fines and regulatory actions such as restrictions on our ability to pay dividends and the necessity to obtain regulatory
approvals to proceed with certain aspects of our business plan, including our acquisition plans, which would negatively impact
our business, financial condition and results of operations. Failure to maintain and implement adequate programs to combat money
laundering and terrorist financing could also have serious reputational consequences for us.
We are subject to a variety of operational,
environmental, legal and compliance risks, which may adversely affect our business and results of operations.
We are exposed to many
types of operational risks, including reputational risk, legal and compliance risk, the risk of fraud or theft by employees or
outsiders, and unauthorized transactions by employees or operational errors, including clerical or record-keeping errors or those
resulting from faulty or disabled computer or telecommunications systems. Negative public opinion can result from our actual or
alleged conduct in any number of activities, including lending practices, corporate governance and acquisitions and from actions
taken by government regulators and community organizations in response to those activities. Negative public opinion can adversely
affect our ability to attract and keep customers and can expose us to litigation and regulatory action. Actual or alleged conduct
by the Bank can also result in negative public opinion about our business.
Risks Related
to This Offering
Issuance of shares to fund the Plan may dilute your ownership
interest.
The Plan allows us to issue
authorized but unissued shares to fund the Plan. The issuance by us of authorized but unissued shares pursuant to the Plan will
increase the number of shares outstanding. Consequently, any increase in the number of shares outstanding pursuant to the Plan
will result in a dilution of the proportionate voting rights of current stockholders and net income per share and stockholders’
equity per share will decrease as a result of the additional shares outstanding. If shares are purchased in the open market by
an outside administrator, there will be no dilutive effect on our stockholders. Since the inception of the Plan in August 2003,
we have issued 181,738 shares, as adjusted to reflect the December 30, 2009 three-for-two stock split, from our authorized shares
and our treasury shares to fund the Plan.
There is a limited market for our common stock, which may negatively
affect the market price.
Our common stock
is currently quoted on the OTC Markets. Purchases and sales of our common stock are being processed by the brokerage firm of Raymond
James Financial, Inc., which has agreed to be a market maker for our common stock. There is no guarantee that there will continue
to be a market for our common stock. You may not be able to sell all of your shares of our common stock on short notice and the
sale of a large number of shares at one time could temporarily depress the market price. There may also be a wide spread between
bid and asked price for the common stock. When there is a wide spread between the bid and asked price, the price at which you may
be able to sell our common stock may be significantly lower than the price at which you could buy it at that time.
We cannot guarantee future payment of dividends.
As a bank holding company,
our ability to pay dividends is primarily a function of the dividend payments we receive from The Delaware National Bank. In 2015,
we declared dividends of $0.6424 per share. It is the Board of Directors’ present intention to continue our current dividend
payment policy. There is no assurance that we will continue to pay dividends in the future or that the amount of such dividends,
if paid, will equal or exceed past dividends. The payment of future dividends will depend upon The Delaware National Bank’s
earnings, financial condition, restrictions under applicable law and regulations and other factors relevant at the time the Board
of Directors considers any declaration of dividends.
The Federal Reserve Board
has issued a policy statement regarding the payment of dividends by bank holding companies. In general, the policy provides that
dividends should be paid only out of current earnings and only if the prospective rate of earnings retention by the holding company
appears consistent with the organization’s capital needs, asset quality and overall financial condition. Regulatory guidance
provides for prior regulatory review of capital distributions in certain circumstances such as where a company’s net income
for the past four quarters, net of dividends previously paid over that period, is insufficient to fully fund the dividend or the
company’s overall rate of earnings retention is not consistent with the company’s capital needs and overall financial
condition. The ability of a holding company to pay dividends may be restricted if a subsidiary bank becomes undercapitalized. These
regulatory policies could affect the ability of the Company to pay dividends.
Because our common stock is not registered
under the Securities Exchange Act of 1934, as amended, there is less public information about Delhi Bank Corp. available as compared
to companies whose securities are registered.
We are not a reporting
company under the Securities Exchange Act of 1934, as amended (“Exchange Act”), and are therefore not required to file
periodic reports which contain detailed financial and other information, such as Annual Reports on Form 10-K, Quarterly Reports
on Form 10-Q, Current Reports on Form 8-K, and other reports. We are not required to provide our stockholders with a proxy statement
in compliance with Schedule 14A under the Exchange Act. As a result, there may not be current information available to the public
upon which investors may base decisions to buy and sell our common stock.
In the future, if we have
more than 1,200 holders of record of our common stock, we would be required to register the common stock under the Exchange Act
and provide audited annual financial statements, quarterly summary financial statements, an annual report to stockholders and a
proxy statement in compliance with the Exchange Act. As of December 31, 2015, we had 482 record holders of our common stock. Eligibility
to participate in the Plan is limited to current stockholders residing in the States of Colorado, Connecticut, Delaware, District
of Columbia, Florida, Georgia, Hawaii, Kentucky, Maryland, Massachusetts, New Hampshire, New Jersey, New Mexico, New York, North
Carolina, Ohio, Pennsylvania, South Carolina, Texas, Vermont, Virginia and Washington. Accordingly, we do not believe that our
record holders will exceed 1,200 as a result of participation in the Plan or at any time in the foreseeable future.
No interest will be paid on optional cash payments.
No interest is paid on
your optional cash payments pending their investment in our common stock.
Delhi Bank
Corp.
Dividend
Reinvestment and
Optional
Cash Purchase Plan
On April 17, 2003, our
Board of Directors voted to adopt this Plan under which authorized but unissued shares of Delhi Bank Corp.’s common stock
are available for issuance and sale to our stockholders who reside in the State of New York, as well as certain additional states.
The Plan was amended on February 28, 2006, March 13, 2007, March 11, 2008, February 24, 2010, February 16, 2011, March 14, 2012,
March 15, 2013, March 19, 2014 and March 27, 2015. Stockholders who do not wish to participate in the Plan will continue to receive
cash dividends, if and when declared.
The following, in question
and answer format, describes the terms and conditions of the Plan, as in effect on the date of this offering circular.
PURPOSE
| 1. | What is the purpose of the Plan? |
The purpose of the
Plan is to provide participants with a simple and convenient method to buy additional shares of Delhi Bank Corp. common stock by
reinvesting cash dividends and making optional cash payments. We expect that generally all Plan purchases will be directly from
Delhi Bank Corp., either through original issue shares or shares we have reacquired and hold as treasury shares. To the extent
that such additional shares are purchased directly from Delhi Bank Corp., we will receive additional funds to be used for general
corporate purposes.
| 2. | What are the advantages of the Plan? |
(a) The Plan provides
participants with the opportunity to reinvest cash dividends paid on all of their shares of common stock in additional shares of
Delhi Bank Corp.’s common stock.
(b) No brokerage commissions
or service charges are paid by participants in connection with any purchase of shares made under the Plan, unless such shares are
purchased through open market purchases.
(c) All cash dividends
paid on participants’ shares can be fully invested in additional shares of Delhi Bank Corp. common stock because the Plan
permits fractional shares to be credited to Plan accounts. Dividends on such fractional shares, as well as on whole shares, will
also be reinvested in additional shares which will be credited to Plan accounts.
(d) Periodic statements
reflecting all current activity, including share purchases and latest Plan account balance, simplify participants’ record
keeping.
ADMINISTRATION
| 3. | Who administers the Plan? |
The Delaware National Bank
of Delhi (the “Bank”), a wholly owned subsidiary of Delhi Bank Corp., acts as the stock transfer agent for Delhi Bank
Corp., and will administer the Plan. The Delaware National Bank, as Plan Administrator, will receive and invest your cash contributions,
maintain your Plan account records, issue periodic account statements and perform other duties related to the Plan. Shares purchased
under the Plan are registered in your name in non-certificated form (book-entry) and are credited to your account in the Plan.
We may appoint a new third-party plan administrator at any time within our sole discretion.
You may contact the Plan
Administrator by mail or telephone at the address and telephone number set forth in Question 37.
ELIGIBILITY
| 4. | Who is eligible to participate in the Plan? |
All holders of record
of at least one (1) whole share of Delhi Bank Corp. common stock who are residents of the States of Colorado, Connecticut, Delaware,
District of Columbia, Florida, Georgia, Hawaii, Kentucky, Maryland, Massachusetts, New Hampshire, New Jersey, New Mexico, New York,
North Carolina, Ohio, Pennsylvania, South Carolina, Texas, Vermont, Virginia and Washington are eligible to participate in the
Plan. If the shares you hold are in your own name, you may participate directly in the Plan. If your stock is registered in another
party’s name (e.g., in a broker’s “street name” or in the name of a bank nominee), you must become
a stockholder of record by having the shares transferred into your name. Shares held in the name of a broker or bank nominee are
not eligible for reinvestment under the Plan. Stockholders who reside in jurisdictions other than those set forth above are not
eligible to participate in the Plan.
PARTICIPATION
| 5. | How does an eligible stockholder participate? |
Participation in the Plan
is entirely voluntary. To participate in the Plan, a stockholder must complete the enclosed Authorization Form and return it to
us in the envelope provided. Additional copies of the Authorization Form will be provided from time to time to the holders of Delhi
Bank Corp.’s common stock, and you may obtain one at any time by writing to Delhi Bank Corp. Dividend Reinvestment Plan,
The Delaware National Bank of Delhi, 124 Main Street, Delhi, New York 13753.
If your shares of common
stock are registered in multiple accounts, you should complete an Authorization Form for each account.
The Plan Administrator
must receive a properly completed Authorization Form at least five (5) business days before a dividend record date in order for
those dividends to be reinvested under the Plan. Those stockholders who do not elect to participate in the Plan will continue to
receive dividends at such times as dividends are paid to all stockholders.
| 6. | When may an eligible stockholder join the Plan? |
You may join the
Plan at any time assuming your shares are registered in your name and you are a resident of the states set forth above in Question
4. If the Authorization Form is received by the Plan Administrator at least five (5) business days before the dividend record date,
reinvestment of dividends will begin with that dividend payment.
| 7. | What are the options that the Authorization Form provides? |
The Authorization Form
allows you to decide the extent to which you want to participate in the Plan through any of the following investment options:
| · | “Dividend Reinvestment”
permits you to reinvest dividends on all shares of Delhi Bank Corp. common stock, currently owned or subsequently registered in
your name, in additional shares of common stock in accordance with the Plan. |
| · | “Optional Cash Purchases”
permits you to make optional cash purchases of additional shares of Delhi Bank Corp. common stock in accordance with the
Plan, whether or not your dividends are being reinvested. |
| 8. | May I have dividends reinvested under the Plan with respect to less than all of the shares of Delhi
Bank Corp. common stock registered in my name? |
You may only have
dividends reinvested with respect to all of the shares of Delhi Bank Corp. common stock registered in your name.
| 9. | How may a participant change options under the Plan? |
You may change participation
in the Plan at any time by completing a revised Authorization Form and returning it to the Plan Administrator, or by submitting
a written request to the Plan Administrator as set forth in the response to Question 5. Any notification of a change that is not
received at least five (5) business days before the dividend record date will not be effective until dividends for such record
date have been reinvested and the shares credited to your account.
REINVESTMENT OF DIVIDENDS
| 10. | When will dividends be reinvested? |
In a month in which
a regular cash dividend is paid on the common stock, the dividend investment date for the regular dividend on our common stock
is the dividend payment date. In any case, if the dividend investment date falls on a day that is not a trading day, the dividend
investment date is deemed to be the prior trading day.
Shares purchased directly
from Delhi Bank Corp. with reinvested dividends will be purchased on the dividend investment date. In the event sufficient shares
of our stock are available in the open market and we appoint an outside administrator for the Plan, shares for the Plan may be
purchased on the open market. Purchases on the open market will begin on the dividend investment date and will be completed no
later than thirty (30) days from that date, except where completion at a later date is necessary or advisable under any applicable
federal securities laws. If open market purchases cannot be completed within thirty (30) days, shares will be purchased directly
from Delhi Bank Corp. Open market purchases may be made in the market, or by negotiated transactions and may be subject to such
terms with respect to price, delivery, and other terms as to which the outside Plan Administrator may agree. In the event we appoint
an outside Plan Administrator, neither we nor any participant shall have any authority or power to direct the time or price at
which shares in the market may be purchased, or the selection of the broker or dealer through or from whom purchases are to be
made.
Any changes in your
method of participating in the dividend reinvestment feature of the Plan will become effective as of the next dividend investment
date if notice is received by the Plan Administrator at least five (5) business days before the dividend record date for the related
dividend payment.
OPTIONAL PURCHASES
| 11. | What are the minimum and maximum optional purchase limits, and when can they be made? |
Any optional cash
payments you wish to make must not be less than $25 per investment nor may your payments for any one account total more than $5,000
per calendar quarter. We will return optional cash payments to the extent that the optional cash payments in any calendar quarter
exceed $5,000 or are less than $25. The same optional cash payment need not be sent for each investment and there is no obligation
to use, nor any penalty for not using, the optional purchase feature of the Plan.
You may send in optional
cash payments as often as you want, however, payments must be received by the Plan Administrator no later than ten (10) calendar
days, but no more than thirty (30) calendar days, prior to the dividend payment date. You may also choose to make optional cash
payments by authorizing automatic deductions from your bank account at The Delaware National Bank of Delhi as is discussed in Question
12.
If the Plan Administrator
is unable to process your optional cash payments within thirty (30) calendar days of the dividend payment date, the Plan Administrator
will return the funds to you by check. No interest will be paid on funds held by the Plan Administrator pending investment in our
common stock.
| 12. | How does the “Optional Purchase” feature operate? |
If you choose to
make optional cash payments, and do not elect the dividend reinvestment option, the Plan Administrator will apply any optional
cash payments received from you to the purchase of shares of Delhi Bank Corp. common stock for your account in the Plan and will
pay cash dividends on all shares registered in your account. If you have elected the dividend reinvestment option, the Plan Administrator
will reinvest all future cash dividends on shares in the Plan purchased pursuant to the optional purchase feature of the Plan.
Once you are enrolled in
the Plan, you may make an optional cash payment by check or by authorizing an individual automatic deduction from your bank account
if you hold a bank account at The Delaware National Bank of Delhi, subject to the time periods during which such optional cash
payments can be made. See Question 11.
If investing by check,
you need not send the same amount each time and you are under no obligation to make optional cash payments in any quarter. We will
not accept cash, travelers’ checks, money orders or third party checks for optional cash payments. Checks should be made
payable to Delhi Bank Corp. No interest will be paid on optional cash payments.
For an individual funds
transfer, your bank account at The Delaware National Bank of Delhi will be debited the next business day following receipt of your
request. For automatic quarterly electronic funds transfers, your bank account at The Delaware National Bank of Delhi is debited
on the dividend payment date, which is usually the fifteenth (15th) day after the end of the quarter or, if that day is not a business
day, the next business day following such day. You will not receive any confirmation of the transfer of funds other than as reflected
on your Plan account statements.
To authorize electronic
funds transfers from your bank account at The Delaware National Bank of Delhi, complete and sign the automatic funds transfer section
of the Authorization Form and return it to the Plan Administrator together with a voided blank check or deposit slip for the account
from which funds are to be transferred. Your automatic funds transfers will begin as soon as practicable after we receive the Plan
automatic funds transfer section. You may change the amount of your quarterly transfer or terminate your quarterly transfer altogether
by writing to the Plan Administrator and indicating you wish to change or terminate electronic funds transfers. To be effective
with respect to a particular investment date, your change or termination request must be received by the Plan Administrator at
least five (5) business days before the dividend record date.
Additional contribution
forms and forms to establish an automatic quarterly deduction from a checking or savings account at The Delaware National Bank
of Delhi may be obtained by contacting the Plan Administrator by any of the methods as set forth in the response to Question 37.
| 13. | When will optional cash payments received by the Plan Administrator be invested and can they be returned to the participant
upon request? |
Optional cash payments
will be invested on the dividend investment date. The dividend investment date, with respect to shares purchased from Delhi Bank
Corp., will be the dividend payment date. In the event we appoint an outside Plan Administrator and purchases to fund the Plan
are made in the open market, shares will be purchased, as soon as practicable after the dividend investment date, as determined
by the outside Plan Administrator. No interest will be paid by us on optional cash payments pending their actual investment. Optional
cash payments will be refunded if a written request for a refund is received by the Plan Administrator no later than five (5) business
days prior to the dividend investment date.
| 14. | Is there a requirement to reinvest the dividends received on shares purchased with optional cash
payments? |
If you have signed
up for the dividend reinvestment option of the Plan in addition to the optional purchase option, then all dividends paid on shares
purchased with optional cash payments must be reinvested. If you have only selected the optional purchase option, you will receive
cash dividends on such shares.
| 15. | What if your payment is returned for insufficient funds? |
Payments are accepted
subject to timely collection as good funds and verification of compliance with the terms of the Plan. Checks or other forms of
payment returned or denied for any reason will not be resubmitted for collection.
In the event that your
check is returned unpaid for any reason, the Plan Administrator will immediately remove from your account any shares already purchased
upon the prior credit of such funds. The Plan Administrator may sell any such shares to satisfy any uncollected amounts. If the
net proceeds of the sale of such shares are insufficient to satisfy the balance of the uncollected amounts, the Plan Administrator
may sell such additional shares from your account as necessary to satisfy the uncollected balance.
A fee of $30 will be charged
for any checks returned for insufficient funds. We may place a hold on your account until the fee is received or sell shares from
your account to satisfy the fee.
SHARES PURCHASED FOR PARTICIPANTS
| 16. | What is the source of common stock purchased under the Plan? |
Shares of common
stock will be purchased directly from Delhi Bank Corp., and will be either authorized but unissued shares or shares held in the
treasury of Delhi Bank Corp. In the event that The Delaware National Bank ceases to administer the Plan on our behalf and we appoint
an outside administrator, we may purchase shares from existing stockholders or in the open market, if sufficient shares are available
for purchase in the open market.
| 17. | How many shares of Delhi Bank Corp. common stock will be purchased for participants? |
The Plan does not
limit the aggregate amount of cash dividends that may be reinvested. The number of shares purchased depends on the amount of your
dividends or optional cash payments, or both, and the applicable market price of the common stock. Your plan account will be credited
with that number of shares, including fractions, equal to the total amount to be invested divided by the purchase price per share.
There are limitations with respect to optional cash purchases, see Question 11.
| 18. | What will be the price of shares of Delhi Bank Corp. common stock purchased under the Plan? |
The price of shares of
Delhi Bank Corp. common stock purchased from us will be equal to the average of the high and low sales prices for our common stock
as quoted on the OTC Markets for the four (4) weeks preceding the applicable dividend investment date. If there is no trading in
our common stock on the OTC Markets for a substantial amount of time at the time of any dividend investment date, Delhi Bank Corp.
will determine the market price based on market quotations it deems appropriate.
| 19. | Could the Plan have a dilutive effect on Delhi Bank Corp.’s stockholders? |
Yes. The issuance
of authorized but unissued shares by Delhi Bank Corp. under the Plan or the purchase of shares of our common stock held in the
treasury of Delhi Bank Corp. will dilute the voting interests of existing stockholders and net income per share and stockholders’
equity per share will decrease. If shares for the Plan are purchased in the open market by an outside plan administrator, there
will be no dilutive effect on Delhi Bank Corp.’s stockholders. To date, all shares purchased under the Plan have been purchased
directly from Delhi Bank Corp.
DIVIDENDS ON SHARES HELD IN THE PLAN
| 20. | May dividends on shares purchased through the Plan be sent directly to me? |
No. The purpose
of the Plan is to have the dividends on shares of Delhi Bank Corp. common stock reinvested. Accordingly, dividends paid on shares
held in the Plan will be automatically reinvested in additional shares of common stock unless and until you elect to terminate
participation in the Plan as to all shares in the Plan as described below. See Question 25.
In the event that you choose
the optional purchase option, but do not elect the dividend reinvestment option, you may have the dividends paid on shares purchased
with optional cash payments sent directly to you.
COSTS
| 21. | Are there any costs to me associated with purchases under the Plan? |
No. Delhi Bank Corp.
pays all administration costs of the Dividend Reinvestment and Optional Cash Purchase Plan. You are not charged brokerage commissions,
service charges or other fees in connection with the purchase of shares of common stock under the Plan, unless shares purchased
under the Plan are purchased through open market purchases, in which case you will pay prorated brokerage commissions charged for
such purchases.
REPORTS TO PARTICIPANTS
| 22. | If I participate, what information will I receive concerning my purchases of stock under the Plan? |
You will receive
a quarterly statement of your Plan account. The statement will confirm each transaction, such as any purchase, sale, transfer,
certificate deposit, certificate issuance or dividend reinvestment. These statements are a record of your Plan account activity
and identify your cumulative share position and the prices for your purchases and sales of shares under the Plan. The statements
will also show the amount of dividends reinvested into additional shares for your Plan account (if applicable), and any brokerage
fees charged for your respective transactions during the period.
As a registered stockholder,
you will also receive copies of Delhi Bank Corp. Annual Reports, proxy statements, notices of annual and special meetings, proxy
cards, and, if applicable, dividend income and other notices for tax reporting purposes.
CERTIFICATES FOR SHARES HELD UNDER THE
PLAN
| 23. | Will I receive stock certificates for shares of Delhi Bank Corp. common stock purchased under
the Plan? |
Unless requested,
certificates for shares of common stock purchased under the Plan will not be issued to you. The Plan Administrator will hold all
shares purchased for the benefit of Plan participants in non-certificated (book-entry) form. Your Plan account statement will show
the number of shares purchased for your account under the Plan. This feature protects against loss, theft, or destruction of stock
certificates.
Certificates for any number
of whole shares credited to your account under the Plan will be issued within 30 days of receipt of your written request or of
your withdrawal from the Plan, if so requested. If you do not request certificates for your shares, the Plan Administrator will
maintain your shares in book-entry form. Any remaining whole shares and fractional shares will continue to be credited to your
account. Certificates for fractional shares will not be issued under any circumstances.
SAFEKEEPING OF SHARES
| 24. | May a participant deposit certificates of Delhi Bank Corp. common stock with the Plan Administrator? |
We do not offer
safekeeping services for certificates of our common stock. However, you may send your certificates for your shares of Delhi Bank
Corp. common stock to us to have the ownership of such shares transferred from certificated form into book-entry form. If you wish
to use this service, you should contact the Plan Administrator at the address set forth in Question 37. Delivery of certificates
is at your risk and, for delivery by mail, we recommend you use insured registered mail with return receipt requested. Your account
statement will reflect the number of shares held by you in book-entry form.
TERMINATION OF PARTICIPATION
| 25. | How may I withdraw from and stop participating in the Plan? |
You may withdraw from the
Plan completely at any time by notifying the Plan Administrator in writing to that effect at the address specified in Question
37.
If the Plan Administrator
receives your notice of withdrawal and termination less than five (5) business days before the next dividend record date, it will
not be effective until dividends paid for such record date have been reinvested and the shares credited to your account.
Any optional cash payments
sent to the Plan Administrator prior to the request to terminate will be invested in Delhi Bank Corp. common stock unless your
termination letter expressly requests the return of the optional cash payments and such letter is received no later than five (5)
business days prior to the dividend investment date.
If you terminate participation
in the Plan, the Plan Administrator will remove your shares from the Plan and those shares held in book-entry form will continue
to be held in your name in such form. If requested, we will send you a check in the amount equal to the value of any fractional
shares, based upon the market price of Delhi Bank Corp. common stock as determined as set forth in Question 18. You may request
certificates for your shares of Delhi Bank Corp. common stock which are held in book-entry form by following the procedure described
in Question 23. Certificates representing fractional shares will not be issued.
After you withdraw from
the Plan, you will receive all subsequent dividends in cash unless you re-enroll in the Plan, which you may do at any time by requesting
an Authorization Form in the manner specified in Question 5. However, we and the Plan Administrator reserve the right to reject
any Authorization Form, on any grounds, including but not limited to excessive joining and withdrawing. This reservation is intended
to minimize unnecessary administrative expenses and to encourage use of the Plan as a long-term investment service.
| 26. | What happens to my Plan accounts if I transfer and sell all the Delhi Bank Corp. stock held in my name? |
If you cease to
be a stockholder of Delhi Bank Corp., you cease to be eligible to participate in the Plan. If you subsequently purchase our common
stock, you will have to complete and send to the Plan Administrator a new Authorization Form to enroll in the Plan.
ADDITIONAL INFORMATION
| 27. | What is the effect of a stock split, stock dividend or rights offering on my shares held in the Plan? |
Any stock dividend
or stock split declared by Delhi Bank Corp. on shares held in the Plan on your behalf will be credited to your account. In the
event that we make available to our stockholders the right to purchase additional shares, debentures or other securities, you will
be given the opportunity to exercise such rights accruing on your shares held in the Plan and any additional shares of Delhi Bank
Corp. common stock purchased will be placed in your account.
| 28. | May I pledge the shares held in my Plan account? |
Your rights under
the Plan and shares credited to your account may not be pledged. If you wish to pledge your shares, you must request that certificates
for such shares be issued in your name.
| 29. | How do I sell shares held in the Plan? |
Currently, we do
not handle the sale of shares for your account. You may choose to sell your shares at any time through a stockbroker of your choice.
If you choose to sell shares held in the Plan, you may need to request a certificate for your shares from the Plan Administrator
for delivery to your stockbroker prior to settlement of such sale. For instructions on how to obtain a stock certificate, see Question
23.
| 30. | How do I change the name, transfer or give my plan shares as a gift? |
You may change the name,
transfer or gift shares in your Plan account at any time. Transfers may be made in book-entry or certificated form. Simply contact
the Plan Administrator at the address specified in Question 37 to submit your request.
To obtain instructions
for transferring your shares, please follow the steps described below:
Call the telephone number
listed in Question 37 and request that Delhi Bank Corp. send you transfer instructions. Once received, provide the full new name,
address and taxpayer identification (or social security) number of the new owner on the Transfer of Ownership Form.
The completed form should
be sent to Delhi Bank Corp. at the address provided in Question 37. If you are sending transfer instructions along with your certificates,
you should send them by registered mail, return receipt requested. All participants in the existing Plan account must sign the
instructions, and their signatures must be authenticated with a Medallion Signature Guarantee as described in the instructions.
| 31. | How will my shares held under the Plan be voted at meetings of stockholders? |
You will receive a proxy
card covering both your certificated shares and the shares held in your account under the Plan (other than fractional shares).
If the proxy card is returned properly signed and marked for voting, all of the shares will be voted as marked. The total number
of full shares held may be voted in person at the stockholders’ meeting in accordance with instructions contained in our
proxy statement.
If a proxy card is returned
properly signed but without indicating instructions as to the manner in which shares are to be voted with respect to any item,
all of your shares will be voted (to the extent legally permissible) in accordance with the recommendations of our Board of Directors.
This procedure is consistent with the actions taken with respect to stockholders who are not participating in the Plan and who
return properly signed proxy cards and who do not provide voting instructions. If the proxy card is not returned, or if it is returned
unsigned or improperly signed, none of your shares covered by such proxy card will be voted.
| 32. | What are the federal income tax consequences of participation in the Plan? |
In general, you will have
the same federal income tax obligations with respect to dividends credited to your account under the Plan as other holders of shares
of Delhi Bank Corp. common stock who elect to receive cash dividends directly. You are treated for income tax purposes as having
received, on the dividend payment date, a dividend in an amount equal to the fair market value of the Delhi Bank Corp. common stock
credited to your account under the Plan, even though that amount was not actually received by you in cash but, instead, was applied
to the purchase of additional shares for your account.
The basis of each share
credited to your account pursuant to the dividend reinvestment aspect of the Plan is the fair market value of the common stock
when purchased, and the holding period for such shares begins on the day after that date the shares are acquired for a participant’s
account. We intend to make every reasonable effort to determine the fair market value on the dividend payment date and use that
value to determine the number of shares purchased with your cash dividend, however, because there is not an active trading market
for our common stock, our valuation may be only an approximation of the fair market value.
Generally, when you receive
certificates representing whole shares previously credited to your account under the Plan upon withdrawal from the Plan or pursuant
to your request, it will not result in the recognition of taxable income. You may recognize a gain or loss when fractional shares
are sold on your behalf upon withdrawal from the Plan or if you sell your shares issued to you from the Plan.
You should consult your
own tax adviser regarding the particular tax consequences, including state tax consequences, which may result from participation
in the Plan and any subsequent disposal of shares acquired pursuant to the Plan.
| 33. | What is the responsibility of Delhi Bank Corp. and the Plan Administrator? |
Delhi Bank Corp.
and the Plan Administrator, in administering the Plan, will not be liable for any act done in good faith or for any good faith
omission to act, including, without limitation, any claim of liability arising out of failure to terminate a participant’s
account upon the participant’s death or judicially declared incompetency prior to receipt by us of notice in writing of such
death or incompetency; the prices and times at which shares are purchased for a participant’s account; or any loss or fluctuation
in the market value before or after purchase of shares.
| 34. | Who bears the risk of market price fluctuations in the common stock? |
Your investment
in shares acquired under the Plan is no different from a direct investment in shares of Delhi Bank Corp. You alone bear the risk
of loss and realize the benefits of any gain from market price changes with respect to all your shares held in the Plan, or otherwise.
Delhi Bank Corp. cannot guarantee liquidity in the market, thus your investment and the marketability of your securities may be
adversely affected by the current market conditions.
| 35. | May the Plan be changed or discontinued? |
Although Delhi Bank Corp.
anticipates maintaining the Plan, the Plan may be amended, suspended, modified or terminated at any time by the Board of Directors
of Delhi Bank Corp. without the approval of the participants. Notice of any such suspension or termination or material amendment
or modification will be sent to all participants, who shall at all times have the right to withdraw from the Plan.
We may terminate your individual
participation in the Plan at any time by written notice. In such event, we will request instructions from you for disposition of
the shares in your account. If we do not receive instructions from you, the Plan Administrator will maintain your shares of Delhi
Bank Corp. common stock held in the Plan in book-entry form and send you a check for any fractional shares.
| 36. | How are the Plan materials and the terms and conditions to be interpreted? |
Delhi Bank Corp.
and the Plan Administrator will determine all issues of interpretation of the provisions set forth in this Plan.
| 37. | Where should I direct correspondence regarding the Plan? |
You may contact
the Plan Administrator by mail or telephone at:
Delhi Bank Corp. Dividend Reinvestment Plan
c/o The Delaware National Bank of Delhi
124 Main Street
Delhi, New York 13753
(855) 363-3544
A Warning
About Forward-Looking Statements
This offering circular
contains forward-looking statements, which can be identified by the use of words such as “believes,” “expects,”
“anticipates,” “estimates,” “projects,” “plans,” “potential,” “possible”
or similar expressions. Forward-looking statements include:
| · | statements of our goals, intentions and
expectations; |
| · | statements regarding our business plans,
prospects, growth and operating strategies; |
| · | statements regarding the quality of our
loan and investment portfolios; and |
| · | estimates of our risks and future costs
and benefits. |
These forward-looking statements
are subject to significant risks and uncertainties. Actual results may differ materially from those contemplated by the forward-looking
statements due to, among others, the following factors:
| · | general economic conditions, either nationally or in our market area, that are worse than expected; |
| · | changes in the interest rate environment that reduce our interest margins or reduce the fair value
of financial instruments; |
| · | our ability to attract and retain deposits; |
| · | increases in premiums for deposit insurance; |
| · | management’s assumptions in determining the adequacy of the allowance for loan losses; |
| · | our ability to control operating costs and expenses; |
| · | the use of estimates in determining fair value of certain of our assets, which estimates may prove
to be incorrect and result in significant declines in valuation; |
| · | difficulties in reducing risks associated with the loans on our balance sheet; |
| · | staffing fluctuations in response to product demand or the implementation of corporate strategies
that affect our workforce and potential associated charges; |
| · | computer systems on which we depend could fail or experience a security breach; |
| · | our ability to retain key members of our senior management team; |
| · | costs and effects of litigation, including settlements and judgments; |
| · | our ability to successfully integrate any assets, liabilities, customers, systems, and management
personnel we may in the future acquire into our operations and our ability to realize related revenue synergies and cost savings
within expected time frames and any goodwill charges related thereto; |
| · | increased competitive pressures among financial services companies; |
| · | changes in consumer spending, borrowing and savings habits; |
| · | legislative or regulatory changes that adversely affect our business; |
| · | changes in consumer spending, borrowing and savings habits; |
| · | the availability of resources to address changes in laws, rules, or regulations or to respond to regulatory actions; |
| · | adverse changes in the securities markets; |
| · | inability of key third-party providers to perform their obligations; and |
| · | changes in accounting policies and practices, as may be adopted by the bank regulatory agencies
and the Financial Accounting Standards Board. |
Any of the forward-looking
statements that we make in this offering circular and in other public statements we make may turn out to be wrong because of inaccurate
assumptions we might make, because of the factors illustrated above or because of other factors that we cannot foresee. Consequently,
no forward-looking statement can be guaranteed.
For any forward-looking
statements made in this offering circular, we claim the protection of the safe harbor for forward-looking statements contained
in the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on these statements, which
speak only as of the date of this offering circular. We do not undertake to update forward-looking statements to reflect facts,
circumstances, assumptions or events that occur after the date the forward-looking statements are made. All subsequent written
and oral forward-looking statements concerning the matters addressed in this offering circular and attributable to us or any person
acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this offering
circular.
Selected
Financial and Other Data
The summary financial
data presented below is derived in part from our consolidated financial statements. The following is only a summary and you should
read it in connection with the financial statements and notes thereto beginning on page F-1 of this offering circular. The information
at December 31, 2015 and 2014 and for the years ended December 31, 2014 and 2015 is derived in part from the audited financial
statements that appear in this offering circular. Operating results for the periods shown are not necessarily indicative of the
results that may be expected for any future period.
| | |
At December 31, | |
| | |
2015 | | |
2014 | |
| Financial Condition Data: | |
| | | |
| | |
| Assets: | |
| | | |
| | |
| Cash and due from banks | |
$ | 16,691,113 | | |
$ | 4,660,891 | |
| Interest-bearing deposits with banks | |
| 37,177,000 | | |
| 32,445,000 | |
| Available for sale securities | |
| 113,890,852 | | |
| 126,198,322 | |
| Held to maturity securities | |
| 4,984,585 | | |
| 7,754,529 | |
| Restricted equity securities | |
| 322,100 | | |
| 371,700 | |
| Loans receivable, net | |
| 100,372,504 | | |
| 97,625,806 | |
| Premises and equipment, net | |
| 3,041,041 | | |
| 3,074,835 | |
| Bank owned life insurance | |
| 8,853,696 | | |
| 6,443,950 | |
| Other assets | |
| 3,118,146 | | |
| 3,396,405 | |
| Total assets | |
$ | 285,451,037 | | |
$ | 281,971,438 | |
| | |
| , | | |
| | |
| Liabilities and Stockholders’ Equity: | |
| | | |
| | |
| Liabilities | |
| | | |
| | |
| Deposits: | |
| | | |
| | |
| Noninterest-bearing | |
$ | 41,057,398 | | |
$ | 34,852,330 | |
| Interest-bearing | |
| 214,167,833 | | |
| 217,950,035 | |
| Total deposits | |
| 255,225,231 | | |
| 252,802,365 | |
| | |
| | | |
| | |
| Borrowed funds | |
| 215,000 | | |
| 372,000 | |
| Capital lease obligation | |
| 239,666 | | |
| 254,473 | |
| Other liabilities | |
| 3,255,222 | | |
| 3,252,070 | |
| Total liabilities | |
| 258,935,119 | | |
| 256,680,908 | |
| | |
| | | |
| | |
| Stockholders’ Equity: | |
| | | |
| | |
Common stock, $1.00 par value: 5,000,000 shares authorized; 1,627,270
shares issued in 2015 and 1,612,495 in 2014 | |
| 1,627,270 | | |
| 1,612,495 | |
| Additional paid-in capital | |
| 3,114,213 | | |
| 2,667,785 | |
| Retained earnings | |
| 23,080,915 | | |
| 22,341,310 | |
| Accumulated other comprehensive income | |
| 511,404 | | |
| 656,503 | |
| Treasury stock, at cost; 98,312 shares in 2015 and 110,244 shares in 2014 | |
| (1,817,884 | ) | |
| (1,987,563 | ) |
| | |
| | | |
| | |
| Total stockholders’ equity | |
| 26,515,918 | | |
| 25,290,530 | |
| Total liabilities and stockholders’ equity | |
$ | 285,451,037 | | |
$ | 281,971,438 | |
| | |
At December 31, | |
| | |
2015 | | |
2014 | |
| Operating Data: | |
| | | |
| | |
| Interest and Dividend Income: | |
| | | |
| | |
| Interest and fees on loans | |
$ | 4,491,384 | | |
$ | 4,518,256 | |
| Investments: | |
| | | |
| | |
| Taxable | |
| 2,622,355 | | |
| 2,880,060 | |
| Tax-exempt | |
| 766,492 | | |
| 843,401 | |
| Dividends | |
| 13,575 | | |
| 15,794 | |
| Total interest and dividend income | |
| 7,893,806 | | |
| 8,265,511 | |
| | |
| | | |
| | |
| Interest Expense: | |
| | | |
| | |
| Deposits | |
| 953,193 | | |
| 1,065,575 | |
| Borrowed funds and capital lease | |
| 23,525 | | |
| 24,770 | |
| Total interest expense | |
| 976,718 | | |
| 1,090,345 | |
| | |
| | | |
| | |
| Net Interest Income | |
| 6,917,088 | | |
| 7,175,166 | |
| | |
| | | |
| | |
| Provision for Loan Losses | |
| 140,000 | | |
| 24,500 | |
| | |
| | | |
| | |
| Net Interest Income After Provision for Loan Losses | |
| 6,777,088 | | |
| 7,150,666 | |
| | |
| | | |
| | |
| Noninterest Income: | |
| | | |
| | |
| Service charges and fees | |
| 1,207,609 | | |
| 1,194,521 | |
| Net gain on sales of securities | |
| 101,023 | | |
| 69,224 | |
| Bank owned life insurance income | |
| 364,668 | | |
| 270,424 | |
| Total noninterest income | |
| 1,673,300 | | |
| 1,534,169 | |
| | |
| | | |
| | |
| Noninterest Expense: | |
| | | |
| | |
| Salaries and employee benefits | |
| 3,525,216 | | |
| 3,386,829 | |
| Occupancy and equipment | |
| 1,335,044 | | |
| 1,443,862 | |
| FDIC premiums | |
| 16,294 | | |
| 152,836 | |
| ATM and debit card processing | |
| 131,855 | | |
| 211,232 | |
| Other | |
| 1,173,572 | | |
| 1,185,425 | |
| Total noninterest expense | |
| 6,325,981 | | |
| 6,380,184 | |
| | |
| | | |
| | |
| Income Before Provision for Income Taxes | |
| 2,124,407 | | |
| 2,304,651 | |
| | |
| | | |
| | |
| Provision for Income Taxes | |
| 403,700 | | |
| 449,654 | |
| | |
| | | |
| | |
| Net income | |
$ | 1,720,707 | | |
$ | 1,854,997 | |
| | |
| | | |
| | |
| | |
| | | |
| | |
| Capital Ratios: | |
| | | |
| | |
| Leverage ratio – consolidated | |
| 9.4 | % | |
| 8.91 | % |
| Tier 1 risk weighted capital – Bank only | |
| 24.5 | | |
| 25.13 | |
| Total risk weighted capital – Bank only | |
| 25.0 | | |
| 25.92 | |
| Common equity Tier 1 capital | |
| 24.5 | | |
| N/A | |
| | |
| | | |
| | |
| Per Share Data: | |
| | | |
| | |
| Earnings per share | |
$ | 1.15 | | |
$ | 1.24 | |
| Dividends per share | |
| 0.64 | | |
| 0.64 | |
| | |
| | | |
| | |
| Asset Quality Ratios: | |
| | | |
| | |
| Allowance for loan losses as a percentage of total loans | |
| 0.43 | % | |
| 0.75 | % |
| Allowance for loan losses as a percentage of nonperforming loans | |
| 49.08 | | |
| 100.95 | |
| Nonperforming loans as a percentage of total loans | |
| 0.86 | | |
| 0.75 | |
| Nonperforming loans as a percentage of total assets | |
| 0.30 | | |
| 0.26 | |
| | |
| | | |
| | |
| Performance Ratios: | |
| | | |
| | |
| Return on average total assets | |
| 0.60 | % | |
| 0.66 | % |
| Return on average equity | |
| 6.52 | | |
| 7.63 | |
| Interest rate spread | |
| 2.58 | | |
| 2.67 | |
| Net interest margin | |
| 2.65 | | |
| 2.74 | |
| Dividend payout ratio | |
| 57.02 | | |
| 51.62 | |
Our Business
General
Delhi Bank Corp. is
a registered bank holding company, which owns 100% of the outstanding capital stock of The Delaware National Bank of Delhi. We
were incorporated under the laws of the State of New York in December 1994 for the purpose of serving as The Delaware National
Bank’s holding company. The holding company structure provides flexibility for growth through expansion of our businesses
and access to varied capital raising operations. Our primary business activity consists of ownership of all of the outstanding
stock of The Delaware National Bank. As of December 31, 2015, we had 482 stockholders of record.
The Delaware National
Bank is a national bank which converted from a New York chartered bank in 1865. The Delaware National Bank operates a full-service
commercial and consumer banking business in Delaware County, New York. The Delaware National Bank originates one- to four-family
residential real estate and commercial real estate mortgage loans, residential construction loans, and secured and unsecured commercial
and consumer loans. We do not make subprime loans. We also finance commercial transactions and offer revolving credit loans, small
business loans and student loans. The Delaware National Bank offers a variety of deposit products, including demand and savings
deposits, regular savings accounts, investment certificates, fixed-rate certificates of deposit and club accounts. The Delaware
National Bank also has a full-service trust department. The Delaware National Bank offers an enhanced delivery system option of
telephone banking and Internet banking. Other services include safe deposit facilities, mobile banking, money orders, wire transfers,
drive-through facilities, 24-hour depositories and ATMs.
Delaware National Realty
Corp., a wholly owned subsidiary of The Delaware National Bank, is a real estate investment trust, which was incorporated in the
State of New York on July 5, 2002 for the purpose of investing in real estate mortgage portfolios. On that date, The Delaware National
Bank transferred to Delaware National Realty Corp. certain one- to four-family residential mortgage loans and mortgage-backed securities.
In return, The Delaware National Bank received shares of common and preferred stock of Delaware National Realty Corp. At December
31, 2015, Delaware National Realty Corp. had total assets of $24.8 million.
The Delaware National
Bank’s telephone number is (855) 413-3544. The Delaware National Bank’s website is www.dnbd.net. Information
on The Delaware National Bank’s website should not be considered part of this offering circular.
Market Area and Competition
We consider Delaware
County, New York to be the Bank’s primary market area for lending and deposit activities, with secondary concentrations of
business activity in neighboring adjoining counties. Delaware County is not part of a metropolitan statistical area, and is mostly
rural in nature, containing employment in a variety of economic sectors.
We face significant
competition for the attraction of deposits and origination of loans. Our most direct competition for deposits has historically
come from the financial institutions operating in our market area. We also face competition for investors’ funds from money
market funds, mutual funds and other corporate and government securities. Our competition for loans comes primarily from financial
institutions in our market area and, to a lesser extent, from other financial service providers, such as mortgage companies and
mortgage brokers. Competition for loans also comes from the increasing number of non-depository financial service companies entering
the mortgage market, such as insurance companies, securities companies and specialty finance companies.
Lending Activities
One- to Four-Family
Residential Loans. We offer both fixed-rate and adjustable-rate one- to four-family residential mortgage loans.
We do not engage in subprime lending. We also offer home equity lines of credit.
Borrower demand for
adjustable-rate loans compared to fixed-rate loans is a function of the level of interest rates, the expectations of changes in
the level of interest rates, and the difference between the interest rates and loan fees offered for fixed-rate mortgage loans
as compared to the interest rates and loan fees for adjustable-rate loans. The relative amount of fixed-rate and adjustable-rate
mortgage loans that can be originated at any time is largely determined by the demand for each in a competitive environment. The
loan fees, interest rates and other provisions of mortgage loans are determined by us on the basis of our own pricing criteria
and competitive market conditions.
While one- to four-family
residential real estate loans are normally originated with up to 30-year terms, such loans typically remain outstanding for substantially
shorter periods because borrowers often prepay their loans in full either upon sale of the property pledged as security or upon
refinancing the original loan. Therefore, average loan maturity is a function of, among other factors, the level of purchase and
sale activity in the real estate market, prevailing interest rates and the interest rates payable on outstanding loans.
We will generally make
mortgage loans with loan-to-value ratios up to 85%. We require all properties securing mortgage loans to be appraised by a Board-approved
independent appraiser. We generally require title insurance on all first mortgage loans. Borrowers must obtain hazard insurance,
and flood insurance is required for loans on properties located in a flood zone.
Commercial and
Multi-Family Real Estate Loans. We originate loans secured by a variety of commercial and multi-family real estate located
in our market area. In reaching a decision on whether to make a commercial or multi-family real estate loan, we consider and review
a cash flow analysis of the borrower and consider the net operating income of the borrower’s business or the property, the
borrower’s expertise, credit history and profitability, and the value of the underlying property. We generally require that
the borrowers have debt service coverage ratios (the ratio of earnings before debt service to debt service) of at least 1.2. In
some circumstances, loans are also collateralized by business assets, assignments of leases or the business owner’s primary
residence. We may also require personal guarantees. An environmental survey or environmental risk insurance is obtained when the
possibility exists that hazardous materials may have existed on the site, or the site may have been impacted by adjoining properties
that handled hazardous materials. In order to monitor these loans, we generally require the borrower and, in some cases, the business
owner to provide annual financial statements and/or income tax returns.
Construction
and Land Development Loans. We originate loans to finance the construction of residential and commercial properties. We
also make loans on vacant land and for land development. Our construction loans generally provide for the payment of interest only
during the construction phase. Loans generally can be made with a maximum loan to value ratio of 75% and generally do not exceed
a term of one year. Before making a commitment to fund a construction loan, we require an appraisal of the property by an independent
licensed appraiser. We also will require an inspection of the property before disbursement of funds during the term of the construction
loan.
Commercial and
Agricultural Loans. We make commercial business and agricultural loans on a secured and unsecured basis. When making such
loans, we consider the financial statements of the borrower, the borrower’s payment history of both corporate and personal
debt, the debt service capabilities of the borrower, the projected cash flows of the business, the viability of the industry in
which the customer operates and the value of the collateral.
Consumer Loans.
Our consumer loans consist of credit cards, automobile loans, mobile homes, personal loans and overdraft protection loans. The
procedures for underwriting consumer loans include an assessment of the applicant’s payment history on other debts and ability
to meet existing obligations and payments on the proposed loan. We generally require that borrowers have a debt to income ratio
of no more than 40%. Although the applicant’s creditworthiness is a primary consideration, the underwriting process also
includes a comparison of the value of the collateral, if any, to the proposed loan amount.
Loan Underwriting
Risks.
Adjustable-Rate
Loans. While we anticipate that adjustable-rate loans will better offset the adverse effects of an increase in interest rates
as compared to fixed-rate mortgages, an increased monthly mortgage payment required of adjustable-rate loan borrowers in a rising
interest rate environment could cause an increase in delinquencies and defaults. The marketability of the underlying property also
may be adversely affected in a high interest rate environment. In addition, although adjustable-rate mortgage loans make our asset
base more responsive to changes in interest rates, the extent of this interest sensitivity is limited by the annual and lifetime
interest rate adjustment limits.
Commercial and Multi-Family
Real Estate Loans. Loans secured by commercial and multi-family real estate generally have larger balances and involve a greater
degree of risk than one- to four-family residential mortgage loans. Of primary concern in commercial and multi-family real estate
lending is the borrower’s creditworthiness and cash flow. Payments on loans secured by investment properties often depend
on successful operation and management of the properties. As a result, repayment of such loans may be subject to adverse conditions
in the real estate market or the economy.
Construction Loans.
Construction financing is generally considered to involve a higher degree of risk of loss than long-term financing on improved,
occupied real estate. Risk of loss on a construction loan depends largely upon the accuracy of the initial estimate of the property’s
value at completion of construction and the estimated cost (including interest) of construction. During the construction phase,
a number of factors could result in delays and cost overruns. If the estimate of construction costs proves to be inaccurate, we
may be required to advance funds beyond the amount originally committed to permit completion of the building. If the estimate of
value proves to be inaccurate, we may be confronted, at or before the maturity of the loan, with a loan having a value which is
insufficiently collateralized. If we are forced to foreclose on a building before or at completion due to a default, there can
be no assurance that we will be able to recover all of the unpaid balance of, and accrued interest on, the loan as well as related
foreclosure and holding costs.
Commercial and Agricultural
Loans. Unlike residential mortgage loans, which generally are made on the basis of the borrower’s ability to make repayment
from his or her employment or other income, and which are secured by real property whose value tends to be more easily ascertainable,
commercial and agricultural loans are of higher risk and typically are made on the basis of the borrower’s ability to make
repayment from the cash flow of the borrower’s business. As a result, the availability of funds for the repayment of commercial
loans may depend substantially on the success of the business itself. Further, any collateral securing such loans may depreciate
over time, may be difficult to appraise and may fluctuate in value.
Consumer Loans.
Consumer loans may entail greater risk than do residential mortgage loans, particularly in the case of consumer loans that are
unsecured or secured by assets that depreciate rapidly, such as motor vehicles. In the latter case, repossessed collateral for
a defaulted consumer loan may not provide an adequate source of repayment for the outstanding loan and a small remaining deficiency
often does not warrant further substantial collection efforts against the borrower. Consumer loan collections depend on the borrower’s
continuing financial stability, and therefore are likely to be adversely affected by various factors, including job loss, divorce,
illness or personal bankruptcy. Furthermore, the application of various federal and state laws, including federal and state bankruptcy
and insolvency laws, may limit the amount that can be recovered on such loans.
Loan Originations,
Purchases and Sales. Loan originations come from a number of sources. The primary source of our mortgage loan originations
are existing customers, walk-in traffic, referrals from customers and advertising. Commercial, agricultural and consumer loans
are generated primarily through the efforts of our loan officers.
Loan Approval
Procedures and Authority. Our lending activities follow written, non-discriminatory, underwriting standards and
loan origination procedures established by our Board of Directors and management. All loans are reviewed by the Board of Directors
on a monthly basis. The Board of Directors has granted loan approval authority to certain officers up to prescribed limits, based
on the officer’s experience and tenure. Loans over certain specified amounts are approved either by the voting members of
the Executive Committee or by the Board of Directors.
Loans to One
Borrower. The maximum amount that we may lend to one borrower and the borrower’s related entities is generally limited,
by internal policy, to 12% of our Tier 1 capital and reserves. At December 31, 2015, our regulatory limit on loans to one borrower
was $3.21 million. At that date, our largest lending relationship was $1.87 million and was 100% guaranteed by the United States
Department of Agriculture. This loan was performing in accordance with its original terms at December 31, 2015.
Loan Commitments.
We issue commitments for fixed-rate and adjustable-rate mortgage loans conditioned upon the occurrence of certain events. Commitments
to originate mortgage loans are legally binding agreements to lend to our customers. Generally, our loan commitments expire after
90 days.
Investment Activities
We have legal authority
to invest in various types of liquid assets, including U.S. Treasury obligations, securities of various federal agencies and of
state and municipal governments, mortgage-backed securities and certificates of deposit of federally insured institutions. We also
are required to maintain an investment in Federal Home Loan Bank of New York stock.
Our investment objectives
are to provide and maintain liquidity, to establish an acceptable level of interest rate and credit risk, to provide an alternate
source of low-risk investments when demand for loans is weak and to maximize portfolio yield over the long-term. Our Board of Directors
has the overall responsibility for the investment portfolio, including approval of our investment policy. The Chief Executive Officer
and President is responsible for implementation of the investment policy. Our Board of Directors reviews the status of our
investment portfolio on a monthly basis, or more frequently, if warranted.
Deposit Activities and Other Sources
of Funds
General.
Deposits, borrowings and loan repayments are the major sources of our funds for lending and other investment purposes. Scheduled
loan repayments are a relatively stable source of funds, while deposit inflows and outflows and loan prepayments are significantly
influenced by general interest rates and money market conditions.
Deposit Accounts.
Substantially all of our depositors are residents of New York. Deposits are attracted from within our market area through the offering
of a broad selection of deposit instruments, including noninterest-bearing demand deposits (such as checking accounts), interest-bearing
demand accounts (such as NOW and money market accounts), savings accounts, club accounts and certificates of deposit. In addition
to accounts for individuals, we also offer commercial checking accounts designed for the businesses operating in our market area.
We do not have any brokered deposits. From time to time we promote various accounts in an effort to increase deposits.
Deposit account terms
vary according to the minimum balance required, the time periods the funds must remain on deposit and the interest rate, among
other factors. In determining the terms of our deposit accounts, we consider the rates offered by our competition, our liquidity
needs, profitability to us, and customer preferences and concerns. We generally review our deposit mix and pricing weekly. Our
deposit pricing strategy has generally been to offer competitive rates and to be towards the top of the local market for rates
on selected types of deposit products.
Borrowings.
We utilize advances from the Federal Home Loan Bank of New York to supplement our investable funds. The Federal Home Loan Bank
functions as a central reserve bank providing credit for member financial institutions. As a member, we are required to own capital
stock in the Federal Home Loan Bank and are authorized to apply for advances on the security of such stock and certain of our mortgage
loans and other assets (principally securities which are obligations of, or guaranteed by, the United States), provided certain
standards related to creditworthiness have been met. Advances are made under several different programs, each having its own interest
rate and range of maturities. Depending on the program, limitations on the amount of advances are based either on a fixed percentage
of an institution’s net worth or on the Federal Home Loan Bank’s assessment of the institution’s creditworthiness.
We also maintain an advance credit facility agreement with another financial institution in the amount of $1,500,000.
Trust Services
The trust department
of The Delaware National Bank provides fiduciary services and investment management and retirement services to individuals, partnerships,
corporations and institutions. Additionally, the Bank acts as guardian, conservator, executor or trustee under various trusts,
wills and other agreements. The Bank has implemented comprehensive policies governing the practices and procedures of the trust
department, including policies relating to investment of trust property, maintaining confidentiality of trust records, avoiding
conflicts of interest and maintaining impartiality. At December 31, 2015, trust assets under administration were $31.0 million,
consisting of 290 accounts.
Personnel
As of December 31,
2015, we had 48 full-time employees and three part-time employees, none of whom is represented by a collective bargaining unit.
We believe our relationship with our employees is good.
Properties
Our main and executive
offices are located at 124 Main Street, Delhi, New York. An additional facility is located at 121 Main Street, Delhi, New York
consisting of a computer center and a drive-through facility. The Delaware National Bank also has full-service branch offices located
in Margaretville, New York, Davenport, New York and Hobart, New York. In addition, The Delaware National Bank owns and operates
six ATM facilities, including one located at The Delaware National Bank’s main office, one located in its Margaretville branch,
one located in its Davenport branch, one located in its Hobart branch, one located at Price Chopper Plaza in Delhi, New York, and
one located on the campus of SUNY College of Technology at Delhi, Delhi, New York. The Delaware National Bank also operates a loan
production office in Oneonta, New York. The Delaware National Bank owns each of its offices, except for the Hobart, New York branch
and the loan production office in Oneonta, New York, both of which are leased.
Legal
Proceedings
Periodically, there
have been various claims and lawsuits involving The Delaware National Bank, such as claims to enforce liens, condemnation proceedings
on properties in which The Delaware National Bank holds security interests, claims involving the making and servicing of real property
loans and other issues incident to The Delaware National Bank’s business. The Delaware National Bank is not a party to any
pending legal proceedings that it believes would have a material adverse effect on the financial condition or operations of The
Delaware National Bank.
Management’s
Discussion and Analysis of
Results
of Operations and Financial Condition
The objective of
this section is to help potential investors understand our views on our results of operations and financial condition. You should
read the discussion in conjunction with the consolidated financial statements and notes to the financial statements that appear
at the end of this offering circular.
Overview
We conduct community
banking activities by accepting deposits and making loans in our market area. Our lending products include one- to four-family
residential loans, commercial real estate loans, commercial, financial and agricultural loans and consumer and home equity loans.
We also maintain an investment portfolio consisting primarily of state and local government obligations and mortgage-backed securities
to manage our liquidity and interest rate risk. Our loan and investment portfolios are funded with deposits as well as collateralized
borrowings from the Federal Home Loan Bank of New York.
Income.
Our primary source of pre-tax income is net interest income. Net interest income is the difference between interest income, which
is the income that we earn on our loans and investments, and interest expense, which is the interest that we pay on our deposits
and borrowings. Changes in levels of interest rates affect our net interest income. See “Risk Factors—Our business
is subject to interest rate risk and variations in interest rates may negatively affect our financial performance.”
A secondary source
of income is non-interest income, which is revenue that we receive from providing products and services. The majority of our non-interest
income generally comes from service charges (mostly from service charges on deposit accounts) and increases in the value of bank-owned
life insurance. In some years we recognize income from the sale of securities and real estate owned.
Allowance for
Loan Losses. The allowance for loan losses is a valuation allowance for probable losses inherent in the loan portfolio.
We evaluate the need to establish allowances against losses on loans on a quarterly basis. When additional allowances are necessary,
a provision for loan losses is charged to earnings.
Expenses.
The noninterest expenses we incur in operating our business consist of salaries and employee benefits expenses, occupancy expenses,
data processing expenses and other miscellaneous expenses, such as office supplies, telephone, postage, advertising and professional
services.
Our largest noninterest
expense is salaries and employee benefits, which consist primarily of salaries and wages paid to our employees, payroll taxes,
and expenses for health insurance, retirement plans and other employee benefits.
Occupancy expenses,
which are the fixed and variable costs of buildings and equipment, consist primarily of depreciation charges, furniture and equipment
expenses, maintenance, real estate taxes and costs of utilities.
Under the FDIC’s
existing risk based assessment system, insured institutions are assigned to one of four risk categories based on supervisory evaluations,
regulatory capital levels and certain other factors, with less risky institutions paying lower assessments. An institution’s
assessment rate depends upon the category to which it is assigned. The initial base assessment rate ranges from five to 35 basis
points.
Balance Sheet Analysis
General.
At December 31, 2015, Delhi Bank Corp. had total consolidated
assets of $285.5 million, an increase of 1.2% from total consolidated assets of $282.0 million at December 31, 2014. This increase
in total consolidated assets was due primarily to an increase in both interest–bearing deposits with banks and cash and due
from bank balances. Interest-bearing deposits increased $4.7 million to $37.2 million, or 14.5%, at December 31, 2015. The increase
in interest-bearing deposits is primarily the result of the investment in certificate of deposits at other financial institutions.
Cash and due from banks at December 31, 2015, totaled $16.7 million, an increase of $12 million, or 258%, compared to $4.7 million
at December 31, 2014. The increase in cash and due from banks was primarily due to a decrease in the investment portfolio. Available
for sale securities decreased $12.3 million in 2015 to $113.9 million, or 9.7%, from $126.2 million in 2014. Held to maturity securities
at December 31, 2015 totaled $5.0 million, a decrease of $2.8 million, or 35.9%, compared to $7.8 million at December 31, 2014.
Total liabilities increased
from $256.7 million at December 31, 2014 to $258.9 million at December 31, 2015, an increase of $2.2 million, due primarily to
growth in our non interest-bearing account. Total stockholders’ equity increased from $25.3 million for the year ended December
31, 2014 to $26.5 million at December 31, 2015, or 4.7%, due to net income for the year offset by dividends paid.
Loans.
The Delaware National Bank offers one- to four-family residential mortgage loans, commercial real estate and multi-family real
estate mortgage loans, residential construction loans, financial and agricultural loans and installment and other consumer loans.
We do not make subprime loans. The Delaware National Bank offers both adjustable and fixed-rate loans. As of December 31, 2015,
The Delaware National Bank’s loan portfolio totaled $100.8 million (including net unamortized deferred origination costs),
representing approximately 35.3% of total assets. Approximately 63.6% of our loan portfolio at that date was comprised of residential
real estate mortgage loans. Of our real estate mortgages, approximately $30.6 million, or 30.4% were secured by commercial real
estate.
The increase in our
loan portfolio for the year ended December 31, 2015 resulted primarily from an increase in residential and commercial mortgages.
The following table
sets forth the composition of our loan portfolio by type of loan before deductions (principally unearned discounts and allowance
for loan losses) at the dates indicated.
| | |
At December 31, | |
| | |
2015 | | |
2014 | |
| | |
Amount | | |
Percent | | |
Amount | | |
Percent | |
| | |
(Dollars in thousands) | |
| | |
| | |
| | |
| | |
| |
| Real Estate: | |
| | | |
| | | |
| | | |
| | |
| Residential | |
$ | 64,131 | | |
| 63.62 | % | |
$ | 62,358 | | |
| 63.39 | % |
| Commercial | |
| 30,606 | | |
| 30.36 | | |
| 29,547 | | |
| 30.04 | |
| Commercial and Industrial | |
| 2,475 | | |
| 2.46 | | |
| 2,404 | | |
| 2.44 | |
| Agricultural | |
| 156 | | |
| 0.15 | | |
| 148 | | |
| 0.15 | |
| Consumer | |
| 3,434 | | |
| 3.41 | | |
| 3,908 | | |
| 3.98 | |
| Total loans | |
| 100,802 | | |
| 100.00 | % | |
| 98,365 | | |
| 100.00 | % |
| | |
| | | |
| | | |
| | | |
| | |
| Less: | |
| | | |
| | | |
| | | |
| | |
| Allowance for loan losses | |
| 430 | | |
| | | |
| 739 | | |
| | |
| Net loans | |
$ | 100,372 | | |
| | | |
$ | 97,626 | | |
| | |
The table below shows
the amount of loans held in our portfolio by categories, net of loans in process and discounts, that mature in the indicated years
following December 31, 2015. The table does not include any estimate of prepayments which significantly shorten the average life
of all loans and may cause our actual repayment experience to differ from that shown below.
| Year | |
Real Estate –
Residential | | |
Real Estate – Commercial | | |
Commercial
and Industrial | | |
Agricultural | | |
Consumer | |
| | |
| |
| Amount due in: | |
| | | |
| | | |
| | | |
| | | |
| | |
| One year or less | |
$ | 13,245 | | |
$ | 32,960 | | |
$ | 508,436 | | |
$ | 79,628 | | |
$ | 1,313,353 | |
| More than one to five years | |
| 1,196,109 | | |
| 661,737 | | |
| 1,838,863 | | |
| 71,252 | | |
| 1,771,361 | |
| More than five years | |
| 62,921,943 | | |
| 29,911,928 | | |
| 127,376 | | |
| 5,145 | | |
| 348,876 | |
| Total | |
$ | 64,131,297 | | |
$ | 30,606,625 | | |
$ | 2,474,675 | | |
$ | 156,025 | | |
$ | 3,433,590 | |
Of the aggregate of
$98.9 million of loans due after one year after December 31, 2015, $41.6 million, or 42.1% of total loans, have floating or adjustable
interest rate features and $57.3 million, or 57.9%, have fixed interest rates.
The following table
sets forth at December 31, 2015 the dollar amount of all loans due more than one year after December 31, 2015 which have either
fixed interest rates or floating or adjustable rates.
| | |
Fixed-Rate | | |
Floating or
Adjustable-Rate | |
| Real Estate: | |
| | | |
| | |
| Residential | |
$ | 38,399,998 | | |
$ | 25,718,054 | |
| Commercial | |
| 15,648,962 | | |
| 14,924,703 | |
| Commercial and Industrial | |
| 1,245,486 | | |
| 744,071 | |
| Agricultural | |
| 5,144 | | |
| 71,252 | |
| Consumer | |
| 1,984,246 | | |
| 135,991 | |
| Total loans | |
$ | 57,283,836 | | |
$ | 41,594,071 | |
Investments.
The Delaware National Bank maintains a securities portfolio. At December
31, 2015, the carrying value of our investment portfolio totaled $118.9 million and represented approximately 41.6% of our total
assets compared to $134.0 million at December 31, 2014. The decrease in our investment portfolio was primarily due to reinvesting
portfolio cash flow into new loans and retaining it as cash for numerous investment and loans settling in January 2016. Securities
in the portfolio are classified as available for sale or held to maturity based on management’s positive intent and ability
to hold such securities to maturity.
Mortgage-backed securities
and state and local government securities held to maturity at December 31, 2015 totaled $5.0 million, a decrease of approximately
$2.8 million, or 35.9%, compared to $7.8 million at December 31, 2014. Investment securities held to maturity decreased primarily
due to the reallocation of these funds into other security types and loans.
The following table
sets forth the carrying and fair values of our investment securities and mortgage-backed securities at the dates indicated. The
carrying value for available for sale securities is their fair value. The carrying value for held to maturity securities is their
amortized cost.
| | |
At December 31, | |
| | |
2015 | | |
2014 | |
| | |
Amortized Cost | | |
Fair Value | | |
Amortized Cost | | |
Fair Value | |
| | |
(In thousands) | |
| Available for sale: | |
| | | |
| | | |
| | | |
| | |
| U.S. Government agencies | |
$ | 43,201 | | |
$ | 43,841 | | |
$ | 34,112 | | |
$ | 34,763 | |
| Local government obligations | |
| 14,973 | | |
| 15,763 | | |
| 25,246 | | |
| 26,337 | |
| Corporate debt securities | |
| 1,531 | | |
| 1,528 | | |
| 1,545 | | |
| 1,551 | |
| Mortgage-backed securities | |
| 53,358 | | |
| 52,758 | | |
| 64,220 | | |
| 63,547 | |
| Total available for sale | |
| 113,063 | | |
| 113,890 | | |
| 125,123 | | |
| 126,198 | |
| | |
| | | |
| | | |
| | | |
| | |
| Held to maturity: | |
| | | |
| | | |
| | | |
| | |
| Mortgage-backed securities | |
| 1,700 | | |
| 1,728 | | |
| 2,247 | | |
| 2,302 | |
| Local government obligations | |
| 3,285 | | |
| 3,385 | | |
| 5,508 | | |
| 5,639 | |
| Total held to maturity | |
| 4,985 | | |
| 5,113 | | |
| 7,755 | | |
| 7,941 | |
| | |
| | | |
| | | |
| | | |
| | |
| Total securities | |
$ | 118,048 | | |
$ | 119,003 | | |
$ | 132,878 | | |
$ | 134,139 | |
The table below sets forth certain information regarding the carrying value, weighted-average yields
and the earlier of call dates or average lives of our investment debt securities as of December 31, 2015. Average yields are presented
on a tax equivalent basis.
| | |
As
of December 31, 2015 | |
| | |
One
Year or Less (1) | | |
More
than one Year to
Five Years (1) | | |
More
than Five Years to
10 Years (1) | | |
More
than 10 Years (1) | | |
Total | |
| | |
Carrying
Value | | |
Weighted
Average
Yield (2) | | |
Carrying
Value | | |
Weighted
Average
Yield (2) | | |
Carrying
Value | | |
Weighted
Average
Yield (2) | | |
Carrying
Value | | |
Weighted
Average
Yield (2) | | |
Carrying
Value | | |
Weighted
Average
Yield (2) | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| Securities: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Available for sale: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| U.S. Government Agencies | |
$ | 12,446,588 | | |
| 1.09 | % | |
$ | 12,564,023 | | |
| 2.15 | % | |
$ | 18,830,763 | | |
| 3.07 | % | |
| — | | |
| —% | | |
$ | 43,841,375 | | |
| 2.23 | % |
| Local government obligations | |
| 1,000,057 | | |
| 4.71 | | |
| 12,411,565 | | |
| 5.08 | | |
| 2,351,473 | | |
| 4.63 | | |
| — | | |
| — | | |
| 15,763,094 | | |
| 4.99 | |
| Corporate debt securities | |
| — | | |
| — | | |
| 1,034,185 | | |
| 2.03 | | |
| 493,671 | | |
| 1.19 | | |
| — | | |
| — | | |
| 1,527,856 | | |
| 1.75 | |
| Mortgage-backed securities | |
| 79,793 | | |
| 2.59 | | |
| 41,969,589 | | |
| 1.78 | | |
| 10,917,960 | | |
| 2.11 | | |
| 91,185 | | |
| 2.35 | | |
| 52,758,527 | | |
| 1.85 | |
| Total available for sale | |
$ | 13,526,438 | | |
| 1.36 | | |
$ | 67,979,362 | | |
| 2.43 | | |
$ | 32,293,867 | | |
| 2.82 | | |
$ | 91,185 | | |
| 2.35 | | |
$ | 113,890,852 | | |
| 2.41 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Held to maturity: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Mortgage-backed securities | |
$ | 1,488 | | |
| 4.86 | | |
$ | 849,643 | | |
| 2.97 | | |
$ | 848,946 | | |
| 2.26 | | |
| — | | |
| — | | |
$ | 1,700,077 | | |
| 2.62 | |
| Local government obligations | |
| 2,303,625 | | |
| 2.38 | | |
| 645,550 | | |
| 5.09 | | |
| 212,833 | | |
| 6.43 | | |
| 122,500 | | |
| 6.61 | | |
| 3,284,508 | | |
| 3.33 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Total held to maturity | |
$ | 2,305,113 | | |
| 2.38 | | |
$ | 1,495,193 | | |
| 3.90 | | |
$ | 1,061,779 | | |
| 3.37 | | |
$ | 122,500 | | |
| 6.61 | | |
$ | 4,984,585 | | |
| 3.09 | |
| Total securities | |
$ | 15,831,551 | | |
| 1.51 | | |
$ | 69,474,555 | | |
| 2.46 | | |
$ | 33,355,646 | | |
| 2.84 | | |
$ | 213,685 | | |
| 4.79 | | |
$ | 118,875,437 | | |
| 2.44 | |
| (1) | The earlier of the call date or average life based upon current prepayment assumptions was utilized
in place of contractual maturity dates. |
| (2) | Average yields are stated on a tax-equivalent basis. |
Deposits.
Our primary source of funds is our deposit accounts, which are comprised
of non interest-bearing accounts, interest-bearing NOW accounts, money market accounts, savings accounts, club accounts and certificates
of deposit. These deposits are provided primarily by individuals and businesses within our market area. The Delaware National Bank
offers competitive rates for all of its deposit products. We set our interest rates on deposits based on a variety of factors,
including rates offered by our competition, our liquidity needs and market interest rates. Current economic conditions
and customer preference for deposit products over other investment products have contributed to the increased deposits. We also
consider the rates paid on our deposit accounts to be towards the top of the local market for rates on selected types of deposit
products. For information about the deposit insurance per account, see “Regulation and Supervision—Bank Regulation—Insurance
of Deposit Accounts.”
Deposits increased
$2.4 million, or 0.96%, to $255.2 million at December 31, 2015 from $252.8 million at December 31, 2014 primarily as a result of
a continuation of offering above market rates. The Delaware National Bank’s local deposit market is very competitive, and
The Delaware National Bank will at times lose deposits to financial institutions paying the highest and most attractive interest
rates and terms. If needed, management believes it can raise The Delaware National Bank’s interest rates to attract new funds
or retain existing deposits. In addition, The Delaware National Bank has an agreement with the FHLB of New York for cash advances,
should it need additional funds for loan originations or other purposes.
The following table
sets forth deposits for the dates indicated:
| | |
Years Ended December 31, | |
| | |
2015 | | |
2014 | |
| | |
Amount | | |
Percent | | |
Amount | | |
Percent | |
| | |
(Dollars in thousands) | |
| | |
| | |
| | |
| | |
| |
| Noninterest-bearing deposits | |
$ | 41,057 | | |
| 16.1 | % | |
$ | 34,852 | | |
| 13.8 | % |
| Interest-bearing deposits: | |
| | | |
| | | |
| | | |
| | |
| NOW accounts | |
| 30,182 | | |
| 11.8 | | |
| 25,968 | | |
| 10.2 | |
| Money markets | |
| 18,636 | | |
| 7.3 | | |
| 18,598 | | |
| 7.4 | |
| Savings | |
| 96,501 | | |
| 37.8 | | |
| 94,004 | | |
| 37.2 | |
| Time (in excess of $100,000) | |
| 26,604 | | |
| 10.4 | | |
| 36,639 | | |
| 14.5 | |
| Other time | |
| 42,245 | | |
| 16.6 | | |
| 42,741 | | |
| 16.9 | |
| Total interest-bearing deposits | |
| 214,168 | | |
| 83.9 | | |
| 217,920 | | |
| 86.2 | |
| | |
| | | |
| | | |
| | | |
| | |
| Total deposits | |
$ | 255,225 | | |
| 100.0 | % | |
$ | 252,802 | | |
| 100.0 | % |
The following table
sets forth average deposits by average rates paid for the dates indicated:
| | |
Years Ended December 31, | |
| | |
2015 | | |
2014 | |
| | |
Average
Amount | | |
Average
Rate | | |
Average
Amount | | |
Average
Rate | |
| | |
(Dollars in thousands) | |
| | |
| | |
| | |
| | |
| |
| Noninterest-bearing deposits | |
$ | 36,047 | | |
| —% | | |
$ | 34,047 | | |
| —% | |
| | |
| | | |
| | | |
| | | |
| | |
| Interest-bearing deposits: | |
| | | |
| | | |
| | | |
| | |
| NOW accounts | |
| 27,327 | | |
| 0.13 | | |
| 23,522 | | |
| 0.13 | |
| Money markets | |
| 19,692 | | |
| 0.30 | | |
| 18,928 | | |
| 0.34 | |
| Savings | |
| 97,356 | | |
| 0.18 | | |
| 99,639 | | |
| 0.22 | |
| Time (in excess of $100,000) | |
| 29,525 | | |
| 0.76 | | |
| 38,545 | | |
| 0.73 | |
| Other time | |
| 42,624 | | |
| 1.08 | | |
| 43,064 | | |
| 1.10 | |
| Total interest-bearing deposits | |
| 216,524 | | |
| 0.44 | | |
| 223,698 | | |
| 0.48 | |
| | |
| | | |
| | | |
| | | |
| | |
| Total deposits | |
$ | 252,571 | | |
| 0.38 | % | |
$ | 257,745 | | |
| 0.41 | % |
At December 31, 2015,
The Delaware National Bank had outstanding $11.5 million in certificates of deposit accounts with balances of $250,000 or more
that mature as follows:
Maturity Distribution of Time Deposits of $250,000 or More | |
Balance | |
| | |
(In thousands) | |
| | |
| | |
| Three months or less | |
$ | 3,728 | |
| Over three through twelve months | |
| 6,996 | |
| Over twelve months | |
| 803 | |
| Total | |
$ | 11,527 | |
Historically, we retain
approximately 95% of maturing certificates of deposit. We currently expect the retention rate of maturing certificates of deposit
to stay at approximately the same rate.
Borrowings.
We utilize borrowings from the Federal Home Loan Bank of New York and
other correspondent banks to supplement our supply of funds for loans and investments. As of December 31, 2015 and December 31,
2014, we had $215,000 and $372,000, respectively, outstanding with a correspondent bank.
Results of Operation for the Years Ended December 31, 2015
and December 31, 2014
Financial Highlights.
Net income for the year ended December 31, 2015 was $1.7 million, or $1.15 per share, compared to net income of $1.9 million, or
$1.24 per share, for the year ended December 31, 2014.
Net
Interest Income. Net interest income decreased by approximately $0.3 million, or 3.6%, to $6.9 million for
2015 from $7.2 million in the same period in 2014 primarily due to the continued low interest rate environment. The net interest
rate spread decreased to 2.58% for the year ended December 31, 2015 from 2.67% for the year ended December 31, 2014. The net interest
margin decreased to 2.65% for the year ended December 31, 2015 from 2.74% for the year ended December 31, 2014. The decrease in
the interest spread and margin was the result of lower yields on the investment and loan portfolio.
Total interest income
decreased approximately $0.4 million to $7.9 million for the year ended December 31, 2015, compared to $8.3 million for the year
ended December 31, 2014. The decrease in interest income was primarily due to reinvesting investment portfolio cash flow into lower
yielding assets. Interest income earned on loans was $4.5 million for the year ended December 31, 2015 and December 31, 2014. Interest
income on investment securities decreased by approximately $0.3 million for the year ended December 31, 2015, from 2014 as a result
of the continued low interest rate environment.
Interest expense on
interest-bearing deposits was $1.0 million for the year ended December 31, 2015 compared to $1.1 million for the year ended December
31, 2014. Interest-bearing deposits decreased from December 31, 2014 to December 31, 2015, the interest rates paid on those interest-bearing
deposits remained constant, resulting in the savings. Interest expense on Federal Home Loan Bank of New York and correspondent
bank borrowings and capital leases decreased from $24,770 at December 31, 2014 to $23,525 at December 31, 2015 due to a reduction
in short term borrowing. The cost of funds decreased in 2015 as compared to 2014 primarily as a result of the continued low rate
environment.
Provision
for Loan Losses. A provision for loan losses is charged
to earnings to maintain the total allowance for loan losses at a level calculated by management based on historical experience,
the volume and type of lending conducted by The Delaware National Bank, the status of past due principal and interest payments
and other factors related to the collectability of the loan portfolio. The provision for loan losses was $140,000 for the year
ended December 31, 2015, compared with a $24,500 provision for loan losses for the year ended December 31, 2014, which was primarily
due to an increase in past due loans. The allowance for loan losses
was $429,708, or 0.43% of total loans, as of December 31, 2015 as compared with $738,959, or 0.75% of total loans, as of December
31, 2014.
Noninterest
Income. Noninterest income was $1.7 million for the year ended December 31, 2015 compared to $1.5 million in 2014
primarily as a result of an increase in Bank Owned Life Insurance income.
The following table
shows the components of noninterest income for the years ended December 31, 2015 and December 31, 2014.
| | |
Year Ended December 31, | | |
Percentage Change | |
| | |
2015 | | |
2014 | | |
Increase/Decrease | |
| | |
(Dollars in thousands) | | |
| |
| | |
| | |
| | |
| |
| Service charges and fees | |
$ | 451 | | |
$ | 442 | | |
| 2.15 | % |
| Net gain on sales of securities | |
| 101 | | |
| 69 | | |
| 46.41 | |
| Other fees collected (1) | |
| 756 | | |
| 753 | | |
| 0.41 | |
| Bank owned life insurance income | |
| 365 | | |
| 270 | | |
| 35.06 | |
| Total | |
$ | 1,673 | | |
$ | 1,534 | | |
| 9.08 | % |
| (1) | | Other fees collected consist of trust department income, banking fees, late fees on loans and credit cards and ATM fees. |
Noninterest
Expense. Noninterest expense decreased in the year ended
December 31, 2015 primarily due to a decrease in salaries and employee benefits. Other expenses consist primarily of OCC assessments,
director fees, office supplies, charitable contributions, advertising and legal expenses.
The following table
shows the components of noninterest expense and percentage change from the year ended December 31, 2014 to the year ended December
31, 2015.
| | |
Year Ended December 31, | | |
Percentage Change | |
| | |
2015 | | |
2014 | | |
Increase/Decrease | |
| | |
(Dollars in thousands) | | |
| |
| | |
| | |
| | |
| |
| Salaries and employee benefits | |
$ | 3,525 | | |
$ | 3,387 | | |
| 4.09 | % |
| Occupancy and equipment expense | |
| 1,335 | | |
| 1,444 | | |
| (7.54 | ) |
| Other real estate expense | |
| 78 | | |
| 111 | | |
| (29.49 | ) |
| Accounting and consulting services | |
| 196 | | |
| 113 | | |
| 72.94 | |
| FDIC premiums | |
| 160 | | |
| 153 | | |
| 4.88 | |
| ATM and debit card processing and expenses | |
| 132 | | |
| 211 | | |
| (37.58 | ) |
| Other expenses | |
| 899 | | |
| 961 | | |
| (6.44 | ) |
| Total | |
$ | 6,326 | | |
$ | 6,380 | | |
| (0.85 | )% |
Income Tax Expense.
The income tax provision for the year ended December 31, 2015 was $403,700, reflecting an effective tax rate of 15.1% compared
to an income tax provision of $449,654 for the year ended December 31, 2014, reflecting an effective tax rate of 19.5%. The decrease
in the effective tax rate is primarily the result of an increase in tax-exempt income.
Average Balance Sheets and Related Yields
and Rates
The following table
sets forth information regarding average balances of assets and liabilities, the total dollar amounts of interest income and dividends
from average interest-earning assets, the total dollar amounts of interest expenses on average interest-bearing liabilities, and
the resulting average yields and costs. The yields and costs for the periods are derived by dividing income or expense by the average
balance of assets or liabilities, respectively, for the periods shown. Average balances are derived from average daily balances.
For purposes of this table, average balances of loans receivable include loans on which we have discontinued accruing interest.
The yields and costs include amortized and deferred fees and costs which are considered adjustments to yields. Yields on non-taxable
investments have not been adjusted for tax effect.
| | |
For the Years Ended December 31, | |
| | |
2015 | | |
2014 | |
| | |
Average
Balance | | |
Interest | | |
Average
Yield/Cost | | |
Average
Balance | | |
Interest | | |
Average
Yield/Cost | |
| | |
(Dollars in thousands) | |
| Assets: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Interest-earning assets: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Interest-earning deposits in other banks | |
$ | 36,259 | | |
$ | 462 | | |
| 1.27 | % | |
$ | 25,761 | | |
$ | 300 | | |
| 1.16 | % |
| Investment securities, net (1): | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Taxable | |
| 63,629 | | |
| 1,045 | | |
| 1.64 | | |
| 44,284 | | |
| 1,198 | | |
| 2.70 | |
| Non-taxable | |
| 24,585 | | |
| 766 | | |
| 3.12 | | |
| 25,872 | | |
| 843 | | |
| 3.26 | |
| Mortgage-backed securities, net (1) | |
| 38,537 | | |
| 1,129 | | |
| 2.93 | | |
| 70,329 | | |
| 1,406 | | |
| 2.00 | |
| Loans receivable, net (2) | |
| 97,633 | | |
| 4,491 | | |
| 4.60 | | |
| 95,197 | | |
| 4,518 | | |
| 4.75 | |
| Total interest-earning assets | |
| 260,643 | | |
| 7,894 | | |
| 3.03 | | |
| 261,443 | | |
| 8,265 | | |
| 3.16 | |
| Noninterest-earning assets | |
| 22,363 | | |
| | | |
| | | |
| 23,981 | | |
| | | |
| | |
| Total assets | |
$ | 283,006 | | |
| | | |
| | | |
$ | 285,425 | | |
| | | |
| | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Liabilities and Equity: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Interest-bearing liabilities: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| NOW accounts | |
$ | 27,327 | | |
$ | 34 | | |
| 0.13 | | |
$ | 23,522 | | |
$ | 30 | | |
| 0.13 | |
| Money markets | |
| 19,692 | | |
| 60 | | |
| 0.30 | | |
| 18,928 | | |
| 65 | | |
| 0.34 | |
| Savings | |
| 97,356 | | |
| 175 | | |
| 0.18 | | |
| 99,639 | | |
| 216 | | |
| 0.22 | |
| Certificates of deposit (in excess of $100,000) | |
| 29,525 | | |
| 226 | | |
| 0.76 | | |
| 38,545 | | |
| 281 | | |
| 0.73 | |
| Other certificates of deposit | |
| 42,624 | | |
| 459 | | |
| 1.08 | | |
| 43,064 | | |
| 473 | | |
| 1.10 | |
| Total deposits | |
| 216,526 | | |
| 953 | | |
| 0.44 | | |
| 223,698 | | |
| 1,066 | | |
| 0.48 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Capital lease obligation and FHLB and correspondent bank advances | |
| 448 | | |
| 24 | | |
| 5.25 | | |
| 259 | | |
| 25 | | |
| 6.05 | |
| Total interest-bearing liabilities | |
| 216,974 | | |
| 977 | | |
| 0.45 | | |
| 223,957 | | |
| 1,090 | | |
| 0.48 | |
| Noninterest-bearing liabilities | |
| 39,641 | | |
| | | |
| | | |
| 37,061 | | |
| | | |
| | |
| Total liabilities | |
| 256,615 | | |
| | | |
| | | |
| 261,018 | | |
| | | |
| | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Stockholders’ equity | |
| 26,391 | | |
| | | |
| | | |
| 24,407 | | |
| | | |
| | |
| Total liabilities and stockholders’ equity | |
$ | 283,006 | | |
| | | |
| | | |
$ | 285,425 | | |
| | | |
| | |
| Net interest income | |
| | | |
$ | 6,917 | | |
| | | |
| | | |
$ | 7,175 | | |
| | |
| Net interest rate spread (3) | |
| | | |
| | | |
| 2.58 | % | |
| | | |
| | | |
| 2.67 | % |
| Net interest margin (4) | |
| | | |
| | | |
| 2.65 | % | |
| | | |
| | | |
| 2.74 | % |
| Average interest-bearing assets to average interest-bearing liabilities | |
| | | |
| | | |
| 120.13 | % | |
| | | |
| | | |
| 116.66 | % |
| (1) | Includes unamortized discounts and premiums. |
| (2) | Amount is net of loans in process, net of deferred loan origination fees and allowance for loan
losses and includes non-performing loans. |
| (3) | Net interest rate spread represents the difference between the yield on interest-earning assets
and the cost of interest-bearing liabilities. |
| (4) | Net interest margin represents net interest income divided by average interest-earning assets. |
Rate/Volume
Analysis. The following table sets forth the effects of
changing rates and volumes on our interest income and interest expense. The rate column shows the effects attributable to changes
in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes
in volume multiplied by prior rate). The net column represents the sum of the prior columns. For purposes of this table, changes
attributable to changes in both rate and volume have been allocated proportionately based on the absolute value of the change due
to rate and the change due to volume.
| | |
Year Ended December 31, 2015 Compared to Year Ended December 31, 2014 | |
| | |
Increase/(Decrease) Due to | | |
| |
| | |
Volume | | |
Rate | | |
Net | |
| | |
(In thousands) | |
| | |
| | |
| | |
| |
| Interest income: | |
| | | |
| | | |
| | |
| Interest-earning deposits in other banks | |
| 122 | | |
| 41 | | |
| 163 | |
| Investment securities, net: | |
| | | |
| | | |
| | |
| Taxable | |
| 522 | | |
| (673 | ) | |
| (151 | ) |
| Non-taxable | |
| (42 | ) | |
| (35 | ) | |
| (77 | ) |
| Mortgage-backed securities, net | |
| (636 | ) | |
| 358 | | |
| (278 | ) |
| Loans receivable, net | |
| 116 | | |
| (146 | ) | |
| (30 | ) |
| Total change in interest income | |
| 82 | | |
| (455 | ) | |
| (373 | ) |
| | |
| | | |
| | | |
| | |
| Interest expense: | |
| | | |
| | | |
| | |
| Deposits: | |
| | | |
| | | |
| | |
| NOW accounts | |
| 5 | | |
| (1 | ) | |
| 4 | |
| Money markets | |
| 3 | | |
| (7 | ) | |
| (4 | ) |
| Savings | |
| (5 | ) | |
| (39 | ) | |
| (44 | ) |
| Time (in excess of $100,000) | |
| (66 | ) | |
| 10 | | |
| (56 | ) |
| Other time deposits | |
| (5 | ) | |
| (10 | ) | |
| (15 | ) |
| | |
| | | |
| | | |
| | |
| Capital lease obligation and FHLB and correspondent bank advances | |
| 2 | | |
| (4 | ) | |
| (2 | ) |
| Total change in interest expense | |
| (66 | ) | |
| (51 | ) | |
| (117 | ) |
| Increase (decrease) in net interest income | |
| 148 | | |
| (404 | ) | |
| (256 | ) |
Risk Management
Overview.
Managing risk is an essential part of successfully managing a financial institution. Our most prominent risk exposures are credit
risk, interest rate risk and market risk. Credit risk is the risk of not collecting the interest and/or the principal balance of
a loan or investment when it is due. Interest rate risk is the potential reduction of interest income as a result of changes in
interest rates. Market risk arises from fluctuations in interest rates that may result in changes in the values of financial instruments,
such as available-for-sale securities that are accounted for on a mark-to-market basis. Other risks that we face are operational
risks, liquidity risks and reputation risk. Operational risks include risks related to fraud, regulatory compliance, processing
errors, technology and disaster recovery. Liquidity risk is the possible inability to fund obligations to depositors, lenders or
borrowers. Reputation risk is the risk that negative publicity or press, whether true or not, could cause a decline in our customer
base or revenue.
Credit Risk Management.
Our strategy for credit risk management focuses on having well-defined credit policies and uniform underwriting criteria and providing
prompt attention to potential problem loans.
When a borrower fails
to make a required loan payment, we take a number of steps to have the borrower cure the delinquency and restore the loan to current
status, including contacting the borrower by letter and phone at regular intervals. When the borrower is in default, we may commence
collection proceedings. If a foreclosure action is instituted and the loan is not brought current, paid in full, or refinanced
before the foreclosure sale, the real property securing the loan generally is sold at foreclosure. Generally, when a consumer loan
or a non-mortgage loan becomes 45 days past due, we institute collection proceedings. Credit card loans and other personal loans
are typically charged off when they become 180 days past due.
Analysis of Nonperforming
and Classified Assets. We consider repossessed assets and loans that are 90 days or more past due to be nonperforming assets.
Under current accounting guidelines, a loan is defined as impaired when, based on current information and events, it is probable
that the creditor will be unable to collect all amounts due under the contractual terms of the loan agreement. When a loan becomes
90 days delinquent, the loan may be placed on a nonaccrual status at which time the accrual of interest ceases, the interest previously
accrued to income is reversed and the loan is placed on a cash basis. Typically, payments on a nonaccrual loan are applied to the
outstanding principal and interest as determined at time of the collection of the loan.
We may grant a concession
or modification for economic or legal reasons related to a borrower’s financial condition that it would not otherwise consider
resulting in a modified loan which is then identified as a troubled debt restructuring (“TDR”). We may modify loans
through rate reductions, extensions of maturity, interest only payments, or payment modifications to better match the timing of
cash flows due under the modified terms with the cash flows from the borrowers’ operations. Loan modifications are intended
to minimize the economic loss and to avoid foreclosure or repossession of the collateral. TDRs are considered impaired loans for
purposes of calculating our allowance for loan losses.
We identify loans for
potential restructure primarily through direct communication with the borrower and evaluation of the borrower’s financial
statements, revenue projections, tax returns, and credit reports. Even if the borrower is not presently in default, management
will consider the likelihood that cash flow shortages, adverse economic conditions, and negative trends may result in a payment
default in the near future.
We did not enter into
any TDRs or have any TDRs default in 2015 and 2014.
The below table sets
forth nonaccrual loans, past due and restructured loans for the dates indicated. Other than as disclosed in the below table, there
are no other loans at December 31, 2015 for which we have serious doubts about the inability of the borrowers to comply with the
present loan repayment terms.
| | |
At December 31, | |
| | |
2015 | | |
2014 | |
| | |
(Dollars in thousands) | |
| | |
| | |
| |
| Nonaccruing (1)(2) | |
$ | 875 | | |
$ | 732 | |
| Accruing, delinquent for 90 days or more (3) | |
| 685 | | |
| 998 | |
| Restructured loans not included in above amounts | |
| — | | |
| — | |
| Percentage of nonperforming loans to total loans | |
| 0.86 | % | |
| 0.75 | % |
| Percentage of nonperforming loans to total assets | |
| 0.30 | % | |
| 0.26 | % |
| Percentage of nonperforming assets to total assets | |
| 0.30 | % | |
| 0.26 | % |
| (1) | The gross interest income that would have been recorded in the period ended December 31, 2015,
if these loans had been current in accordance with their original terms and had been outstanding throughout the period or since
origination, if held for part of the period, was $69,676. There was no interest income on these loans that was included in net
income for the period ended December 31, 2015. |
| (2) | The increase in nonaccruing loans in 2015 was due to the perceived inability to repay the contractual
amount. |
| (3) | Loans delinquent as to principal or interest payments. |
Federal regulations
require us to regularly review and classify our assets. In addition, our regulators have the authority to identify problem assets
and, if appropriate, require them to be classified. There are three classifications for problem assets: substandard, doubtful and
loss. An asset is classified “substandard” if it is determined to be inadequately protected by the current net worth
and paying capacity of the obligor or of the collateral pledged, if any. As a general rule, The Delaware National Bank will classify
a loan as substandard if The Delaware National Bank can no longer rely on the borrower’s income as the primary source for
repayment of the indebtedness and must look to secondary sources such as guarantors or collateral. An asset is classified as “doubtful”
if full collection is highly questionable or improbable. An asset is classified as “loss” if it is considered uncollectible,
even if a partial recovery could be expected in the future. The regulations also provide for a “special mention” classification,
described as assets which do not currently expose The Delaware National Bank to a sufficient degree of risk to warrant classification,
but do possess credit deficiencies or potential weaknesses deserving management’s close attention. Assets classified as substandard
or doubtful may require The Delaware National Bank to establish specific allowances for loan losses. If an asset or portion thereof
is classified loss, The Delaware National Bank must charge off such amount. Federal examiners may disagree with The Delaware National
Bank’s classifications and amounts reserved. If The Delaware National Bank does not agree with an examiner’s classification
of an asset, it may appeal this determination to the Office of the Comptroller of the Currency.
At December 31, 2015,
The Delaware National Bank had $4.0 million in assets classified as substandard and $1.0 million in assets classified as doubtful
compared to $3.8 million in assets classified as substandard and $732,210 in assets classified as doubtful or loss at December
31, 2014. The increase in substandard loans was primarily due to a change in various loans classifications. See the section titled
“Allowance for Loan Losses” in Note 1 to the Company’s consolidated audited financial statements. In addition,
at December 31, 2015, The Delaware National Bank had $4.6 million in assets classified as special mention as compared to $5.8 million
in assets classified as special mention at December 31, 2014.
Analysis
and Determination of the Allowance for Loan Losses. The allowance
for loan losses is a valuation allowance for probable losses inherent in the loan portfolio. We evaluate the need to establish
allowances against losses on loans on a monthly basis based on written policies and procedures that we have established to evaluate
the risk in our portfolio, ensure the timely charge off of loans and properly reflect estimated future losses in the portfolio.
The amount of the allowance is based on management’s evaluation of the collectability of the loan portfolio, including the
nature of the portfolio, credit concentrations, trends in historical loss experience, specific impaired loans, economic conditions
and other risks in the portfolio. When additional allowances are necessary, a provision for loan losses is charged to earnings.
The recommendations for increases or decreases to the allowance are presented by management to the board of directors. Where
specific loan loss allowances have been established, any difference between the loss allowances and the amount of loss realized
has been charged or credited to current income.
At December 31, 2015,
the allowance for loan losses represented 0.43% of total loans, compared to 0.75% of total loans at December 31, 2014. The allowance
for loan losses, as a percentage of loans, decreased 0.32% from December 31, 2014 to December 31, 2015.
The following table
sets forth a breakdown of the allowance for loan losses by loan category at the dates indicated.
| | |
At December 31, | |
| | |
2015 | | |
2014 | |
| | |
Amount | | |
Percent of Allowance to Total Allowance | | |
Percent of Loans in Category to Total Loans | | |
Amount | | |
Percent of Allowance to Total Allowance | | |
Percent of Loans in Category to Total Loans | |
| | |
(Dollars in thousands) | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| Real Estate: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Residential | |
$ | 268 | | |
| 63 | % | |
| 64 | % | |
$ | 474 | | |
| 65 | % | |
| 64 | % |
| Commercial | |
| 88 | | |
| 20 | | |
| 30 | | |
| 76 | | |
| 10 | | |
| 30 | |
| Commercial and Industrial | |
| 11 | | |
| 3 | | |
| 2 | | |
| 9 | | |
| 1 | | |
| 2 | |
| Agricultural | |
| 1 | | |
| — | | |
| — | | |
| 1 | | |
| — | | |
| — | |
| Consumer | |
| 62 | | |
| 14 | | |
| 4 | | |
| 179 | | |
| 24 | | |
| 4 | |
| Total | |
$ | 430 | | |
| 100 | % | |
| 100 | % | |
$ | 739 | | |
| 100 | % | |
| 100 | % |
Although management
believes that its allowance for loan losses conforms with generally accepted accounting principles based upon the available facts
and circumstances, there can be no assurance that additions to the allowance will not be necessary in future periods, which would
adversely affect our results of operations. Furthermore, our banking regulators, as an integral part of our examination process,
periodically review our allowance for loan losses. The examinations may require us to make additional provisions for loan losses
based on judgments different from ours. In addition, because future events affecting borrowers and collateral cannot be predicted
with certainty, there can be no assurance that the existing allowance for loan losses is adequate or that increases will not be
necessary should the quality of any loans deteriorate as a result of the factors discussed above. Any material increase in the
allowance for loan losses may adversely affect our financial conditions and results of operations.
Analysis
of Loan Loss Experience. The following table sets forth an
analysis of the allowance for loan losses for the periods indicated. Where specific loan loss allowances have been established
any differences between the loss allowance and the amount of loss realized has been charged or credited to the allowance.
| | |
Years Ended December
31, | |
| | |
2015 | | |
2014 | |
| | |
(Dollars in thousands) | |
| | |
| | |
| |
| Balance at the beginning of the period | |
$ | 739 | | |
$ | 751 | |
| Provision | |
| 140 | | |
| 24 | |
| Charge-offs: | |
| | | |
| | |
| Real estate: | |
| | | |
| | |
| Residential | |
| 417 | | |
| 26 | |
| Commercial | |
| 33 | | |
| — | |
| Commercial and Industrial | |
| — | | |
| 2 | |
| Agricultural | |
| — | | |
| — | |
| Consumer | |
| 25 | | |
| 37 | |
| Total charge-offs | |
| 475 | | |
| 65 | |
| Recoveries: | |
| | | |
| | |
| Real estate: | |
| | | |
| | |
| Residential | |
| — | | |
| 2 | |
| Commercial | |
| 11 | | |
| 10 | |
| Commercial and Industrial | |
| 1 | | |
| 2 | |
| Agricultural | |
| — | | |
| 1 | |
| Consumer | |
| 14 | | |
| 14 | |
| Total recoveries | |
| 26 | | |
| 29 | |
| Net charge-offs | |
| (449 | ) | |
| (36 | ) |
| | |
| | | |
| | |
| Balance at the end of the period | |
$ | 430 | | |
$ | 739 | |
| | |
| | | |
| | |
| Ratio of net charge-offs during the period to average loans outstanding
during the period | |
| 0.46 | % | |
| 0.04 | % |
| | |
| | | |
| | |
| Allowance to total loans outstanding at the end of the period | |
| 0.43 | % | |
| 0.75 | % |
| | |
| | | |
| | |
| Ratio of allowance for loan losses to non-performing loans | |
| 49.08 | % | |
| 100.95 | % |
Interest
Rate Management. Our earnings and the market value of
our assets and liabilities are subject to fluctuations caused by changes in the level of interest rates. We manage the interest
rate sensitivity of our interest-bearing liabilities and interest-earning assets in an effort to minimize the adverse effects
of changes in the interest rate environment. Deposit accounts typically react more quickly to changes in market interest rates
than mortgage loans because of the shorter maturities of deposits. To reduce the potential volatility of our earnings, we have
sought to improve the match between asset and liability maturities and rates, while maintaining an acceptable interest rate spread.
We have an Asset/Liability
Committee to coordinate all aspects involving asset/liability management. The committee establishes and monitors the volume, maturities,
pricing and mix of assets and funding sources with the objective of managing assets and funding sources to provide results that
are consistent with liquidity, growth, risk limits and profitability goals.
Liquidity Management.
Liquidity is the ability to meet current and future financial obligations of a short-term nature. Our primary source of
funds consist of deposit inflows, loan repayments, maturities of and payments on investment securities and borrowings from the
Federal Home Loan Bank of New York. While maturities and scheduled amortization of loans and securities are predictable sources
of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition.
Our primary investing
activities are the origination and purchase of loans and the purchase of securities. Our primary funding activities consist of
activity in deposit accounts and Federal Home Loan Bank of New York advances. Deposit flows are affected by the overall level
of interest rates, the interest rates and products offered by us and our local competitors and other factors. We generally manage
the pricing of our deposits to be competitive. Occasionally, we offer promotional rates on certain deposit products to attract
deposits.
Capital Management.
We are subject to various regulatory capital requirements administered by the Federal Deposit Insurance Corporation, including
a risk-based capital measure. The risk-based capital guidelines include both a definition of capital and a framework for calculating
risk-weighted assets by assigning balance sheet assets and off-balance sheet items to broad risk categories. At December 31, 2015,
we exceeded all of our regulatory capital requirements. We are considered “well capitalized” under regulatory guidelines.
See “Regulation and Supervision—Bank Regulation—Capital Adequacy Requirements” and Note
13 of the notes to the consolidated financial statements included in this offering circular.
Off-Balance Sheet
Arrangements. In the normal course of operations, we engage in a variety of financial transactions that, in accordance
with generally accepted accounting principles, are not recorded in our financial statements. These transactions involve, to varying
degrees, elements of credit, interest rate and liquidity risk. Such transactions are used primarily to manage customers’
requests for funding and take the form of loan commitments and lines of credit. For information about our loan commitments and
unused lines of credit, see Note 11 of the notes to the consolidated financial statements included in this offering circular.
For the year ended December
31, 2015, we did not engage in any off-balance sheet transactions reasonably likely to have a material effect on our financial
condition, results of operations or cash flows.
Impact of Recent Accounting Pronouncements
The FASB issues Accounting
Standards Updates (“ASUs”) to the FASB Accounting Standards Codification (“ASC”). This section provides
a summary description of recent ASUs that have significant implications (elected or required) within the consolidated financial
statements, or that management expects may have a significant impact on financial statements issued in the near future.
In January 2014, the FASB
issued ASU 2014-01, Accounting for Investments in Qualified Affordable Housing Projects. This Update provides guidance on accounting
for investments in flow-through limited liability entities that qualify for the federal low-income housing tax credit. Prior to
ASU 2014-01, under U.S. GAAP, a reporting entity that invests in a qualified affordable housing project could elect to account
for that investment using the effective yield method if certain conditions are met, or alternatively, the investment would be
accounted for under either the equity method or the cost method. Generally, investors in qualified affordable housing project
investments expect to receive all of their return through the receipt of tax credits and tax deductions from operating losses,
and use of the effective yield method results in recognition of the return as a reduction of income tax expense over the period
of the investment. The amendments in this Update modify the conditions that a reporting entity must meet to be eligible to use
a method other than the equity or cost methods to account for investments in qualified affordable housing projects. Additionally,
the amendments introduce new recurring disclosure requirements about investments in qualified affordable housing projects. The
amendments in this Update became effective for the Corporation for annual and interim periods beginning in the first quarter 2015,
and are to be applied retrospectively. Information concerning Delhi Bank Corp.’s investments in qualified affordable housing
projects is provided in Note 14 to these consolidated financial statements.
In January 2014, the FASB
issued ASU 2014-04, Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure. The objective
of the amendments in this Update is to reduce diversity among reporting entities by clarifying when an in substance foreclosure
occurs. The amendments in this Update clarify that an in substance foreclosure occurs, and a creditor is considered to have received
physical possession of residential real property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining
legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest
in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure
or through a similar legal agreement. Additionally, the amendments require interim and annual disclosure of both (1) the amount
of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans
collateralized by residential real estate property that are in the process of foreclosure according to the requirements of the
applicable jurisdiction. An entity can elect to adopt the amendments in this Update using either a modified retrospective transition
method or a prospective transition method. Under the modified retrospective transition method, an entity would record a cumulative-effect
adjustment to residential consumer mortgage loans and foreclosed residential real estate properties existing as of the beginning
of the annual period for which the amendments are effective. For prospective transition, an entity would apply the amendments
to all instances of an entity receiving physical possession of residential real estate property collateralizing consumer mortgage
loans that occur after the date of adoption. Early adoption is permitted. The amendments in this Update became effective for Delhi
Bank Corp. for annual and interim periods beginning in the first quarter 2015. Delhi Bank Corp. has applied the amendments to
its accounting and reporting practices prospectively in the first quarter 2015. Disclosures required by this Update are provided
in Note 8 to these consolidated financial statements.
In May 2014, the FASB
issued ASU 2014-09, Revenue from Contracts with Customers, which provides a principles-based framework for revenue recognition
that supersedes virtually all previously issued revenue recognition guidance under U.S. GAAP. Additionally, the ASU requires improved
disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue that
is recognized. The core principle of the five-step revenue recognition framework is that an entity should recognize revenue to
depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services. In August 2015 the FASB issued ASU 2015-14, which deferred the
effective date of the revenue recognition standard by a year, making it applicable for Delhi Bank Corp. in the first quarter 2018
and for the annual period ending December 31, 2018. The amendments should be applied either retrospectively to each prior reporting
period presented or retrospectively with the cumulative effect of initially applying the amendments recognized at the date of
initial application. Delhi Bank Corp. is in the process of evaluating the potential impact of adopting the amendments, including
determining which transition method to apply.
In June 2014, the FASB
issued ASU 2014-11, Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures. In addition to various other
amendments that will affect accounting and disclosures for transactions in which the Corporation has not engaged to date, this
Update requires expanded disclosures for repurchase agreements that are accounted for as secured borrowings, including: (1) a
disaggregation of the gross obligation by the class of collateral pledged, (2) the remaining contractual tenor of the agreements
and (3) a discussion of the potential risks associated with the agreements and the related collateral pledged, including obligations
arising from a decline in the fair value of the collateral pledged and how those risks are managed. The expanded disclosure requirements
associated with repurchase agreements are effective for Delhi Bank Corp. for annual and interim periods beginning in the second
quarter 2015. Information concerning Delhi Bank Corp.’s repurchase agreements is provided in Note 12 to these consolidated
financial statements.
In August 2014, the FASB
issued ASU 2014-14, Receivables – Troubled Debt Restructuring by Creditors, which requires that a mortgage loan be derecognized
and that a separate other receivable be recognized upon foreclosure if the following conditions are met: (1) the loan has a government
guarantee that is not separable from the loan before foreclosure, (2) at the time of foreclosure, the creditor has the intent
to convey the real estate property to the guarantor and make a claim on the guarantee, and the creditor has the ability to recover
under the claim and (3) at the time of foreclosure, any amount of the claim that is determined on the basis of the fair value
of the real estate is fixed. The amendments in this Update became effective for Delhi Bank Corp. for annual and interim periods
beginning in the first quarter 2015, and the impact of the amendment was not significant to the Corporation.
In January 2016, the FASB
issued ASU 2016-01, Recognition and Measurement of Financial Assets and Liabilities. This makes significant changes in U.S. GAAP
related to certain aspects of recognition, measurement, presentation and disclosure of financial instruments. The changes provided
for in this Update that are applicable to Delhi Bank Corp. are as follows: (1) require equity investments (except those accounted
for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value
with changes in fair value recognized in net income; however, an entity may choose to measure equity investments that do not have
readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes
in orderly transactions for the identical or a similar investment of the same issuer; (2) for equity investments without readily
determinable fair values, require a qualitative assessment to identify impairment, and if a qualitative assessment indicates that
impairment exists, requiring an entity to measure the investment at fair value; (3) eliminate the requirement for public business
entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed
for financial instruments measured at amortized cost on the balance sheet; (4) require public business entities to use the exit
price notion when measuring the fair value of financial instruments for disclosure purposes; (5) require an entity to present
separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change
in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the
fair value option for financial instruments (at December 31, 2015 and 2014, Delhi Bank Corp. has no liabilities for which the
fair value measurement option has been elected); (6) require separate presentation of financial assets and financial liabilities
by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the
accompanying notes to the financial statements; and (7) clarify that an entity should evaluate the need for a valuation allowance
on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets.
The amendments in this Update will become effective for Delhi Bank Corp. for annual and interim periods beginning in the first
quarter 2018. With limited exceptions, early adoption of the amendments in this Update is not permitted. Amendments are to be
applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The
amendments related to equity securities without readily determinable fair values should be applied prospectively.
Effect of Inflation and Changing Prices
The financial statements
and related financial data presented in this offering circular have been prepared in accordance with generally accepted accounting
principles, which require the measurement of financial position and operating results in terms of historical dollars without considering
the change in the relative purchasing power of money over time due to inflation. The primary impact of inflation on our operations
is reflected in increased operating costs. Unlike most industrial companies, virtually all of the assets and liabilities of a
financial institution are monetary in nature. As a result, interest rates generally have a more significant impact on a financial
institution’s performance than do general levels of inflation. Interest rates do not necessarily move in the same direction
or to the same extent as the prices of goods and services.
Our Management
Board of Directors
The Board of Directors
of Delhi Bank Corp. is presently composed of eight (8) members who are elected for terms of three (3) years, approximately one
third of whom are elected annually as required by the Bylaws of Delhi Bank Corp. Each director of Delhi Bank Corp. is also a member
of the Board of Directors of The Delaware National Bank. The executive officers of Delhi Bank Corp. and The Delaware National
Bank are elected annually by the respective Board of Directors and serve at such Board’s discretion. The following tables
present information with respect to our directors and executive officers. Unless otherwise stated, each director and executive
officer has held his or her current occupation for the last five years. There are no family relationships among or between the
directors or executive officers.
| Name |
|
Age
(1) |
|
Principal Occupation for Past Five
Years
and Business Experience |
|
Director
Since (2) |
|
Term
Expires |
| |
|
|
|
|
|
|
|
|
| Michael E. Finberg |
|
69 |
|
Director
and President of Margaretville Bowl Ltd.; President of MMA Corp.; Owner of Reliable Tent. |
|
1998 |
|
2016 |
| |
|
|
|
|
|
|
|
|
| Peter V. Gioffe
(3) |
|
43 |
|
Vice
President and Controller of Delhi Bank Corp. since 2005; Vice President and Controller of The Delaware National Bank since
2005; Human Resources Officer of The Delaware National Bank since 2014. |
|
2014 |
|
2016 |
| |
|
|
|
|
|
|
|
|
| Kristen L. Baxter |
|
42 |
|
Director
of Auxiliary Services Finance, College Association at Delhi, Inc. |
|
2015 |
|
2016 |
| |
|
|
|
|
|
|
|
|
| Bruce J. McKeegan |
|
58 |
|
Attorney
and Sole Owner of McKeegan & McKeegan. |
|
2000 |
|
2017 |
| |
|
|
|
|
|
|
|
|
| Ann S. Morris |
|
71 |
|
Retired
President, CPA of Morris & Ronovech CPA, PC, a public accounting firm; Self-employed accountant. |
|
2002 |
|
2017 |
| |
|
|
|
|
|
|
|
|
| Paul J. Roach |
|
62 |
|
Vice
President and Chief Financial Officer of the Clark Companies, a contracting company. |
|
2001 |
|
2018 |
| |
|
|
|
|
|
|
|
|
| Andrew F. Davis
III |
|
70 |
|
Chairman
of the Board of Delhi Bank Corp. and The Delaware National Bank. Director and Owner of D&D of Walton, Inc.,
an auto parts business. |
|
1991 |
|
2018 |
| |
|
|
|
|
|
|
|
|
| Robert W. Armstrong
(3) |
|
53 |
|
President
and Chief Executive Officer of Delhi Bank Corp. and The Delaware National Bank since 2005; Director and President of Delaware
National Realty Corp; Former Treasurer of Delhi Bank Corp. from 1994 to 2004; Former Vice President, Treasurer, Cashier and
Trust Officer of The Delaware National Bank from 1987 to 2004. |
|
2005 |
|
2018 |
| (1) | As of December 31, 2015. |
| (2) | Years prior to 1994 indicate service with The Delaware
National Bank. |
| (3) | Effective
January 1, 2016, Mr. Gioffe will transition to
the President position and Mr. Armstrong will remain as Chief Executive Officer. |
Executive Officers Who are Not Directors
| Name |
|
Age
(1) |
|
Positions Held with Delhi Bank Corp.
and/or The Delaware National Bank |
|
Officer
Since |
| |
|
|
|
|
|
|
| Gretchen E. Rossley
|
|
53 |
|
Vice
President of Administration of The Delaware National Bank since 2006; Secretary of Delaware National Realty Corp. from 2005
to 2013; Vice President of Delaware National Realty Corp. since 2013. Prior to 2006, Ms. Rossley served as Assistant
Vice President of Customer Service and as Internal Auditor for The Delaware National Bank. |
|
2005 |
| |
|
|
|
|
|
|
| Deirdre A. Hillis |
|
49 |
|
Vice
President of Lending of The Delaware National Bank since 2009 |
|
2009 |
| |
|
|
|
|
|
|
| Terry Mostert |
|
58 |
|
Vice
President of Customer Service of The Delaware National Bank since 2005 |
|
2005 |
| |
|
|
|
|
|
|
| Bryan
Boyer |
|
37 |
|
Vice
President, Senior Trust Officer of The Delaware National Bank since 2013 |
|
2013 |
(1) As of December 31, 2015.
Succession Planning
Robert W. Armstrong, Chief
Executive Officer of the Company and the Bank, has announced his retirement effective December 31, 2017. The Board of Directors
of the Company and the Bank appointed Peter V. Gioffe, Vice President and Controller of the Company and the Bank, as the President
of the Company and the Bank effective January 1, 2016 and Chief Executive Officer of the Company and the Bank upon Mr. Armstrong’s
retirement. The time prior to December 31, 2017 will serve as a transition period for Mr. Gioffe.
Director Compensation
In 2015, independent directors
of The Delaware National Bank received $1,650 for each regular and special Board meeting attended and $500 for each annual and
organizational meeting attended. Non-employee directors who were members of all other committees of The Delaware National Bank
received $300 for each committee meeting attended. In addition, our non-employee directors received $300 per day for attendance
at seminars. Delhi Bank Corp. does not pay director fees.
Executive Compensation
The following table sets
forth the annual compensation paid by Delhi Bank Corp. to the three (3) highest paid persons who are executive officers of Delhi
Bank Corp. and/or The Delaware National Bank for the fiscal year ended December 31, 2015.
Name of Individual or
Identity of Group |
|
Capacities
in which
Remuneration was Received |
|
|
Aggregate
Remuneration |
| The
highest paid Executive Officers of The Delaware National Bank and Delhi Bank Corp. (1) |
|
President
and Chief Executive Officer of The Delaware National Bank and Delhi Bank Corp.; Vice President and Controller of Delhi Bank
Corp. and Vice President, Controller and Human Resources Officer of The Delaware National Bank; and Vice President of Administration
of The Delaware National Bank. |
|
|
$570,262 |
| (1) | The group consists of three persons
including Robert W. Armstrong, President and Chief Executive Officer of Delhi Bank Corp.
and The Delaware National Bank of Delhi, Peter V. Gioffe, Vice President and Controller
of Delhi Bank Corp. and Vice President, Controller and Human Resources Officer of The
Delaware National Bank and Gretchen E. Rossley, Vice President of Administration of The
Delaware National Bank. |
Salary Continuation Agreements
The Bank has entered into
salary continuation agreements with the President and Chief Executive Officer of The Delaware National Bank and Delhi Bank Corp.
and the Vice President and Controller of Delhi Bank Corp. and Vice President of Human Resources and Controller of The Delaware
National Bank.
The salary continuation
with the President and Chief Executive Officer of The Delaware National Bank provides for an annual benefit of $100,000, payable
for 20 years, beginning on the later of the executive attaining the age of 55 or the date on which the executive terminates employment
(the “President’s Normal Retirement Benefit”). The agreement also provides for a reduced benefit (equal to 1/5th
of the accrued liability balance), payable in five equal installments with the first payment made in the month following the executive’s
termination date, if the executive separates from service with the Bank prior to attaining age 55. The agreement also provides
for a disability benefit for a period of 20 years if the executive separates from service with the Bank on account of a disability
before attaining age 55 equal to the President’s Normal Retirement Benefit regardless of the executive’s age on the
date of disability. In addition, the agreement provides for a change in control benefit if the executive separates from service
with the Bank within two years following a change in control regardless of the executive’s age on the date of termination,
which is equal to the President’s Normal Retirement Benefit and is payable in a lump sum. The agreement also provides for
certain benefits to the executive’s beneficiary upon the death of the executive.
The salary continuation
with the Vice President of Human Resources and Controller of The Delaware National Bank provides for an annual benefit of $32,500,
payable for 20 years, upon the executive’s termination of employment on or after attaining the age of 60 for any reason
other than death or a termination for specially-defined cause (the “Controller’s Normal Retirement Benefit”).
The agreement also provides for a reduced benefit (equal to 1/5th of the accrued liability balance), payable in five equal installments
with the first payment made in the month following the executive’s termination date, if the executive separates from service
with the Bank prior to attaining age 60. The agreement also provides for a disability benefit for a period of ten years if the
executive separates from service with the Bank on account of a disability before attaining age 60 equal to the accrued liability
balance reflected on the financial statements of the Bank under GAAP accounting principles on the date of the executive’s
termination of service, without regard to vesting. In addition, the agreement provides for a change in control benefit if the
executive separates from service with the Bank within two years following a change in control regardless of the executive’s
age on the date of termination, which is equal to the Controller’s Normal Retirement Benefit and is payable in a lump sum.
The agreement also provides for certain benefits to the executive’s beneficiary upon the death of the executive.
The salary continuation
with the Vice President of Administration of The Delaware National Bank provides for an annual benefit of $20,000, payable for
20 years, upon the executive’s termination of employment on or after attaining the age of 58 for any reason other than death
or a termination for specially-defined cause (the “Vice President’s Normal Retirement Benefit”). The agreement
also provides for a reduced benefit (equal to 1/5th of the accrued liability balance), payable in five equal installments with
the first payment made in the month following the executive’s termination date, if the executive separates from service
with the Bank prior to attaining age 58. The agreement also provides for a disability benefit for a period of ten years if the
executive separates from service with the Bank on account of a disability before attaining age 58 equal to the accrued liability
balance reflected on the financial statements of the Bank under GAAP accounting principles on the date of the executive’s
termination of service, without regard to vesting. In addition, the agreement provides for a change in control benefit if the
executive separates from service with the Bank within two years following a change in control regardless of the executive’s
age on the date of termination, which is equal to the Vice President’s Normal Retirement Benefit and is payable in a lump
sum. The agreement also provides for certain benefits to the executive’s beneficiary upon the death of the executive.
Corporate Governance and Board Matters
Director Independence
The Company’s Board
of Directors currently consists of eight members, all of whom are considered independent under the regulations of the FDIC, except
for Robert W. Armstrong, President and Chief Executive Officer of the Company and the Bank and Peter V. Gioffe, Vice President,
Controller and Human Resources Officer of the Company and the Bank.
Committees of the Board of Directors
The following table identifies
the members of our Audit Committee as of December 31, 2015.
| Director | |
Audit
Committee
|
| Robert W. Armstrong | |
| X | |
| Kristen L. Baxter | |
| X | |
| Andrew F. Davis III | |
| X | |
| Michael E. Finberg | |
| X | |
| Peter V. Gioffe | |
| X | |
| Bruce J. McKeegan | |
| X | |
| Ann S. Morris | |
| X | |
| Paul J. Roach | |
| X* | |
| Number of Meetings in 2015 | |
| 10 | |
* Denotes Chairperson
Audit Committee
The Audit Committee assists
the Board of Directors in its oversight of the Company’s accounting and reporting practices, the quality and integrity of
the Company’s financial reports and the Company’s compliance with applicable laws and regulations. The Audit Committee
is also responsible for engaging the Company’s independent auditors and monitoring its conduct and independence. The Board
of Directors has determined that Paul J. Roach, Kristen L. Baxter and Ann S. Morris are audit committee financial experts under
the rules of the Securities and Exchange Commission. A majority of the members of the Audit Committee are considered independent
under the regulations of the FDIC.
Transactions with Certain Related Persons
The Delaware National
Bank extends credit to certain of our directors, officers and employees, as well as members of their immediate families, in connection
with mortgage loans, home equity lines of credit and installment and other consumer loans.
The
Delaware National Bank makes loans to executive officers and directors at reduced interest rates under a benefit program generally
available to all other employees and does not give preference to any executive officer or director over any other employee. The
following table reflects the aggregate amount of loans granted by the Bank to each named executive officer and director
at December 31, 2015. These loans were performing according to their
original terms at December 31, 2015.
| Name | |
Aggregate Loan
Principal
Outstanding at
December 31, 2015 | |
| | |
| | |
Robert W. Armstrong
President and Chief Executive Officer | |
$ | 210,495 | |
| | |
| | |
Peter V. Gioffe
Vice President, Controller and Human Resources
Officer | |
| 301,094 | |
| | |
| | |
Kristen L. Baxter
Director | |
| — | |
| | |
| | |
Bryan Boyer
Vice President, Senior Trust Officer | |
| 51,780 | |
| | |
| | |
Andrew F. Davis III
Director | |
| 19,674 | |
| | |
| | |
Michael E. Finberg
Director | |
| — | |
| | |
| | |
Deirdre A. Hillis
Vice President, Lending | |
| 192,805 | |
| | |
| | |
Bruce J. McKeegan
Drector | |
| 148,360 | |
| | |
| | |
Ann S. Morris
Director | |
| 116,073 | |
| | |
| | |
Terry A. Mostert
Vice President, Customer
Service | |
| — | |
| | |
| | |
Paul J. Roach
Director | |
| 53,460 | |
| | |
| | |
Gretchen E. Rossley
Vice President | |
| 222,126 | |
Delhi Bank Corp. engaged
the services of McKeegan & McKeegan, which is owned by director Bruce McKeegan, to provide legal assistance to The Delaware
National Bank and its customers in the form of mortgage closing and related services. Amounts paid to McKeegan & McKeegan
totaled approximately $44,850 in 2015 and $45,300 in 2014.
Stock Ownership
The following table sets
forth, as of December 31, 2015, certain information regarding the beneficial ownership of Delhi Bank Corp. common stock by each
of the directors and executive officers of The Delaware National Bank, and all of our directors and executive officers as a group.
| Name and Address (1) | |
Amount and
Nature of
Beneficial
Ownership (2)
| |
Percent of Class (3) |
| Robert W. Armstrong | |
| 6,443 | (4) | |
| * | |
| Kristen L. Baxter | |
| 400 | | |
| * | |
| Peter V. Gioffe | |
| 7,357 | (5) | |
| * | |
| Deirdre A. Hillis | |
| 8,960 | (6) | |
| * | |
| Gretchen E. Rossley | |
| 11,325 | (7) | |
| * | |
| Andrew F. Davis III | |
| 50,731 | (8) | |
| 3.3 | % |
| Michael E. Finberg | |
| 3,124 | (9) | |
| * | |
| Bruce J. McKeegan | |
| 7,363 | (10) | |
| * | |
| Ann S. Morris | |
| 1,836 | (11) | |
| * | |
| Paul J. Roach | |
| 54,399 | (12) | |
| 3.6 | % |
| Terry A. Mostert | |
| 6,175 | (13) | |
| * | |
| Bryan R. Boyer | |
| 5,369 | (14) | |
| * | |
| | |
| | | |
| | |
| All Executive Officers and Directors as a Group — (12) Persons
in Total | |
| 163,482 | | |
| 10.7 | % |
* Does not exceed 1.0% of Delhi Bank Corp.’s
voting securities.
| (1) | Delhi Bank Corp., 124 Main Street,
Delhi, New York 13753. |
| (2) | Differences may exist between figures
shown here and actual share amounts due to rounding up of such numbers. |
| (3) | Based on 1,528,958 shares outstanding
as of December 31, 2015. |
| (4) | Includes 5,945 shares held under The
Delaware National Bank of Delhi Employee Stock Ownership Plan for the account of Mr.
Armstrong. |
| (5) | Includes 6,531 shares held under The
Delaware National Bank of Delhi Employee Stock Ownership Plan for the account of Mr.
Gioffe; 213 shares held as Custodian for Brenna Gioffe and 201 shares held as Custodian
for Connor Gioffe. |
| (6) | Includes 8,819 shares held under The
Delaware National Bank of Delhi Employee Stock Ownership Plan for the account of Ms.
Hillis and 141 shares held jointly with Ms. Hillis’ spouse. |
| (7) | Includes 3,647 shares held jointly
with Ms. Rossley’s spouse and 7,565 shares held under The Delaware National Bank
of Delhi Employee Stock Ownership Plan for the account of Ms. Rossley. Included 100 shares
held as custodian for Ms. Rossley’s grandchildren and 81 shares held by Ms. Rossley’s
son. |
| (8) | Includes 9,051 shares held by Mr. Davis’
spouse, 4,517 shares held by D&D of Walton, Inc., of which he is the President
and 2,564 shares held by Mr. Davis’ son. Includes 6,400 shares pledged as security. |
| (9) | Includes 181 shares held jointly with
Mr. Finberg’s son and 205 shares held jointly with Mr. Finberg’s spouse. |
| (10) | Includes 5,150 shares held by Mr. McKeegan’s
spouse. |
| (11) | Includes 225 shares held by Ms. Morris’
spouse. |
| (12) | Includes 5,344 shares held jointly
with Mr. Roach’s wife and 40,871 shares held by Burton F. Clark, Inc. d/b/a
Clark Companies of which Mr. Roach is the Vice President. |
| (13) | Includes 5,697 shares held under
The Delaware National Bank of Delhi Employee Stock Ownership Plan for the account of
Mr. Mostert and 478 shares held jointly with Mr. Mostert’s spouse. |
| (14) | Includes 5,050 shares held under
The Delaware National Bank of Delhi Employee Stock Ownership Plan for the account of
Mr. Boyer, 35 shares held as custodian for Lyla A. Boyer and four shares held as custodian
for Fiona M. Boyer. |
To our knowledge, the
only record owner of 10% or more of any class of our equity securities is Cede & Co. To our knowledge, there are no other
beneficial owners of 10% or more of any class of our equity securities.
Regulation
and Supervision
General
The Delaware National
Bank is a nationally chartered banking association, the deposits of which are insured by the Deposit Insurance Fund administered
by the Federal Deposit Insurance Corporation (“FDIC”). Federal law, primarily the National Bank Act, delineates the
nature and extent of the activities in which The Delaware National Bank can engage. The Delaware National Bank’s primary
regulator is the Office of the Comptroller of the Currency (“OCC”). By virtue of the insurance of its deposits, however,
The Delaware National Bank is also subject to supervision and regulation by the FDIC. Such supervision and regulation subjects
The Delaware National Bank to special restrictions, requirements, potential enforcement actions and periodic examination by the
OCC and, in some circumstances, the FDIC. The primary purpose of such supervision and regulation is to protect the FDIC insurance
fund and depositors. Delhi Bank Corp. is a bank holding company subject to reporting to, and supervision by, the Federal Reserve
Board (“FRB”).
The regulatory structure
gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and examination
policies, including policies with respect to the classification of assets and the establishment of adequate loan loss reserves
for regulatory purposes. Any change in such regulatory requirements and policies, whether by the OCC, the FDIC or Congress, could
have a material adverse impact on The Delaware National Bank, and/or Delhi Bank Corp. and their operations.
Certain of the statutory
and regulatory provisions applicable to Delhi Bank Corp. and The Delaware National Bank are described below. This discussion is
intended to be a summary, does not purport to be a complete description of the applicable statutes and regulations and their effects
on Delhi Bank Corp. and The Delaware National Bank and is qualified in its entirety by reference to the statutes and regulations
involved.
Holding Company Regulation
Federal Regulation.
Due to its control of The Delaware National Bank, Delhi Bank Corp. is subject to examination, regulation, and periodic
reporting under the Bank Holding Company Act of 1956 (“BHCA”), as administered by the FRB.
Delhi Bank Corp. is required
to obtain the prior approval of the FRB to acquire all, or substantially all, of the assets of any bank or bank holding company
or merge with another bank holding company. Prior FRB approval will also be required for Delhi Bank Corp. to acquire direct or
indirect ownership or control of any voting securities of any bank or bank holding company if, after giving effect to such acquisition,
Delhi Bank Corp. would, directly or indirectly, own or control more than 5% of any class of voting shares of such bank or bank
holding company. In evaluating such transactions, the FRB considers such matters as the financial and managerial resources of
and future prospects of the companies involved, competitive factors and the convenience and needs of the communities to be served.
Bank holding companies may acquire additional banks in any state, subject to certain restrictions such as deposit concentration
limits. In addition to the approval of the FRB, prior approval may also be required from other agencies having supervisory jurisdiction
over banks to be acquired.
A bank holding company
is generally prohibited from engaging in or acquiring direct or indirect control of more than 5% of the voting securities of any
company engaged in non-banking activities. One of the principal exceptions to this prohibition is for activities found by the
FRB to be so closely related to banking or managing or controlling banks to be a proper incident thereto. Some of the principal
activities that the FRB has determined by regulation to be closely related to banking are: (i) making or servicing loans; (ii)
performing certain data processing services; (iii) providing discount brokerage services; (iv) acting as fiduciary, investment
or financial advisor; (v) finance leasing personal or real property; (vi) making investments in corporations or projects designed
primarily to promote community welfare; and (vii) acquiring a savings association, provided that the savings association only
engages in activities permitted bank holding companies.
Under Federal law, a bank
holding company that meets specified conditions, including being “well capitalized” and “well managed,”
may opt to become a “financial holding company” and thereby engage in a broader array of financial activities than
previously permitted. Such activities can include insurance underwriting and investment banking. Delhi Bank Corp. has not, up
to now, opted to become a financial holding company. Federal law also authorizes banks to engage through “financial subsidiaries”
in certain of the activities permitted for financial holding companies. Financial subsidiaries are generally treated as affiliates
for purposes of restrictions on a bank’s transactions with affiliates.
The FRB has adopted capital
adequacy guidelines for bank holding companies (on a consolidated basis) substantially similar to those of the OCC for a bank.
However, the capital adequacy requirements apply on a bank-only basis until a bank holding company’s consolidated assets
exceed $500 million.
A bank holding company
is generally required to give the FRB prior written notice of any purchase or redemption of its outstanding equity securities
if the gross consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases
or redemptions during the preceding 12 months, is equal to 10% or more of the company’s consolidated net worth. The FRB
may disapprove such a purchase or redemption if it determines that the proposal would constitute an unsafe and unsound practice,
or would violate any law, regulation, FRB order or directive, or any condition imposed by, or written agreement with, the FRB.
There is an exception to this approval requirement for well-capitalized bank holding companies that meet certain other conditions.
The FRB has issued a policy
statement regarding the payment of dividends by bank holding companies. In general, the FRB’s policies provide that dividends
should be paid only out of current earnings and only if the prospective rate of earnings retention by the bank holding company
appears consistent with the organization’s capital needs, asset quality, and overall financial condition. The FRB’s
policies also require that a bank holding company serve as a source of financial strength to its subsidiary banks by standing
ready to use available resources to provide adequate capital funds to those banks during periods of financial stress or adversity
and by maintaining the financial flexibility and capital-raising capacity to obtain additional resources for assisting its subsidiary
banks where necessary. These regulatory policies could affect Delhi Bank Corp.’s ability to pay dividends or otherwise engage
in capital distributions. Delhi Bank Corp.’s ability to pay dividends could also be restricted should The Delaware National
Bank ever become “undercapitalized.” See “—Corrective Measures for Capital Deficiencies.”
Delhi Bank Corp.’s
status as a registered bank holding company under the BHCA does not exempt it from certain federal and state laws and regulations
applicable to corporations generally, including, without limitation, certain provisions of the Federal securities laws.
Change
in Control. Under the Change in Bank Control Act
of 1978 (the “CBCA”), a written notice must be submitted to the FRB if any person (including a company), or any group
acting in concert, seeks to acquire 10% of any class of Delhi Bank Corp.’s outstanding voting securities, unless the FRB
determines that such acquisition will not result in a change of control of the bank. Under the CBCA, the FRB has 60 days within
which to act on such notice taking into consideration certain factors, including the financial and managerial resources of the
proposed acquiror, the convenience and needs of the community served by the bank and the antitrust effects of an acquisition.
Under the BHCA, any company
would be required to obtain prior approval from the FRB before it may obtain “control” of Delhi Bank Corp. within
the meaning of the BHCA. Control for BHCA purposes generally is defined to mean the ownership or power to vote 25% or more of
any class of Delhi Bank Corp.’s voting securities or the ability to control in any manner the election of a majority of
Delhi Bank Corp.’s directors. An existing bank holding company would be required to obtain the FRB’s prior approval
under the BHCA before acquiring more than 5% of Delhi Bank Corp.’s voting stock. See “—Holding Company Regulation.”
Bank Regulation
Business Activities.
The activities of national banks are governed by federal law and regulations. In particular, the authority of national
banks to lend money, accept deposits, branch and engage in other activities is found in the National Bank Act and the OCC’s
regulations.
Examinations.
The OCC periodically examines and evaluates national banks. Based upon such examination and evaluation, the OCC may revalue
the assets of the institution and require that it establish specific reserves to compensate for the difference between the OCC-determined
value and the book value of such assets.
Capital Adequacy
Requirements. Effective January 1, 2015, the new minimum capital level requirements applicable to the Company
and the Bank are: (i) a new common equity Tier 1 capital ratio of 4.5%; (ii) a Tier 1 capital ratio of 6% (increased
from 4%); (iii) a total capital ratio of 8% (unchanged from current rules); and (iv) a Tier 1 leverage ratio of 4% for
all institutions. In addition, the rules assign a higher risk weight (150%) to exposures that are more than 90 days past
due or are on nonaccrual status and to certain commercial real estate facilities that finance the acquisition, development or
construction of real property. The rules also eliminate the inclusion of certain instruments, such as trust preferred securities,
from Tier 1 capital. However, instruments issued prior to May 19, 2010 will be grandfathered for companies with consolidated
assets of $15 billion or less. In addition, Tier 2 capital is no longer limited to the amount of Tier 1 capital included in total
capital. Mortgage servicing rights, certain deferred tax assets and investments in unconsolidated subsidiaries over designated
percentages of common stock will be required to be deducted from capital, subject to a two-year transition period. Finally, Tier
1 capital will include accumulated other comprehensive income (which includes all unrealized gains and losses on available for
sale debt and equity securities), subject to a two-year transition period.
The rules also establish
a “capital conservation buffer” of 2.5% above the new regulatory minimum capital requirements, which must consist
entirely of common equity Tier 1 capital and would result in the following minimum ratios: (i) a common equity Tier 1 capital
ratio of 7.0%, (ii) a Tier 1 capital ratio of 8.5%, and (iii) a total capital ratio of 10.5%. The new capital conservation
buffer requirement will be phased in beginning in January 2016 at 0.625% of risk-weighted assets and would increase by that amount
each year until fully implemented in January 2019. An institution would be subject to limitations on paying dividends, engaging
in share repurchases, and paying discretionary bonuses if its capital level falls below the buffer amount. These limitations would
establish a maximum percentage of eligible retained income that could be utilized for such actions.
The OCC also has authority
to establish individual minimum capital requirements in appropriate cases upon a determination that an institution’s capital
level is or may become inadequate in light of particular risks or circumstances.
Corrective Measures
for Capital Deficiencies. The federal banking regulators are required to take “prompt corrective action”
with respect to capital-deficient institutions. Agency regulations define, for each capital category, the levels at which institutions
are “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly
undercapitalized” and “critically undercapitalized.” For the period ended December 31, 2015, a “well capitalized”
bank has a total capital risk-weighted ratio of 10.0% or higher; a Tier 1 risk-weighted ratio of 6.0% or higher; a leverage ratio
of 5.0% or higher and is not subject to any written agreement, order or directive requiring it to maintain a specific capital
level for any capital measure. An “adequately capitalized” bank has a total risk-weighted ratio of 8.0% or higher;
a Tier 1 risk-weighted ratio of 4.0% or higher; a leverage ratio of 4.0% or higher (3.0% or higher if the bank was rated a composite
1 in its most recent examination report and is not experiencing significant growth); and does not meet the criteria for a well-capitalized
bank. A bank is “undercapitalized” if it fails to meet any one of the ratios required to be adequately capitalized.
An institution that has a total risk-weighted ratio less than 6%, a Tier 1 risk-weighted ratio of less than 3% or a leverage ratio
that is less than 3% is considered to be “significantly undercapitalized” and an institution that has a tangible capital
to assets ratio equal to or less than 2% is deemed to be “critically undercapitalized.”
Effective January 1, 2015,
an institution is deemed to be “well capitalized” if it has a total risk-based capital ratio of 10% or greater, a
Tier 1 risk-based capital ratio of 8% or greater, a common equity Tier 1 risk-based capital ratio of 6.5% or greater, and a leverage
capital ratio of 5% or greater, and is not subject to a regulatory order, agreement, or directive to meet and maintain a specific
capital level for any capital measure. An institution is deemed to be “adequately capitalized” if it has a total risk-based
capital ratio of 8% or greater, a Tier 1 risk-based capital ratio of 6% or greater, a common equity Tier 1 risk-based capital
ratio of 4.5% or greater and generally a leverage capital ratio of 4% or greater. An institution is deemed to be “undercapitalized”
if it has a total risk-based capital ratio of less than 8%, a Tier 1 risk-based capital ratio of less than 6%, a common equity
Tier 1 risk-based capital ratio of less than 4.5% or generally a leverage capital ratio of less than 4%. An institution is deemed
to be “significantly undercapitalized” if it has a total risk-based capital ratio of less than 6%, a Tier 1 risk-based
capital ratio of less than 4%, a common equity Tier 1 risk-based capital ratio of less than 3% or a leverage capital ratio of
less than 3%. An institution is deemed to be “critically undercapitalized” if it has a ratio of tangible equity (as
defined in the regulations) to total assets that is equal to or less than 2%.
As an institution’s
capital decreases, the OCC’s enforcement actions may become more severe. A significantly undercapitalized institution is
subject to mandated capital raising activities, restrictions on interest rates paid and transactions with affiliates, removal
of management, prohibitions on holding company dividends and other restrictions. The OCC has only very limited discretion in dealing
with a critically undercapitalized institution and is generally required to appoint a receiver or conservator within specified
time frames.
Banks with risk-based
capital and leverage ratios below the required minimums may also be subject to certain administrative actions, including the termination
of deposit insurance upon notice and hearing, or a temporary suspension of insurance without a hearing in the event the institution
has no tangible capital.
Restrictions on
Bank Dividends. Without prior approval, a national bank may not declare a dividend if the total amount of all dividends
declared by the bank in any calendar year exceeds the total of the bank’s retained net income for the current year and retained
net income (meaning net income less all dividends declared) for the preceding two years. Under federal law, the bank cannot pay
a dividend if, after paying the dividend, the bank would be “undercapitalized.” The OCC may declare a dividend payment
to be unsafe and unsound even though the bank would continue to meet its capital requirements after the dividend.
Loans to One Borrower.
Subject to certain exceptions, federal law provides that a national bank may not make a loan or extend credit to a single
or related group of borrowers in excess of 15% of its unimpaired capital and surplus. An additional amount may be lent, equal
to 10% of unimpaired capital and surplus, if secured by specified readily-marketable collateral. At December 31, 2015, The Delaware
National Bank’s limit on loans-to-one borrower was $3.21 million. At that date, The Delaware National Bank’s largest
lending relationship was $1.87 million.
Standards for Safety
and Soundness. The federal banking agencies have adopted Interagency Guidelines prescribing Standards for Safety
and Soundness. The guidelines set forth the safety and soundness standards that the federal banking agencies use to identify and
address problems at insured depository institutions before capital becomes impaired. If the OCC determines that a banking institution
fails to meet any standard prescribed by the guidelines, the OCC may require the institution to submit an acceptable plan to achieve
compliance with the standard.
Branching.
National banks are authorized to establish branches within the state in which they are headquartered to the extent state law
allows branching by state banks. The Riegle-Neal Interstate Banking and Branching Efficiency Act (the “Act”) provided
for interstate branching for national banks. Under the Act, interstate branching by merger was authorized on June 1, 1997, unless
the state in which the target has enacted a law opting out of interstate branching. De novo interstate branching is permitted
by the Act to the extent the state into which the bank is to branch has enacted a law authorizing out-of-state banks to establish
de novo branches.
Assessments.
National banks pay semi-annual assessments to the OCC to fund its operations. These assessments are based primarily on asset
size and financial condition.
Insurance
of Deposit Accounts. The Delaware National
Bank’s deposits are insured up to applicable limits by the Deposit Insurance Fund of the Federal Deposit Insurance Corporation.
Under the FDIC’s
existing risk-based assessment system, insured institutions are assigned to one of four risk categories based on supervisory evaluations,
regulatory capital levels and certain other factors, with less risky institutions paying lower assessments. An institution’s
assessment rate depends upon the category to which it is assigned. Assessment rates range from five to 45 basis points on the
institution’s assessment base, which is calculated as total assets minus tangible equity. The rate schedules will automatically
adjust in the future when the Deposit Insurance Fund reaches certain milestones. No institution may pay a dividend if in default
of the federal deposit insurance assessment.
Deposit insurance per
account owner is currently $250,000 for all types of accounts. That level was made permanent by the Dodd-Frank Act. The Dodd-Frank
Act increased the minimum target Deposit Insurance Fund ratio from 1.15% of estimated insured deposits to 1.35% of estimated insured
deposits. The Federal Deposit Insurance Corporation must seek to achieve the 1.35% ratio by September 30, 2020. Insured institutions
with assets of $10 billion or more are supposed to fund the increase. The Dodd-Frank Act eliminated the 1.5% maximum fund ratio,
instead leaving it to the discretion of the Federal Deposit Insurance Corporation.
The Federal Deposit Insurance
Corporation has authority to increase insurance assessments. A significant increase in insurance premiums would likely have an
adverse effect on the operating expenses and results of operations of The Delaware National Bank. Management cannot predict what
insurance assessment rates will be in the future.
Insurance of deposits
may be terminated by the Federal Deposit Insurance Corporation upon a finding that the institution has engaged in unsafe or unsound
practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order
or condition imposed by the Federal Deposit Insurance Corporation or the OCC. The management of the Delaware National Bank does
not know of any practice, condition or violation that might lead to termination of deposit insurance.
Restrictions
on Transactions with Affiliates and Insiders. Transactions
between a bank and any non-banking affiliates are subject to Section 23A of the Federal Reserve Act. An affiliate of a bank is
any company or entity that controls, is controlled by or is under common control with The Delaware National Bank, including Delhi
Bank Corp. Currently, a subsidiary of a bank that is not also a depository institution is not generally treated as an affiliate
of the bank for purposes of Sections 23A and 23B unless it is a “financial subsidiary” that is engaged in activities
not permissible for the bank itself. In general, Section 23A imposes limits on the amount of transactions with affiliates, and
also requires certain levels of collateral for loans to and guarantees issued on behalf of affiliated parties.
Affiliate transactions
are also subject to Section 23B of the Federal Reserve Act which generally requires that transactions between the bank and its
affiliates 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.
The Sarbanes-Oxley Act
of 2002 generally prohibits loans by Delhi Bank Corp. to its executive officers and directors. However, the law contains a specific
exception for loans by a bank to its executive officers and directors in compliance with federal banking laws. The restrictions
on loans to directors, executive officers, principal stockholders and their related interests (collectively referred to herein
as “insiders”) contained in the Federal Reserve Act and Regulation O apply to all insured depository institutions.
Those restrictions include quantitative and qualitative limits on loans to insiders, including more stringent limits on loans
to executive officers. There is also an aggregate limitation on all loans to insiders and their related interests and certain
board approval requirements. Those loans cannot exceed the institution’s total unimpaired capital and surplus, and the OCC
may determine that a lesser amount is appropriate. Loans to insiders may generally be made only on non-preferential terms except
as part of a bank-wide employee benefit program that does not favor insiders over other employees. Insiders are subject to enforcement
actions for knowingly accepting loans in violation of applicable restrictions.
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 operation of the banks. These regulations also provide for regulatory assessment of a bank’s record
in meeting the needs of its service area when considering applications to establish branches, merger applications and applications
to acquire the assets and assume the liabilities of another bank. An unsatisfactory record can substantially delay or block such
a transaction. Federal law requires federal banking agencies to make public a rating of a bank’s performance under the CRA.
The Delaware National Bank’s latest CRA rating was “Satisfactory.”
Consumer Laws and
Regulations. The Delaware National Bank’s operations are also subject to various federal laws applicable
to credit transactions, including the Truth-In-Lending Act, Home Mortgage Disclosure Act of 1975, Equal Credit Opportunity Act,
Fair Credit Reporting Act of 1978, Fair Debt Collection Act, Right to Financial Privacy Act, Electronic Funds Transfer Act, and
Check Clearing for the 21st Century Act.
The Delaware National
Bank must comply with the applicable provisions of these consumer protection laws and regulations as part of their ongoing operations.
Enforcement Powers.
The OCC, the FDIC, the FRB and the other federal banking agencies have broad enforcement powers, including the power to
issue cease and desist orders, remove directors and officers, impose substantial fines and other civil penalties and appoint a
conservator or receiver. Failure to comply with applicable laws, regulations and supervisory agreements could subject The Delaware
National Bank or Delhi Bank Corp., as well as officers, directors and other institution-affiliated parties of these organizations,
to administrative sanctions such as cease and desist orders and potentially substantial civil money penalties. The OCC may appoint
the FDIC as conservator or receiver for a national bank (or the FDIC may appoint itself, under certain circumstances) if any one
or more of a number of circumstances exist, including, without limitation, the fact that the bank being undercapitalized and having
no reasonable prospect of becoming adequately capitalized or failing to submit and implement an acceptable capital restoration
plan; the bank being in unsafe and unsound condition to transact business or the bank undergoing a substantial dissipation of
assets or earnings due to violation of law or regulation or an unsafe or unsound practice.
Federal Reserve
System. The FRB regulations require savings associations to maintain non-interest earning reserves against their
transaction accounts (primarily Negotiable Order of Withdrawal and regular checking accounts). The regulations generally provide
that reserves be maintained against aggregate transaction accounts as follows for 2015: a 3% reserve ratio was assessed on net
transaction accounts up to and including $103.6 million; a 10% reserve ratio is applied above $103.6 million. The first $14.5
million of otherwise reservable balances (subject to adjustments by the Federal Reserve Board) are exempted from the reserve requirements.
The amounts are adjusted annually and, for 2016, will require a 3% ratio for up to $110.2 million and an exemption of $15.2 million.
At December 31, 2015, the Bank met applicable Federal Reserve Board reserve requirements.
Effect
on Economic Environment. The policies of regulatory
authorities, including the monetary policy of the FRB, have a significant effect on the operating results of banks. Among the
means available to the FRB to affect the money supply are open market operations in U.S. Government securities, changes in the
discount rate on member bank borrowings, and changes in reserve requirements against member bank deposits or in interest paid
on excess reserves. These means are used in varying combinations to influence overall growth and distribution of bank loans, investments
and deposits, and their use may affect interest rates charged on loans or paid for deposits.
FRB monetary policies
have materially affected the operating results of banks in the past and can be expected to continue to do so in the future. The
nature of future monetary policies and the effect of such policies on the business and earnings of the bank cannot be predicted.
Description
of Common Stock
We are authorized to issue
5,000,000 shares of common stock having a par value $1.00 per share. Each share of our common stock has the same relative rights
as, and is identical in all respects with, each other share of common stock. We are not authorized to issue preferred stock.
Voting Rights.
The holders of our common stock possess exclusive voting rights. Each holder of common stock is entitled to one vote for each
share held of record on all matters submitted to a vote of holders of common stock. Holders of shares of common stock are not
entitled to cumulate votes for the election of directors.
Dividends.
The holders of common stock are entitled to such dividends as the Board of Directors may declare from time to time out
of funds legally available for the payment of dividends. Dividends from us largely depend upon the receipt by us of dividends
from The Delaware National Bank because we generally have no source of cash flow other than dividends from The Delaware National
Bank.
We pay quarterly dividends
to our stockholders based on a quarterly determination of the Board of Directors. It is our present intention to continue our
present dividend policy subject to the discretion of the Board of Directors. The Plan does not represent a change in our dividend
policy. Stockholders who do not wish to participate and those who are ineligible to participate in the Plan will continue to receive
cash dividends when and as declared. As discussed in “Risk Factors – We cannot guarantee future payment of dividends”
we cannot provide assurance whether, or at what rate, we will continue to pay dividends.
Liquidation.
In the event of our liquidation, dissolution or winding up, the holders of shares of common stock are entitled to share
ratably in all assets remaining after payment of all of our debts and other liabilities.
Other Characteristics.
Holders of common stock do not have any preemptive, conversion or other subscription rights with respect to any additional
shares of common stock which may be issued. Therefore, the Board of Directors may authorize the issuance and sale of shares of
our capital stock without first offering them to our existing stockholders. The common stock is not subject to any redemption
or sinking fund provisions.
Plan of
Distribution
The Delaware National
Bank will act as the Plan Administrator and purchase shares of our common stock to fund the Plan directly from the Company at
fair market value. We will appoint a third party plan administrator if shares are to be purchased in the open market or in negotiated
transactions to fund the Plan. Since the inception of the Plan in August 2003, all shares to fund the Plan have been acquired
directly from the Company from its treasury shares. No employee, officer or director will receive any commissions or additional
remuneration for activities involving the Plan. We have no arrangements to engage securities dealers in connection with the Plan
at this time. All of our stockholders who choose to participate in the Plan must do so by completing and returning to us the Authorization
Form and all other required materials as described under “Delhi Bank Corp. Dividend Reinvestment and Optional Cash Purchase
Plan” and listed on the Authorization Form enclosed with this offering circular. We are making no recommendation regarding
participation in the Plan. Robert W. Armstrong, President and Chief Executive Officer of Delhi Bank Corp., should be contacted
for any questions regarding the Plan at (855) 333-3544.
Dividends
and Stock Repurchases
Delhi Bank Corp. has paid
cash dividends since 1994. In 2015, we declared quarterly cash dividends for an annual dividend of $0.6424 per share. No
assurance can be given that we will continue to pay dividends or that they will not be reduced or eliminated in the future. Our
ability to pay dividends is primarily a function of the dividend payments we receive from The Delaware National Bank. The payment
of dividends from the Bank will depend upon The Delaware National Bank’s earnings, financial condition, restrictions under
applicable law and regulations and other factors relevant at the time the Board of Directors of the Bank considers any declaration
of dividends. As a bank holding company, our ability to pay dividends is subject to Federal Reserve Board regulations as described
under “Regulation and Supervision – Holding Company Regulation, and the Federal Reserve Board’s policy
statement regarding the payment of dividends by bank holding companies as described under “Risk Factors Related to the
Offering – We cannot guarantee future payment of dividends.”
Delhi Bank Corp. has repurchased
its common stock in the past under stock repurchase plans adopted by the Board of Directors. Our current stock repurchase plan
was last extended on February 24, 2016 and remains open as of the date of this offering circular. No assurance can be given that
we will adopt stock repurchase plans to repurchase our common stock in the future. Any potential repurchase of our common stock
in the future will depend on our earnings, financial condition, restrictions under applicable law and regulations and other factors
relevant at the time the Board of Directors considers any repurchase plan.
Use of Proceeds
We cannot predict the
number of shares of common stock that will be purchased under the Plan or the prices at which shares will be purchased. As of
the date of this offering circular, the proceeds received by Delhi Bank Corp. pursuant to the Plan have been used to cover the
costs of the Plan and for general corporate purposes. To the extent that additional shares are purchased from us, and not in the
open market, as contemplated as of the date of this offering circular, we intend to use the proceeds from the sales to cover the
costs of this offering. Once the costs of this offering have been paid, we intend to add any additional proceeds from the sales
to our general funds to be used for general corporate purposes, including, without limitation, investments in and advances to
The Delaware National Bank and repurchases of our common stock. The amounts and timing of the application of proceeds will depend
upon our funding requirements and the availability of other funds.
Legal Opinion
Kilpatrick Townsend &
Stockton LLP, Washington, DC, has issued a legal opinion concerning the validity of the common stock being issued in connection
with the Plan.
Independent
Auditors
The financial statements
as of December 31, 2015 and 2014 and for the years then ended in this offering circular have been audited by Baker Tilly Virchow
Krause, LLP, our independent auditors.
Index to
Consolidated Financial Statements
of Delhi Bank Corp.
Independent Auditors’ Report
Board of Directors and Stockholders
Delhi Bank Corp. and Subsidiary
We have audited the accompanying
consolidated financial statements of Delhi Bank Corp. and Subsidiary (the “Company”), which comprise the
consolidated balance sheet as of December 31, 2015 and 2014, and the related consolidated statements of income,
comprehensive income, changes in stockholders’ equity, and cash flows for the years then ended, and the related notes
to the consolidated financial statements.
Management’s Responsibility
for the Financial Statements
Management is responsible for the preparation
and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in
the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation
and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion
on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures
to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend
on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s
preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.
Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and
the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements.
We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial
statements referred to above present fairly, in all material respects, the financial position of Delhi Bank Corp. and Subsidiary
as of December 31, 2015 and 2014, and the results of their operations and their cash flows for the years then ended in accordance
with accounting principles generally accepted in the United States of America.
/s/ Baker Tilly Virchow Krause, LLP
Wilkes-Barre, Pennsylvania
March 16, 2016
| Delhi Bank Corp. and Subsidiary |
| Consolidated Balance Sheet |
|
|
|
|
| December 31, 2015 and 2014 |
|
|
|
|
| | |
2015 | | |
2014 | |
| | |
| | |
| |
| Assets | |
| | | |
| | |
| | |
| | | |
| | |
| Cash and due from banks | |
$ | 16,691,113 | | |
$ | 4,660,891 | |
| Interest-bearing deposits with banks | |
| 37,177,000 | | |
| 32,445,000 | |
| Available for sale securities | |
| 113,890,852 | | |
| 126,198,322 | |
| Held to maturity securities | |
| 4,984,585 | | |
| 7,754,529 | |
| Restricted equity securities | |
| 322,100 | | |
| 371,700 | |
| Loans receivable, net | |
| 100,372,504 | | |
| 97,625,806 | |
| Premises and equipment, net | |
| 3,041,041 | | |
| 3,074,835 | |
| Bank owned life insurance | |
| 5,853,696 | | |
| 6,443,950 | |
| Other assets | |
| 3,118,146 | | |
| 3,396,405 | |
| | |
| | | |
| | |
| Total assets | |
$ | 285,451,037 | | |
$ | 281,971,438 | |
| | |
| | | |
| | |
| Liabilities and Stockholders' Equity | |
| | | |
| | |
| | |
| | | |
| | |
| Liabilities | |
| | | |
| | |
| Deposits: | |
| | | |
| | |
| Noninterest-bearing | |
$ | 41,057,398 | | |
$ | 34,852,330 | |
| Interest-bearing | |
| 214,167,833 | | |
| 217,950,035 | |
| | |
| | | |
| | |
| Total deposits | |
| 255,225,231 | | |
| 252,802,365 | |
| | |
| | | |
| | |
| Short-term borrowings | |
| 215,000 | | |
| 372,000 | |
| Capital lease obligation | |
| 239,666 | | |
| 254,473 | |
| Other liabilities | |
| 3,255,222 | | |
| 3,252,070 | |
| | |
| | | |
| | |
| Total liabilities | |
| 258,935,119 | | |
| 256,680,908 | |
| | |
| | | |
| | |
| Stockholders' Equity | |
| | | |
| | |
| Common stock, $1 par; 5,000,000 shares authorized;
1,627,270 shares issued and 1,528,958 shares outstanding in 2015, and 1,612,495 shares issued and 1,502,251 shares
outstanding in 2014 | |
| 1,627,270 | | |
| 1,612,495 | |
| Additional paid-in capital | |
| 3,114,213 | | |
| 2,667,785 | |
| Retained earnings | |
| 23,080,915 | | |
| 22,341,310 | |
| Accumulated other comprehensive income | |
| 511,404 | | |
| 656,503 | |
| Treasury stock, at cost; 98,312 shares in 2015 and 110,244 shares in 2014 | |
| (1,817,884 | ) | |
| (1,987,563 | ) |
| | |
| | | |
| | |
| Total stockholders' equity | |
| 26,515,918 | | |
| 25,290,530 | |
| | |
| | | |
| | |
| Total liabilities and stockholders' equity | |
$ | 285,451,037 | | |
$ | 281,971,438 | |
See notes to consolidated financial statements
| Delhi Bank Corp. and Subsidiary |
| Consolidated Statement of Income |
| Years Ended December 31, 2015 and 2014 |
| | |
2015 | | |
2014 | |
| | |
| | |
| |
| Interest and Dividend Income | |
| | | |
| | |
| Interest and fees on loans | |
$ | 4,491,384 | | |
$ | 4,518,256 | |
| Investments: | |
| | | |
| | |
| Taxable | |
| 2,622,355 | | |
| 2,888,060 | |
| Tax-exempt | |
| 766,492 | | |
| 843,401 | |
| Dividends | |
| 13,575 | | |
| 15,794 | |
| | |
| | | |
| | |
| Total interest and dividend income | |
| 7,893,806 | | |
| 8,265,511 | |
| | |
| | | |
| | |
| Interest Expense | |
| | | |
| | |
| Deposits | |
| 953,193 | | |
| 1,065,575 | |
| Borrowed funds and capital lease | |
| 23,525 | | |
| 24,770 | |
| | |
| | | |
| | |
| Total interest expense | |
| 976,718 | | |
| 1,090,345 | |
| | |
| | | |
| | |
| Net Interest Income | |
| 6,917,088 | | |
| 7,175,166 | |
| | |
| | | |
| | |
| Provision for Loan Losses | |
| 140,000 | | |
| 24,500 | |
| | |
| | | |
| | |
| Net Interest Income After Provision for Loan Losses | |
| 6,777,088 | | |
| 7,150,666 | |
| | |
| | | |
| | |
| Noninterest Income | |
| | | |
| | |
| Service charges and fees | |
| 1,207,609 | | |
| 1,194,521 | |
| Net gain on sales of securities | |
| 101,023 | | |
| 69,224 | |
| Bank owned life insurance income | |
| 364,668 | | |
| 270,424 | |
| | |
| | | |
| | |
| Total noninterest income | |
| 1,673,300 | | |
| 1,534,169 | |
| | |
| | | |
| | |
| Noninterest Expense | |
| | | |
| | |
| Salaries and employee benefits | |
| 3,525,216 | | |
| 3,386,829 | |
| Occupancy and equipment | |
| 1,335,044 | | |
| 1,443,862 | |
| FDIC premiums | |
| 160,294 | | |
| 152,836 | |
| ATM and debit card processing | |
| 131,855 | | |
| 211,232 | |
| Other | |
| 1,223,088 | | |
| 1,185,425 | |
| | |
| | | |
| | |
| Total noninterest expense | |
| 6,375,497 | | |
| 6,380,184 | |
| | |
| | | |
| | |
| Income Before Provision for Income Tax | |
| 2,074,891 | | |
| 2,304,651 | |
| | |
| | | |
| | |
| Provision for Income Tax | |
| 354,184 | | |
| 449,654 | |
| | |
| | | |
| | |
| Net Income | |
$ | 1,720,707 | | |
$ | 1,854,997 | |
| | |
| | | |
| | |
| Earnings Per Share | |
$ | 1.13 | | |
$ | 1.24 | |
See notes
to consolidated financial statements
| Delhi Bank Corp. and Subsidiary |
| Consolidated Statement of Comprehensive Income |
| Years Ended December 31, 2015 and 2014 |
| | |
2015 | | |
2014 | |
| | |
| | |
| |
| Net Income | |
$ | 1,720,707 | | |
$ | 1,854,997 | |
| | |
| | | |
| | |
| Other Comprehensive (Loss) Income | |
| | | |
| | |
| Unrealized (losses) gains on available-for-sale securities | |
| (149,238 | ) | |
| 2,504,591 | |
| Less reclassification adjustment for gains included in net gain on sales of securities on consolidated statement of income | |
| (97,392 | ) | |
| (66,038 | ) |
| | |
| | | |
| | |
| Net unrealized (losses) gains on available for sale securities | |
| (246,630 | ) | |
| 2,438,553 | |
| | |
| | | |
| | |
| Tax effect (a) | |
| 101,531 | | |
| (949,816 | ) |
| | |
| | | |
| | |
| Total other comprehensive (loss) income | |
| (145,099 | ) | |
| 1,488,737 | |
| | |
| | | |
| | |
| Total Comprehensive Income | |
$ | 1,575,608 | | |
$ | 3,343,734 | |
| (a) | Includes provision for income taxes of $37,292 in 2015
and $25,755 in 2014 related to the realized net gain on sales of securities. |
See notes to consolidated financial statements
| Delhi Bank Corp. and Subsidiary |
| Consolidated Statement of Changes in Stockholders' Equity |
| Years Ended December 31, 2015 and 2014 |
| | |
| | |
| | |
| | |
Accumulated | | |
| | |
| |
| | |
| | |
Additional | | |
| | |
Other | | |
| | |
| |
| | |
Common | | |
Paid-In | | |
Retained | | |
Comprehensive | | |
Treasury | | |
| |
| | |
Stock | | |
Capital | | |
Earnings | | |
Income (Loss) | | |
Stock | | |
Total | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| Balance, December 31, 2013 | |
$ | 1,596,039 | | |
$ | 2,168,300 | | |
$ | 21,443,882 | | |
$ | (832,234 | ) | |
$ | (1,934,537 | ) | |
$ | 22,441,450 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net income | |
| | | |
| | | |
| 1,854,997 | | |
| | | |
| | | |
| 1,854,997 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Other comprehensive income | |
| | | |
| | | |
| | | |
| 1,488,737 | | |
| | | |
| 1,488,737 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Issuance of 16,456 shares of common stock | |
| 16,456 | | |
| 431,970 | | |
| | | |
| | | |
| | | |
| 448,426 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Purchase of 12,932 shares of treasury stock | |
| | | |
| | | |
| | | |
| | | |
| (354,338 | ) | |
| (354,338 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Sale of 17,532 shares of treasury stock | |
| | | |
| 67,515 | | |
| | | |
| | | |
| 301,312 | | |
| 368,827 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Dividends declared ($0.6374 per share) | |
| | | |
| | | |
| (957,569 | ) | |
| | | |
| | | |
| (957,569 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance, December 31, 2014 | |
| 1,612,495 | | |
| 2,667,785 | | |
| 22,341,310 | | |
| 656,503 | | |
| (1,987,563 | ) | |
| 25,290,530 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net income | |
| | | |
| | | |
| 1,720,707 | | |
| | | |
| | | |
| 1,720,707 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Other comprehensive loss | |
| | | |
| | | |
| | | |
| (145,099 | ) | |
| | | |
| (145,099 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Issuance of 14,775 shares of common stock | |
| 14,775 | | |
| 390,909 | | |
| | | |
| | | |
| | | |
| 405,684 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Purchase of 4,890 shares of treasury stock | |
| | | |
| | | |
| | | |
| | | |
| (135,686 | ) | |
| (135,686 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Sale of 16,822 shares of treasury stock | |
| | | |
| 55,519 | | |
| | | |
| | | |
| 305,365 | | |
| 360,884 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Dividends declared ($0.6417 per share) | |
| | | |
| | | |
| (981,102 | ) | |
| | | |
| | | |
| (981,102 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance, December 31, 2015 | |
$ | 1,627,270 | | |
$ | 3,114,213 | | |
$ | 23,080,915 | | |
$ | 511,404 | | |
$ | (1,817,884 | ) | |
$ | 26,515,918 | |
See notes to consolidated financial statements
| Delhi Bank Corp. and Subsidiary |
| Consolidated Statement of Cash Flows |
| Years Ended December 31, 2015 and 2014 |
| | |
2015 | | |
2014 | |
| | |
| | |
| |
| Cash Flows from Operating Activities | |
| | | |
| | |
| Net income | |
$ | 1,720,707 | | |
$ | 1,854,997 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | |
| | | |
| | |
| Provision for loan losses | |
| 140,000 | | |
| 24,500 | |
| Depreciation | |
| 314,120 | | |
| 329,557 | |
| Net gain on sales of securities | |
| (101,023 | ) | |
| (69,224 | ) |
| Amortization and accretion of investment securities, net | |
| 730,716 | | |
| 827,488 | |
| Deferred income taxes | |
| 148,521 | | |
| 180,383 | |
| Bank owned life insurance income | |
| (364,668 | ) | |
| (270,424 | ) |
| Provision for loss on foreclosed assets | |
| - | | |
| 30,000 | |
| (Gain) loss on sale of foreclosed assets | |
| (4,822 | ) | |
| 32,743 | |
| Net change in: | |
| | | |
| | |
| Other assets | |
| 328,853 | | |
| (651,723 | ) |
| Other liabilities | |
| (3,557 | ) | |
| (299,267 | ) |
| | |
| | | |
| | |
| Net cash provided by operating activities | |
| 2,908,847 | | |
| 1,989,030 | |
| | |
| | | |
| | |
| Cash Flows from Investing Activities | |
| | | |
| | |
| Net increase in interest-bearing deposits in banks | |
| (4,732,000 | ) | |
| (14,187,000 | ) |
| Purchase of available for sale securities | |
| (24,186,755 | ) | |
| (15,279,594 | ) |
| Proceeds from sales of available for sale securities | |
| 4,940,627 | | |
| 5,968,232 | |
| Proceeds from maturities, calls and principal repayments of available for
sale securities | |
| 30,708,102 | | |
| 18,709,642 | |
| Purchase of held to maturity securities | |
| (2,139,562 | ) | |
| (4,075,164 | ) |
| Proceeds from maturities, calls and principal repayments of held to maturity
securities | |
| 4,736,981 | | |
| 1,692,418 | |
| Proceeds from sales of held-to-maturity securities | |
| 141,698 | | |
| 128,851 | |
| Purchase of restricted equity securities | |
| (165,400 | ) | |
| (400,200 | ) |
| Proceeds from redemption of restricted equity securities | |
| 215,000 | | |
| 427,700 | |
| Net increase in loans receivable | |
| (3,126,821 | ) | |
| (5,678,843 | ) |
| Proceeds from bank owned life insurance | |
| 954,922 | | |
| 198,380 | |
| Proceeds from sale of foreclosed assets | |
| 23,622 | | |
| 187,518 | |
| Purchase of premises and equipment | |
| (156,587 | ) | |
| (261,563 | ) |
| | |
| | | |
| | |
| Net cash provided by (used in) investing activities | |
| 7,213,827 | | |
| (12,569,623 | ) |
| | |
| | | |
| | |
| Cash Flows from Financing Activities | |
| | | |
| | |
| Net increase in deposits | |
| 2,422,866 | | |
| 4,437,846 | |
| Net (decrease) increase in short-term borrowings | |
| (157,000 | ) | |
| 372,000 | |
| Principal payments on capital lease obligation | |
| (14,807 | ) | |
| (10,946 | ) |
| Dividends paid | |
| (974,393 | ) | |
| (951,839 | ) |
| Purchase of treasury stock | |
| (135,686 | ) | |
| (354,338 | ) |
| Issuance of common stock | |
| 405,684 | | |
| 448,426 | |
| Proceeds from sale of treasury stock | |
| 360,884 | | |
| 368,827 | |
| | |
| | | |
| | |
| Net cash provided by financing activities | |
| 1,907,548 | | |
| 4,309,976 | |
| | |
| | | |
| | |
| Net Increase (Decrease) in Cash and Due From Banks | |
| 12,030,222 | | |
| (6,270,617 | ) |
| | |
| | | |
| | |
| Cash and Due From Banks, Beginning of Year | |
| 4,660,891 | | |
| 10,931,508 | |
| | |
| | | |
| | |
| Cash and Due From Banks, End of Year | |
$ | 16,691,113 | | |
$ | 4,660,891 | |
See notes to consolidated financial statements
| Delhi Bank Corp. and Subsidiary |
| Notes to Consolidated Financial Statements |
| December 31, 2015 and 2014 |
| 1. | Summary of Significant Accounting Policies |
Principles of Consolidation
The consolidated financial statements
include the accounts of the Delhi Bank Corp. (the “Bank Corp.”) and its wholly-owned subsidiary, the Delaware National Bank of Delhi (the “Bank”) (collectively,
the “Company”). All significant intercompany accounts and transactions have been eliminated in consolidation.
Nature of Operations
The Company provides a
full range of commercial banking services to individual and small business customers in Delaware County, New York, and the
surrounding counties. The area is a rural market with an economic base made up of light manufacturing, retail and agricultural
businesses. The Company’s primary deposit products are demand deposits and interest bearing time and savings accounts.
It offers a full array of loan products to meet the needs of retail and commercial customers.
The Bank is subject to regulation
by the Office of the Comptroller of the Currency. The Bank Corp. is subject to regulation by the Federal Reserve Bank of New York.
Use of Estimates
The preparation of financial
statements in conformity with accounting principles generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Material estimates that are particularly
susceptible to significant change relate to the determination of the allowance for loan losses, the valuation of investment securities
and determination of other-than-temporary impairment thereon, and valuation of deferred tax assets.
In connection with the determination
of the allowance for loan losses, management generally obtains independent appraisals for significant properties. While management
uses available information to recognize losses on loans, further reductions in the carrying amounts of loans may be necessary based
on changes in economic conditions. It is reasonably possible that the estimated losses on loans may change materially in the near
term.
The Company’s investment
securities are comprised of a variety of financial instruments. The fair values and possible other-than-temporary impairment of
these securities are subject to various risks including changes in the interest rate environment and general economic conditions.
Due to the increased level of these risks and their potential impact on the fair values and the need to recognize other-than-temporary
impairment of the securities, it is possible that the amounts reported in the accompanying financial statements could materially
change in the near term.
| Delhi Bank Corp. and Subsidiary |
| Notes to Consolidated Financial Statements |
| December 31, 2015 and 2014 |
Cash and Due from Banks
For the purposes of the statement
of cash flows, cash and due from banks includes cash on hand, amounts due from other banks, and federal funds sold.
Interest-bearing Deposits with Banks
Interest-bearing deposits with
banks consist of certificates of deposit and are carried at cost which approximates fair value.
Significant Group Concentration of Credit Risk
The Company grants loans to customers
primarily located in Delaware County, New York and the surrounding counties. Although the Company has a diversified loan portfolio,
a substantial portion of its debtors’ ability to honor their contracts is dependent on the economic conditions in its marketplace.
The Company does not have any significant concentrations from one industry or customer.
Investment Securities
Debt securities that management
has the positive intent and ability to hold to maturity are classified as “held-to-maturity” and reported at amortized
cost. Securities not classified as held-to-maturity are classified as “available-for-sale” and reported at fair value,
with unrealized gains and losses excluded from earnings and reported in other comprehensive income. The Company has no trading
securities.
Purchase premiums and discounts
are recognized in interest income using the interest method over the terms of the securities. Gains and losses on the sale of securities
are recorded on the trade date and are determined using the specific identification method. Declines in the fair value of held-to-maturity
and available-for-sale securities below their costs that are deemed to be credit-related are reflected in earnings as realized
losses.
Restricted Equity Securities
Restricted equity securities
consist of investments in the Federal Home Loan Bank of New York (“FHLB”), the Federal Reserve Bank of New York and
the Atlantic Community Bankers Bank. Investments in these entities are restricted and carried at cost.
The Company, as a member of
the FHLB system, is required to maintain an investment in the capital stock of the FHLB. Based on redemption provisions of
the FHLB, the stock has no quoted market value and is carried at cost. Management considers whether this investment is
impaired based on the ultimate recoverability of the cost basis rather than by recognizing temporary declines in value. The
determination of whether a decline affects the ultimate recoverability of the cost includes (1) the significance of the
decline in net assets of the FHLB as compared to the capital stock amount and the length of time this situation has
persisted, (2) commitments by the FHLB to make payments required by law or regulation and the level of such payments in
relation to the operating performance of the FHLB, and (3) the impact of legislative and regulatory changes on the
institutions and on the customer base of the FHLB. Management believes no impairment charge is necessary related to its
investment in FHLB stock.
| Delhi Bank Corp. and Subsidiary |
| Notes to Consolidated Financial Statements |
| December 31, 2015 and 2014 |
Loans Receivable
Loans that management has the
intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at their outstanding unpaid principal
balances, adjusted for the allowance for loan losses and any unamortized deferred fees or costs on originated loans. Interest income
is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized
as an adjustment of the related loan yield over the contractual life of the loan using the interest method.
The loan receivable portfolio
is segmented into real estate, commercial and industrial, agricultural and consumer loans. Real estate loans include loans secured
by commercial, residential and agricultural properties. Residential loans include 1-4 family mortgage loans and home equity loans.
Commercial and industrial loans are secured by equipment, accounts receivable, inventories or other business assets. Agricultural
loans are secured by equipment and other farm assets. Consumer loans consist of personal installment and auto loans and credit
cards. The segments of the Company’s loan portfolio are disaggregated to a level that allows management to monitor risk and
performance. Common risk characteristics include loan type, collateral type and geographic location.
Generally, the accrual of interest
is discontinued when the contractual payment of principal or interest has become 90 days past due or management has serious
doubts about further collectability of principal or interest, even though the loan is currently performing. A loan may remain on
accrual status if it is in the process of collection and is well secured. When a loan is placed on nonaccrual status, unpaid interest
is reversed against interest income. Interest received on nonaccrual loans, including impaired loans, is either applied to principal
or recognized as interest income, depending on management’s judgment as to the collectability of principal. Generally, loans
are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for
a reasonable period of time (generally six months) and the ultimate collectability of the total contractual principal and interest
is no longer in doubt. The past due status of all classes of loans receivable is determined based on contractual due dates for
loan payments.
Allowance for Loan Losses
The allowance for loan losses
represents management’s estimate of losses inherent in the loan portfolio as of the balance sheet date and is recorded as
a reduction to loans. The allowance for loan losses is increased by the provision for loan losses and decreased by charge-offs,
net of recoveries. Loans deemed to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries,
if any, are credited to the allowance. All, or part, of the principal balance of loans receivable are charged off to the allowance
as soon as it is determined that the repayment of all, or part, of the principal balance is highly unlikely. Consumer loans are
generally charged off no later than 120 days past due on a contractual basis (earlier in the event of bankruptcy) or if there is
an amount deemed uncollectible.
| Delhi Bank Corp. and Subsidiary |
| Notes to Consolidated Financial Statements |
| December 31, 2015 and 2014 |
The allowance for loan losses
is maintained at a level considered adequate to provide for losses that can be reasonably anticipated. Management performs a quarterly
evaluation of the adequacy of the allowance. The allowance is based on the Company’s past loan loss experience, known and
inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value
of any underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. This evaluation
is inherently subjective as it requires material estimates that may be susceptible to significant revision as more information
becomes available.
The allowance consists of specific
and general components.
The specific component relates
to loans that are classified as impaired. For loans that are classified as impaired, a specific allowance is established when the
collateral value, observable market price, or discounted cash flows of the impaired loan is lower than the carrying value of that
loan. A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable
to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors
considered by management in determining impairment include payment status, collateral value, and the probability of collecting
scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally
are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case
basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay,
the reasons for the delay, the borrower’s prior payment records, and the amount of the shortfall in relation to the principal
and interest owed. Impairment is measured on a loan-by-loan basis.
The estimated fair values of
substantially all of the Company’s impaired loans are measured based on the estimated fair value of the loan’s collateral.
For loans secured by real estate,
estimated fair values are determined primarily through third-party appraisals. When a real estate secured loan becomes impaired,
a decision is made regarding whether an updated certified appraisal of the real estate is necessary. This decision is based on
various considerations, including the age of the most recent appraisal, the loan-to-value ratio based on the original appraisal
and the condition of the property. Appraised values are discounted, when necessary, to arrive at the estimated selling price of
the collateral, which is considered to be the estimated fair value. The discounts also include estimated costs to sell the property.
For loans secured by non-real
estate collateral, such as accounts receivable, inventory and equipment, estimated fair values are determined based on the borrower’s
financial statements, inventory reports, accounts receivable agings or equipment appraisals or invoices. Indications of value from
these sources are generally discounted, as appropriate, based on the age of the financial information or the quality of the assets.
| Delhi Bank Corp. and Subsidiary |
| Notes to Consolidated Financial Statements |
| December 31, 2015 and 2014 |
The general component covers
pools of loans by loan class including loans not considered impaired, as well as smaller balance homogeneous loans, such as residential
and consumer loans. These pools of loans are evaluated for loss exposure based upon historical loss rates, adjusted for qualitative
risk factors. These qualitative risk factors include:
| 1. | Lending policies and procedures, including underwriting standards and collection, charge-off, and
recovery practices. |
| 2. | National, regional, and local economic and business conditions as well as the condition of various
market segments, including the value of underlying collateral for collateral dependent loans. |
| 3. | Nature and volume of the portfolio and terms of loans. |
| 4. | Experience, ability, and depth of lending management and staff. |
| 5. | Volume and severity of past due, classified and nonaccrual loans as well as other loan modifications. |
| 6. | Existence and effect of any concentrations of credit and changes in the level of such concentrations. |
| 7. | Oversight, including the impact of banking laws and regulations as well as the overall regulatory
environment. |
Each factor is assigned a value
to reflect improving, stable or declining conditions based on management’s best judgment using relevant information available
at the time of the evaluation. Adjustments to the factors are supported through documentation of changes in conditions in a narrative
accompanying the allowance for loan loss calculation.
The allowance calculation methodology
includes further segregation of loan classes into risk rating categories. The borrower’s overall financial condition, repayment
sources, guarantors and value of collateral, if appropriate, are evaluated annually for all loan classes. Credit quality risk ratings
include regulatory classifications of pass, special mention, substandard, doubtful and loss. Loans criticized as special mention
have potential weaknesses that deserve management’s close attention. If uncorrected, the potential weaknesses may result
in deterioration of the repayment prospects. Loans classified substandard have a well-defined weakness or weaknesses that jeopardize
the liquidation of the debt. They include loans that are inadequately protected by the current sound net worth and paying capacity
of the obligor or of the collateral pledged, if any. Loans classified doubtful have all the weaknesses inherent in loans classified
substandard with the added characteristic that collection or liquidation in full, on the basis of current conditions and facts,
is highly improbable. Loans classified as a loss are considered uncollectible and are immediately charged to the allowance for
loan losses. Loans not classified are rated pass. To help ensure that risk ratings are accurate and reflect the present and future
capacity of borrowers to repay a loan as agreed, the Company has a structured loan rating process encompassing both internal and
external oversight. The Company’s loan officers are responsible for the timely and accurate risk rating of all loans in the
Company’s loan portfolio at origination and on an ongoing basis. The Company utilizes an external loan review consultant
to conduct a loan review of its portfolio each year. The external consultant generally reviews all commercial loan relationships
exceeding a specified threshold.
| Delhi Bank Corp. and Subsidiary |
| Notes to Consolidated Financial Statements |
| December 31, 2015 and 2014 |
Loans whose terms are modified
are classified as troubled debt restructurings if the Company grants such borrowers concessions and it is deemed that those borrowers
are experiencing financial difficulty. Concessions granted under a troubled debt restructuring may involve a temporary reduction
in interest rate or an extension of a loan’s stated maturity date. Nonaccrual troubled debt restructurings are restored to
accrual status if principal and interest payments, under the modified terms, are current for six consecutive months after modification.
Loans classified as troubled debt restructurings are designated as impaired.
In addition, federal regulatory
agencies, as an integral part of their examination process, periodically review the Company’s allowance for loan losses and
may require the Company to recognize additions to the allowance based on their judgments about information available to them at
the time of their examination, which may not be currently available to management. Based on management’s comprehensive analysis
of the loan portfolio, management believes the current level of the allowance for loan losses is adequate.
Premises and Equipment
Premises and equipment are stated
at cost less accumulated depreciation computed on the straight-line method over the estimated lives of the assets. Assets under
capital lease are recorded at the lower of the present value of the minimum lease payments or the fair value of the asset and amortized
over the shorter of the lease term or the estimated life of the asset. Amortization of assets under capital lease is included in
depreciation expense.
Bank Owned Life Insurance
The Company is the owner and
beneficiary of life insurance policies on certain employees and directors. The life insurance investment is carried at the cash
surrender value of the underlying policies. The increase in the cash surrender value is recognized as a component of noninterest
income. The policies can be liquidated, if necessary, with tax costs associated. However, the Company intends to hold these policies
and, accordingly, the Company has not provided for deferred income taxes on the earnings from the increase in cash surrender value.
Earnings Per Share
Earnings per share is based on
the weighted average number of shares of common stock outstanding. The Company’s basic and diluted earnings per share are
the same since there are no dilutive shares of potential common stock outstanding. Weighted average shares outstanding were 1,517,220
in 2015 and 1,495,211 in 2014.
Advertising Costs
Advertising costs are expensed
as incurred and were $45,317 in 2015 and $42,404 in 2014.
| Delhi Bank Corp. and Subsidiary |
| Notes to Consolidated Financial Statements |
| December 31, 2015 and 2014 |
Foreclosed Assets
Assets acquired through, or in
lieu of, loan foreclosure are held for sale and are initially recorded at fair value less costs to sell at the date of foreclosure,
establishing a new cost basis. Any losses based on the asset’s fair value at the date of foreclosure are charged to the allowance
for loan losses Subsequent to foreclosure, valuations are periodically performed and the assets are carried at the lower of carrying
amount or fair value less cost to sell. Costs incurred in maintaining foreclosed assets and subsequent adjustments to the carrying
amount of the assets are included in other noninterest expenses. Foreclosed assets totaled $346,668 and $249,084 at December 31,
2015 and 2014, respectively, and are included in other assets. Foreclosed assets consist entirely
of residential real estate. Residential real estate loans in process of foreclosure at December 31, 2015 were approximately
$588,000.
Income Taxes
Income tax accounting guidance
results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or
refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions
over revenues. The Company determines deferred income taxes using the liability (or balance sheet) method. Under this method, the
net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and
liabilities. Enacted changes in tax rates and laws are recognized in the period in which they occur. Deferred tax assets are reduced
by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of
a deferred tax asset will not be realized.
The Company recognizes interest
and penalties on income taxes as a component of income tax expense.
Treasury Stock
Treasury stock is recorded at
cost. The subsequent disposition or sale of the treasury stock is recorded using the average cost method.
Comprehensive Income
Comprehensive income consists
of net income and other comprehensive income. Other comprehensive income consists solely of the net unrealized gains on available-for-sale
securities, net of deferred income taxes. Accumulated other comprehensive income consists of net unrealized gains of $828,722 less
deferred income taxes of $317,318 at December 31, 2015 and net unrealized gains of $1,075,353 less deferred income taxes of
$418,850 at December 31, 2014.
Statement of Cash Flows
Interest paid totaled $986,582
in 2015 and $1,101,549 in 2014. Income tax payments totaled $217,000 in 2015 and $331,866 in 2014. Amounts transferred from loans
to foreclosed assets were $240,123 in 2015 and $102,454 in 2014.
| Delhi Bank Corp. and Subsidiary |
| Notes to Consolidated Financial Statements |
| December 31, 2015 and 2014 |
Subsequent Events
Subsequent events were evaluated
through March 16, 2016, the date the consolidated financial statements were available to be issued.
Recent Accounting Pronouncements
In
January 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”)
2014-04, Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure. The ASU clarifies
that an in substance foreclosure occurs, and a creditor is considered to have received physical possession of residential real
property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate
property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to
the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally,
the ASU requires disclosure of both (1) the amount of foreclosed residential real estate property held by the creditor and (2)
the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of
foreclosure according to the requirements of the applicable jurisdiction. An entity can elect to adopt this ASU using either a
modified retrospective transition method or a prospective transition method. The Company has elected the prospective transition
method and will apply the ASU to all instances of an entity receiving physical possession of residential real estate property collateralizing
consumer mortgage loans that occur after the date of adoption. The Company adopted this ASU beginning in 2015.
In
May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which provides a principles-based framework
for revenue recognition that supersedes virtually all previously issued revenue recognition guidance under U.S. GAAP. Additionally,
the ASU requires improved disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty
of revenue that is recognized. The core principle of the five-step revenue recognition framework is that an entity should recognize
revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which
the entity expects to be entitled in exchange for those goods or services. In August 2015 the FASB issued ASU 2015-14, which deferred
the effective date of the revenue recognition standard by a year, making it applicable for the Company in 2019. The ASU should
be applied either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially
applying the ASU recognized at the date of initial application. The Company is in the process of evaluating the potential impact
of adopting this ASU, including determining which transition method to apply.
In August 2014, the FASB issued
ASU 2014-14, Receivables – Troubled Debt Restructuring by Creditors, which requires that a mortgage loan be derecognized
and that a separate other receivable be recognized upon foreclosure if the following conditions are met: (1) the loan has a government
guarantee that is not separable from the loan before foreclosure, (2) at the time of foreclosure, the creditor has the intent to
convey the real estate property to the guarantor and make a claim on the guarantee, and the creditor has the ability to recover
under the claim and (3) at the time of foreclosure, any amount of the claim that is determined on the basis of the fair value of
the real estate is fixed. This ASU was effective for the Company in 2015, and the impact of the ASU was not significant to the
Company.
| Delhi
Bank Corp. and Subsidiary |
| Notes to Consolidated Financial Statements |
| December 31, 2015 and 2014 |
In
January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Liabilities. This makes significant
changes in U.S. GAAP related to certain aspects of recognition, measurement, presentation and disclosure of financial instruments.
The changes provided for in this ASU include the following: (1) require most equity investments to be measured at fair value with
changes in fair value recognized in net income; however, an entity may choose to measure equity investments that do not have readily
determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly
transactions for the identical or a similar investment of the same issuer; (2) for equity investments without readily determinable
fair values, require a qualitative assessment to identify impairment, and if a qualitative assessment indicates that impairment
exists, requiring an entity to measure the investment at fair value; (3) eliminate the requirement to disclose the methods and
significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at
amortized cost on the balance sheet; (4) require use of the exit price notion when measuring the fair value of financial instruments
for disclosure purposes; (5) require an entity to present separately in other comprehensive income the portion of the total change
in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to
measure the liability at fair value in accordance with the fair value option for financial instruments (at December 31, 2015 and
2014, the Company has no liabilities for which the fair value measurement option has been elected); (6) require separate presentation
of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans
and receivables) on the balance sheet or the accompanying notes to the financial statements; and (7) clarify that an entity should
evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with
the entity’s other deferred tax assets. The amendments in this Update will become effective for the Company in 2019. With
limited exceptions, early adoption of the ASU is not permitted. The ASU will be applied by means of a cumulative-effect adjustment
to the balance sheet as of the beginning of the year of adoption. The amendments related to equity securities without readily determinable
fair values should be applied prospectively. The Company is in the process of evaluating the potential impact of adopting this
ASU.
| 2. | Cash and Due From Banks |
The Company is required to maintain
amounts on reserve with the Federal Reserve Bank. These reserves totaled $1,570,000 at December 31, 2015 and $1,360,000 at
December 31, 2014.
The Company is also required to
maintain clearing balance funds on deposit with the Federal Reserve Bank. The required minimum clearing balance at December 31,
2015 and 2014 was $734,000 and $471,000, respectively.
| Delhi
Bank Corp. and Subsidiary |
| Notes to Consolidated Financial Statements |
| December 31, 2015 and 2014 |
The amortized cost and fair values
of investment securities available-for-sale and held-to-maturity are as follows:
| | |
December 31, 2015 | |
| | |
Amortized
Cost | | |
Gross
Unrealized
Gains | | |
Gross
Unrealized
Losses | | |
Fair
Value | |
| Available-for-sale: | |
| | | |
| | | |
| | | |
| | |
| U.S. government agencies | |
$ | 43,200,544 | | |
$ | 752,005 | | |
$ | 111,174 | | |
$ | 43,841,375 | |
| U.S. government sponsored enterprises - (“GSE”) - mortgage- backed securities - residential | |
| 53,357,801 | | |
| 182,940 | | |
| 782,214 | | |
| 52,758,527 | |
| Corporate debt securities | |
| 1,531,013 | | |
| 7,766 | | |
| 10,923 | | |
| 1,527,856 | |
| Local government obligations | |
| 14,972,771 | | |
| 790,323 | | |
| - | | |
| 15,763,094 | |
| | |
| | | |
| | | |
| | | |
| | |
| Total | |
$ | 113,062,129 | | |
$ | 1,733,034 | | |
$ | 904,311 | | |
$ | 113,890,852 | |
| | |
| | | |
| | | |
| | | |
| | |
| Held-to-maturity: | |
| | | |
| | | |
| | | |
| | |
| Mortgage-backed securities - GSE - residential | |
$ | 1,700,077 | | |
$ | 38,466 | | |
$ | 10,331 | | |
$ | 1,728,212 | |
| Local government obligations | |
| 3,284,508 | | |
| 100,068 | | |
| - | | |
| 3,384,576 | |
| | |
| | | |
| | | |
| | | |
| | |
| Total | |
$ | 4,984,585 | | |
$ | 138,534 | | |
$ | 10,331 | | |
$ | 5,112,788 | |
| Delhi
Bank Corp. and Subsidiary |
| Notes to Consolidated Financial Statements |
| December 31, 2015 and 2014 |
| | |
December 31, 2014 | |
| | |
Amortized
Cost | | |
Gross
Unrealized
Gains | | |
Gross
Unrealized
Losses | | |
Fair
Value | |
| Available-for-sale: | |
| | | |
| | | |
| | | |
| | |
| U.S. government agencies | |
$ | 34,111,914 | | |
$ | 826,957 | | |
$ | 175,527 | | |
$ | 34,763,344 | |
| U.S. government sponsored enterprises - (“GSE”) - mortgage- backed securities - residential | |
| 64,220,354 | | |
| 294,997 | | |
| 968,491 | | |
| 63,546,860 | |
| Corporate debt securities | |
| 1,545,161 | | |
| 10,998 | | |
| 5,214 | | |
| 1,550,945 | |
| Local government obligations | |
| 25,245,540 | | |
| 1,091,633 | | |
| - | | |
| 26,337,173 | |
| | |
| | | |
| | | |
| | | |
| | |
| Total | |
$ | 125,122,969 | | |
$ | 2,224,585 | | |
$ | 1,149,232 | | |
$ | 126,198,322 | |
| | |
| | | |
| | | |
| | | |
| | |
| Held-to-maturity: | |
| | | |
| | | |
| | | |
| | |
| Mortgage-backed securities - GSE - residential | |
$ | 2,246,524 | | |
$ | 62,386 | | |
$ | 7,383 | | |
$ | 2,301,527 | |
| Local government obligations | |
| 5,508,005 | | |
| 130,949 | | |
| - | | |
| 5,638,954 | |
| | |
| | | |
| | | |
| | | |
| | |
| Total | |
$ | 7,754,529 | | |
$ | 193,335 | | |
$ | 7,383 | | |
$ | 7,940,481 | |
The amortized cost and fair market
values of debt securities at December 31, 2015, by contractual maturity, are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the right to call or prepay obligations without call or prepayment penalties.
| | |
Available-for-Sale | |
| | |
Amortized
Cost | | |
Fair
Value | |
| Due in one year or less | |
$ | 680,712 | | |
$ | 692,861 | |
| Due after one through five years | |
| 27,339,364 | | |
| 27,688,638 | |
| Due after five through ten years | |
| 7,956,504 | | |
| 8,260,783 | |
| Due after ten years | |
| 23,727,748 | | |
| 24,490,043 | |
| Mortgage-backed securities | |
| 53,357,801 | | |
| 52,758,527 | |
| | |
| | | |
| | |
| Total | |
$ | 113,062,129 | | |
$ | 113,890,852 | |
| Delhi
Bank Corp. and Subsidiary |
| Notes to Consolidated Financial Statements |
| December 31, 2015 and 2014 |
| | |
Held-to-Maturity | |
| | |
Amortized
Cost | | |
Fair
Value | |
| Due in one year or less | |
$ | 2,303,625 | | |
$ | 2,314,939 | |
| Due after one through five years | |
| 694,383 | | |
| 736,597 | |
| Due after five through ten years | |
| 181,500 | | |
| 209,025 | |
| Due after ten years | |
| 105,000 | | |
| 124,015 | |
| Mortgage-backed securities | |
| 1,700,077 | | |
| 1,728,212 | |
| | |
| | | |
| | |
| Total | |
$ | 4,984,585 | | |
$ | 5,112,788 | |
Gross realized gains on the sale
of securities available-for-sale were $97,392 in 2015 and $66,287 in 2014. Gross realized losses were $-0- in 2015 and $249 in
2014.
The Company sold certain
of its securities held-to-maturity in 2015 and 2014. These securities were considered as held-to-maturity as more than
a substantial portion (at least 85%) of the principal outstanding at acquisition had been collected. Gross realized gains
were $3,630 in 2015 and $3,562 in 2014 and gross realized losses were $-0- in 2015 and $376 in 2014.
The following tables show the gross
unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in
a continuous unrealized loss position:
| | |
December 31,
2015 | |
| | |
Less
Than 12 Months | | |
12
Months or More | | |
Total | |
| | |
Fair
Value | | |
Unrealized
Loss | | |
Fair
Value | | |
Unrealized
Loss | | |
Fair
Value | | |
Unrealized
Value | |
| Available-for-sale: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| U.S.
government agencies | |
$ | 9,136,272 | | |
$ | 34,155 | | |
$ | 3,925,634 | | |
$ | 77,019 | | |
$ | 13,061,906 | | |
$ | 111,174 | |
Mortgage-backed
securities -
GSE - residential | |
| 9,612,590 | | |
| 74,297 | | |
| 28,709,226 | | |
| 707,917 | | |
| 38,321,816 | | |
| 782,214 | |
| Corporate
debt securities | |
| - | | |
| - | | |
| 493,670 | | |
| 10,923 | | |
| 493,670 | | |
| 10,923 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Total | |
$ | 18,748,862 | | |
$ | 108,452 | | |
$ | 33,128,530 | | |
$ | 795,859 | | |
$ | 51,877,392 | | |
$ | 904,311 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Held-to-maturity: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Mortgage-backed
securities -
GSE - residential | |
$ | 749,552 | | |
$ | 10,331 | | |
$ | - | | |
$ | - | | |
$ | 749,552 | | |
$ | 10,331 | |
| Delhi
Bank Corp. and Subsidiary |
| Notes to Consolidated Financial Statements |
| December 31, 2015 and 2014 |
| | |
December 31, 2014 | |
| | |
Less Than 12 Months | | |
12 Months or More | | |
Total | |
| | |
Fair
Value | | |
Unrealized
Loss | | |
Fair
Value | | |
Unrealized
Loss | | |
Fair
Value | | |
Unrealized
Value | |
| Available-for-sale: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| U.S. government agencies | |
$ | 808,363 | | |
$ | 10,392 | | |
$ | 6,074,902 | | |
$ | 165,135 | | |
$ | 6,883,265 | | |
$ | 175,527 | |
Mortgage-backed securities -
GSE - residential | |
| 569,646 | | |
| 1,635 | | |
| 38,987,018 | | |
| 966,856 | | |
| 39,556,664 | | |
| 968,491 | |
| Corporate debt securities | |
| 500,010 | | |
| 5,214 | | |
| - | | |
| - | | |
| 500,010 | | |
| 5,214 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Total | |
$ | 1,878,019 | | |
$ | 17,241 | | |
$ | 45,061,920 | | |
$ | 1,131,991 | | |
$ | 46,939,939 | | |
$ | 1,149,232 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Held-to-maturity: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Mortgage-backed securities -
GSE - residential | |
$ | 889,462 | | |
$ | 7,383 | | |
$ | - | | |
$ | - | | |
$ | 889,462 | | |
$ | 7,383 | |
The Company had 43 debt
securities in unrealized loss positions at December 31, 2015. The securities have depreciated approximately 1.7% from
the Company’s amortized cost basis. These securities are issued by U.S. government agencies, U.S. government sponsored
enterprises or large corporate issuers. The unrealized losses are considered to result from changes in interest rates and not
from downgrades in the creditworthiness of the issuers. In analyzing an issuer’s financial condition, management
considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating
agencies have occurred, and the results of reviews of the issuer’s financial condition. The Company does not intend to
sell these securities nor is it more likely than not that it will be required to sell these securities prior to recovery. No
declines are deemed to be other-than-temporary.
Investment securities with carrying
amounts of $38,697,321 and $46,159,935 at December 31, 2015 and 2014, respectively, were pledged to secure deposits as required
or permitted by law.
| Delhi
Bank Corp. and Subsidiary |
| Notes to Consolidated Financial Statements |
| December 31, 2015 and 2014 |
| 4. | Loans Receivable and Allowance for Loan Losses |
Loans receivable at December 31
are summarized as follows:
| | |
2015 | | |
2014 | |
| Real estate: | |
| | | |
| | |
| Residential | |
$ | 62,659,248 | | |
$ | 61,072,806 | |
| Commercial | |
| 30,339,992 | | |
| 29,204,341 | |
| Commercial and industrial | |
| 2,451,357 | | |
| 2,394,496 | |
| Agricultural | |
| 156,025 | | |
| 147,926 | |
| Consumer | |
| 3,401,289 | | |
| 3,878,932 | |
| | |
| | | |
| | |
| Total | |
| 99,007,911 | | |
| 96,698,501 | |
| | |
| | | |
| | |
| Allowance for loan losses | |
| 429,708 | | |
| 738,959 | |
| Deferred loan costs, net | |
| 1,794,301 | | |
| 1,666,264 | |
| | |
| | | |
| | |
| Net | |
$ | 100,372,504 | | |
$ | 97,625,806 | |
Changes in the allowance for loan
losses for 2015 and related loan information are as follows:
| | |
Residential
Real Estate | | |
Commercial
Real Estate | | |
Commercial
and
Industrial | | |
Agricultural | | |
Consumer | | |
Total | |
| Allowance for loan losses: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Beginning balance,
January 1, 2015 | |
$ | 474,149 | | |
$ | 76,210 | | |
$ | 9,545 | | |
$ | 444 | | |
$ | 178,611 | | |
$ | 738,959 | |
| Charge-offs | |
| (416,915 | ) | |
| (33,252 | ) | |
| - | | |
| - | | |
| (24,548 | ) | |
| (474,715 | ) |
| Recoveries | |
| - | | |
| 11,008 | | |
| 600 | | |
| - | | |
| 13,856 | | |
| 25,464 | |
| Provision | |
| 211,087 | | |
| 34,065 | | |
| 425 | | |
| 24 | | |
| (105,601 | ) | |
| 140,000 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Ending balance,
December 31, 2015 | |
$ | 268,321 | | |
$ | 88,031 | | |
$ | 10,570 | | |
$ | 468 | | |
$ | 62,318 | | |
$ | 429,708 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Ending balance individually evaluated for impairment | |
$ | 6,285 | | |
$ | 21,532 | | |
$ | 1,916 | | |
$ | - | | |
$ | 3,459 | | |
$ | 33,192 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Ending balance collectively evaluated for impairment | |
$ | 262,036 | | |
$ | 66,499 | | |
$ | 8,654 | | |
$ | 468 | | |
$ | 58,859 | | |
$ | 396,516 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Loans receivable at
December 31, 2015: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Total balance | |
$ | 62,659,248 | | |
$ | 30,339,992 | | |
$ | 2,451,357 | | |
$ | 156,025 | | |
$ | 3,401,289 | | |
$ | 99,007,911 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Ending balance individually evaluated for impairment | |
$ | 1,479,151 | | |
$ | 328,087 | | |
$ | 1,916 | | |
$ | - | | |
$ | 24,090 | | |
$ | 1,833,244 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Ending balance collectively evaluated for impairment | |
$ | 61,180,097 | | |
$ | 30,011,905 | | |
$ | 2,449,441 | | |
$ | 156,025 | | |
$ | 3,377,199 | | |
$ | 97,174,667 | |
| Delhi
Bank Corp. and Subsidiary |
| Notes to Consolidated Financial Statements |
| December 31, 2015 and 2014 |
Changes in the allowance for loan
losses for 2014 and related loan information are as follows:
| | |
Residential
Real Estate | | |
Commercial
Real Estate | | |
Commercial
and
Industrial | | |
Agricultural | | |
Consumer | | |
Total | |
| Allowance for loan losses: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Beginning balance,
January 1, 2014 | |
$ | 388,764 | | |
$ | 169,176 | | |
$ | 14,738 | | |
$ | 610 | | |
$ | 177,291 | | |
$ | 750,579 | |
| Charge-offs | |
| (26,215 | ) | |
| - | | |
| (2,311 | ) | |
| - | | |
| (37,077 | ) | |
| (65,603 | ) |
| Recoveries | |
| 1,500 | | |
| 10,743 | | |
| 2,316 | | |
| 481 | | |
| 14,443 | | |
| 29,483 | |
| Provision | |
| 110,100 | | |
| (103,709 | ) | |
| (5,198 | ) | |
| (647 | ) | |
| 23,954 | | |
| 24,500 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Ending balance,
December 31, 2014 | |
$ | 474,149 | | |
$ | 76,210 | | |
$ | 9,545 | | |
$ | 444 | | |
$ | 178,611 | | |
$ | 738,959 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Ending balance individually evaluated for impairment | |
$ | 99,514 | | |
$ | 14,497 | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 114,011 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Ending balance collectively evaluated for impairment | |
$ | 374,635 | | |
$ | 61,713 | | |
$ | 9,545 | | |
$ | 444 | | |
$ | 178,611 | | |
$ | 624,948 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Loans receivable at
December 31, 2014: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Total balance | |
$ | 61,072,806 | | |
$ | 29,204,341 | | |
$ | 2,394,496 | | |
$ | 147,926 | | |
$ | 3,878,932 | | |
$ | 96,698,501 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Ending balance individually evaluated for impairment | |
$ | 1,574,943 | | |
$ | 302,604 | | |
$ | - | | |
$ | - | | |
$ | 21,491 | | |
$ | 1,899,038 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Ending balance collectively evaluated for impairment | |
$ | 59,497,863 | | |
$ | 28,901,737 | | |
$ | 2,394,496 | | |
$ | 147,926 | | |
$ | 3,857,441 | | |
$ | 94,799,463 | |
| Delhi
Bank Corp. and Subsidiary |
| Notes to Consolidated Financial Statements |
| December 31, 2015 and 2014 |
The following table summarizes information
on impaired loans at December 31:
| December 31, 2015 | |
Recorded
Investment | | |
Unpaid
Principal
Balance | | |
Related
Allowance | | |
Average
Recorded
Investment | | |
Interest
Income
Recognized | |
| With no related allowance recorded: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Commercial real estate | |
$ | 216,072 | | |
$ | 210,675 | | |
$ | - | | |
$ | 184,185 | | |
$ | 10,489 | |
| Residential real estate | |
| 1,400,771 | | |
| 1,355,413 | | |
| - | | |
| 895,664 | | |
| 59,545 | |
| Consumer | |
| 22,304 | | |
| 20,631 | | |
| - | | |
| 22,802 | | |
| 2,341 | |
| Commercial and industrial | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| With an allowance recorded: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Commercial real estate | |
$ | 117,412 | | |
$ | 117,412 | | |
$ | 21,532 | | |
$ | 138,981 | | |
$ | 2,749 | |
| Residential real estate | |
| 123,738 | | |
| 123,738 | | |
| 6,285 | | |
| 629,973 | | |
| 8,250 | |
| Consumer | |
| 3,459 | | |
| 3,459 | | |
| 3,459 | | |
| 466 | | |
| 78 | |
| Commercial and industrial | |
| 1,916 | | |
| 1,916 | | |
| 1,916 | | |
| 160 | | |
| 285 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Totals: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Commercial real estate | |
$ | 333,484 | | |
$ | 328,087 | | |
$ | 21,532 | | |
$ | 323,166 | | |
$ | 13,238 | |
| Residential real estate | |
| 1,524,509 | | |
| 1,479,151 | | |
| 6,285 | | |
| 1,525,637 | | |
| 67,795 | |
| Consumer | |
| 25,763 | | |
| 24,090 | | |
| 3,459 | | |
| 23,268 | | |
| 2,419 | |
| Commercial and industrial | |
| 1,916 | | |
| 1,916 | | |
| 1,916 | | |
| 160 | | |
| 285 | |
| December 31, 2014 | |
Recorded
Investment | | |
Unpaid
Principal
Balance | | |
Related
Allowance | | |
Average
Recorded
Investment | | |
Interest
Income
Recognized | |
| With no related allowance recorded: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Commercial real estate | |
$ | 217,614 | | |
$ | 214,787 | | |
$ | - | | |
$ | 228,494 | | |
$ | 7,312 | |
| Residential real estate | |
| 1,254,911 | | |
| 1,181,560 | | |
| - | | |
| 1,317,656 | | |
| 45,400 | |
| Consumer | |
| 22,664 | | |
| 21,491 | | |
| - | | |
| 23,797 | | |
| 1,475 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| With an allowance recorded: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Commercial real estate | |
$ | 87,817 | | |
$ | 87,817 | | |
$ | 14,497 | | |
$ | 92,208 | | |
$ | - | |
| Residential real estate | |
| 407,364 | | |
| 393,383 | | |
| 99,514 | | |
| 427,732 | | |
| 17,857 | |
| Consumer | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Totals: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Commercial real estate | |
$ | 305,431 | | |
$ | 302,604 | | |
$ | 14,497 | | |
$ | 320,702 | | |
$ | 7,312 | |
| Residential real estate | |
| 1,662,275 | | |
| 1,574,943 | | |
| 99,514 | | |
| 1,745,388 | | |
| 63,257 | |
| Consumer | |
| 22,664 | | |
| 21,491 | | |
| - | | |
| 23,797 | | |
| 1,475 | |
The following table presents information
on nonaccrual loans at December 31:
| | |
2015 | | |
2014 | |
| Commercial real estate | |
$ | 216,689 | | |
$ | 188,409 | |
| Residential real estate | |
| 655,699 | | |
| 543,801 | |
| Consumer | |
| 3,000 | | |
| - | |
| | |
| | | |
| | |
| Total | |
$ | 875,388 | | |
$ | 732,210 | |
| Delhi
Bank Corp. and Subsidiary |
| Notes to Consolidated Financial Statements |
| December 31, 2015 and 2014 |
The following table presents information
by the Company’s internal risk rating system at December 31:
| 2015 | |
Residential
Real Estate | | |
Commercial
Real Estate | | |
Commercial
and
Industrial | | |
Agricultural | | |
Consumer | | |
Total | |
| Pass | |
$ | 57,146,555 | | |
$ | 26,747,239 | | |
$ | 2,094,192 | | |
$ | 156,025 | | |
$ | 3,214,984 | | |
$ | 89,358,995 | |
| Special mention | |
| 2,932,499 | | |
| 1,425,771 | | |
| 134,898 | | |
| - | | |
| 146,822 | | |
| 4,639,990 | |
| Substandard | |
| 1,761,497 | | |
| 1,950,293 | | |
| 220,351 | | |
| - | | |
| 36,024 | | |
| 3,968,165 | |
| Doubtful | |
| 818,697 | | |
| 216,689 | | |
| 1,916 | | |
| - | | |
| 3,459 | | |
| 1,040,761 | |
| Loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Total | |
$ | 62,659,248 | | |
$ | 30,339,992 | | |
$ | 2,451,357 | | |
$ | 156,025 | | |
$ | 3,401,289 | | |
$ | 99,007,911 | |
| 2014 | |
Residential
Real Estate | | |
Commercial
Real Estate | | |
Commercial
and
Industrial | | |
Agricultural | | |
Consumer | | |
Total | |
| Pass | |
$ | 55,290,866 | | |
$ | 25,379,269 | | |
$ | 1,881,721 | | |
$ | 141,498 | | |
$ | 3,666,655 | | |
$ | 86,360,009 | |
| Special mention | |
| 3,220,308 | | |
| 2,050,448 | | |
| 327,400 | | |
| 6,428 | | |
| 171,686 | | |
| 5,776,270 | |
| Substandard | |
| 2,017,831 | | |
| 1,586,215 | | |
| 185,375 | | |
| - | | |
| 40,591 | | |
| 3,830,012 | |
| Doubtful | |
| 543,801 | | |
| 188,409 | | |
| - | | |
| - | | |
| - | | |
| 732,210 | |
| Loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Total | |
$ | 61,072,806 | | |
$ | 29,204,341 | | |
$ | 2,394,496 | | |
$ | 147,926 | | |
$ | 3,878,932 | | |
$ | 96,698,501 | |
The following table presents information
on past due status at December 31:
| 2015 | |
30-59
Days
Past Due | | |
60-89
Days
Past Due | | |
Greater
> 90
Days | | |
Total
Past Due | | |
Current | | |
Total
Loans | |
Recorded
Investment
> 90 Days
Accruing | |
| Residential real estate | |
$ | 446,969 | | |
$ | 323,244 | | |
$ | 1,240,914 | | |
$ | 2,011,127 | | |
$ | 60,648,121 | | |
$62,659,248 | |
$ | 676,050 | |
| Commercial real estate | |
| 75,374 | | |
| 42,038 | | |
| 21,150 | | |
| 138,562 | | |
| 30,201,430 | | |
30,339,992 | |
| - | |
| Commercial and industrial | |
| - | | |
| - | | |
| - | | |
| - | | |
| 2,451,357 | | |
2,451,357 | |
| - | |
| Agricultural | |
| - | | |
| - | | |
| - | | |
| - | | |
| 156,025 | | |
156,025 | |
| - | |
| Consumer | |
| 2,631 | | |
| 20,631 | | |
| 11,567 | | |
| 34,829 | | |
| 3,366,460 | | |
3,401,289 | |
| 8,567 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| |
| | |
| Total | |
$ | 524,974 | | |
$ | 385,913 | | |
$ | 1,273,631 | | |
$ | 2,184,518 | | |
$ | 96,823,393 | | |
$99,007,911 | |
$ | 684,617 | |
| 2014 | |
30-59
Days
Past Due | | |
60-89
Days
Past Due | | |
Greater
> 90
Days | | |
Total
Past Due | | |
Current | | |
Total
Loans | | |
Recorded
Investment
> 90 Days
Accruing | |
| Residential real estate | |
$ | 602,654 | | |
$ | 110,753 | | |
$ | 1,396,128 | | |
$ | 2,109,535 | | |
$ | 58,963,271 | | |
$ | 61,072,806 | | |
$ | 933,152 | |
| Commercial real estate | |
| 18,724 | | |
| - | | |
| 43,308 | | |
| 62,032 | | |
| 29,142,309 | | |
| 29,204,341 | | |
| 43,308 | |
| Commercial and industrial | |
| - | | |
| - | | |
| - | | |
| - | | |
| 2,394,496 | | |
| 2,394,496 | | |
| - | |
| Agricultural | |
| - | | |
| - | | |
| - | | |
| - | | |
| 147,926 | | |
| 147,926 | | |
| - | |
| Consumer | |
| 16,910 | | |
| - | | |
| 21,652 | | |
| 38,562 | | |
| 3,840,370 | | |
| 3,878,932 | | |
| 21,652 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Total | |
$ | 638,288 | | |
$ | 110,753 | | |
$ | 1,461,088 | | |
$ | 2,210,129 | | |
$ | 94,488,372 | | |
$ | 96,698,501 | | |
$ | 998,112 | |
| Delhi
Bank Corp. and Subsidiary |
| Notes to Consolidated Financial Statements |
| December 31, 2015 and 2014 |
The Company may grant a concession
or modification for economic or legal reasons related to a borrower’s financial condition that it would not otherwise consider
resulting in a modified loan which is then identified as a troubled debt restructuring (“TDR”). The Company may modify
loans through rate reductions, extensions of maturity, interest only payments, or payment modifications to better match the timing
of cash flows due under the modified terms with the cash flows from the borrowers’ operations. Loan modifications are intended
to minimize the economic loss and to avoid foreclosure or repossession of the collateral. TDRs are considered impaired loans for
purposes of calculating the Company’s allowance for loan losses.
The Company identifies loans for
potential restructure primarily through direct communication with the borrower and evaluation of the borrower’s financial
statements, revenue projections, tax returns, and credit reports. Even if the borrower is not presently in default, management
will consider the likelihood that cash flow shortages, adverse economic conditions, and negative trends may result in a payment
default in the near future.
The Company did not enter into any
TDRs or have any TDRs default in 2015 and 2014.
Premises and equipment at December 31
is summarized as follows:
| | |
2015 | | |
2014 | |
| Land | |
$ | 683,780 | | |
$ | 560,041 | |
| Buildings and improvements | |
| 3,931,640 | | |
| 3,872,844 | |
| Furniture and equipment | |
| 1,829,581 | | |
| 3,076,828 | |
| Asset under capital lease | |
| 300,000 | | |
| 300,000 | |
| | |
| | | |
| | |
| Total cost | |
| 6,745,001 | | |
| 7,809,713 | |
| | |
| | | |
| | |
| Less accumulated depreciation | |
| 3,703,960 | | |
| 4,734,878 | |
| | |
| | | |
| | |
| Net | |
$ | 3,041,041 | | |
$ | 3,074,835 | |
The Company leases a branch
facility under the terms of a lease agreement that has been accounted for as a capital lease. The lease expires in 2025 but
there are options for three additional five year extensions. The net book value of the asset under capital lease was $193,333
at December 31, 2015 and $213,333 at December 31, 2014.
| Delhi
Bank Corp. and Subsidiary |
| Notes to Consolidated Financial Statements |
| December 31, 2015 and 2014 |
Future minimum lease payments are
as follows:
| Year Ended December 31: | |
| | |
| 2016 | |
$ | 32,340 | |
| 2017 | |
| 32,340 | |
| 2018 | |
| 32,340 | |
| 2019 | |
| 32,340 | |
| 2020 | |
| 33,420 | |
| Thereafter | |
| 166,039 | |
| | |
| | |
| Total minimum lease payments | |
| 328,819 | |
| | |
| | |
| Amount representing interest | |
| 89,153 | |
| | |
| | |
| Net present value of minimum lease payments | |
$ | 239,666 | |
Interest expense on the capital
lease was $16,596 in 2015 and $17,431 in 2014.
Deposit account balances at December 31
are summarized as follows:
| | |
2015 | | |
2014 | |
| Noninterest-bearing | |
$ | 41,057,398 | | |
$ | 34,852,330 | |
| Interest-bearing demand | |
| 30,182,579 | | |
| 25,968,062 | |
| Money market | |
| 18,635,875 | | |
| 18,598,026 | |
| Savings | |
| 96,500,809 | | |
| 94,003,778 | |
| Time | |
| 68,848,570 | | |
| 79,380,169 | |
| | |
| | | |
| | |
| Total | |
$ | 255,225,231 | | |
$ | 252,802,365 | |
Time deposits in denominations of
$250,000 and over were $11,526,918 and $19,948,369 at December 31, 2015 and 2014,
respectively.
At December 31, 2015, scheduled
maturities of time deposits are as follows (in thousands):
| 2016 | |
$ | 38,709 | |
| 2017 | |
| 9,678 | |
| 2018 | |
| 6,675 | |
| 2019 | |
| 8,071 | |
| 2020 | |
| 5,716 | |
| | |
| | |
| Total | |
$ | 68,849 | |
| Delhi
Bank Corp. and Subsidiary |
| Notes to Consolidated Financial Statements |
| December 31, 2015 and 2014 |
The Company has a $1,500,000 unsecured
line of credit agreement with the Atlantic Community Bankers Bank at December 31, 2015. Borrowings bear interest at the prime
rate plus .50%, with a floor of 4.50%. The line expires July 2016. There were borrowings of $215,000 and $372,000 at December 31,
2015 and 2014, respectively.
The Company may borrow funds
from the FHLB up to the amount of eligible collateral (loans and securities) it places with the FHLB. At December 31,
2015, the Company had $25,679,267 available to borrow. This amount was reduced by a $10,750,000 municipal letter of credit
which expires August 2016 leaving an amount available for borrowing of $14,929,267.
The provision for income tax consists
of the following:
| | |
2015 | | |
2014 | |
| Current | |
$ | 205,663 | | |
$ | 269,271 | |
| Deferred | |
| 148,521 | | |
| 180,383 | |
| | |
| | | |
| | |
| Total | |
$ | 354,184 | | |
$ | 449,654 | |
The reconciliation between the expected
statutory income tax provision and the actual provision for income tax is as follows:
| | |
2015 | | |
2014 | |
| | |
Amount | | |
Percent | | |
Amount | | |
Percent | |
| Expected provision at statutory rate | |
$ | 705,463 | | |
| 34.0 | % | |
$ | 783,581 | | |
| 34.0 | % |
| Tax-exempt income | |
| (374,394 | ) | |
| (18.0 | ) | |
| (372,301 | ) | |
| (16.2 | ) |
| State income taxes and other, net | |
| 23,115 | | |
| 1.1 | | |
| 38,374 | | |
| 1.7 | |
| | |
| | | |
| | | |
| | | |
| | |
| Actual provision and rate | |
$ | 354,184 | | |
| 17.1 | % | |
$ | 449,654 | | |
| 19.5 | % |
| Delhi
Bank Corp. and Subsidiary |
| Notes to Consolidated Financial Statements |
| December 31, 2015 and 2014 |
The following
temporary differences gave rise to the net deferred tax asset at December 31:
| | |
2015 | | |
2014 | |
| Deferred compensation | |
$ | 987,744 | | |
$ | 972,259 | |
| AMT credit carryforward | |
| 355,622 | | |
| 344,895 | |
| Allowance for loan losses | |
| 88,659 | | |
| 209,868 | |
| Depreciation | |
| 50,392 | | |
| 52,801 | |
| Other | |
| 91,625 | | |
| 77,258 | |
| | |
| | | |
| | |
| Total deferred tax assets | |
| 1,574,042 | | |
| 1,657,081 | |
| | |
| | | |
| | |
| Unrealized gains on available-for-sale securities | |
| (317,318 | ) | |
| (418,850 | ) |
| Deferred loan costs | |
| (582,905 | ) | |
| (517,423 | ) |
| | |
| | | |
| | |
| Total deferred tax liabilities | |
| (900,223 | ) | |
| (936,273 | ) |
| | |
| | | |
| | |
| Net deferred tax asset | |
$ | 673,819 | | |
$ | 720,808 | |
The net deferred tax asset is included
in other assets in 2015 and 2014.
The Company had no unrecognized
tax benefits at December 31, 2015 and 2014. There were no interest and penalties recognized in the consolidated balance sheet
and statement of income in 2015 and 2014.
| 9. | Pension and Postretirement Benefits |
The Company sponsors two defined
contribution plans, a 401(k) plan and a non-leveraged employee stock ownership plan (“ESOP”) covering substantially
all eligible Company employees. Eligible employees may defer and contribute a percentage of their annual earnings to the plans.
In the 401(k) plan, the Company contributes 100% of the first 5% of compensation deferred. In the ESOP, the Company contributes
100% of the first 5% of compensation deferred. Pension expense for these plans was $185,109 in 2015 and $176,579 in 2014. The ESOP
held 120,386 and 134,963 of the Company’s stock at December 31, 2015 and 2014, with a fair value of $2,347,532 and $2,699,265,
respectively. The ESOP shares are eligible to receive dividends and are considered outstanding shares for purposes of computing
net income per share.
The Company also has individual
deferred compensation arrangements with certain key executives and directors which provide supplemental retirement benefits. The
total of these obligations was $2,807,919 and $2,776,113 at December 31, 2015 and 2014, respectively. Expense related to these
arrangements was $203,806 in 2015 and $62,863 in 2014.
| Delhi
Bank Corp. and Subsidiary |
| Notes to Consolidated Financial Statements |
| December 31, 2015 and 2014 |
| 10. | Related Party Transactions |
In the ordinary course of business,
the Company has granted loans to principal officers, directors, significant shareholders (greater than 10%) and their affiliates.
Such transactions were made on substantially the same terms and at those rates prevailing at the same time for comparable transactions
with other customers. The following table summarizes the activity in these loans:
| | |
2015 | | |
2014 | |
| Balance, beginning | |
$ | 1,450,847 | | |
$ | 1,959,506 | |
| New loans | |
| 8,500 | | |
| 1,211,759 | |
| Repayments | |
| (143,481 | ) | |
| (1,720,418 | ) |
| | |
| | | |
| | |
| Balance, ending | |
$ | 1,315,866 | | |
$ | 1,450,847 | |
The Bank held deposits of $469,190
and $407,945 for related parties at December 31, 2015 and 2014, respectively.
A director of the Company provides
professional legal services to the Company. Fees for these services were approximately $45,000 in 2015 and 2014.
| 11. | Financial Instruments with Off-Balance-Sheet Risk |
The Company is a party to financial
instruments with off balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial
instruments include commitments to extend credit and standby letters of credit. Such commitments involve, to varying degrees, elements
of credit and interest rate risk in excess of the amounts recognized in the consolidated balance sheet. The Company’s exposure
to credit loss is represented by the contractual amounts of these commitments. The Company follows the same credit policies in
making commitments as it does for on-balance-sheet instruments.
Commitments to extend credit are
agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally
have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected
to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Unfunded
commitments under lines of credit are commitments for possible future extensions of credit to existing customers. These lines of
credit may or may not be collateralized and usually contain a specified maturity date and may not be drawn upon to the total extent
to which the Company is committed.
Standby letters of credit written
are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those letters-of-credit
are primarily issued to support public and private borrowing arrangements. Essentially all letters of credit issued have expiration
dates within one year. The credit risk involved in issuing letters-of-credit is essentially the same as that involved in extending
loan facilities to customers.
| Delhi
Bank Corp. and Subsidiary |
| Notes to Consolidated Financial Statements |
| December 31, 2015 and 2014 |
To reduce credit risk related to
the use of credit-related financial instruments, the Company might deem it necessary to obtain collateral. The amount and nature
of the collateral obtained is based on the Company’s credit evaluation of the customer. Collateral held varies but may include
cash, securities, accounts receivable, inventory, property, plant and equipment and real estate. The Company has not incurred any
losses on its commitments in either 2015 or 2014.
Financial instruments whose contract
amount represents credit risk were as follows:
| | |
2015 | | |
2014 | |
| Commitments to extend credit (including lines of credit) | |
$ | 17,002,728 | | |
$ | 16,137,253 | |
| Standby letters of credit | |
| 280,794 | | |
| 280,794 | |
| 12. | Fair Value Disclosures |
Fair value is defined as an exit
price representing the amount that would be received to sell an asset or settle a liability in an orderly transaction between market
participants. A three-level hierarchy exists for fair value measurements based upon the inputs to the valuation of an asset or
liability.
Level 1 - Valuation is based on quoted
prices in active markets for identical assets or liabilities;
Level 2 - Valuation is determined
from quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets or liabilities
in markets that are not active; or inputs that are observable for the asset or liability, either directly or indirectly through
market corroboration, for substantially the full term of the financial instrument;
Level 3 - Valuation is derived from
model-based and other techniques in which at least one significant input is unobservable and which may be based on the Company’s
own estimates about the assumptions that a market participant would use to value the asset or liability.
| Delhi
Bank Corp. and Subsidiary |
| Notes to Consolidated Financial Statements |
| December 31, 2015 and 2014 |
The following table sets forth the
Company’s financial assets and liabilities measured at fair value on a recurring basis by level within the fair value hierarchy:
| | |
December 31, 2015 | |
| | |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
| Available-for-sale: | |
| | | |
| | | |
| | | |
| | |
| U.S. government agencies | |
$ | - | | |
$ | 43,841,375 | | |
$ | - | | |
$ | 43,841,375 | |
| U.S. government sponsored enterprises - (“GSE”) - mortgage - backed securities - residential | |
| - | | |
| 52,758,527 | | |
| - | | |
| 52,758,527 | |
| Corporate debt securities | |
| - | | |
| 1,527,856 | | |
| - | | |
| 1,527,856 | |
| Local government obligations | |
| - | | |
| 15,763,094 | | |
| - | | |
| 15,763,094 | |
| | |
| | | |
| | | |
| | | |
| | |
| Total | |
$ | - | | |
$ | 113,890,852 | | |
$ | - | | |
$ | 113,890,852 | |
| | |
December 31, 2014 | |
| Available-for-sale: | |
| | | |
| | | |
| | | |
| | |
| U.S. government agencies | |
$ | - | | |
$ | 34,763,344 | | |
$ | - | | |
$ | 34,763,344 | |
| U.S. government sponsored enterprises - (“GSE”) - mortgage - backed securities - residential | |
| - | | |
| 63,546,860 | | |
| - | | |
| 63,546,860 | |
| Corporate debt securities | |
| - | | |
| 1,550,945 | | |
| - | | |
| 1,550,945 | |
| Local government obligations | |
| - | | |
| 26,337,173 | | |
| - | | |
| 26,337,173 | |
| | |
| | | |
| | | |
| | | |
| | |
| Total | |
$ | - | | |
$ | 126,198,322 | | |
$ | - | | |
$ | 126,198,322 | |
A financial asset or liability’s
classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
All debt securities are measured
at fair value using quoted prices from an independent third party that provide valuation services, such as matrix pricing, for
similar assets, with similar terms in actively traded markets.
| Delhi
Bank Corp. and Subsidiary |
| Notes to Consolidated Financial Statements |
| December 31, 2015 and 2014 |
The following table sets forth the
Company’s financial assets and liabilities subject to fair value adjustments on a nonrecurring basis by level within the
fair value hierarchy:
| | |
December 31, 2015 | |
| | |
| Level 1 | | |
| Level 2 | | |
| Level 3 | | |
| Total | |
| | |
| | | |
| | | |
| | | |
| | |
| Impaired loans, net | |
$ | - | | |
$ | - | | |
$ | 213,333 | | |
$ | 213,333 | |
| | |
December 31, 2014 | |
| | |
| |
| Impaired loans, net | |
$ | - | | |
$ | - | | |
$ | 367,189 | | |
$ | 367,189 | |
Impaired loans that are collateral
dependent are written down to fair value through the establishment of specific reserves. Such collateral is primarily real estate
whose value is based on appraisals performed by certified appraisers. These values are generally adjusted based on management’s
knowledge of changes in market conditions or other factors. Since the adjustments may be significant, are based on management’s
estimates and are generally unobservable, they have been classified as Level 3.
The appraisals may be adjusted by
management for qualitative reasons and estimated liquidation expenses. Management’s assumptions may include consideration
of location and occupancy of the property and current economic conditions. At December 31, 2015 and 2014, to account for these
factors, negative adjustments to the appraisal value between 6-26% were made.
In addition to the disclosures of
financial instruments recorded at fair value, generally accepted accounting principles require the disclosure of the estimated
fair value of all the Company’s financial instruments. The majority of the Company’s assets and liabilities are considered
financial instruments. However, many of these instruments lack an available market. In addition, the Company’s general practice
and intent is to hold its financial instruments to maturity. The Company has considered the fair value measurement criteria as
required under the accounting standard relating to fair value measurement as noted above. Fair value estimates have been determined
based on the methodologies management considers most appropriate for each financial instrument.
| Delhi
Bank Corp. and Subsidiary |
| Notes to Consolidated Financial Statements |
| December 31, 2015 and 2014 |
| | |
2015 | |
| | |
Carrying
Amount | | |
Estimated
Fair Value | | |
Level 1 | | |
Level 2 | | |
Level 3 | |
| Financial assets: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Cash and due from banks | |
$ | 16,691,113 | | |
$ | 16,691,113 | | |
$ | 16,691,113 | | |
$ | - | | |
$ | - | |
| Interest-bearing deposits with banks | |
| 37,177,000 | | |
| 37,177,000 | | |
| - | | |
| 37,177,000 | | |
| - | |
| Available-for-sale securities | |
| 113,890,852 | | |
| 113,890,852 | | |
| - | | |
| 113,890,852 | | |
| - | |
| Held-to-maturity securities | |
| 4,984,585 | | |
| 5,112,788 | | |
| - | | |
| 5,112,788 | | |
| - | |
| Restricted equity securities | |
| 322,100 | | |
| 322,100 | | |
| - | | |
| 322,100 | | |
| - | |
| Loans receivable, net | |
| 100,372,504 | | |
| 105,163,000 | | |
| - | | |
| - | | |
| 105,163,000 | |
| Accrued interest receivable | |
| 973,602 | | |
| 973,602 | | |
| - | | |
| 973,602 | | |
| - | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Financial liabilities: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Deposits | |
| 255,225,231 | | |
| 255,324,661 | | |
| - | | |
| 255,324,661 | | |
| - | |
| Short-term borrowings | |
| 215,000 | | |
| 215,000 | | |
| - | | |
| 215,000 | | |
| - | |
| Accrued interest payable | |
| 29,938 | | |
| 29,938 | | |
| - | | |
| 29,938 | | |
| - | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Off-balance sheet financial instruments: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Commitments to extend credit | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| Standby letters of credit | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| | |
2014 | |
| Financial assets: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Cash and due from banks | |
$ | 4,660,891 | | |
$ | 4,660,891 | | |
$ | 4,660,891 | | |
$ | - | | |
$ | - | |
| Interest-bearing deposits with banks | |
| 32,445,000 | | |
| 32,445,000 | | |
| - | | |
| 32,445,000 | | |
| - | |
| Available-for-sale securities | |
| 126,198,322 | | |
| 126,198,322 | | |
| - | | |
| 126,198,322 | | |
| - | |
| Held-to-maturity securities | |
| 7,754,529 | | |
| 7,940,481 | | |
| - | | |
| 7,940,481 | | |
| - | |
| Restricted equity securities | |
| 371,700 | | |
| 371,700 | | |
| - | | |
| 371,700 | | |
| - | |
| Loans receivable, net | |
| 97,625,806 | | |
| 101,245,000 | | |
| - | | |
| - | | |
| 101,245,000 | |
| Accrued interest receivable | |
| 1,209,866 | | |
| 1,209,866 | | |
| - | | |
| 1,209,866 | | |
| - | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Financial liabilities: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Deposits | |
| 252,802,365 | | |
| 252,956,196 | | |
| - | | |
| 252,956,196 | | |
| - | |
| Short-term borrowings | |
| 372,000 | | |
| 372,000 | | |
| - | | |
| 372,000 | | |
| - | |
| Accrued interest payable | |
| 39,802 | | |
| 39,802 | | |
| - | | |
| 39,802 | | |
| - | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Off-balance sheet financial instruments: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Commitments to extend credit | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| Standby letters of credit | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| Delhi
Bank Corp. and Subsidiary |
| Notes to Consolidated Financial Statements |
| December 31, 2015 and 2014 |
The carrying value of short-term
financial instruments, as listed below, approximates their fair value. These instruments generally have limited credit exposure,
no stated or short-term maturities and carry interest rates that approximate market.
| |
Assets |
|
Liabilities |
| |
|
|
|
| |
Cash and due from banks |
|
Demand and savings deposits |
| |
Interest-bearing deposits with banks |
|
Short-term borrowings |
| |
Accrued interest receivable |
|
Accrued interest payable |
The fair value methodology for available-for-sale
securities was described previously. The fair value methodology for held-to-maturity securities is similar to the methodology for
available-for-sale securities. The fair value of restricted equity securities is considered to approximate its carrying value as
there is no market for these securities and the stock is redeemable at par value.
For short-term loans and variable
rate loans which reprice within 90 days, the carrying value is considered to approximate fair value. For other types of loans,
fair value was estimated by discounting cash flows using current interest rates for similar loans, adjusted to reflect credit risk.
The fair value of interest–bearing
time deposits is estimated by discounting contractual cash flows using current rates for instruments with similar maturities.
The fair value of commitments to
extend credit is estimated using the fees currently charged for similar agreements. For fixed rate loan commitments, fair value
also considers the difference between current levels of interest rates and the committed rates. The fair value of standby letters
of credit is based on fees currently charged for similar agreements plus the estimated cost to terminate or otherwise settle the
obligations. The fair value of these instruments is considered immaterial.
The Company is subject to various
regulatory capital requirements administered by the federal banking agencies. The final rules implementing BASEL Committee on Banking
Supervisor’s Capital Guidance for U.S. banks (BASEL III rules) became effective for the Company on January 1, 2015, with
full compliance with all of the requirements being phased in over a multi-year schedule and fully phased in by January 1, 2019.
The net unrealized gain or losses on available-for-sale securities is not included in computing regulatory capital amounts and
ratios for December 31, 2014 are calculated using BASEL I rules. Failure to meet minimum capital requirements can initiate certain
mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect
on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective
action, the Company must meet specific capital guidelines that involve quantitative measures of its assets, liabilities, and certain
off-balance sheet items calculated under regulatory accounting practices. The capital amounts and classification are also subject
to qualitative judgments by the regulators about components, risk-weightings, and other factors.
| Delhi
Bank Corp. and Subsidiary |
| Notes to Consolidated Financial Statements |
| December 31, 2015 and 2014 |
Quantitative measures established
by regulation to ensure capital adequacy require the maintenance of minimum amounts and ratios (set forth on the following table)
of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets, and of Tier 1 capital to average
assets. Management believes, as of December 31, 2015, that the Company meets all capital adequacy requirements to which they
are subject.
As of December 31, 2015, the
most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as well capitalized, an institution must maintain minimum total risk-based,
Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following tables. There are no conditions or events
since that notification that management believes have changed the Bank’s category. The Company’s ratios do not differ
significantly from the Bank’s ratios presented below. The Bank’s actual capital amounts and ratios are as follows:
| | |
2015 | |
| | |
Actual | | |
For Capital Adequacy Purposes | | |
To be Well Capitalized under Prompt Corrective Action Provisions | |
| | |
Amount | | |
Ratio | | |
Amount | | |
Ratio | | |
Amount | | |
Ratio | |
| | |
(Dollar Amounts in Thousands) | |
Total capital
(to risk-weighted assets) | |
$ | 26,833 | | |
| 25.0 | % | |
$ | ≥ 8,587 | | |
| ³8.0 | % | |
$ | ³10,733 | | |
| ³10.0 | % |
| Common equity Tier 1 (CET1) capital (to risk-weighted assets) | |
| 26,358 | | |
| 24.5 | | |
| ³ 4,841 | | |
| ³4.5 | | |
| ³
6,993 | | |
| ³ 6.5 | |
Tier 1 (core) capital
(to risk-weighted assets) | |
| 26,358 | | |
| 24.5 | | |
| ³
6,455 | | |
| ³6.0 | | |
| ³
8,607 | | |
| ³
8.0 | |
Tier 1 (core) capital
(to average assets) | |
| 26,358 | | |
| 9.4 | | |
| ³11,216 | | |
| ³4.0 | | |
| ³ 14,020 | | |
| ³
5.0 | |
| | |
2014 | |
Total capital
(to risk-weighted assets) | |
$ | 25,932 | | |
| 25.9 | % | |
$ | ³ 8,004 | | |
| ³8.0 | % | |
$ | ³10,005 | | |
| ³10.0 | % |
Tier 1 (core) capital
(to risk-weighted assets) | |
| 25,148 | | |
| 25.1 | | |
| ³ 4,008 | | |
| ³4.0 | | |
| ³ 6,011 | | |
| ³
6.0 | |
Tier 1 (core) capital
(to average assets) | |
| 25,148 | | |
| 8.9 | | |
| ³11,302 | | |
| ³4.0 | | |
| ³14,128 | | |
| ³
5.0 | |
The Federal Reserve Bank has established
capital guidelines for bank holding companies. These guidelines allow holding companies with less than $500 million in assets an
exemption from regulatory capital requirements. The Bank Corp. meets the eligibility criteria and is exempt from regulatory capital
requirements.
The Bank is subject to legal limitations
on the amount of dividends that can be paid to the Bank Corp. without regulatory approval. Generally, the dividend limit is equal
to the current and preceding two years net income less dividends paid during the same period. However, dividend payments would
be prohibited if the effect would cause the Bank’s capital to be reduced below minimum capital requirements as discussed
above. The Bank’s retained earnings available for dividends was approximately $2,477,000 at December 31, 2015 and $2,618,000
at December 31, 2014.
| Delhi
Bank Corp. and Subsidiary |
| Notes to Consolidated Financial Statements |
| December 31, 2015 and 2014 |
| 14. | Dividend Reinvestment and Optional Cash Purchase Plan |
In 2003, the Company established
a Dividend Reinvestment and Optional Cash Purchase Plan (the “Plan”) for its shareholders. The Plan is designed to
provide the Company’s stock at no transactional cost to its shareholders. Cash dividends paid to shareholders who are enrolled
in the Plan plus voluntary cash deposits received are used to purchase shares either directly from the Company, from shares that
become available in the open market or from the Company’s previously acquired treasury stock. The Company has reserved 393,750
shares of its un-issued common stock for issuance under the Plan. Once these shares are issued, the Plan will terminate but there
is no set termination date. The maximum amount of common stock that may be issued in any twelve month period is limited in that
the aggregate consideration received from the sale of shares may not exceed $5,000,000. The Company issued 14,775 shares of common
stock in 2015 and 16,456 shares of common stock in 2014 directly from authorized but unissued shares of the Company plus the Company
sold 5,575 shares of treasury stock in 2015 and 5,436 shares of treasury stock in 2014 for a total of 20,350 and 21,892 shares
in 2015 and 2014, respectively. As of December 31, 2015, there were 217,323 shares available for future issuance.
You should rely only on the information contained
in this offering circular. Delhi Bank Corp. has not authorized anyone to provide you with different information. This offering
circular does not constitute an offer to sell or a solicitation of an offer to buy any of the securities offered by this offering
circular in any jurisdiction in which, or to any person to whom, such offer or solicitation is not authorized or in which the
person making the solicitation is not qualified to do so. Neither the delivery of this offering circular nor any sale hereunder
shall under any circumstances create any implication that there has been no change in the affairs of Delhi Bank Corp. since any
of the dates as of which information is furnished in this offering circular or since the date of this offering circular.
DELHI BANK
CORP.
DIVIDEND REINVESTMENT
AND
OPTIONAL CASH
PURCHASE PLAN
212,012 Shares of Common Stock
OFFERING CIRCULAR
March 16, 2016
PART III
EXHIBITS
| Exhibit No. |
|
Description |
| |
|
|
| 2.1 |
|
Charter of Delhi Bank Corp.(1) |
| 2.2 |
|
Bylaws of Delhi Bank Corp.(1) |
| 4.1 |
|
Authorization Form(1) |
| 6.1 |
|
Salary Continuation Agreement by and between The Delaware National Bank of Delhi and Robert W. Armstrong dated as of March 16, 2005(2) |
| 6.2 |
|
Salary Continuation Agreement by and between The Delaware National Bank of Delhi and Peter V. Gioffe dated as of December 29, 2009(2) |
| 6.3 |
|
Salary Continuation Agreement by and between The Delaware National Bank of Delhi and
Gretchen E. Rossley dated as of December 29, 2009 |
| 11.1 |
|
Consent of Baker Tilly Virchow Krause, LLP |
| 11.2 |
|
Consent of Kilpatrick Townsend & Stockton LLP |
| 12.1 |
|
Opinion of Kilpatrick Townsend & Stockton LLP(3) |
| (1) | Incorporated herein by reference to the Company’s Pre-Qualification Form 1-A Amendment No. 1, filed with the Securities
and Exchange Commission on May 15, 2001. |
| (2) | Incorporated herein by reference to the Company’s Post-Qualification Form 1-A Amendment No. 11, filed with the Securities
and Exchange Commission on March 16, 2012. |
| (3) | Incorporated herein by reference to the Company’s Pre-Qualification Form 1-A Amendment No. 3, filed with the Securities
and Exchange Commission on June 27, 2001. |
SIGNATURES
Pursuant to the requirements of Regulation
A, the issuer certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form 1-A
and has duly caused this offering statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the Village
of Delhi, State of New York, on March 16, 2016.
| |
DELHI BANK CORP. |
| |
|
|
| |
By: |
/s/ Robert W. Armstrong |
| |
|
Robert W. Armstrong |
| |
|
Director, President and Chief Executive Officer |
This offering statement has been signed by the following persons
in the capacities and on the dates indicated.
| /s/ Robert W. Armstrong |
|
|
|
|
| Robert W. Armstrong |
|
Director, President and |
|
March 16, 2016 |
| |
|
Chief Executive Officer |
|
|
| /s/ Peter V. Gioffe |
|
|
|
|
| Peter V. Gioffe |
|
Director, Vice President, Controller |
|
March 16, 2016 |
| |
|
and Human Resources Officer |
|
|
| /s/ Andrew F. Davis III |
|
|
|
|
| Andrew F. Davis III |
|
Chairman of the Board |
|
March 16, 2016 |
| |
|
|
|
|
| /s/ Kristen L. Baxter |
|
|
|
|
| Kristen L. Baxter |
|
Director |
|
March 16, 2016 |
| |
|
|
|
|
| /s/ Michael E. Finberg |
|
|
|
|
| Michael E. Finberg |
|
Director |
|
March 16, 2016 |
| |
|
|
|
|
| /s/ Bruce J. McKeegan |
|
|
|
|
| Bruce J. McKeegan |
|
Director |
|
March 16, 2016 |
| |
|
|
|
|
| /s/ Ann S. Morris |
|
|
|
|
| Ann S. Morris |
|
Director |
|
March 16, 2016 |
| |
|
|
|
|
| /s/ Paul J. Roach |
|
|
|
|
| Paul J. Roach |
|
Director |
|
March 16, 2016 |
Exhibit 6.3
DELAWARE NATIONAL BANK OF DELHI
SALARY CONTINUATION AGREEMENT
THIS AGREEMENT is adopted this
29th day of DECEMBER 2009, by and between THE DELAWARE NATIONAL BANK OF DELHI, a national bank located in Delhi,
New York (the “BANK”), and GRETCHEN E. ROSSLEY (the “EXECUTIVE”).
INTRODUCTION
To encourage
the Executive to remain an employee of the Bank, the Bank is willing to provide salary continuation benefits to the Executive.
The Bank will pay the benefits from its general assets.
AGREEMENT
The Bank
and the Executive agree as follows:
ARTICLE 1
DEFINITIONS
Whenever used
in this Agreement, the following words and phrases shall have the meanings specified:
“ACTUARIAL
EQUIVALENT” shall mean a benefit of equivalent current value to the benefit which could otherwise have been provided
to the Executive, computed on the basis of the discount rates, mortality tables and other assumptions applicable under Section
417(e) of the Code in determining the actuarial equivalent of payments.
“CHANGE
OF CONTROL” shall be deemed to have occurred in any of the following events:
| (i) | Merger: Delhi Bank Corp. (“the “Company”)
merges into or consolidates with another corporation, or merges another corporation into the Company, and, as a result, less than
a majority of the combined voting power of the resulting corporation immediately after the merger or consolidation is held by
persons who were stockholders of the Company immediately before the merger or consolidation. |
| (ii) | Acquisition of Significant Share Ownership: a report
on Schedule 13D or another form or schedule (other than Schedule 13G) is filed or is required to be filed under Sections 13(d)
or 14(d) of the Securities Exchange Act of 1934, if the schedule discloses that the filing person or persons acting in concert
has or have become the beneficial owner of 25% or more of a class of the Company’s voting securities, but this clause (b)
shall not apply to beneficial ownership of Company voting shares held in a fiduciary capacity by an entity of which the Company
directly or indirectly beneficially owns fifty percent (50%) or more of its outstanding voting securities; |
| (iii) | Change in Board Composition: During any period of
two consecutive years, individuals who constitute the Company’s or the Bank’s Board of Directors at the beginning of the
two-year period cease for any reason to constitute at least a majority of the Company’s or the Bank’s Board of Directors;
provided, however, that for purposes of this clause (iii), each director who is first elected by the board (or first nominated
by the board for election by the stockholders) by a vote of at least two-thirds (2/3) of the directors who were directors at the
beginning of the two-year period shall be deemed to have also been a director at the beginning of such period; or |
| (iv) | Sale of Assets: The Company or the Bank sells to
a third party all or substantially all of its assets. |
“CODE”
means the Internal Revenue Code of 1986, as amended.
“DISABILITY”
means the Executive’s suffering a sickness, accident or injury to such an extent that the Executive is receiving long-term
benefits from the carrier of any individual or group disability insurance policy covering the Executive, or from the Social Security
Administration. The Executive must submit proof to the Bank of the carrier’s or Social Security Administration’s determination
upon the request of the Bank.
“EFFECTIVE
DATE” means JANUARY 1, 2009.
“EARLY
TERMINATION” means the Executive, prior to Normal Retirement Age, has terminated employment with the Bank for reasons
other than Termination for Specially-Defined Cause, Disability, or Death.
“NORMAL
RETIREMENT AGE” means the Executive attaining age 58.
“NORMAL
RETIREMENT DATE” means the later of the Normal Retirement Age or the date on which Termination of Employment, as defined
below, occurs.
“TERMINATION
OF EMPLOYMENT” means that the Executive ceases to be employed by the Bank for any reason, voluntary or involuntary, other
than by reason of a leave of absence approved by the Bank.
“YEARS
OF SERVICE” means the Executive’s years of employment with the Bank, commencing on the Executive’s hire date
and including partial years of employment.
ARTICLE 2
LIFETIME BENEFITS
2.1 NORMAL
RETIREMENT BENEFIT. Upon the Executive’s Termination of
Employment on or after attaining his Normal Retirement Age for any reason other than death or a Termination for
Specially-Defined Cause, the Bank shall distribute to the Executive the benefit described in this Section 2.1 in lieu of any
other benefit under this Agreement.
2.1.1 AMOUNT
OF BENEFIT. The annual benefit under this Section 2.1 is twenty thousand dollars ($20,000).
2.1.2 DISTRIBUTION
OF BENEFIT. The Bank shall commence payment of the annual benefit on the first business day of the month
following the Executive’s Termination of Employment. The annual benefit shall be distributed to the Executive for
twenty (20) years.
2.2 EARLY
TERMINATION BENEFIT. The Early Termination benefit is the accrued liability balance reflected on the financial statements
of the Bank under GAAP accounting principles on the date of the Participant’s termination of services, vesting at 1/12th
per year. Payment of the Early Termination Benefit shall be made in the form of five annual payments equal to l/5th
of the accrued liability balance with the first payment being made in the month following the Executive’s termination
date.
2.3 DISABILITY
BENEFIT. If the Executive experiences a Disability which results in a Termination of Employment prior to Normal Retirement
Age, the Bank shall pay to the Executive the benefit described in this Section 2.3 in lieu of any other benefit under this Agreement.
The amount of the Disability Benefit is the accrued liability balance reflected on the financial statements of the Bank under GAAP
accounting principles on the date of the Participant’s termination of service, without regard to vesting. The Bank shall
pay the Disability benefit under this Section 2.3 to the Executive commencing with the month following Executive’s Termination
of Employment, paying the Disability benefit to the Executive for a period of ten (10) years.
2.4 CHANGE
IN CONTROL. If the Executive terminates employment within two years following a Change in Control and prior to Normal Retirement
Age, the Company shall pay to the Executive the benefit described in this Section 2.4 in lieu of any other benefit under this Agreement.
The annual amount of the Change in Control benefit is the Normal Retirement Benefit determined without regard to the Executive’s
age at Termination of Employment. The Bank shall pay the Change in Control benefit under this Section 2.4 to the Executive not
later than 30 days after his Termination of Employment in a lump sum that is the Actuarial Equivalent of the annual benefit determined
under this Section 2.4.
ARTICLE 3
DEATH BENEFITS
3.1 DEATH
DURING ACTIVE SERVICE. If the Executive dies prior to Termination of Employment of the Bank, the Bank shall pay to the
Executive’s beneficiary the benefit described in this Section 3.1 in lieu of any other benefits under this Agreement. The
amount of the Death Benefit is the accrued liability balance reflected on the financial statements of the Bank under GAAP accounting
principles on the date of the Participant’s termination of services, without regard to vesting. The Bank shall pay the Death
benefit under this Section 3.1 to the Executive’s beneficiary commencing with the month following the Executive’s death,
paying the Death benefit to the Executive’s beneficiary for a period of ten (10) years.
3.2 DEATH
DURING DISTRIBUTION OF A BENEFIT. If the Executive dies after benefit payments have commenced under Article 2 of this Agreement,
but before receiving all such payments, the Bank shall pay the remaining benefits to the Executive’s beneficiary at the same
time and in the same amounts they would have been paid to the Executive had the Executive survived.
3.3 DEATH
AFTER TERMINATION OF EMPLOYMENT BUT BEFORE BENEFIT DISTRIBUTIONS COMMENCE. If the Executive is entitled to a benefit distribution
under this Agreement, but dies prior to the commencement of said benefit payments, the Bank shall pay the same benefit payments
to the Executive’s beneficiary that the Executive was entitled to prior to death except that the benefit payments shall commence
on the first day of the month following the date of the Executive’s death.
ARTICLE 4
BENEFICIARIES
4.1 BENEFICIARY
DESIGNATIONS. The Executive shall designate a beneficiary by filing a written designation with the Bank. The Executive
may revoke or modify the designation at any time by filing a new designation. However, designations will only be effective if signed
by the Executive and received by the Bank during the Executive’s lifetime. The Executive’s beneficiary designation
shall be deemed automatically revoked if the beneficiary predeceases the Executive, or if the Executive names a spouse as beneficiary
and the marriage is subsequently dissolved. If the Executive dies without a valid beneficiary designation, all payments shall be
made to the Executive’s estate.
4.2 FACILITY
OF PAYMENT. If a benefit is payable to a minor, to a person declared incompetent, or to a person incapable of handling
the disposition of his or her property, the Bank may pay such benefit to the guardian, legal representative or person having the
care or custody of such minor, incompetent person or incapable person. The Bank may require proof of incompetence, minority or
guardianship as it may deem appropriate prior to distribution of the benefit. Such distribution shall completely discharge the
Bank from all liability with respect to such benefit.
ARTICLE 5
GENERAL LIMITATIONS
5.1 TERMINATION
FOR SPECIALLY-DEFINED CAUSE. Notwithstanding any provision of this Agreement to the contrary, the Bank shall not pay any
benefit under this Agreement if the Bank terminates the Executive’s employment for:
| (i) | The willful and continued failure by the Executive to substantially
perform his duties with the Bank (other than any such failure resulting from incapacity due to physical or mental illness), after
a demand for specific performance is delivered to the Executive by the Board which identifies individual goals and objectives
which must be accomplished to remedy the Executive’s performance, as well as provides rationale as to the reason the Board
believes that he has not historically substantially performed his duties; |
| (ii) | Commission of a felony or of a gross misdemeanor involving
moral turpitude; or |
| (iii) | Fraud, dishonesty or willful violation of any law or significant
Bank policy committed in connection with the Executive’s employment and resulting in an adverse effect on the Bank. For
purposes of this paragraph, no act, or failure to act, on the Executive’s part shall be considered “willful”
unless done, or omitted to be done, by him not in good faith and without reasonable belief that his action or omission was in
the best interest of the Bank. |
Notwithstanding
the foregoing, the Executive shall not be deemed to have been terminated for Specially-Defined Cause unless and until there have
been delivered to him a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the entire authorized
membership of the Board at a meeting of the Board called and held for the purpose (after reasonable notice and an opportunity for
the Executive, together with counsel, to be heard before the Board), finding that in the good faith opinion of the Board he was
guilty of conduct set forth above and specifying the particulars thereof.
ARTICLE 6
CLAIMS AND REVIEW PROCEDURE
6.1 CLAIMS
PROCEDURE. An Executive or beneficiary who has not received benefits under the Agreement that he or she believes should
be paid shall make a claim for such benefits as follows:
6.1.1 INITIATION
- WRITTEN CLAIM. The claimant initiates a claim by submitting to the Bank a written claim for the benefits.
6.1.2 TIMING
OF BANK RESPONSE. The Bank shall respond to such claimant within 45 days after receiving the claim. If the Bank determines
that special circumstances require additional time for processing the claim, the Bank can extend the response period by an additional
45 days by notifying the claimant in writing, prior to the end of the initial 45-day period, that an additional period is required.
The notice of extension must set forth the special circumstances and the date by which the Bank expects to render its decision.
6.1.3 NOTICE
OF DECISION. If the Bank denies part or all of the claim, the Bank shall notify the claimant in writing of such denial. The
Bank shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:
| (i) | The specific reasons for the denial; |
| (ii) | A reference to the specific provisions of the Agreement
on which the denial is based; |
| (iii) | A description of any additional information or material
necessary for the claimant to perfect the claim and an explanation of why it is needed; |
| (iv) | An explanation of the Agreement’s review procedures
and the time limits applicable to such procedures; and |
6.2 REVIEW
PROCEDURE. If the Bank denies part or all of the claim, the claimant shall have the opportunity for a full and fair review
by the Bank of the denial, as follows:
6.2.1 INITIATION
- WRITTEN REQUEST. To initiate the review, the claimant, within 60 days after receiving the Bank’s notice of denial,
must file with the Bank a written request for review.
6.2.2 ADDITIONAL
SUBMISSIONS - INFORMATION ACCESS. The claimant shall then have the opportunity to submit written comments, documents, records
and other information relating to the claim. The Bank shall also provide the claimant, upon request and free of charge, reasonable
access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to
the claimant’s claim for benefits.
6.2.3 CONSIDERATIONS
ON REVIEW. In considering the review, the Bank shall take into account all materials and information the claimant submits relating
to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.
6.2.4 TIMING
OF BANK RESPONSE. The Bank shall respond in writing to such claimant within 45 days after receiving the request for review.
If the Bank determines that special circumstances require additional time for processing the claim, the Bank can extend the response
period by an additional 45 days by notifying the claimant in writing, prior to the end of the initial 45-day period, that an additional
period is required. The notice of extension must set forth the special circumstances and the date by which the Bank expects to
render its decision.
6.2.5 NOTICE
OF DECISION. The Bank shall notify the claimant in writing of its decision on review. The Bank shall write the notification
in a manner calculated to be understood by the claimant. The notification shall set forth:
| (i) | The specific reasons for the denial; |
| (ii) | A reference to the specific provisions of the Agreement
on which the denial is based; |
| (iii) | A statement that the claimant is entitled to receive, upon
request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined
in applicable ERISA regulations) to the claimant’s claim for benefits; and |
ARTICLE 7
AMENDMENTS AND TERMINATION
This Agreement
may be amended or terminated only by a written agreement signed by the Bank and the Executive; provided, however, that the Bank
may amend this Agreement without the Executive’s written consent to the extent such amendment is, in the judgment of
the Bank’s outside counsel, necessary to conform the Agreement to the requirements of Section 409A of the Code and the
regulations thereunder.
ARTICLE 8
MISCELLANEOUS
8.1 BINDING
EFFECT. This Agreement shall bind the Executive and the Bank, and their beneficiaries, survivors, executors, successors,
administrators and transferees.
8.2 NO
GUARANTEE OF EMPLOYMENT. This Agreement is not an employment policy or contract. It does not give the Executive the right
to remain an employee of the Bank, nor does it interfere with the Bank’s right to discharge the Executive. It also does not
require the Executive to remain an employee nor interfere with the Executive’s right to terminate employment at any time.
8.3 NON-TRANSFERABILITY.
Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.
8.4 REORGANIZATION.
The Bank shall not merge or consolidate into or with another Bank, or reorganize, or sell substantially all of its assets to
another Bank, firm, or person unless such succeeding or continuing Bank, firm, or person agrees to assume and discharge the obligations
of the Bank under this Agreement. Upon the occurrence of such event or upon a Change of Control, the term “BANK” as
used in this Agreement shall be deemed to refer to the successor or survivor Bank.
8.5 TAX
WITHHOLDING. The Bank shall withhold any taxes that are required to be withheld under this Agreement.
8.6 APPLICABLE
LAW. The Agreement and all rights hereunder shall be governed by the laws of the State of New York, except to the extent
preempted by federal law.
8.7 UNFUNDED
ARRANGEMENT. The Executive and any beneficiary are general unsecured creditors of the Bank for the payment of benefits
under this Agreement. The benefits represent the mere promise by the Bank to pay such benefits. The rights to benefits are not
subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment
by creditors. Any insurance on the Executive’s life is a general asset of the Bank to which the Executive and beneficiary
have no preferred or secured claim.
8.8 ENTIRE
AGREEMENT. This Agreement constitutes the entire agreement between the Bank and the Executive as to the subject matter
hereof. No rights are granted to the Executive by virtue of this Agreement other than those specifically set forth herein.
8.9 COMPLIANCE
WITH CODE SECTION 409A. This Agreement shall be interpreted and administered consistent with Code Section 409A; provided,
however, the Bank shall be under no obligation to indemnify the Executive for any tax liabilities incurred by the Executive with
respect to the Agreement, including but not limited to Code Section 409A.
8.10 ADMINISTRATION.
The Bank shall have powers which are necessary to administer this Agreement, including but not limited to:
| (i) | Establishing and revising the method of accounting for
the Agreement; |
| (ii) | Maintaining a record of benefit payments; and |
| (iii) | Establishing rules and prescribing any forms necessary
or desirable to administer the Agreement. |
8.11 NON-COMPETITION
AND NON-SOLICITATION PROVISION. In consideration of the benefits provided to the Executive under this Agreement, the Executive
acknowledges that the following restrictions shall apply:
| (i) | During the period of Executive’s employment with
the Bank and for a period of two (2) years thereafter, the Executive shall not, without the prior written consent of Bank, directly
or indirectly, whether or not for compensation, own, manage, operate, finance, control, or participate in the ownership, management,
operation, financing, or control of a similar type financial institution, whose products or activities compete with the products
or activities of Bank or its affiliates within a fifty (50) mile radius of the offices of the Bank, provided, however, that the
Executive may purchase or otherwise acquire up to (but not more than) five (5%) percent of any class of securities of any enterprise
(but without otherwise actively participating in the management of such enterprise). |
| (ii) | The Executive will not, directly or indirectly, either
for himself or any other Person (as defined herein), (i) induce or attempt to induce any employee of Bank to leave the employ
of Bank, (ii) in any way interfere with the relationship between Bank and any of its employees, (iii) employ, or otherwise engage
as an employee, independent contractor, or otherwise, any employee of Bank, or (iv) induce or attempt to induce any customer,
supplier, licensee, or business relation of Bank to cease doing business with Bank, or in any way interfere with the relationship
between any customer, supplier, licensee, or business relation of Bank. The Executive will not, directly or indirectly, either
for himself or any other Person (which term shall include an individual, trust, estate, corporation, limited liability company,
savings bank, savings and loan association, savings and loan holding company, bank, bank holding company, mortgage company or
similar type financial institution) solicit the business of any Person known to the Executive to be a customer of Bank, with respect
to products or activities which compete with the products or activities of Bank. |
| (iii) | The Executive agrees that, given the nature of his position at the Bank, the restrictions set
forth in Section 8.11(i) and (ii) above are reasonable in scope, length of time and geographic area and are necessary for
the protection of the significant investment of the Bank in developing, maintaining and expanding its business. Accordingly,
the parties hereto agree that, in the event of any breach by the Executive of any of the provisions of Section 8.11, monetary
damages alone will not adequately compensate the Bank for its losses and, therefore, the Bank shall be entitled to any and
all legal or equitable relief available, specifically including, but not limited to, injunctive relief, and the Executive
shall be liable for costs and expenses, including attorneys’ fees, incurred by the Bank as a result of its taking
action to enforce, or recover for, any breach of Section 8.11. The restrictions contained in Section 8.11 shall be
construed and interpreted in any judicial proceeding to permit its enforcement to the maximum extent permitted by law. |
IN WITNESS WHEREOF, the parties to
this Agreement set forth above consent to the terms of this Agreement.
| |
THE DELAWARE NATIONAL BANK OF DELHI |
| |
|
|
| |
By |
/s/ Robert W. Armstrong |
| |
|
|
| |
Title |
PRESIDENT / CEO |
| |
|
|
| |
EXECUTIVE: |
| |
|
| |
/s/ Gretchen E. Rossley |
| |
Gretchen E. Rossley |
Exhibit 11.1
Consent of Baker Tilly Virchow Krause, LLP
CONSENT
We hereby consent to the inclusion of our
report dated March 16, 2016, relating to the consolidated financial statements of Delhi Bank Corp. and Subsidiary as of December
31, 2015 and 2014 and for the years then ended, included in Amendment No. 15 to the Offering Statement on Form 1-A dated March
16, 2016 filed with the Securities and Exchange Commission.
/s/ Baker Tilly Virchow Krause, LLP
March 16, 2016
Wilkes-Barre, Pennsylvania
Exhibit 11.2
Consent of Kilpatrick Townsend & Stockton
LLP
CONSENT
We hereby consent to the
references to this firm and our opinion in, and the inclusion of our opinion as an exhibit to the Offering Statement on Form 1-A
filed by Delhi Bank Corp. (the “Company”), and all amendments thereto, relating to the Dividend Reinvestment and Optional
Cash Purchase Plan through which the Company is offering its common stock.
| |
KILPATRICK TOWNSEND & STOCKTON LLP |
| |
|
|
| |
By: |
/s/ Christina M. Gattuso |
| |
|
Christina M. Gattuso |
Dated this 16th day of March, 2016
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