SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
NORTH BANCSHARES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (Set forth the amount on which the
filing fee is calculated and state how it was determined.)
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing party:
(4) Date filed:
March 15, 1999
Dear Fellow Stockholder:
On behalf of the Board of Directors and management of North Bancshares,
Inc. (the "Company"), I cordially invite you to attend the Company's Annual
Meeting of Stockholders (the "Meeting"). The Meeting will be held at 10:00 a.m.,
local time, on April 28, 1999 at the Chicago Historical Society, located at 1601
N. Clark Street, Chicago, Illinois.
At the Meeting, stockholders are being asked to elect three directors,
to ratify the appointment of KPMG LLP as the Company's independent auditors for
the fiscal year ended December 31, 1999 and to vote on a resolution proposed by
a stockholder. Your Board of Directors unanimously recommends that you vote FOR
the director nominees named herein and FOR the ratification of the appointment
of independent auditors. Your Board of Directors unanimously recommends that you
vote AGAINST the stockholder proposal.
Whether or not you plan to attend, PLEASE READ THE ENCLOSED PROXY
STATEMENT AND THEN COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT IN
THE ACCOMPANYING POSTPAID RETURN ENVELOPE AS PROMPTLY AS POSSIBLE. This action
will save the Company additional expense in soliciting proxies and will ensure
that your shares are represented at the Meeting.
Thank you for your attention to this important matter.
Very truly yours,
Mary Ann Hass
Chairman of the Board
NORTH BANCSHARES, INC.
100 West North Avenue
Chicago, Illinois 60610
(312) 664-4320
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be Held on April 28, 1999
Notice is hereby given that the Annual Meeting of Stockholders (the
"Meeting") of North Bancshares, Inc. ("North Bancshares" or the "Company") will
be held at the Chicago Historical Society, located at 1601 North Clark Street,
Chicago, Illinois at 10:00 a.m., local time, on April 28, 1999.
A Proxy Card and a Proxy Statement for the Meeting are enclosed.
The Meeting is for the purpose of considering and acting upon:
1. The election of three directors of the Company;
2. The ratification of the appointment of KPMG LLP as independent auditors
for the Company for the fiscal year ending December 31, 1999;
3. A stockholder proposal concerning the creation of a special committee
of the Board of Directors;
and such other matters as may properly come before the Meeting, or any
adjournments or postponements thereof. The Board of Directors is not aware of
any other business to properly come before the Meeting.
Any action may be taken on the foregoing proposals at the Meeting on
the date specified above, or on any date or dates to which the Meeting may be
adjourned or postponed. Stockholders of record as of the close of business on
March 1, 1999 are the stockholders entitled to vote at the Meeting, and any
adjournments or postponements thereof.
You are requested to complete and sign the enclosed Proxy Card which is
solicited on behalf of the Board of Directors, and to mail it promptly in the
enclosed envelope. The proxy will not be used if you attend and vote at the
Meeting in person.
By Order of the Board of Directors
Mary Ann Hass
Chairman of the Board
Chicago, Illinois
March 15, 1999
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IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES TO ENSURE A QUORUM AT THE MEETING. A SELF-
ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF
MAILED WITHIN THE UNITED STATES.
- --------------------------------------------------------------------------------
PROXY STATEMENT
NORTH BANCSHARES, INC.
100 West North Avenue
Chicago, Illinois 60610
(312) 664-4320
ANNUAL MEETING OF STOCKHOLDERS
April 28, 1999
This Proxy Statement is furnished in connection with the solicitation
on behalf of the Board of Directors of North Bancshares, Inc. ("North
Bancshares" or the "Company") of proxies to be used at the Annual Meeting of
Stockholders of the Company (the "Meeting") which will be held at the Chicago
Historical Society, located at 1601 North Clark Street, Chicago, Illinois, on
April 28, 1999, at 10:00 a.m., local time, and all adjournments and
postponements of the Meeting. The accompanying Notice of Meeting and form of
proxy and this Proxy Statement are first being mailed to stockholders on or
about March 15, 1999. Certain of the information provided herein relates to
North Federal Savings Bank ("North Federal" or the "Bank"), a wholly owned
subsidiary of the Company.
At the Meeting, stockholders of the Company are being asked to consider
and vote upon (i) the election of three directors of the Company, (ii) a
proposal to ratify the appointment of KPMG LLP as the Company's independent
auditors for the fiscal year ending December 31, 1999 and (iii) a stockholder
proposal concerning the creation of a special committee of the Board of
Directors (the "Stockholder Proposal").
VOTE REQUIRED AND PROXY INFORMATION
All shares of the Company's common stock, par value $.01 per share
("Common Stock"), represented at the Meeting by properly executed proxies
received prior to or at the Meeting, and not revoked, will be voted at the
Meeting in accordance with the instructions thereon. If no instructions are
indicated, properly executed proxies will be voted FOR the nominees named
herein, FOR the ratification of the appointment of the independent auditors and
AGAINST the Stockholder Proposal. The Company does not know of any other matters
that may properly come before the Meeting. If any other matters should properly
come before the Meeting or any adjournment or postponement thereof, the holders
of proxies acting thereunder will have the discretion to vote on such matters in
accordance with their best judgment.
Directors shall be elected by a plurality of the votes cast in person
or by proxy at the Meeting. In all matters other than the election of directors,
the affirmative vote of the majority of the votes cast on the matter shall be
the act of the stockholders. Proxies marked to abstain with respect to a
proposal will have the same effect as votes against the proposal. Votes withheld
(for the election of directors) and broker non-votes will have no effect on the
vote. One-third of the shares of the Company's Common Stock, present in person
or represented by proxy, shall constitute a quorum for purposes of the Meeting.
Abstentions and broker non-votes are counted for purposes of determining a
quorum.
A proxy given pursuant to this solicitation may be revoked at any time
before it is voted. Proxies may be revoked by: (i) filing with the Secretary of
the Company at or before the Meeting a written notice of revocation bearing a
later date than the proxy; (ii) duly executing a subsequent proxy relating to
the same shares and delivering it to the Secretary of the Company at or before
the Meeting; or (iii) attending the Meeting and voting in person (although
attendance at the Meeting will not in and of itself constitute revocation of a
proxy). Any written notice revoking a proxy should be delivered to Victor E.
Caputo, Secretary, North Bancshares, Inc., 100 West North Avenue, Chicago,
Illinois 60610-1399.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Stockholders of record as of the close of business on March 1, 1999
will be entitled to one vote for each share then held. As of that date, the
Company had 1,258,585 shares of Common Stock issued and outstanding. The
following table sets forth information regarding share ownership of: (i) those
persons or entities known by management to beneficially own more than five
percent of the Company's Common Stock; and (ii) all directors and officers of
the Company and the Bank as a group. For information regarding share ownership
by the directors of the Company, see "Election of Directors."
Beneficial Owner Shares Beneficially Owned Percent of Class
- -------------------------------- ------------------------- ----------------
North Bancshares, Inc.(1) 155,432 12.35%
Employee Stock Ownership Plan
100 West North Avenue
Chicago, Illinois 60610
Mary Ann Hass/Elmer L. Hass(2) 114,383 9.01
100 West North Avenue
Chicago, Illinois 60610
Robert H. Rusher(3) 95,234 7.42
100 West North Avenue
Chicago, Illinois 60610
Joseph A. Graber (4) 76,182 5.96
100 West North Avenue
Chicago, Illinois 60610
Directors and executive officers 381,853 28.33
of the Company and the Bank as a
group (11 persons)(5)
- ------------------------
(1) The amount reported represents shares held by the Company's Employee Stock
Ownership Plan ("ESOP"), 96,081 of which were allocated to accounts of
participants. John P. Koch, the trustee of the ESOP, may be deemed to
beneficially own the shares held by the ESOP which have not been allocated
to the accounts of participants. Pursuant to the terms of the ESOP,
participants have the right to direct the voting of shares allocated to
their accounts. Unallocated shares held by the ESOP are voted by the plan
trustee in the same proportion that participants direct the allocated
shares to be voted.
(2) Includes shares held directly, jointly with family members, in a retirement
account of either individual or allocated to the ESOP account of Mrs. Hass,
and 10,414 shares subject to options granted under the 1993 Stock Option
and Incentive Plan ("Stock Option Plan") which are currently exercisable or
which will become exercisable within 60 days of March 1, 1999. The Hasses
are husband and wife. Mr. and Mrs. Hass are deemed to beneficially own all
shares held either directly or indirectly by either individual.
(3) Includes shares held directly and jointly with family members, as well as
25,658 shares subject to options granted under the Stock Option Plan which
are currently exercisable or which will become exercisable within 60 days
of March 1, 1999.
(4) Includes shares held directly and jointly with family members, as well as
19,747 shares subject to options granted under the Stock Option Plan which
are currently exercisable or which will become exercisable within 60 days
of March 1, 1999.
(5) Includes shares held directly, as well as jointly with family members, and
shares held in retirement accounts, allocated to ESOP accounts, held in a
fiduciary capacity or by certain family members, with respect to which
shares the group members may be deemed to have shared or sole voting and/or
investment power. This amount includes 89,397 shares in the aggregate
subject to options granted under the Stock Option Plan which are currently
exercisable or which will become exercisable within 60 days of March 1,
1999.
2
I. ELECTION OF DIRECTORS
GENERAL
The Company's Board of Directors currently consists of seven members.
The Board is divided into three classes, each of which contains approximately
one-third of the members of the Board. Approximately one-third of the directors
are elected annually. Directors are elected to serve for a three-year period or
until their respective successors are qualified and elected. The Board of
Directors voted to expand the Board from six to seven members in September 1998
and appointed Frank J. Donati to the newly created directorship.
The table below sets forth certain information regarding the
composition of the Company's Board of Directors, including each director's term
of office. The Board of Directors acting as the nominating committee has
recommended and approved the nominees identified in the following table. It is
intended that the proxies solicited on behalf of the Board of Directors (other
than proxies in which the vote is withheld as to a nominee) will be voted at the
Meeting FOR the election of the nominees identified below. If any nominee is
unable to serve, the shares represented by all valid proxies will be voted for
the election of such substitute nominee as the Board of Directors may recommend.
At this time, the Board of Directors knows of no reason why any nominee may be
unable to serve, if elected. Except as disclosed herein, there are no
arrangements or understandings between the nominees and any other person
pursuant to which the nominees were selected.
SHARES OF
COMMON STOCK
BENEFICIALLY PERCENT
POSITION(S) HELD DIRECTOR TERM TO OWNED AT OF
NAME AGE(1) IN THE COMPANY SINCE(2) EXPIRE MARCH 1, 1999(3) CLASS(3)
- ---------------- ------ ---------------- -------- ------- ---------------- --------
NOMINEES
Robert H. Rusher 70 Director 1993 1999 95,234 7.42%
Elmer L. Hass 70 Director 1968 1999 114,383 9.01
Frank J. Donati 46 Director 1998 1999 3,500 0.28
DIRECTORS CONTINUING IN OFFICE
James L. Ferstel 71 Director 1983 2000 37,229 2.93
Gregory W. Rose 39 Director 1997 2000 5,250 0.42
Mary Ann Hass 66 Chairman of the Board 1962 2001 114,383 9.01
Joseph A. Graber 48 Director, President and 1993 2001 76,182 5.96
Chief Executive Officer
- -----------------------
(1) At December 31, 1998.
(2) Includes service as a director of the Bank.
(3) Amounts include shares held directly and jointly with family members, as
well as shares held in retirement accounts, allocated to the ESOP accounts
of the named individuals, held by certain members of the named individuals'
families, or held by trusts of which the named individual is a trustee or
substantial beneficiary,
3
with respect to which shares the respective directors may be deemed to have
sole or shared voting and/or investment power. Amounts also include 10,414
shares subject to options granted to Messrs. Ferstel and Hass, 2,500 shares
subject to options granted to Mr. Donati and 3,750, 25,658 and 19,747
shares subject to options granted to Messrs. Rose, Rusher and Graber,
respectively, which are currently exercisable or which will become
exercisable within 60 days of March 1, 1999.
(4) Mr. and Mrs. Hass may be deemed to beneficially own all shares held
directly or indirectly by each other.
The business experience of each director of the Company is set forth
below. All directors have held their present position for at least five years
unless otherwise indicated.
ROBERT H. RUSHER - Mr. Rusher retired in 1995 after serving as
President and Chief Operating Officer of the Company since its formation in
1993, and President and Chief Operating Officer of the Bank since 1992. He was
elected to the Board of Directors in 1960 while serving as attorney to the Bank,
and was appointed an Advisory Director in 1979. Before beginning his career with
the Bank, Mr. Rusher was an associate with the law firm of Koch & Koch and a
partner in the firm of Eley, Rusher and Koch. Mr. Rusher also served on the
Board of Directors of Chicagoland Association of Savings Institutions and the
Lincoln Park Conservation Association. Mr. Rusher is the brother-in-law of Mrs.
Hass.
ELMER L. HASS - Mr. Hass was employed as a foreman by Cragin Metal
Products, Inc. from 1955 until his retirement on November 30, 1993. Mr. Hass is
Mrs. Hass' husband.
FRANK J. DONATI - Mr. Donati is the President of Donati Financial
Services, Inc., a consulting firm to financial institutions and corporations.
Prior to forming this company, Mr. Donati was Senior Vice President of Finance
at Bell Bancorp, Inc., the $1.9 billion holding company of Bell Federal Savings,
Chicago, Illinois. He also previously held the position of Senior Vice
President, Chief Financial Officer and Treasurer at United Savings of America
and he was a senior audit manager at KPMG LLP. Mr. Donati is a graduate of
DePaul University and a member of the Illinois CPA Society and the American
Institute of Certified Public Accountants.
JAMES L. FERSTEL - Mr. Ferstel has been a practicing attorney in the
Chicago area since 1952.
GREGORY W. ROSE - Mr. Rose is an owner, director and managing partner
of Monarch Tool and Die Company and STAG Real Estate Holdings.
MARY ANN HASS - Mrs. Hass has served as Chairman of the Board of the
Company since its incorporation in 1993, and as Chairman of the Board of the
Bank since 1968. She served as Chief Executive Officer of the Company from its
incorporation in 1993 until her retirement in July 31, 1998 and Chief Executive
Officer of the Bank from 1968 until July 31, 1998. She has served in various
capacities since beginning her career with the Bank in 1950. Mrs. Hass has
served on the Board of Directors of the Illinois League of Financial
Institutions; the Board of Trustees of the Latin School of Chicago; the Board of
Directors of the New City YMCA, formerly known as ISHAM YMCA. She is also a past
Chairman and Director of the Chicagoland Association of Savings Institutions;
past President and Director of the Federal Savings and Loan Council of Illinois;
and past President and Director of the Lincoln Park Chamber of Commerce. She
also has served on the Board of Directors and the Supervisory Committee of the
Norwood Park Catholic Credit Union. Mrs. Hass served on the Resource Development
Committee of the Neighborhood Housing Services of Chicago, Inc. and is a member
of The Economic Club of Chicago. Mrs. Hass has also served on the Publications
Committee and the Housing Finance Development Committees of the International
Union of Housing Finance Institutions. Mrs. Hass is the wife of Director Elmer
L. Hass and sister-in-law of Director Robert H. Rusher.
JOSEPH A. GRABER - Mr. Graber was appointed Chief Executive Officer of
the Company and the Bank on August 1, 1998. Mr. Graber was appointed President
of the Company and the Bank in 1995 after serving as Executive Vice President
and Corporate Secretary of the Company since its formation in 1993, and
Executive Vice President, Corporate Secretary and Advisory Director of the Bank
since 1992. Mr. Graber also has served as
4
Assistant Controller, Branch Manager, Vice President and Senior Vice President
during his tenure with the Bank, which began in 1972. Mr. Graber serves on the
Board of Directors of the Lincoln Park Chamber of Commerce. He also serves on
the Board of the Friends of the Near North Library. Mr. Graber was also
appointed to serve on the Citizens Advisory Council for the Community Area
Resident Economic Center. Mr. Graber is a member of the Executives' Club of
Chicago and a past President of the Wilmette Kiwanis Club and has served on the
Board of Directors of the Wilmette Chamber of Commerce. He was also Trustee of
the Chicago Savings and Trust Forum and Chairman of the Lincoln Park Unit of the
American Cancer Society.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
MEETINGS AND COMMITTEES OF THE COMPANY'S BOARD OF DIRECTORS. The
Company's Board of Directors meets as needed upon the written request of the
Chairman of the Board or at least three directors. The Board of Directors met
eleven times during fiscal 1998. During fiscal 1998, no incumbent director of
the Company attended fewer than 75% of the total number of Board meetings held
while he or she was a director and the total number of meetings held by the
committees of the Board of Directors on which he or she served during the period
that he or she served.
The Board of Directors of the Company has standing Audit, Compensation
and Allocation and Executive Committees.
The Audit Committee recommends independent auditors to the Board,
reviews the results of the auditors' services, reviews with management the
systems of internal control and internal audit reports and ensures that the
books and records of the Company are kept in accordance with applicable
accounting principles and standards. The members of the Audit Committee are
Messrs. Rusher, Ferstel and Rose. This committee met two times during the fiscal
year ended December 31, 1998.
The Compensation and Allocation Committee is composed of Messrs.
Ferstel, Hass and Rose. This committee administers the Company's Stock Option
Plan and the Recognition and Retention Plan, and reviews compensation and
benefit matters. This committee met two times during the fiscal year ended
December 31, 1998.
The Executive Committee is composed of Mrs. Hass and Messrs. Graber and
Rusher. To the extent authorized by the Board of Directors and the Company's
Bylaws, this committee exercises all of the authority of the Board of Directors
between Board Meetings. Specifically, the committee works with senior management
to accomplish the goals and objectives of the Company, and to formulate future
business strategies. The Executive Committee met once during the year ended
December 31, 1998.
The Nominating Committee is composed of Messrs. Graber, Rose and
Ferstel and is responsible for selecting nominees for election as directors. The
Nominating Committee met once during fiscal 1998. While the nominating committee
will consider nominees recommended by stockholders, the Nominating Committee has
not actively solicited such recommendations.
MEETINGS AND COMMITTEES OF THE BANK'S BOARD OF DIRECTORS. The Bank's
Board of Directors meets monthly and may have additional special meetings upon
the written request of the Chairman of the Board or at least three directors.
The Bank's Board of Directors met 13 times during the year ended December 31,
1998. During fiscal 1998, no incumbent director of the Bank attended fewer than
75% of the total number of Board meetings held while he or she was a director
and the total number of meetings held by the committees of the Board of
Directors on which he or she served during the period he or she served.
The Bank has standing Asset-Liability Risk Management, Compensation and
Allocation, Community Reinvestment Act ("CRA"), Executive, Interest Rate and
Loan Committees.
The Asset-Liability Risk Management Committee evaluates the Bank's
assets and liabilities and identifies problem assets. The committee also
considers investment recommendations and determines actions to be taken thereon.
The current members of this committee are Mr. Graber, Victor E. Caputo,
Executive Vice President and Secretary of the Company and the Bank, Martin W.
Trofimuk, Vice President and Treasurer of the Company and
5
the Bank and D. Robert Harless, Assistant Vice President and Controller of the
Bank. This committee held four meetings during the year ended December 31, 1998.
The Compensation and Allocation Committee establishes the salaries of
Bank personnel and reviews other compensation and benefit matters. Messrs.
Ferstel, Rose and Hass are the current members of the Compensation and
Allocation Committee. This committee met three times during fiscal 1998.
The CRA Committee reviews the Bank's CRA Statement and the Bank's
general overall compliance with the requirements of the CRA and makes
recommendations to the Board on changes to the CRA Statement. The CRA Committee
is composed of Mr. Graber and John K. Taylor, Vice President of the Bank. This
committee met once during fiscal 1998.
The Bank's Executive Committee exercises the powers of the full Board
of Directors between Board meetings, except that this committee does not have
the authority of the Board to amend the charter or bylaws, adopt a plan of
merger, consolidation, dissolution, or provide for the disposition of all or
substantially all of the property and assets of the Bank. The Executive
Committee is composed of Mrs. Hass and Messrs. Graber and Rusher. The Executive
Committee met once during the year ended December 31, 1998.
The Interest Rate Committee manages the Bank's interest rate risk and
sets the interest rates paid by the Bank. The committee consists of Messrs.
Graber, Caputo, Trofimuk and Ms. Karla Lauer, Vice President of the Bank, and
meets once per week.
The Loan Committee reviews and evaluates loans and approves loans and
loan commitments, within the guidelines established by the Board. The current
members of this committee are Messrs. Graber, Caputo, Taylor and Harless. The
Loan Committee met as necessary to approve loan applications, review loan
policies and set interest rates during the year ended December 31, 1998.
DIRECTOR COMPENSATION
The Bank's directors and advisory directors were each paid an annual
retainer fee of $9,600 and an additional fee of $300 for each meeting of the
Bank's Board of Directors attended during fiscal 1998. The Company's directors
are paid a fee of $250 for each meeting of the Company's Board attended unless
such meeting is held immediately following a meeting of the Bank's Board of
Directors, in which case no fee is paid for the Company Board meeting.
Upon his appointment to the Board of Directors in September 1998,
Director Frank J. Donati was awarded an immediately exercisable option to
purchase 2,500 shares of Common Stock at an exercise price of $11.50 per share
(the market value per share of the Common Stock on the date of grant).
6
EXECUTIVE COMPENSATION
The Company has not paid any compensation to its executive officers
since its formation. The Company does not presently anticipate paying any
compensation to such persons unless and until it becomes actively involved in
the operation or acquisition of businesses other than the Bank.
The following table sets forth information regarding compensation for
fiscal 1998 paid by the Bank to Joseph A. Graber, the Company's and the Bank's
current President and Chief Executive Officer, and Mary Ann Hass, who retired as
the Company's and the Bank's President and Chief Executive Officer on July 31,
1998 (the "named executive officers"). There were no other executive officers
whose salary and bonus for fiscal 1998 exceeded $100,000.
SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION LONG TERM COMPENSATION
----------------------------------------------- -------------------------------
AWARDS PAYOUTS
--------------------- -------
RESTRICTED
OTHER ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION AWARD(S) SARs PAYOUTS COMPENSATION
POSITION YEAR ($)(1) ($) ($)(4) ($) (#) ($) ($)(6)
- --------------------- ----------------------------------------------- -----------------------------------------------
Joseph A. Graber 1998 $119,167 $ -- $ -- $ -- 7,000(5) -- $31,377
President and Chief
Executive Officer 1997 $95,800 4,075(2) -- -- -- -- 34,811
1996 $90,050 -- -- -- -- -- 24,686
- --------------------- -------------------------------------------------------------------------------------------------
Mary Ann Hass 1998 $94,466 $6,383(2) -- -- -- -- $1,953
Chairman and Retired
President and Chief 1997 136,800 3,190(3) -- -- -- -- 54,715
Executive Officer
1996 127,350 7,068(3) -- -- -- -- 37,622
(1) Includes director's fees of $13,750, $12,800 and $11,350 for fiscal
1998, 1997 and 1996, respectively for each of Mr. Graber and Mrs. Hass.
(2) For Mr. Graber, represents a service award. For Mrs. Hass, represents a
service award and a payment in lieu of pension plan contributions.
(3) Represents a payment in lieu of pension plan contributions.
(4) Does not include perquisites which did not exceed the lesser of $50,000
or 10% of salary and bonus.
(5) For additional information regarding this award, see the table below
captioned "Option Grants in Last Fiscal Year."
(6) Represents the dollar value of term life insurance premiums paid by the
Bank and contributions to accounts under the ESOP, respectively, as
follows: Mr. Graber (i) 1998 - $502 and $30,875; (ii) 1997 - $348 and
$34,463; and (iii) 1996 - $348 and $24,337. Mrs. Hass (i) 1998 - $1,953
and none; (ii) 1997 - $2,520 and $52,195; and (iii) 1996 - $1,404 and
$36,218.
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The following table sets forth certain information concerning grants of
stock options made to the named executive officers during fiscal 1998 pursuant
to the Stock Option Plan. No stock appreciation rights were granted to the named
executive officers in fiscal 1998.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
-----------------------------------------------------------
NUMBER OF % OF TOTAL
SHARES OPTIONS
UNDERLYING GRANTED TO PER SHARE
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION
GRANTED FISCAL YEAR PRICE DATE
----------- ------------- --------- ----------
Joseph A. Graber 7,000 70% $14.50 7/17/08
Mary Ann Hass -- -- -- --
The following table provides information as to stock options exercised
by the named executive officers during fiscal 1998 and the value of the options
held by the named executive officers on December 31, 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END
OPTION VALUES
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY-END(#) FY-END($)(1)
--------------------------- ---------------------------
SHARES VALUE
NAME ACQUIRED REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
ON EXERCISE(#) ($) (#) (#) ($) ($)
- ---------------- -------------- -------- ----------- ------------- ----------- -------------
Joseph A. Graber 4,000 $19,320 18,000 -- $61,426 $ --
Mary Ann Hass 37,072 $358,493 -- -- -- --
(1) Represents the aggregate market value (market price of the Common Stock
less the exercise price) of the options held based upon the option
exercise price of $6.67 per share for 8,496 shares, $7.75 per share for
2,504 shares, and $14.56 per share for 7,000 shares, and the closing
price per share of the Common Stock on December 31, 1998 of $12.50, as
reported on the Nasdaq National Market.
EMPLOYMENT AGREEMENTS
The Bank has entered into employment agreements with Messrs. Graber,
Caputo and Trofimuk. The employment agreements are designed to assist the Bank
and the Company in maintaining a stable and competent management base. The
continued success of the Bank and the Company depends to a significant degree on
the skills and competence of their officers. The employment agreements provide
for an annual base salary in an amount not less than the employee's then current
salary and an initial term of three years with respect to Messrs. Graber and
Caputo, and one year with respect to Mr. Trofimuk. The agreements provide for an
extension of one year, in addition to the then-remaining term under the
agreement, on each anniversary of the effective date of the agreements, subject
to a performance evaluation performed by disinterested members of the Board of
Directors of the Bank. The
8
agreements provide for termination upon the employee's death, for cause or in
certain events specified by Office of Thrift Supervision regulations. The
employment agreements are also terminable by the employee upon 90 days notice to
the Bank.
The employment agreements provide for payment to the employee of his
salary for the remainder of the term of the agreement, plus up to 299% of the
employee's base compensation with respect to Messrs. Graber and Caputo, and up
to 100% of base compensation with respect to Mr. Trofimuk, in the event there is
a "change in control" of the Bank where employment terminates involuntarily in
connection with such change in control or within 12 months thereafter. This
termination payment is subject to reduction by the amount of all other
compensation to the employee deemed for purposes of the Internal Revenue Code of
1986, as amended, to be contingent on a "change in control," and may not exceed
three times the employee's average annual compensation over the most recent five
year period or be non-deductible by the Bank for federal income tax purposes.
For the purposes of the employment agreements, a "change in control" is defined
as any event which would require the filing of an application for acquisition of
control or notice of change in control pursuant to 12 C.F.R. ss. 574.3 or 4.
Such events are generally triggered prior to the acquisition or control of 10%
of the Company's Common Stock. The agreements guarantee participation in an
equitable manner in employee benefits applicable to executive personnel.
Based on their current salaries, if the employment of Messrs. Graber,
Caputo and Trofimuk had been terminated as of December 31, 1998, under
circumstances entitling them to severance pay as described above, they would
have been entitled to receive lump sum cash payments of approximately $360,000
$262,000 and $55,500, respectively.
CERTAIN TRANSACTIONS
The Bank has followed a policy of granting consumer loans and loans
secured by the borrower's personal residence to officers, directors and
employees. All loans to executive officers and directors are made in the
ordinary course of business and on the same terms and conditions as those of
comparable transactions prevailing at the time, in accordance with the Bank's
underwriting guidelines, and do not involve more than the normal risk of
collectibility or present other unfavorable features. Loans to executive
officers and directors must be approved by a majority of the disinterested
directors and loans to other officers and employees must be approved by the
Bank's Loan Committee. All loans by the Bank to its directors and executive
officers are subject to OTS regulations restricting loan and other transactions
with affiliated persons of the Bank. Federal law currently requires that all
loans to directors and executive officers be made on terms and conditions
comparable to those for similar transactions with non-affiliates. As required
under Federal law, all loans to executive officers and directors are made in the
ordinary course of business and on the same terms and conditions as those of
comparable transactions prevailing at the time, in accordance with the Company's
underwriting guidelines, and do not involve more than the normal risk of
collectibility or present other unfavorable features.
The Bank has made several loans to its directors and officers, or
certain family members or affiliates thereof, in the ordinary course of business
and on the same terms, including collateral and interest rates, as those
prevailing at the time for comparable transactions with other persons and which
did not involve more than the normal risk of collectibility or present other
unfavorable features or which complied with applicable rules concerning loans to
such persons in effect at the time when the loans were made.
9
II. RATIFICATION OF THE APPOINTMENT OF AUDITORS
The Board of Directors has renewed the Company's arrangement for KPMG
LLP to be its auditors for the 1999 fiscal year, subject to the ratification of
the appointment by the Company's stockholders. A representative of KPMG LLP is
expected to attend the Meeting to respond to appropriate questions and will have
an opportunity to make a statement if he so desires.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS THE COMPANY'S AUDITORS FOR THE
FISCAL YEAR ENDING DECEMBER 31, 1999.
III. STOCKHOLDER PROPOSAL
Management receives suggestions and proposals throughout the year from
stockholders, customers of the Company and others. Such proposals are welcomed,
and management seeks to assure that its views on the action it proposes to take
in their implementation or rejection are communicated to the proponent. Some
proposals from stockholders are presented to the Company in the form of
resolutions, and they may be adopted and implemented by management after review
with and agreement by their proponents, and therefore, need not be presented to
the stockholders. Other resolutions from stockholders, like the one presented
below, are properly presented to the Company, but are regarded by management as
not being in the best interests of the Company or its stockholders, and are
presented in the proxy materials to the stockholders for a vote as required by
law.
The name and address and the number of shares held by the stockholder
submitting the following proposal will be furnished by the Company to any person
either orally or in writing as requested, promptly upon the receipt of any oral
or written request therefor.
PROPOSED RESOLUTION
"RESOLVED, that the shareholders of North Bancshares, Inc. hereby
recommend that the Board of Directors appoint a special committee, for the
purpose of soliciting, reviewing and negotiating offers to acquire North
Bancshares, Inc. on terms that are fair and in the best interests of all of the
shareholders of North Bancshares, Inc. The special committee should consist of
all directors except those who are current or former officers of North
Bancshares, Inc. or who are related by blood or marriage to a current or former
officer of North Bancshares, Inc."
SUPPORTING STATEMENT
"Proponent believes that, in view of the poor historical returns of the
company , the devastatingly negative return on investment to shareholders over
the last year and the lack of an effective plan to improve performance in the
future, the best method of enhancing and maximizing shareholder value is the
creation of a committee of independent directors to actively explore the
possibility of the sale of the company. Proponent states that in the four years
that North Bancshares, Inc., has been a stockholder-owned company, return on
equity, return on assets and the market value of the company stock have been
well below peer group averages. Moreover, the performance of the Company stock
over the last year has been devastating to investors. Return on equity in 1997
was 3.7% and return on assets 0.39%--results far below industry standards of
8.0% and .80% respectively. Results for the first nine months of 1998 had
deteriorated further to a ROE of 3.2% and a ROA of .36%. The company's ROE and
ROA performances are in the bottom 20% of all national publicly traded thrifts.
The company's stock price has, over the last year, plummeted, resulting in a
negative return on investment to shareholders.
Proponent further states that the strategy espoused by management in
the 1997 Annual Report is specious and will never produce the financial goals
stated. In support of this comment, proponent points out that virtually none of
the financial goals specified in the 1995, 1996 or 1997 annual reports have been
met.
10
Proponent additionally states that management has ignored requests made
by several shareholders over the last several years to engage an experienced
investment banking firm to evaluate the best options available to shareholders
to enhance value.
Consequently, proponent recommends out of fairness to the shareholders
of the company that the Board of Directors create a special committee to carry
out this effort to maximize shareholder value and better serve the interests of
all of the shareholders."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" THE STOCKHOLDER
PROPOSAL FOR THE FOLLOWING REASONS.
The Board of Directors recognizes as its primary duty the maximization
of stockholder value. The Board believes that the short-term solution to
increasing stockholder value advocated by the above proposal, the sale of the
Company, would not compensate stockholders sufficiently for the value their
shares in the Company represent. The Board believes that the long-term business
plan of the Company will provide stockholders the greatest value.
We believe that the proponent's statement contains misleading
information and erroneous statements. The proponent fails to point out the
Company stock is trading at approximately 119% of book value, which is compared
to the average of 116% for the Company's peer group based on a September 30,
1998 independent analysis. Our dividend rate, which amounts to 3.6% at the
current best offer price level of $12.25 and 6.6% at the split adjusted initial
public offering price of $6.67 is well above the peer group average of 2.1%.
From the Company's initial public offering in December 1993 through December
1998, the Company's stock has provided investors a compounded annual return on
investment, including dividends, of over 15%.
The proponent states that the goals outlined in the Company's business
plan are specious. The business plan targets and goals are aggressive but
realistic and over 80% of the goals that were detailed in previous annual
reports have been achieved.
* TARGETED LOAN GROWTH OF 5% TO 7% PER YEAR-Achieved 16.3% growth from
the end of 1994 to the end of 1998;
* LOAN DIVERSIFICATION BY REPLACING CONVENTIONAL ONE- TO FOUR-FAMILY
LOANS WITH HIGHER YIELDING INVESTMENT PROPERTY AND CONSUMER LOANS- 60%
of the loan production during 1998 involved these types of loans;
* LOANS AND MORTGAGE-BACKED SECURITIES TO ASSETS RATIO OF 65% TO 75% OF
ASSETS-Ratio at the end of 1998 was 77.5%;
* DEPOSIT ACCOUNT DIVERSIFICATION BY SHIFTING FROM HIGHER COST
CERTIFICATES OF DEPOSIT TO CHECKING AND MONEY MARKET
ACCOUNTS-Certificates currently account for less than 55% of total
deposits and non-interest checking accounts have increased by 90.4%
from January 1, 1997 to December 31, 1998;
* NON-INTEREST INCOME GROWTH GOAL OF 10% PER YEAR-23% improvement during
1998;
* HIGH DIVIDEND PAYOUT RATIO-Paid out 100% of diluted earning per share
in 1998;
* STOCK REPURCHASE PROGRAMS-Completed eleven repurchase programs totaling
$10.7 million and the Board of Directors recently approved the twelfth
program to repurchase up to 50,000 shares;
* REDUCTION IN THE EQUITY TO ASSETS RATIO-Reduced from 22.5% at the
beginning of 1994 to 10.5% at the end of 1998;
* REDUCTION IN THE RATIO OF OPERATING EXPENSES TO AVERAGE ASSETS-Reduced
from 2.75% at the end of 1994 to 2.54% at the end of 1998.
All of the above goals were designed to improve the Company's earnings
per share, return on equity and return on assets.
The proponent is wrong when he states that management has ignored
requests to seek outside assistance. Management regularly reviews the Company's
targets and goals with investment bankers, stock analysts and market-makers, as
well as a professional economist that the Company retained on a consulting
basis. Their comments and recommendations have been incorporated into the plan.
11
Finally, the Board believes the Company serves an important role in our
community, a role it could not adequately serve if sold to a larger financial
institution. The directors and executive officers of the Company are members of
our community, who understand the needs of the area and are able to tailor the
Company's policies and procedures to the community. The directors and executive
officers of the Company are also substantial stockholders who believe that the
Company's value is increased by its reputation as an independent,
community-based financial institution and the long term interests of the
stockholders are best served by continuing to implement the Company's business
plan.
ACCORDINGLY, THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "AGAINST'
THIS PROPOSAL, AND YOUR PROXY WILL BE SO VOTED UNLESS YOU SPECIFY OTHERWISE.
The proposal will be approved if a majority of votes cast by the
holders of shares are cast in favor of the proposal. However, the proposal is
only advisory and is not binding on the Company's Board of Directors. The Board
has not decided what action, if any, it will take should the proposal be
approved.
DATE OF SUBMISSION OF STOCKHOLDER PROPOSALS
In order to be eligible for inclusion in the Company's proxy materials
for the next Annual Meeting of Stockholders, any stockholder proposal to take
action at such meeting must be received by the Company's Secretary at the
Company's main office located at 100 West North Avenue, Chicago, Illinois 60610
no later than November 16, 1999. Any such proposal shall be subject to the
requirements of the proxy rules adopted under the Securities Exchange Act of
1934, as amended, and, as with any stockholder proposal (regardless of whether
included in the Company's proxy materials), the Company's Certificate of
Incorporation and Bylaws and Delaware law. Under the proxy rules, in the event
that the Company receives notice of a stockholder proposal to take action at the
next annual meeting that is not submitted for inclusion in the Company' proxy
materials, or is submitted for inclusion but is properly excluded from such
proxy materials, the persons named in the form of proxy sent by the Company to
its stockholders intend to exercise their discretion to vote on such proposal in
accordance with their best judgment if notice of the proposal is not received at
the main office of the Company by the Deadline (as defined below). In addition
to the provision of the proxy rules regarding discretionary voting authority
described in the preceding sentence, the Company's Bylaws provided that if
notice of a stockholder proposal to take action at the next annual meeting is
not received at the main office of the Company by the Deadline, such proposal
will not be recognized as a matter proper for submission to the Company
stockholders and will not be eligible for presentation at such meeting. The
"Deadline" means the date that is 30 days prior to the date of the next annual
meeting; however, in the event that less than 40 days' notice of the date of
such meeting is given or made to stockholders, the "Deadline" means the close of
business on the tenth day following the day on which notice of the date of the
meeting was mailed.
OTHER MATTERS
The cost of solicitation of proxies will be borne by the Company. The
Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy materials
to the beneficial owners of Common Stock. In addition to solicitation by mail,
directors, officers and employees of the Company or the Bank may solicit proxies
personally or by telegraph or telephone without additional compensation. The
Company has retained Morrow & Company to assist in the solicitation of proxies
for a fee of $5,000, plus reasonable out-of-pocket expenses.
BY ORDER OF THE BOARD OF DIRECTORS
Mary Ann Hass
Chairman of the Board
Chicago, Illinois
March 15, 1999
12
NORTH BANCSHARES, INC.
ANNUAL MEETING OF STOCKHOLDERS
APRIL 28, 1999
The undersigned hereby appoints the Board of Directors of North Bancshares,
Inc. (the "Company"), and its survivor, with full powers of substitution, to act
as attorneys and proxies for the undersigned to vote all shares of common stock
of the Company which the undersigned is entitled to vote at the Company's Annual
Meeting of Stockholders (the "Meeting") to be held at the Chicago Historical
Society, located at 1601 N. Clark Street, Chicago, Illinois on April 28, 1999 at
10:00 a.m., local time, and at any and all adjournments and postponements
thereof.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED,
THIS PROXY WILL BE VOTED FOR THE NOMINEES FOR ELECTION AS DIRECTORS LISTED IN
ITEM 1 BELOW, FOR THE RATIFICATION OF THE APPOINTMENT OF AUDITORS NAMED IN ITEM
2 BELOW AND AGAINST THE PROPOSAL SET FORTH IN ITEM 3 BELOW. IF ANY OTHER
BUSINESS IS PRESENTED AT THE MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN
THIS PROXY IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS
KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE
NOMINEES LISTED IN ITEM 1 BELOW AND "FOR" THE RATIFICATION OF
THE APPOINTMENT OF AUDITORS NAMED IN ITEM 2 BELOW.
1. The election as directors of all nominees listed below (except as marked to
the contrary):
[ ] FOR [ ] VOTE WITHHELD
INSTRUCTION: TO WITHHOLD YOUR VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A
LINE THROUGH THAT NOMINEE'S NAME BELOW.
ROBERT H. RUSHER ELMER L. HASS FRANK J. DONATI
2. The ratification of the appointment of KPMG LLP as auditors for the
Company for the fiscal year ending December 31, 1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued and to be SIGNED on Reverse Side)
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" THE
PROPOSAL SET FORTH IN ITEM 3 BELOW.
3. A proposal by a stockholder of the Company concerning the creation of a
special committee of the Board of Directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote on any other
business that may properly come before the Meeting or any adjournment or
postponement thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
This Proxy may be revoked at any time before it is voted by: (i) filing
with the Secretary of the Company at or before the Meeting a written notice of
revocation bearing a later date than this Proxy; (ii) duly executing a
subsequent proxy relating to the same shares and delivering it to the Secretary
of the Company at or before the Meeting; or (iii) attending the Meeting and
voting in person (although attendance at the Meeting will not in and of itself
constitute revocation of this Proxy). If this Proxy is properly revoked as
described above, then the power of such attorneys and proxies shall be deemed
terminated and of no further force and effect.
The undersigned acknowledges receipt from the Company, prior to the
execution of this proxy, of notice of the Meeting, a Proxy Statement and an
Annual Report to Stockholders.
Dated: ________________, 1999 ____________________________________________
Signature of Stockholder
Please sign exactly as your name(s)
appear(s) to the left. When signing as
attorney, executor, administrator, trustee
or guardian, please give your full title. If
shares are held jointly, each holder should
sign.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE