U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended June 30, 2001
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from to
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Commission File Number 0-22800
NORTH BANCSHARES, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 36-3915073
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(State or other jurisdiction (I.R.S. Employer
of Incorporation or organization) Identification Number)
100 West North Avenue, Chicago, Illinois 60610-1399
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(Address of Principal Executive Offices) (Zip Code)
(312) 664-4320
(Registrant's telephone number, including area code)
Check whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 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 ( )
As of July 31, 2001, there were 1,157,774 outstanding shares of the
Registrant's Common Stock.
Transitional Small Business Disclosure Format(Check one):Yes ( ) No (X)
1
NORTH BANCSHARES, INC.
Table of Contents
Part I - FINANCIAL INFORMATION (UNAUDITED)
Item 1. Condensed Consolidated Financial Statements 3
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II - OTHER INFORMATION 13
Item 1. Legal Proceedings 13
Item 4. Submission of Matters to a Vote of Security Holders. 13
Item 6. Exhibits and Reports on Form 8-K 13
FORM 10-QSB SIGNATURE PAGE 14
2
Part I. Financial Information
Item 1. Condensed Consolidated Financial Statements
NORTH BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS JUNE 30, 2001 DEC 31, 2000
(UNAUDITED)
Cash and due from Banks $ 2,064 1,930
Interest-bearing deposits 2,270 2,006
Federal funds sold 9,789 4,245
Investment in dollar denominated mutual funds 191 903
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TOTAL CASH AND CASH EQUIVALENTS 14,314 9,084
Securities available for sale at fair value 16,130 16,961
Mortgage-backed securities available for sale at fair value 12,830 13,580
Stock in Federal Home Loan Bank of Chicago 2,692 1,905
Loans receivable, net of allowance for loan losses of $273 at
June 30, 2001 and $262 at December 31, 2000 91,901 90,765
Accrued interest receivable 1,012 1,016
Premises and equipment, net 758 803
Amounts due from brokers - 376
Other assets 182 91
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TOTAL ASSETS 139,819 134,581
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Deposit accounts 84,644 81,317
Borrowed Funds 39,100 38,200
Advance payments by borrowers for taxes and insurance 1,094 1,068
Accrued interest payable and other liabilities 2,294 1,213
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TOTAL LIABILITIES 127,132 121,798
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Preferred stock, $.01 par value. Authorized 500,000 shares; none
outstanding - -
Common stock, $.01 par value. Authorized 3,500,000 shares; issued
and outstanding 1,157,774 at June 30, 2001 and 1,181,253 at
December 31, 2000 19 19
Additional paid in capital 13,224 13,242
Retained earnings, substantially restricted 11,941 11,955
Treasury stock, at cost (756,301 shares at June 30, 2001 and
732,822 shares at December 31, 2000) (11,542) (11,316)
Accumulated other comprehensive loss (788) (895)
Common stock acquired by Employee Stock Ownership Plan (167) (222)
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TOTAL STOCKHOLDERS' EQUITY 12,687 12,783
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $139,819 134,581
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See accompanying notes to unaudited condensed consolidated financial statements.
3
NORTH BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2001 2000 2001 2000
INTEREST INCOME:
Loans receivable $1,696 1,690 3,403 3,347
Interest-bearing deposits and federal funds sold 118 59 246 98
Securities available for sale 274 314 560 616
Mortgage-backed securities available for sale 205 226 416 456
Other interest income 41 41 84 88
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TOTAL INTEREST INCOME 2,334 2,330 4,709 4,605
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INTEREST EXPENSE:
Deposit accounts 887 877 1,809 1,717
Borrowed funds 557 572 1,137 1,130
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TOTAL INTEREST EXPENSE 1,444 1,449 2,946 2,847
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NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES 890 881 1,763 1,758
PROVISION FOR LOAN LOSSES 7 27 11 31
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NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 883 854 1,752 1,727
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NON-INTEREST INCOME:
Gain (loss) on sale of securities available for sale - (90) 11 (90)
Other than temporary decline in value of securities
available for sale - (24) - (24)
Gain on sale of real estate - 1,322 - 1,322
Gain on sale of mortgage loans 9 - 44 -
Other non-interest income 86 76 158 159
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TOTAL NON-INTEREST INCOME 95 1,284 213 1,367
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NON-INTEREST EXPENSE:
Compensation and benefits 445 429 900 850
Occupancy expense 124 111 248 241
Professional fees 43 66 71 115
Data processing 55 55 104 104
Advertising and promotion 36 41 59 85
Other non-interest expense 92 97 183 190
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TOTAL NON-INTEREST EXPENSE 795 799 1,565 1,585
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INCOME BEFORE INCOME TAXES 183 1,339 400 1,509
INCOME TAX EXPENSE 73 306 157 363
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NET INCOME $110 1,033 243 1,146
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EARNINGS PER SHARE:
Basic $.10 .88 .21 .97
Diluted $.10 .87 .21 .96
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AVERAGE SHARES OUTSTANDING:
Basic 1,139,347 1,171,405 1,146,620 1,181,380
Diluted 1,152,318 1,180,442 1,158,579 1,190,906
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COMPREHENSIVE INCOME (LOSS) $(74) 1,161 350 1,217
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See accompanying notes to unaudited condensed consolidated financial statements.
4
NORTH BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
SIX MONTHS ENDED JUNE 30, 2000 AND 2001
(UNAUDITED)
Accumulated Common
Additional other stock
Common paid in Retained Treasury comprehensive acquired
Stock capital earnings stock income (loss) by ESOP Total
Balance at December 31, 1999 $19 13,393 11,115 (11,025) (1,916) (333) 11,253
Net income - - 1,146 - - - 1,146
Change in accumulated other
comprehensive loss - - - - 71 - 71
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Total comprehensive income - - - - - - 1,217
ESOP shares earned - 19 - - - 55 74
Purchase of treasury stock, 49,830
shares - - - (442) - - (442)
Cash dividend ($.22 per share) - - (267) - - - (267)
Options exercised and reissuance of
treasury stock, 17,110 shares - (154) - 275 - - 121
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Balance at June 30, 2000 19 13,258 11,994 (11,192) (1,845) (278) 11,956
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Balance at December 31, 2000 19 13,242 11,955 (11,316) (895) (222) 12,783
Net income - - 243 - - - 243
Change in accumulated other
comprehensive loss - - - - 107 - 107
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Total comprehensive income - - - - - - 350
ESOP shares earned - 25 - - - 55 80
Purchase of treasury stock, 30,749
shares - - - (318) - - (318)
Cash dividend ($.22 per share) - - (257) - - - (257)
Options exercised and reissuance of
treasury stock, 6,000 shares - (43) - 92 - - 49
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Balance at June 30, 2001 $19 13,224 11,941 (11,542) (788) (167) 12,687
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See accompanying notes to condensed unaudited consolidated financial statements.
5
NORTH BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
FOR THE SIX MONTHS ENDED JUNE 30,
2001 2000
Cash flows from operating activities:
Net Income $ 243 1,146
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 48 51
Deferred loan costs, net of amortization 24 15
Amortization of premiums and discounts, net (25) 2
ESOP expense 80 74
Provision for loan losses 11 31
(Gain) loss on sale of securities available for sale (9) 114
Gain on sale of loans (10) -
Gain on sale of real estate - (1,322)
Federal Home Loan Bank of Chicago stock dividend (71) (77)
Changes in assets and liabilities:
Decrease (Increase) in other assets, net 289 (123)
Increase in other liabilities 1,038 897
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Net cash provided by operating activities 1,616 808
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Cash flows from investing activities:
Maturities of securities available for sale 1,000 -
Purchase of securities available for sale - (1,991)
Proceeds from sales of securities available for sale - 2,191
Purchase of mortgage-backed securities available for sale (986) -
Proceeds from sales of mortgage-backed securities available
for sale 924 -
Repayment of mortgage-backed securities available for sale 829 606
Increase in loans (2,012) (2,232)
Proceeds from sale of mortgage loans 851
Proceeds from sale of real estate - 1,500
(Purchase) sale of Federal Home Loan Bank of Chicago stock (716) 477
Federal Home Loan Bank of Chicago stock dividend (71) (77)
Purchase of premises and equipment (3) (8)
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Net cash (used in) provided by investing activities (113) 543
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Cash flows from financing activities:
Increase in deposit accounts 3,327 4,625
Increase (decrease) in borrowed funds 900 (4,835)
Increase in advance payments by borrowers for taxes and insurance 26 48
Payment of cash dividend (257) (267)
Proceeds from stock options exercised 49 121
Purchase of treasury stock (318) (442)
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Net cash provided by (used in) financing activities 3,727 (750)
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Net increase in cash and cash equivalents 5,230 601
Cash and cash equivalents at beginning of period 9,084 5,877
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Cash and cash equivalents at end of period $14,314 6,478
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Supplemental disclosures of cash flow information:
Cash payments during the period for:
Interest $2,191 2,233
Taxes 385 125
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See accompanying notes to unaudited condensed consolidated financial statements.
6
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1) Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with accounting principles generaly accepted in
the United States of America for interim financial information and with the
instructions to Form 10-QSB and Article 10 of Regulation S-X. Accordingly, they
do not include all the information and notes required by accounting principles
generaly accepted in the United States of America for complete financial
statements.
In the opinion of management, the unaudited condensed consolidated
financial statements contain all adjustments (which are normal and recurring in
nature) necessary for a fair presentation of the financial condition as of June
30, 2001 and results of operations for the three and six month periods ended
June 30, 2001 and June 30, 2000, but are not necessarily indicative of the
results which may be expected for the entire year.
(2) Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements
include the accounts of North Bancshares, Inc. (the "Company"), its wholly-owned
subsidiary, North Federal Savings Bank (the "Bank"), and the Bank's subsidiary
North Financial Corporation. All significant intercompany accounts and
transactions have been eliminated in consolidation.
(3) Earnings Per Share
The following table sets forth the computation of basic and diluted
earnings per share for the periods indicated.
For the three months For the six months
ended June 30, ended June 30,
(In thousands, except share data) 2001 2000 2001 2000
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Numerator:
Net Income $110 1,033 243 1,146
Denominator:
Basic earnings per share-weighted average
shares outstanding 1,139,347 1,171,405 1,146,620 1,181,380
Effect of dilutive stock options outstanding 12,971 9,037 11,959 9,526
Diluted earnings per share-adjusted weighted
average shares outstanding 1,152,318 1,180,442 1,158,579 1,190,906
Basic earnings per share .10 .88 .21 .97
Diluted earnings per share .10 .87 .21 .96
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4) Comprehensive income
The Company's comprehensive income includes net income and other
comprehensive income (loss) comprised of unrealized gains or losses on
securities available for sale, net of tax effect, which are also recognized as
separate components of equity.
(5) Stock Repurchase Program
On September 14, 2000, the Company announced the beginning of another
stock repurchase program. The new repurchase program amounts to 50,000 shares or
approximately 4.0% of the outstanding shares of the Company. The Company intends
to repurchase shares in open market transactions or in privately negotiated
transactions over a one year period. At June 30, 2001, 40,168 shares had been
repurchased under the new program at an average cost of $10.23 per share.
Management continues to believe that stock repurchase programs provide enhanced
value to both the Company and its stockholders.
7
(6) Dividend Declaration
On April 16, 2001, the Company announced that the Board of Directors
declared a quarterly dividend of $.11 per share, which was paid on May 15, 2001
to stockholders of record on May 1, 2001. On July 16, 2001, the Company
announced that the Board of Directors declared a quarterly dividend of $.11 per
share, to be paid on August 15, 2001 to stockholders of record on August 1,
2001.
(7) Commitments and Contingencies
At June 30, 2001, the Bank had outstanding applications and commitments
to originate loans in the amount of $5.1 million at an average rate of 7.58% and
unused lines of credit totaling $3.9 million.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
General
The primary business of the Company is that of an independent
community-oriented financial institution offering a variety of financial
services to meet the needs of the communities it serves. The Company attracts
deposits from the general public, acquires deposits through brokers or borrows
funds and uses such funds to originate or acquire one-to-four family residential
mortgages, loans secured by small apartment buildings or mixed use properties,
equity lines of credit secured by real estate and commercial real estate loans.
The Company also invests in U.S. Government and agency securities, federal
agency mortgage-backed securities, investment grade securities, common stocks of
other financial institutions and money market accounts.
The Company's consolidated results of operations are primarily
dependent on net interest income, which is the difference between the interest
income earned on interest-earning assets and the interest paid on deposits and
other borrowings, loan loss provisions and to a lesser degree on non-interest
income less non-interest expense and income taxes. The Company's operating
expenses consist principally of employee compensation and benefits, occupancy
expenses, and other non-interest expenses. The Company's results of operations
are also significantly affected by general economic and competitive conditions,
particularly changes in market interest rates, government policies and actions
of regulatory authorities.
Forward-Looking Statements
When used in this Form 10-QSB, and in other filings by the Company with
the SEC, in the Company's press releases or other public or shareholder
communications, and in oral statements made with the approval of an authorized
executive officer, the words or phrases "will likely result", "are expected to",
"will continue", "is anticipated", "estimate", "project" or similar expressions
are intended to identify "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements are subject to
certain risks and uncertainties including changes in economic conditions in the
Company's market area, changes in policies by regulatory agencies, fluctuations
in interest rates, demand for loans in the Company's market area and
competition, that could cause actual results to differ materially from
historical earnings and those presently anticipated or projected. The Company
wishes to caution readers not to place undue reliance on any such
forward-looking statements which speak only as of the date made. The Company
wishes to advise readers that the factors listed above could affect the
Company's financial performance and could cause the Company's actual results for
future periods to differ materially from any opinions or statements expressed
with respect to future periods in any current statements.
The Company does not undertake -- and specifically disclaims any
obligation -- to publicly release the results of any revisions which may be made
to any forward-looking statements to reflect events or circumstances after the
date of such statements or to reflect the occurrence of anticipated or
unanticipated events.
Liquidity and Capital Resources
The Bank's primary sources of funds are deposits, borrowings from the
FHLB of Chicago, amortization and prepayment of loans and mortgage-backed
securities, sales and maturities of investment and mortgage-backed securities
and occasionally the use of reverse repurchase agreements. The Bank can also
borrow from its
8
correspondent banks. The Bank uses its liquid resources to fund loan
commitments, to meet operating expenses, to make investments and to fund deposit
withdrawals. Management believes that loan repayments and the Bank's other
sources of funds will be adequate to meet the liquidity needs of the Bank.
The OTS requires the Bank to maintain sufficient liquidity to ensure
its safe and sound operation. At June 30, 2001, the Bank's liquidity ratio was
12.4% compared with 5.8% for the quarter ended June 30, 2000.
Current regulatory standards impose the following capital requirements
on the Bank and other thrifts: a tangible capital ratio expressed as a
percentage of total adjusted assets, a leverage ratio of core capital to total
adjusted assets and a risk-based capital standard expressed as a percentage of
risk-adjusted assets. At June 30, 2001, the Bank exceeded all of its regulatory
capital requirements. At such date, the Bank's tangible capital, core capital
and risk-based capital of $12.7 million, $12.7 million and $13.0 million,
respectively, exceeded the applicable minimum requirements by $10.6 million or
7.5%, $8.5 million or 6.0%, and $7.9 million or 12.6%, respectively.
Changes In Financial Condition
Total assets amounted to $139.8 million at June 30, 2001, an increase
of $5.2 million from $134.6 million at December 31, 2000. The increase was
primarily attributable to a $5.2 million increase in cash and cash equivalents
resulting primarily from a $3.3 million increase in deposit accounts and a
$900,000 increase in borrowed funds.
Net loans receivable amounted to $91.9 million at June 30, 2001, an
increase of $1.1 million from $90.8 million at December 31, 2000. The increase
was due primarily to increased commercial real estate and equity line of credit
activity during the period. The Company originated $15.3 million in residential
mortgage, consumer and commercial real estate loans during the six months ended
June 30, 2001 compared with $7.4 million during the six months ended June 30,
2000. Repayments of loans during the six months ended June 30, 2001 amounted to
$13.3 million compared with $5.1 million during the six months ended June 30,
2000. The company also sold $851,000 in fixed rate mortgage loans during the six
months ended June 30, 2001 compared with no loan sales during the six months
ended June 30, 2000.
Total deposits amounted to $84.6 million at June 30, 2001 compared with
$81.3 million at December 31, 2000. The $3.3 million increase was primarily
attributable to a $2.1 million increase in certificates of deposit and a $1.7
million increase in checking and money market accounts. The increase in
certificates was primarily due to the use of brokered certificates of deposit as
a funding source for short term construction and commercial real estate loans.
Non-interest bearing checking accounts increased 11.8% to $3.5 million at June
30, 2001 from $3.1 million at December 31, 2000.
Borrowed funds increased by $900,000 to $39.1 million at June 30, 2001
compared with $38.2 million at December 31, 2000. The average cost of borrowed
funds decreased to 5.73% for the three months ended June 30, 2001 compared with
5.84% for the three months ended June 30, 2000. The weighted average cost of
borrowed funds decreased to 5.59% at June 30, 2001 compared with 5.96% at June
30, 2000. The decrease in the average cost was primarily attributable to
refinancing short-term higher cost FHLB advances with FHLB advances at lower
rates and longer maturities.
Accrued interest payable and other liabilities amounted to $2.3 million
at June 30, 2001, an increase of $1.1 million from $1.2 million at December 31,
2000. The increase was primarily attributable to accrued interest on
certificates of deposit that pay interest once a year in December.
Stockholders' equity was $12.7 million at June 30, 2001 compared with
$12.8 million at December 31, 2000. The decrease was primarily attributable to a
$226,000 increase in treasury stock partially offset by a $107,000 improvement
in other comprehensive loss. Retained earnings increased by $243,000 due to net
income which was offset by $257,000 in dividend payments. Book value per share
increased to $10.96 at June 30, 2001 from $10.82 at December 31, 2000.
9
Average Balance Sheet
The following table presents certain information relating to the
Company's average balance sheet and reflects the average yield on assets and
average cost of liabilities for the periods indicated. Such yields and costs are
derived by dividing income or expense by the average balance of assets or
liabilities, respectively, for the periods shown. Average balances are derived
from average monthly balances. The yields and costs include fees which are
considered adjustments to yield.
Three Months Ended June 30, Six Months Ended June 30,
2001 2000 2001
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Interest Average Interest Average Interest Average
Average Earned\ Yield\ Average Earned\ Yield\ Average Earned\ Yield\
Balance Paid Cost(3) Balance Paid Cost Balance Paid Cost
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(Dollars in thousands)
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Interest-earnings assets:
Loans receivable $90,800 $1,696 7.47% $90,543 $1,690 7.47% $90,397 $3,403 7.53%
Investment securities 16,950 280 6.61 19,051 319 6.70 17,364 572 6.59
Mortgage-backed securities 13,489 205 6.08 14,891 226 6.07 13,659 416 6.09
Federal funds sold 8,000 91 4.55 2,357 43 7.30 7,798 197 5.05
Other 5,161 62 4.81 3,581 52 5.81 4,555 121 5.31
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Total interest-earning assets 134,400 2,334 6.95 130,423 2,330 7.15 133,773 4,709 7.04
Non-interest-earning assets 3,021 2,202 3,024
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Total Assets $137,421 $132,625 $136,797
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Interest-bearing liabilities:
MMDA & NOW accounts 25,194 218 3.46 23,821 241 4.05 24,706 464 3.76
Passbook accounts 12,191 83 2.72 12,884 88 2.73 12,254 167 2.73
Certificate accounts 42,072 586 5.57 40,213 548 5.45 41,701 1,178 5.65
Borrowed funds 38,850 557 5.73 39,192 572 5.84 39,268 1,137 5.79
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Total interest-bearing
liabilities 118,307 1,444 4.88 116,110 1,449 4.99 117,929 2,946 5.00
Non-interest bearing deposits 3,056 2,825 3,065
Other liabilities 3,287 2,255 2,979
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Total liabilities 124,650 121,190 123,973
Stockholders' equity 12,771 11,435 12,824
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Total liabilities and
stockholders' equity $137,421 $132,625 $136,797
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Net interest income/interest
rate spread (1) 890 2.07% 881 2.16% 1,763 2.04%
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Net earning assets/net interest
margin (2) $16,093 2.65% $14,313 2.70% $15,844 2.64%
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Percentage of interest-earning
assets to interest-bearing
liabilities 113.60% 112.33% 113.44%
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1. Interest rate spread represents the difference between the average rate on
interest-earning assets and the average cost of interest-bearing liabilities.
2. Net interest margin represents net interest income divided by average
interest-earning assets.
3. Average yield and costs for the three and six month periods presented are
annualized for presentation purposes.
10
Comparison Of Operating Results For The Three Months Ended June 30, 2001 And
June 30, 2000
General. Net income was $110,000 for the three months ended June 30,
2001, a decrease of $923,000 from $1.0 million for the three months ended June
30, 2000. Diluted earnings per share amounted to $.10 for the three months ended
June 30, 2001, a decrease of $.77, from $.87 per share for the three months
ended June 30, 2000. The decrease in net income and diluted earnings per share
was primarily related to a $1.3 million pre-tax gain on the sale of real estate
recorded during the three months ended June 30, 2000.
Interest Income. Interest income remained steady and amounted to $2.3
million for the three months ended June 30, 2001 and 2000. There was a decrease
in the annualized yield on average interest-earning assets to 6.95% for the
three months ended June 30, 2001 from 7.15% for the three months ended June 30,
2000 due primarily to a decrease in the average yield of federal funds sold and
other investments. The decrease in yield was partially offset by an increase in
average interest-earning assets to $134.4 million for the three months ended
June 30, 2001 compared with $130.4 million for the three months ended June 30,
2000.
Interest Expense. Interest expense remained steady and amounted to $1.4
million for the three months ended June 30, 2001 and June 30, 2000. The
annualized average cost of interest-bearing liabilities decreased to 4.88% for
the three months ended June 30, 2001 from 4.99% for the three months ended June
30, 2000. The decrease was due primarily to a decrease in the average cost of
money market deposit accounts and borrowed funds. The decrease in the average
cost was partially offset by a $2.6 million increase in the average balance of
interest -bearing deposit accounts to $79.5 million for the three months ended
June 30, 2001 from $76.9 million for the three months ended June 30, 2000.
Provision For Loan Losses. The Company provided an additional $7,000 to
its allowance for loan losses for the three months ended June 30, 2001 compared
with $27,000 for the three months ended June 30, 2000. The allowance for loan
losses was $273,000 at June 30, 2001 and $262,000 at June 30, 2000. The
allowance for loan losses amounted to .30% of loans receivable at June 30, 2001
and .29% at June 30, 2000. The increase in the allowance was primarily
attributable to an increase in commercial real estate lending and general
economic conditions. There were no loans delinquent 90 days or more at June 30,
2001.
On a quarterly basis, management of the Bank meets to review the
adequacy of the allowance for loan losses. Management classifies loans in
compliance with regulatory classifications. Classified loans are individually
reviewed to arrive at specific reserves for those loans. Once the specific
portion of the allowance is calculated, management calculates a historical
portion for each loan category based on loan loss history, peer data, current
economic conditions and trends in the portfolio, including delinquencies and
impairments, as well as changes in the composition of the loan portfolio.
Although management believes the allowance for loan losses was at a level
adequate to absorb probable incurred losses on existing loans at June 30, 2001,
there can be no assurance that such losses will not exceed estimated amounts.
Non-Interest Income. Non-interest income amounted to $95,000 for the
three months ended June 30, 2001, a decrease of $1.2 million from $1.3 million
for the three months ended June 30, 2000. The decrease was primarily
attributable to a $1.3 million gain on the sale of real estate recorded during
the three months ended June 30, 2000. The gain was partially offset by a $90,000
loss on the sale of securities available for sale and $24,000 in other than
temporary declines in value of securities available for sale recorded during the
three months ended June 30, 2000.
Non-Interest Expense. Non-interest expense decreased by $4,000 to
$795,000 for the three months ended June 30, 2001 compared with $799,000 for the
three months ended June 30, 2000. There was a $23,000 decrease in professional
fees which were partially offset by a $16,000 increase in compensation and
benefits expense related to increased salary and benefit costs.
Income Tax Expense. Income tax expense amounted to $73,000 for the
three months ended June 30, 2001 compared with $306,000 for the three months
ended June 30, 2000. The decrease was primarily due to a decrease in income
before taxes. The effective tax rate amounted to 39.8% for the three months
ended June 30, 2001 compared with 22.9% for the three months ended June 30,
2000. The effective tax rate for the quarter ended June 30, 2000 was lower due
primarily to the utilization of capital loss carryforwards which had been
previously reserved.
11
Comparison Of Operating Results For The Six Months Ended June 30, 2001 And
June 30, 2000
General. Net income amounted to $243,000 for the six months ended June
30, 2001, a decrease of $903,000 from $1.1 million for the six months ended June
30, 2000. Diluted earnings per share amounted to $.21 for the six months ended
June 30, 2001 a decrease of $.75 from $.96 per share for the six months ended
June 30, 2000. The decrease was primarily attributable to a $1.3 million pre-tax
gain on the sale of real estate recorded during the six months ended June 30,
2000.
Interest Income. Interest income increased $104,000 and amounted to
$4.7 million for the six months ended June 30, 2001 compared with $4.6 million
for the six months ended June 30, 2000. The increase was primarily attributable
to an increase in average interest earning assets to $133.8 million for the six
months ended June 30, 2001 from $129.6 million for the six months ended June 30,
2000. This increase was partially offset by a decrease in the annualized yield
on average interest-earning assets to 7.04% for the six months ended June 30,
2001 from 7.11% for the six months ended June 30, 2000. The decrease in the
annualized yield was primarily attributable to a decrease in the average yield
on federal funds sold and other investments.
Interest Expense. Interest expense increased $99,000 and amounted to
$2.9 million for the six months ended June 30, 2001 compared with $2.8 million
for the six months ended June 30, 2000. The increase was primarily attributable
to an increase in the average balance of interest-bearing liabilities to $117.9
million for the six months ended June 30, 2001 from $115.6 million for the six
months ended June 30, 2000. In addition, there was an increase in the average
cost of interest-bearing liabilities to 5.00% for the six months ended June 30,
2001 from 4.93% for the six months ended June 30, 2000 due primarily to an
increase in the average cost of certificates of deposit. During the six month
period higher cost certificates of deposit and borrowings matured and were
replaced with lower cost deposits and borrowings with longer terms. As a result,
the overall weighted average cost of funds at June 30, 2001 decreased to 4.97%
from 5.03% at June 30, 2000.
Provision For Loan Losses. The Company added $11,000 to its allowance
for loan losses for the six months ended June 30, 2001 compared with $31,000 for
the six months ended June 30, 2000. The allowance for loan losses was $273,000
at June 30, 2001 and amounted to .30% of loans receivable. The allowance for
loan losses was $262,000 and amounted to .29% of loans receivable at June 30,
2000.
On a quarterly basis, management of the Bank meets to review the
adequacy of the allowance for loan losses. Management classifies loans in
compliance with regulatory classifications. Classified loans are individually
reviewed to arrive at specific reserves for those loans. Once the specific
portion of the allowance is calculated, management calculates a historical
portion for each loan category based on loan loss history, peer data, current
economic conditions and trends in the portfolio, including delinquencies and
impairments, as well as changes in the composition of the loan portfolio.
Although management believes the allowance for loan losses was at a level
adequate to absorb probable incurred losses on existing loans at June 30, 2001,
there can be no assurance that such losses will not exceed estimated amounts.
Non-Interest Income. Non-interest income decreased $1.2 million and
amounted to $213,000 for the six months ended June 30, 2001 compared with $1.4
million for the six months ended June 30, 2000. The decrease was primarily
attributable to a $1.3 million gain on the sale of real estate related to the
sale of an employee parking facility recorded during the six months ended June
30, 2000. That decrease was partially offset by $55,000 in gains on the sale of
mortgage loans and securities available for sale recorded during the six months
ended June 30, 2001 compared with a $90,000 loss on securities sales and a
$24,000 other than temporary decline in value on securities available for sale
recorded during the six months ended June 30, 2000.
Non-Interest Expense. Non-interest expense decreased $20,000 and
amounted to $1.6 million for the six months ended June 30, 2001 and June 30,
2000. The decrease was primarily attributable to a $44,000 decrease in
professional fees and a $26,000 decrease in advertising and promotion expense
partially offset by a $50,000 increase in compensation and benefits expense
related to increased salaries and benefits expense. The decrease in professional
fees were primarily attributable to reduced audit and accounting expense and
legal fees associated with the sale of the parking facility recorded during the
year 2000.
Income Tax Expense. Income tax expense decreased $206,000 and amounted
to $157,000 for the six months ended June 30, 2001 compared with $363,000 for
the six months ended June 30, 2000. The decrease was primarily attributable to
a decrease in taxable income. The effective tax rate was 39.2% for the six
months ended June 30, 2001 compared with 24.1% for the six months ended June 30,
2000. The effective tax rate for the six months ended June 30, 2000 was lower
due primarily to the utilization of capital loss carryforwards.
12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There are no material legal proceedings pending to which the Company or
any of its subsidiaries is a party other than ordinary routine litigation
incidental to their respective businesses.
Item 4. Submission of Matters to a Vote of Security Holders.
On April 25, 2001, the annual meeting of stockholders was held. At the
meeting, Mary Ann Hass and Joseph A. Graber were elected to serve as directors
with terms expiring in 2004. Continuing on as directors were Elmer L. Hass,
Robert H. Rusher and Frank J. Donati, whose terms will expire in the year 2002
and James L. Ferstel and Gregory W. Rose, whose terms will expire in 2003. In
addition, the stockholders ratified the appointment of Crowe, Chizek and Company
LLP as the Company's independent auditors for the fiscal year ending December
31, 2001.
The voting on each item presented at the annual meeting was as follows:
Election of Directors For Withheld
--------------------- --- --------
Mary Ann Hass 945,723 86,916
Joseph A. Graber 944,973 87,666
Ratification of the
appointment of Crowe, Chizek
and Company LLP as the
Company's auditors for the Broker
fiscal year ending For Against Abstain Non-votes
December 31, 2001 --- ------- ------- ---------
1,010,380 21,509 750 None
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibit (3)(ii):
1. Amended and restated bylaws of North Bancshares, Inc.
Forms 8-K:
(B) 1. Form 8-K dated April 17, 2001, Registrant issued a press release
dated April 17, 2001 regarding first quarter 2001 earnings and a
regular quarterly dividend.
13
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
NORTH BANCSHARES,INC.
---------------------
(Registrant)
Date August 9, 2001 /S/ Joseph A. Graber
--------------------- --------------------------
Joseph A. Graber
President and Chief Executive Officer
Date August 9, 2001 /S/ Martin W. Trofimuk
--------------------- --------------------------
Martin W. Trofimuk
Vice President and Treasurer
14
Exhibit (3)(ii)
AMENDED AND RESTATED BYLAWS
OF
NORTH BANCSHARES, INC.
ARTICLE I
STOCKHOLDERS
Section 1. Annual Meeting.
--------------
An annual meeting of the stockholders, for the election of directors to
succeed those whose terms expire and for the transaction of such other business
as may properly come before the meeting, shall be held at such place, on such
date, and at such time as the Board of Directors shall each year fix.
Section 2. Special Meetings.
----------------
Subject to the rights of the holders of any class or series of
preferred stock of the Corporation, special meetings of stockholders of the
Corporation may be called only by the Board of Directors pursuant to a
resolution adopted by a majority of the total number of directors which the
Corporation would have if there were no vacancies on the Board of Directors
(hereinafter the "Whole Board").
Section 3. Notice of Meetings.
------------------
Written notice of the place, date, and time of all meetings of the
stockholders shall be given, not less than ten (10) nor more than sixty (60)
days before the date on which the meeting is to be held, to each stockholder
entitled to vote at such meeting, except as otherwise provided herein or
required by law (meaning, here and hereinafter, as required from time to time by
the Delaware General Corporation Law or the Certificate of Incorporation of the
Corporation).
When a meeting is adjourned to another place, date or time, written
notice need not be given of the adjourned meeting if the place, date and time
thereof are announced at the meeting at which the adjournment is taken;
provided, however, that if the date of any adjourned meeting is more than thirty
(30) days after the date for which the meeting was originally noticed, or if a
new record date is fixed for the adjourned meeting, written notice of the place,
date and time of the adjourned meeting shall be given in conformity herewith. At
any adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
Section 4. Quorum.
------
At any meeting of the stockholders, the holders of at least one-third
of all of the shares of the stock entitled to vote at the meeting, present in
person or by proxy, shall constitute a quorum for all purposes, unless or except
to the extent that the presence of a larger number may be required by law. Where
a separate vote by a class or classes is required, a majority of the shares of
such class or classes, present in person or represented by proxy, shall
constitute a quorum entitled to take action with respect to that vote on that
matter.
1
If a quorum shall fail to attend any meeting, the chairman of the
meeting or the holders of a majority of the shares of stock entitled to vote who
are present, in person or by proxy, may adjourn the meeting to another place,
date or time.
If a notice of any adjourned special meeting of stockholders is sent to
all stockholders entitled to vote thereat, stating that it will be held with
those present constituting a quorum, then except as otherwise required by law,
those present at such adjourned meeting shall constitute a quorum, and all
matters shall be determined by a majority of the votes cast at such meeting.
Section 5. Organization.
------------
Such person as the Board of Directors may have designated or, in the
absence of such a person, the President of the Corporation or, in his or her
absence, such person as may be chosen by the holders of a majority of the shares
entitled to vote who are present, in person or by proxy, shall call to order any
meeting of the stockholders and act as chairman of the meeting. In the absence
of the Secretary of the Corporation, the secretary of the meeting shall be such
person as the chairman appoints.
Section 6. Conduct of Business.
-------------------
(a) The chairman of any meeting of stockholders shall
determine the order of business and the procedure at the meeting, including such
regulation of the manner of voting and the conduct of discussion as seem to him
or her in order.
(b) At any annual meeting of the stockholders, only such
business shall be conducted as shall have been brought before the meeting (I) by
or at the direction of the Board of Directors or (ii) by any stockholder of the
Corporation who is entitled to vote with respect thereto and who complies with
the notice procedures set forth in this Section 6(b). For business to be
properly brought before an annual meeting by a stockholder, the stockholder must
have given timely notice thereof in writing to the Secretary of the Corporation.
To be timely, a stockholder's notice must be delivered or
mailed to and received at the principal executive offices of the Corporation not
less than 90 days prior to the anniversary of the preceding year's annual
meeting; provided, however, that in the event that the date of the annual
meeting is advanced by more than 20 days, or delayed by more than 60 days, from
such anniversary date, notice by the stockholder to be timely must be received
at the principal executive offices of the Corporation not later than the close
of business on the later of (A) the 90th day prior to the date of such annual
meeting or (B) the tenth day following the first to occur of the day on which
notice of the date of the annual meeting is mailed or the day on which public
announcement of the date of such meeting is first made. A stockholder's notice
to the Secretary shall set forth as to each matter such stockholder proposes to
bring before the annual meeting (I) a brief description of the business desired
to be brought before the annual meeting and the reasons for conducting such
business at the annual meeting, (ii) the name and address, as they appear on the
Corporation's books, of the stockholder who proposed such business, (iii) the
class and number of shares of the Corporation's capital stock that are
beneficially owned by such stockholder and (iv) any material interest of such
stockholder in such business. Notwithstanding anything in these By-laws to the
contrary, no business shall be brought before or conducted at an annual meeting
except in accordance with the provisions of this Section 6(b). The officer of
the Corporation or other person presiding over the annual meeting shall, if the
facts so warrant, determine and declare to the meeting that business was not
properly brought before the meeting in accordance with the provisions of this
Section 6(b) and, if he or she should so determine, he or she shall so declare
to the meeting and any such business so determined to be not properly brought
before the meeting shall not be transacted.
At any special meeting of the stockholders, only such business shall be
conducted as shall have been brought before the meeting by or at the direction
of the Board of Directors.
(c) Only persons who are nominated in accordance with the
procedures set forth in these By- laws shall be eligible for election as
directors. Nominations of persons for election to the Board of Directors of the
Corporation may be made at a meeting of stockholders at which directors are to
be elected only (I) by or at the direction of the Board of Directors or (ii) by
any stockholder of the Corporation entitled to vote for the election of
directors at the meeting who complies with the notice procedures set forth in
this Section 6(c). Such nominations,
2
other than those made by or at the direction of the Board of Directors, shall be
made by timely notice in writing to the Secretary of the Corporation. To be
timely, a stockholder's notice shall be delivered or mailed to and received at
the principal executive offices of the Corporation not less than 90 days prior
to the date of the meeting; provided, however, that in the event that less than
100 days' notice or public announcement of the date of the meeting is given or
made to stockholders, notice by the stockholder to be timely must be so received
not later than the close of business on the tenth day following the first to
occur of the day on which such notice of the date of the meeting is mailed or
the day on which public announcement of the date of the meeting is first made.
Such stockholder's notice shall set forth (x) as to each person whom such
stockholder proposes to nominate for election or re-election as a director, all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended (including such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected); and (y) as to
the stockholder giving the notice: (A) the name and address, as they appear on
the Corporation's books, of such stockholder and (B) the class and number of
shares of the Corporation's capital stock that are beneficially owned by such
stockholder. At the request of the Board of Directors, any person nominated by
the Board of Directors for election as a director shall furnish to the Secretary
of the Corporation that information required to be set forth in a stockholder's
notice of nomination which pertains to the nominee. No person shall be eligible
for election as a director of the Corporation unless nominated in accordance
with the provisions of this Section 6(c). The officer of the Corporation or
other person presiding at the meeting shall, if the facts so warrant, determine
that a nomination was not made in accordance with such provisions and, if he or
she should so determine, he or she shall so declare to the meeting and the
defective nomination shall be disregarded.
(d) For purposes of subsections (b) and (C) of this Section 6,
the term "public announcement" shall mean disclosure (I) in a press release
reported by a nationally recognized news service or (ii) in a document publicly
filed by the Corporation with the U.S. Securities and Exchange Commission.
Section 7. Proxies and Voting.
------------------
At any meeting of the stockholders, every stockholder entitled to vote
may vote in person or by proxy authorized by an instrument in writing (or as
otherwise permitted under applicable law) by the stockholder or his duly
authorized attorney-in-fact filed in accordance with the procedure established
for the meeting. Proxies solicited on behalf of the management shall be voted as
directed by the stockholder or in the absence of such direction, as determined
by a majority of the Board of Directors. No proxy shall be valid after eleven
months from the date of its execution except for a proxy coupled with an
interest.
Each stockholder shall have one (1) vote for every share of stock
entitled to vote which is registered in his or her name on the record date for
the meeting, except as otherwise provided herein or in the Certificate of
Incorporation of the Corporation or as required by law.
All voting, including on the election of directors but excepting where
otherwise required by law, may be by a voice vote; provided, however, that upon
demand therefore by a stockholder entitled to vote or his or her proxy, a stock
vote shall be taken. Every stock vote shall be taken by ballot, each of which
shall state the name of the stockholder or proxy voting and such other
information as may be required under the procedure established for the meeting.
Every vote taken by ballot shall be counted by an inspector or inspectors
appointed by the chairman of the meeting.
All elections shall be determined by a plurality of the votes cast, and
except as otherwise required by law or as provided in the Certificate of
Incorporation, all other matters shall be determined by a majority of the votes
cast.
Section 8. Stock List.
----------
The officer who has charge of the stock transfer books of the
Corporation shall prepare and make, in the time and manner required by
applicable law, a list of stockholders entitled to vote and shall make such list
available for such purposes, at such places, at such times and to such persons
as required by applicable law. The stock transfer books shall be the only
evidence as to the identity of the stockholders entitled to examine the stock
transfer books or to vote in person or by proxy at any meeting of stockholders.
3
Section 9. Consent of Stockholders in Lieu of Meeting.
------------------------------------------
Subject to the rights of the holders of any class or series of
preferred stock of the Corporation, any action required or permitted to be taken
by the stockholders of the Corporation must be effected at a duly called annual
or special meeting of stockholders of the Corporation and may not be effected by
any consent in writing by such stockholders.
Section 10. Inspectors of Election
The Board of Directors shall, in advance of any meeting of
stockholders, appoint one or more persons as inspectors of election, to act at
the meeting or any adjournment thereof and make a written report thereof, in
accordance with applicable law.
ARTICLE II
BOARD OF DIRECTORS
Section 1. General Powers, Number and Term of Office.
-----------------------------------------
The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors. The number of directors shall be
as provided for in the Certificate of Incorporation. The Board of Directors
shall annually elect a Chairman of the Board and a President from among its
members and shall designate, when present, either the Chairman of the Board or
the President to preside at its meetings.
The directors, other than those who may be elected by the holders of
any class or series of preferred stock, shall be divided into three classes, as
nearly equal in number as reasonably possible, with the term of office of the
first class to expire at the conclusion of the first annual meeting of
stockholders, the term of office of the second class to expire at the conclusion
of the annual meeting of stockholders one year thereafter and the term of office
of the third class to expire at the conclusion of the annual meeting of
stockholders two years thereafter, with each director to hold office until his
or her successor shall have been duly elected and qualified. At each annual
meeting of stockholders, commencing with the first annual meeting, directors
elected to succeed those directors whose terms expire shall be elected for a
term of office to expire at the third succeeding annual meeting of stockholders
after their election, with each director to hold office until his or her
successor shall have been duly elected and qualified.
No person seventy-five (75) years of age shall be eligible for
election, reelection, appointment or reappointment to the Corporation's Board of
Directors and no director shall serve as such beyond the annual meeting of the
Corporation immediately following the director attaining seventy-five (75) years
of age.
Section 2. Vacancies and Newly Created Directorships.
-----------------------------------------
Subject to the rights of the holders of any class or series of
preferred stock then outstanding, newly created directorships resulting from any
increase in the authorized number of directors or any vacancies in the Board of
Directors resulting from death, resignation, retirement, disqualification,
removal from office or other cause may be filled only by a majority vote of the
directors then in office, though less than a quorum, and directors so chosen
shall hold office for a term expiring at the annual meeting of stockholders at
which the term of office of the class to which they have been elected expires,
and until such director's successor shall have been duly elected and qualified.
No decrease in the number of authorized directors constituting the Board shall
shorten the term of any incumbent director.
Section 3. Regular Meetings.
----------------
Regular meetings of the Board of Directors shall be held at such place
or places, on such date or dates, and at such time or times as shall have been
established by the Board of Directors and publicized among all directors. A
notice of each regular meeting shall not be required.
4
Section 4. Special Meetings.
----------------
Special meetings of the Board of Directors may be called by one-third
(1/3) of the directors then in office (rounded up to the nearest whole number)
or by the Chairman or Chief Executive Officer and shall be held at such place,
on such date, and at such time as they or he or she shall fix. Notice of the
place, date, and time of each such special meeting shall be given to each
director by whom it is not waived by mailing written notice not less than five
(5) days before the meeting or by telegraphing or telexing or by facsimile
transmission of the same not less than twenty-four (24) hours before the
meeting. Unless otherwise indicated in the notice thereof, any and all business
may be transacted at a special meeting.
Section 5. Quorum.
------
At any meeting of the Board of Directors, a majority of the authorized
number of directors then constituting the Board shall constitute a quorum for
all purposes. If a quorum shall fail to attend any meeting, a majority of those
present may adjourn the meeting to another place, date, or time, without further
notice or waiver thereof.
Section 6. Participation in Meetings By Conference Telephone.
-------------------------------------------------
Members of the Board of Directors, or of any committee thereof, may
participate in a meeting of such Board or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other and such participation shall
constitute presence in person at such meeting.
Section 7. Conduct of Business.
-------------------
At any meeting of the Board of Directors, business shall be transacted
in such order and manner as the Board may from time to time determine, and all
matters shall be determined by the vote of a majority of the directors present,
except as otherwise provided herein or required by law. Action may be taken by
the Board of Directors without a meeting if all members thereof consent thereto
in writing, and the writing or writings are filed with the minutes of
proceedings of the Board of Directors.
Section 8. Powers.
------
The Board of Directors may, except as otherwise required by law,
exercise all such powers and do all such acts and things as may be exercised or
done by the Corporation, including, without limiting the generality of the
foregoing, the unqualified power:
(1) To declare dividends from time to time in accordance with
law;
(2) To purchase or otherwise acquire any property, rights or
privileges on such terms as it shall determine;
(3) To authorize the creation, making and issuance, in such
form as it may determine, of written obligations of every kind, negotiable or
non-negotiable, secured or unsecured, and to do all things necessary in
connection therewith;
(4) To remove any officer of the Corporation with or without
cause, and from time to time to devolve the powers and duties of any officer
upon any other person for the time being;
(5) To confer upon any officer of the Corporation the power to
appoint, remove and suspend subordinate officers, employees and agents;
(6) To adopt from time to time such stock, option, stock
purchase, bonus or other compensation plans for directors, officers, employees
and agents of the Corporation and its subsidiaries as it may determine;
(7) To adopt from time to time such insurance, retirement, and
other benefit plans for directors, officers, employees and agents of the
Corporation and its subsidiaries as it may determine; and,
5
(8) To adopt from time to time regulations, not inconsistent
with these By-laws, for the management of the Corporation's business and
affairs.
Section 9. Compensation of Directors.
-------------------------
Directors, as such, may receive, pursuant to resolution of the Board of
Directors, fixed fees and other compensation for their services as directors,
including, without limitation, their services as members of committees of the
Board of Directors.
ARTICLE III
COMMITTEES
Section 1. Committees of the Board of Directors.
------------------------------------
The Board of Directors, by a vote of a majority of the Board of
Directors, may from time to time designate committees of the Board, with such
lawfully delegable powers and duties as it thereby confers, to serve at the
pleasure of the Board and shall, for those committees and any others provided
for herein, elect a director or directors to serve as the member or members,
designating, if it desires, other directors as alternate members who may replace
any absent or disqualified member at any meeting of the committee. Any committee
so designated may exercise the power and authority of the Board of Directors to
declare a dividend, to authorize the issuance of stock or to adopt a certificate
of ownership and merger pursuant to Section 253 of the Delaware General
Corporation Law if the resolution which designated the committee or a
supplemental resolution of the Board of Directors shall so provide. In the
absence or disqualification of any member of any committee and any alternate
member in his or her place, the member or members of the committee present at
the meeting and not disqualified from voting, whether or not he or she or they
constitute a quorum, may by unanimous vote appoint another member of the Board
of Directors to act at the meeting in the place of the absent or disqualified
member.
Section 2. Conduct of Business.
-------------------
Each committee may determine the procedural rules for meeting and
conducting its business and shall act in accordance therewith, except as
otherwise provided herein or required by law. Adequate provision shall be made
for notice to members of all meetings; one-third (1/3) of the members shall
constitute a quorum unless the committee shall consist of one (1) or two (2)
members, in which event one (1) member shall constitute a quorum; and all
matters shall be determined by a majority vote of the members present. Action
may be taken by any committee without a meeting if all members thereof consent
thereto in writing, and the writing or writings are filed with the minutes of
the proceedings of such committee.
Section 3. Nominating Committee.
--------------------
The Board of Directors shall appoint a Nominating Committee of the
Board, consisting of at least three (3) members of the Board of Directors.
ARTICLE IV
OFFICERS
Section 1. Generally.
---------
(a) The Board of Directors as soon as may be practicable after
the annual meeting of stockholders shall choose a Chief Executive Officer,
President, a Secretary and a Treasurer and from time to time may choose such
other officers as it may deem proper. The Chief Executive Officer shall be
chosen from among the directors. Any number of offices may be held by the same
person.
6
(b) The term of office of all officers shall be until the next
annual election of officers and until their respective successors are chosen,
but any officer may be removed from office at any time by the affirmative vote
of a majority of the authorized number of directors then constituting the Board
of Directors.
(c) All officers chosen by the Board of Directors shall each
have such powers and duties as generally pertain to their respective offices,
subject to the specific provisions of this Article IV. Such officers shall also
have such powers and duties as from time to time may be conferred by the Board
of Directors or by any committee thereof.
Section 2. Chief Executive Officer.
-----------------------
The Chief Executive Officer shall have general power over the
management and oversight of the administration and operation of the
Corporation's business and general supervisory power and authority over its
policies and affairs. He or she shall see that all orders and resolutions of the
Board of Directors and of any committee thereof are carried into effect.
Each meeting of the stockholders and of the Board of Directors shall be
presided over by such person as has been designated by the Board of Directors
or, in his absence, by such officer or other person as is chosen at the meeting.
The Secretary or, in his absence, the General Counsel of the Corporation or such
officer as has been designated by the Board of Directors or, in his absence,
such officer or other person as is chosen by the person presiding, shall act as
secretary of each such meeting.
Section 3. President.
---------
The President, if any, shall perform the duties of the Chief Executive
Officer in his or her absence or during his or her disability to act. In
addition, the President shall perform the duties and exercise the powers usually
incident to his or her respective office and/or such other duties and powers as
may be properly assigned to him or her from time to time by the Board of
Directors, the Chairman of the Board or the Chief Executive Officer.
Section 4. Vice President.
--------------
The Vice President or Vice Presidents, if any, shall perform the duties
of the President in his or her absence or during his or her disability to act.
In addition, the Vice Presidents shall perform the duties and exercise the
powers usually incident to their respective offices and/or such other duties and
powers as may be properly assigned to them from time to time by the Board of
Directors, the Chairman of the Board, Chief Executive Officer or the President.
Section 5. Secretary.
---------
The Secretary or an Assistant Secretary shall issue notices of
meetings, shall keep their minutes, shall have charge of the seal and the
corporate books, shall perform such other duties and exercise such other powers
as are usually incident to such offices and/or such other duties and powers as
are properly assigned thereto by the Board of Directors, the Chairman of the
Board or the President.
Section 6. Treasurer.
---------
The Treasurer shall have charge of all monies and securities of the
Corporation, other than monies and securities of any division of the Corporation
which has a treasurer or financial officer appointed by the Board of Directors,
and shall keep regular books of account. The funds of the Corporation shall be
deposited in the name of the Corporation by the Treasurer with such banks or
trust companies or other entities as the Board of Directors from time to time
shall designate. He shall sign or countersign such instruments as require his
signature, shall perform all such duties and have all such powers as are usually
incident to such office and/or such other duties and powers as are properly
assigned to him by the Board of Directors, the Chairman of the Board or the
President, and may be required to give bond, payable by the Corporation, for the
faithful performance of his duties in such sum and with such surety as may be
required by the Board of Directors.
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Section 7. Assistant Secretaries and Other Officers.
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The Board of Directors may appoint one or more assistant secretaries
and one or more assistants to the Treasurer, or one appointee to both such
positions, which officers shall have such powers and shall perform such duties
as are provided in these By-laws or as may be assigned to them by the Board of
Directors, the Chairman of the Board or the President.
Section 8. Action with Respect to Securities of Other Corporations
Unless otherwise directed by the Board of Directors, the President or
any officer of the Corporation authorized by the President shall have power to
vote and otherwise act on behalf of the Corporation, in person or by proxy, at
any meeting of stockholders of or with respect to any action of stockholders of
any other corporation in which this Corporation may hold securities and
otherwise to exercise any and all rights and powers which this Corporation may
possess by reason of its ownership of securities in such other Corporation.
ARTICLE V
STOCK
Section 1. Certificates of Stock.
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Each stockholder shall be entitled to a certificate signed by, or in
the name of the Corporation by, the Chairman of the Board, and the President or
a Vice President, and by the Secretary or an Assistant Secretary, or the
Treasurer or an Assistant Treasurer, certifying the number of shares owned by
him or her. Any or all of the signatures on the certificate may be by facsimile.
Section 2. Transfers of Stock.
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Transfers of stock shall be made only upon the transfer books of the
Corporation kept at an office of the Corporation or by transfer agents
designated to transfer shares of the stock of the Corporation. Except where a
certificate is issued in accordance with Section 4 of Article V of these
By-laws, an outstanding certificate for the number of shares involved shall be
surrendered for cancellation before a new certificate is issued therefore.
Section 3. Record Date.
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In order that the Corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders, or to receive payment of
any dividend or other distribution or allotment of any rights or to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix a record
date, which record date shall not precede the date on which the resolution
fixing the record date is adopted and which record date shall not be more than
sixty (60) nor less than ten (10) days before the date of any meeting of
stockholders, nor more than sixty (60) days prior to the time for such other
action as hereinbefore described; provided, however, that if no record date is
fixed by the Board of Directors, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given or,
if notice is waived, at the close of business on the day next preceding the day
on which the meeting is held, and, for determining stockholders entitled to
receive payment of any dividend or other distribution or allotment of rights or
to exercise any rights of change, conversion or exchange of stock or for any
other purpose, the record date shall be at the close of business on the day on
which the Board of Directors adopts a resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
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Section 4. Lost, Stolen or Destroyed Certificates.
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In the event of the loss, theft or destruction of any certificate of
stock, another may be issued in its place pursuant to such regulations as the
Board of Directors may establish concerning proof of such loss, theft or
destruction and concerning the giving of a satisfactory bond or bonds of
indemnity.
Section 5. Regulations.
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The issue, transfer, conversion and registration of certificates of
stock shall be governed by such other regulations as the Board of Directors may
establish.
ARTICLE VI
NOTICES
Section 1. Notices.
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Except as otherwise specifically provided herein or required by law,
all notices required to be given to any stockholder, director, officer, employee
or agent shall be in writing and may in every instance be effectively given by
hand delivery to the recipient thereof, by depositing such notice in the mail,
postage paid, by sending such notice by prepaid telegram or mailgram or by
sending such notice by facsimile machine or other electronic transmission. Any
such notice shall be addressed to such stockholder, director, officer, employee
or agent at his or her last known address as the same appears on the books of
the Corporation. The time when such notice is received, if hand delivered, or
dispatched, if delivered through the mail, by telegram or mailgram or by
facsimile machine or other electronic transmission, shall be the time of the
giving of the notice.
Section 2. Waivers.
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A written waiver of any notice, signed by a stockholder, director,
officer, employee or agent, whether before or after the time of the event for
which notice is to be given, shall be deemed equivalent to the notice required
to be given to such stockholder, director, officer, employee or agent. Neither
the business nor the purpose of any meeting need be specified in such a waiver.
ARTICLE VII
MISCELLANEOUS
Section 1. Facsimile Signatures.
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In addition to the provisions for use of facsimile signatures elsewhere
specifically authorized in these By- laws, facsimile signatures of any officer
or officers of the Corporation may be used whenever and as authorized by the
Board of Directors or a committee thereof.
Section 2. Corporate Seal.
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The Board of Directors may provide a suitable seal, containing the name
of the Corporation, which seal shall be in the charge of the Secretary. If and
when so directed by the Board of Directors or a committee thereof, duplicates of
the seal may be kept and used by the Treasurer or by an Assistant Secretary or
Assistant Treasurer.
Section 3. Reliance upon Books, Reports and Records.
----------------------------------------
Each director, each member of any committee designated by the Board of
Directors, and each officer of the Corporation shall, in the performance of his
or her duties, be fully protected in relying in good faith upon the books of
account or other records of the Corporation and upon such information, opinions,
reports or statements presented to the Corporation by any of its officers or
employees, or committees of the Board of Directors so
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designated, or by any other person as to matters which such director or
committee member reasonably believes are within such other person's professional
or expert competence and who has been selected with reasonable care by or on
behalf of the Corporation.
Section 4. Fiscal Year.
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The fiscal year of the Corporation shall be as fixed by the Board of
Directors.
Section 5. Time Periods.
------------
In applying any provision of these By-laws which requires that an act
be done or not be done a specified number of days prior to an event or that an
act be done during a period of a specified number of days prior to an event,
calendar days shall be used, the day of the doing of the act shall be excluded
and the day of the event shall be included.
ARTICLE VIII
AMENDMENTS
The By-laws of the Corporation may be adopted, amended or repealed as
provided in Article SEVENTH of the Certificate of Incorporation of the
Corporation.
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