UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
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 1-13793
NORTHEAST PENNSYLVANIA FINANCIAL CORP.
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 06-1504091
--------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
12 E. BROAD STREET, HAZLETON, PENNSYLVANIA 18201
-------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(570) 459-3700
-------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--------- ----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: The Registrant had
5,293,149 shares of Common Stock outstanding as of August 11, 2000.
<PAGE>
TABLE OF CONTENTS
Item
No.
---- Page
Number
PART I - CONSOLIDATED FINANCIAL INFORMATION
Item 1 CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Financial Condition at
June 30, 2000 (unaudited) and September 30, 1999.................... 1
Consolidated Statements of Operations for the Three Months Ended
June 30, 2000 and 1999 (unaudited).................................. 2
Consolidated Statement of Comprehensive Income (Loss) for the Three
Months Ended June 30, 2000 and 1999 (unaudited)..................... 3
Consolidated Statements of Operations for the Nine Months Ended
June 30, 2000 and 1999 (unaudited).................................. 4
Consolidated Statement of Comprehensive Income (Loss) for the Nine
Months Ended June 30, 2000 and 1999 (unaudited)..................... 5
Consolidated Statements of Changes in Equity for the Years Ended
September 30, 1999, 1998 and 1997 and the Nine Months Ended June 30,
2000 (unaudited)................................................... 6
Consolidated Statements of Cash Flows for the Nine Months Ended
June 30, 2000 and 1999 (unaudited).................................. 7
Notes to Consolidated Financial Statements (unaudited)............9-12
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations...........................................13
Item 3 Quantitative and Qualitative Disclosures about Market Risk..........20
Part II - OTHER INFORMATION
1 Legal Proceedings...................................................21
2 Changes in Securities and Use of Proceeds...........................21
3 Defaults Upon Senior Securities.....................................21
4 Submission of Matters to a Vote of Security Holders.................21
5 Other Information...................................................21
6 Exhibits and Reports on Form 8 - K...............................21-22
Signatures
<PAGE>
Northeast Pennsylvania Financial Corp.
Consolidated Statements of Financial Condition
June 30, 2000 (unaudited) and September 30, 1999
(in thousands)
<TABLE>
<S> <C> <C>
June 30, September 30,
2000 1999
---- ----
Assets (unaudited)
Cash and cash equivalents $ 8,177 $ 4,177
Securities available-for-sale 179,304 189,835
Securities held-to-maturity (estimated fair value of $27,795 at June
2000 and $28,315 at September 1999) 30,334 30,332
Loans (less allowance for loan losses $3,437 for June 2000 and
$2,924 for September 1999) 412,835 364,190
Accrued interest receivable 5,437 4,769
Assets acquired through foreclosure 316 98
Property and equipment, net 9,625 9,868
Other assets 12,501 8,956
-------- --------
Total assets $ 658,529 $ 612,225
======== ========
Liabilities and Equity
Deposits $354,803 $375,983
Federal Home Loan Bank advances 225,465 155,980
Other borrowings 1,252 524
Advances from borrowers for taxes and insurance 1,324 1,040
Accrued interest payable 1,998 1,317
Other liabilities 2,582 1,905
-------- --------
Total liabilities 587,424 536,749
-------- --------
Preferred stock ($.01 par value; 2,000,000 authorized shares; 0
shares issued) - -
Common stock ($.01 par value; 16,000,000 authorized shares;
6,427,350 shares issued) 64 64
Additional paid-in capital 62,158 62,119
Common stock acquired by stock benefit plans (6,424) (7,066)
Retained earnings - substantially restricted 33,121 30,818
Accumulated other comprehensive loss (5,286) (2,874)
Treasury stock, at cost (1,134,201 shares at June 2000 and
626,667 at September 1999) (12,528) (7,585)
-------- --------
Total equity 71,105 75,476
-------- --------
Total liabilities and equity $ 658,529 $ 612,225
========= =========
</TABLE>
1
<PAGE>
Northeast Pennsylvania Financial Corp.
Consolidated Statements of Operations
For the Three Months Ended June 30, 2000 and 1999 (unaudited)
(in thousands, except for share data)
<TABLE>
<S> <C> <C>
For the Three months ended
June 30,
Interest Income: 2000 1999
---- ----
(unaudited)
Loans $ 8,032 $ 6,291
Mortgage-related securities 923 897
Investment securities
Taxable 1,865 1,518
Non-taxable 781 848
----- -----
Total interest income 11,601 9,554
Interest Expense:
Deposits 3,751 3,320
Federal Home Loan Bank advances and other 3,235 1,666
----- -----
Total interest expense 6,986 4,986
Net interest income 4,615 4,568
Provision for loan losses 141 149
----- -----
Net interest income after provision for loan losses 4,474 4,419
Non-interest Income:
Service charges and other fees 338 223
Other income 126 123
Insurance premium income 83 61
Gain (loss) on sale of:
Real estate owned (53) (8)
Loans 1 246
Available-for-sale securities 18 31
Other - (5)
----- -----
Total non-interest income 513 671
Non-interest Expense:
Salaries and net employee benefits 1,940 1,898
Occupancy costs 474 426
Data processing 183 129
Professional fees 164 159
Federal Home Loan Bank service charges 166 133
Other 682 635
----- -----
Total non-interest expense 3,609 3,380
Income before income taxes 1,378 1,710
Income taxes 202 330
----- -----
Net income $ 1,176 $ 1,380
======= =======
Earnings per share - basic $ 0.25 $ 0.27
======= =======
Earnings per share - diluted $ 0.24 $ 0.25
======= =======
</TABLE>
2
<PAGE>
Northeast Pennsylvania Financial Corp.
Consolidated Statement of Comprehensive Income (Loss)
For the Three Months Ended June 30, 2000 and 1999 (unaudited)
(in thousands)
<TABLE>
<S> <C> <C>
For the Three Months Ended
June 30,
2000 1999
---- ----
(unaudited)
Net Income $ 1,176 $ 1,380
======= =======
Other comprehensive loss, net of tax Unrealized losses on securities:
Unrealized holding losses arising during the period $(2,424) $(3,263)
Less: Reclassification adjustment for gains included in net
income 12 20
------- -------
Other comprehensive loss (2,412) (3,243)
------- -------
Comprehensive loss $(1,236) $(1,863)
======= =======
</TABLE>
3
<PAGE>
Northeast Pennsylvania Financial Corp.
Consolidated Statements of Operations
For the Nine Months Ended June 30, 2000 and 1999 (unaudited)
(in thousands, except per share data)
<TABLE>
<S> <C> <C>
For the Nine Months Ended
June 30,
2000 1999
---- ----
(unaudited)
Interest Income:
Loans $ 22,899 $ 17,839
Mortgage-related securities 2,760 3,194
Investment securities:
Taxable 5,318 4,156
Non-Taxable 2,515 2,308
-------- --------
Total interest income 33,492 27,497
Interest Expense:
Deposits 11,209 9,931
Federal Home Loan Bank advances and other 8,237 4,336
-------- --------
Total interest expense 19,446 14,267
Net interest income 14,046 13,230
Provision for loan losses 585 343
-------- --------
Net interest income after provision for loan losses 13,461 12,887
Non-interest Income:
Service charges and other fees 925 635
Other Income 340 305
Insurance premium income 189 184
Gain (loss) on the sale of
Real estate owned (167) (39)
Loans 15 282
Available-for-sale securities 5 64
Other - (6)
-------- --------
Total non-interest income 1,307 1,425
Non-interest Expense:
Salaries and net employee benefits 5,818 5,461
Occupancy costs 1,448 1,246
Data processing 444 371
Professional fees 466 624
Federal Home Loan Bank and other service charges 491 324
Other 2,141 1,720
-------- --------
Total non-interest expense 10,808 9,746
Income before income taxes 3,960 4,566
Income taxes 540 973
-------- --------
Net income $ 3,420 $ 3,593
======= =======
Earnings per share - basic $ 0.70 $ 0.65
======= =======
Earnings per share - diluted $ 0.68 $ 0.62
======= =======
</TABLE>
4
<PAGE>
Northeast Pennsylvania Financial Corp.
Consolidated Statement of Comprehensive Income (Loss)
For the Nine Months Ended June 30, 2000 and 1999 (unaudited)
(in thousands)
<TABLE>
<S> <C> <C>
For the Nine Months Ended
June 30,
2000 1999
---- ----
(unaudited)
Net Income $ 3,420 $ 3,593
======= =======
Other comprehensive loss, net of tax Unrealized losses on securities:
Unrealized holding losses arising during the period $(2,415) $(4,399)
Less: Reclassification adjustment for gains included in net
income 3 42
------- -------
Other comprehensive loss (2,412) (4,357)
------- -------
Comprehensive loss $(1,008) $ (764)
======= =======
</TABLE>
5
<PAGE>
Northeast Pennsylvania Financial Corp.
Consolidated Statements of Changes in Equity
For the Three Years Ended September 30, 1999,1998 and 1997
and the Nine Months Ended June 30, 2000 (unaudited)
(in thousands)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Common Stock Accumulated
Additional Acquired by Other
Common Paid In stock benefit Retained Comprehensive Treasury Total
Stock Capital plans Earnings income(loss) Stock Equity
Balance September 30, 1996 $ - $ - $ - $ 25,874 $ 253 $ - $ 26,127
Net changes in gains (losses) on
securities available for sale, net of tax 1,030 1,030
Net Income 1,381 1,381
------- ------- ------- ------- ------- ------- -------
Balance September 30, 1997 $ - $ - $ - $ 27,255 $ 1,283 $ - $ 28,538
Issuance of Common Stock ($.01 par value;
16,000,000 authorized shares;
6,427,350 shares issued) 64 64
Additional paid-in Capital 61,959 61,959
Unearned Employee Stock Ownership
Plan (ESOP) shares (5,142) (5,142)
ESOP shares committed to be released 124 343 467
Net changes in gains (losses) on
securities available for sale, net of tax 1,595 1,595
Net loss (47) (47)
------- ------- ------- ------- ------- ------- -------
Balance September 30, 1998 $ 64 $ 62,083 $ (4,799) $ 27,208 $ 2,878 $ - $87,434
Unearned stock awards (3,312) (3,312)
ESOP shares committed to be released 77 557 634
Stock awards (41) 488 447
Net changes in gains (losses) on
securities available for sale, net of tax (5,752) (5,752)
Treasury stock at cost, (626,667 shares) (7,585) (7,585)
Cash dividend paid (955) (955)
Net income 4,565 4,565
------- ------- ------- ------- ------- ------- -------
Balance September 30, 1999 $ 64 $ 62,119 $ (7,066) $ 30,818 $(2,874) $(7,585) $75,476
ESOP shares committed to be released 77 200 277
Stock awards (38) 442 404
Net changes in losses on
securities available-for-sale, net of tax (2,412) (2,412)
Treasury stock at cost, (507,534 shares) (4,943) (4,943)
Cash dividend paid (1,117) (1,117)
Net income 3,420 3,420
------- ------- ------- ------- ------- ------- -------
Balance, June 30, 2000 $ 64 $ 62,158 $ (6,424) $ 33,121 $(5,286) $(12,528) $71,105
======= ======= ======= ======= ======= ======= =======
</TABLE>
6
<PAGE>
<TABLE>
Northeast Pennsylvania Financial Corp.
Consolidated Statement of Cash Flows
For the Nine Months Ended June 30, 2000 and 1999 (unaudited)
(in thousands)
<S> <C> <C>
For the Nine Months Ended
June 30,
2000 1999
---- ----
Operating Activities: (unaudited)
Net Income $ 3,420 $ 3,593
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for REO loss 64 12
Provision for loan losses 585 343
Depreciation 853 626
Deferred income tax provision 461 142
ESOP expense 277 455
Stock award expense 404 411
Amortization and (accretion) on:
Held-to-maturity securities (4) 32
Available-for-sale securities (1,521) 302
Amortization of deferred loan fees (122) (597)
(Gain) loss on sale of:
Assets acquired through foreclosure 167 39
Loans (15) (282)
Available-for-sale securities (5) (64)
Gain (loss) on disposal of property and equipment - 6
Changes in assets and liabilities:
Increase in accrued interest receivable (668) (467)
Increase in other assets (2,481) (2,137)
Increase in accrued interest payable 681 106
Decrease in accrued income taxes payable (776) (566)
Increase in other liabilities 1,453 1,542
----- -----
Net cash provided by operating activities 2,773 3,496
Investing Activities:
Net increase in loans (50,801) (66,023)
Proceeds from sale of:
Available-for-sale securities 32,058 19,401
Assets acquired through foreclosure 208 147
Loans 1,051 7,728
Proceeds from repayments of held-to-maturity securities 2 17,953
Proceeds from repayments of available-for-sale securities 6,952 48,984
Proceeds from disposal of fixed assets - 71
Purchase of:
Held-to-maturity securities - (14,545)
Available-for-sale securities (24,641) (72,562)
Office properties and equipment (610) (1,710)
Federal Home Loan Bank stock (6,249) (3,600)
------- -------
Net cash used in investing activities (42,030) (64,156)
Financing Activities:
Net increase (decrease) in deposit accounts (21,180) 40,475
Net increase (decrease) in Federal Home Loan Bank short-term advances 39,500 (8,500)
Borrowings of Federal Home Loan Bank long-term advances 30,000 45,000
Repayments of Federal Home Loan Bank long-term advances (15) (14)
Net increase in advances from borrowers for taxes and insurance 284 798
</TABLE>
7
<PAGE>
<TABLE>
Northeast Pennsylvania Financial Corp.
Consolidated Statement of Cash Flows
For the Nine Months Ended June 30, 2000 and 1999 (unaudited)
(in thousands)
<S> <C> <C>
For the Nine Months Ended
June 30,
2000 1999
---- ----
(unaudited)
Net increase (decrease) in other borrowings $ 728 $ (520)
Purchase of common stock for stock incentive plan - (3,312)
Purchase of treasury stock (4,943) (7,585)
Cash dividend on common stock (1,117) (607)
------- -----
Net cash provided by financing activities 43,257 65,735
Increase in cash and cash equivalents 4,000 5,075
Cash and cash equivalents, beginning of year 4,177 3,053
----- -----
Cash and cash equivalents, end of year $ 8,177 $ 8,128
======= =======
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $18,887 $ 14,160
======= ========
Income taxes $ 696 $ 1,361
===== =======
Supplemental disclosure - non-cash information:
Transfer from loans to real estate owned $ 657 $ 161
===== =====
Net change in unrealized losses on securities
available-for-sale, net of tax $ (2,412) $ (4,357)
========= =========
</TABLE>
8
<PAGE>
Northeast Pennsylvania Financial Corp.
Notes to Consolidated Financial Statements (unaudited)
1. Summary of Significant Accounting Policies
Basis of Financial Statements Presentation
The accompanying consolidated financial statements were prepared in
accordance with instructions to Form 10-Q, and therefore, do not
include information or footnotes necessary for a complete presentation
of financial position, results of operations and cash flows in
conformity with generally accepted accounting principles. However, all
normal recurring adjustments which, in the opinion of management, are
necessary for a fair presentation of the financial statements, have
been included. These financial statements should be read in conjunction
with the audited financial statements and the notes thereto included in
the Company's Annual Report for the period ended September 30, 1999.
The results for the nine months ended June 30, 2000 are not necessarily
indicative of the results that may be expected for the year ended
September 30, 2000.
Business
Northeast Pennsylvania Financial Corp. (the "Company") is the holding
company for First Federal Bank. First Federal Bank serves Northeastern
and Central Pennsylvania through thirteen full service office locations
and a loan production office. The Bank provides a wide range of banking
services to individual and corporate customers. The Company and the
Bank are subject to competition from other financial institutions and
other companies that provide financial services. The Company and the
Bank are subject to the regulations of certain federal agencies and
undergo periodic examinations by those regulatory authorities.
Principles of Consolidation and Presentation
The accompanying financial statements of the Company include the
accounts of First Federal Bank, Abstractors, Inc., Northeast
Pennsylvania Trust
Co. and FIDACO, Inc. First Federal Bank, Northeast Pennsylvania Trust
Co., and Abstractors, Inc., are wholly-owned subsidiaries of Northeast
Pennsylvania Financial Corp. Abstractors, Inc. is a title insurance
agency. Northeast Pennsylvania Trust Co. offers trust, estate and
asset management services and products. . FIDACO, Inc. is an inactive
subsidiary of First Federal Bank and its only major asset is an
investment in Hazleton Community Development Corporation. All material
inter-company balances and transactions have been eliminated in
consolidation. Prior period amounts are reclassified, when necessary,
to conform with the current year's presentation.
Earnings per Share
Earnings per share ("EPS"), basic and diluted, were $0.25 and $0.24,
respectively, for the three months ended June 30, 2000, compared to
$0.27 and $0.25, respectively, for the three months ended June 30,
1999, and $0.70 and $0.68, respectively, for the nine months ended June
30, 2000, compared to $0.65 and $0.62, respectively, for the nine
months ended June 30, 1999.
9
<PAGE>
The following table presents the reconciliation of the numerators and
denominators of the basic and diluted EPS computations.
<TABLE>
<S> <C> <C> <C> <C>
Three months ended Nine months ended
June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
(unaudited)
(Dollars in thousands, except per share data)
Basic:
Net Income $1,176 $1,380 $3,420 $3,593
====== ====== ====== ======
Weighted average shares outstanding
4,543,060 5,123,339 4,760,307 5,482,719
Plus: ESOP shares released or
committed to be released 122,121 66,418 109,266 57,132
------- ------ ------- ------
4,665,181 5,189,757 4,869,573 5,539,851
========= ========= ========= =========
Earnings per share - basic $0.25 $0.27 $0.70 $0.65
===== ===== ===== =====
Three months ended Nine months ended
June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
(unaudited)
(Dollars in thousands, except per share data)
Diluted: (1)
Net Income $1,176 $1,380 $3,420 $3,593
====== ====== ====== ======
Basic weighted shares outstanding 4,665,181 5,189,757 4,869,573 5,539,851
Dilutive Instruments:
Dilutive effect of outstanding
stock options - - - -
Dilutive effect of stock awards 193,984 242,438 193,925 243,089
------- ------- ------- -------
4,859,165 5,432,195 5,063,498 5,782,940
========= ========= ========= =========
Earnings per share - diluted $0.24 $0.25 $0.68 $0.62
===== ===== ===== =====
The Company has 508,930 and 617,310 anti-dilutive common stock options outstanding
as of June 30, 2000 and 1999, respectively. These options are not included in the
calculation of diltued earnings per share for the periods presented.
<FN>
(1) Diluted earnings per share include the dilutive effect of the Company's
weighted average stock options/awards outstanding using the Treasury Stock
Method.
</FN>
</TABLE>
2. Recent Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which was subsequently amended in
July 1999 by SFAS No. 137, "Accounting for Derivative Instruments and
Hedging Activities-Deferral of the Effective Date of FASB Statement No.
133" and amended again in June 2000 by SFAS No. 138, "Accounting for
Certain Derivative Instruments and Certain Hedging Activities, an
Amendment to FASB No. 133." This Statement established accounting and
reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, (collectively
referred to as derivatives) and for hedging activities. It required
that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those
10
<PAGE>
instruments at fair value. The accounting for changes in the fair value
of a derivative depends on the intended use of the derivative and the
resulting designation. If certain conditions are met, a derivative may
be specifically designated as (a) a hedge of the exposure to changes in
the fair value of a recognized asset or liability or an unrecognized
firm commitment, (b) a hedge of the exposure to variable cash flows of
a forecasted transaction, or (c) a hedge of certain foreign currency
exposures. This Statement "as amended" becomes effective for fiscal
years beginning after December 15, 1999. Earlier adoption is permitted.
The Company adopted SFAS 133, prior to the issuance of SFAS 137, in its
fourth fiscal quarter of 1998, including its provision for the
potential reclassification of investments, resulting in a $56.2 million
transfer of securities from held to maturity to available for sale and
an increase of $597,000 of unrealized gains, net of taxes, on
securities available for sale. The adoption of this Statement did not
materially affect the operating results of the Company.
3. Conversion to Stock Form of Ownership
The Company is a business corporation formed at the direction of the
Bank under the laws of Delaware on December 16, 1997. On March 31,
1998, the Company issued 6,427,350 shares, par value $.01 per share
(the "Common Stock"), including 514,188 shares to the Bank's Employee
Stock Ownership Plan and related trust ("ESOP") and a contribution of
476,100 shares of Common Stock to The First Federal Charitable
Foundation (the "Foundation"). The Conversion resulted in net proceeds
of $52.1 million, after expenses of $2.2 million.
The Bank established a liquidation account at the time of the
Conversion in an amount equal to the equity of the Bank as of the date
of its latest balance sheet date, September 30, 1997, contained in the
final Prospectus used in connection with the Conversion. In the
unlikely event of a complete liquidation of the Bank, (and only in such
an event), eligible depositors who continue to maintain accounts at the
Bank shall be entitled to receive a distribution from the liquidation
account. The amount of the liquidation account decreases to the extent
the balances of eligible deposits decrease. The liquidation account
approximated $10.7 million at September 30, 1999.
The Company may not declare nor pay dividends on its stock if such
declaration and payment would violate statutory or regulatory
requirements.
In addition to the 16,000,000 authorized shares of common stock, the
Company authorized 2,000,000 shares of preferred stock with a par value
of $0.01 per share (the "preferred stock"). The Board of Directors is
authorized, subject to any limitations by law, to provide for the
issuance of the shares of preferred stock in series, to establish from
time to time the number of shares to be included in each such series,
and to fix the designation, powers, preferences and rights of the
shares of each such series and any qualifications, limitations or
restriction thereof. As of June 30, 2000, there were no shares of
preferred stock issued.
<PAGE>
<TABLE>
<S> <C> <C>
4. Loans
Loans are summarized as follows: June 30, September 30,
2000 1999
---- ----
(unaudited)
(In thousands)
Real Estate loans:
One-to four-family $201,283 $196,885
Multi- family and commercial 58,680 31,497
Construction 2,968 3,983
----- -----
Total real estate loans 262,931 232,365
------- -------
Consumer Loans:
Home equity loans and lines of credit 71,943 70,118
Automobile 46,336 34,619
Education 3,387 2,796
Unsecured lines of credit 1,743 1,744
Other 7,964 5,571
----- -----
Total consumer loans 131,373 114,848
------- -------
Commercial loans 23,465 21,262
------ ------
Total loans 417,769 368,475
------- -------
Less:
Allowance for loan losses (3,437) (2,924)
Deferred loan origination fees (1,497) (1,361)
------- -------
Total loans, net $412,835 $364,190
======== ========
</TABLE>
Allowance for loan losses is summarized as follows (in thousands):
<TABLE>
<S> <C> <C> <C>
For the nine For the nine
months ended For the year ended months ended
June 30, 2000 September 30, 1999 June 30, 1999
------------- ------------------ -------------
(unaudited) (unaudited)
Balance, beginning of period $2,924 $2,273 $2,273
Charge-offs (88) (101) (99)
Recoveries 16 5 3
Provision for loan losses 585 747 343
--- --- ---
Balance, end of period $3,437 $2,924 $2,520
====== ====== ======
</TABLE>
5. Deposits
Deposits consist of the following major classifications (in thousands):
<TABLE>
<S> <C> <C> <C> <C>
June 30, 2000 September 30, 1999
------------- ------------------
(unaudited)
Percent Percent
Amount of Total Amount of Total
------------- ------------- -------------- ------------
Savings accounts (passbook, statement, clubs) $67,831 19.12% $69,667 18.53%
Money market accounts 24,617 6.94% 21,132 5.62%
Certificates of deposit less than $100,000 163,339 46.03% 185,790 49.41%
Certificates of deposit greater than $100,000(1) 42,631 12.02% 51,200 13.62%
NOW Accounts 38,368 10.81% 35,339 9.40%
Non-interest bearing deposits 18,017 5.08% 12,855 3.42%
------ ----- ------ -----
Total deposits at end of period $354,803 100.00% $375,983 100.00%
======== ======= ======== =======
<FN>
(1) Deposit balances in excess of $100,000 are not federally insured.
</FN>
</TABLE>
12
<PAGE>
Item 2 MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
In addition to historical information, this 10-Q may include certain
forward-looking statements based on current management expectations. The
Company's actual results could differ materially from those management
expectations. Factors that could cause future results to vary from current
management expectations include, but are not limited to, general economic
conditions, legislative and regulatory changes, monetary and fiscal policies of
the federal government, changes in tax policies, rates and regulations of
federal, state and local tax authorities, changes in interest rates, deposit
flows, the cost of funds, demand for loan products, demand for financial
services, competition, changes in the quality or composition of the Bank's loan
and investment portfolios, changes in accounting principles, policies or
guidelines, and other economic, competitive, governmental and technological
factors affecting the Company's operations, markets, products, services and
prices. Further description of the risks and uncertainties to the business are
included in detail in Section B, Management Strategy; and Section D, Liquidity
and Capital Resources.
A. General
The Company is the holding company for First Federal Bank (the "Bank"), a
federally chartered capital stock savings bank regulated by the Office of Thrift
Supervision ("OTS"). The Company does not transact any material business other
than through the Bank and its other subsidiaries. The Bank's results of
operations are dependent primarily on net interest income, which is the
difference between the income earned on its loan and investment portfolios and
its cost of funds, consisting of the interest paid on deposits and borrowings.
Results of operations are also affected by the Bank's provision for loan losses,
loan and security sales, service charges and other fee income, and non-interest
expense. The Bank's non-interest expense principally consists of compensation
and employee benefits, office occupancy and equipment expense, professional
fees, federal deposit insurance premiums, data processing, and advertising and
business promotion expenses. Results of operations are also significantly
affected by general economic and competitive conditions, particularly changes in
interest rates, government policies and actions of regulatory authorities.
B. Management Strategy
The Bank's operating strategy is that of a community-based bank, offering a wide
variety of savings products to its retail customers, while concentrating on
residential and consumer lending and, to a lesser extent, construction lending
and small business and municipal commercial lending. In order to promote
long-term financial strength and profitability, the Bank's operating strategy
has focused on: (i) maintaining strong asset quality by originating one-to
four-family loans in its market area; (ii) increasing profitability by
emphasizing higher-yielding consumer and commercial loans; (iii) managing its
interest rate risk by emphasizing consumer and commercial loans, in addition to
shorter-term, fixed-rate, one-to four-family loans; limiting its retention of
newly-originated longer-term fixed-rate one-to four-family loans; soliciting
longer-term deposits; utilizing longer-term advances from the Federal Home Loan
Bank of Pittsburgh ("FHLB"); and investing in investment and mortgage-related
securities having shorter estimated durations; (iv) meeting the banking needs of
its customers through expanded products and improved delivery systems by taking
advantage of technological advances; and (v) maintaining a strong regulatory
capital position.
13
<PAGE>
During the quarter ended June 30, 2000, the Bank continued to diversify and
expand its loan products to better serve its growing customer base by placing a
greater emphasis on consumer lending and commercial lending, primarily to small
businesses and municipalities. The Bank has an investment in and an agreement
with BuildersFirst.com (an internet based business-to-business portal offering
construction mortgage lending, financial services and other products to the
independent homebuilder industry) to purchase one to four family construction
loans. These loans will be underwritten according to the Bank's standards. It is
anticipated that loan purchases will commence in the fourth fiscal quarter.
BuildersFirst.com will provide an internet-based delivery and servicing system
giving Northeast Pennsylvania Financial Corp. a virtual management tool.
C. Non-Performing Assets
The following table presents information regarding the Bank's non-performing
assets at the dates indicated (dollars in thousands):
<TABLE>
<S> <C> <C>
June 30, September 30,
2000 1999
---- ----
(unaudited)
Non-performing assets:
Non-accrual loans $1,501 $1,371
Real estate owned and other repossessed assets 316 98
--- --
Total non-performing assets $1,817 $1,469
====== ======
Total non-performing loans as a percentage of total loans 0.36% 0.38%
Total non-performing assets as a percentage of total assets 0.28% 0.24%
</TABLE>
The increase in non-performing loans was not due to any one particular credit,
rather it was a result of higher outstanding balances. Real estate owned and
other repossessed assets increased due to additional repossessions of
residential mortgages acquired through foreclosure.
D. Liquidity and Capital Resources
The Bank's primary sources of funds on a long-term and short-term basis are
deposits, principal and interest payments on loans, mortgage-backed and
investment securities, and FHLB advances. The Bank uses the funds generated to
support its lending and investment activities as well as any other demands for
liquidity such as deposit outflows. While maturities and scheduled amortization
of loans are predictable sources of funds, deposit flows, mortgage prepayments
and the exercise of call features 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 current required liquidity
ratio is 4.0%. At June 30, 2000 and 1999, the Bank's liquidity ratios were 12.2%
and 12.4%, respectively.
At June 30, 2000, the Bank had total equity, determined in accordance with
generally accepted accounting principles, of $54.1 million, or 8.4%, of total
assets. At June 30, 2000, the Bank exceeded all of its regulatory capital
requirements with a tangible capital level of $57.4 million, or 8.9% of total
adjusted assets, which is above the required level of $9.7 million, or 1.5%; a
core capital level of $57.4 million, or 8.9% of total adjusted assets, which is
above the required level of $26.0 million, or 4.0%; and a risk-based capital of
$61.0 million, or 16.9% of risk-weighted assets, which is above the required
14
<PAGE>
level of $28.8 million, or 8.0%. An institution with a ratio of tangible capital
to total assets of greater than or equal to 5% is considered to be
"well-capitalized" pursuant to OTS regulations.
The Bank's most liquid assets are cash and cash equivalents and its investment
and mortgage-related securities available-for-sale. The levels of these assets
are dependent on the Bank's operating, financing, lending and investing
activities during any given period. At June 30, 2000, cash and cash equivalents
and investment and mortgage-related securities available-for-sale totaled $187.5
million, or 28.5% of total assets.
The Bank has other sources of liquidity if a need for additional funds arises,
including FHLB advances. At June 30, 2000, the Bank had $225.5 million in
advances outstanding from the FHLB, and had an overall borrowing capacity from
the FHLB of $289.2 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.
At June 30, 2000, the Bank had commitments to originate and purchase loans and
unused outstanding lines of credit and undisbursed proceeds of construction
mortgages totaling $39.9 million. The Bank anticipates that it will have
sufficient funds available to meet these commitments. Certificate accounts,
including Individual Retirement Account and KEOGH accounts, which are scheduled
to mature in less than one year from June 30, 2000, totaled $144.2 million. The
Bank expects that substantially all of the maturing certificate accounts, with
the exception of jumbo certificates of deposit (balances greater than $100,000
with a negotiated rate of return), will be retained by the Bank at maturity. At
June 30, 2000, the Bank had $17.5 million in jumbo certificates, the majority of
which are deposits from local school districts and municipalities.
E. Comparison of Financial Condition at June 30, 2000 and September 30, 1999
Total assets increased $46.3 million from $612.2 million at September 30, 1999
to $658.5 million at June 30, 2000. The growth in assets was primarily due to
increases in loans receivable, which were funded by increases in FHLB advances.
Securities classified as available-for-sale securities decreased $10.5 million,
from $189.8 million at September 30, 1999 to $179.3 million at June 30, 2000.
The decrease was primarily attributable to the effect of security sales,
particularly tax-free municipal bonds and unrealized losses on
available-for-sale securities.
Net loans increased $48.6 million to $412.8 million at June 30, 2000. This was
primarily due to a $27.2 million, or 86.3% increase in multi-family and
commercial real estate loans, as a result of business development efforts and
competitive pricing. Automobile loans increased $11.7 million, or 33.8%
primarily due to increased direct and indirect auto loan originations, as a
result of more participating automobile dealers. One-to-four family real estate
loans increased $4.4 million as a result of loan purchases from other financial
institutions. Other consumer loans increased $2.4 million while commercial loans
increased $2.2 million. These increases are a result of continued marketing
efforts and competitive pricing. A significant portion of this quarter and prior
quarters loan originations and purchases were adjustable or floating rate loans.
These loans will assist in the management of interest rate risk, as they will be
15
<PAGE>
adjusting over the next several quarters, which also should increase their yield
to the Bank, assuming the higher interest rate environment continues.
Other assets increased $3.5 million to $12.5 million at June 30, 2000. This
change was primarily due to a $2.0 million investment in the preferred stock of
BuildersFirst.com. Also contributing to the change was a $1.1 million increase
in deferred income taxes, due to the change in other comprehensive income.
Total deposits decreased $21.2 million, or 5.6% to $354.8 million at June 30,
2000. This decrease was primarily due to a $31.0 million decrease in
certificates of deposit from $237.0 million at June 30, 1999 to $206.0 million
at June 30, 2000, as a result of the maturity of jumbo certificates from local
municipalities. This decrease was offset by a $5.2 million increase in
non-interest bearing deposits, as well as a $3.5 million increase in money
market accounts, resulting from a more active marketing of such accounts,
coupled with a concerted effort to build customer relationships.
FHLB advances increased $69.5 million from $156.0 million at September 30, 1999
to $225.5 million at June 30, 2000. This was a result of management's
utilization of FHLB borrowings to fund asset growth and offset the decrease in
deposits. FHLB borrowings have been invested at yields higher than the cost of
the borrowed funds thereby increasing net interest income.
Total equity decreased $4.4 million to $71.1 million at June 30, 2000. This
decrease in equity resulted primarily from a repurchase of 507,534 shares of
common stock at a cost of $4.9 million. Also contributing to this decline was a
$2.4 million increase in unrealized losses on securities reflected in
accumulated other comprehensive loss. These decreases were partially offset by
net income of $3.4 million for the period less dividends of $1.1 million.
F. Comparison of Operating Results for the Three Months ended June
30, 2000 and June 30, 1999
General. The Company had net income of $1.2 million for the three months ended
June 30, 2000, compared to net income of $1.4 million for the three months ended
June 30, 1999, a decrease of $204,000 or 14.8%. This decrease was primarily
attributable to a $229,000 rise in non-interest expense, as well as a $158,000
decrease in non-interest income.
Interest Income. Total interest income increased $2.0million, or 21.4%, from
$9.6 million for the three months ended June 30, 1999 to $11.6 million for the
three months ended June 30, 2000. This was primarily due to a $99.4 million, or
18.3%, increase in the average balance of interest earning assets. Specifically,
interest income on loans increased $1.7 million, or 27.7% from $6.3 million for
the period ending June 30, 1999 to $8.0 million at June 30, 2000, primarily due
to a $62.8 million increase in the average balance of real estate loans and a
$24.8 million increase in the average balance of consumer loans.
Interest Expense. Interest expense increased $2.0 million, or 40.1%, from $5.0
million for the three months ended June 30, 1999 to $7.0 million for the three
months ended June 30, 2000. The increase in interest expense was primarily the
result of an $89.7 million increase in the average balance of FHLB advances and
other borrowings, which increased from $128.5 million at June 30, 1999 to $218.3
million at June 30, 2000, as well as a 76 basis point increase in the weighted
average rate paid on those borrowings from 5.20% for the three months ended June
30, 1999 to 5.96% for the three months ended June 30, 2000. The increase in FHLB
16
<PAGE>
advances reflects management's decision to more heavily utilize FHLB advances to
fund asset growth and offset deposit outflow. Contributing to the increase in
interest expense was a $361,000 increase in interest expense on certificates of
deposit, which was the result of a $13.0 million increase in the average balance
of these accounts.
Provision for Loan Losses. The Bank's provision for loan losses for the three
months ended June 30, 2000 was $141,000 compared to $149,000 for the three
months ended June 30, 1999. The provision for loan losses increases the
allowance for loan losses. The allowance is maintained at a level that
management considers adequate to provide for estimated losses based upon an
evaluation of known and inherent risks in the loan portfolio. Loan losses, other
than those incurred on loans held for sale, are charged directly against the
allowance and recoveries on previously charged-off loans are added to the
allowance. At June 30, 2000 and June 30, 1999 the allowance for loan losses was
$3.4 million and $2.5 million, respectively. This represented 229.0% of
non-performing loans and .82% of total loans at June 30, 2000 compared to 239.3%
of non-performing loans and .73% of total loans at June 30, 1999.
Management's evaluation is based upon, among other things, delinquency trends,
the volume of non-performing loans, prior loss experience of the portfolio,
current economic conditions, and other relevant factors. Although management
believes it has used the best information available to it in making such
determinations, and that the allowance for loan losses is adequate, future
adjustments to the allowance may be necessary, and net income may be adversely
affected if circumstances differ substantially from the assumptions used in
determining the level of the allowance. In addition, various regulatory
agencies, as an integral part of their examination process, periodically review
the Bank's allowance for losses on loans. Such agencies may require the Bank to
recognize additions to the allowance based on their judgments about information
available to them at the time of their examination.
Non-interest Income. Non-interest income decreased $158,000 from $671,000 to
$513,000, for the three months ended June 30, 2000. The decrease in non-interest
income was primarily due to a decrease in gain on sale of loans from $246,000 to
$1,000 for the three months ended June 30, 2000, as a result of the sale of
mortgage loans as part of a restructuring transaction in the period ended June
30, 1999. Also contributing to the decrease was a $45,000 increase in loss on
real estate owned, due to an increase in assets acquired through foreclosure.
Offsetting the decrease was a $115,000, or 51.6% increase in service charges and
other fees resulting from increased customer activity on the various deposit and
loan accounts, and late charges on a delinquent loan brought current.
Non-interest Expense. Total non-interest expense increased from $3.4 million for
the three months ended June 30, 1999 to $3.6 million for the three months ended
June 30, 2000. Data processing increased $54,000 due to a maintenance contract
incurred in the current quarter as a result of a vendor billing error. Occupancy
costs increased $48,000 as a result of three additional branches since June
1999. Other expense increased $47,000 due to the amortization of goodwill from
the purchase of the Danville branch. Salaries and benefits increased $42,000 as
a result of the addition of the new branches, as well as the additional staff
hired by Northeast Pennsylvania Trust Co.
Income Taxes. The Company had an income tax provision of $202,000 for the three
months ended June 30, 2000, compared to a provision of $330,000 for the three
months ended June 30, 1999 resulting in effective tax rates of 14.6%, and 19.3%,
respectively. The decline in income tax expense was attributable to an increase
17
<PAGE>
in tax-free income due to the purchase of municipal securities, as well as a
decrease in income before taxes.
G. Comparison of Operating Results for the Nine Months ended June 30, 2000
and June 30, 1999.
General. For the nine months ended June 30, 2000, the Company reported net
income of $3.4 million, compared to net income of $3.6 million for the same
period in 1999. The decrease was due to a $5.2 million increase in interest
expense, offset by a $6.0 million increase in interest income and a $1.1 million
increase in non-interest expense.
Interest Income. Total interest income increased $6.0 million, or 21.8%, from
$27.5 million, for the nine months ended June 30, 1999 to $33.5 million for the
nine months ended June 30, 2000, primarily due to a $98.8 million, or 18.9%,
increase in the average balance of interest earning assets.
Interest income on investment securities increased $1.4 million, or 21.2% to
$7.8 million for the nine months ended June 30, 2000, primarily due to an $18.0
million increase in the average balance of such securities. Interest income on
loans increased $5.1 million, or 28.4%, to $22.9 million for the nine months
ended June 30, 2000. This was primarily due to the increase in the average
balance on real estate loans increasing by $54.8 million from $194.8 million at
June 30, 1999 to $249.6 million at June 30, 2000, due to the increased purchase
of loans from June 1999. Interest income on consumer loans grew $2.1 million, or
36.7%, from $5.7 million at June 30, 1999 to $7.8 million at June 30, 2000, due
to a $31.0 million increase on the average balance of these loans. An increase
in indirect auto loan originations, as well as greater marketing efforts and
competitive pricing of these loans was the basis for the growth in consumer
loans.
Interest Expense. Interest expense increased $5.2 million, or 36.3%, from $14.3
million to $19.4 million for the nine months ended June 30, 1999 and June 30,
2000, respectively. The increase in interest expense was primarily the result of
an $81.6 million increase in the average balance of FHLB advances, which
increased from $111.4 million at June 30, 1999 to $193.0 million at June 30,
2000, as well as an increase in the weighted average rate paid on such
borrowings from 5.20% at June 30, 1999 to 5.70% at June 30, 2000. The increase
in FHLB advances reflects management's decision to more heavily utilize FHLB
advances to fund asset growth and offset the deposit outflow. This increase in
interest expense was also due to an overall increase in interest expense on
deposits primarily due to a $24.4 million, or 11.7%, rise in the average balance
of certificate accounts.
Provision for Loan Losses. The Bank's provision for loan losses for the nine
months ended June 30, 2000 was $585,000 compared to $343,000 for the nine months
ended June 30, 1999. The increase in the provision was a result of the $49.3
million increase in outstanding total loan balances from September 1999 to June
2000. The provision for loan losses increases the allowance for loan losses. The
allowance is maintained at a level that management considers adequate to provide
for estimated losses based upon an evaluation of known and inherent risks in the
loan portfolio. Loan losses, other than those incurred on loans held for sale,
are charged directly against the allowance and recoveries on previously
charged-off loans are added to the allowance.
18
<PAGE>
Non-interest income. The Company experienced a $118,000 decrease in non-interest
income from $1.4 million for the nine months ended June 30, 1999 to $1.3 million
for the nine months ended June 30, 2000. The decrease was largely the result of
a $267,000 decrease in gain on sale of loans due to the sales of mortgage loans
as a part of a restructuring transaction in the period ending June 30, 1999.
Contributing to this decrease was a $128,000 increase in the loss on the sale of
real estate owned, due to an increase in assets acquired through foreclosure.
The decrease in non-interest income was offset by a $290,000 increase in service
charges and other fees, due to increased customer activity on various deposit
and loan accounts and delinquent loan fees on a loan brought current.
Non-interest expense. Total non-interest expense increased from $9.7 million,
for the nine months ended June 30, 1999 to $10.8 million for the nine months
ended June 30, 2000. The largest increase in non-interest expense was in other
expense, which increased $421,000, primarily due to the amortization of goodwill
associated with branch and subsidiary acquisitions and increased advertising
costs due to loan and deposit product promotions. Salary and benefit expense
increased $357,000, or 6.5% due to the additional staffing of new branches since
June 1999. There was also a $202,000, or 16.2% increase in occupancy costs
associated with branch expansion. FHLB and other service charges increased
$167,000, or 51.5%, mainly due to increased charges for higher ATM volume.
Offsetting the increases was a $158,000 decrease in professional fees, as a
result of consulting fees paid in prior year for expansion into new market
areas.
Income taxes. The Company had income tax expense of $540,000 for the nine months
ended June 30, 2000, compared to $973,000 for the nine months ended June 30,
1999, resulting in effective tax rates of 13.6% and 21.3% for the nine months
ended June 30, 2000 and June 30, 1999, respectively. The decline in the
effective tax rate was the result of increased tax-free income.
19
<PAGE>
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of June 30, 2000, there have been no material changes in
the quantitative and qualitative disclosures about market
risks presented in the Company's Annual Report on Form 10-K
for the fiscal year ended September 30, 1999.
20
<PAGE>
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not involved in any pending legal proceedings
other than routine legal proceedings occurring in the ordinary
course of business. Such routine legal proceedings, in the
aggregate, are believed by management to be immaterial to the
Company's financial condition or results of operation.
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
2.1 Agreement and Plan of Merger, dated June 2, 2000, by
and between Northeast Pennsylvania Financial Corp.,
Northeast Acquisition, Inc. and Security of
Pennsylvania Financial Corp.*
3.1 Certificate of Incorporation of Northeast
Pennsylvania Financial Corp.**
3.2 Bylaws of Northeast Pennsylvania Financial Corp.
4.0 Form of Stock Certificate of Northeast Pennsylvania
Financial Corp.**
11.0 Statement regarding Computation of Per Share Earnings
(See Notes to Consolidated Financial Statements)
27.0 Financial Data Schedule (submitted only with filing
in electronic format)
* Incorporated herein by reference into this document from the Form 8-K
filed on June 15, 2000.
**Incorporated herein by reference into this document from the
Exhibits to Form S-1, Registration Statement, and any amendments
thereto, Registration No. 333-43281.
21
<PAGE>
(B) Reports on Form 8-K
On June 2, 2000, the Company filed an 8-K to announce that it had
entered into an agreement and plan of merger with Security of
Pennsylvania Financial Corp., Hazleton, Pennsylvania. A copy of
the press release announcing the merger was attached by exhibit.
On June 15, 2000, the Company filed an 8-K summarizing the
material components of its merger agreement and plan of merger
with Security of Pennsylvania Financial Corp., Hazleton,
Pennsylvania. A copy of the agreement and plan of merger was
filed by exhibit.
22
<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.
NORTHEAST PENNSYLVANIA
FINANCIAL CORP.
Date: By: /s/ E. Lee Beard
E. Lee Beard
President and Chief Executive Officer
Date: By: /s/ Patrick J. Owens, Jr.
Patrick J. Owens, Jr.
Treasurer and Chief Financial Officer
<PAGE>
Exhibit Index
-------------
3.2 Bylaws of Northeast Pennsylvania Financial Corp.
27.0 Financial Data Schedule (submitted only with filing in electronic format)
NORTHEAST PENNSYLVANIA FINANCIAL CORP.
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
<PAGE>
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.
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.
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 qualified under Article II, Section 1
of these Bylaws and 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 would indicate such person's qualification under Article II,
Section 1, including an affidavit that such person would not be disqualified
under the provisions of Section 1(d), and such information 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 establish his or her qualifications and 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) and Section 1 of Article
II. 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 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
------------------------------------------
Qualifications.
---------------
(a) General Powers. The business and affairs of the
Corporation shall be under the direction of its Board of
Directors. The Board of Directors shall annually elect a
Chairman of the Board from among its members who shall,
when present, preside at its meetings.
(b) Number. 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 nine (9).
Except for the initial members of the Board of Directors as of the
effective date of these Bylaws, no person shall be eligible for initial election
as a Director who is 68 years of age or more. No person may be elected,
appointed, nominated or otherwise serve as a Director of the Corporation after
December 31 of the year in which such person attains the age of 70. Vacancies on
the Board of Directors created by operation of this provision may be filled in
accordance with these Bylaws.
(c) Term of Office. 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.
(d) No person shall be eligible for election or appointment
to the Board of Directors: (i) if such person has, within
the previous 10 years, been the subject of supervisory
action by a financial regulatory agency that resulted in a
cease and desist order or an agreement or other written
statement subject to public disclosure under 12U.S.C.1818(u),
or any successor provision; (ii)if such person has been
convicted of a crime involving dishonesty or breach of trust
which is punishable by imprisonment for a term exceeding one
year under state or federal law; (iii) if such person is
currently charged in any information, indictment, or other
complaint with the commission of or participation in such
a crime; and (iv) unles such person has been, for a period
of at least one year prior to his or her election, nomination
or appointment, a resident of a county in which the
Corporation or its subsidiaries maintains a banking office or
of a county contiguous to any such county or had significant
business ties to such counties. No person may serve on the
Board of Directors and at the same time be a director or
officer of another co-operative bank, credit union, savings
bank, savings and loan association, trust company, bank
holding company or banking association (in each case whether
chartered by a state, the federal government or any other
jurisdiction) that engages in business activities in the
same market area as the Corporation or any of its
subsidiaries. No person shall be eligible for election to the
Board of Directors if such person is the representative or
agent of a person or acting in concert (as that term is used
to describe relationships involved in either presumptive or
actual concerted action under 12 C.F.R. Section 574.4(d))
with respect to the Corporation or its subsidiaries, with a
person who is ineligible for election to the Board of
Directors under this Subsection 1(d). No nomination of
any individual who would not be qualified to be elected or
appointed to or serve as a member of the Board of Directors
under this Article II, Section 1(d) shall be valid, accepted
or voted upon. The Board of Directors shall have the power
to construe and apply the provisions of this Section
1(d) and to make all determinations necessary to implement
such provisions, including but not limited to determinations
as to whether any persons are a group acting in concert, as
defined by this Section 1(d). The Board may request from a
nominee information it deems relevant to assessing a
nominee's satisfaction of the requirements of this Section
1(d).
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.
<PAGE>
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 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.
--------- ------------------------------------
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.
(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.
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 May 16, 2000.
