-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UqzHTNuAdhTqZ12qAc0nnM/FF8S9fNuqttwk13DAuOOgpFbBVCX/vvNsMYKTTmQ0 6TJCgXxgUv7s5VmMjpeQGQ== 0000737875-01-500019.txt : 20010515 0000737875-01-500019.hdr.sgml : 20010515 ACCESSION NUMBER: 0000737875-01-500019 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST KEYSTONE CORP CENTRAL INDEX KEY: 0000737875 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 232249083 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-21344 FILM NUMBER: 1632658 BUSINESS ADDRESS: STREET 1: 111 W FRONT ST CITY: BERWICK STATE: PA ZIP: 18603 BUSINESS PHONE: 717-752-36 MAIL ADDRESS: STREET 1: 111 WEST FRONT STREET CITY: BERWICK 10-Q 1 fm10q301.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10Q Quarterly Report Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 2001 Commission File Number: 2-88927 FIRST KEYSTONE CORPORATION (Exact name of registrant as specified in its charter) Pennsylvania 23-2249083 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) identification No.) 111 West Front Street, Berwick, PA 18603 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (570) 752-3671 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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date: Common Stock, $2 Par Value, 2,833,727 shares as of March 31, 2001. PART I. - FINANCIAL INFORMATION Item. 1 Financial Statements FIRST KEYSTONE CORPORATION AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (Unaudited)
(Amounts in thousands, except per share data) March December 2001 2000 ASSETS Cash and due from banks $ 5,681 $ 6,733 Interest bearing deposits with banks 11,300 2,428 Available-for-sale securities carried at estimated fair value 157,014 142,224 Investment securities, held-to-maturity securities, estimated fair value of $8,407 and $8,635 8,459 8,737 Loans, net of unearned income 188,994 190,671 Allowance for loan losses (2,648) (2,702) ________ ________ Net loans $186,346 $187,969 Bank premises and equipment 3,478 3,570 Accrued interest receivable 2,714 2,491 Other assets 6,528 6,190 ________ ________ Total Assets $381,520 $360,342 LIABILITIES AND STOCKHOLDERS' EQUITY Deposits Non-interest bearing $ 22,854 $ 24,847 Interest bearing 267,297 246,626 ________ ________ Total deposits $290,151 $271,473 Short-term borrowings 8,887 8,560 Long-term borrowings 40,250 41,250 Accrued interest and other expenses 2,309 2,231 Other liabilities 1,002 171 _______ ________ Total Liabilities $342,599 $323,685 STOCKHOLDERS' EQUITY Common stock, par value $2 per share 5,867 5,867 Surplus 9,761 9,761 Retained earnings 23,947 23,311 Accumulated other comprehensive income 2,443 815 Less treasury stock at cost 100,000 shares in 2000 and 1999 (3,097) (3,097) _______ _______ Total Stockholders' Equity $ 38,921 $ 36,657 ________ ________ Total Liabilities and Stockholders' Equity $381,520 $360,342 See Accompanying Notes to Consolidated Financial Statements
1 FIRST KEYSTONE CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED March 31, 2001 AND 2000 (Unaudited)
(Amounts in thousands except per share data) 2001 2000 INTEREST INCOME Interest and fees on loans $ 3,949 $ 3,834 Interest and dividend income on securities 2,558 2,122 Interest on deposits in banks 101 1 Other interest income 89 87 _________ _________ Total Interest Income $ 6,697 $ 6,044 INTEREST EXPENSE Interest on deposits $ 3,176 $ 2,549 Interest on short-term borrowings 112 325 Interest on long-term borrowings 592 344 _________ _________ Total Interest Expense $ 3,880 $ 3,218 Net interest income $ 2,817 $ 2,826 Provision for loan losses 100 75 _________ _________ Net Interest Income After Provision for Loan Losses $ 2,717 $ 2,751 OTHER INCOME Service charges on deposit accounts $ 268 $ 210 Other non-interest income 200 142 Investment securities gains (losses) net 13 3 _________ _________ Total Other Income $ 481 $ 355 OTHER EXPENSES Salaries and employee benefits $ 956 $ 967 Net occupancy and fixed asset expense 262 244 Other non-interest expense 483 535 _________ _________ Total Other Expenses $ 1,701 $ 1,746 Income before income taxes $ 1,497 $ 1,360 Applicable income tax (benefit) 294 202 _________ _________ Net Income $ 1,203 $ 1,158 PER SHARE DATA Net Income $ .42 $ .41 Cash Dividends .20 .19 Weighted Average Shares Outstanding 2,833,727 2,833,727 See Accompanying Notes to Consolidated Financial Statements
2 FIRST KEYSTONE CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED March 31, 2001 AND 2000 (Unaudited)
(Amounts in thousands) 2001 2000 OPERATING ACTIVITIES Net income $ 1,203 $ 1,158 Adjustments to reconcile net income to net cash provided (used) by operating activities: Provision for loan losses 100 75 Provision for depreciation and amortization 107 100 Premium amortization on investment securities 39 23 Discount accretion on investment securities (284) (151) Gain on sale of mortgage loans (47) (1) Proceeds from sale of mortgage loans 3,949 605 Originations of mortgage loans for resale (692) (926) (Gain) loss on sales of investment securities (13) (3) (Gain) loss on sale of other real estate owned 0 (1) Deferred income tax (benefit) (28) (17) (Increase) decrease in interest receivable and other assets (489) (100) Increase (decrease) in interest payable, accrued expenses and other liabilities 95 133 ________ ________ NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES $ 3,940 $ 895 INVESTING ACTIVITIES Purchases of investment securities available-for-sale $(32,782) $(14,081) Proceeds from sales of investment securities available-for-sale 14,156 11,919 Proceeds from maturities and redemptions of investment securities available for sale 4,569 821 Proceeds from maturities and redemption of investment securities held-to-maturity 2,272 1,607 Net (increase) decrease in loans (1,758) (2,856) Purchase of premises and equipment (15) (52) Proceeds from sale of other real estate owned 0 86 ________ ________ NET CASH (USED) BY INVESTING ACTIVITIES $(13,558) $ (2,556) FINANCING ACTIVITIES Net increase (decrease) in deposits $ 18,678 $ 10,587 Net increase (decrease) in short-term borrowings 327 (3,578) Net increase (decrease)in long-term borrowings (1,000) (5,000) Cash dividends (567) (538) ________ ________ NET CASH PROVIDED BY FINANCING ACTIVITIES $ 17,438 $1,471 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ 7,820 $ (190) CASH AND CASH EQUIVALENTS, BEGINNING 9,161 6,964 ________ ________ CASH AND CASH EQUIVALENTS, ENDING $ 16,981 $ 6,774 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during period for Interest $ 3,980 $ 3,218 Income Taxes 11 0 See Accompanying Notes to Consolidated Financial Statements
3 FIRST KEYSTONE CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2001 (Unaudited) NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies of First Keystone Corporation and Subsidiary (the "Corporation") are in accordance with accounting principles generally accepted in the United States of America and conform to common practices within the banking industry. The more significant policies follow: PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of First Keystone Corporation and its wholly-owned Subsidiary, The First National Bank of Berwick (the "Bank"). All significant inter-company balances and transactions have been eliminated in consolidation. NATURE OF OPERATIONS The Corporation, headquartered in Berwick, Pennsylvania, provides a full range of banking, trust and related services through its wholly owned Bank subsidiary and is subject to competition from other financial institutions in connection with these services. The Bank serves a customer base which includes individuals, businesses, public and institutional customers primarily located in the Northeast Region of Pennsylvania. The Bank has nine full service offices and 12 ATMs located in Columbia, Luzerne and Montour Counties. The Corporation and its subsidiary must also adhere to certain federal banking laws and regulations and are subject to periodic examinations made by various federal agencies. SEGMENT REPORTING The Corporation's banking subsidiary acts as an independent community financial services provider, and offers traditional banking and related financial services to individual, business and government customers. Through its branch and automated teller machine network, the Bank offers a full array of commercial and retail financial services, including the taking of time, savings and demand deposits; the making of commercial, consumer and mortgage loans; and the providing of other financial services. The Bank also performs personal, corporate, pension and fiduciary services through its Trust Department. Management does not separately allocate expenses, including the cost of funding loan demand, between the commercial, retail, trust and mortgage banking operations of the Corporation. Currently, management measures the performance and allocates the resources of First Keystone Corporation as a single segment. USE OF ESTIMATES The preparation of these consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of these consolidated financial statements and the reported amounts of income and expenses during the reporting periods. Actual results could differ from those estimates. INVESTMENT SECURITIES The Corporation classifies its investment securities as either "Held-to-Maturity" or "Available-for-Sale" at the time of purchase. Debt securities are classified as held-to-maturity when the Corporation has the ability and positive intent to hold the securities to maturity. Investment securities Held-to-Maturity are carried at cost adjusted for amortization of premium and accretion of discount to maturity. Debt securities not classified as Held-to-Maturity and equity securities are included in the Available-for-Sale category and are carried at fair value. The amount of any unrealized gain or loss, net of the effect of deferred income taxes, is reported as other comprehensive income as a component of Stockholders' Equity. Management's 4 decision to sell available-for-sale securities is based on changes in economic conditions controlling the sources and applications of funds, terms, availability of and yield of alternative investments, interest rate risk and the need for liquidity. The cost of debt securities classified as Held-to-Maturity or Available-for-Sale is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization and accretion, as well as interest and dividends is included in interest income from investments. Realized gains and losses are included in net investment securities gains. The cost of investment securities sold, redeemed or matured is based on the specific identification method. Equity securities that do not have readily determinable fair values such as Federal Reserve Bank Stock, Federal Home Loan Bank Stock and Bankers' bank stock are carried at cost and are included in other assets and the income is reflected as other interest income. LOANS Loans are stated at their outstanding unpaid principal balances, net of deferred fees or costs, unearned income and the allowance for loan losses. Interest on installment loans is recognized as income over the term of each loan, generally, by the "actuarial method". Interest on all other loans is primarily recognized based upon the principal amount outstanding. Loan origination fees and certain direct loan origination costs have been deferred with the net amount amortized using the interest method over the contractual life of the related loans as an interest yield adjustment. Mortgage loans held for resale are carried at the lower of cost or market on an aggregate basis. These loans are sold without recourse to the Corporation. Non-Accrual Loans - Generally, a loan is classified as non-accrual and the accrual of interest on such a loan is discontinued when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about further collectibility of principal or interest, even though the loan currently is performing. A loan may remain on accrual status if it is in the process of collection and is either guaranteed or well secured. When a loan is placed on non-accrual status, unpaid interest credited to income in the current year is reversed and unpaid interest accrued in prior years is charged against the allowance for loan losses. Certain non-accrual loans may continue to perform, that is, payments are still being received. Generally, the payments are applied to principal. These loans remain under constant scrutiny and if performance continues, interest income may be recorded on a cash basis based on management's judgement as to collectibility of principal. Allowance for Loan Losses - The allowance for loan losses is established through provisions for loan losses charged against income. Loans deemed to be uncollectible are charged against the allowance for loan losses and subsequent recoveries, if any, are credited to the allowance. A principal factor in estimating the allowance for loan losses is the measurement of impaired loans. A loan is considered impaired when, based on current information and events, it is probable that the Corporation will be unable to collect all amounts due according to the contractual terms of the loan agreement. Under current accounting standards, the allowance for loan losses related to impaired loans is based on discounted cash flows using the effective interest rate of the loan or the fair value of the collateral for certain collateral dependent loans. The allowance for loan losses is maintained at a level estimated by management to be adequate to absorb potential loan losses. Management's periodic evaluation of the adequacy of the allowance for loan losses is based on the Corporation's past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower's ability to repay (including the timing of future payments), 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 including the amounts and timing of future cash flows expected to be received on impaired loans that may be susceptible to significant change. 5 PREMISES AND EQUIPMENT Premises and equipment are stated at cost less accumulated depreciation computed principally on the straight-line method over the estimated useful lives of the assets. Maintenance and minor repairs are charged to operations as incurred. The cost and accumulated depreciation of the premises and equipment retired or sold are eliminated from the property accounts at the time of retirement or sale, and the resulting gain or loss is reflected in current operations. MORTGAGE SERVICING RIGHTS The Corporation originates and sells real estate loans to investors in the secondary mortgage market. After the sale, the Corporation retains the right to service certain loans. When originated mortgage loans are sold and servicing is retained, a servicing asset is capitalized based on relative fair value at the date of sale. Servicing assets are amortized as an offset to other fees in proportion to, and over the period of, estimated net servicing income. The unamortized cost is included in other assets in the accompanying consolidated balance sheet. The servicing rights are periodically evaluated for impairment based on their relative fair value. FORECLOSED ASSETS HELD FOR SALE Real estate properties acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value on the date of foreclosure establishing a new cost basis. After foreclosure, valuations are periodically performed by management and the real estate is carried at the lower of carrying amount or fair value less cost to sell and is included in other assets. Revenues derived from and costs to maintain the assets and subsequent gains and losses on sales are included in other non-interest income and expense. INCOME TAXES The provision for income taxes is based on the results of operations, adjusted primarily for tax-exempt income. Certain items of income and expense are reported in different periods for financial reporting and tax return purposes. Deferred tax assets and liabilities are determined based on the differences between the consolidated financial statement and income tax bases of assets and liabilities measured by using the enacted tax rates and laws expected to be in effect when the timing differences are expected to reverse. Deferred tax expense or benefit is based on the difference between deferred tax asset or liability from period to period. PER SHARE DATA Statement of Financial Accounting Standards (SFAS) No. 128, Earnings Per Share, requires dual presentation of basic and fully diluted earnings per share. Basic earnings per share is calculated by dividing net income by the weighted average number of shares of common stock outstanding at the end of each period. Fully diluted earnings per share is calculated by increasing the denominator for the assumed conversion of all potentially dilutive securities. The Corporation's dilutive securities are limited to stock options which currently have no effect on earnings per share since the market price per share historically has not been greater than the lowest stock option exercise price. Per share data has been adjusted retroactively for stock splits and stock dividends. CASH FLOW INFORMATION For purposes of reporting consolidated cash flows, cash and cash equivalents include cash on hand and due from other banks and interest bearing deposits in other banks. The Corporation considers cash classified as interest bearing deposits with other banks as a cash equivalent since they are represented by cash accounts essentially on a demand basis. TRUST ASSETS AND INCOME Property held by the Corporation in a fiduciary or agency capacity for its customers is not included in the accompanying consolidated financial statements since such items are not assets of the Corporation. Trust Department income is generally recognized on a cash basis and is not materially different than if it were reported on an accrual basis. 6 NEW ACCOUNTING STANDARDS Statement of Financial Accounting Standards (SFAS) No. 133 (as amended by SFAS No. 138), "Accounting for Derivative Instruments and Hedging Activities", becomes effective for financial reporting periods beginning after June 15, 2000. SFAS 133 requires the recognition of the fair value of all derivative instruments on the consolidated balance sheet. Since the Corporation does not enter into transactions involving derivatives described in the standard and does not engage in hedging activities, the standard is not expected to have a significant impact on the Corporation's consolidated financial condition or results of operations. Statement of Financial Accounting Standards (SFAS) No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities", is generally effective for transactions occurring after March 31, 2001. For recognition and reclassification of collateral and for disclosure related to securitization transactions and collateral, the effective date is for fiscal years ending after December 15, 2000. SFAS No. 140 replaces SFAS No. 125 and provides revisions to the standards for accounting and requirements for certain disclosures relating to securitzations and other transfers of financial assets. The standard is not expected to have a significant impact on the Corporation's consolidated financial condition or results of operations. REPORTING FORMAT Certain amounts in the consolidated financial statements of prior periods have been reclassified to conform with presentation used in the 2001 consolidated financial statements. Such reclassifications have no effect on the Corporation's consolidated financial condition or net income. NOTE 2. ALLOWANCE FOR LOAN LOSSES Changes in the allowance for loan losses for the periods ended March 31, 2001, and March 31, 2000, were as follows:
(amounts in thousands) 2001 2000 Balance, January 1 $2,702 $2,600 Provision charged to operations 100 75 Loans charged off (165) (79) Recoveries 11 4 ______ ______ Balance, March 31 $2,648 $2,600
At March 31, 2001, the recorded investment in loans that are considered to be impaired as defined by SFAS No. 114 was $154,195. No additional charge to operations was required to provide for the impaired loans since the total allowance for loan losses is estimated by management to be adequate to provide for the loan loss allowance required by SFAS No. 114 along with any other potential losses. At March 31, 2001, there were no significant commitments to lend additional funds with respect to non-accrual and restructured loans. NOTE 3. SHORT-TERM BORROWINGS Federal funds purchased, securities sold under agreements to repurchase and Federal Home Loan Bank advances generally represent overnight or less than 30-day borrowings. U.S. Treasury tax and loan notes for collections made by the Bank are payable on demand. 7 NOTE 4. LONG-TERM BORROWINGS Long-term borrowings are comprised of advances from the Federal Home Loan Bank (FHLB). Under terms of a blanket agreement, collateral for the loans are secured by certain qualifying assets of the Corporation's banking subsidiary which consist principally of first mortgage loans and certain investment securities. NOTE 5. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND CONCENTRATIONS OF CREDIT RISK The Corporation 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. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets. The contract or notional amounts of those instruments reflect the extent of involvement the Corporation has in particular classes of financial instruments. The Corporation does not engage in trading activities with respect to any of its financial instruments with off-balance sheet risk. The Corporation's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual notional amount of those instruments. The Corporation uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. The Corporation may require collateral or other security to support financial instruments with off-balance sheet credit risk. The contract or notional amounts at March 31, 2001, and December 31, 2000, were as follows:
(amounts in thousands) March 31, December 31, 2001 2000 _______ ______ Financial instruments whose contract amounts represent credit risk: Commitments to extend credit $18,118 $15,467 Standby letters of credit $ 1,005 $ 947
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 that 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. The Corporation evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Corporation upon extension of credit, is based on management's credit evaluation of the counter-party. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment, and income-producing commercial properties. Standby letters of credit are conditional commitments issued by the Corporation to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Corporation may hold collateral to support standby letters of credit for which collateral is deemed necessary. The Corporation grants commercial, agribusiness and residential loans to customers within the state. It is management's opinion that the loan portfolio was balanced and diversified at March 31, 2001, to the extent necessary to avoid any significant concentration of credit risk. 8 NOTE 6. STOCKHOLDERS' EQUITY Changes in Stockholders' Equity for the period ended March 31, 2001, were are follows:
(Amounts in thousands, except common share data) Common Common Shares Stock Surplus ______ ______ _______ Balance at January 1, 2001 2,933,727 $5,867 $9,761 Comprehensive Income: Net Income Change in unrealized gain (loss) on investment securities available-for-sale, net of reclassification adjustment and tax effects Total Comprehensive income (loss) Cash dividends - $.20 per share _________ ______ ______ Balance at March 31, 2001 2,933,727 $5,867 $9,761 (Amounts in thousands, except common share data) Accumulated Compre- Other hensive Retained Comprehensive Income Earnings Income (Loss) ______ _______ __________ Balance at January 1, 2001 $23,311 $ 815 Comprehensive Income: Net Income $1,203 1,203 Change in unrealized gain (loss) on investment securities available-for-sale, net of reclassification adjustment and tax effects 1,628 1,628 ______ Total Comprehensive income (loss) $2,831 Cash dividends - $.20 per share (567) _______ ______ Balance at March 31, 2001 $23,947 $2,443 (Amounts in thousands, except common share data) Treasury Stock Total _____ _____ Balance at January 1, 2001 $(3,097) $36,657 Comprehensive Income: Net Income 1,203 Change in unrealized gain (loss) on investment securities available-for-sale, net of reclassification adjustment and tax effects 1,628 Total Comprehensive income (loss) Cash dividends - $.20 per share (567) _______ _______ Balance at March 31, 2001 $(3,097) $38,921
NOTE 7. MANAGEMENT'S ASSERTIONS AND COMMENTS REQUIRED TO BE PROVIDED WITH FORM 10Q FILING In management's opinion, the consolidated interim financial statements reflect fair presentation of the consolidated financial position of First Keystone Corporation and Subsidiary, and the results of their operations and their cash flows for the interim periods presented. Further, the consolidated interim financial statements are unaudited; however they reflect all adjustments, which are in the opinion of management, necessary to present fairly the consolidated financial condition and consolidated results of operations and cash flows for the interim periods presented and that all such adjustments to the consolidated financial statements are of a normal recurring nature. The independent accountants, J. H. Williams & Co., LLP, reviewed these consolidated financial statements as stated in their accompanying review report. The results of operations for the three-month period ended March 31, 2001, are not necessarily indicative of the results to be expected for the full year. These consolidated interim financial statements have been prepared in accordance with requirements of Form 10Q and therefore do not include all disclosures normally required by generally accepted accounting principles applicable to financial institutions as included with consolidated financial statements included in the Corporation's annual Form 10K filing. The reader of these consolidated interim financial statements may wish to refer to the Corporation's annual report or Form 10K for the period ended December 31, 2000, filed with the Securities and Exchange Commission. 9 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Board of Directors and Stockholders of First Keystone Corporation: We have reviewed the accompanying consolidated balance sheet of First Keystone Corporation and Subsidiary as of March 31, 2001, and the related consolidated statements of income and cash flows for the three-month periods ended March 31, 2001, and 2000. These consolidated financial statements are the responsibility of the management of First Keystone Corporation and Subsidiary. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America. We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet of First Keystone Corporation and Subsidiary as of December 31, 2000, and the related consolidated statements of income, stockholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated January 10, 2001, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2000, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. /s/ J. H. Williams & Co., LLP J. H. Williams & Co., LLP Kingston, Pennsylvania April 24, 2001 10 Item 2. First Keystone Corporation Management's Discussion and Analysis of Financial Condition and Results of Operation as of March 31, 2001 RESULTS OF OPERATIONS First Keystone Corporation realized earnings for the first quarter of 2001 of $1,203,000, an increase of $45,000, or 3.9% over the first quarter of 2000. The increase in net income for the first quarter of 2001 was primarily the result of an increase of $126,000, or 35.5% in non-interest income or other income, and a decrease in total other expense of $45,000, or 2.6%. The tightening of our net interest margin resulted in net interest income remaining relatively stable at $2,817,000 for the first quarter of 2001 compared to $2,826,000 for the first quarter of 2000. On a per share basis, net income per share increased to $.42 for the first three months of 2001 compared to $.41 for the first three months of 2000, while dividends increased to $.20 per share up from $.19 in 2000, or an increase of 5.3%. Year-to-date net income annualized amounts to a return on average common equity of 12.87% and a return on assets of 1.30%. For the three months ended March 31, 2000, these measures were 15.83% and 1.40%, respectively on an annualized basis. NET INTEREST INCOME The major source of operating income for the Corporation is net interest income, defined as interest income less interest expense. In the first quarter of 2001, net interest income decreased slightly because of our reduced net interest margin. In the first quarter of 2001, interest income amounted to $6,697,000, an increase of $653,000 or 10.8% over the first quarter of 2000, while interest expense amounted to $3,880,000 in the first quarter of 2001, an increase of $662,000, or 20.6% over the first quarter of 2000. As a result, net interest income decreased $9,000, or 0.3% over the first quarter of 2000. Our net interest margin for the quarter ended March 31, 2001, was 3.48% compared to 3.96% for the quarter ended March 31, 2000. PROVISION FOR LOAN LOSSES The provision for loan losses for the quarter ended March 31, 2001, was $100,000, compared to the $75,000 provision for the first quarter of 2000. Net charge-offs totaled $154,000 for the three months ended March 31, 2001, as compared to $75,000 for the first three months of 2000. The allowance for loan losses as a percentage of loans, net of unearned interest, was 1.40% as of March 31, 2001, as compared to 1.42% as of December 31, 2000, and 1.38% as of March 31, 2000. NON-INTEREST INCOME Total non-interest income or other income was $481,000 for the quarter ended March 31, 2001, as compared to $355,000 for the quarter ended March 31, 2000, an increase of $126,000, or 35.5%. Excluding investment security gains and losses, non-interest income was $468,000 for the first quarter of 2001, an increase of $116,000 over the first quarter of 2000. An increase in service charges on deposit accounts and an increase in other non-interest income, were the primary reasons for the increase in non-interest income. 11 NON-INTEREST EXPENSES Total non-interest expenses, or other expenses, was $1,701,000 for the quarter ended March 31, 2001, as compared to $1,746,000 for the quarter ended March 31, 2000. The decrease of $45,000 is comprised of salary and benefits decreasing $11,000, occupancy expense increasing $18,000, and other non-interest expense decreasing $52,000. The overall decrease in non-interest expenses was $45,000, or 2.6%. Expenses associated with employees (salaries and employee benefits) continue to be the largest category of non-interest expenses. Salaries and benefits amount to 56.2% of total non-interest expense for the three months ended March 31, 2001, as compared to 55.4% for the first three months of 2000. Other non-interest expenses amounted to $483,000 for the three months ended March 31, 2001, a decrease of $52,000, or 9.7% over the first three months of 2000. With the decrease in our non-interest expense in the first quarter, our overall non-interest expense is less than 2% of average assets on an annualized basis, which places us among the leaders of our peer financial institutions at controlling total non-interest expense. INCOME TAXES Effective tax planning has helped produce favorable net income. The effective total income tax rate was 19.6% for the first quarter of 2001 as compared to 14.9% for the first quarter of 2000. The increase in our effective tax rate in the first quarter of 2001 was due primarily to the limited opportunities to purchase municipal (tax-free investments) securities at relatively attractive interest rates. ANALYSIS OF FINANCIAL CONDITION ASSETS Total assets increased to $381,520,000 as of March 31, 2001, an increase of $21,178,000, or 5.9% over year-end 2000. Total deposits increased to $290,151,000 as of March 31, 2001, an increase of $18,678,000, or 6.9% over year-end 2000. With the increase in total deposits, the Corporation did not increase borrowed funds. Short-term borrowings remained stable at $8,887,000 as of March 31, 2001, comparable to $8,560,000 as of March 30, 2000. Long-term borrowings decreased by $1,000,000 to $40,250,000 as of March 31, 2001. EARNING ASSETS Our primary earning asset, loans, net of unearned income decreased to $188,994,000 as of March 31, 2001, down $1,677,000, or 0.9% since year-end 2000. The loan portfolio continues to be well diversified and overall asset quality remains strong with past-due loans and non-performing assets remaining relatively stable. Our investment portfolio increased in size from December 31, 2000, to March 31, 2001. Held-to-maturity securities amounted to $8,459,000 as of March 31, 2001, a decrease of $278,000 from December 31, 2000. However, available-for-sale securities amounted to $157,014,000 as of March 31, 2001, an increase of $14,790,000 from year-end 2000. Interest bearing deposits with banks increased to $11,300,000 as of March 31, 2001, compared to $2,428,000 as of December 31, 2000. 12 ALLOWANCE FOR LOAN LOSSES Management performs a quarterly analysis to determine the adequacy of the allowance for loan losses. The methodology in determining adequacy incorporates specific and general allocations together with a risk/loss analysis on various segments of the portfolio according to an internal loan review process. Management maintains its loan review and loan classification standards consistent with those of its regulatory supervisory authority. Management feels, considering the conservative portfolio composition, which is largely composed of small retail loans (mortgages and installments) with minimal classified assets, low delinquencies, and favorable loss history, that the allowance for loan loss is adequate to cover foreseeable future losses. Any loans classified for regulatory purposes as loss, doubtful, substandard, or special mention that have not been disclosed under Industry Guide 3 do not (i) represent or result from trends or uncertainties which management reasonably expects will materially impact future operating results, liquidity, or capital resources, or (ii) represent material credits about which management is aware of any information which causes management to have serious doubts as to the ability of such borrowers to comply with the loan repayment terms. The Corporation was required to adopt Financial Accounting Standards Board Statement No. 114, "Accounting by Creditors for Impairment of a Loan" - Refer to Note 5 above for details. NON-PERFORMING ASSETS Non-performing assets consist of non-accrual and restructured loans, other real estate and foreclosed assets, together with loans past-due 90 days or more and still accruing. As of March 31, 2001, total non-performing assets were $1,104,000 as compared to $742,000 on December 31, 2000. Non-performing assets to total loans and foreclosed assets was .58% as of March 31, 2001, and .21% as of December 31, 2000. Interest income received on non-performing loans as of March 31, 2001, was $5,179 compared to $30,345 as of December 31, 2000. Interest income, which would have been recorded on these loans under the original terms as of March 31, 2001, and December 31, 2000, were $20,831 and $67,584, respectively. As of March 31, 2001 and December 31, 2000, there was no outstanding commitments to advance additional funds with respect to these non-performing loans. DEPOSITS AND OTHER BORROWED FUNDS As indicated previously, total deposits increased $18,678,000 as non-interest bearing deposits decreased by $1,993,000 and interest bearing deposits increased by $20,671,000 as of March 31, 2001, from year-end 2000. Total short-term and long-term borrowings declined slightly by $673,000 from year-end 2000. CAPITAL STRENGTH Normal increases in capital are generated by net income, less cash dividends paid out. Also, net unrealized gains on investment securities available-for-sale increased shareholders' equity, or capital, net of taxes by $2,443,000 as of March 31, 2001, and $815,000 as of December 31, 2000. Our stock repurchase plan indicates 100,000 shares being repurchased as of March 31, 2001 and December 31, 2000. This had an effect of our reducing our total stockholders' equity by $3,097,000 as of both March 31, 2001 and December 31, 2000. Total stockholders' equity was $38,921,000 as of March 31, 2001, compared to $36,657,000 as of December 31, 2000. 13 Leverage ratio and risk based capital ratios remain very strong. As of March 31, 2001, our leverage ratio was 9.87% as compared to 10.47% as of December 31, 2000. In addition, Tier 1 risk based capital and total risk based capital ratio as of March 31, 2001, were 15.67% and 16.99%, respectively. The same ratios as of December 31, 2000, were 16.25% and 17.55%, respectively. LIQUIDITY The liquidity position of the Corporation remains adequate to meet customer loan demand and deposit fluctuation. Managing liquidity remains an important segment of asset liability management. Our overall liquidity position is maintained by an active asset liability management committee. Management feels its current liquidity position is satisfactorily given a very stable core deposit base which has increased annually. Secondly, our loan payments and principal paydowns on our mortgage backed securities provide a steady source of funds. Also, short-term investments and maturing investment securities represent additional sources of liquidity. Finally, short-term borrowings are readily accessible at the Federal Reserve Bank, Atlantic Central Bankers Bank, or the Federal Home Loan Bank. 14 PART II - OTHER INFORMATION Item 1. Legal Proceedings None. Item 2. Changes in Securities None. Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders Annual Meeting of Shareholders of First Keystone Corporation held on Tuesday, April 17, 2001, at 10:00 a.m.
Votes Votes Directors Elected Votes For Against Withheld _________________ _________ ______ _______ John Arndt 2,431,315 50,404 0 J. Gerald Bazewicz 2,431,315 50,404 0 Robert E. Bull 2,430,767 50,952 0 Broker Directors Elected Abstentions Non-Votes _________________ ___________ _________ John Arndt 0 0 J. Gerald Bazewicz 0 0 Robert E. Bull 0 0
Directors Continuing: ____________________ John L. Coates, term expires in 2002 Dudley P. Cooley, term expires in 2002 Budd L. Beyer, term expires in 2003 Frederick E. Crispin, Jr., term expires in 2003 Jerome F. Fabian, term expires in 2003 Robert J. Wise, term expires in 2003 Matters Voted Upon: __________________ Selection of J. H. Williams & Co. LLP, as auditors for the Corporation. Votes For - 2,463,445 Votes Against - 17,731 Votes Withheld - 0 Abstentions - 543 Broker Non-Votes - 0 Item 5. Other Information None. 15 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits required by Item 601 Regulation S-K Exhibit Number Description of Exhibit 3(i) Articles of Incorporation, as amended 3(ii) Bylaws, as amended 10.1 Supplemental Employee Retirement Plan (Incorporated by reference to Exhibit 10 to Registrant's Form 10-K for the year ended December 31, 2000) 10.2 Management Incentive Compensation Plan (Incorporated by reference to Exhibit 10 (Page 18) to Registrant's Form 10Q for the quarter ended June 30, 1997) 10.3 Profit Sharing Plan Summary (Incorporated by reference to Exhibit 10 (Page 16) to Registrant's Form 10Q for the quarter ended June 30, 1997) 10.4 First Keystone Corporation 1998 Stock Incentive Plan (Incorporated by reference to Exhibit 99 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1997) 11 Statement RE: Computation of Earnings Per Share. (b) During the quarter ended March 30, 2001, the registrant filed the following reports on Form 8-K: Date of Report Item Description ______________ ____ ___________ March 27, 2001 5 Press release announcing share buyback plan. 16 FIRST KEYSTONE CORPORATION SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly cause this report to be signed on its behalf by the undersigned, thereunto duly authorized. FIRST KEYSTONE CORPORATION Registrant May 11, 2001 J. Gerald Bazewicz President and Chief Executive Officer (Principal Executive Officer) May 11, 2001 David R. Saracino Treasurer/Assistant Secretary (Principal Accounting Officer) 17 INDEX TO EXHIBITS Exhibit Description _______ ___________ 10.1 Supplemental Employee Retirement Plan (Incorporated by reference to Exhibit 10 to Registrant's Form 10-K for the year ended December 31, 2000) 10.2 Management Incentive Compensation Plan (Incorporated by reference to Exhibit 10 (Page 18) to Registrant's Form 10Q for the quarter ended June 30, 1997) 10.3 Profit Sharing Plan Summary (Incorporated by reference to Exhibit 10 (Page 16) to Registrant's Form 10Q for the quarter ended June 30, 1997) 10.4 First Keystone Corporation 1998 Stock Incentive Plan (Incorporated by reference to Exhibit 99 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1997) 11 Compensation of Earning Per Share 18 EX-3 2 exh3i0301.txt EXHIBIT 3i ARTICLES OF INCORPORATION AS AMENDED OF FIRST KEYSTONE CORPORATION 19 ARTICLES OF INCORPORATION DOMESTIC BUSINESS CORPORATION FIRST KEYSTONE CORPORATION 111 WEST FRONT STREET BERWICK, PENNSYLVANIA 18603 COLUMBIA COUNTY Purpose of the Corporation: To have unlimited power to engage in and do any lawful act concerning any or all lawful business for which corporations may be incorporated under the provisions of the Business Corporation Law of the Commonwealth of Pennsylvania. Number and Class of Shares: 1,000,000 shares, Common Stock Stated Par Value Per Share if Any: $10.00 Total Authorized Capital: $10,000,000 Term of Existence: Perpetual Name and Address of Each Incorporator, and the Number and Class of Shares Subscribed to by each Incorporator:
Number and Address (Street, City, Class of Name State, Zip Code) Shares ______________________________________________________________________ Arthur E. Arndt, Jr. 910 E. 3rd St., Berwick, PA 1 share 18603 Common Stock Budd L. Beyer R.R. #2, Berwick, PA 18603 1 share Common Stock Robert E. Bull 323 W. 4th St., Nescopeck, PA 1 share 18635 Common Stock
(See Attached Sheet for Additional Incorporators) IN TESTIMONY WHEREOF, the Incorporator(s) have signed and sealed the Articles of Incorporation this 5th day of July, 1983. /s/ Arthur E. Arndt, Jr. Arthur E. Arndt, Jr. /s/ Budd L. Beyer Budd L. Beyer /s/ Robert E. Bull Robert E. Bull /s/ Bernard A. Ciampi Bernard A. Ciampi FIRST KEYSTONE CORPORATION ARTICLES OF INCORPORATION ADDITIONAL ARTICLES 7. No merger, consolidation, liquidation or dissolution of this corporation nor any action that would result in the sale or other disposition of all or substantially all of the assets of this corporation shall be valid unless first approved by the affirmative vote of the holders of at least sixty-six and two-thirds (66 2/3%) percent of the outstanding shares of Common Stock of this corporation. This Article 7 may not be amended unless first approved by the affirmative vote of the holders of at least sixty-six and two-thirds (66 2/3%) percent of the outstanding shares of Common Stock of this corporation. 8. Cumulative voting rights shall not exist with respect to the election of directors. 9. (a) The Board of Directors may, if it deems it advisable, oppose a tender or other offer for the corporation's securities, whether the offer is in cash or in the securities of a corporation or otherwise. When considering whether to oppose an offer, the Board of Directors may, but is not legally obligated to, consider any relevant, germane or pertinent issue; by way of illustration, but not to be considered any limitation on the power of the Board of Directors to oppose a tender or other offer for this corporation's securities, the Board of Directors may, but shall not be legally obligated to, consider any or all of the following: (i) Whether the offer price is acceptable based on historical and present operating results or financial condition of the corporation; (ii) Whether a more favorable price could be obtained for the corporation's securities in the future; (iii) The impact which an acquisition of the corporation would have on the employees, depositors and customers of the corporation and its subsidiaries and the communities which they serve; (iv) The reputation and business practices of the offeror and its management and affiliates as they would affect the employees, depositors and customers of the corporation and its subsidiaries and the future value of the corporation's stock; (v) The value of the securities (if any) which the offeror is offering in exchange for the corporation's securities, based on an analysis of the worth of the corporation as compared to the corporation or other entity who securities are being offered; and (vi) Any antitrust or other legal and regulatory issues that are raised by the offer. (b) If the Board of Directors determines that an offer should be rejected, it may take any lawful action to accomplish its purpose, including, but not limited to, any or all of the following: advising shareholders not to accept the offer; litigation against the offeror; filing complaints with all governmental and regulatory authorities; acquiring the corporation's securities; selling or otherwise issuing authorized but unissued securities or treasury stock or granting options with respect thereto; acquiring a company to create an antitrust or other regulatory problem for the offeror; and obtaining a more favorable offer from another individual or entity. FIRST KEYSTONE CORPORATION ARTICLES OF INCORPORATION INCORPORATORS AND SIGNATURES
Number and Address (Street, City, Class of Name State, Zip Code) Shares Arthur E. Arndt, Jr. 910 E. 3rd St., Berwick, PA 1 share 18603 Common Stock Budd L. Beyer R.R. #2, Berwick, PA 18603 1 share Common Stock Robert E. Bull 323 W. 4th St., Nescopeck, PA 1 share 18635 Common Stock Bernard A. Ciampi 302 Martzville Rd., Berwick, 1 share PA 18603 Common Stock Frank C. Elmes 113 W. Front St., Berwick, PA 1 share 18603 Common Stock Russell M. Henne 521 E. 5th St., Berwick, PA 1 share 18603 Common Stock Doyle W. Hortman 328 Mulberry St., Berwick, 1 share PA 18603 Common Stock John K. Jacoby 312 E. 4th St., Berwick, 1 share PA 18603 Common Stock F. Stuart Straub 1001 E. Front St., Berwick, 1 share PA 18603 Common Stock Robert J. Wise R.R. #3, Berwick, PA 18603 1 share Common Stock
IN TESTIMONY WHEREOF, The Incorporator(s) Has (Have) Signed And Sealed The Articles Of Incorporation This 5th Day of July, 1983. /s/ Arthur E. Arndt, Jr. Arthur E. Arndt, Jr. /s/ Budd L. Beyer Budd L. Beyer /s/ Robert E. Bull Robert E. Bull /s/ Bernard A. Ciampi Bernard A. Ciampi /s/ Frank C. Elmes Frank C. Elmes /s/ Russell M. Henne Russell M. Henne /s/ Doyle W. Hortman Doyle W. Hortman /s/ John K. Jacoby John K. Jacoby /s/ F. Stuart Straub F. Stuart Straub /s/ Robert J. Wise Robert J. Wise FIRST KEYSTONE CORPORATION DIRECTORS' CONSENT TO CORPORATE ACTION The undersigned, being all the directors of the above-named corporation, entitled to vote at a meeting thereof, do hereby consent to the adoption of the following resolutions and to the taking of the corporate action hereinafter specified as though same had been adopted at a meeting the directors duly called and convened, this consent being given pursuant to Section 402 of the Business Corporation Law, as amended: BE IT RESOLVED, that, in accordance with Section 1802 of the Business Corporation Law, the Board of Directors approves, adopts, ratifies and consents to an amendment to Article 5 of this corporation's Articles of Incorporation to read as follows: 5. The aggregate number of shares which the corporation shall have authority to issue is: Three Million (3,000,000) shares of Common Stock of the par value of Two Dollars ($2.00) per share (the "Common Stock") and Five Hundred Thousand (500,000) shares of Preferred Stock of the par value of Ten Dollars ($10.00) per share (the "Preferred Stock") with a total authorized capital of Eleven Million Dollars ($11,000,000). The Preferred Stock of the corporation may, from time to time, be divided into and issued in one or more series of shares, each of which series shall be so designated as to distinguish the shares thereof from the shares of all other series. All shares within any series of Preferred Stock shall be identical. There may be variations between different series of Preferred Stock, namely, the rate of dividend, the right of redemption, and the price at, and the terms and conditions on, which shares may be redeemed, the amounts payable upon shares in event of voluntary or involuntary liquidation, sinking fund provisions for the redemption or purchase of shares, the right of conversion, and the terms and conditions on which shares may be converted in the event the shares of any series of Preferred Stock are issued with the privilege of conversion. Different series of Preferred Stock shall not be construed to constitute different classes of shares for the purpose of voting by classes under the applicable laws of the Commonwealth of Pennsylvania. The Board of Directors of the corporation is hereby expressly vested with the authority, by resolution, from time to time to divide the Preferred Stock of the corporation into one or more series as aforesaid, to fix and determine the variable relative rights and preferences of any series so established, and to change redeemed or reacquired shares of any one series thereof into shares of another series. and, BE IT FURTHER RESOLVED, that the Board of Directors approves, adopts, ratifies and consents to a new additional Article 10 of the corporation's Articles of Incorporation to read as follows: 10. No holder of shares of any class or of any series of any class shall have any preemptive right to subscribe for, purchase or receive any shares of the corporation, whether now or hereafter authorized, or any obligations or other securities convertible into or carrying options or warrants to purchase any such shares of the corporation, or any options or rights to purchase any such shares or securities, issued or sold by the corporation for cash or any other form of consideration, and any such shares, securities, options, warrants or rights may be issued or disposed of by the Board of Directors to such persons and on such terms as the Board of Directors, in its discretion, shall deem advisable. and, BE IT FURTHER RESOLVED, that the Board of Directors, directs that the two aforesaid amendments to the corporation's Articles of Incorporation be submitted to the shareholders at the 1989 Annual Meeting of Shareholders to be held on March 21, 1989 at 9:00 a.m., prevailing time, at the main office of The First National Bank of Berwick, 111 West Front Street, Berwick, Pennsylvania, 18603; and NOW, THEREFORE, BE IT RESOLVED, that the proper officers of the corporation are hereby directed, authorized and empowered to take such action, for and on behalf of the corporation, as they deem necessary, to effectuate the intent and purpose of the foregoing resolutions. Dated: February 15, 1989 /s/ Arthur E. Arndt, Jr. Arthur E. Arndt, Jr. /s/ J. Gerald Bazewicz J. Gerald Bazewicz /s/ Budd L. Beyer Budd L. Beyer /s/ Robert E. Bull Robert E. Bull /s/ John L. Coates John L. Coates /s/ Dudley P. Cooley Dudley P. Cooley /s/ Frederick E. Crispin, Jr. Frederick E. Crispin, Jr. /s/ Stanley E. Oberrender Stanley E. Oberrender /s/ F. Stuart Straub F. Stuart Straub /s/ Robert J. Wise Robert J. Wise COMMONWEALTH OF PENNSYLVANIA DEPARTMENT OF STATE CORPORATION BUREAU ARTICLES OF AMENDMENT - DOMESTIC BUSINESS CORPORATION In compliance with the requirements of 15 Pa.C.S. paragraph 1915 (relating to Articles of Amendment), the undersigned business corporation, desiring to amend its Articles, does hereby certify and state that: 1. The Name of the Corporation is: First Keystone Corporation 2. The Address, including street and number, of its Registered Office in this Commonwealth is: (The Department of State is hereby authorized to correct the following statement to conform to the records of the Department): 111 West Front Street, P.O. Box 289, Columbia County, Berwick, Pennsylvania 18603 3. The Statute by or under which the Corporation was Incorporated is: Business Corporation law of 1933, Act of May 5, 1933, P.L. 364, as amended. 4. The Date of its Incorporation is: July 6, 1983 5. The Manner in which the Amendment was Adopted by the Corporation is: The amendment was duly approved and adopted, and proposed to the Shareholders, by the Board of Directors of the Corporation at a Meeting of the Board of Directors of the Corporation duly called, convened and held on February 10, 1998. The amendment was duly adopted by the Shareholders of the Corporation pursuant to Section 1914(a) and (b) of the Business Corporation Law of 1988, as amended, at the 1998 Annual Meeting of Shareholders of the Corporation duly called, convened and held pursuant to a Notice of Annual Meeting of Shareholders, Proxy Statement, and Form of Proxy dated March 27, 1998 and first sent on or about March 27, 1998 by United States Mail, first class postage prepaid, to the Shareholders of record as of the Record Date of March 10, 1998. The 1998 Annual Meeting of shareholders was held at 9:00 a.m., prevailing time, on Tuesday, April 21, 1998 at the main office of The First National Bank of Berwick, 111 West Front Street Berwick, Pennsylvania 18603. The total number of shares outstanding was 2,933,727 with each share entitled to one vote. The total number of shares entitled to vote was 2,933,727. The total number of shares that voted for the amendment was 2,376,425, the total number of shares that voted against the amendment was 66,663, and the total number of shares that abstained from voting on the matter was 35,532. Thus, the amendment was approved and adopted by 81% of the outstanding shares of Common Stock of the Corporation, which constitutes greater than a majority of the outstanding shares of Common Stock required to approved and adopt the amendment. 6. The Amendment Adopted by the Corporation set forth in full is: 5. The aggregate number of shares which the Corporation shall have authority to issue is 10,000,000 shares of Common Stock of the par value of $2.00 per share (the "Common Stock"). 7. The Amendment shall be Effective upon filing these Articles of Amendment with the Commonwealth of Pennsylvania, Department of State, Corporation Bureau. IN TESTIMONY WHEREOF, the undersigned Corporation has caused these Articles of Amendment to be signed by a duly authorized officer and its corporate seal, duly attested by another such officer, to be hereunto affixed this 30th day of April, 1998. Attest: FIRST KEYSTONE CORPORATION /s/ John L. Coates By: /s/ J. Gerald Bazewicz Secretary President CORPORATE SEAL EX-3 3 exh3ii0301.txt EXHIBIT 3ii BY-LAWS AS AMENDED OF FIRST KEYSTONE CORPORATION 20 BY-LAWS of FIRST KEYSTONE CORPORATION Article 1 CORPORATION OFFICE Section 1.1 The Corporation shall have and continuously maintain in Pennsylvania a registered office which may, but need not, be the same as its place of business and at an address to be designated from time to time by the Board of Directors. Section 1.2 The Corporation may also have offices at such other places as the Board of Directors may from time to time designate or the business of the Corporation may require. Article 2 SHAREHOLDERS MEETINGS Section 2.1 All meetings of the shareholders shall be held at such time and place as may be fixed from time to time by the Board of Directors. Section 2.2 The annual meeting of the shareholders shall be held on the third Tuesday in March in each year if not a legal holiday, and if a legal holiday, then on the next full business day, when they shall elect a Board of Directors and transact such other business as may properly be brought before the meeting. Section 2.3 Special meetings of the shareholders may be called at any time by the Chairman of the Board, the President, the Executive Vice President, if any, a majority of the Board of Directors or of its Executive Committee or by shareholders entitled to cast at least one-fourth of the votes which all shareholders are entitled to cast at the particular meeting. If such request is addressed to the Secretary, it shall be signed by the persons making the same and shall state the purpose or purposes of the proposed meeting. Upon receipt of any such request, the person or persons making the request may issue the call. Section 2.4 Written notice of all meetings other than adjourned meetings of shareholders, stating the place, data and hour, and, in case of special meetings of shareholders, the purpose thereof, shall be served upon, or mailed, postage prepaid, or telegraphed, charges prepaid, at least ten days before such meeting, unless a greater period of notice is required by statute or by these By-laws, to each shareholder entitled to vote thereat at such address as appears on the transfer books of the Company. Article 3 QUORUM OF SHAREHOLDERS Section 3.1 The presence, in person or by proxy, of shareholders entitled to cast at least a majority of the votes which all shareholders are entitled to cast on the particular matter shall constitute a quorum for purposes of considering such matter, and unless otherwise provided by statute the acts of such shareholders at a duly organized meeting shall be the acts of the shareholders. If, however, any meeting of shareholders cannot be organized because of lack of a quorum, those present, in person or by proxy, shall have the power, except as otherwise provided by statute, to adjourn the meeting to such time and place as they may determine, without notice other than an announcement at the meeting, until the requisite number of shareholders for a quorum shall be present, in person or by proxy, except that in the case of any meeting called for the election of directors such meeting may be adjourned only for periods not exceeding 15 days as the holders of a majority of the shares present, in person or by proxy, shall direct, and those who attend the second of such adjourned meetings, although less than a quorum, shall nevertheless constitute a quorum for the purpose of electing directors. At any adjourned meeting at which a quorum shall be present or so represented, any business may be transacted which might have been transacted at the original meeting if a quorum had been present. The shareholders present, in person or by proxy, at a duly organized meeting can continue to do business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum. Article 4 VOTING RIGHTS Section 4.1 Except as may be otherwise provided by statute or by the Articles of Incorporation, at every shareholders meeting, every shareholder entitled to vote thereat shall have the right to one vote for every share having voting power standing in his name on the books of the Corporation on the record date fixed for the meeting. No share shall be voted at any meeting if any installment is due and unpaid thereon. Section 4.2 When a quorum is present at any meeting the voice vote of the holders of a majority of the stock having voting power, present, in person or by proxy, shall decide any question brought before such meeting except as provided differently by statute or by the Articles of Incorporation. Section 4.3 Upon demand made by a shareholder entitled to vote at any election for directors before the voting begins, the election shall be by ballot. -2- Article 5 PROXIES Section 5.1 Every shareholder entitled to vote at a meeting of shareholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for him by proxy. Every proxy shall be executed in writing by the shareholder or his duly authorized attorney in fact an filed with the Secretary of the Corporation. A proxy, unless coupled with an interest, shall be revocable at will, notwithstanding any other agreement or any provision in the proxy to the contrary, but the revocation of a proxy shall not be effective until notice thereof has been given to the Secretary of the Corporation. No unrevoked proxy shall be valid after 11 months from the date of its execution, unless a longer time is expressly provided therein, but in no event shall a proxy, unless coupled with an interest, be voted after three years from the date of its execution. A proxy shall not be revoked by the death or incapacity of the maker, unless before the vote is counted or the authority is exercised, written notice of such death or incapacity is given to the Secretary of the Corporation. Article 6 RECORD DATE Section 6.1 The Board of Directors may fix a time, not more than 45 days prior to the date of any meeting of shareholders, or the date fixed for the payment of any dividend or distribution, or the date for the allotment of rights, or the date when any change or conversion or exchange of shares will be made or go into effect, as a record date for the determination of the shareholders entitled to notice of, and to vote at, any such meeting, or entitled to receive payment of any such dividend or distribution, or to receive any such allotment of rights, or to exercise the rights in respect to any such change, conversion or exchange of shares. In such case, only such shareholders as shall be shareholders of record on the date so fixed shall be entitled to notice of, or to vote at, such meeting or to receive payment of such dividend or to receive such allotment of rights or to exercise such rights, as the case may be, notwithstanding any transfer of any shares of the books of the Corporation after any record date fixed as aforesaid. The Board of Directors may close the books of the Corporation against transfers of shares during the whole or any part of such period, and in such case written or printed notice thereof shall be mailed at least ten days before the closing thereof to each shareholder of record at the address appearing on the records of the Corporation or supplied by him to the Corporation for the purpose of notice. While the stock transfer books of the Corporation are closed, no transfer of shares shall be made thereon. If no record date is fixed by the Board of Directors for the determination of shareholders entitled to receive notice of, and vote at, a shareholders meeting, transferees of shares which are transferred on the books of the Corporation within ten days -3- next preceding the date of such meeting shall not be entitled to notice of or to vote at such meeting. Article 7 VOTING LISTS Section 7.1 The officer or agent having charge of the transfer books for shares of the Corporation shall make, at least five days before each meeting of shareholders, a complete alphabetical list of the shareholders entitled to vote at the meeting, with their addresses and the number of shares held by each, which list shall be kept on file at the registered offices or principal place of business of the Corporation and shall be subject to inspection by any shareholder during the entire meeting. The original transfer books for shares of the Corporation, or a duplicate thereof kept in this Commonwealth, shall be prima facie evidence as to who are the shareholders entitled to exercise the rights of a shareholder. Article 8 JUDGES OF ELECTION Section 8.1 In advance of any meeting of shareholders, the Board of Directors may appoint judges of election, who need not be shareholders, to act at such meeting or any adjournment thereof. If judges of election are not so appointed, the Chairman of any such meeting may, and on the request of any shareholder or his proxy shall, make such appointment at the meeting. The number of judges shall be one or three. If appointed at a meeting on the request of one or more shareholders or proxies, the majority of shares present and entitled to vote shall determine whether one or three judges are to be appointed. No person who is a candidate for office shall act as a judge. The judges of election shall do all such acts as may be proper to conduct the election or vote, and such other duties as may be prescribed by statute, with fairness to all shareholders, and if requested by the Chairman of the meeting or any shareholder or his proxy, shall make a written report of any matter determined by them and execute a certificate of any fact found by them. If there are three judges of election, the decision, act or certificate of a majority shall be the decision, act or certificate of all. Article 9 CONSENT OF SHAREHOLDERS IN LIEU OF MEETING Section 9.1 Any action required to be taken at a meeting of the shareholders, or of a class of shareholders, may be taken without a meeting, if a consent or consents in writing setting forth the action so taken shall be signed by all of the shareholders who would be -4- entitled to vote at a meeting for such purpose and shall be filed with the Secretary of the Corporation. Article 10 DIRECTORS Section 10.1 Any shareholder who intends to nominate or to cause to have nominated any candidate for election to the Board of Directors (other than any candidate proposed by the Corporation's then existing Board of Directors) shall so notify the Secretary of the Corporation in writing not less than 45 days prior to the date of any meeting of shareholders called for the election of directors. Such notification shall contain the following information to the extent known by the notifying shareholder: (a) The name and address of each proposed nominee; (b) the age of each proposed nominee; (c) the principal occupation of each proposed nominee; (d) the number of shares of the Corporation owned by each proposed nominee; (e) the total number of shares that to the knowledge of the notifying shareholder will be voted for each proposed nominee; (f) the name and residence address of the notifying shareholder; and (g) the number of shares of the Corporation owned by the notifying shareholder. Any nomination for director not made in accordance with this Section shall be disregarded by the chairman of the meeting, and votes cast for each such nominee shall be disregarded by the judges of election. In the event that the same person is nominated by more than one shareholder, if at least one nomination for such person complies with this Section, the nomination shall be honored and all votes cast for such nominee shall be counted. Section 10.2 The number of directors that shall constitute the whole Board of Directors shall be not less than seven nor more than twenty-five. The Board of Directors shall be classified into three classes, each class to be elected for a term of three years. The terms of the respective classes shall expire in successive years as provided in Section 10.3 hereof. Within the foregoing limits, the Board of Directors may from time to time fix the number of directors and their respective classifications. The Directors shall be natural persons of full age and need not be residents of Pennsylvania or shareholders of the Corporation. -5- No person who is 70 years of age or older (except for the eleven interim directors of the Corporation) shall be elected a director. Section 10.3 At the 1984 annual meeting of shareholders of the Corporation, the shareholders shall elect eleven directors as follows: four Class A directors to serve until the 1985 annual meeting of shareholders, four Class B directors to serve until the 1986 annual meeting of shareholders, and three Class C directors to serve until the 1987 annual meeting of shareholders. Each class shall be elected in a separate election. At each annual meeting of shareholders thereafter, successors to the class of directors whose term shall then expire shall be elected to hold office for a term of three years, so that the term of office of one class of directors shall expire in each year. Section 10.4 The Board of Directors may declare vacant the office of a director if he is declared of unsound mind by an order of court or convicted of felony or for any other proper cause or if, within thirty days after notice of election, he does not accept such office either in writing or by attending a meeting of the Board of Directors. *Amended February 4, 1986. Article 11 VACANCIES ON BOARD OF DIRECTORS Article 11.1 Vacancies on the Board of Directors, including vacancies resulting from an increase in the number of directors, shall be filled by a majority of the remaining members of the Board of Directors, though less than a quorum, each person so appointed shall be a director until the expiration of the term of office of the class of directors to which he was appointed. Article 12 POWERS OF BOARD OF DIRECTORS Section 12.1 The business and affairs of the Corporation shall be managed by its Board of Directors, which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Articles of Incorporation or by these By-laws directed or required to be exercised and done by the shareholders. Section 12.2 The Board of Directors shall have the power and authority to appoint an Executive Committee and such other committees as may be deemed necessary by the Board of Directors for the efficient operation of the Corporation. The Executive Committee shall consist of the Chairman of the Board, if any, the President and not less than two nor more than three other directors (which other directors shall not be employees of the Corporation or any of its subsidiaries). The Executive Committee shall meet at such time as may be fixed by the Board of Directors, or upon call of the Chairman of the Board or the -6- President. A majority of members of the Executive Committee shall constitute a quorum. The Executive Committee shall have and exercise the authority of the Board of Directors in the intervals between the meetings of the Board of Directors as far as may be permitted by law. Article 13 MEETINGS OF THE BOARD OF DIRECTORS Section 13.1 An organization meeting may be held immediately following the annual shareholders meeting without the necessity of notice to the directors to constitute a legally convened meeting, or the directors may meet at such time and place as may be fixed by either a notice or waiver of notice or consent signed by all of such directors. Section 13.2 Regular meetings of the Board of Directors shall be held not less often than semi-annually at a time and place determined by the Board of Directors at the preceding meeting. One or more directors may participate in any meeting of the Board of Directors, or of any committee thereof, by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear one another. Section 13.3 Special meetings of the Board of Directors may be called by the Chairman of the Board or the President on one day's notice to each director, either personally or by mail, telegram or telephone; special meetings shall be called by the Chairman of the Board or the President in like manner and on like notice upon the written request of three directors. Section 13.4 At all meetings of the Board of Directors, a majority of the directors shall constitute a quorum for the transaction of business, and the acts of a majority of the directors present at a meeting in person or by conference telephone or similar communications equipment at which a quorum is present in person or by such communications equipment shall be the acts of the Board of Directors, except as may be otherwise specifically provided by statute or by the Articles of Incorporation or by these By-laws. If a quorum shall not be present in person or by communications equipment at any meeting of the directors, the directors present may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or as permitted herein. Article 14 INFORMAL ACTION BY THE BOARD OF DIRECTORS Section 14.1 If all the directors shall severally or collectively consent in writing, including but not limited to telegrams and radiograms, to any action to be taken by the Corporation, such action -7- shall be as valid a corporation action as though it had been authorized at a meeting of the Board of Directors. Article 15 COMPENSATION OF DIRECTORS Section 15.1 Directors, as such, may receive a stated salary for their services or a fixed sum and expenses for attendance at regular and special meetings, or any combination of the foregoing as may be determined from time to time by resolution of the Board of Directors, and nothing contained herein shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Article 16 OFFICERS Section 16.1 The officers of the Corporation shall be elected by the Board of Directors at its organization meeting and shall be a President, a Secretary and a Treasurer. At its option, the Board of Directors may elect a Chairman of the Board. The Board of Directors may also elect one or more Vice Presidents and such other officers and appoint such agents as it shall deem necessary, who shall hold their offices for such terms, have such authority and perform such duties as may from time to time be prescribed by the Board of Directors. Any two or more offices may be held by the same person. Section 16.2 The compensation of all officers of the Corporation shall be fixed by the Board of Directors. Section 16.3 The Board of Directors may remove any officer or agent elected or appointed, at any time and within the period, if any, for which such person was elected or employed whenever in the Board of Directors' judgment it is in the best interests of the Corporation, and all persons shall be elected and employed subject to the provisions hereof. If the office of any officer becomes vacant for any reason, the vacancy may be filled by the Board of Directors. Article 17 THE CHAIRMAN OF THE BOARD Section 17.1 The Chairman of the Board shall preside at all meetings of the shareholders and directors. He shall supervise the carrying out of the policies adopted or approved by the Board of Directors. He shall have general executive powers, as well as the specific powers conferred by these By-laws. He shall also have and may -8- exercise such further powers and duties as from time to time may be conferred upon or assigned to him by the Board of Directors. Article 18 THE PRESIDENT Section 18.1 The President shall be the chief executive officer of the Corporation; shall have general and active management of the business of the Corporation; shall see that all orders and resolutions of the Board of Directors are put into effect, subject, however, to the right of the Board of Directors to delegate any specific powers, except such as may be by statute exclusively conferred on the President, to any other officer or officers of the Corporation; shall execute bonds, mortgages and other contracts requiring a seal under the seal of the Corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the Corporation. In the absence or incapacity of the Chairman of the Board, the President shall preside at meetings of the shareholders and the directors. If there is no Chairman of the Board, the President shall have and exercise all powers conferred by these By-laws or otherwise on the Chairman of the Board. Article 19 THE VICE PRESIDENT Section 19.1 The Vice President or, if more than one, the Vice Presidents in the order established by the Board of Directors shall, in the absence or incapacity of the President, exercise all the powers and perform the duties of the President. The Vice Presidents, respectively, shall also have such other authority and perform such other duties as may be provided in these By-laws or as shall be determined by the Board of Directors or the President. Any Vice President may, in the discretion of the Board of Directors, be designated as "executive", "senior", or by departmental or functional classification. Article 20 THE SECRETARY Section 20.1 The Secretary shall attend all meetings of the Board of Directors and of the shareholders and keep accurate records thereof in one or more minute books kept for that purpose and shall perform the duties customarily performed by the secretary of a corporation and such other duties as may be assigned to him by the Board of Directors or the President. -9- Article 21 THE TREASURER Section 21.1 The Treasurer shall have the custody, of the corporate funds and securities; shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall perform such other duties as may be assigned to him by the Board of Directors or the President. He shall give bond in such sum and with such surety as the Board of Directors may from time to time direct. Article 22 ASSISTANT OFFICERS Section 22.1 Each assistant officer shall assist in the performance of the duties of the officer to whom he is assistant and shall perform such duties in the absence of the officer. He shall perform such additional duties as the Board of Directors, the President or the officer to whom he is assistant may from time to time assign him. Such officers may be given such functional titles as the Board of Directors shall from time to time determine. Article 23 INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 23.1 The Corporation shall indemnify any director, officer and/or employee, or any former director, officer and/or employee, who was or is a party to, or is threatened to be made a party to, or who is called to be a witness in connection with, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that such person is or was a director, officer and/or employee of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not of itself create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or -10- proceeding, had reasonable cause to believe that his conduct was unlawful. Section 23.2 The Corporation shall indemnify any director, officer and/or employee, who was or is a party to, or is threatened to be made a party to, or who is called as a witness in connection with, any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person is or was a director, officer and/or employee or agent of another corporation, partnership, joint venture, trust or other enterprise against amounts paid in settlement and expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of, or serving as a witness in, such action or suit if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Corporation and except that no indemnification shall be made in respect of any such claim, issue or matter as to which such person shall have been adjudged to be liable for misconduct in the performance of his duty to the Corporation. Section 23.3 Except as may be otherwise ordered by a court, there shall be a presumption that any director, officer and/or employee is entitled to indemnification as provided in Sections 23.1 and 23.2 of this Article unless either a majority of the directors who are not involved in such proceedings ("disinterested directors") or, if there are less than three disinterested directors, then the holders of one-third of the outstanding shares of the Corporation determine that the person is not entitled to such presumption by certifying such determination in writing to the Secretary of the Corporation. In such event the disinterested director(s) or, in the event of certification by shareholders, the Secretary of the Corporation shall request of independent counsel, who may be the outside general counsel of the Corporation, a written opinion as to whether or not the parties involved are entitled to indemnification under Sections 23.1 and 23.2 of this Article. Section 23.4 Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized in the manner provided under Section 23.3 of this Article upon receipt of an undertaking by or on behalf of the director, officer and/or employee to repay such amount unless it shall ultimately be determined that he is entitled to be indemnified by the Corporation as authorized in this Article. Section 23.5 The indemnification provided by this Article shall not be deemed exclusive of any other rights to which a person seeking indemnification may be entitled under any agreement, vote of shareholders or disinterested directors, or otherwise, both as to action in his official capacity while serving as a director, officer and/or employee and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer and/or employee and shall inure to the benefit of the heirs and personal representatives of such a person. -11- Article 24 SHARE CERTIFICATES Section 24.1 The share certificates of the Corporation shall be numbered and registered in a share register as they are issued; shall bear the name of the registered holder, the number and class of shares represented thereby, the par value of each share or a statement that such shares are without par value, as the case may be; shall be signed by the President or a Vice President and the Secretary or the Treasurer or any other person properly authorized by the Board of Directors, and shall bear the corporate seal, which seal may be a facsimile engraved or printed. Where the certificate is signed by a transfer agent or a registrar, the signature of any corporate officer on such certificate may be a facsimile engraved or printed. In case any officer who has signed, or whose facsimile signature has been placed upon, any share certificate shall have ceased to be such officer because of death, resignation or otherwise before the certificate is issued, it may be issued by the Corporation with the same effect as if the officer had not ceased to be such at the date of its issue. Article 25 TRANSFER OF SHARES Section 25.1 Upon surrender to the Corporation of a share certificate duly endorsed by the person named in the certificate or by attorney duly appointed in writing and accompanied where necessary by proper evidence of succession, assignment or authority to transfer, a new certificate shall be issued to the person entitled thereto and the old certificate cancelled and the transfer recorded upon the share register of the Corporation. No transfer shall be made if it would be inconsistent with the provisions of Article 8 of the Pennsylvania Uniform Commercial Code. Article 26 LOST CERTIFICATES 26.1 Where a shareholder of the Corporation alleges the loss, theft or destruction of one or more certificates for shares of the Corporation and requests the issuance of a substitute certificate therefor, the Board of Directors may direct a new certificate of the same tenor and for the same number of shares to be issued to such person upon such person's making of an affidavit in form satisfactory to the Board of Directors setting forth the facts in connection therewith, provided that prior to the receipt of such request the Corporation shall not have either registered a transfer of such certificate or received notice that such certificate has been acquired by a bona fide purchaser. When authorizing such issue of a new -12- certificate the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate, or his heirs or legal representatives, as the case may be, to advertise the same in such manner as it shall require and/or give the Corporation a bond in such form and with surety or sureties, with fixed or open penalty, as shall be satisfactory to the Board of Directors, as indemnity for any liability or expense which it may incur by reason of the original certificate remaining outstanding. Article 27 DIVIDENDS Section 27.1 The Board of Directors may, from time to time, at any duly convened regular or special meeting or by unanimous consent in writing, declare and pay dividends upon the outstanding shares of capital stock of the Corporation in cash, property or shares of the Corporation, as long as any dividend shall not be in violation of law or the Articles of Incorporation. Section 27.2 Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in their absolute discretion, think proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purposes as the Board of Directors shall believe to be for the best interests of the Corporation, and the Board of Directors may reduce or abolish any such reserve in the manner in which it was created. Article 28 FINANCIAL REPORT TO SHAREHOLDERS Section 28.1 The President and the Board of Directors shall present at each annual meeting of the shareholders a full and complete statement of the business and affairs of the corporation for the preceding year. Article 29 INSTRUMENTS Section 29.1 All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the President or the Board of Directors may from time to time designate. -13- Section 29.2 All agreements, indentures, mortgages, deeds, conveyances, transfers, certificates, declarations, receipts, discharges, releases, satisfactions, settlements, petitions, schedules, accounts, affidavits, bonds, undertakings, proxies and other instruments and documents may be signed, executed, acknowledged, verified, delivered or accepted, including those in connection with the fiduciary powers of the Corporation, on behalf of the Corporation by the President or other persons as may be designated by him. Article 30 FISCAL YEAR Section 30.1 The fiscal year of the Corporation shall be the calendar year. Article 31 SEAL Section 31.1 The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal, Pennsylvania". Said seal may be used by causing it or a facsimile thereof to be impressed or affixed in any manner reproduced. Article 32 NOTICES AND WAIVERS THEREOF Section 32.1 Whenever, under the provisions of applicable law or of the Articles of Incorporation or of these By-laws, written notice is required to be given to any person, it may be given to such person either personally or by sending a copy thereof through the mail or by telegram, charges prepaid, to his address appearing on the books of the Corporation or supplied by him to the Corporation for the purpose of notice. If the notice is sent by mail or telegraph, it shall be deemed to have been given to the person entitled thereto when deposited in the United States mail or with a telegraph office for transmission to such person. Such notice shall specify the place, day and hour of the meeting and, in the case of a special meeting of shareholders, the general nature of the business to be transacted. Section 32.2 Any written notice required to be given to any person may be waived in writing signed by the person entitled to such notice whether before or after the time stated therein. Attendance of any person entitled to notice, whether in person or by proxy, at any meeting shall constitute a waiver of notice of such meeting, except where any person attends a meeting for the express purpose of objecting to the transaction of any business because the meeting was not lawfully -14- called or convened. Where written notice is required of any meeting, the waiver thereof must specify the purpose only if it is for a special meeting of shareholders. Article 33 AMENDMENTS Section 33.1 These By-laws may be altered, amended or repealed by the affirmative vote of the holders of a majority of the outstanding shares of Common Stock at any regular or special meeting duly convened after notice to the shareholders of that purpose, or by a majority vote of the members of the Board of Directors at any regular or special meeting thereof duly convened after notice to the directors of that purpose, subject always to the power of the shareholders to change such action of the Board of Directors by the affirmative vote of the holders of a majority of the outstanding shares of Common Stock. Amendment to Section 10.4, approved February 4, 1986: Section 10.4 The Board of Directors may declare vacant the office of a director if he is declared of unsound mind by an order of court or convicted of felony or for any other proper cause or if, within thirty days after notice of election, he does not accept such office either in writing or by attending a meeting of the Board of Directors. In addition, whenever a director of this Corporation who is also an officer, director, or employee of this Corporation or of any subsidiary of this Corporation is terminated or resigns, voluntarily or involuntarily, from such position or positions, then the office of director that such person holds in this Corporation shall be deemed to be vacant as of the date of such termination or resignation; provided, however, that the office of director that such person holds shall not be deemed vacant in the case of the normal retirement of such person from one or more of the aforesaid positions with this Corporation or any subsidiaries of this Corporation. -15- FIRST KEYSTONE CORPORATION Secretary's Certification (1) I hereby certify that I am Secretary of First Keystone Corporation, a Pennsylvania business corporation located in Berwick, Commonwealth of Pennsylvania, and that I am presently serving in this position in accordance with By-laws of said corporation. (2) I hereby further certify that at the Annual Meeting of Shareholders held on March 17, 1987, the attached Articles #23 and #24 were approved by 76% of the issued and outstanding shares entitled to vote thereon. These Articles #23 and #24 are presently in full force and effect and have not been modified or rescinded as of this date. IN WITNESS WHEREOF, I have hereunto set my hand and Seal of the Corporation on this 26th day of March, 1987. /s/ Arthur E. Arndt, Jr. Arthur E. Arndt, Jr. Secretary Seal of Corporation FIRST KEYSTONE CORPORATION Resolution adopted by the Board of Directors on February 3, 1987 RESOLVED, that the Board of Directors of this Corporation takes notice of and concludes: (1) that it is becoming more difficult and costly to purchase adequate insurance coverage under a directors' and officers' liability policy, (2) that lawsuits are proliferating against Boards of Directors and members thereof by individuals, groups, associations and other corporations that perceive Boards of Directors and their members as easy targets to recover monies, and (3) that, as a result thereof, it is difficult to retain and to have qualified persons accept seats on the Boards of Directors of corporations due to this exposure to liability for actions while members of Boards of Directors; and BE IT FURTHER RESOLVED, that the Board of Directors takes further notice of the Directors' Liability Act that was recently enacted by the General Assembly of the Commonwealth of Pennsylvania to ameliorate the aforesaid difficulties to corporations and personal liability exposure to members of Boards of Directors; and BE IT FURTHER RESOLVED, that, in accordance with the Directors' Liability Act, the Board of Directors of this corporation hereby adopts, ratifies and approves amendments to the By-laws of the corporation to read as follows: Article 23 INDEMNIFICATION OF OFFICERS AND EMPLOYEES Section 23.1 The Corporation shall indemnify any officer and/or employee, or any former officer and/or employee, who was or is a party to, or is threatened to be made a party to, or who is called to be a witness in connection with, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that such person is or was an officer and/or employee of the Corporation, or is or was serving at the request of Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not of itself create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his conduct was unlawful. Section 23.2 The Corporation shall indemnify any officer and/or employee, who was or is a party to, or is threatened to be made a party to, or who is called as a witness in connection with, any threatened, pending or completed action or Suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person is or was a director, officer, and/or employee or agent of another Corporation, partnership, joint venture, trust or other enterprise against amounts paid in settlement and expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of, or serving as a witness in, such action or suit if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Corporation and except that no indemnification shall be made in respect of any such claim, issue or matter as to which such person shall have been adjudged to be liable for misconduct in the performance of his duty to the Corporation. Section 23.3 Except as may be otherwise ordered by a court, there shall be a presumption that any officer and/or employee is entitled to indemnification as provided in Sections 23.1 and 23.2 of this Article unless either a majority of the directors who are not involved in such proceedings ("disinterested directors") or, if there are less than three disinterested directors, then the holders of one-third of the outstanding shares of the Corporation determine that the person is not entitled to such presumption by certifying such determination in writing to the Secretary of the Corporation. In such event the disinterested director(s) or, in the event of certification by shareholders, the Secretary of the Corporation shall request of independent counsel, who may be the outside general counsel of the Corporation, a written opinion as to whether or not the parties involved are entitled to indemnification under Sections 23.1 and 23.2 of this Article. Section 23.4 Expenses incurred by an officer and/or employee in defending a civil or criminal action, Suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized in the manner provided under Section 23.3 of this Article upon receipt of an undertaking by or on behalf of the officer and/or employee to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation. Section 23.5 The indemnification provided by this Article shall not be deemed exclusive of any other rights to which a person seeking indemnification may be entitled under any agreement, vote of shareholders or disinterested directors, or otherwise, both as to action in his official capacity while serving as an officer and/or employee and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be an officer and/or employee and shall inure to the benefit of the heirs, executors and administrators of such a person. Section 23.6 The Corporation may create a fund of any nature, which may, but need not be, under the control of a trustee, or otherwise secure or insure in any manner its indemnification obligations arising under this Article. Section 23.7 The Corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was an officer and/or employee of the Corporation, or is or was serving at the request of the Corporation as an officer and/or employee of another Corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article. Section 23.8 Indemnification under this Article shall not be made in any case where the act or failure to act giving rise to the claim for indemnification is determined by a court to have constituted willful misconduct or recklessness. Section 23.9 No amounts shall be payable by the Corporation (or any of its subsidiaries that have a provision in their by-laws similar to this Section 23.9) to any person under this Article 23 (or under such similar provision) unless prior to any such payment the Corporation and its applicable subsidiary shall have received a written opinion from its counsel that the payment (2) of any such amount will not constitute an unsafe or unsound banking practice. Counsel for the Corporation and its applicable subsidiary may consult and seek advise from the appropriate banking supervisory agency before issuing such opinion. Article 24 INDEMNIFICATION OF DIRECTORS Section 24.1 A director of this Corporation shall stand in a fiduciary relation to the Corporation and shall perform his duties as a director, including his duties as a member of any committee of the board upon which he may serve, in good faith, in a manner he reasonably believed to be in the best interests of the Corporation, and with such care, including reasonable inquiry, skill and diligence, as a person of ordinary prudence would use under similar circumstances. In performing his duties, a director shall be entitled to rely in good faith on information, opinions, reports or statements, including financial statements and other financial data, in each case prepared or presented by any of the following: (a) One or more officers or employees of the Corporation whom the director reasonably believes to be reliable and competent in the matters presented. (b) Counsel, public accountants or other persons as to matters which the director reasonably believes to be within the professional or expert competence of such person. (c) A committee of the board upon which he does not serve, duly designated in accordance with law, as to matters within its designated authority, which committee the director reasonably believes to merit confidence. A director shall not be considered to be acting in good faith if he has knowledge concerning the matter in question that would cause his reliance to be unwarranted. Section 24.2 In discharging the duties of their respective positions, the board of directors, committees of the board, and individual directors may, in considering the best interests of the Corporation, consider the effects of any action upon employees, upon suppliers and customers of the Corporation and upon communities in which offices or other establishments of the Corporation are located, and all other pertinent factors. The consideration of those factors shall not constitute a violation of Section 24.1. Section 24.3 Absent a breach of fiduciary duty, lack of good faith or self-dealing, actions taken as a director or any failure to take any action shall be presumed to be in the best interests of the Corporation. Section 24.4 A director of this Corporation shall not be personally liable for monetary damages as such for any action taken or for any failure to take any action, unless: (a) the director has breached or failed to perform the duties of his office under the provisions of Sections 24.1 and 24.2, and (b) the breach or failure to perform constitutes self-dealing, willful misconduct or recklessness. Section 24.5 The provisions of Section 24.4 shall not apply to: (3) (a) the responsibility or liability of a director pursuant to a criminal statute, or (b) the liability of a director for the payment of taxes pursuant to local, state or federal law. Section 24.6 The Corporation shall indemnify any director, or any former director who was or is a party to, or is threatened to be made a party to, or who is called to be a witness in connection with, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that such person is or was a director of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another Corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys, fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not of itself create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his conduct was unlawful. Section 24.7 The Corporation shall indemnify any director who was or is a party to, or is threatened to be made a party to, or who is called as a witness in connection with, any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person is or was a director, officer and/or employee or agent of another Corporation, partnership, joint venture, trust or other enterprise against amounts paid in settlement and expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of, or serving as a witness in, such action or suit if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Corporation and except that no indemnification shall be made in respect of any such claim, issue or matter as to which such person shall have been adjudged to be liable for misconduct in the performance of his duty to the Corporation. Section 24.8 Except as may be otherwise ordered by a court, there shall be a presumption that any director is entitled to indemnification as provided in Sections 24.6 and 24.7 of this Article unless either a majority of the directors who are not involved in such proceedings ("disinterested directors") or, if there are less than three disinterested directors, then the holders of one-third of the outstanding shares of the Corporation determine that the person is not entitled to such presumption by certifying such determination in writing to the Secretary of the Corporation. In such event the disinterested director(s) or, in the event of certification by shareholders, the Secretary of the Corporation shall request of independent counsel, who may be the outside general counsel of the Corporation, a written opinion as to whether or not the parties involved are entitled to indemnification under Sections 24.6 and 24.7 of this Article. Section 24.9 Expenses incurred by a director in defending a civil or criminal action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized in the manner provided under Section 24.8 of this Article upon receipt of an undertaking by or on behalf of the director, officer and/or employee to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized in this Article. (4) Section 24.10 The indemnification provided by this Article shall not be deemed exclusive of any other rights to which a person seeking indemnification may be entitled under any agreement, vote of shareholders or disinterested directors, or otherwise, both as to action in his official capacity while serving as a director and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director and shall inure to the benefit of the heirs, executors and administrators of such a person. Section 24.11 The Corporation may create a fund of any nature, which may, but need not be, under the control of a trustee, or otherwise secure or insure in any manner its indemnification obligations arising under this Article. Section 24.12 The Corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director or is or was serving at the request of the Corporation as a director, officer, employee or agent of another Corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article. Section 24.13 Indemnification under this Article shall not be made in any case where the act or failure to act giving rise to the claim for indemnification is determined by a court to have constituted willful misconduct or recklessness. Section 24.14 No amounts shall be payable by the Corporation (or any of its subsidiaries that have a provision in their by-laws similar to this Section 24.14) to any person under this Article 24 (or under such similar provision) unless prior to any such payment the Corporation and its applicable subsidiary shall have received a written opinion from its counsel that the payment of any such amount will not constitute an unsafe or unsound banking practice. Counsel for the Corporation and its applicable subsidiary may consult and seek advice from the appropriate banking supervisory agency before issuing such opinion. and, BE IT FURTHER RESOLVED that present Articles 24 through 33 be renumbered Articles 25 through 34 respectively after the approval and adoption of the aforesaid Articles 23 and 24 by the shareholders; and NOW, THEREFORE, BE IT RESOLVED, that the aforesaid Articles 23 and 24 are to be submitted to the shareholders of this Corporation for their approval at the Annual Meeting of Shareholders to be held on March 17, 1987, and that the appropriate officers of the Corporation be and are hereby authorized, empowered and directed, in the name and on behalf of this Corporation, to take such action as may be necessary or desirable to carry out the intents and purpose of the foregoing resolutions. IN TESTIMONY WHEREOF, hereunder are set our hands and seals this 3rd day of February, 1987. FIRST KEYSTONE CORPORATION By: /s/ J. Gerald Bazewicz J. Gerald Bazewicz Attest: President /s/ Arthur E. Arndt Jr. Arthur E. Arndt Jr. Secretary (CORPORATE SEAL) (5) FIRST KEYSTONE CORPORATION Amendment to By-laws re Director Emeritus Section 10.6 The Board of Directors may appoint a former member of the Board of Directors of the Corporation as a director emeritus. A person appointed as a director emeritus shall serve for a three-year term. A director emeritus may be appointed by the Board of Directors to serve for successive terms. A director emeritus shall not be a member of any standing or special committee of the Corporation. A director emeritus shall not have the right to vote on any matter that is presented to the Board of Directors. A director emeritus may attend all regular and special meetings of the Board of Directors and shall be paid a fee for such attendance equal to one-half the current fee paid to a director for attendance at such meetings. There is no age limit as a disqualification to serve as a director emeritus. Adopted March 17, 1987 FIRST KEYSTONE CORPORATION Amendment to By-Laws re: Annual Meeting Section 2.2 The annual meeting of the shareholders shall be held on the third Tuesday in April in each year if not a legal holiday, and if a legal holiday, then on the next full business day, when they shall elect a Board of Directors and transact such other business as may properly be brought before the meeting. Adopted November 21, 1989 EX-11 4 exh110301.txt EXHIBIT 3i ARTICLES OF INCORPORATION AS AMENDED OF FIRST KEYSTONE CORPORATION 19 ARTICLES OF INCORPORATION DOMESTIC BUSINESS CORPORATION FIRST KEYSTONE CORPORATION 111 WEST FRONT STREET BERWICK, PENNSYLVANIA 18603 COLUMBIA COUNTY Purpose of the Corporation: To have unlimited power to engage in and do any lawful act concerning any or all lawful business for which corporations may be incorporated under the provisions of the Business Corporation Law of the Commonwealth of Pennsylvania. Number and Class of Shares: 1,000,000 shares, Common Stock Stated Par Value Per Share if Any: $10.00 Total Authorized Capital: $10,000,000 Term of Existence: Perpetual Name and Address of Each Incorporator, and the Number and Class of Shares Subscribed to by each Incorporator:
Number and Address (Street, City, Class of Name State, Zip Code) Shares ______________________________________________________________________ Arthur E. Arndt, Jr. 910 E. 3rd St., Berwick, PA 1 share 18603 Common Stock Budd L. Beyer R.R. #2, Berwick, PA 18603 1 share Common Stock Robert E. Bull 323 W. 4th St., Nescopeck, PA 1 share 18635 Common Stock
(See Attached Sheet for Additional Incorporators) IN TESTIMONY WHEREOF, the Incorporator(s) have signed and sealed the Articles of Incorporation this 5th day of July, 1983. /s/ Arthur E. Arndt, Jr. Arthur E. Arndt, Jr. /s/ Budd L. Beyer Budd L. Beyer /s/ Robert E. Bull Robert E. Bull /s/ Bernard A. Ciampi Bernard A. Ciampi FIRST KEYSTONE CORPORATION ARTICLES OF INCORPORATION ADDITIONAL ARTICLES 7. No merger, consolidation, liquidation or dissolution of this corporation nor any action that would result in the sale or other disposition of all or substantially all of the assets of this corporation shall be valid unless first approved by the affirmative vote of the holders of at least sixty-six and two-thirds (66 2/3%) percent of the outstanding shares of Common Stock of this corporation. This Article 7 may not be amended unless first approved by the affirmative vote of the holders of at least sixty-six and two-thirds (66 2/3%) percent of the outstanding shares of Common Stock of this corporation. 8. Cumulative voting rights shall not exist with respect to the election of directors. 9. (a) The Board of Directors may, if it deems it advisable, oppose a tender or other offer for the corporation's securities, whether the offer is in cash or in the securities of a corporation or otherwise. When considering whether to oppose an offer, the Board of Directors may, but is not legally obligated to, consider any relevant, germane or pertinent issue; by way of illustration, but not to be considered any limitation on the power of the Board of Directors to oppose a tender or other offer for this corporation's securities, the Board of Directors may, but shall not be legally obligated to, consider any or all of the following: (i) Whether the offer price is acceptable based on historical and present operating results or financial condition of the corporation; (ii) Whether a more favorable price could be obtained for the corporation's securities in the future; (iii) The impact which an acquisition of the corporation would have on the employees, depositors and customers of the corporation and its subsidiaries and the communities which they serve; (iv) The reputation and business practices of the offeror and its management and affiliates as they would affect the employees, depositors and customers of the corporation and its subsidiaries and the future value of the corporation's stock; (v) The value of the securities (if any) which the offeror is offering in exchange for the corporation's securities, based on an analysis of the worth of the corporation as compared to the corporation or other entity who securities are being offered; and (vi) Any antitrust or other legal and regulatory issues that are raised by the offer. (b) If the Board of Directors determines that an offer should be rejected, it may take any lawful action to accomplish its purpose, including, but not limited to, any or all of the following: advising shareholders not to accept the offer; litigation against the offeror; filing complaints with all governmental and regulatory authorities; acquiring the corporation's securities; selling or otherwise issuing authorized but unissued securities or treasury stock or granting options with respect thereto; acquiring a company to create an antitrust or other regulatory problem for the offeror; and obtaining a more favorable offer from another individual or entity. FIRST KEYSTONE CORPORATION ARTICLES OF INCORPORATION INCORPORATORS AND SIGNATURES
Number and Address (Street, City, Class of Name State, Zip Code) Shares Arthur E. Arndt, Jr. 910 E. 3rd St., Berwick, PA 1 share 18603 Common Stock Budd L. Beyer R.R. #2, Berwick, PA 18603 1 share Common Stock Robert E. Bull 323 W. 4th St., Nescopeck, PA 1 share 18635 Common Stock Bernard A. Ciampi 302 Martzville Rd., Berwick, 1 share PA 18603 Common Stock Frank C. Elmes 113 W. Front St., Berwick, PA 1 share 18603 Common Stock Russell M. Henne 521 E. 5th St., Berwick, PA 1 share 18603 Common Stock Doyle W. Hortman 328 Mulberry St., Berwick, 1 share PA 18603 Common Stock John K. Jacoby 312 E. 4th St., Berwick, 1 share PA 18603 Common Stock F. Stuart Straub 1001 E. Front St., Berwick, 1 share PA 18603 Common Stock Robert J. Wise R.R. #3, Berwick, PA 18603 1 share Common Stock
IN TESTIMONY WHEREOF, The Incorporator(s) Has (Have) Signed And Sealed The Articles Of Incorporation This 5th Day of July, 1983. /s/ Arthur E. Arndt, Jr. Arthur E. Arndt, Jr. /s/ Budd L. Beyer Budd L. Beyer /s/ Robert E. Bull Robert E. Bull /s/ Bernard A. Ciampi Bernard A. Ciampi /s/ Frank C. Elmes Frank C. Elmes /s/ Russell M. Henne Russell M. Henne /s/ Doyle W. Hortman Doyle W. Hortman /s/ John K. Jacoby John K. Jacoby /s/ F. Stuart Straub F. Stuart Straub /s/ Robert J. Wise Robert J. Wise FIRST KEYSTONE CORPORATION DIRECTORS' CONSENT TO CORPORATE ACTION The undersigned, being all the directors of the above-named corporation, entitled to vote at a meeting thereof, do hereby consent to the adoption of the following resolutions and to the taking of the corporate action hereinafter specified as though same had been adopted at a meeting the directors duly called and convened, this consent being given pursuant to Section 402 of the Business Corporation Law, as amended: BE IT RESOLVED, that, in accordance with Section 1802 of the Business Corporation Law, the Board of Directors approves, adopts, ratifies and consents to an amendment to Article 5 of this corporation's Articles of Incorporation to read as follows: 5. The aggregate number of shares which the corporation shall have authority to issue is: Three Million (3,000,000) shares of Common Stock of the par value of Two Dollars ($2.00) per share (the "Common Stock") and Five Hundred Thousand (500,000) shares of Preferred Stock of the par value of Ten Dollars ($10.00) per share (the "Preferred Stock") with a total authorized capital of Eleven Million Dollars ($11,000,000). The Preferred Stock of the corporation may, from time to time, be divided into and issued in one or more series of shares, each of which series shall be so designated as to distinguish the shares thereof from the shares of all other series. All shares within any series of Preferred Stock shall be identical. There may be variations between different series of Preferred Stock, namely, the rate of dividend, the right of redemption, and the price at, and the terms and conditions on, which shares may be redeemed, the amounts payable upon shares in event of voluntary or involuntary liquidation, sinking fund provisions for the redemption or purchase of shares, the right of conversion, and the terms and conditions on which shares may be converted in the event the shares of any series of Preferred Stock are issued with the privilege of conversion. Different series of Preferred Stock shall not be construed to constitute different classes of shares for the purpose of voting by classes under the applicable laws of the Commonwealth of Pennsylvania. The Board of Directors of the corporation is hereby expressly vested with the authority, by resolution, from time to time to divide the Preferred Stock of the corporation into one or more series as aforesaid, to fix and determine the variable relative rights and preferences of any series so established, and to change redeemed or reacquired shares of any one series thereof into shares of another series. and, BE IT FURTHER RESOLVED, that the Board of Directors approves, adopts, ratifies and consents to a new additional Article 10 of the corporation's Articles of Incorporation to read as follows: 10. No holder of shares of any class or of any series of any class shall have any preemptive right to subscribe for, purchase or receive any shares of the corporation, whether now or hereafter authorized, or any obligations or other securities convertible into or carrying options or warrants to purchase any such shares of the corporation, or any options or rights to purchase any such shares or securities, issued or sold by the corporation for cash or any other form of consideration, and any such shares, securities, options, warrants or rights may be issued or disposed of by the Board of Directors to such persons and on such terms as the Board of Directors, in its discretion, shall deem advisable. and, BE IT FURTHER RESOLVED, that the Board of Directors, directs that the two aforesaid amendments to the corporation's Articles of Incorporation be submitted to the shareholders at the 1989 Annual Meeting of Shareholders to be held on March 21, 1989 at 9:00 a.m., prevailing time, at the main office of The First National Bank of Berwick, 111 West Front Street, Berwick, Pennsylvania, 18603; and NOW, THEREFORE, BE IT RESOLVED, that the proper officers of the corporation are hereby directed, authorized and empowered to take such action, for and on behalf of the corporation, as they deem necessary, to effectuate the intent and purpose of the foregoing resolutions. Dated: February 15, 1989 /s/ Arthur E. Arndt, Jr. Arthur E. Arndt, Jr. /s/ J. Gerald Bazewicz J. Gerald Bazewicz /s/ Budd L. Beyer Budd L. Beyer /s/ Robert E. Bull Robert E. Bull /s/ John L. Coates John L. Coates /s/ Dudley P. Cooley Dudley P. Cooley /s/ Frederick E. Crispin, Jr. Frederick E. Crispin, Jr. /s/ Stanley E. Oberrender Stanley E. Oberrender /s/ F. Stuart Straub F. Stuart Straub /s/ Robert J. Wise Robert J. Wise COMMONWEALTH OF PENNSYLVANIA DEPARTMENT OF STATE CORPORATION BUREAU ARTICLES OF AMENDMENT - DOMESTIC BUSINESS CORPORATION In compliance with the requirements of 15 Pa.C.S. paragraph 1915 (relating to Articles of Amendment), the undersigned business corporation, desiring to amend its Articles, does hereby certify and state that: 1. The Name of the Corporation is: First Keystone Corporation 2. The Address, including street and number, of its Registered Office in this Commonwealth is: (The Department of State is hereby authorized to correct the following statement to conform to the records of the Department): 111 West Front Street, P.O. Box 289, Columbia County, Berwick, Pennsylvania 18603 3. The Statute by or under which the Corporation was Incorporated is: Business Corporation law of 1933, Act of May 5, 1933, P.L. 364, as amended. 4. The Date of its Incorporation is: July 6, 1983 5. The Manner in which the Amendment was Adopted by the Corporation is: The amendment was duly approved and adopted, and proposed to the Shareholders, by the Board of Directors of the Corporation at a Meeting of the Board of Directors of the Corporation duly called, convened and held on February 10, 1998. The amendment was duly adopted by the Shareholders of the Corporation pursuant to Section 1914(a) and (b) of the Business Corporation Law of 1988, as amended, at the 1998 Annual Meeting of Shareholders of the Corporation duly called, convened and held pursuant to a Notice of Annual Meeting of Shareholders, Proxy Statement, and Form of Proxy dated March 27, 1998 and first sent on or about March 27, 1998 by United States Mail, first class postage prepaid, to the Shareholders of record as of the Record Date of March 10, 1998. The 1998 Annual Meeting of shareholders was held at 9:00 a.m., prevailing time, on Tuesday, April 21, 1998 at the main office of The First National Bank of Berwick, 111 West Front Street Berwick, Pennsylvania 18603. The total number of shares outstanding was 2,933,727 with each share entitled to one vote. The total number of shares entitled to vote was 2,933,727. The total number of shares that voted for the amendment was 2,376,425, the total number of shares that voted against the amendment was 66,663, and the total number of shares that abstained from voting on the matter was 35,532. Thus, the amendment was approved and adopted by 81% of the outstanding shares of Common Stock of the Corporation, which constitutes greater than a majority of the outstanding shares of Common Stock required to approved and adopt the amendment. 6. The Amendment Adopted by the Corporation set forth in full is: 5. The aggregate number of shares which the Corporation shall have authority to issue is 10,000,000 shares of Common Stock of the par value of $2.00 per share (the "Common Stock"). 7. The Amendment shall be Effective upon filing these Articles of Amendment with the Commonwealth of Pennsylvania, Department of State, Corporation Bureau. IN TESTIMONY WHEREOF, the undersigned Corporation has caused these Articles of Amendment to be signed by a duly authorized officer and its corporate seal, duly attested by another such officer, to be hereunto affixed this 30th day of April, 1998. Attest: FIRST KEYSTONE CORPORATION /s/ John L. Coates By: /s/ J. Gerald Bazewicz Secretary President CORPORATE SEAL -----END PRIVACY-ENHANCED MESSAGE-----