FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2004, OR
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission File No. 0-12870
FIRST CHESTER COUNTY CORPORATION
(Exact name of Registrant as specified in its charter)
Pennsylvania 23-2288763
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9 North High Street, West Chester, Pennsylvania 19380
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(Address of principal executive offices)
Registrant's telephone number, including area code
(484) 881-4000
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Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
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None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $1.00 per share
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No __
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes X No___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ( X )
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The aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
last sold, or the average bid and asked price of such common equity, as of the
last business day of the registrant's most recently completed second fiscal
quarter: $100,117,292
The number of shares outstanding of Common Stock of the Registrant as of March
3, 2005, was 4,578,268.
FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive Proxy Statement for its 2005 Annual
Meeting of Shareholders, which definitive Proxy Statement will be filed with the
Securities and Exchange Commission not later than 120 days after the Registrants
year end at December 31, 2004, are incorporated by reference into Part III.
FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE
PART I: Item 1 - Business 1
Item 2 - Properties 12-13
Item 3 - Legal Proceedings 13
Item 4 - Submission of Matters to a Vote of Security Holders 13
PART II: Item 5 - Market for the Corporation's Common Equity, Related
Stockholder Matters and Issuer Repurchases of Equity Securities 13 - 14
Item 6 - Selected Financial Data 15
Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operation 15
Item 7A - Quantitative and Qualitative Disclosures about Market Risk 15
Item 8 - Financial Statements and Supplementary Data 15
Item 9 - Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure 15
Item 9A - Controls and Procedures 15
Item 9B - Other Information 16
PART III: Item 10 - Directors and Executive Officers of the Corporation 16
Item 11 - Executive Compensation 16
Item 12 - Security Ownership of Certain Beneficial Owners
and Management and Related Stockholder Matters 16
Item 13 - Certain Relationships and Related Transactions 16
Item 14 - Principal Accountant Fees and Services 16
PART IV: Item 15 - Exhibits and Financial Statement Schedules 17 - 18
SIGNATURES 19 - 20
FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES
PART I
Item 1. Business.
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First Chester County Corporation (the "Corporation") may from time to time
make written or oral "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995, including statements contained
in the Corporation's filings with the Securities and Exchange Commission
(including this Report on Form 10-K), its reports to shareholders and in other
communications by the Corporation. These statements can often be identified by
the use of forward-looking terminology such as "believes", "expects", "intends",
"may", "will", "should" or "anticipates" or similar terminology. These
statements involve risks and uncertainties and are based on various assumptions.
Although the Corporation believes that its expectations are based on reasonable
assumptions, investors and prospective investors are cautioned that such
statements are only projections. Also, future results may differ materially from
our historic results. The risks and uncertainties noted below, among others,
could cause the Corporation's actual future results to differ materially from
those described in forward-looking statements made in this report, or presented
elsewhere by Management from time to time, or from our historic results.
These risks and uncertainties include, but are not limited to, the
following: (a) loan growth and/or loan margins may be less than expected due to
competitive pressures in the banking industry and/or changes in the interest
rate environment; (b) general economic conditions in the Corporation's market
area may be less favorable than expected resulting in, among other things, a
deterioration in credit quality causing increased loan losses; (c) costs of the
Corporation's planned training initiatives, product development, branch
expansion, new technology and operating systems may exceed expectations; (d)
competition among financial and non-financial institutions in the Corporation's
market area that may result in customer turnover and lower interest rate
margins; (e) changes in the regulatory environment, securities markets, general
business conditions and inflation may adversely affect loan demand, credit
quality, consumer spending and saving habits, and interest rate margins; (f)
impact of changes in interest rates on customer behavior; (g) the impact of
changes in demographics on branch locations; (h) technological changes; (i)
changes in the value of securities and investments managed for others may affect
the growth level of the Corporation's non-interest income; (j) changes in the
credit of our borrowers, the collateral securing assets or other aspects of
credit quality; and (k) our ability to manage the risks involved in the
foregoing. These risks and uncertainties are all difficult to predict and most
are beyond the control of the Corporation's Management.
The Corporation undertakes no obligation to publicly release any revisions
to the forward-looking statements to reflect events or circumstances after the
date of this report.
GENERAL
The Corporation is a Pennsylvania corporation and a bank holding company
registered under the Federal Bank Holding Company Act of 1956, as amended (the
"BHC Act"). As a bank holding company, the Corporation's operations are confined
to the ownership and operation of banks and activities deemed by the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board") to be so
closely related to banking to be a proper incident thereto. The Corporation was
incorporated on March 9, 1984, for the purpose of becoming a registered bank
holding company pursuant to the BHC Act and acquiring First National Bank of
Chester County, formerly known as The First National Bank of West Chester (the
"Bank"), thereby enabling the Bank to operate within a bank holding company
structure. On September 13, 1984, the Corporation acquired all of the issued and
outstanding shares of common stock of the Bank. The principal activities of the
Corporation are the owning and supervising of the Bank, which engages in a
general banking business based in Chester County, Pennsylvania. The Corporation
directs the policies and coordinates the financial resources of the Bank. In
addition, the Corporation is the sole shareholder of Turks Head Properties,
Inc., a Pennsylvania corporation, which was formed in 1994, and Turks Head II
LLC, which was formed in 2003, each of which serves the purpose of holding the
Bank's interests in and operating foreclosed real property until liquidation of
such properties. First Chester County Capital Trust I, which was formed on July
11, 2002, and First Chester County Capital Trust II, which was formed on
November 13, 2003, are special purpose statutory trusts created expressly for
the issuance of preferred capital securities and investing proceeds in junior
subordinated debentures of the Corporation. The Bank has two wholly-owned
subsidiaries, FNB Insurance Services, LLC, trading as First National Wealth
Advisory Services, and FNB Properties, LLC. First National Wealth Advisory
Services offers insurance, full-service brokerage, financial planning and mutual
fund services. Through May 2004, FNB Properties, LLC acted as property manager
for the properties where the Bank's
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FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES
Lionville and New Garden branches are located. On
August 5, 2001, the Corporation became a financial holding company pursuant to
the Grahm-Leach-Bliley Act of 1999.
BUSINESS OF THE BANK
The Bank is engaged in the business of commercial and retail banking and
was organized under the banking laws of the United States in December 1863. The
Bank currently conducts its business through seventeen banking offices located
in Chester and Delaware Counties, Pennsylvania, including its main office. In
addition, the Bank operates 24 ATM facilities. The Bank is a member of the
Federal Reserve System. At December 31, 2004, the Bank had total assets of
approximately $805.5 million, total loans of approximately $610.7 million, total
deposits of approximately $663.0 million and employed 270 persons, of which 243
were full-time and 27 were part-time.
The Bank is a full service commercial bank offering a broad range of retail
banking, commercial banking, Internet banking, trust and investment management
and insurance services to individuals, businesses, governmental entities,
nonprofit organizations, and community service groups. Retail services include
checking accounts, savings programs, money-market accounts, certificates of
deposit, safe deposit facilities, consumer loan programs, residential mortgages,
overdraft checking, automated tellers and extended banking hours. Commercial
services include revolving lines of credit, commercial mortgages, equipment
leasing and letter of credit services.
These retail and commercial banking activities are provided primarily to
consumers and small to mid-sized companies within the Bank's market area.
Lending services are focused on commercial, consumer, and real estate lending to
local borrowers. The Bank attempts to establish a total borrowing relationship
with its customers that may typically include commercial loans, a mortgage loan
for the borrower's residence, a consumer loan or a revolving personal credit
line.
The Bank's Trust and Investment Services Division (formerly known as the
Financial Management Services Division), provides a broad range of trust and
investment management services. It administers and provides services for
estates, trusts, agency accounts, and individual and employer sponsored
retirement plans. At December 31, 2004, the Bank's Trust and Investment Services
Division administered or provided investment management services to accounts
that held assets with an aggregate market value of approximately $555.6 million.
For the year ended December 31, 2004, gross income from the Bank's Trust and
Investment Services Department and related activities amounted to approximately
$3.5 million.
In addition to retail and commercial banking and trust services, the Bank
offers an array of investment opportunities to including mutual funds,
annuities, retirement planning, education planning and insurance through the
Wealth Advisory Services Division.
COMPETITION
The Bank's service area consists primarily of greater Chester County, as
well as the fringe of Delaware County, Pennsylvania. The core of the Bank's
service area is located within a fifteen-mile radius of the Bank's main office
in West Chester, Pennsylvania. The Bank encounters vigorous competition for
market share in the communities it serves from bank holding companies, other
community banks, thrift institutions, credit unions, Internet banks and other
non-bank financial organizations such as mutual fund companies, brokerage firms,
and the financing arms of corporate conglomerates. The Bank also competes with
banking and financial institutions, some from out-of-state that have opened
branches in our market, which are substantially larger and have greater
financial resources than the Bank. As of June 30, 2004, the Bank held an 7.91%
market share of Chester County's $7.4 billion in deposits. The $7.4 billion is
held by 185 branches of 32 banks, thrifts, and Savings and Loans.
The Bank's Trust and Investment Services Division competes with a variety
of companies including private trust companies, banks with trust departments,
private money managers', brokerage firms, mutual fund companies, attorneys,
accountants and insurance companies.
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FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES
Management believes that the Bank is able to effectively compete with its
competitors because of its ability to provide responsive personalized services
and competitive rates. This ability is a direct result of management's knowledge
of the Bank's market area and customer base. Management believes the needs of
the small to mid-sized commercial business and retail customers are not
adequately met by larger financial institutions, therefore creating a marketing
opportunity for the Bank.
SUPERVISION AND REGULATION
General
The Corporation is a bank holding company subject to supervision and
regulation by the Federal Reserve Board. In addition, the Bank is subject to
supervision, regulation and examination by the Office of the Comptroller of the
Currency (the "OCC") and secondary regulation by the Federal Deposit Insurance
Corporation (the "FDIC"). Federal and state laws impose a number of requirements
and restrictions on the operations of the Bank, including requirements to
maintain reserves against deposits, restrictions on the types and amounts of
loans that may be made and the types of services which may be offered, and
restrictions on the ability to acquire deposits under certain circumstances. The
Bank must also comply with various consumer laws and regulations, and approval
of the OCC is required before establishing new branches and for bank mergers if
the continuing bank would be a national bank. Certain aspects of the Bank's
operation are also subject to state laws. The following sections discuss more
fully some of the principal elements of the regulatory framework applicable to
the Corporation and the Bank. This discussion is not intended to be an
exhaustive description of the statutes and regulations applicable to the
Corporation and the Bank and is subject to and qualified by reference to the
statutory and regulatory provisions. A change in these statutes, regulations or
regulatory policies, or the adoption of new statutes, regulations or regulatory
policies, may have a material effect on our business.
Bank Holding Company Act
The Corporation is required to file with the Federal Reserve Board an
annual report and such additional information as the Federal Reserve Board may
require pursuant to the BHC Act. Annual and other periodic reports also are
required to be filed with the Federal Reserve Board. The Federal Reserve Board
also makes examinations of bank holding companies and their subsidiaries. The
BHC Act requires each bank holding company to obtain the prior approval of the
Federal Reserve Board before it may acquire substantially all of the assets of
any bank, or if it would acquire or control more than 5% of the voting shares of
such a bank. The Federal Reserve Board considers numerous factors, including its
capital adequacy guidelines, before approving such acquisitions. For a
description of certain applicable guidelines, see this Item "Capital," Part II,
Item 7, "Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Capital Adequacy," and Part II, Item 8, "Note I -- Regulatory
Matters" in the consolidated financial statements.
The Community Reinvestment Act
The Community Reinvestment Act of 1977, as amended (the "CRA"), and the
regulations promulgated to implement the CRA are designed to create a system for
bank regulatory agencies to evaluate a depository institution's record in
meeting the credit needs of its community. The CRA regulations were completely
revised in 1995 to establish performance-based standards for use in examining a
depository institution's compliance with the CRA (the "revised CRA
regulations"). The revised CRA regulations establish new tests for evaluating
both small and large depository institutions' investment in the community. For
the purposes of the revised CRA regulations, the Bank is deemed to be a large
retail institution, based upon financial information as of December 31, 2004.
The Bank has opted to be examined under a three-part test evaluating the Bank's
lending service and investment performance. The Bank received an outstanding
rating at our last regulatory exam.
Dividend Restrictions
The Corporation is a legal entity separate and distinct from the Bank.
Virtually all of the revenue of the Corporation available for payment of
dividends on its Common Stock will result from amounts paid to the Corporation
from dividends received from the Bank. All such dividends are subject to
limitations imposed by federal and state laws and by regulations and policies
adopted by federal and state regulatory agencies.
3
FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES
The Bank, as a national bank, is required by federal law to obtain the
approval of the OCC for the payment of dividends if the total of all dividends
declared by the Board of Directors of the Bank in any calendar year will exceed
the total of the Bank's net income for that year and the retained net income for
the preceding two years, less any required transfers to surplus or a fund for
the retirement of any preferred stock. Under this formula, in 2004, the Bank,
without affirmative governmental approvals, could declare aggregate dividends of
approximately $8.4 million, plus an amount approximately equal to the net
income, if any, earned by the Bank for the period from January 1, 2004, through
the date of declaration of such dividend less dividends previously paid, subject
to the further limitations that a national bank can pay dividends only to the
extent that retained net profits (including the portion transferred to surplus)
exceed bad debts and provided that the Bank would not become "undercapitalized"
(as these terms are defined under federal law). Dividends declared in 2004 were
$2.5 million.
If, in the opinion of the applicable regulatory authority, a bank or bank
holding company under its jurisdiction is engaged in or is about to engage in an
unsafe or unsound practice (which, depending on the financial condition of the
bank or bank holding company, could include the payment of dividends), such
regulatory authority may require such bank or bank holding company to cease and
desist from such practice, or to limit dividends in the future. Finally, the
several regulatory authorities described herein, may from time to time,
establish guidelines, issue policy statements and adopt regulations with respect
to the maintenance of appropriate levels of capital by a bank or bank holding
company under their jurisdiction. Compliance with the standards set forth in
such policy statements, guidelines and regulations could limit the amount of
dividends which the Corporation and the Bank may pay.
Capital
The Corporation and the Bank are both subject to minimum capital
requirements and guidelines. The Federal Reserve Board measures capital adequacy
for bank holding companies on the basis of a risk-based capital framework and a
leverage ratio. The Federal Reserve Board has established minimum leverage ratio
guidelines for bank holding companies. These guidelines currently provide for a
minimum leverage ratio of Tier I Capital to average total assets of 3% for bank
holding companies that meet certain criteria, including that they maintain the
highest regulatory rating. All other bank holding companies are required to
maintain a leverage ratio of 3% plus an additional cushion of at least 100 to
200 basis points. The Federal Reserve Board has not advised the Corporation of
any specific minimum leverage ratio under these guidelines which would be
applicable to the Corporation. Failure to satisfy regulators that a bank holding
company will comply fully with capital adequacy guidelines upon consummation of
an acquisition may impede the ability of a bank holding company to consummate
such acquisition, particularly if the acquisition involves payment of
consideration other than common stock. In many cases, the regulatory agencies
will not approve acquisitions by bank holding companies and banks unless their
capital ratios are well above regulatory minimums.
The Bank is subject to capital requirements which generally are similar to
those affecting the Corporation. The minimum ratio of total Risk-Based Capital
to Risk-Weighted assets (including certain off-balance sheet items, such as
standby letters of credit) is 8%. Capital may consist of equity and qualifying
perpetual preferred stock, less goodwill ("Tier I capital"), and certain
convertible debt securities, qualifying subordinated debt, other preferred stock
and a portion of the reserve for possible credit losses ("Tier II capital").
A depository institution's capital classification depends upon its capital
levels in relation to various relevant capital measures, which include a
Risk-Based Capital measure and a leverage ratio capital measure. A depository
institution is considered well capitalized if it significantly exceeds the
minimum level required by regulation for each relevant capital measure,
adequately capitalized if it meets each such measure, undercapitalized if it
fails to meet any such measure, significantly undercapitalized if it is
significantly below any such measure and critically undercapitalized if it fails
to meet any critical capital level set forth in the regulations. An institution
may be placed in a lower capitalization category if it receives an
unsatisfactory examination rating, is deemed to be in an unsafe or unsound
condition, or engages in unsafe or unsound practices. Under applicable
regulations, for an institution to be well capitalized it must have a Total
Risk-Based Capital ratio of at least 10%, a Tier I capital ratio of at least 6%
and a Leverage ratio of at least 5% and not be subject to any specific capital
order or directive. As of December 31, 2004, 2003 and 2002, the Corporation and
the Bank had capital in excess of all regulatory minimums and the Bank was "well
capitalized."
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FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES
Deposit Insurance Assessments
The Bank is subject to deposit insurance assessments by the FDIC's Bank
Insurance Fund ("BIF"). The FDIC has developed a risk-based assessment system,
under which the assessment rate for an insured depository institution varies
according to its level of risk. An institution's risk category is based upon
whether the institution is well capitalized, adequately capitalized or
undercapitalized and the institution's "supervisory subgroups": Subgroup A, B or
C. Subgroup A institutions are financially sound institutions with a few minor
weaknesses; Subgroup B institutions are institutions that demonstrate weaknesses
which, if not corrected, could result in significant deterioration; and Subgroup
C institutions are institutions for which there is a substantial probability
that the FDIC will suffer a loss in connection with the institution unless
effective action is taken to correct the areas of weakness. Based on its capital
and supervisory subgroups, each BIF member institution is assigned an annual
FDIC assessment rate per $100 of insured deposits varying between 0.00% per
annum (for well capitalized Subgroup A institutions) and 0.27% per annum (for
undercapitalized Subgroup C institutions). As of January 1, 2001, well
capitalized Subgroup A institutions paid 0.00%.
In accordance with the Deposit Insurance Act of 1997 an additional
assessment by the Financing Corporation ("FICO") became applicable to all
insured institutions as of January 1, 1998. This assessment is not tied to the
FDIC risk classification. The FICO assessment rates effective for both the
fourth quarter 2004 and the first quarter of 2005 were $0 per $100 of BIF
assessable deposits. FDIC deposit insurance expense was $86, $88 and $86
thousand for the year 2004, 2003, and 2002. Currently, there is proposed
legislation that if passed could increase the Corporation's FDIC deposit
insurance expense in future time periods.
Financial Services Modernization Act of 1999
On November 12, 1999, the President signed into law the Gramm-Leach-Bliley
Act (the "Act") which became effective on March 11, 2000. Among the Act's
various provisions are some changes governing the operations of companies doing
business in the financial services industry. The Act eliminates many of the
restrictions previously placed on the activities of banks and bank holding
companies, and through the creation of two new designations, financial holding
companies and financial subsidiaries, bank holding companies and national banks
may participate in a wider array of financial services and products (referred to
as "financial activities" in the Act), including services and products that had
been reserved only for insurance companies and securities firms. In addition, a
bank holding company can now affiliate with an insurance company and a
securities firm.
A "financial activity" is an activity that does not pose a safety
and soundness risk and is financial in nature, incidental to an activity that is
financial in nature, or complementary to a financial activity. Some examples of
"financial activities" which are permitted under the Act are:
o Lending, investing or safeguarding money or securities;
o Underwriting insurance or annuities, or acting as an insurance or annuity
principal, agent or broker;
o Providing financial or investment advice; o Underwriting, dealing in
or making markets in securities; and
o Insurance company portfolio investments.
The Corporation meets the qualifications set forth under the Act to elect
to become a financial holding company, and the Bank, as a national bank, is
authorized by the Act to use "financial subsidiaries" to engage in financial
activities, subject to the limitations imposed by the Act. On August 5, 2001,
the Bank became a financial holding company pursuant to the Act. During 2000,
First National Wealth Advisory Services was formed as a wholly-owned subsidiary
of the Bank for the purpose of offering insurance, full service brokerage,
financial planning and mutual fund services. First National Wealth Advisory
Services has elected to become a financial subsidiary under the Act.
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FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES
Control Acquisitions
The Change in Bank Control Act prohibits a person or group of persons from
acquiring "control" of a bank holding company, unless the Federal Reserve Board
has been notified and has not objected to the transaction. Under a rebuttable
presumption established by the Federal Reserve Board, the acquisition of ten
percent or more of a class of voting stock of a bank holding company with a
class of securities registered under Section 12 of the Exchange Act, such as the
Corporation, would, under the circumstances set forth in the presumption,
constitute acquisition of control of the bank holding company.
In addition, as described above, under the Bank Holding Company Act, the
Federal Reserve Board must give its prior approval of any transaction pursuant
to which any person or persons may acquire 25 percent (five percent in the case
of an acquirer that is a bank holding company) or more of any class of
outstanding common stock of a bank holding company, such as the Corporation, or
otherwise obtaining control or a "controlling influence" over that bank holding
company. See this Item, "Bank Holding Company Act".
Other Matters
Federal and state law also contains a variety of other provisions that
affect the operations of the Corporation and the Bank including certain
reporting requirements, regulatory standards and guidelines for real estate
lending, "truth in savings" provisions, the requirement that a depository
institution give 90 days prior notice to customers and regulatory authorities
before closing any branch, certain restrictions on investments and activities of
nationally-chartered insured banks and their subsidiaries, limitations on credit
exposure between banks, restrictions on loans to a bank's insiders, guidelines
governing regulatory examinations, and a prohibition on the acceptance or
renewal of brokered deposits by depository institutions that are not well
capitalized or are adequately capitalized and have not received a waiver from
the FDIC.
EFFECT OF GOVERNMENTAL POLICIES
The earnings of the Bank and, therefore, of the Corporation are affected
not only by domestic and foreign economic conditions, but also by the monetary
and fiscal policies of the United States and its agencies (particularly the
Federal Reserve Board), foreign governments and other official agencies. The
Federal Reserve Board can and does implement national monetary policy, such as
the curbing of inflation and combating of recession, by its open market
operations in United States government securities, control of the discount rate
applicable to borrowings from the Federal Reserve and the establishment of
reserve requirements against deposits and certain liabilities of depository
institutions. The actions of the Federal Reserve Board influence the level of
loans, investments and deposits and also affect interest rates charged on loans
or paid on deposits. The nature and impact of future changes in monetary and
fiscal policies are not predictable.
From time to time, various proposals are made in the United States Congress
and the Pennsylvania legislature and before various regulatory authorities, who
would alter the powers of different types of banking organizations, remove
restrictions on such organizations and change the existing regulatory framework
for banks, bank holding companies and other financial institutions. It is
impossible to predict whether any of such proposals will be adopted and the
impact, if any, of such adoption on the business of the Corporation.
STATISTICAL DISCLOSURES
The following tables set forth certain statistical disclosures
concerning the Corporation and the Bank. These tables should be read in
conjunction with Management's Discussion and Analysis of Financial Condition and
Results of Operations set forth below in Item 7 of this Report.
6
FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES
RATE VOLUME ANALYSIS (1)
Increase (decrease) in net interest income due to:
----------------------------------------------------------------------------------------
Volume (2) Rate (2) Total Volume (2) Rate (2) Total
------ ---- ----- ------ ---- -----
(Dollars in thousands) 2004 Compared to 2003 2003 Compared to 2002
------------------------------------ -----------------------------
INTEREST INCOME
Federal funds sold $ (18) $ 50 $ 32 $ (63) $ (104) $ (167)
Interest bearing deposits in banks 1 2 3 8 (10) (2)
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Total Interest Income (17) 52 35 (55) (114) (169)
Investment securities
Taxable (202) 548 346 861 (1,504) (639)
Tax-exempt(3) 458 (32) 426 927 (394) 533)
------ ------- ------ ------ ------ ------
Total investment securities 256 516 772 1,788 (1,898) (106)
Loans
Taxable 5,833 (2,591) 3,242 1,638 (4,906) (3,288)
Tax-exempt(3) 144 (22) 122 402 (137) 264)
------ ------- ------ ------ ------ ------
Total loans(4) 5,977 (2,613) 3,364 2,040 (5,043) (3,024)
------ ------- ------ ------ ------ ------
Total interest income 6,216 (2,045) 4,171 3,773 (7,055) (3,299)
------ ------- ------ ------ ------ ------
INTEREST EXPENSE
Savings, NOW and money market
deposits 390 (287) 103 610 (1,996) (1,374)
Certificates of deposits and other time (208) (478) (686) (642) (1,442) (2,087)
------ ------- ------ ------ ------ ------
Total interest bearing deposits 181 (765) (584) (32) (3,438) (3,461)
Securities sold under repurchase
Agreements (3) - (3) (19) (1) (20)
Guaranteed preferred
beneficial interest in Corp.'s
subordinated debentures 449 (32) 416 233 (53) 176
Other borrowings 819 62 881 444 (657) (214)
------ ------- ------ ------ ------ ------
Total Interest expense 1,446 (735) 711 626 (4,149) (3,579)
------ ------ ------ ------ ------ ------
Net Interest income $ 4,771 $(1,310) $ 3,461 $ 3,147 $(2,907) $ 220
====== ====== ====== ====== ====== ======
NOTES:
(1) The related average balance sheets can be found on page 30 of the
Corporation's Annual Report to Shareholders, attached as part of
Exhibit 13, incorporated herein by reference.
(2) The changes in interest due to both rate and volume has been allocated
to volume and rate changes in proportion to the relationship of the
absolute dollar amounts of the change in each.
(3) The indicated changes are presented on a tax equivalent basis.
(4) Non-accruing loans have been used in the daily average balances to
determine changes in interest due to volume. Loan fees included in the
interest income computation are not material.
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FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES
LOAN PORTFOLIO BY TYPE AT DECEMBER
(Dollars in thousands) 2004 2003 2002 2001 2000
--------------- ---------------- --------------- --------------- --------------
Amount % Amount % Amount % Amount % Amount %
------ - ------ - ------ - ------ - ------ -
Commercial loans $187,903 30% $142,144 28% $122,005 27% $118,420 26% $105,125 26%
Real estate - construction 59,093 10% 56,340 11% 47,601 11% 40,065 9% 30,134 7%
Real estate - other 243,490 40% 202,898 40% 175,846 39% 199,398 45% 181,129 45%
Consumer loans 101,157 16% 77,113 15% 62,646 14% 48,323 11% 54,692 13%
Lease financing receivables 26,362 4% 32,754 6% 39,584 9% 41,904 9% 35,809 9%
------- ------- ------- ------- -------
Total gross loans
and lease $618,005 100% $511,249 100% $447,682 100% $448,110 100% $406,889 100%
Allowance for possible
loan and lease losses (1) $ (7,213) $ (5,864) $ (6,230) $ (6,344) $ (6,609)
------- ------- ------- ------- ------
Total net loans (2) $610,792 $505,385 $441,452 $441,766 $400,280
======= ======= ======= ======= =======
NOTES:
(1) Non-accruing loans have been used in the daily average balances to
determine changes in interest due to volume. Loan fees included in the
interest income computation are not material.
(2) At December 31, 2004 there were no concentrations of loans exceeding
10% of total loans which is not otherwise disclosed as a category of
loans in the above table.
8
FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES
MATURITIES AND RATE SENSITIVITY OF LOANS DUE TO CHANGES IN
INTEREST RATES AT DECEMBER 31, 2004 (1) (2)
Maturing
Maturing After 1 Year Maturing
Within And Within After
(Dollars in thousands) 1 Year(3) 5 Years 5 Years Total
---------- ------------ --------- ---------
Commercial loans $ 20,364 $ 56,827 $110,712 $187,903
Real Estate - construction 45,620 12,704 769 59,093
--------- ------- ------- -------
Total $ 65,984 $ 69,531 $111,481 $246,996
========= ======= ======= =======
Loans maturing after 1 year with:
- ---------------------------------
Fixed interest rates
Commercial Loans $ 39,746 $ 33,667
Commercial real estate - construction 6,660 769
Variable interest rates
Commercial Loans 17,081 77,045
Commercial Real Estate - construction 6,044 --
------- -------
Total $ 69,531 $111,481
======= =======
NOTES:
(1) Determination of maturities included in the loan maturity table are
based upon contract terms. In situations where a "rollover" is
appropriate, the Corporation's policy in this regard is to evaluate the
credit for collectability consistent with the normal loan evaluation
process. This policy is used primarily in evaluating ongoing customer's
use of their lines of credit with the Bank that are at floating
interest rates.
(2) This data excludes real estate-other loans, consumer loans and lease
financing receivables.
(3) Demand loans and overdrafts are reported maturing "Within 1 Year". Most
construction real estate loans are reported maturing "Within 1 Year"
because of their short term maturity or index to the Bank's prime rate.
An immaterial amount of loans has no stated schedule of repayments.
9
FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES
INVESTMENT SECURITIES YIELD BY MATURITY AT DECEMBER 31, 2004
Due over Due over
Due 1 year 5 years Due
Within Through Through Over
(Dollars in thousands) 1 year 5 years 10 years 10 years Total
------ ------- -------- -------- -----
Held-to-Maturity
U.S. Treasury -- -- -- -- --
U.S. Government agency -- -- -- -- --
Mortgage-backed securities (1) -- -- -- -- --
State and municipal (2) -- 10 -- -- 10
Corporate securities -- -- -- -- --
Asset-backed (1) -- -- -- -- --
------- --------- -------- -------- -------
-- 10 -- -- 10
------- --------- -------- -------- -------
Available-for-Sale
U.S. Treasury 24,997 2,517 -- -- 27,514
U.S. Government agency -- -- -- 1,049 1,049
Mortgage-backed securities (1) -- -- 2,788 62,897 65,685
State and municipal (2) 565 9,878 14,270 -- 24,713
Corporate securities -- 3,153 8,000 2,710 13,863
Asset-backed (1) -- -- 235 141 376
Mutual Funds -- -- -- 797 797
Other equity securities (3) -- -- -- 6,022 6,022
-------- --------- -------- -------- -------
25,562 15,548 25,293 73,616 140,019
------- --------- -------- -------- -------
Total Investment securities $ 25,562 $ 15,548 $ 25,293 $ 73,616 $140,029
======= ========= ======== ======== =======
Percent of portfolio 18.25% 11.11% 18.06% 52.58% 100.00%
======= ========= ======== ======= =======
Weighted average yield 1.79% 3.17% 3.92% 4.29% 3.63%
======= ========= ======== ======= =========
NOTES:
(1) Mortgage-backed and Asset-backed securities are included in the above table
based on their contractual maturity.
(2) The yield on tax-exempt obligations has been computed on a tax equivalent
basis using the Federal marginal rate of 34% adjusted for the 20% interest
expense disallowance.
(3) Other equity securities having no stated maturity have been included in
"Due over 10 years".
10
FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES
INVESTMENT SECURITIES AT DECEMBER 31,
2004 2003
--------------------- --------------------
(Dollars in thousands) Book Market Book Market
Value Value Value Value
Held-to-Maturity
U.S. Treasury $ -- $ -- $ -- $ --
U.S. Government agency -- -- -- --
Mortgage-backed securities -- -- 4 4
State and municipal 10 11 15 16
Corporate securities -- -- -- --
Asset-backed -- -- -- --
Mutual funds -- -- -- --
Other equity securities -- -- -- --
------- ------- ------- -------
$ 10 $ 11 $ 19 $ 20
======= ======= ======= =======
Available-for-Sale
U.S. Treasury $ 27,503 $ 27,514 $ 2,498 $ 2,561
U.S. Government agency 1,058 1,049 10,821 10,715
Mortgage-backed securities 65,830 65,685 69,821 70,035
State and municipal 24,797 24,713 25,815 25,840
Corporate securities 12,069 12,176 12,893 13,181
Corporate CMO's 1,687 1,687 119 118
Asset-backed 377 376 2,692 2,666
Mutual Funds 863 797 863 801
Other equity securities 5,951 6,022 4,724 4,793
------- ------- ------- -------
$140,135 $140,019 $130,246 $130,710
======= ======= ======= =======
11
FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES
Item 2. Properties.
- ------- ----------
The Bank owns eleven properties which are not subject to any mortgages, and
the Corporation leases the Westtown-Thornbury, Exton, Frazer, Kendal,
Crosslands, Lima, Granite Farms, Hershey's Mill, Coatesville, Giunta's and
Freedom Village offices. Management of the Corporation believes the
Corporation's and the Bank's facilities are suitable and adequate for their
respective present needs. Set forth below is a listing of each banking office
presently operated by the Bank, and other properties owned or leased by the Bank
and the Corporation which may serve as future sites for branch offices.
Management is currently evaluating all of its properties for future use.
Current Date
Banking Acquired
Offices / Use Address or Opened
- ------------- ------- ---------
Main Office / Branch 9 North High Street December 1863
and Corporate West Chester, Pennsylvania
Headquarters
Goshen / Branch 311 North Five Points Road September 1956
West Goshen, Pennsylvania
Walk-In Facility / Branch 17 East Market Street February 1978
West Chester, Pennsylvania
Kennett Square / Branch 126 West Cypress Street February 1987
Kennett Square, Pennsylvania
Westtown-Thornbury / Route 202 and Route 926 May 1994
Branch Westtown, Pennsylvania
Swope Building (formerly High & Market Streets July 1995
known as the Commonwealth Building) West Chester, Pennsylvania
Exton / Branch Route 100 and Boot Road August 1995
West Chester, Pennsylvania
Frazer / Branch 309 Lancaster Avenue August 1999
Frazer, Pennsylvania
Kendal at Longwood / Branch 1109 E. Baltimore Pike December 1999
Kennett Square, Pennsylvania
Crosslands / Branch 1660 E. Street Road December 1999
Kennett Square, Pennsylvania
Lima Estates / Branch 411 North Middletown Road December 1999
Media, Pennsylvania
Granite Farms Estates / Branch 1343 West Baltimore Pike December 1999
Wawa, Pennsylvania
Lionville / Branch Route 114 & Sheree Boulevard December 2000
Uwchlan Township, Pennsylvania
12
FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES
New Garden / Branch 741 West Cypress Street August 2001
Kennett Square, Pennsylvania
Hershey's Mill / Branch 1371 Boot Road December 2001
West Chester, Pennsylvania
Coatesville Branch 258A East Lincoln Highway June 2003
Coatesville, PA 19320
Giunta's Branch 700 Downingtown Pike September 2003
West Chester, PA 19380
Freedom Village 15 Freedom Boulevard July 2004
West Brandywine, PA 19320
Oxford 275 Limestone Road December 2004
Oxford, PA 19363
Other Date Acquired
Properties / Use Address or Opened
Operations 202 Carter Drive July 1988
Center / Operations West Chester, Pennsylvania
Matlack Street / 887 South Matlack Street September 1999
Operations West Chester, Pennsylvania
Paoli Pike / Parking 1104 Paoli Pike July 1963
West Chester, Pennsylvania
Item 3. Legal Proceedings.
There are no material pending legal proceedings, other than ordinary
routine litigation incidental to the business, to which the Corporation, or any
of its subsidiaries, is a party or of which any of their respective property is
the subject.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters
and Issuer Repurchases of Equity Securities
The information called for in Item 201 (a), (b) and (c) of
Regulation S-K is incorporated herein by reference to the information set forth
on page 36 and the back cover of the Corporation's Annual Report to
Shareholders, which material is filed herewith as part of Exhibit 13.
13
FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES
The information called for in Item 201 (d) of Regulation S-K is set forth in the
following table:
Equity Compensation Plan Information Form
Number of
securities
remaining
Number of securities Weighted-average available for
to be issued upon exercise price future
exercise of of outstanding issuance under
outstanding options, options, equity
warrants and warrants compensation
rights* and rights* plans*
-------------------- ---------------- --------------
Equity compensation plans approved by security holders 442,445** $15.35 17,294
Equity compensation plans not approved by security holders -- -- --
Total 442,445** $15.35 17,294
* The securities referred to in this table are shares of the Corporation's
common stock issuable upon exercise of options issued pursuant to the 1995 Stock
Option Plan.
** Number of options issued and outstanding that were exercisable as December
31, 2004.
The information required by Item 703 is set forth in the following table:
Issuer Purchases of Equity Securities
(a) (b) (c) (d)
Total Number Average Total Number of Shares Maximum Number (or Approximate
Period of Shares (or Price Paid (or Units) Purchased as Dollar Value) of Shares (or
Units) per Share Part of Publicly Announced Units) that May Yet Be Purchased
Purchased (or Unit) Plans or Programs Under the Plans or Programs
October 1 to October 31, 2004 -- -- -- $6,980,678
November 1 to November 30, 2004 10,000 $26.51 10,000 $6,715,573
December 1 to December 31, 2004 -- -- -- $6,715,573
Total 10,000 $26.51 10,000 $6,715,573
Note: All of the foregoing shares were purchased pursuant to theCorporation's
program to repurchase up to $10.0 million of the Corporation's common
stock that was publicly announced on October 16, 2003.
14
FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES
Item 6. Selected Financial Data.
Selected financial data concerning the Corporation and the Bank is
incorporated herein by reference to page 22 of the Corporation's 2004 Annual
Report to Shareholders, filed as part of of Exhibit 13 hereto.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Management's Discussion and Analysis of Financial Condition and
Results of Operations is incorporated herein by reference to pages 23 to 37 of
the Corporation's 2004 Annual Report to Shareholders filed as part of Exhibit 13
hereto.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Quantitative and Qualitative Disclosures about Market Risk are
incorporated herein by reference to pages 38 to 40 of the Corporation's 2004
Annual Report to Shareholders filed as part of Exhibit 13 hereto.
Item 8. Financial Statements and Supplementary Data.
Consolidated financial statements of the Corporation and the Report
of Independent Certified Public Accountants thereon are incorporated herein by
reference to pages 41 to 72 of the Corporation's 2004 Annual Report to
Shareholders filed as part of Exhibit 13 hereto.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Disclosure controls and procedures. Appearing as Exhibits 31.1,
31.2, 31.3 and 31.4 (the "302 Certifications") to this Annual Report are four
certifications, one by each of our Chief Executive Officer (CEO), President,
Chief Financial Officer (CFO) / Treasurer (our principal accounting and
financial officer), and our Assistant Treasurer (the "Principal Officers"). This
Item 9A contains information concerning the evaluation of the Corporation's
disclosure controls and procedures that are referred to in the Section 302
Certifications. This information should be read in conjunction with the Section
302 Certifications for a more complete understanding of the topics presented in
the 302 Certifications.
The Securities and Exchange Commission (the "SEC") requires that as
of the end of the period covered by this Annual Report on Form 10-K, our CEO and
our CFO / Treasurer evaluate the effectiveness of the design and operation of
the Corporation's "disclosure controls and procedures" and report their
conclusions on the effectiveness of the design and operation of the
Corporation's disclosure controls and procedures in this Annual Report.
"Disclosure controls and procedures" mean the controls and other
procedures that are designed with the objective of ensuring that information
required to be disclosed in our reports filed under the Securities Exchange Act
of 1934 (the "Exchange Act"), such as this Annual Report, is recorded,
processed, summarized and reported within the time periods specified in the
rules and forms promulgated by the Securities and Exchange Commission (the
"SEC"). Our disclosure controls and procedures are also designed with the
objective of ensuring that such information is accumulated and communicated to
our management, including the CEO and CFO / Treasurer, as appropriate to allow
timely decisions regarding required disclosure.
Based upon their evaluation of the disclosure controls and
procedures, the Principal Officers have concluded that our disclosure controls
and procedures are effective to provide reasonable assurance that material
information relating to the Corporation and its consolidated subsidiaries is
made known to Management, including the CEO and CFO / Treasurer, on a timely
basis.
Internal Control Over Financial Reporting. The information set forth
on pages 71 and 72 of our Annual Report to Shareholders, which is filed as part
of herein as Exhibit 13, is incorporated by reference.
15
FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES
Item 9B. Other Items.
On November 24, 2004, the Bank entered into separation agreements
with Messrs. D'Angelo and Glarner in connection with their termination as
executive officers of the Bank. Under the terms of these agreements, Messrs.
D'Angelo and Glarner are entitled to receive severance payments on the Bank's
regular payroll cycle based upon their annualized salaries ($139,256 and
$134,559, respectively) and benefits ($25,185 and $30,149, respectively) at the
time of separation, for a period of one year. In addition, under the separation
agreements each of Messrs. D'Angelo and Glarner will continue to receive a
monthly car allowance of $700 per month, and Mr. Glarner will receive
reimbursement of payments made for COBRA benefits, in each case for one year. In
addition, on November 26 and November 24, 2004, respectively, the Bank entered
into agreements with Messrs. D'Angelo and Glarner (collectively, the "2004
Agreements") pursuant to which each of them are employed as officers of the
Bank. Each of the 2004 Agreements will continue in force until either the
officer or the Bank gives notice of termination, which notice shall be at least
14 days prior to the effective date of termination. As compensation under the
2004 Agreements, the officers receive salary, benefits and car allowance, and
may be eligible to receive incentive compensation, as determined from time to
time. Amounts paid to, and benefits received by, Messrs. D'Angelo and Glarner
during the first twelve months following the commencement of the 2004 Agreements
shall offset amounts due to each such officer pursuant to their respective
separation agreements.
PART III
Item 10. Directors and Executive Officers of the Corporation.
The information called for by this Item is incorporated herein by
reference to the Corporation's Proxy Statement for its 2004 Annual Meeting of
Shareholders that will be filed not later than March 30, 2005.
Item 11. Executive Compensation.
The information called for by this Item is incorporated herein by
reference to the Corporation's Proxy Statement for its 2005 Annual Meeting of
Shareholders that will be filed not later than March 30, 2005.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information called for in Item 201(d) of Regulation S-K is
included in Item 5 of this Report. The other information called for by this Item
is incorporated herein by reference to the Corporation's Proxy Statement for its
2005 Annual Meeting of Shareholders that will be filed not later than March 30,
2005.
Item 13. Certain Relationships and Related Transactions.
The information called for by this Item is incorporated herein by
reference to the Corporation's Proxy Statement for its 2005 Annual Meeting of
Shareholders that will be filed not later than March 30, 2005.
Item 14. Principal Accountant Fees and Services
The information called for by this Item is incorporated herein by
reference to the Corporation's Proxy Statement for its 2005 Annual Meeting of
Shareholders that will be filed not later than March 30, 2005.
16
FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES
PART IV
Item 15. Exhibits and Financial Statement Schedules.
1. Financial Statements
The Consolidated Financial Statements, for the years ending December
31, 2004 and 2003, together with the report thereon of Grant Thornton LLP dated
March 15, 2005, are filed as part of this Report under Item 8.
2. Financial Statement Schedules
Financial Statement Schedules are not required under the related
instructions of the Securities and Exchange Commission, are inapplicable or are
included in the Consolidated Financial Statements or notes thereto.
3. Exhibits
The following is a list of the exhibits filed with, or
incorporated by reference into, this Report (those exhibits marked with an
asterisk are filed herewith and those exhibits marked "(CP)" are management
contracts or compensatory plans, contracts or arrangements in which a director
or executive officer participates):
3(i). Articles of Incorporation. Copy of the Articles of
Incorporation of the Corporation, as amended, filed as Exhibit 3(i) to the
Corporation's Quarterly Report on Form 10-Q for the quarter ended March 31, 2004
is incorporated by reference.
3(ii). By-Laws of the Corporation. By-Laws of the Corporation,
filed as Exhibit 3(ii) to the Corporation's Annual Report on Form 10-K for the
year ended December 31, 1997 is incorporated by reference.
10. Material contracts.
* (a) Copy of Employment Agreement among the Corporation, the
Bank and John A. Featherman, III, dated as of November 13, 2003 (CP)
* (b) Copy of Employment Agreement among the Corporation, the
Bank and Kevin C. Quinn, dated as of November 13, 2003. (CP)
* (c) Compensatory Arrangements of Executive Officers and
Directors for 2005. (CP)
(d) Copy of the Corporation's Dividend Reinvestment and Stock
Purchase Plan, filed as an exhibit to the Corporation's registration statement
on Form S-3 filed August 7, 2003 (SEC File No. 333-107739) is incorporated
herein by reference.
(e) Copy of the Corporation's Amended and Restated Stock Bonus
Plan, filed as an exhibit to the Corporation's registration statement on Form
S-8 filed August 12, 1997 (SEC File No. 333-33411) is incorporated herein by
reference. (CP)
(f) Copy of the Bank's Amended and Restated Supplemental Benefit
Retirement Plan, effective date January 1, 1995, is incorporated herein by
reference to Exhibit 10(g) to the Corporation's Annual Report on Form 10-K for
the year ended December 31, 1994 (SEC File No. 00012870. (CP)
* (g) Summary of changes to the Amended and Restated Supplemental
Benefit Retirement Plan approved through December 31, 2004. (CP)
* (h) Copy of the Corporation's and the Bank's Directors' Deferred
Compensation Plan.
17
FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES
(i) Copy of the Corporation's Amended and Restated 1995 Stock
Option Plan, filed as an appendix to the Corporation's Proxy statement for the
2003 Annual Meeting of Shareholders as filed with the SEC via EDGAR is
incorporated herein by reference. (CP)
* (j) Copy of form of Stock Option Agreement (Directors). (CP)
* (k) Copy of form of Stock Option Agreement (Executive Officers).
(CP)
(l) Copy of Employment Agreement between the Bank and J. Duncan
Smith (CFO), dated December 1, 1999 is incorporated by reference to Exhibit 10
(g) to the Corporation's Annual Report on Form 10-K for the year ended December
31, 1999. (CP)
* (m) Copy of Employment Agreement between the Bank and Peter
D'Angelo. (CP)
* (n) Copy of Separation Agreement between the Bank and Peter
D'Angelo. (CP)
* (o) Copy of Employment Agreement between the Bank and David
Glarner. (CP)
* (p) Copy of Separation Agreement between the Bank and David
Glarner. (CP)
* 13. Annual Report to Shareholders. Portions of our Annual Report to
Shareholders that are incorporated by reference in this report on Form 10-K.
14. Code of Conduct (Ethics). Copy of Code of Conduct (Ethics) filed
as Exhibit 14 to the Corporation's Annual Report on Form 10-K for the year ended
December 31, 2003 is incorporated herein by reference.
* 21. Subsidiaries of the Corporation. First National Bank of Chester
County, formerly known as The First National Bank of West Chester, is a banking
institution organized under the banking laws of the United States in December
1863. Turks Head Properties, Inc., formerly known as 323 East Gay Street
Corporation, was incorporated in 1996 in the State of Pennsylvania. Turks Head
II, LLC was incorporated in 2003 in the State of Pennsylvania. FNB Insurance
Services, LLC, t/a First National Wealth Advisory Services, a wholly-owned
subsidiary of the Bank, is a limited liability company formed in 2000 under the
laws of Pennsylvania. FNB Properties, LLC, a wholly-owned subsidiary of the
Bank, is a limited liability company formed in 2000 under the laws of
Pennsylvania. First Chester County Capital Trust I was formed on July 11, 2002.
First Chester County Capital Trust II was formed on November 13, 2003.
* 23. Consent of Grant Thornton LLP, dated March 15, 2005.
* 31.1 Certification of Chief Executive Officer.
* 31.2 Certifications of President.
* 31.3 Certification of Treasurer.
* 31.4 Certification of Assistant Treasurer.
* 32.1 Certification of Chief Executive Officer.
* 32.2 Certification of President.
* 32.3 Certification of Treasurer.
* 32.4 Certification of Assistant Treasurer.
18
FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Corporation has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
FIRST CHESTER COUNTY CORPORATION
By: /s/ John A. Featherman, III
---------------------------
John A. Featherman, III
Chief Executive Officer and
Chairman of the Board
Date: March 15, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the Corporation and in the capacities indicated as of March 15, 2005.
Signature Title
--------- -----
/s/ John A. Featherman, III Chief Executive Officer and
_____________________________ Chairman of the Board
John A. Featherman, III (Principal Executive Officer)
/s/ J. Duncan Smith Treasurer
_____________________________ (Principal Accounting and Financial Officer)
J. Duncan Smith
(Signatures continued on following page)
19
FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES
(Signatures continued from previous page)
Signature Title
--------- -----
/s/ John A. Featherman, III Director
- ----------------------------------
John A. Featherman, III
/s/ John J. Ciccarone Director
- ----------------------------------
John J. Ciccarone
/s/ M. Robert Clarke Director
- ----------------------------------
M. Robert Clarke
/s/ Clifford E. DeBaptiste Director
- ----------------------------------
Clifford E. DeBaptiste
/s/ John S. Halsted Director
- ----------------------------------
John S. Halsted
/s/ J. Carol Hanson Director
- ----------------------------------
J. Carol Hanson
/s/ Edward A. Leo Director
- ----------------------------------
Edward A. Leo
/s/ David L. Peirce Director
- ----------------------------------
David L. Peirce
/s/ John B. Waldron Director
- ----------------------------------
John B. Waldron
/s/ Kevin C. Quinn Director
- ----------------------------------
Kevin C. Quinn
20
FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES
INDEX TO EXHIBITS
The following is a list of the exhibits filed with, or incorporated by
reference into, this Report (those exhibits marked with an asterisk are filed
herewith and those exhibits marked "(CP)" are management contracts or
compensatory plans, contracts or arrangements in which a director or executive
officer participates):
3(i). Articles of Incorporation. Copy of the Articles of Incorporation
of the Corporation, as amended, filed as Exhibit 3(i) to the Corporation's
Quarterly Report on Form 10-Q for the quarter ended March 31, 2004 is
incorporated by reference.
3(ii). By-Laws of the Corporation. By-Laws of the Corporation, filed as
Exhibit 3(ii) to the Corporation's Annual Report on Form 10-K for the year ended
December 31, 1997 is incorporated by reference.
10. Material contracts.
* (a) Copy of Employment Agreement among the Corporation, the Bank
and John A. Featherman, III, dated as of November 13, 2003 (CP)
* (b) Copy of Employment Agreement among the Corporation, the Bank
and Kevin C. Quinn, dated as of November 13, 2003. (CP)
* (c) Compensatory Arrangements of Executive Officers and Directors
for 2005. (CP)
(d) Copy of the Corporation's Dividend Reinvestment and Stock
Purchase Plan, filed as an exhibit to the Corporation's registration statement
on Form S-3 filed August 7, 2003 (SEC File No. 333-107739) is incorporated
herein by reference.
(e) Copy of the Corporation's Amended and Restated Stock Bonus
Plan, filed as an exhibit to the Corporation's registration statement on Form
S-8 filed August 12, 1997 (SEC File No. 333-33411) is incorporated herein by
reference. (CP)
(f) Copy of the Bank's Amended and Restated Supplemental Benefit
Retirement Plan, effective date January 1, 1995, is incorporated herein by
reference to Exhibit 10(g) to the Corporation's Annual Report on Form 10-K for
the year ended December 31, 1994 (SEC File No. 00012870. (CP)
* (g) Summary of changes to the Amended and Restated Supplemental
Benefit Retirement Plan approved through December 31, 2004. (CP)
* (h) Copy of the Corporation's and the Bank's Directors' Deferred
Compensation Plan.
(i) Copy of the Corporation's Amended and Restated 1995 Stock
Option Plan, filed as an appendix to the Corporation's Proxy statement for the
2003 Annual Meeting of Shareholders as filed with the SEC via EDGAR is
incorporated herein by reference. (CP)
* (j) Copy of form of Stock Option Agreement (Directors). (CP)
* (k) Copy of form of Stock Option Agreement (Executive Officers).
(CP)
(l) Copy of Employment Agreement between the Bank and J. Duncan
Smith (CFO), dated December 1, 1999 is incorporated by reference to Exhibit 10
(g) to the Corporation's Annual Report on Form 10-K for the year ended December
31, 1999. (CP)
* (m) Copy of Employment Agreement between the Bank and Peter
D'Angelo. (CP)
21
FIRST CHESTER COUNTY CORPORATION AND SUBSIDIARIES
* (n) Copy of Separation Agreement between the Bank and Peter
D'Angelo. (CP)
* (o) Copy of Employment Agreement between the Bank and David
Glarner. (CP)
* (p) Copy of Separation Agreement between the Bank and David
Glarner. (CP)
* 13. Annual Report to Shareholders. Portions of our Annual Report
to Shareholders that are incorporated by reference in this annual report on Form
10-K.
14. Code of Conduct (Ethics). Copy of Code of Conduct (Ethics) filed as
Exhibit 14 to the Corporation's Annual Report on Form 10-K for the year ended
December 31, 2003 is incorporated herein by reference.
* 21. Subsidiaries of the Corporation. First National Bank of Chester
County, formerly known as The First National Bank of West Chester, is a banking
institution organized under the banking laws of the United States in December
1863. Turks Head Properties, Inc., formerly known as 323 East Gay Street
Corporation, was incorporated in 1996 in the State of Pennsylvania. Turks Head
II, LLC was incorporated in 2003 in the State of Pennsylvania. FNB Insurance
Services, LLC, t/a First National Wealth Advisory Services, a wholly-owned
subsidiary of the Bank, is a limited liability company formed in 2000 under the
laws of Pennsylvania. FNB Properties, LLC, a wholly-owned subsidiary of the
Bank, is a limited liability company formed in 2000 under the laws of
Pennsylvania. First Chester County Capital Trust I was formed on July 11, 2002.
First Chester County Capital Trust II was formed on November 13, 2003.
* 23. Consent of Grant Thornton LLP, dated March 15, 2005.
* 31.1 Certification of Chief Executive Officer.
* 31.2 Certifications of President.
* 31.3 Certification of Treasurer.
* 31.4 Certification of Assistant Treasurer.
* 32.1 Certification of Chief Executive Officer.
* 32.2 Certification of President.
* 32.3 Certification of Treasurer.
* 32.4 Certification of Assistant Treasurer.
22