FORM 10-QSB
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended December 31, 1998
or
[ ] 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 1-13691
Bay State Bancorp, Inc.
(Exact name of small business issuer as specified in its charter)
Delaware 04-3398630
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
1299 Beacon Street, Brookline, Massachusetts 02446
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (617) 739-9500
Check whether the issuer (1) 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.|X| Yes |_| No
The number of shares of common stock outstanding of each of the issuer's classes
of common stock, as of February 8, 1999 was 2,408,470.
Transitional Small Business Disclosure Format |_| Yes |X| No
<PAGE>
BAY STATE BANCORP, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
<S> <C>
PART I - FINANCIAL INFORMATION..................................................................................1
Item 1 - Financial Statements.................................................................................1
Consolidated Balance Sheets - December 31, 1998 and March 31, 1998 .........................................1
Consolidated Income Statements - Three and nine months ended December 31, 1998 and 1997.....................2
Consolidated Statements of Cash Flows - nine months ended December 31, 1998 and 1997........................3
Consolidated Statements of Changes in Stockholders' Equity - nine months ended
December 31, 1998...........................................................................................4
Notes to Consolidated Financial Statements for the Period Ended December 31, 1998...........................5
Item 2 - Management's Discussion and Analysis or Plan of Operation............................................6
PART II - OTHER INFORMATION....................................................................................20
Item 1 - Legal Proceedings...................................................................................20
Item 2 - Changes in Securities and use of proceeds...........................................................20
Item 3 - Defaults Upon Senior Securities.....................................................................20
Item 4 - Submission of Matters to a Vote of Security Holders.................................................20
Item 5 - Other Information...................................................................................20
Item 6 - Exhibits and Reports on Form 8-K....................................................................20
SIGNATURES...................................................................................................21
EXHIBITS.....................................................................................................22
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Bay State Bancorp, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
December 31, March 31,
1998 1998
----------- --------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and due from banks $ 5,975 $ 3,513
Short-term investments 12,007 46,000
Investment and mortgage-backed securities
Available-for-sale (amortized cost of $25,564 and $5,391) 26,063 6,523
Held to maturity (market value of $1,298 and $4,274) 1,299 4,272
Mortgage loans held for sale -- 822
Loans receivable, net 283,300 224,928
Stock in Federal Home Loan Bank of Boston 3,240 1,873
Accrued interest receivable 1,714 1,260
Premises and equipment, net 2,607 2,581
Deferred tax asset, net 2,260 2,065
Other assets 5,655 1,454
-------- --------
Total assets $344,120 $295,291
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $213,167 $207,780
Federal Home Loan Bank Advances 64,449 20,000
Other borrowed funds 4,640 2,176
Accrued expenses and other liabilities 2,437 1,761
-------- --------
Total liabilities 284,693 231,717
-------- --------
Stockholders' equity:
Common stock, par value $.01 per share, issued
and outstanding 2,535,232 shares 25 25
Additional paid-in capital 49,194 49,194
Retained earnings 19,007 17,340
Accumulated other comprehensive income 228 666
Less: Unearned ESOP shares (3,651) (3,651)
Unearned 1998 Stock-Based Incentive Plan (2,269) --
Treasury stock, 126,762 shares (3,107) --
-------- --------
Total stockholders' equity 59,427 63,574
-------- --------
Total liabilities and stockholders' equity $344,120 $295,291
======== ========
Equity-to-asset ratio 17.27% 21.53%
Book value per share $26.74 $27.02
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
Page 1
<PAGE>
Bay State Bancorp, Inc. and Subsidiaries
Consolidated Income Statements
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Nine months ended
December 31, December 31,
1998 1997 1998 1997
---- ---- ---- ----
Unaudited Unaudited
<S> <C> <C> <C> <C>
Interest income:
Loans $ 5,551 $ 4,564 $ 15,201 $ 13,250
Investments 405 263 1,010 814
Other interest 95 20 799 58
---------- ---------- ---------- ----------
Total interest income 6,051 4,847 17,010 14,122
---------- ---------- ---------- ----------
Interest expense:
Deposits 2,199 2,255 6,689 6,621
Borrowed funds 580 355 1,042 899
---------- ---------- ---------- ----------
Total interest expense 2,779 2,610 7,731 7,520
---------- ---------- ---------- ----------
Net interest income before provision for loan losses 3,272 2,237 9,279 6,602
Provision for loan losses 260 30 410 474
---------- ---------- ---------- ----------
Net interest income after provision for loan losses 3,012 2,207 8,869 6,128
---------- ---------- ---------- ----------
Non-interest income:
Service charges on deposit accounts 70 72 202 207
Gain on sale of loans 17 1 46 6
Gain on sale of other real estate owned -- -- -- 19
---------- ---------- ---------- ----------
Total non-interest income 87 73 248 232
---------- ---------- ---------- ----------
Income before non-interest expense and income taxes 3,099 2,280 9,117 6,360
---------- ---------- ---------- ----------
Non-interest expense:
Salaries and employee benefits 1,448 1,041 3,780 2,759
Equipment and occupancy 253 229 750 669
Federal deposit insurance premiums 32 30 95 93
Advertising 62 40 162 128
Data processing 63 56 185 166
Other 316 205 1,275 677
---------- ---------- ---------- ----------
Total non-interest expense 2,174 1,601 6,247 4,492
---------- ---------- ---------- ----------
Income before income taxes 925 679 2,870 1,868
Income tax expense 378 284 1,203 775
---------- ---------- ---------- ----------
Net income $ 547 $ 395 $ 1,667 $ 1,093
========== ========== ========== ==========
Comprehensive net income $ 714 $ 451 $ 1,229 $ 1,315
========== ========== ========== ==========
Weighted average common and common equivalent shares 2,317,682 n/a 2,340,982 n/a
outstanding ========== =========
Basic earnings per share $ 0.24 n/a $ 0.71 n/a
========== ==========
Diluted earnings per share $ 0.23 n/a $ 0.71 n/a
========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
Page 2
<PAGE>
Bay State Bancorp, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Nine months ended December 31,
------------------------------
1998 1997
---- ----
Unaudited
---------
<S> <C> <C>
Net cash flows from operating activities:
Net income $ 1,667 $ 1,093
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 410 474
Net decrease in mortgage loans held-for-sale (822) --
Gain on sale of mortgage loans (46) (6)
Depreciation and amortization 232 170
Increase (decrease) in deferred loan origination fees (235) (23)
Amortization of securities, net of accretion 6 6
Gain on sale of other real estate owned -- (19)
Increase in accrued interest receivable (454) (119)
Decrease in deferred income tax asset -- (169)
(Increase) decrease in prepaid expenses and other assets (3,801) (832)
Increase (decrease) in other liabilities 676 658
-------- --------
Net cash provided by (used in) operating activities (2,367) 1,233
-------- --------
Cash flows from investing activities:
Proceeds from sales of other real estate owned -- 322
Proceeds from maturities of held-to-maturity securities 2,969 4,316
Proceeds from maturities of available-for-sale securities 5,217 --
Purchases of available-for-sale securities (25,391) (103)
Purchases of Federal Home Loan Bank Stock (1,367) --
Distribution to Rabbi Trust (400) (697)
Net increase in loans (56,858) (17,744)
Capital expenditures (258) (696)
-------- --------
Net cash used in investing activities (76,088) (14,602)
-------- --------
Cash flows from financing activities:
Net increase in deposits 5,387 6,711
Repayment of advances from the Federal Home Loan Bank (5,516) (54,000)
Advances from the Federal Home Loan Bank 49,965 62,000
Net increase in other borrowed funds 2,464 102
Purchase of stock for stock-based incentive plans (2,269) --
Purchase of treasury stock (3,107) --
-------- --------
Net cash provided by financing activities 46,924 14,813
-------- --------
Net increase (decrease) in cash and cash equivalents (31,531) 1,444
Cash and cash equivalents at beginning of period 49,513 3,617
-------- --------
Cash and cash equivalents at end of period $ 17,982 $ 5,061
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 7,730 $ 7,520
Taxes 1,089 746
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
Page 3
<PAGE>
Bay State Bancorp, Inc. and Subsidiaries
Consolidated Statements of Changes in Stockholders' Equity
(in thousands)
<TABLE>
<CAPTION>
Accumulated Unearned
Additional Other Comp- Stock-based Total
Common Paid-in Retained rehensive Unearned Treasury Incentive Stockholders'
Stock Capital Earnings Income ESOP Shares Stock Plan Shares Equity
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1997 $ -- $ -- $ 19,091 $ 383 $ -- $ -- $ -- $ 19,474
Net Loss -- -- (1,751) -- -- -- -- (1,751)
Stock issued pursuant to
initial common
stock offering 23 45,245 -- -- -- -- -- 45,268
Issuance of 187,795 shares of
common stock to The Bay
State Federal Savings
Charitable Foundation 2 3,754 -- -- -- -- -- 3,756
Common Stock acquired by ESOP -- -- -- -- (4,056) -- -- (4,056)
Reduction in unearned ESOP
shares charged to expense -- -- -- -- 405 -- -- 405
Appreciation in fair value of
unearned ESOP
shares charged to expense -- 195 -- -- -- -- -- 195
Net Change in unrealized gain
on available for sale
securities -- -- -- 283 -- -- -- 283
---------------------------------------------------------------------------------------------
Balance at March 31, 1998 25 49,194 17,340 666 (3,651) -- -- 63,574
Net Income -- -- 1,667 -- -- -- -- 1,667
Purchase of treasury stock -- -- -- -- -- (3,107) -- (3,107)
Common stock acquired for
stock-based incentive plans -- -- -- -- -- -- (2,269) (2,269)
Net change in unrealized gain
on available for sale
securities -- -- -- (438) -- -- -- (438)
---------------------------------------------------------------------------------------------
Balance at December 31, 1998
(Unaudited) $ 25 $ 49,194 $ 19,007 $ 228 $ (3,651) $ (3,107) $ (2,269) $ 59,427
=============================================================================================
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
Page 4
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED DECEMBER 31, 1998
(1) Organization
Bay State Bancorp, Inc. ("Company" or "Bay State") was incorporated under
the laws of Delaware in October 1997 for the purpose of serving as the holding
company of Bay State Federal Savings Bank ("Bank") as part of the Bank's
conversion from a mutual form of organization to a stock form of organization
(the "Conversion"). The Company is a savings and loan holding company and is
subject to regulation by the Office of Thrift Supervision ("OTS"), the Federal
Deposit Insurance Corporation ("FDIC") and the Securities and Exchange
Commission ("SEC"). The Conversion, completed on March 29, 1998, resulted in the
Company issuing an aggregate 2,535,232 shares of its common stock, par value
$.01 per share, at a price of $20 per share, of which 2,347,437 shares were
issued in a subscription offering and 187,795 shares were issued to The Bay
State Federal Savings Charitable Foundation (the "Foundation), established by
the Bank. Prior to the Conversion, Bay State had not engaged in any material
operations.
(2) Accounting Principles
The accompanying unaudited consolidated financial statements of Bay State
Bancorp, Inc. have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-QSB and of Regulation S-B. Accordingly, the financial
statements do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of a normal recurring
nature) considered necessary for a fair presentation have been included.
Operating results for the three and nine months ended December 31, 1998 are not
necessarily indicative of the results that may be expected for the current
fiscal year.
For further information, refer to the consolidated financial statements
included in the Company's annual report and Form 10-KSB for the period ended
March 31, 1998, and form 10-QSB for the periods ended June 30, 1998 and
September 30, 1998, filed with the Securities and Exchange Commission.
(3) Stock Based Incentive Plan
The Company has established a trust to purchase 101,409 shares of common
stock for the purpose of funding the 1998 Stock Based Incentive Plan ("Plan").
The Plan was approved by shareholders' at the September 29, 1998 Annual Meeting.
The trust has purchased 101,409 shares at a cost of $2,269,000, or $22.38 per
share.
(4) Stock Repurchase Program
On October 30, 1998 the Company announced it had received approval from the
OTS to repurchase up to 5% of the Company's outstanding common stock, or 126,762
shares. During the quarter the Company completed the
Page 5
<PAGE>
purchase of the stock at a total cost of $3,107,000, or $24.51 per share.
Item 2 - Management's Discussion and Analysis or Plan of Operation
General
Bay State Bancorp, Inc., a savings and loan holding company, was
incorporated under the laws of Delaware in October 1997 for the purpose of
serving as the holding company of Bay State Federal Savings Bank as part of the
Bank's conversion from a mutual to stock form of organization. Bay State Federal
Savings Bank is a federally chartered savings bank and is subject to regulation
by the Office of Thrift Supervision.
The Bank has five full service retail banking offices located in Norfolk
and Suffolk counties, Massachusetts. Through these offices, the Bank offers a
full range of retail and commercial banking products and services and conducts
other business as allowable for federally chartered banks. The Banks' lending
operations focus on, residential first mortgages, commercial real estate loans,
residential construction loans, home equity lines of credit, and consumer loans.
The Bank's business activities are concentrated in Eastern Massachusetts.
All retail banking activity is conducted through the banking offices. Lending
operations, particularly loan originations, are conducted from the retail
offices and at the point of sale. Neither the Company and the Bank nor any of
their subsidiaries conduct business on a national or international basis.
The operating results of the Company depend primarily on its net interest
and dividend income, which is the difference between (i) interest and dividend
income on earnings assets, primarily loans and investment securities and (ii)
interest expense on interest bearing liabilities, which consist of deposits and
borrowings. Results of operations are also affected by the provision for loan
losses, the level of non-interest income, including deposit and loan fees, gains
on sales of assets, operating expenses and income taxes.
Comparison of Financial Condition at December 31, 1998 and March 31, 1998
Total assets at December 31, 1998 were $344.1 million, compared to $295.3
million at March 31, 1998, an increase of 16.5%. Loans receivable increased
$58.4 million, or 26.0%, primarily in multi-family residential and commercial
real estate loans and to a lesser extent an increase in 1-4 family residential
mortgages, which were originated and purchased. The increase in loans was funded
from a net reduction of $17.4 million, or 30.6%, in short-term investments and
investment securities, an increase in deposits of $5.4 million, or 2.6%, and an
increase of $44.5 million, or 222.3%, in Federal Home Loan Bank borrowings.
Total equity was $59.4 million, or 17.27% of total assets at December 31,
1998, a net decrease of $4.2 million, or 6.52%, from the $63.6 million, or
21.53% of total assets at March 31, 1998. The net decrease was primarily the
result of net income for the period and the Company completing the purchase of
$2.3 million of its common stock for the 1998 Stock Based Incentive Plan, and
the purchase of $3.1 million of its common stock to be held as treasury stock.
The Company's book value per share at December 31, 1998 was $26.74.
Page 6
<PAGE>
Investments
Short-term investments of $12.0 million at December 31, 1998, consisted of
overnight deposits in the Federal Home Loan Bank of Boston and the Bank
Investment Fund, a decrease of $34.0 million, or 73.9%, from the $46.0 million
at March 31, 1998. Investment securities increased $16.6 million, or 153.5%,
primarily in short term agencies, mortgage-backed securities and common and
trust preferred equities. The net decrease in total investments of $17.4 million
was used to fund loan growth.
As a result of the volatility of the financial markets during the period,
and the corresponding impact on the market value of the investments classified
as available-for-sale, a $228,000 net unrealized gain was recognized as an
increase to equity at December 31, 1998, compared to a net unrealized gain of
$666,000 at March 31, 1998.
The tables below show the investment securities portfolios for the periods
presented:
The amortized cost and estimated market values of investments
available-for-sale were:
<TABLE>
<CAPTION>
December 31, 1998 March 31, 1998
------------------------ ------------------------
Estimated Estimated
Amortized market Amortized market
cost value cost value
--------- --------- --------- ---------
(In thousands)
<S> <C> <C> <C> <C>
Investment securities
Marketable equity securities $ 9,451 $ 9,924 $ 5,391 $ 6,523
Mortgage-backed securities 5,857 5,864 -- --
Trust preferred equity securities 2,507 2,526 -- --
Corporate bonds and notes 1,249 1,226 -- --
Preferred stocks 1,500 1,506 -- --
Government agency securities 5,000 5,017 -- --
------- ------- ------- -------
$25,564 $26,063 $ 5,391 $ 6,523
======= ======= ======= =======
</TABLE>
The amortized cost and estimated market values of investments
held-to-maturity were:
<TABLE>
<CAPTION>
December 31, 1998 March 31, 1998
------------------------ ------------------------
Estimated Estimated
Amortized market Amortized market
cost value cost value
--------- --------- --------- ---------
(In thousands)
<S> <C> <C> <C> <C>
Investment securities
Government agency securities $ -- $ -- $2,001 $1,999
Mortgage-backed securities 1,299 1,298 2,271 2,275
------ ------ ------ ------
$1,299 $1,298 $4,272 $4,274
====== ====== ====== ======
</TABLE>
Page 7
<PAGE>
Loans
During the first nine months of the fiscal year, loans receivable increased
by $58.4 million, or 26.07%, as detailed below:
<TABLE>
<CAPTION>
December 31, % of total March 31, % of total
1998 loans 1998 loans
---- ----- ---- -----
(Dollars in thousands)
<S> <C> <C> <C> <C>
Mortgage loans:
Residential 1 - 4 family $172,818 60.35% $157,240 68.99%
Equity lines 5,029 1.76 4,028 1.77
Residential multi-family 37,871 13.22 22,411 9.83
Commercial real estate 60,219 21.03 35,468 15.56
Construction and development 5,615 1.96 5,287 2.32
------- ------ ------- ------
Total mortgage loans 281,552 98.32 224,434 98.47
Commercial loans 445 0.16 43 0.02
Other loans 4,371 1.52 3,434 1.51
------- ------ ------- ------
Total loans 286,368 100.00% 227,911 100.00%
====== ======
Deduct:
Allowance for loan losses 2,833 2,513
Deferred loan fees 235 470
-------- --------
Net loans receivable $283,300 $224,928
======== ========
</TABLE>
The Banks' primary lending focus is real estate lending. At December 31,
1998, residential, commercial real estate and construction and development loans
represented 98.3% of total loans, compared to 98.5% at March 31, 1998.
At December 31, 1998 loans serviced for investors was $20.3 million
compared to $15.6 million at March 31, 1998.
Asset Quality
At December 31, 1998 non-performing assets totaled $1.9 million, a decrease
of $381,000, or 16.7%, from $2.3 million at March 31, 1998. Non-performing
assets consist of all loans that are delinquent 90 days or more. The Bank had no
other real estate owned at December 31, 1998 or March 31, 1998. At December 31,
1998, non-performing assets represented 0.55% of total assets and 0.66% of loans
receivable, compared to 0.77% and 1.00%, respectively, at March 31, 1998. The
decrease in non-performing assets was primarily in one-to-four family and
multi-family residential mortgages as the result of the payoff of certain loans.
Page 8
<PAGE>
The composition of non-performing assets, which consist solely of
non-performing loans for the periods presented was:
December 31, March 31,
1998 1997 1998
------------------ ----------
(Dollars in thousands)
Non-accrual loans:
One-to-four-family $ 862 $1,258 $1,258
Multi-family 280 -- 254
Commercial real estate 742 735 739
Construction and development -- -- --
Equity lines -- -- --
Other 14 15 28
------ ------ ------
$1,898 $2,008 $2,279
====== ====== ======
Non-performing assets as a percentage of:
Loans receivable 0.66% 0.89% 1.00%
Total assets 0.55 0.80 0.77
The following represents the activity in the allowance for loan losses for
the nine months ended December 31, 1998:
(In thousands)
Balance at March 31, 1998 $ 2,513
Provision for loan losses 410
Losses charged to allowance (90)
Recoveries --
-------
Balance at December 31, 1998 $ 2,833
=======
The Bank continually reviews its delinquency position, underwriting and
appraisal procedures, charge-off experience and current real estate market
conditions with respect to its entire loan portfolio. While management uses the
best information available in establishing the allowance, future adjustments may
be necessary if economic conditions differ from the assumptions used in making
the current evaluation.
Page 9
<PAGE>
Deposits and Borrowed Funds
Deposits increased slightly during the nine month period as detailed below:
<TABLE>
<CAPTION>
December 31, % of total March 31, % of total
1998 deposits 1998 deposits
------------ ---------- --------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Regular savings accounts $ 25,912 12.16% $ 32,216 15.51%
NOW accounts 24,413 11.45 22,989 11.06
Money market accounts 52,102 24.44 42,440 20.43
Non-interest bearing deposits 2,062 0.97 485 0.23
-------- ------ -------- ------
104,489 49.02 98,130 47.23
Term deposits 108,678 50.98 109,650 52.77
-------- ------ -------- ------
Total deposits $213,167 100.00% $207,780 100.00%
======== ====== ======== ======
</TABLE>
During the period, FHLB advances increased $44.5 million, or 222.3%, as the
Bank took advantage of attractive pricing to fund asset growth.
Comparison of Operating Results for the three months ended December 31, 1998 and
1997
Results of Operations
Consolidated net income for the three months ended December 31, 1998
totaled $547,000, or $0.24 per share, compared to $395,000 for the same period
last year. This represents an increase of 38.5% in earnings. Due to the recent
Conversion, the earnings per share numbers for the prior period are not
applicable. The increase in earnings was directly attributable to an increase in
net interest income after the loan loss provision offset by an increase in
operating expenses. The increase in net interest income was directly
attributable to the increased level of interest-earning assets funded by the
Conversion proceeds an increased level of borrowed funds, and an increase in
deposits.
Interest Income
Interest income for the three months ended December 31, 1998 increased $1.2
million, or 24.8%, to $6.1 million, compared to $4.8 million for the same period
last year. The increase in interest income was primarily due to an increase in
the average balance of interest-earning assets, partially offset by a decrease
in the yield on interest-earning assets. The average balance of interest-earning
assets increased from $236.6 million for the quarter ended December 31, 1997 to
$316.3 million for the quarter ended December 31, 1998, an increase of $79.7
million, or 33.7%. The increase in the average balance of interest-earning
assets was primarily a net result of an increase in the average balance of
short-term investments and investment securities of $15.5 million, or 97.2%, an
increase in loans, net, and mortgage-loans held for sale of $61.5 million or
28.2% and an increase in mortgage-backed and mortgage related securities of $2.7
million, or 100.0%. The yield on interest-earning assets decreased 57 basis
points to 7.65%.
Interest Expense
Interest expense for the three months ended December 31, 1998 increased
$169,000, or 6.5%, to $2,779,000, compared to $2,610,000 for the same period
last year. The increase in interest expense was the net result of a $29.7
million, or 13.1%, increase in the average balance of interest-bearing
liabilities which increased
Page 10
<PAGE>
from $226.3 million for the three months ended December 31, 1997 to $256.0
million for the three months ended December 31, 1998, offset by a decrease of 27
basis points in the cost of funds to 4.34%. The increase in the average balance
of interest-bearing liabilities was primarily a result of an increase in the
average balance of deposits of $4.9 million, or 2.4% and the average balance of
FHLB advances of $24.8 million, or 102.8%.
Net interest income
The table below shows the average balance sheet, the interest earned and
paid on interest-earning assets and interest-bearing liabilities and the
resulting net interest spread and margin for the periods presented.
<TABLE>
<CAPTION>
For the three months ended December 31, 1998 1997
-------------------------------- --------------------------------
Interest Interest
Average income/ Yield/ Average income/ Yield/
balance expense rate balance expense rate
-------- ------- ------ -------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Assets (Dollars in thousands)
Interest-earning assets:
Short-term investments $ 9,718 $ 102 4.20% $ 1,466 $ 20 5.46%
Investment securities 21,813 321 5.89 14,526 217 5.98
Mortgage-backed and mortgage
related securities 5,426 77 5.68 2,713 45 6.63
Loans and mortgage loans held-for-sale 279,309 5,551 7.95 217,863 4,565 8.38
-------- ------- -------- -------
Total interest-earning assets 316,266 6,051 7.65 236,568 4,847 8.22
------- -------
Non interest-earning assets 7,278 13,002
-------- --------
Total $323,544 $249,570
======== ========
Liabilities and Equity
Interest-bearing liabilities:
NOW accounts $ 22,451 76 1.35 $ 21,746 100 1.84
Regular savings accounts 26,664 137 2.06 28,519 176 2.47
Money market accounts 49,561 483 3.90 42,997 435 4.05
Certificate accounts 108,474 1,503 5.54 108,992 1,544 5.67
-------- ------- -------- -------
Total interest-bearing deposits 207,150 2,199 4.25 202,254 2,255 4.46
FHLB advances 48,830 580 4.75 24,074 355 5.90
-------- ------- -------- -------
Total interest-bearing liabilities 255,980 2,779 4.34 226,328 2,610 4.61
------- -------
Demand deposits 715 262
Other liabilities 4,878 2,798
Equity 61,971 20,182
-------- --------
Total $323,544 $249,570
======== ========
Net interest income $ 3,272 $ 2,237
======= =======
Interest rate spread 3.31% 3.60%
===== =====
Net interest margin 4.14% 3.91%
===== =====
</TABLE>
Page 11
<PAGE>
The increase of $1,035,000 in net interest income is analyzed as follows:
Quarters ended December 31,
1998 vs. 1997
------------------------------------------
Change due to Increase (Decrease)
------------------------------------------
Volume Rate Net
------- ------- -------
(In thousands)
Interest income:
Loans $ 1,206 $ (220) $ 986
Investments 230 (12) 218
------- ------- -------
Total 1,436 (232) 1,204
------- ------- -------
Interest expense:
Deposits 48 (104) (56)
Borrowings 284 (59) 225
------- ------- -------
Total 332 (163) 169
------- ------- -------
Net interest income $ 1,104 $ (69) $ 1,035
======= ======= =======
Provision for Loan Losses
The provision for loan losses totaled $260,000 for the quarter ended
December 31, 1998, compared to $30,000 for the same period last year. The
increased provision is directly related to the increase in the loan portfolio
for the period and reflects the risks associated with the Banks' primary lending
objective to increase the overall loan portfolio. The allowance for loan losses
is maintained at an amount management considers adequate to cover estimated
losses on loans receivable which are deemed probable and estimable based on
information currently known to management. While management believes the Bank's
allowance for loan losses is sufficient to cover losses inherent in its loan
portfolio at this time, no assurances can be given that the Bank's level of
allowance for loan losses will be sufficient to cover future losses incurred by
the Bank, or that future adjustments to the allowance for loan losses will not
be necessary if economic and other conditions differ substantially from the
economic and other conditions analyzed by management to determine the current
level of the allowance for loan losses.
Non-interest income
Total non-interest income increased $14,000, or 19.2%, to $87,000. Other
fees and charges decreased $2,000 from fees on transaction accounts. Gain on
sale of loans increased $16,000, due to the increased level of sales over the
same period last year.
Non-interest expense
Salaries and benefits increased $407,000, or 39.1%, the result of $340,000
in compensation expense associated with the Company's stock-based benefit plans,
and a general increase in salaries and benefits due to the increase in the
number of employees over the same period last fiscal year. Occupancy and
equipment expenses increased $24,000, or 10.5%, primarily a result of the
increased level of depreciation on building and leasehold improvements. Other
expenses increased $111,000, or 54.2%, primarily as a result of an increase in
general expenses associated with the development and implementation of certain
products and programs as part of the strategic planning for the future.
Page 12
<PAGE>
Income Taxes
Income taxes for the three months ended December 31, 1998 were $378,000 on
pretax income of $925,000, for an effective rate of 40.86%, compared to $284,000
on pretax income of $679,000, for an effective rate of 41.83% for the same
period last year. The effective tax rate is different than the prior year due to
the non-deductibility of certain expenses and the reduction in the state tax
rate for banks.
Comparison of Operating Results for the nine months ended December 31, 1998 and
1997
Results of Operations
Consolidated net income for the nine months ended December 31, 1998 totaled
$1,667,000, or $0.71 per share, compared to $1,093,000 for the same period last
year. This represents an increase of 52.52% in earnings. Due to the recent
Conversion, the earnings per share numbers for the prior period are not
applicable. The increase in earnings was directly attributable to an increase in
net interest income after the loan loss provision offset by an increase in
operating expenses. The increase in net interest income is directly attributable
to the increased level of interest-earning assets funded by the Conversion
proceeds and an increased level of deposits and borrowed funds.
Interest Income
Interest income for the nine months ended December 31, 1998 increased $2.9
or 20.5%, to $17.0 million, compared to $14.1 million for the same period last
year. The increase in interest income was primarily due to an increase in the
average balance of interest-earning assets, partially offset by a decrease in
the yield on interest-earning assets. The average balance of interest-earning
assets increased from $231.2 million for the nine months ended December 31, 1997
to $291.5 million for the nine months ended December 31, 1998, an increase of
$60.3 million, or 26.1%. The increase in the average balance of interest-earning
assets was primarily the net result of an increase in the average balance of
short-term investments and investment securities of $23.8 million, or 152.7%, an
increase in loans, net and mortgage loans held for sale, of $36.3 million or
17.1% and an increase in mortgage-backed and mortgage related securities of $0.2
million, or 6.5%. The yield on interest-earning assets decreased 37 basis points
to 7.78%.
Interest Expense
Interest expense for the nine months ended December 31, 1998 increased
$211,000, or 2.8%, to $7.7 million, compared to $7.5 million for the same period
last year. The increase in interest expense was primarily due to a $17.1
million, or 7.9%, increase in the average balance of interest-bearing
liabilities which increased from $216.3 million for the nine months ended
December 31, 1997 to $233.4 million for the nine months ended December 31, 1998,
offset by a decrease of 20 basis points in the cost of interest-bearing
liabilities to 4.42%. The increase in the average balance of interest-bearing
liabilities was primarily a result of an increase in the average balance of
deposits of $9.0 million, or 4.6% and an increase in the average balance of FHLB
advances of $8.2 million, or 40.1%.
Page 13
<PAGE>
Net interest income
The table below shows the average balance sheet, the interest earned and
paid on interest-earning assets and interest-bearing liabilities and the
resulting net interest spread and margin for the periods presented.
<TABLE>
<CAPTION>
For the nine months ended December 31, 1998 1997
-------------------------------- --------------------------------
Interest Interest
Average income/ Yield/ Average income/ Yield/
balance expense rate balance expense rate
-------- ------- ------ -------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
(Dollars in thousands)
Assets
Interest-earning assets:
Short-term investments $ 19,514 $ 806 5.51% $ 1,394 $ 57 5.45%
Investment securities 19,885 860 5.77 14,199 669 6.28
Mortgage-backed and mortgage related
securities 3,100 143 6.15 2,912 146 6.68
Loans, net and mortgage loan held-
for-sale 248,997 15,201 8.14 212,662 13,250 8.31
-------- ------- -------- -------
Total interest-earning assets 291,496 17,010 7.78 231,167 14,122 8.15
------- -------
Non interest-earning assets 10,292 7,549
-------- --------
Total $301,788 $238,716
======== ========
Liabilities and Equity
Interest-bearing liabilities:
NOW accounts $ 21,848 264 1.61 $ 20,839 291 1.85
Regular savings accounts 27,481 477 2.31 28,902 545 2.50
Money market accounts 44,993 1,404 4.16 40,329 1,238 4.07
Certificate accounts 110,514 4,544 5.48 105,805 4,547 5.70
-------- ------- -------- -------
Total interest-bearing deposits 204,836 6,689 4.35 195,875 6,621 4.49
FHLB advances 28,555 1,042 4.87 20,382 899 5.77
-------- ------- -------- -------
Total interest-bearing liabilities 233,391 7,731 4.42 216,257 7,520 4.62
------- -------
Demand deposits 608 147
Other liabilities 4,495 2,603
Equity 63,294 19,709
-------- --------
Total $301,788 $238,716
======== ========
Net interest income $ 9,279 $ 6,602
======= =======
Interest rate spread 3.36% 3.53%
===== =====
Net interest margin 4.15% 3.83%
===== =====
</TABLE>
Page 14
<PAGE>
The increase of $2,677,000 in net interest income is analyzed as follows:
Nine months ended December 31,
1998 vs. 1997
---------------------------------------
Change due to Increase (Decrease)
---------------------------------------
Volume Rate Net
------ ------ ------
(In thousands)
Interest income:
Loans $2,212 $ (261) $1,951
Investment securities 1,001 (64) 937
------ ------ ------
Total 3,213 (325) 2,888
------ ------ ------
Interest expense:
Deposits 106 (38) 68
Borrowings 251 (108) 143
------ ------ ------
Total 357 (146) 211
------ ------ ------
Net interest income $2,856 $ (179) $2,677
====== ====== ======
Provision for Loan Losses
The provision for loan losses totaled $410,000 for the nine months ended
December 31, 1998, compared to $474,000 for the same period last year. While the
asset quality of the Company has improved since March 31, 1998, the addition to
loan loss is directly attributable to the increase in the total loan portfolio
during the current fiscal year. The level of the provision for loan losses for
the previous fiscal year was attributable to the classification of certain
purchased loans that had been acquired in the merger with another financial
institution. These loans were identified and classified accordingly, as a result
an increase in the level of reserves was recognized in conjunction with the
classification of the loans.
Non-interest income
Total non-interest income totaled $248,000 compared to $232,000 for the
same period last year. Other fees and charges decreased $5,000 from the reduced
level of fees collected on transaction accounts. Gain on sale of loans increased
$40,000 due to the increased level of loans sold over the same period last year.
During the nine months ended December 31, 1997, the company recognized income of
$19,000 from the sale of other real estate owned; there was no such income for
the same period this year.
Non-interest expense
Salaries and benefits increased $1,021,000, or 37.0%, the result of
$609,000 in compensation expense associated with the Company's stock-based
benefit plans, and a general increase in salaries and benefits due to the
increase in the number of employees over the same period last fiscal year.
Occupancy and equipment expenses increased $81,000, or 12.1%, primarily a result
of the increased level of depreciation on building and leasehold improvements.
Other expenses increased $598,000, or 88.3%, primarily as a result of $305,000
in non-recurring expenses associated with the implementation of certain
developmental strategies as part of the strategic planning for the future,
approximately $35,000 associated with software upgrades for year 2000
compliance, and an increase in other general expenses.
Page 15
<PAGE>
Income Taxes
Income taxes for the nine months ended December 31, 1998 were $1,203,000 on
pretax income of $2,870,000, for an effective rate of 41.92%, compared to
$775,000 on pretax income of $1,868,000, for an effective rate of 41.49% for the
same period last year. The effective tax rate is different than the prior year
due to the non-deductibility of certain expenses and the reduction in the state
tax rate for banks.
Capital Adequacy
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 financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the Company and the Bank must meet specific capital guidelines that involve
quantitative measures of their assets, liabilities and certain off-balance-sheet
items as calculated under regulatory accounting practices. Their capital amounts
and classification are also subject to qualitative judgments by the regulators
about components, risk weighting and other factors.
At December 31, 1998 the Company's capital ratio was 17.27% of total
assets. The Bank at December 31, 1998 had total capital of 12.34% and risk based
capital of 21.40% (unaudited), as compared to 13.54% and 24.74% (unaudited) at
September 30, 1998.
The FDIC sets minimum leverage ratios for each insured institution
depending upon its CAMELS rating. Banks with the highest ratings are required to
carry a 3.0% leverage ratio, with less highly rated institutions required to
have minimum ratios at least 1.0% to 2.0% greater. Additionally, the FDIC has
risk-based capital regulations. Under these requirements, banks must have a
minimum risk-based capital rate of 8.00%.
At December 31, 1998 the Company and the Bank met all the capital adequacy
requirements to which they are subject. As of December 31, 1998, the most recent
notification from the Office of Thrift Supervision categorized the Bank as "well
capitalized" under the regulatory framework for prompt corrective action.
Asset/Liability Management
The principal objective of the Bank's interest rate risk management
function is to evaluate the interest rate risk included in certain balance sheet
accounts, determine the appropriate level of risk given the Bank's business
strategy, operating environment, capital and liquidity requirements and
performance objectives and manage the risk consistent with the Board of
Directors' approved guidelines. Through such management, the Bank seeks to
reduce the vulnerability of its operations to changes in interest rates.
The Bank monitors its interest rate risk as such risk relates to its
operating strategies. The Bank's Board of Directors has established an
Asset/Liability Committee, responsible for reviewing its asset/liability
policies and interest rate risk position, which meets on a monthly basis and
reports trends and interest rate risk position to the Board of Directors on a
quarterly basis. The extent of the movement of interest rates is an uncertainty
that could have a negative impact on the earnings of the Bank.
Page 16
<PAGE>
In recent years, the Bank has primarily utilized the following strategies
to manage interest rate risk: (i) emphasizing the origination and purchase of
adjustable-rate loans; (ii) investing primarily in short-term U.S. Government
securities or mortgage-backed and mortgage-related securities with shorter
estimated maturities; (iii) utilizing FHLB advances to better structure the
maturities of its interest rate sensitive liabilities; and (iv) to a
substantially lesser extent, selling in the secondary market longer-term
fixed-rate mortgage loans originated while generally retaining the servicing
rights on such loans.
As part of its interest rate risk analysis, the Bank uses an interest rate
sensitivity model which generates estimates of the change in the Bank's net
portfolio value ("NPV") over a range of interest rate scenarios and which is
prepared by the OTS on a quarterly basis. NPV is the present value of expected
cash flows from assets, liabilities and off-balance sheet contracts. The NPV
ratio, under any interest rate scenario, is defined as the NPV in that scenario
divided by the market value of assets in the same scenario. The OTS produces
such analysis using its own model, based upon data submitted on the Bank's
quarterly Thrift Financial Reports, including estimated loan prepayment rates,
reinvestment rates and deposit decay rates. The following table sets forth the
Bank's NPV as of September 30, 1998 (the latest NPV analysis prepared by the
OTS), as calculated by the OTS.
<TABLE>
<CAPTION>
Change in
Interest Rates
in Net Portfolio Value NPV as % of Portfolio
Basis Points Value of Assets
(Rate Shock)
NPV
Amount $ Change % Change Ratio Change(1)
--------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
400 $30,374 $(8,385) (22)% 10.70% (241)
300 33,275 (5,484) (14) 11.57 (154)
200 35,737 (3,022) (8) 12.29 (82)
100 37,467 (1,291) (3) 12.77 (34)
Static 38,759 -- -- 13.11 --
(100) 39,893 1,135 3 13.40 29
(200) 41,505 2,746 7 13.82 71
(300) 44,062 5,303 14 14.51 140
(400) 46,392 8,173 21 15.26 215
</TABLE>
(1) Expressed in basis points.
Liquidity
The Bank's primary sources of funds are deposits, principal and interest
payments on loans, mortgage-backed and investment securities and FHLB advances.
While maturities and scheduled amortization of loans are predictable sources of
funds, deposit flows and mortgage prepayments are greatly influenced by general
interest rates, economic conditions and competition. The Bank has continued to
maintain the required levels of liquid assets as defined by OTS regulations.
This requirement of the OTS, which may be varied at the direction of the OTS
depending upon economic conditions and deposit flows, is based upon a percentage
of deposits and short-term borrowings. The Bank's currently required liquidity
ratio is 4%. At December 31, 1998 the Bank's liquidity ratio was 9.72%.
Management's strategy is to maintain liquidity as close as possible to the
minimum regulatory requirement and to invest any excess liquidity in higher
yielding interest-earning assets. The Bank manages its liquidity position and
Page 17
<PAGE>
demands for funding primarily by investing excess funds in short-term
investments and utilizing FHLB advances in periods when the Bank's demands for
liquidity exceed funding from deposit inflows.
The Bank's most liquid assets are cash and cash equivalents and securities.
The levels of these assets are dependent on the Bank's operating, financing,
lending and investing activities during any given period. At December 31, 1998,
cash and cash equivalents and short-term investments totaled $18.0 million, or
5.2% of total assets.
The Bank has other sources of liquidity if a need for additional funds
arises, including FHLB advances. At December 31, 1998, the Bank had $64.5
million in advances outstanding from the FHLB, and at December 31, 1998, had an
additional overall borrowing capacity from the FHLB of $92.8 million. Depending
on market conditions, the pricing of deposit products and FHLB advances, the
Bank may continue to rely on FHLB borrowings to fund asset growth.
Year 2000 Compliance
As the year 2000 approaches, an important business issue has emerged
regarding how existing application software programs and operating systems can
accommodate this date value. In addressing the year 2000 the Company has broken
down the process into four steps: assessment, correction/replacement, testing
and implementation.
The Company has completed the assessment phase. During this phase the
Company identified all potential programs and applications that could be
effected which were date sensitive. The Company has also included the various
utility companies that it uses for assessment as to their readiness for year
2000. This assessment included all hardware and software applications as well as
vendor identification. The various applications identified were then prioritized
in consideration of their overall importance of use to the Company.
Correspondence was sent to all vendors inquiring into their applications year
2000 compliance. For a number of applications the correction, testing and vendor
certification and implementation has been completed.
The most critical applications to the Company are the software to process
all loan and deposit accounts and transactions, the internal accounting system
and utility companies for the various facility locations. The Bank utilizes a
third-party vendor for processing the primary banking applications and does not
have any proprietary or self developed software. In addition, the Bank also uses
third-party vendor application software for all ancillary computer applications,
specifically general ledger and accounting systems. The third-party vendor for
the Bank's banking applications is in the process of modifying and upgrading its
computer applications to ensure Year 2000 compliance. The Bank has completed the
second phase of testing. At the current time it is anticipated that the system
will be compliant and implemented by June 30, 1999. During the quarter the
Company completed the conversion to a new accounting software application which
is year 2000 compliant.
For all other applications the Company is continuing to ensure compliance
by continuing to follow up with vendors for year 2000 certification. At this
point in time the Company remains in the correction/replacement, testing and
implementation phases of the process.
Page 18
<PAGE>
During the quarter the Company also completed the process of creating a
preliminary contingency plan to deal with any unforeseen events that could occur
which would have a negative impact on the day to day operations of the Company.
The plan is expected to be finalized by March 31, 1999. The plan will address
how to deal with the lack of utilities and support systems.
The Company has expensed approximately $35,000 to replace and upgrade
existing software for year 2000 compliance. In addition the company purchased a
new accounting system which is year 2000 compliant; the cost of this system was
approximately $75,000 and will be depreciated over a period of five years.
Additional expenses will be incurred over the next year to meet year 2000
compliance, however, at this time these expenses are not expected to be material
in nature.
In the event that the Bank's third party vendor or its significant
suppliers or customers do not successfully and timely achieve year 2000
compliance, the Bank's business or operations could be adversely affected.
However, management believes that the Bank's own internal system, networks and
resources would allow the Bank to effectively operate and service its customers
in the event its significant vendors do not achieve satisfactory year 2000
compliance. In addition, if significant vendors failed to meet year 2000
operating requirements, the Bank intends to engage alternative vendors and
suppliers. While the Bank cannot estimate the costs and expenses associated with
hiring new vendors and suppliers, management believes that such costs would not
have a material impact on the Bank's earnings or results of operations.
Statements contained in this document, which are not historical facts, are
forward-looking statements as that term is defined in the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements are subject to
risk and uncertainties, which could cause actual results to differ materially
from those currently anticipated due to a number of factors, which include, but
are not limited to, factors discussed in documents filed by the Company with the
Securities and Exchange Commission from time to time.
Page 19
<PAGE>
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
Neither the Company nor any of its subsidiaries is party to any pending
legal proceedings which are material other than routine litigation incidental to
their business activities.
Item 2 - Changes in Securities and Use of Proceeds
Not applicable.
Item 3 - Defaults Upon Senior Securities
Not applicable.
Item 4 - Submission of Matters to a Vote of Security Holders
Not applicable
Item 5 - Other Information
Not applicable.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Certificate of Incorporation of Bay State Bancorp, Inc. *
3.2 Amended and Restated Bylaws of Bay State Bancorp, Inc.
(filed herewith)
4.0 Stock Certificate of Bay State Bancorp, Inc. *
11.0 Computation of per share earnings
27.0 Financial data schedule (filed herewith)
* Incorporated herein by reference from the exhibits to Form SB-2
registration as amended, Registration No. 333-40115
(b) Reports on Form 8-K
(i) None
Page 20
<PAGE>
SIGNATURES
Under 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.
Bay State Bancorp, Inc.
February 10, 1999 \s\ John F. Murphy
- --------------------- ---------------------------------------------
Date John F. Murphy
Chairman, President, and
Chief Executive Officer
(Principal Executive Officer)
February 10, 1999 \s\ Michael O. Gilles
- --------------------- ---------------------------------------------
Date Michael O. Gilles
Senior Vice President and
Chief Financial Officer
(Principal Accounting and Financial Officer)
Page 21
BAY STATE BANCORP, INC.
AMENDED AND RESTATED BYLAWS
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, which date
shall be within thirteen (13) months subsequent to the later of the date of
incorporation or the last annual meeting of stockholders.
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 a majority of all of the
shares of the stock entitled to vote at the meeting, present in person or by
proxy (after giving effect to the provisions of Article FOURTH of the
Corporation's Certificate of Incorporation), 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 (after giving effect to the provisions of Article FOURTH of
the Corporation's Certificate of Incorporation) shall constitute a quorum
entitled to take action with respect to that vote on that matter.
<PAGE>
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 in person or by proxy constituting a quorum, then except as otherwise
required by law, those present in person or by proxy 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 Chairman of the Board 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 procedures at the meeting, including such regulation of the
manner of voting and the conduct of discussion as seem to him or her in order.
The date and time of the opening and closing of the polls for each matter upon
which the stockholders will vote at the meeting shall be announced at the
meeting.
(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 business must
relate to a proper subject matter for stockholder action and 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
ninety (90) days prior to the date of the annual meeting; provided, however,
that in the event that less than one hundred (100) days' notice or prior public
disclosure of the date of the meeting is given or made to stockholders, notice
by the stockholder to be timely must be received not later than the close of
business on the 10th day following the day on which such notice of the date of
the annual meeting was mailed or such public disclosure was 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 proposing 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
Bylaws 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 should so determine, he shall so
declare to the meeting and any such business so determined to be not properly
brought before the meeting shall not be transacted.
<PAGE>
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 Bylaws 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, 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 ninety (90) days prior to the date of the meeting; provided, however, that
in the event that less than one hundred (100) days' notice or prior disclosure
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 10th day following the day on which such notice of the date of
the meeting was mailed or such public disclosure was made. Such stockholder's
notice shall set forth: (i) 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 (ii) as to the stockholder giving
the notice (x) the name and address, as they appear on the Corporation's books,
of such stockholder and (y) 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 shall so
determine, he or she shall so declare to the meeting and the defective
nomination shall be disregarded.
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 filed in
accordance with the procedure established for the meeting. Any facsimile
telecommunication or other reliable reproduction of the writing or transmission
created pursuant to this paragraph may be substituted or used in lieu of the
original writing or transmission for any and all purposes for which the original
writing or transmission could be used, provided that such copy, facsimile
telecommunication or other reproduction shall be a complete reproduction of the
entire original writing or transmission.
All voting, including on the election of Directors but excepting where
otherwise required by law or by the governing documents of the Corporation, may
be made by a voice vote; provided, however, that upon demand therefor 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 procedures established for the meeting. The Corporation shall, in
advance of any meeting of stockholders, appoint one or more inspectors to act at
the meeting and make a written report thereof. The Corporation may designate one
or more persons as alternate inspectors to replace
<PAGE>
any inspector who fails to act. If no inspector or alternate is able to act at a
meeting of stockholders, the person presiding at the meeting shall appoint one
or more inspectors to act at the meeting. Each inspector, before entering upon
the discharge of his duties, shall take and sign an oath faithfully to execute
the duties of inspector with strict impartiality and according to the best of
his ability.
All elections shall be determined by a plurality of the votes cast, and
except as otherwise required by law or the Certificate of Incorporation, all
other matters shall be determined by a majority of the votes cast.
Section 8. Stock List.
A complete list of stockholders entitled to vote at any meeting of
stockholders, arranged in alphabetical order for each class of stock and showing
the address of each such stockholder and the number of shares registered in his
or her name, shall be open to the examination of any such stockholder, for any
purpose germane to the meeting, during ordinary business hours for a period of
at least ten (10) days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or if not so specified, at the place where the meeting is to be
held.
The stock list shall also be kept at the place of the meeting during the
whole time thereof and shall be open to the examination of any such stockholder
who is present. This list shall presumptively determine the identity of the
stockholders entitled to vote at the meeting and the number of shares held by
each of them.
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 an annual or special meeting
of stockholders of the Corporation and may not be effected by any consent in
writing by such stockholders.
ARTICLE II - BOARD OF DIRECTORS
Section 1. General Powers, Number, Term of Office and Limitations.
The business and affairs of the Corporation shall be under the direction of
its Board of Directors. The number of Directors who shall constitute the Whole
Board shall be such number as the Board of Directors shall from time to time
have designated, except that in the absence of such designation shall be seven.
The Board of Directors shall annually elect a Chairman of the Board from among
its members who shall, when present, 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, with respect to the time
for which they severally hold office, into three classes, with the term of
office of the first class to expire at the first annual meeting of stockholders,
the term of office of the second class to expire at the annual meeting of
stockholders one year thereafter and the term of office of the third class to
expire at 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, Directors elected to
succeed those Directors whose terms then 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.
<PAGE>
Section 2. Vacancies and Newly Created Directorships.
Subject to the rights of the holders of any class or series of Preferred
Stock, and unless the Board of Directors otherwise determines, 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.
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), by the
Chairman of the Board or the President or, in the event that the Chairman of the
Board or President are incapacitated or otherwise unable to call such meeting,
by the Secretary, 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 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 Whole 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
<PAGE>
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;
(8) To adopt from time to time regulations, not inconsistent with
these Bylaws, for the management of the Corporation's business and affairs;
and
(9) To fix the Compensation of officers and employees of the
Corporation and its subsidiaries as it may determine.
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.
<PAGE>
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 these 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 designates 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. The quorum requirements for each such
committee shall be a majority of the members of such committee unless otherwise
determined by the Board of Directors by a majority vote of the Board of
Directors which such quorum determined by a majority of the Board may be
one-third of such members and all matters considered by such committees 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 not less than three (3) members. The Nominating Committee shall
have authority: (a) to review any nominations for election to the Board of
Directors made by a stockholder of the Corporation pursuant to Section 6(c)(ii)
of Article I of these Bylaws in order to determine compliance with such Bylaw;
and (b) to recommend to the Whole Board nominees for election to the Board of
Directors to replace those Directors whose terms expire at the annual meeting of
stockholders next ensuing.
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 Chairman of the Board, Chief Executive
Officer, a President, one or more Vice Presidents, a Secretary and a Treasurer
and from time to time may choose such other officers as it may deem proper. The
Chairman of the Board shall be chosen from among the Directors. Any number of
offices may be held by the same person.
(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.
<PAGE>
(c) All Officers chosen by the Board of Directors shall 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. Chairman of the Board of Directors.
The Chairman of the Board, subject to the provisions of these Bylaws and to
the direction of the Board of Directors, when present shall preside at all
meetings of the stockholders of the Corporation. The Chairman of the Board shall
perform such duties designated to him by the Board of Directors and which are
delegated to him or her by the Board of Directors by resolution of the Board of
Directors.
Section 3. President and Chief Executive Officer.
The President and Chief Executive Officer shall have general responsibility
for the management and control of the business and affairs of the Corporation
and shall perform all duties and have all powers which are commonly incident to
the office of President and Chief Executive Officer or which are delegated to
him or her by the Board of Directors. Subject to the direction of the Board of
Directors, the President and Chief Executive Officer shall have power to sign
all stock certificates, contracts and other instruments of the Corporation which
are authorized and shall have general supervision of all of the other Officers
(other than the Chairman of the Board), employees and agents of the Corporation.
Section 4. Vice President.
The Vice President or Vice Presidents shall perform the duties of the
President in his absence or during his inability 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 by the Board of Directors, the Chairman of the Board or the
President. A Vice President or Vice Presidents may be designated as Executive
Vice President or Senior Vice President.
Section 5. Secretary.
The Secretary or 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 office 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.
Subject to the direction of the Board of Directors, the Secretary shall have the
power to sign all stock certificates.
Section 6. Treasurer.
The Treasurer shall be the Comptroller of the Corporation and shall have
the responsibility for maintaining the financial records of the Corporation. He
or she shall make such disbursements of the funds of the Corporation as are
authorized and shall render from time to time an account of all such
transactions and of the financial condition of the Corporation. The Treasurer
shall also perform such other duties as the Board of Directors may from time to
time prescribe. Subject to the direction of the Board of Directors, the
Treasurer shall have the power to sign all stock certificates.
<PAGE>
Section 7. Assistant Secretaries and Other Officers.
The Board of Directors may appoint one or more Assistant Secretaries and
such other Officers who shall have such powers and shall perform such duties as
are provided in these Bylaws 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.
<PAGE>
ARTICLE V - STOCK
Section 1. Certificates of Stock.
Each stockholder shall be entitled to a certificate signed by, or in the
name of the Corporation by, the Chairman of the Board or the President, and by
the Secretary or an Assistant Secretary, or any Treasurer or 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.
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 Bylaws,
an outstanding certificate for the number of shares involved shall be
surrendered for cancellation before a new certificate is issued therefor.
Section 3. Record Date.
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 next day 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 or 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.
<PAGE>
Section 4. Lost, Stolen or Destroyed Certificates.
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.
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.
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 mails,
postage paid, or by sending such notice by prepaid telegram or mailgram or other
courier. 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 mails or by telegram or
mailgram or other courier, shall be the time of the giving of the notice.
Section 2. Waivers.
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.
In addition to the provisions for use of facsimile signatures elsewhere
specifically authorized in these Bylaws, 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.
<PAGE>
Section 2. Corporate Seal.
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 an
assistant to the 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 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.
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 Bylaws 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 Board of Directors may amend, alter or repeal these Bylaws at any
meeting of the Board, provided notice of the proposed change was given not less
than two (2) days prior to the meeting. The stockholders shall also have power
to amend, alter or repeal these Bylaws at any meeting of stockholders provided
notice of the proposed change was given in the notice of the meeting; provided,
however, that, notwithstanding any other provisions of the Bylaws or any
provision of law which might otherwise permit a lesser vote or no vote, but in
addition to any affirmative vote of the holders of any particular class or
series of the voting stock required by law, the Certificate of Incorporation,
any Preferred Stock Designation or these Bylaws, the affirmative votes of the
holders of at least 80% of the voting power of all the then-outstanding shares
of the Voting Stock, voting together as a single class, shall be required to
alter, amend or repeal any provisions of these Bylaws. The above Bylaws are
effective as of October 24, 1997, the date of incorporation of Bay State
Bancorp, Inc.
EXHIBIT 11
COMPUTATION OF PER SHARE EARNINGS
Three months ended
December 31,
-------------------------------
1998 1997
---------- -----------
Net Income $ 547,000 $ 395,000
========== ===========
Average shares outstanding 2,317,682 N/A
==========
Basic earnings per share $ 0.24 N/A
==========
Net Income
$ 547,000 $ 395,000
========== ===========
Average shares outstanding 2,317,682 N/A
Net effect of dilutive stock options 39,720 N/A
----------
Total shares outstanding 2,357,402 N/A
==========
Diluted earnings per share $ 0.23 N/A
==========
Nine months ended
December 31,
-------------------------------
1998 1997
---------- -----------
Net Income $1,667,000 $ 1,093,000
========== ===========
Average shares outstanding 2,340,982 N/A
==========
Basic earnings per share $ 0.71 N/A
Net Income ==========
$1,667,000 $ 1,093,000
========== ===========
Average shares outstanding 2,340,982 N/A
Net effect of dilutive stock options 13,240 N/A
----------
Total shares outstanding 2,354,222 N/A
==========
$ 0.71 N/A
==========
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF BAYSTATE BANCORP, INC. AT AND FOR THE NINE MONTHS ENDED
DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
</LEGEND>
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<PERIOD-START> APR-01-1998
<PERIOD-END> DEC-31-1998
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