U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
X Quarterly Report pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934
For the quarterly period ended March 31, 1999
Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ________ to ________.
Commission File Number 0-23235
Success Bancshares, Inc.
(Exact name of registrant as specified in its charter)
Delaware 36-34976644
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One Marriott Drive, Lincolnshire, IL 60069
(Address of Principal Executive Offices) (Zip Code)
(847) 279-9000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange of Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common stock: 2,902,497 shares $0.001 par value, outstanding as of May 5,
1999.<PAGE>
Table of Contents
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet 1
Consolidated Statements of Income 2
Consolidated Statements of Cash Flow 3
Footnotes to Unaudited Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5 - 11
Item 3. Quantitative and Qualitative Disclosures about
Market Risk Not Applicable 12
Part II. OTHER INFORMATION
Item 6. (a) Exhibits 13 - 15
(b) Reports of Form 8-K
None
Form 10-Q Signature Page 16<PAGE>
Success Bancshares, Inc. and Subsidiaries
Consolidated Balance Sheets
March 31, 1999 and December 31, 1998
March 31, December 31
1999 1998
----------- ----------
(Unaudited)
ASSETS (In thousands, except share data)
Cash and cash equivalents $ 26,480 $ 38,824
Securities available-for-sale 40,780 41,037
Real estate loans held-for-sale 1,513 1,006
Loans, less allowance for loan losses
of $3,977 at March 31, 1999,
and $3,824 at December 31, 1998 366,925 371,263
Premises and equipment, net 11,729 11,362
Interest receivable 3,016 2,699
Other real estate owned 420 435
Other assets 4,042 3,852
--------- ---------
$454,905 $470,478
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Non-interest bearing deposits $ 56,033 $ 53,557
Interest bearing deposits 323,211 345,178
--------- ---------
Total deposits 379,244 398,735
Federal Home Loan Bank advances 15,430 15,491
Federal funds purchased 2,500 -
Securities sold under repurchase agreements 5,885 5,136
Demand notes payable to U.S. Government 1,009 886
Interest payable and other liabilities 3,105 2,906
-------- -------
Total liabilities 407,173 423,154
Company obligated mandatory redeemable preferred
securities of subsidiary trust holding solely
junior subordinated debentures 15,000 15,000
Shareholders' equity
Preferred stock, $0.001 par value, 1,000,000
shares authorized, none issued 0 0
Common stock, $0.001 par value, 7,500,000
shares authorized, 2,959,236
and 2,959,236 shares issued and outstanding,
at 1999 and December 31, 1998, respectively 3 3
Additional paid-in capital 24,528 24,528
Retained earnings 7,997 7,556
Loan to Employee Stock Ownership Plan (113) (113)
Unearned compensation (85) (92)
Accumulated other comprehensive income 402 442
-------- ---------
Total shareholders' equity 32,732 32,324
-------- -------- <PAGE>
$454,905 $470,478
========= ========
See accompanying notes to Unaudited Consolidated Financial Statements
<PAGE>
Success Bancshares, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
Three Months Ended
March 31,
1999 1998
Interest income (In thousands, except share data)
Loans (including fee income) $7,621 $6,538
Investment securities
Taxable 391 616
Exempt from federal income tax 156 135
Other interest income 97 123
------- ------
8,265 7,412
Interest expense
Deposits 3,738 3,599
Convertible subordinated debentures - 4
Other borrowings 619 241
------- -------
4,357 3,844
------- -------
Net interest income 3,908 3,568
Provision for loan losses 150 196
------- -------
Net interest income after provision for
loan losses 3,758 3,372
Other operating income
Service charges on deposit accounts 489 500
Gain on sale of loans 95 17
Credit card processing income (expense) (7) 28
Other noninterest income 323 56
------- --------
900 601
Other operating expenses
Salaries and employee benefits 2,184 1,853
Occupancy and equipment expense 815 537
Data processing 190 191
Other noninterest expenses 845 834
------- -------
4,034 3,415
------- -------
Income before income taxes 624 558
Income tax expense 183 173
------- -------
Net income $ 441 $ 385
======= =======
Basic earnings per share $0.15 $0.13
Diluted earnings per share $0.15 $0.13
See accompanying notes to Unaudited Consolidated Financial Statements <PAGE>
Success Bancshares, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1999 and 1998
(Unaudited)
1999 1998
(In thousands)
Net cash provided by operating activities $678 $694
Cash flows from investing activities:
Proceeds from maturities of available-for-sale
securities 2,194 2,568
Purchase of available-for-sale securities (1,982) (7,461)
Proceeds from maturities of held-to-maturity
securities - 1,117
Net decrease (increase) in loans 3,681 (15,455)
Premises and equipment expenditures (733) (347)
Purchase of subsidiary bank common stock - (1)
-------- --------
Net cash provided by (used in)
investing activities 3,158 (19,579)
-------- --------
Cash flows from financing activities:
Increase (decrease) in non-interest
bearing deposits 2,476 1,306
Increase (decrease) in interest
bearing deposits (21,967) 19,344
Increase in demand notes payable to U.S.
Government 123 108
Increase in securities sold under
agreements to repurchase 749 2,113
Increase in federal funds purchased 2,500 -
Net decrease in Federal Home
Loan Bank advances (61) (57)
Issuance of common stock - 26
Repayments of loan to ESOP - (20)
-------- -------
Net cash provided by (used in)
financing activities (16,180) 20,820
-------- -------
Net increase in cash and cash equivalents (12,344) 3,935
Cash and cash equivalents at beginning of period 38,824 23,901
-------- --------
Cash and cash equivalents at end of period $26,480 $27,836
======= =======
See accompanying notes to the Unaudited Consolidated Financial Statements.<PAGE>
NOTE 1: Basis of Presentation
The financial information of Success Bancshares, Inc. and subsidiaries (the
Company) included herein is unaudited; however, such information reflects all
adjustments (consisting of normal recurring adjustments) which are, in the
opinion of management, necessary for a fair statement of results for the
interim periods. The interim financial statements should be read in
conjunction with the Company's Annual Report and Form 10-K for the period
ending December 31, 1998. The results of the interim period ended March 31,
1999 are not necessarily indicative of the results expected for the year ended
December 31, 1999.
NOTE 2: Recent Accounting Developments
In October 1998, the FASB issued SFAS No. 134, "Accounting for Mortgage-Backed
Securities Retained after the Securitization of Mortgage Loans Held for Sale by
a Mortgage Banking Enterprise" which is effective for the first fiscal quarter
after December 15, 1998. This statement amends SFAS No. 65 "Accounting for
Certain Mortgage Banking Activities." This statement revises the accounting
for retained securities and beneficial interests. The adoption of SFAS No. 134
does not presently impact the Company's consolidated financial condition or
results of operations.
NOTE 3: Earnings Per Share
Basic earnings per share are computed by dividing net income, after deducting
any dividends on preferred stock, by the weighted average number of common
shares outstanding. Diluted earnings per share assumes the exercise of any
dilutive instruments, including stock options and convertible subordinated
debt.
The table following summarizes the computation of earnings per share for the
periods indicated:
For the Three Months Ended March 31,
1999 1998
Income Share Per-Share Income Share Per-Share
Numerator Denominator Amt Numerator Denominator Amt
- ------------------------------------------------------------------------------
(In thousands, except per share amounts)
Net income $441 $385
Less: Preferred stock
dividends - -
------ -----
Basic EPS
Income available to common
stockholders 441 2,959 $0.15 385 2,919 $0.13
Effect of Dilutive Securities
Options - 67 - 94
Convertible subordinated debt - - 2 23
------ ------ ------ ------
Diluted EPS
Income available to common
stockholders + assumed
conversions $441 $3,026 $0.15 $387 $3,036 $0.13
====== ====== ====== ====== ====== ======<PAGE>
NOTE 4: Comprehensive Income
For the three months ended March 31, 1999 accumulated other comprehensive
income decreased $40,000. For the comparable period in 1998, accumulated other
comprehensive income increased $75,000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
General
The Company's principal business is conducted by its majority owned subsidiary,
Success National Bank (the "Bank") and consists of full service community
banking. The Bank is headquartered in Lincolnshire, Illinois located
approximately 35 miles north of downtown Chicago, and, in addition to its
headquarters, has eleven branch offices. These banking facilities are located
in Deerfield (2), Libertyville (2), Lincolnwood (2), Chicago (2) (Lincoln Park
and downtown), Arlington Heights, Skokie and Northbrook.
The profitability of the Company's operations depends primarily on its net
interest income, provision for loan losses, other operating income, and other
operating expenses. Net interest income is the difference between the income
the Company receives on its loan and investment portfolios and its cost of
funds, which consists of interest paid on deposits and borrowings. The
provision for loan losses reflects the cost of credit risk in the Company's
loan portfolio. Other operating income consists of service charges on deposit
accounts, securities gains, gains on sale of loans, net credit card processing
income and fees and commissions. Other operating expenses include salaries and
employee benefits as well as occupancy and equipment expenses and other
non-interest expenses.
Net interest income is dependent on the amounts and yields of interest earning
assets as compared to the amounts of and rates on interest bearing liabilities.
Net interest income is sensitive to changes in market rates of interest and the
Company's asset/liability management procedures in coping with such changes.
The provision for loan losses is dependent on increases in the loan portfolio,
management's assessment of the collectibility of the loan portfolio, as well as
economic and market factors. Non-interest expenses are heavily influenced by
the growth of operations, with additional employees necessary to staff and open
new branch facilities and marketing expenses necessary to promote them. Growth
in the number of account relationships directly affects such expenses as data
processing costs, supplies, postage and other miscellaneous expenses.
Operating Results
For the three months ended March 31, 1999, net income was $441,000 or $0.15 per
share on a diluted basis, an increase of 14.5% from the net income of $385,000
or $0.13 per diluted share for the same period in 1998.
Net Interest Income
The major source of earnings for the Company is net interest income. The
related net interest margin represents the net interest income as a percentage
of average interest earning assets during the period. The following table sets
forth information relating to the Company's consolidated average balance sheets
and reflects the average yield on assets and cost of liabilities for the<PAGE>
periods ended March 31, 1999 and 1998. The yields and costs include
adjustments for accretion and amortization of deferred fees and costs.
Three Months Ended March 31,
1999 1998
Average Average Average Average
Assets Balance Interest Rate Balance Interest Rate
- ------------------------------------------------------------------------------
(Dollars in thousands)
Loans (1)(2) $372,463 $7,621 8.18%$296,345$6,541 8.83%
Taxable investment securities 27,351 391 5.72 41,989 616 5.87
Investment securities exempt from
Federal income tax (1) 13,403 238 7.10 10,971 182 6.64
Interest bearing deposits with
financial institutions 2,748 30 4.37 4,640 62 5.34
Other interest earning assets 5,523 66 4.78 4,309 61 5.66
--------------- ------ ------ ------ ------
Total interest earning assets $421,488 $8,346 7.92 $358,254$7.462 8.33
Non-interest earning assets 40,072 30,455
------ ------
Total Assets $461,560 $388,709
======= =======
Liabilities & Shareholders' Equity
Deposits:
NOW & money market accounts $161,513 $1,775 4.40%$115,871$1,116 3.85%
Savings deposits 22,897 131 2.29 20,113 161 3.20
Time deposits 149,065 1,832 4.92 159,032 2,322 5.84
Other borrowings 37,908 619 6.53 17,912 245 5.47
------ ------ ------ ------ ------ ------
Total interest bearing
liabilities 371,383 4,357 4.69 312,928 3,844 4.91
Demand deposits - non-interest
bearing 54,006 42,962
Other non-interest bearing
liabilities 3,346 2,004
Minority interest in subsidiary
bank - 580
Shareholders' equity 32,825 30,235
------ ------
Total liabilities & shareholders'
equity $461,560 $388,709
======= =======
Net Interest Income $3,989 $3,618
======= =======
Net Yield on Interest Earning Assets 3.79% 4.04%
====== ======
(1) Tax exempt income as reflected on a fully tax equivalent basis utilizing a
34% rate for all years presented.
(2) Non-accrual loans are included in average loans.
The decline in annualized net interest margin for the three months ended March
31, 1999 compared with the same period of 1998, is primarily attributable to a
decline in the rate earned on loans as market pressures continue to require
that the Bank be more competitive in commercial loan, home equity loan and
residential loan pricing. The situation was further impacted by promotional<PAGE>
deposit programs intended to fund the growth experienced by the Company during
the past three years. Net interest margin for all of 1998 was 3.95%. To the
extent the Company continues to grow utilizing promotional products, the net
interest margin could experience further compression.
The following table represents a reconciliation of fully tax equivalent net
interest income.
(In thousands)
Fully tax equivalent net interest income for the
three months ended March 31, 1998 $3,618
Change due to average earning assets fluctuations 726
Change due to interest rate fluctuations (355)
------
Fully tax equivalent net interest income for the
three months ended March 31, 1999 $3,989
======
Other Operating Income
Other operating income was $900,000 for the quarter ended March 31, 1999 as
compared to $601,000 for the comparable quarter in 1998. During the current
quarter the Company received a lawsuit settlement of $70,000 and settled
monthly billing claims and conversion related charges with its service provider
and reduced previously accrued expenses by $94,000. In addition, gain on sale
of loans was $95,000 for the quarter ended March 31, 1999 versus $17,000 for
the comparable quarter in 1998.
Other Operating Expenses
Other operating expenses were $4.0 million for the three months ended March 31,
1999 compared with $3.4 million for the first quarter of 1998. The higher
level of expenses reflects the expenditures made to support the Company's
branch expansion. Salaries and benefits expense increased $331,000, or 17.9%
to $2.2 million for the current quarter as compared to $1.9 million for the
same period in 1998. Occupancy expenses increased $278,000 or 51.8%, to
$815,000 for the quarter ended March 31, 1999 versus the comparable period in
1998. The increases in both of these areas are largely the result of the
opening and staffing of three new branch offices between April 1, 1998 and
March 31, 1999. At March 31, 1999 the Company had 198 full-time equivalent
employees, an increase of 17 over the number reported at March 31, 1998.
Financial Condition
Loans
The loan portfolio is the largest category of the Company's interest earning
assets. At March 31, 1999 total loans were $370.9 million, a decrease of $4.2
million, or 1.1% from the $375.1 million at December 31, 1998. The decrease
resulted primarily from continued competitive rate pressures in the commercial
and home equity loan areas.
The following table sets forth the composition of the loan portfolio:
March 31, 1999 December 31, 1998
Percent of Percent of <PAGE>
Amount Portfolio Amount Portfolio
--------- --------- --------- --------
(Dollars in thousands)
Commercial $99,342 26.77% $102,592 27.34%
Real estate - construction 13,703 3.69 15,517 4.14
Real estate - mortgage 173,619 46.79 168,833 45.00
Home equity 74,959 20.20 78,384 20.89
Installment 8,987 2.42 9,471 2.52
Credit cards 418 .11 418 .11
------- ------- -------- -------
Total gross loans 371,028 100.00% 375,215 100.00%
======= ========
Net deferred loan fees 112 135
Unaccreted discount resulting
from loss on transfer of loans
held-for-sale to portfolio (238) (263)
------- --------
Loans net of unearned discount
and net deferred loan fees 370,902 375,087
Allowance for loan losses (3,977) (3,824)
-------- -------
Net loans $366,925 $371,263
======= =======
Non-Performing Loans
The following table presents a summary of book value of non-performing assets
which includes (a) non-performing loans and (b) other real estate owned.
Non-performing loans include: (1) loans accounted for on a non-accrual basis;
(2) accruing loans contractually past due 90 days or more as to interest or
principal payment; and (3) loans whose terms have been renegotiated to provide
a reduction or deferral of interest or principal because of a deterioration in
the financial position of the borrower. The Company has a reporting and
control system to monitor non-performing loans.
Loans with principal or interest payments contractually due but not yet paid
are reviewed by senior management on a weekly basis and are placed on
non-accrual status when scheduled payments remain unpaid for 90 days or more,
unless the loan is both well-secured and in the process of collection.
Interest income on non-accrual loans is recorded when actually received in
contrast to the accrual basis, which records income over the period in which it
is earned, regardless of when it is received.
March 31, December 31,
1999 1998
(Dollars in thousands)
Non-accrual $2,315 $ 268
90 days or more past due, still accruing 1,230 81
Restructured - -
------ -------
Total non-performing loans 3,545 349
Other real estate owned 420 435
------ -------
$3,965 $ 784
====== ======
Non-performing loans to total loans,
net of unearned discount and net deferred loan fees 0.96% 0.09%<PAGE>
Non-performing loans to allowance for loan losses 98.14% 9.13%
The increase in non-performing loans of $3.2 million from December 31, 1998 to
March 31, 1999 is primarily the result of the deterioration of loans totaling
$2.3 million to one customer and related interests. Management is currently
analyzing options including a foreclosure action and ultimate sale of the
underlying collateral. Since one of the affected loans involves a forgery, a
claim has been initiated with the Bank's bond carrier. In addition, a loan to
another customer in the amount of $684,000 has been classified as 90 days or
more past due and still accruing at March 31, 1999 since the loan maturity date
was not extended. Management is in the process of renewing the loan.
Potential Problem Loans
In addition to those loans disclosed under "Non-performing Loans," there are
certain loans in the portfolio which management has identified through its
problem loan identification system which exhibit a higher than normal credit
risk. However, these loans do not represent non-performing loans to the
Company. Management's review of the total loan portfolio to identify loans
where there is concern that the borrower will not be able to continue to
satisfy present loan repayment terms includes factors such as review of
individual loans, recent loss experience and current economic conditions.
Loans in this category include those with characteristics such as those that
have recent adverse operating cash flow or balance sheet trends, or have
general risk characteristics that the loan officer believes might jeopardize
the future timely collection of principal and interest payments. The principal
amount of loans in this category as of March 31, 1999 and December 31, 1998
were approximately $769,000 and $812,000, respectively. At March 31, 1999,
there were no significant loans which were classified by any bank regulatory
agency that are not included above as non-performing or as a potential problem
loan.
Allowance for Loan Losses
The allowance for loan losses is maintained at a level considered adequate to
provide for potential future losses in the Company's loan portfolio. The level
of the allowance is based upon management's periodic and comprehensive
evaluation of the loan portfolio, as well as current and projected economic
conditions. Reports of examination furnished by Federal banking authorities
are also considered by management in this regard. These evaluations by
management in assessing the adequacy of the allowance include consideration of
past loan loss experience, changes in the composition of the loan portfolio,
the volume and condition of loans outstanding and current market and economic
conditions.
Loans are charged to the allowance for loan losses when deemed uncollectible by
management, unless sufficient collateral exists to repay the loan.
The following table summarizes transactions in the allowance for loan losses
for the periods indicated:
Three Months Ended
March 31,
1999 1998
(Dollars in thousands)
Allowance at beginning of period $3,824 $2,079 <PAGE>
Provision for loan losses 150 196
Recoveries on loans previously charged off 3 5
Loans charged-off - (17)
----- ------
Balance at end of year 3,977 2,263
====== ======
Allowance as a % of total loans, net of
unearned discount and net deferred loan fees 1.07% 0.74%
Ratio of net charge-offs to average loans
outstanding (annualized) 0.00% 0.02%
Control of the Company's loan quality is continually monitored by management
and is reviewed by the Board of Directors and loan committee of the Bank on a
monthly basis, subject to the oversight by the Company's Board of Directors
through its members who serve on the loan committee. Independent external
review of the loan portfolio is provided by the examinations conducted by
regulatory authorities, independent public accountants in conjunction with
their annual audit, and an independent loan review performed by a consultant
engaged by the Board of Directors. The amount of additions to the allowance
for possible loan losses which are charged to earnings through the provision
for loan losses are determined based on a variety of factors, including actual
charge-offs during the year, historical loss experience, delinquent loans, and
an evaluation of current and prospective economic conditions in the market
area. Although management believes the allowance for possible loan losses is
adequate to cover any potential losses, there can be no assurance that the
allowance will prove sufficient to cover actual loan losses in the future.
Deposits
The following table sets forth deposits at the periods indicated:
March 31, Percent December 31,Percent
1999 or Deposits 1997 of Deposits
(Dollars in thousands)
NOW and money market accounts $165,790 43.72% $166,421 41.74%
Savings deposits 22,450 5.92 22,686 5.69
Time deposits 134,971 35.59 156,071 39.14
Demand deposits 56,033 14.77 53,557 13.43
-------- -------- ------- -------
Total $379,244 100.00% $398,735 100.00%
======= ======== ======= =======
The Company and the Bank are subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory, and possibly additional
discretionary, actions by regulators that, if undertaken, could have a direct
material effect on the Company's growth and financial condition. The
regulations require the Company and the Bank to meet specific capital adequacy
guidelines that involve quantitative measures of assets, liabilities, and
certain off-balance-sheet items as calculated under regulatory accounting
principles. The capital classifications are also subject to qualitative
judgments by the regulators about risk weightings and other factors.
Quantitative measures established by Federal regulations to ensure capital
adequacy require the Company and the Bank to maintain minimum ratios (set forth
in the table below) of Tier I capital (as defined in the regulations) to total
average assets (as defined in the regulations). As of March 31, 1999, the<PAGE>
Company's actual total capital to risk-weighted assets ratio was 15.66%. As of
March 31, 1999, the ratio of the Bank's total capital to risk-weighted assets
was 11.42% indicating that the Bank is considered "well capitalized."
The required ratios and the Company's and Bank's actual ratios at March 31,
1999, are presented below:
The required ratios and the Company's and Bank's actual ratios at March 31,
1998, are presented below:
To Be Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Provisions
Actual Ratio Actual Ratio Actual Ratio
(Dollars in thousands)
As of March 31, 1999
Total Capital (to Risk
Weighted Assets):
Consolidated $51,307 15.66% $26,214 8.0% Not Applicable
Bank 37,160 11.42 26,033 8.0 $32,542 10.0%
Tier 1 Capital (to Risk
Weighted Assets):
Consolidated 43,107 13.16 13,107 4.0 Not Applicable
Bank 33,183 10.20 13,107 4.0 19,525 6.0
Tier 1 Capital (To
Total Average Assets):
Consolidated 43,107 9.34 18,462 4.0 Not Applicable
Bank $33,183 7.22% $18,386 4.0% $22,983 5.0%
Operating Investing and Financing Activities
Liquidity management at the Bank involves planning to meet anticipated funding
needs at a reasonable cost. Liquidity management is guided by policies
formulated and monitored by the Company's senior management and the Bank's
asset/liability committee, which take into account the marketability of assets,
the sources and stability of funding and the level of unfunded commitments.
The Bank's principal sources of funds are deposits, short-term borrowings and
capital contributions by the Company. Borrowings by the Bank from the Federal
Reserve Bank of Chicago and Federal Home Loan Bank of Chicago provide
additional available sources of liquidity.
The Bank's core deposits, the most stable source of liquidity for community
banks due to the nature of long-term relationships generally established with
depositors and the security of deposit insurance provided by the FDIC, are
available to provide long-term liquidity. At March 31, 1999 and December 31,
1998, 41.33% and 38.96%, respectively, of the Company's total assets were
funded by demand deposits.
Liquid assets refer to money market assets such as cash and due from banks,
Federal funds sold and interest bearing time deposits with financial
institutions, as well as securities available for sale and securities
held-to-maturity with a remaining maturity less than one year. Net liquid
assets represent the sum of the liquid asset categories less the amount of
assets pledged to secure public funds. As of March 31, 1999 and December 31,
1998, net liquid assets totaled approximately $38.5 million and $52.7 million,
respectively.<PAGE>
The Company's cash flows are composed of three classifications: cash flows
from operating activities, cash flows from investing activities, and cash flows
from financing activities. Net cash provided by operating activities consists
primarily of earnings. Net cash provided by investing activities, consisting
primarily of loan and investment funding, was $3.2 million at March 31, 1999 as
compared to cash used of $19.6 million for the same period in 1998. The
decreased usage is primarily attributed to a decline in loan volume in the
current quarter. Net cash used in financing activities, consisting primarily
of deposit activities, was $16.2 million at March 31, 1999 as compared to cash
provided of $20.8 million at March 31, 1998. The decrease in cash provided is
primarily the result of a decline in deposit balances during the current
quarter.
Year 2000 Issue
The year 2000 will be the first century date change ever for an automated
society. For years, information systems were designed using a two-digit date
field. This practice has created an environment in which older generation
software programs may not be able to discern the difference between the year
2000 and the year 1900. This problem could result in the failure of computers
and/or information systems. Due to its reliance on both computers and
information systems, in early 1998, the Company began the process of
identifying and assessing the degree to which its hardware and software would
be impacted by the date change.
A committee, comprised of representatives from all major operating areas, was
created to assess whether or not the Company's internal and external systems,
particularly those that are mission-critical, are year 2000 compliant. The
committee has developed and adopted an action plan that addresses the Company's
year 2000 renovation, testing, contingency planning and management review
process. In addition the Company has developed a due diligence process to
monitor and evaluate the efforts of external third party suppliers to achieve
year 2000 readiness. The committee has developed and implemented a written
testing plan for both internal and external mission-critical systems and
finalized substantially all testing of internal mission-critical systems by
December 31, 1998. A business resumption contingency plan that defines
scenarios for mission-critical systems failing to achieve year 2000 readiness
and evaluates the Company's options has been completed and will be updated as
necessary.
The Company is committed to year 2000 compliance and, as such, has taken steps
to educate its customers in identifying potential year 2000 problems. A year
2000 risk assessment of borrowers with loans in excess of $100,000 has been
completed. The Company is satisfied that these borrowers represent a low year
2000 risk; however, the Company has instituted a program to assist in the
management of underwriting risk.
As of March 31, 1999, year 2000 compliance costs incurred are estimated to be
$90,000 to $110.000. It is estimated that the Company will spend $125,000 to
$150,000 in total. However, this is a complex issue and no assurances can be
given that compliance will be achieved without any unplanned outlays that would
affect future financial results.
Forward Looking Statements
Statements made about the Company's future economic performance, strategic
plans or objectives, revenues or earnings projections, or other financial items
and similar statements are not guarantees of future performance, but are
forward looking statements. By their nature, these statements are subject to
numerous uncertainties that could cause actual results to differ materially<PAGE>
from those in the statements. Important factors that might cause the Company's
actual results to differ materially include, but are not limited to, the
following:
. Federal and state legislative and regulatory developments;
. The impact of continued loan and deposit promotions on the Company's net
interest margin;
. The impact of opening, staffing and operating new branch facilities;
. loan losses;
. Changes in management's estimate of the adequacy of the
allowance for loan losses;
. Changes in the level and direction of loan delinquencies and write-offs;
. Interest rate movements and their impact on customer behavior and the
Company's net interest margin;
. The impact of repricing and competitors' pricing initiatives on loan and
deposit products;
. The Company's ability to adapt successfully to technological changes to
meet customers' needs and developments in the marketplace;
. The Company's ability to access cost effective funding;
. Changes in financial markets and general economic conditions; and
. The Company's ability to achieve year 2000 compliance without incurring
material unplanned expenditures.<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company's net income is dependent on its net interest income. Net interest
income is susceptible to interest rate risk to the degree that interest bearing
liabilities mature or reprice on a different basis than interest earning
assets. When interest bearing liabilities mature or reprice more quickly than
interest earning assets in a given period, a significant increase in market
rates of interest could adversely affect net interest income. Similarly, when
interest earning assets mature or reprice more quickly than interest bearing
liabilities, falling interest rates could result in a decrease in net income.
In order to evaluate its asset/liability sensitivity, management employs a
measurement tool which determines exposure to changes in interest rates by
measuring the percentage change in net interest income due to changes in rates
over a one-year time horizon. Management measures such percentage change
assuming an instantaneous permanent parallel shift in the yield curve of 100
and 200 basis points, both upward and downward. The model uses an option-based
pricing approach to estimate the sensitivity of mortgage loans. The most
significant embedded option in these types of assets is the prepayment option
of the borrowers. The model uses various prepayment assumptions depending upon
the type of mortgage instrument (residential mortgages, commercial mortgages,
mortgage-backed securities, etc.). Prepayment rates for mortgage instruments
ranged form 5 to 45 CPR (Constant Prepayment Rate) as of March 31, 1999 and
December 31, 1998. For administered rate core deposits (e.g. NOW and savings
accounts), the model utilizes interest rate floors equal to 100 basis points
below their current levels.
Utilizing this measurement concept, the interest rate risk of the Company,
expressed as a percentage change in net interest income over a one-year time
horizon due to changes in interest rates, at March 31, 1999 and December 31,
1998, was as follows:
Basis Point Change
+200 +100 -100 -200
At March 31, 1999 (6.5%) (2.6%) 5.0% 5.6%
At December 31, 1998 (9.5%) (4.8%) 3.9% 5.6%
The Company does not currently engage in trading activities or use derivative
instruments to control interest rate risk. Although such activities may be
permitted with the approval of the Board of Directors of the Bank, the Company
does not intend to engage in such activities in the immediate future.
Interest rate risk is the most significant market risk affecting the Company.
Other types of market risk, such as foreign currency exchange rate risk and
commodity price risk, do not arise in the normal course of the Company's
business activities.<PAGE>
PART II: OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Exhibit Title
3.1 Second Restated Certificate of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 of the Company's Form S-1
Registration Statement (No. 333-32561) filed with the Securities and
Exchange Commission the ("Commission") on July 31, 1997).
3.1.1 Certificates of Designations of Series B Junior Participating
Preferred Stock
3.2 By-laws of the Company (incorporated by reference to Exhibit 3.2 of
The Company's Form S-1 Registration Statement (No. 333-32561) filed
with the Commission on July 31, 1997).
(2) 3.2.1 Amendment No. 1 to By-laws
4.1 Form of Subordinated Indenture relating to the Junior Subordinated
Debentures (incorporated by reference to Exhibit 4.1 of the Form S-1
Registration Statement of the Company and Success Capital Trust I
("Success Capital") (No. 333-51271 and No. 333-51271-01) filed with
the Commission on April 28, 1998).
4.2 Form of Junior Subordinated Debenture Certificate (included as an
exhibit to Exhibit 4.1).
4.3 Certificate of Trust of Success Capital (incorporated by reference to
Exhibit 4.3 of the Form S-1 Registration Statement of the Company and
Success Capital (No. 333-51271 and 333-51271-01) filed with the
Commission on April 28, 1998).
4.4 Form of Amended and Restated Trust Agreement of Success Capital
(incorporated by reference to Exhibit 4.4 of the Form S-1
Registration Statement of the Company and Success Capital (No.
333-51271 and 333-51271-01) filed with the Commission on April 28,
1998).
4.5 Form of Trust Preferred Security Certificate of Success Capital
(included as an exhibit to Exhibit 4.4).
4.6 Form of Common Security Certificate of Success Capital (included as
an exhibit to Exhibit 4.4).
4.7 Form of Guarantee Agreement of the Company relating to the Trust
Preferred Securities (incorporated by reference to Exhibit 4.7 of the
Form S-1 Registration Statement of the Company and Success Capital
(No. 333-51271 and 333-51271-01) filed with the Commission on April
28, 1998).
4.8 Form of Rights Agreement, dated as of August 1, 1998, between the
Company and Harris Trust and Savings Bank, which includes as Exhibit
B thereto the Form of Right Certificate (incorporated by reference to
Exhibit 1 of the Company's Form 8-A Registration Statement (File No.
001-14381) filed with the Commission on August 6, 1998).
10.1 $10 Million Business Loan Agreement, dated January 13, 1997, between
the Company and Cole Taylor Bank (incorporated by reference to
Exhibit 10.1 of the Company's 1997 Annual Report on Form 10-K filed
with the Commission on March 31, 1998).
10.2 Success Bancshares, Inc. 1995 Employee Stock Option Plan
(incorporated by reference to Exhibit 10.2 of the Company's Form S-1
Registration Statement (No. 333-32561) filed with the Commission on
July 31, 1997). <PAGE>
10.3 Employment Agreement between the Company and Saul D. Binder
(incorporated by reference to Exhibit 10.3 of the Company's Form S-1
Registration Statement (No. 333-32561) filed with the Commission on
July 31, 1997)
10.4 Success Bancshares, Inc. 1999 Stock Option Plan (incorporated by
reference to Exhibit 10.4 of the Company's Annual Report on Form 10-K
filed with the Commission on March 30, 1999).
10.5 Lease with respect to Lincolnwood branch banking facility (October,
1991) (incorporated by reference to Exhibit 10.5 of the Company's
Form S-1 Registration Statement (No. 333-32561) filed with the
Securities and Exchange Commission on July 31, 1997).
10.6 Lease with respect to Lincoln Park branch banking facility (April,
1993) (incorporated by reference to Exhibit 10.6 of the Company's
Form S-1 Registration Statement (No. 333-32561) filed with the
Commission on July 31, 1997).
10.7 Lease with respect to Northbrook branch banking facility (December,
1994) (incorporated by reference to Exhibit 10.7 of the Company's
Form S-1 Registration Statement (No. 333-32561) filed with the
Commission on July 31, 1997).
10.8 Lease with respect to Deerfield/Riverwoods branch banking facility
(September, 1995) (incorporated by reference to Exhibit 10.8 of the
Company's Form S-1 Registration Statement (No. 333-32561) filed with
the Commission on July 31, 1997).
10.9 Employment Agreement between the Bank and Christa N. Calabrese dated
as of August 1, 1998, as amended (incorporated by reference to
Exhibit 10.9 of the Company's Form 10-Q filed with the Commission on
November 13, 1998).
10.10 Employment Agreement between the Bank and Kurt C. Felde dated as of
August 1, 1998, as amended (incorporated by reference to Exhibit
10.10 of the Company's Form 10-Q filed with the Commission on
November 13, 1998).
10.11 Employment Agreement between the Bank and Ronald W. Tragasz dated as
of August 1,1 998, as amended (incorporated by reference to Exhibit
10.11 of the Company's Form 10-Q filed with the Commission on
November 13, 1998).
10.12 Employment Agreement between the Bank and Marlene Sachs dated as of
August 1, 1998 (incorporated by reference to Exhibit 10.12 of the
Company's Form 10-Q filed with the Commission on November 13, 1998).
10.13 Stock Option Agreement dated as of September 23, 1998 between the
Company and Christa N. Calabrese (incorporated by reference to
Exhibit 10.13 of the Company's Form 10-Q filed with the Commission on
November 13, 1998).
10.14 Stock Option Agreement dated as of June 25, 1998 between the Company
and Kurt C. Felde (incorporated by reference to Exhibit 10.14 of the
Company's Form 10-Q filed with the Commission on November 13, 1998).
10.15 Stock Option Agreement dated as of September 23, 1998 between the
Company and Ronald W. Tragasz (incorporated by reference to Exhibit
10.15 of the Company's Form 10-Q filed with the Commission on
November 13, 1998).
10.16 Stock Option Agreement dated as of September 23, 1998 between the
Company and Marlene Sachs (incorporated by reference to Exhibit 10.16
of the Company's Form 10-Q filed with the Commission on November 13,
1998).
10.17 Stock Option Agreement dated as of August 26, 1998 between the
Company and Sherwin Koopmans (incorporated by reference to Exhibit
10.17 of the Company's Form 10-Q filed with the Commission on
November 13, 1998).<PAGE>
10.18 Stock Option Agreement dated as of August 26, 1998 between the
Company and George M. Ohlhausen (incorporated by reference to Exhibit
10.18 of the Company's Form 10-Q filed with the Commission on
November 13, 1998).
10.19 Stock Option Agreement dated as of August 26, 1998 between the
Company and Charles G. Freund (incorporated by reference to Exhibit
10.19 of the Company's Form 10-Q filed with the Commission on
November 13, 1998).
10.20 Stock Option Agreement dated as of August 26, 1998 between the
Company and Norman D. Rich (incorporated by reference to Exhibit
10.20 of the Company's Form 10-Q filed with the Commission on
November 13, 1998).
10.21 Amendment No. 1 to Employment Agreement dated as of August 1, 1998
between the Bank and Marlene Sachs (incorporated by reference to
Exhibit 10.21 of the Company's Annual Report on Form 10-K filed with
the Commission on March 30, 1999).
10.22 Stock Option Agreement dated as of August 26, 1998 between the
Company and Avrom H. Goldfeder (incorporated by reference to Exhibit
10.22 of the Company's Form 10-Q filed with the Commission on
November 13, 1998).
10.23 Stock Option Agreement dated as of August 26, 1998 between the
Company and Glen Wherfel (incorporated by reference to Exhibit 10.23
of the Company's Form 10-Q filed with the Commission on November 13,
1998).
10.24 Employment Agreement dated as of December 16, 1998 between the Bank
and Wilbur G. Meinen (incorporated by reference to Exhibit 10.24 of
the Company's Annual Report on Form 10-K filed with the Commission on
March 30, 1999).
10.25 Stock Option Agreement dated as of December 16, 1998 between the
Company and Kurt C. Felde (incorporated by reference to Exhibit 10.25
of the Company's Annual Report on Form 10-K filed with the Commission
on March 30, 1999).
10.26 Stock Option Agreement dated as of December 16, 1998 between the
Company and Wilbur G. Meinen (incorporated by reference to Exhibit
10.26 of the Company's Annual Report on Form 10-K filed with the
Commission on March 30, 1999).
10.27 Stock Option Agreement dated as of January 27, 1999 between the
Company and Wilbur G. Meinen (incorporated by reference to Exhibit
10.27 of the Company's Annual Report on Form 10-K filed with the
Commission on March 30, 1999).
10.28 Success Bancshares, Inc. 1998 Employee Stock Purchase Plan
(incorporated by reference to Exhibit 10.28 of the Company's Annual
Report on Form 10-K filed with the Commission on March 30, 1999).
10.29 Amendment No. 1 to 1995 Stock Option Plan (incorporated by reference
to Exhibit 10.29 of the Company's Annual Report on Form 10-K filed
with the Commission on March 30, 1999).
10.30 Restricted Stock Agreement dated as of December 16, 1998 between the
Company and Wilbur G. Meinen (incorporated by reference to Exhibit
10.30 of the Company's Annual Report on Form 10-K filed with the
Commission on March 30, 1999).
10.31 Lease with respect to Chicago downtown branch banking facility (May,
1998) (incorporated by reference to Exhibit 10.31 of the Company's
Annual Report on Form 10-K filed with the Commission on March 30,
1999).
(2) 10.32 Amendment No. 2 to Employment Agreement dated as of December 16,
1998 between the Bank and Christa N. Calabrese.<PAGE>
(2) 27.1 Financial Data Schedule
(b) Reports on Form 8K
None<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Success Bancshares, Inc.
(Registrant)
May 11, 1999 /s/
- ----------------------- ----------------------------
Date Wilbur G. Meinen
President & Chief Executive Officer
May 11, 1999 /s/
- ------------------------- --------------------------------
Date Kurt C. Felde
Executive Vice President
& Chief Financial Officer<PAGE>
EXHIBIT INDEX
Exhibit
Number Exhibit Title
3.1 Second Restated Certificate of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 of the Company's Form S-1
Registration Statement (No. 333-32561) filed with the Securities and
Exchange Commission the ("Commission") on July 31, 1997).
3.1.1 Certificates of Designations of Series B Junior Participating
Preferred Stock
3.2 By-laws of the Company (incorporated by reference to Exhibit 3.2 of
The Company's Form S-1 Registration Statement (No. 333-32561) filed
with the Commission on July 31, 1997).
(2) 3.2.1 Amendment No. 1 to By-laws
4.1 Form of Subordinated Indenture relating to the Junior Subordinated
Debentures (incorporated by reference to Exhibit 4.1 of the Form S-1
Registration Statement of the Company and Success Capital Trust I
("Success Capital") (No. 333-51271 and No. 333-51271-01) filed with
the Commission on April 28, 1998).
4.2 Form of Junior Subordinated Debenture Certificate (included as an
exhibit to Exhibit 4.1).
4.3 Certificate of Trust of Success Capital (incorporated by reference to
Exhibit 4.3 of the Form S-1 Registration Statement of the Company and
Success Capital (No. 333-51271 and 333-51271-01) filed with the
Commission on April 28, 1998).
4.4 Form of Amended and Restated Trust Agreement of Success Capital
(incorporated by reference to Exhibit 4.4 of the Form S-1
Registration Statement of the Company and Success Capital (No.
333-51271 and 333-51271-01) filed with the Commission on April 28,
1998).
4.5 Form of Trust Preferred Security Certificate of Success Capital
(included as an exhibit to Exhibit 4.4).
4.6 Form of Common Security Certificate of Success Capital (included as
an exhibit to Exhibit 4.4).
4.7 Form of Guarantee Agreement of the Company relating to the Trust
Preferred Securities (incorporated by reference to Exhibit 4.7 of the
Form S-1 Registration Statement of the Company and Success Capital
(No. 333-51271 and 333-51271-01) filed with the Commission on April
28, 1998).
4.8 Form of Rights Agreement, dated as of August 1, 1998, between the
Company and Harris Trust and Savings Bank, which includes as Exhibit
B thereto the Form of Right Certificate (incorporated by reference to
Exhibit 1 of the Company's Form 8-A Registration Statement (File No.
001-14381) filed with the Commission on August 6, 1998).
10.1 $10 Million Business Loan Agreement, dated January 13, 1997, between
the Company and Cole Taylor Bank (incorporated by reference to
Exhibit 10.1 of the Company's 1997 Annual Report on Form 10-K filed
with the Commission on March 31, 1998).
10.2 Success Bancshares, Inc. 1995 Employee Stock Option Plan
(incorporated by reference to Exhibit 10.2 of the Company's Form S-1
Registration Statement (No. 333-32561) filed with the Commission on
July 31, 1997).
10.3 Employment Agreement between the Company and Saul D. Binder
(incorporated by reference to Exhibit 10.3 of the Company's Form S-1
Registration Statement (No. 333-32561) filed with the Commission on
July 31, 1997) <PAGE>
10.4 Success Bancshares, Inc. 1999 Stock Option Plan (incorporated by
reference to Exhibit 10.4 of the Company's Annual Report on Form 10-K
filed with the Commission on March 30, 1999).
10.5 Lease with respect to Lincolnwood branch banking facility (October,
1991) (incorporated by reference to Exhibit 10.5 of the Company's
Form S-1 Registration Statement (No. 333-32561) filed with the
Securities and Exchange Commission on July 31, 1997).
10.6 Lease with respect to Lincoln Park branch banking facility (April,
1993) (incorporated by reference to Exhibit 10.6 of the Company's
Form S-1 Registration Statement (No. 333-32561) filed with the
Commission on July 31, 1997).
10.7 Lease with respect to Northbrook branch banking facility (December,
1994) (incorporated by reference to Exhibit 10.7 of the Company's
Form S-1 Registration Statement (No. 333-32561) filed with the
Commission on July 31, 1997).
10.8 Lease with respect to Deerfield/Riverwoods branch banking facility
(September, 1995) (incorporated by reference to Exhibit 10.8 of the
Company's Form S-1 Registration Statement (No. 333-32561) filed with
the Commission on July 31, 1997).
10.9 Employment Agreement between the Bank and Christa N. Calabrese dated
as of August 1, 1998, as amended (incorporated by reference to
Exhibit 10.9 of the Company's Form 10-Q filed with the Commission on
November 13, 1998).
10.10 Employment Agreement between the Bank and Kurt C. Felde dated as of
August 1, 1998, as amended (incorporated by reference to Exhibit
10.10 of the Company's Form 10-Q filed with the Commission on
November 13, 1998).
10.11 Employment Agreement between the Bank and Ronald W. Tragasz dated as
of August 1,1 998, as amended (incorporated by reference to Exhibit
10.11 of the Company's Form 10-Q filed with the Commission on
November 13, 1998).
10.12 Employment Agreement between the Bank and Marlene Sachs dated as of
August 1, 1998 (incorporated by reference to Exhibit 10.12 of the
Company's Form 10-Q filed with the Commission on November 13, 1998).
10.13 Stock Option Agreement dated as of September 23, 1998 between the
Company and Christa N. Calabrese (incorporated by reference to
Exhibit 10.13 of the Company's Form 10-Q filed with the Commission on
November 13, 1998).
10.14 Stock Option Agreement dated as of June 25, 1998 between the Company
and Kurt C. Felde (incorporated by reference to Exhibit 10.14 of the
Company's Form 10-Q filed with the Commission on November 13, 1998).
10.15 Stock Option Agreement dated as of September 23, 1998 between the
Company and Ronald W. Tragasz (incorporated by reference to Exhibit
10.15 of the Company's Form 10-Q filed with the Commission on
November 13, 1998).
10.16 Stock Option Agreement dated as of September 23, 1998 between the
Company and Marlene Sachs (incorporated by reference to Exhibit 10.16
of the Company's Form 10-Q filed with the Commission on November 13,
1998).
10.17 Stock Option Agreement dated as of August 26, 1998 between the
Company and Sherwin Koopmans (incorporated by reference to Exhibit
10.17 of the Company's Form 10-Q filed with the Commission on
November 13, 1998).
10.18 Stock Option Agreement dated as of August 26, 1998 between the
Company and George M. Ohlhausen (incorporated by reference to Exhibit
10.18 of the Company's Form 10-Q filed with the Commission on
November 13, 1998).<PAGE>
10.19 Stock Option Agreement dated as of August 26, 1998 between the
Company and Charles G. Freund (incorporated by reference to Exhibit
10.19 of the Company's Form 10-Q filed with the Commission on
November 13, 1998).
10.20 Stock Option Agreement dated as of August 26, 1998 between the
Company and Norman D. Rich (incorporated by reference to Exhibit
10.20 of the Company's Form 10-Q filed with the Commission on
November 13, 1998).
10.21 Amendment No. 1 to Employment Agreement dated as of August 1, 1998
between the Bank and Marlene Sachs (incorporated by reference to
Exhibit 10.21 of the Company's Annual Report on Form 10-K filed with
the Commission on March 30, 1999).
10.22 Stock Option Agreement dated as of August 26, 1998 between the
Company and Avrom H. Goldfeder (incorporated by reference to Exhibit
10.22 of the Company's Form 10-Q filed with the Commission on
November 13, 1998).
10.23 Stock Option Agreement dated as of August 26, 1998 between the
Company and Glen Wherfel (incorporated by reference to Exhibit 10.23
of the Company's Form 10-Q filed with the Commission on November 13,
1998).
10.24 Employment Agreement dated as of December 16, 1998 between the Bank
and Wilbur G. Meinen (incorporated by reference to Exhibit 10.24 of
the Company's Annual Report on Form 10-K filed with the Commission on
March 30, 1999).
10.25 Stock Option Agreement dated as of December 16, 1998 between the
Company and Kurt C. Felde (incorporated by reference to Exhibit 10.25
of the Company's Annual Report on Form 10-K filed with the Commission
on March 30, 1999).
10.26 Stock Option Agreement dated as of December 16, 1998 between the
Company and Wilbur G. Meinen (incorporated by reference to Exhibit
10.26 of the Company's Annual Report on Form 10-K filed with the
Commission on March 30, 1999).
10.27 Stock Option Agreement dated as of January 27, 1999 between the
Company and Wilbur G. Meinen (incorporated by reference to Exhibit
10.27 of the Company's Annual Report on Form 10-K filed with the
Commission on March 30, 1999).
10.28 Success Bancshares, Inc. 1998 Employee Stock Purchase Plan
(incorporated by reference to Exhibit 10.28 of the Company's Annual
Report on Form 10-K filed with the Commission on March 30, 1999).
10.29 Amendment No. 1 to 1995 Stock Option Plan (incorporated by reference
to Exhibit 10.29 of the Company's Annual Report on Form 10-K filed
with the Commission on March 30, 1999).
10.30 Restricted Stock Agreement dated as of December 16, 1998 between the
Company and Wilbur G. Meinen (incorporated by reference to Exhibit
10.30 of the Company's Annual Report on Form 10-K filed with the
Commission on March 30, 1999).
10.31 Lease with respect to Chicago downtown branch banking facility (May,
1998) (incorporated by reference to Exhibit 10.31 of the Company's
Annual Report on Form 10-K filed with the Commission on March 30,
1999).
(2) 10.32 Amendment No. 2 to Employment Agreement dated as of December 16,
1998 between the Bank and Christa N. Calabrese.
(2) 27.1 Financial Data Schedule
(b) Reports on Form 8K<PAGE>
None<PAGE>
Legend This schedule contains summary financial information extracted from
the quarterly unaudited financial statements of Success Bancshares,
Inc. for the three months ended March 31, 1999, and is qualified in
its entirety by reference to such financial statements.
Name Success Bancshares, Inc.
Multiplier 1,000
Period Type 3 months
Fiscal Year End Dec-31-1999
Period Start Jan-01-1999
Period End Mar-31-1999
Cash 26,375
Int. Bearing Deposits 104
Fed Funds Sold 0
Trading Assets 0
Investments Held-for-Sale 40,780
Investments Carrying 0
Investments Market 0
Loans 372,415
Allowance 3,977
Total Assets 454,905
Deposits 379,244
Short Term 11,394
Liabilities - Other 3,105
Long Term 13,430
Preferred Mandatory 15,000
Preferred 0
Common 24,531
Other - SE 8,201
Total Liabilities and Equity 454,905
Interest - Loan 7,621
Interest - Invest 547
Interest - Other 97
Interest - Total 8,265
Interest - Deposit 3,738
Interest - Expense 4,357
Interest - Income - Net 3,908
Loan - Losses 150
Securities - Gains 0
Expense - Other 4,034
Income - Pretax 624
Income - Pre-Extraordinary 624
Extraordinary 0
Changes 0
Net - Income 441
EPS - Basic 0.15
EPS - Diluted 0.15
Yield - Actual 3.79
Loans - Non 2,315
Loans - Past 1,230
Loans - Troubled 0
Loans - Problem 769
Allowance - Open 3,824
Charge-Offs 0
Recoveries 3
Allowance - Close 3,977
Allowance - Domestic 3,977<PAGE>
Allowance - Foreign 0
Allowance - Unallocated 1,684<PAGE>
AMENDMENT NO. 1 TO SUCCESS BANCSHARES, INC. BY-LAWS
Section 2.6(A)(2) is amended by adding thereto the following sentence:
"A proxy granted in connection with an annual meeting of stockholders may
confer discretionary authority to vote on any matter properly submitted by a
stockholder for presentation at the annual meeting in accordance with these
By-laws but not included in the Corporation's proxy materials for use in
connection with such meeting if the Corporation did not receive proper notice
of such proposal at least 120 days before the date of the Corporation's proxy
statement released to shareholders in connection with the previous year's
annual meeting. However, if the Corporation did not hold an annual meeting the
previous year, or if the date of the current year's annual meeting has been
changed by more than 30 days from the date of the previous year's meeting, then
the deadline is a reasonable time before the Corporation begins to print and
mail its proxy materials."<PAGE>
AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT
This Amendment (this "Amendment") is made and entered into as of December
16, 1998, by and between Success National Bank, a national banking organization
("Employer"), and Christa N. Calabrese ("Employee").
WHEREAS, Employer and Employee have entered into an Employment Agreement
dated as of August 1, 1998 (the "Employment Agreement"); and
WHEREAS, Employer and Employee desire to amend the Employment Agreement as
set forth below.
NOW, THEREFORE, in consideration of the provisions and undertakings set
forth herein, the parties, intending to be legally bound, hereby agree as
follows:
1. AMENDMENT. Section 2.1(a) of the Employment Agreement is hereby amended
by substituting the dollar amount "$125,000" for the dollar amount "$106,000"
in the second line thereof.
2. MISCELLANEOUS
2.1 Sole Amendment. The Employment Agreement shall not be amended except
as expressly set forth herein.
2.2 Governing Law. This Amendment shall be interpreted, construed and
enforced in accordance with the internal laws of Illinois.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the last date written below.
EMPLOYER
SUCCESS NATIONAL BANK
By: /s/ Wilbur G. Meinen
------------------------------
Name: Wilbur G. Meinen
Title: President and
Chief Executive Officer
EMPLOYEE: /s/ Christa N. Calabrese
---------------------------
Name: Christa N. Calabrese<PAGE>
