<PAGE>
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(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, 1998
--------------------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to _______________
Commission file number 0-14468
-------
First Oak Brook Bancshares, Inc.
--------------------------------
(Exact Name of registrant as specified in its charter)
Delaware 36-3220778
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1400 Sixteenth Street, Oak Brook, Illinois 60523
- --------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (630) 571-1050
--------------
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 number of shares outstanding of each of the issuer's classes of common
stock, as of July 31, 1998.
Class A 3,726,272
- ------------------------------- ----------------
CLASS NUMBER OF SHARES
Common 2,915,938
- ------------------------------- ----------------
CLASS NUMBER OF SHARES
<PAGE>
FIRST OAK BROOK BANCSHARES, INC. AND SUBSIDIARY
INDEX
Page
----
Part I. Financial Information
- ------------------------------
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets
June 30, 1998 and December 31, 1997 3
Condensed consolidated statements of income
Three months ended June 30, 1998 and 1997 and
Six months ended June 30, 1998 and 1997 5
Condensed consolidated statements of cash flows
Six months ended June 30, 1998 and 1997 7
Notes to condensed consolidated financial
statements -- June 30, 1998 9
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 13
Part II. Other Information
- ---------------------------
Item 1. Legal Proceedings *
Item 2. Changes in Securities *
Item 3. Defaults upon Senior Securities *
Item 4. Submission of Matters to a Vote of Security Holders 23
Item 5. Other Information *
Item 6. Exhibits and Reports on Form 8-K 25
Signatures 26
- ----------
* Not applicable
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIRST OAK BROOK BANCSHARES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1998 AND DECEMBER 31, 1997
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
---- ----
<S> <C> <C>
Assets
- ------
Cash and due from banks $ 38,812 $ 32,893
Federal funds sold and securities
purchased under agreement to resell 70,209 -
Interest-bearing deposits
with banks 11,335 10,239
Securities held-to-maturity, at
amortized cost (fair value $133,343
and $145,639 at June 30, 1998 and
December 31, 1997) 131,258 142,682
Securities available-for-sale, at
fair value 174,922 159,416
Loans, net of unearned discount 501,128 447,332
Less allowance for loan losses (3,953) (4,329)
-------- --------
Net loans 497,175 443,003
-------- --------
Premises and equipment, net 20,264 18,773
Other assets 9,691 9,138
-------- --------
Total assets $953,666 $816,144
======== ========
</TABLE>
3
<PAGE>
FIRST OAK BROOK BANCSHARES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS (Cont.)
(Unaudited)
(In Thousands Except Share Information)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
---- ----
<S> <C> <C>
Liabilities
- -----------
Noninterest-bearing demand deposits $170,854 $153,806
-------- --------
Interest-bearing deposits:
Savings deposits and interest
bearing checking accounts 172,384 166,040
Money market accounts 40,002 33,139
Time deposits
Under $100,000 183,519 113,839
$100,000 and over 175,640 160,939
-------- --------
Total interest-bearing deposits 571,545 473,957
-------- --------
Total deposits 742,399 627,763
-------- --------
Federal funds purchased and securities
sold under agreements to repurchase 53,526 52,608
Treasury, tax and loan demand notes 20,000 12,508
Federal Home Loan Bank borrowings 56,000 42,500
Other liabilities 8,272 9,104
-------- --------
Total liabilities 880,197 744,483
-------- --------
Shareholders' Equity
- --------------------
Class A Common Stock (aggregate
liquidation preference of $11,754) 8,025 7,946
Common stock 6,542 6,596
Surplus 11,956 11,802
Accumulated other comprehensive
income 1,509 1,644
Retained earnings 50,378 47,258
Less cost of shares in treasury,
293,000 Class A and 348,046 common
shares in 1998 and 236,000 Class A
and 348,046 common shares in 1997 (4,941) (3,585)
-------- --------
Total shareholders' equity 73,469 71,661
-------- --------
Total liabilities and
shareholders' equity $953,666 $816,144
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
4
<PAGE>
FIRST OAK BROOK BANCSHARES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
----------------- -----------------
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Interest income:
Interest on loans $ 9,778 $ 9,859 $18,933 $19,321
Interest on securities:
U.S. Treasury and Government agencies 3,763 3,285 7,218 6,459
Obligations of states and political subdivisions 629 601 1,237 1,260
Other securities 300 53 601 104
Interest on Federal funds sold and securities
purchased under agreements to resell 779 112 1,045 299
Interest on deposits with banks 191 3 376 7
------- ------- ------- -------
Total interest income 15,440 13,913 29,410 27,450
------- ------- ------- -------
Interest expense:
Interest on savings deposits and NOW accounts 1,501 1,557 2,958 3,116
Interest on money market accounts 307 257 592 533
Interest on time deposits 5,288 3,718 9,583 7,631
Interest on Federal funds purchased and securities
sold under agreements to repurchase 599 662 1,169 1,232
Interest on Treasury, tax and loan demand notes 159 171 269 288
Interest on Federal Home Loan Bank borrowings 811 116 1,594 162
------- ------- ------- -------
Total interest expense 8,665 6,481 16,165 12,962
------- ------- ------- -------
Net interest income 6,775 7,432 13,245 14,488
Provision for loan losses 90 1,175 150 1,550
------- ------ ------- -------
Net interest income after provision for loan losses $ 6,685 $ 6,257 $13,095 $12,938
------- ------ ------- -------
</TABLE>
5
<PAGE>
FIRST OAK BROOK BANCSHARES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Cont.)
(Unaudited)
(In Thousands Except Share Information)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
--------------------- ---------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Other income:
Service charges on deposit accounts $ 791 $ 674 $ 1,563 $ 1,354
Investment management and trust fees 289 212 505 497
Merchant card processing fees 332 249 624 467
Other operating income 608 261 1,124 489
Investment securities gains (losses) - - 79 (9)
Gain on sale of credit card portfolio - 9,117 - 9,117
--------- --------- --------- ---------
Total other income 2,020 10,513 3,895 11,915
--------- --------- --------- ---------
Other expenses:
Salaries and employee benefits 3,461 3,119 6,886 6,238
Occupancy expense 377 353 760 740
Equipment expense 443 388 863 781
Data processing 204 429 346 872
Professional fees 127 112 244 216
Postage, stationery and supplies 225 192 436 367
Advertising and business development 294 369 573 754
FDIC premiums 19 20 38 40
Gain on other real estate owned - - - (515)
Other operating expenses 487 489 865 973
--------- --------- --------- ---------
Total other expenses 5,637 5,471 11,011 10,466
--------- --------- --------- ---------
Income before provision for income taxes 3,068 11,299 5,979 14,387
--------- --------- --------- ---------
Provision for income taxes 887 4,173 1,720 5,048
--------- --------- --------- ---------
Net income $ 2,181 $ 7,126 $ 4,259 $ 9,339
========= ========= ========= =========
Earnings per common share and common
equivalent share:
Basic $ .33 $ 1.09 $ .64 $ 1.42
========= ========= ========= =========
Diluted .32 1.06 .62 1.38
========= ========= ========= =========
Dividends per share:
Class A Common $ .090 $ .065 $ .165 $ .130
========= ========= ========= =========
Common .075 .053 .138 .105
========= ========= ========= =========
Weighted average number of common shares
and common share equivalents:
Basic 6,673,106 6,537,106 6,684,164 6,579,818
========= ========= ========= =========
Diluted 6,847,196 6,731,116 6,856,912 6,760,500
========= ========= ========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
6
<PAGE>
FIRST OAK BROOK BANCSHARES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(In Thousands)
<TABLE>
<CAPTION>
1998 1997
---- ----
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,259 $ 9,339
Adjustments to reconcile net income to net
cash provided by operating activities:
Gain on credit card portfolio sale - (9,117)
Depreciation, discount accretion, premium
amortization and amortization of
intangibles 1,244 1,266
Provision for loan losses 150 1,550
Investment securities (gains) losses (79) 9
Increase in other assets (1,108) (850)
Increase (decrease) in other liabilities (764) 5,955
-------- --------
Net cash provided by operating activities 3,702 8,152
-------- --------
Cash flows from investing activities:
Purchase of domestic certificates of deposit - (10,000)
Purchase of securities held-to-maturity (15,367) (26,235)
Purchase of securities available-for-sale (71,597) (53,549)
Proceeds from maturities and calls of
securities held-to-maturity 28,210 18,696
Proceeds from sales, maturities and calls
of securities available-for-sale 54,301 38,792
Proceeds from credit card portfolio sale - 64,000
Increase in loans (54,322) (10,880)
Additions to premises and equipment (2,466) (1,308)
-------- --------
Net cash provided by (used in) investing
activities (61,241) 19,516
-------- --------
Cash flows from financing activities:
Increase in demand deposits 17,048 10,125
Increase (decrease) in savings and NOW accounts 6,344 (6,722)
Increase in money market accounts 6,863 1,670
Increase (decrease) in time deposits 84,381 (18,211)
Increase in federal funds purchased and
securities sold under agreements to repurchase 918 12,952
Increase in treasury, tax and loan demand notes 7,492 8,018
Proceeds from Federal Home Loan Bank borrowings 41,000 12,500
Repayment of Federal Home Loan Bank borrowings (27,500) -
Exercise of stock options 170 177
Purchase of treasury stock (1,356) (2,815)
Cash dividends (1,130) (796)
------- ------
Net cash provided by financing activities 134,230 16,898
------- ------
</TABLE>
7
<PAGE>
FIRST OAK BROOK BANCSHARES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(Unaudited)
(Continued)
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Net increase in cash and cash equivalents 76,691 44,566
Cash and cash equivalents at beginning
of period 32,954 61,255
-------- --------
Cash and cash equivalents at end of
period $109,645 $105,821
======== ========
Supplemental disclosures:
Interest paid $ 15,724 $ 13,326
Income taxes paid 1,200 1,515
======== ========
</TABLE>
See notes to Condensed Consolidated Financial Statements.
8
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
(Unaudited)
1. Basis of Presentation:
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with the rules and regulations of the
Securities and Exchange Commission. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring items) considered necessary
for a fair presentation have been included. Operating results for the three
and six month periods ended June 30, 1998 are not necessarily indicative of
the results that may be expected for the year ended December 31, 1998. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10-K for
the year ended December 31, 1997.
2. New Accounting Pronouncements:
In June 1998, the Financial Accounting Standards Board adopted Statement
133, "Accounting for Derivative Instruments and Hedging Activities."
Statement 133 standardizes the accounting for derivative instruments,
including certain derivative instruments embedded in other contracts. Under
the standard, entities are required to carry all derivative instruments in
the statement of financial position at fair value. The Company must adopt
Statement 133 by January 1, 2000; however, early adoption is permitted.
Upon adoption, the provisions of Statement 133 must be applied
prospectively. The Company anticipates that the adoption of Statement 133
will not have a material impact on the Company's financial statements.
On January 1, 1998, the Company adopted the Financial Accounting Standards
Board's Statement 130, "Reporting Comprehensive Income." Statement 130
established new rules for the reporting and display of comprehensive income
and its components; however, the adoption of the Statement had no impact on
the Company's net income or shareholders' equity. Statement 130 requires
unrealized gains or losses on the Company's available-for-sale securities,
which prior to adoption were reported separately in shareholders' equity,
to be included in other comprehensive income. Prior year financial
statements have been reclassified to conform to the requirements of
Statement 130. During the three and six month periods ended June 30, total
comprehensive income
9
<PAGE>
amounted to $1,909,000 and $4,124,000, respectively, in 1998 and $7,620,000
and $9,227,000, respectively, in 1997. These amounts represent the sum of
net income for the period and the change in the accumulated other
comprehensive income.
3. Commitments and Contingent Liabilities:
In the normal course of business, there are various outstanding commitments
and contingent liabilities, including commitments to extend credit, which
are not reflected in the financial statements. The Company's exposure to
credit loss in the event of nonperformance by the other party to the
commitments and lines of credit is limited to their contractual amount.
Many commitments to extend credit expire without being used. Therefore, the
following amounts do not necessarily represent future cash commitments.
These commitments are subject to the same credit policies as followed for
loans recorded in the financial statements.
The summary of these commitments to extend credit follows (in thousands):
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
------------- -----------------
<S> <C> <C>
Commercial $65,605 $46,831
Commercial mortgage 30,082 37,834
Home equity 84,603 80,338
Check credit 917 969
</TABLE>
4. Shareholders' Equity:
On July 21, 1998 the Board declared a 100% stock dividend on Common and
Class A common stock which will be distributed on September 3, 1998 to
shareholders of record on August 20, 1998. The June 30, 1998 and 1997
financial statements have been restated to reflect the stock split effected
in the form of a dividend.
10
<PAGE>
Shares authorized, issued and outstanding are as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
---------- ------------
<S> <C> <C>
Preferred Stock, Series B,
no par value:
Authorized 100,000 100,000
Issued None None
Outstanding None None
Class A Common Stock,
$2.00 par value:
Authorized 10,000,000 4,000,000
Issued 4,012,604 3,972,814
Outstanding 3,719,604 3,736,814
Common Stock,
$2.00 par value:
Authorized 6,000,000 3,000,000
Issued 3,270,652 3,297,792
Outstanding 2,922,606 2,949,746
</TABLE>
Each share of Class A common stock is entitled to one-twentieth of one vote
and a cash dividend of at least 120% of the dividend declared on the Common
stock. Holders of the Class A common stock, upon liquidation of the
Company, are entitled to receive an aggregate amount per share equal to the
$3.16 offering price of the Class A common stock before any amount is paid
to holders of the Common stock.
The Common stock is convertible into Class A Common stock on a one-for-one
basis at any time.
On July 21, 1998 the Board declared the quarterly cash dividend. The Class
A common quarterly dividend is $.09 per share and the Common quarterly
dividend is $.075 per share. The dividends are payable October 22, 1998 to
shareholders of record on October 9, 1998.
5. Earnings per Share:
On December 31, 1997, the Company adopted the Financial Accounting Standards
Board's Statement 128, "Earnings per Share." Statement 128 replaces the
presentation of primary earnings per share (EPS) with basic EPS and fully
diluted EPS with diluted EPS. Basic EPS is computed by dividing net income
by the weighted average number of common shares outstanding for the period.
Diluted EPS is computed by dividing net income by the weighted average
number of common shares and common equivalent shares outstanding for the
period. EPS calculations for the three and six month periods ended June 30,
1997 have been restated to reflect the adoption of Statement 128. Earnings
per share calculations for the three and six month periods ended June 30,
1998 and 1997 have been restated to give effect to the 100% stock dividend
which was declared on July 21, 1998.
11
<PAGE>
The following table sets forth the denominator used for basic and diluted
earnings per share for the periods ended June 30, 1998 and 1997:
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
1998 1997 1998 1997
------------------------ --------------------
<S> <C> <C> <C> <C>
Denominator for
basic earnings per
share-weighted
average shares 6,673,106 6,537,106 6,684,164 6,579,818
Effect of diluted
securities:
Stock options issued
to employees and
directors 174,090 194,010 172,748 180,682
--------- --------- --------- ---------
Denominator for
diluted earnings
per share 6,847,196 6,731,116 6,856,912 6,760,500
========= ========= ========= =========
</TABLE>
6. Restatement and Reclassification:
Certain amounts in the June 30, 1997 interim condensed consolidated
financial statements have been reclassified to conform to their 1998
presentation and restated to give effect to the 100% stock dividend which
was declared on July 21, 1998.
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Earnings Highlights - Second Quarter Results
- -------------------
Net income for the second quarter of 1998 was $2,181,000 compared with
$7,126,000 earned in the second quarter of 1997, a decrease of $4,945,000. Basic
earnings per share for the second quarter of 1998 were $.33 as compared to $1.09
for 1997, while diluted earnings per share were $.32 for 1998 compared with
$1.06 for 1997.
Core earnings for the second quarter increased $51,000 to $2,181,000 in 1998
from $2,130,000 in 1997. Core earnings for the second quarter of 1997 were
calculated by excluding the after-tax gain on the sale of the credit card
portfolio of $4,996,000.
Key performance indicators for the 1998 second quarter compared to the 1997
second quarter (both before and after the nonrecurring gain) are as follows
(amounts in thousands except earnings per share data):
<TABLE>
<CAPTION>
1997
(excluding
nonrecurring
1998 1997 gain)
------- ------- -------------
<S> <C> <C> <C>
Net income $2,181 $7,126 $2,130
Earnings per share:
Basic $ .33 $ 1.09 $ .33
Diluted $ .32 $ 1.06 $ .32
Return on average assets .94% 3.80% 1.14%
Return on average
shareholders' equity 11.98% 48.32% 14.44%
</TABLE>
Net interest income is the difference between interest earned on loans and
investments and interest paid on deposits and other interest-bearing
liabilities. Net interest income, on a tax-equivalent basis, decreased $651,000
or 8% from 1997. This decrease is attributable to a 26% increase in average
earning assets, offset by a 27% decrease in the net interest margin. The net
interest margin for the second quarter of 1998 was 3.27% compared to 4.48% for
the same period last year. The compression in the net interest margin was the
result of the change in the composition of average earning assets due to the
sale of the credit card portfolio and to a lesser extent, competitive pricing
for loans and deposits.
13
<PAGE>
Average balances and effective interest yields and rates on a tax equivalent
basis for the second quarters of 1998 and 1997 were as follows (dollars in
thousands):
<TABLE>
<CAPTION>
1998 1997
-------------------- --------------------
Average Effective Average Effective
Balance Yield Balance Yield
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Federal funds sold $ 56,190 5.56% $ 8,235 5.46%
Interest-bearing
deposits with banks 11,435 6.70 198 6.08
Securities 311,101 6.38 257,967 6.50
Loans 488,784 8.05 423,977 9.36
-------- ---- -------- ----
Total earning assets/
yield $867,510 7.27% $690,377 8.25%
======== ==== ======== ====
Interest-bearing
deposits $570,490 4.99% $464,394 4.78%
Short-term debt 58,063 5.24 64,472 5.18
FHLB borrowings 56,000 5.81 8,214 5.67
-------- ---- -------- ----
Total interest-bearing
liabilities/cost of
funds $684,553 5.08% $537,080 4.84%
======== ==== ======== ====
Net interest margin 3.27% 4.48%
==== ====
Net interest spread 2.19% 3.41%
==== ====
</TABLE>
In comparison to the second quarter of 1997, average loans for the second
quarter of 1998 grew 15%, or $64.8 million, led by indirect auto loans (up $58.6
million), commercial loans (up $21.9 million), commercial real estate loans (up
$19.7 million) and home equity loans (up $7.8 million). These increases were
partially offset by a decrease in credit card loans due to the sale of the
portfolio ($54 million). Loan growth since December 31, 1997 of $53.8 million
was primarily due to indirect auto (up $23.4 million) and commercial loans (up
$22.0 million).
Average interest-bearing liabilities increased $147.5 million or 27% as compared
to the second quarter of 1997 due primarily to increases in average Federal Home
Loan Bank borrowings and average time deposits. In addition, time deposits
increased $84.4 million since December 31, 1997 in response to a successful
retail deposit promotion.
Based on management's review of the adequacy of the loan loss reserve, the
Company recorded a provision for loan losses of $90,000 for the second quarter
of 1998 compared to $1,175,000 in 1997. This decrease was mainly the result of a
special provision for loan losses of $800,000 in 1997 related to the sale of the
14
<PAGE>
credit card portfolio as well as low levels of nonperforming loans. See Asset
Quality Section.
Total other income, excluding the gain on the sale of the credit card portfolio
in 1997, increased $624,000 or 45%. Service charges on deposit accounts
increased $117,000 primarily due to an increase in business account analysis
fees.
Investment management and trust fee income rose $77,000 principally due to an
increase in discretionary assets under investment management and other new trust
business. Discretionary assets under investment management totaled $174 million
at June 30, 1998 compared to $115 million at June 30, 1997.
Merchant card processing fees increased $83,000 primarily due to several new
large volume merchants and continued marketing efforts. Merchant interchange
expense (in other operating expenses) also rose $68,000 as compared to the
second quarter of 1997.
Other operating income increased $347,000 primarily due to income of $225,000
earned from the revenue sharing agreement on the sold credit card portfolio, the
introduction of ATM surcharge fees and gains on mortgages sold into the
secondary market.
Other expenses for the second quarter rose $166,000 compared to 1997. Salaries
and employee benefits rose $342,000 as compared to 1997 due to normal raises, a
highly competitive job market for new hires and increased requirements for staff
in the new Aurora branch and other growing areas of the bank. These additional
salaries were offset by the elimination of salaries due to the sale of the
credit card portfolio.
Occupancy and equipment expenses increased $79,000 primarily due to an upgrade
of the mainframe computer system and the new Aurora branch.
Data processing fees decreased $225,000 and advertising costs decreased $75,000
primarily as a result of the sale of the credit card portfolio.
Earnings Highlights - Six Month Results
- -------------------
Net income for the six months ended June 30, 1998 was $4,259,000, compared with
$9,339,000 earned in 1997, a decrease of $5,080,000. Basic earnings per share
for the first six months of 1998 were $.64 as compared to $1.42 earned in 1997
while diluted earnings per share were $.62 in 1998 as compared to $1.38 in 1997.
Earnings, excluding nonrecurring items, for the first six months of 1998
increased $198,000 or 5% as compared to earnings, excluding nonrecurring items,
for the same period in 1997.
15
<PAGE>
Earnings, excluding nonrecurring items, in 1998 excludes the after-tax gain on
the sale of securities while earnings, excluding nonrecurring items, in 1997
excludes the gain on the sale of property, the gain on the sale of the credit
card portfolio as well as the loss on securities sales.
Key performance indicators both before and after the non-recurring items for the
first six months of 1998 and 1997 compare as follows (amounts in thousands
except earnings per share):
<TABLE>
<CAPTION>
1998 1997
(excluding (excluding
nonrecurring nonrecurring
1998 1997 items) items)
---- ---- ------ ------
<S> <C> <C> <C> <C>
Net income $4,259 $9,339 $4,207 $4,009
Earnings per share:
Basic $ .64 $ 1.42 $ .63 $ .61
Diluted $ .62 $ 1.38 $ .61 $ .59
Return on average
assets .95% 2.49% .95% 1.07%
Return on average
shareholders'
equity 11.65% 32.08% 11.65% 13.77%
</TABLE>
On a tax equivalent basis, net interest income for the first six months of 1998
totaled $13,811,000 as compared to $15,069,000 in 1997, an 8% decrease. This
decrease is due to a 19% increase in average earning assets offset by a 23%
decrease in the net interest margin to 3.37% in 1998 from 4.39% in 1997. The
compression of the net interest margin was the result of a change in the
composition of average earning assets due to the sale of the credit card
portfolio and competitive pricing for loans and deposits.
16
<PAGE>
Average balances and effective interest yields and rates on a tax equivalent
basis for the first six months of 1998 and 1997 were as follows (dollars in
thousands):
<TABLE>
<CAPTION>
1998 1997
---------------------- --------------------
Average Effective Average Effective
Balance Yield Balance Yield
--------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Federal Funds sold $ 38,050 5.54% $ 11,250 5.36%
Interest-bearing
deposits with banks 11,212 6.76 256 5.50
Securities 301,288 6.40 259,115 6.48
Loans 475,503 8.06 421,822 9.27
--------- --------- --------- ---------
Total earning assets/
yield $826,053 7.32% $692,443 8.16%
========= ========= ======== =========
Interest-bearing
deposits $534,400 4.96% $476,066 4.78%
Short-term debt 55,458 5.23 59,907 5.12
FHLB borrowings 55,508 5.79 5,746 5.69
--------- --------- -------- ---------
Total interest-bearing
liabilities/cost of
funds $645,366 5.05% $541,719 4.83%
========= ========= ======== =========
Net interest margin 3.37% 4.39%
========= =========
Net interest spread 2.27% 3.33%
========= =========
</TABLE>
In comparison to the six months ended June 30 1997, average loans for the six
month period ended June 30, 1998 grew 13%, or $53.7 million, led by indirect
auto loans (up $55.4 million), commercial real estate loans (up $19.8 million),
commercial loans (up $16.0 million), and home equity loans (up $8.9 million).
These increases were partially offset by a decrease in credit card loans due to
the sale of the portfolio ($54 million).
Average interest-bearing liabilities for the period increased $103.6 million or
19% as compared to the same period of 1997 due primarily to increases in average
Federal Home Loan Bank borrowings and average time deposits.
Total other income excluding the gain on the sale of the credit card portfolio
rose $1,097,000 or 39% over 1997. Service charges on deposit accounts increased
$209,000 primarily due to an increase in business account analysis fees.
Investment management and trust fees rose $8,000 primarily due to an increase in
discretionary assets under investment management and other new trust business
offset by a change to quarterly billing in 1997 from annual billing in 1996.
17
<PAGE>
Merchant card processing fees increased $157,000 primarily due to several new
large volume merchants and continued marketing efforts. Merchant interchange
expense (in the other operating expenses) also rose $128,000 as compared to the
same period in 1997.
Other operating income increased $635,000 primarily due to income of $450,000
earned from the revenue sharing agreement on the sold credit card portfolio, the
introduction of ATM surcharge fees and gains on mortgages sold into the
secondary market.
Total other expenses for the six month period increased $545,000, or 5%.
Excluding the non-recurring gain on the property sale in 1997, other expenses
increased only $30,000 as compared to 1997. Salaries and employee benefits
increased $648,000 due to normal raises, a highly competitive job market for new
hires and increased requirements for staff in the new Aurora branch and other
growing areas of the bank. These additional salaries were offset by the
elimination of salaries due to the sale of the credit card portfolio.
Occupancy and equipment expenses for the first six months of 1998 increased
$102,000 primarily due to an upgrade to the mainframe computer system and the
new Aurora branch.
Data processing costs decreased $526,000 and advertising costs decreased
$181,000, primarily as a result of the sale of the credit card portfolio.
Other operating expenses decreased $108,000 primarily as a result of the sale of
the credit card portfolio, offset by an increase in merchant interchange
expense.
Asset Quality
- ------------
Asset quality remains very strong, with nonperforming loans (nonaccrual loans
and loans past due 90 days or more and still accruing) totaling $310,000, or
.06%, of loans outstanding. There was no other real estate owned as of June 30,
1998.
Net charge-offs year-to-date totaled $526,000, or .22% (annualized), of average
loans outstanding. Of total net charge-offs year-to-date, $451,000 related to an
overdraft. The Company's subsidiary is vigorously pursuing recovery of this
charge-off in a lawsuit filed in Federal Court for the Northern District of
Illinois. The suit names a commercial customer and a major Loop bank as
defendants. The complaint alleges the commercial customer perpetrated an
improper kiting scheme and a major Chicago bank violated the requirements for
the timely return of the subject checks imposed on it by law and regulations.
Currently the case is in a discovery phase. At June 30, 1998 the Company's loan
loss
18
<PAGE>
reserve totaled $3,953,000, or .79%, of loans outstanding. Management believes
the loan loss reserve is at an adequate level commensurate with the risks
inherent in the loan portfolio.
The following table summarizes the Company's nonperforming assets (in
thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------- -----------
<S> <C> <C>
Nonaccrual $ - $ -
Loans which are past due
90 days or more 310 378
--------- ----------
Total nonperforming loans 310 378
Other real estate owned - -
--------- ---------
Total nonperforming assets $ 310 $ 378
========= =========
Nonperforming loans to loans
outstanding .06% .09%
Nonperforming assets to loans
outstanding and other real
estate owned .06% .09%
Allowance for loan losses to
nonperforming loans 12.75x 11.45x
</TABLE>
Capital
- -------
Shareholders' equity remains strong at $73.5 million. The Company and its
subsidiary bank's Tier 1, total risk-based capital and leveraged ratios are in
excess of minimum regulatory guidelines and also exceed the FDIC criteria for
"well capitalized" banks. The following table shows the capital ratios of the
Company and its subsidiary bank as of June 30, 1998 and the minimum ratios for
"well capitalized" banks. The Federal regulators exclude the after-tax
unrealized gain/loss on securities available for sale from these ratios.
<TABLE>
<CAPTION>
Well Company Oak Brook
Capitalized Consolidated Bank
------------ ------------- ----------
<S> <C> <C> <C>
Tier 1
Risk-based (GREATER THAN) 6% 12.44% 11.34%
Total Capital
Ratio (GREATER THAN) 10% 13.12% 12.02%
Tier 1 Capital
leverage (GREATER THAN) 5% 7.62% 6.94%
</TABLE>
On January 28, 1997, the Company's Board of Directors authorized a stock
repurchase program allowing the Company to repurchase up to 4%, or approximately
270,000 shares, of its Class A or common stock through mid-1998. This repurchase
plan was completed during the second quarter of 1998.
19
<PAGE>
On January 27, 1998, the Board of Directors authorized another stock repurchase
program. This program allows the Company to repurchase up to an additional
200,000 shares of its Class A common stock over the following 18 months.
Repurchases are being made in the open market or through negotiated transactions
from time to time depending on market conditions. The repurchased stock is held
as treasury stock to be used for general corporate purposes. As of June 30,
1998, approximately 174,000 shares of stock remain to be purchased under this
repurchase plan.
Liquidity
- ---------
Effective management of balance sheet liquidity is necessary to fund growth in
earning assets and to pay liability maturities, depository customers' withdrawal
requirements and shareholders' dividends.
The Company has numerous sources of liquidity including a significant portfolio
of shorter term assets, readily marketable investment securities, its deposit
base, and access to borrowing arrangements. Available borrowing arrangements are
summarized as follows:
Oak Brook Bank:
Informal Federal funds lines of $115 million with six correspondent banks,
subject to continued good financial standing.
Reverse repurchase agreement lines of $125 million with three brokerage
firms, subject to the availability of collateral and continued good
financial standing.
Additional advances from the Federal Home Loan Bank of Chicago, subject to
the pledge of specific collateral and FHLB stock ownership.
Parent Company:
Revolving credit arrangement for $5 million. The line is currently unused
and matures on May 1, 1999. It is anticipated to be renewed annually.
The parent company also had cash, short-term investments, and other readily
marketable securities totaling $7.2 million at June 30, 1998.
Year 2000 Compliance
- --------------------
The Company has developed and is implementing its Year 2000 Project Plan ("The
Plan"). The Company has completed an assessment of its computer hardware and
software and physical
20
<PAGE>
plant equipment ("The Systems"). The Plan's Assessment Phase identified the
Company's vendors and the Company has contacted these vendors regarding their
Systems' Year 2000 compliance. The Company is currently in the Testing Phase and
has thus far determined that some of its older PC's were not Year 2000
compliant; therefore, the Company has replaced these PC's. The Testing Phase
will continue through the first half of 1999. The Company's core data processing
system is the Jack Henry Silverlake System, and the Company has received written
assurances from Jack Henry that a current release is Year 2000 compliant. The
Company plans to install this release in November 1998 and is scheduled to test
it for compliance in early 1999. The Company currently estimates that the out of
pocket costs for testing will be under $100,000; this cost however does not
include the number of internal man-hours expended to assess, test and certify
that its Systems are Year 2000 compliant, nor does it include costs associated
with replacing a non-compliant system which it may discover in the Testing
Phase. The Company will continue to expense costs for Year 2000 compliance as
they occur consistent with generally accepted accounting principals.
Branch Expansion
- ----------------
The Company's strategy is to invest in future growth through branch expansion in
Chicago's western suburbs. This form of growth requires a significant investment
in non-earning assets during the construction phase. Upon completion, for a
time, expenses exceed the income of the branch. While new branches retard short-
term earnings, we believe our market warrants judicious office additions.
In early January, 1998, the Company opened a new branch in Aurora, Illinois.
Operations of the Aurora branch through June 30, 1998 had a net after-tax cost
of approximately $.02 per basic and diluted share.
Currently, construction is in progress for another new branch to be opened
during September, 1998 in Glen Ellyn, Illinois. Costs incurred on the Glen Ellyn
branch are being capitalized during construction. The Company will bear more
expenses, including depreciation, when the branch is put into service.
In June, 1998, the Company entered into a contract, subject to certain
conditions, to purchase a site for a branch in LaGrange, Illinois. This branch
is expected to open in 1999. Costs incurred for the LaGrange branch have been
capitalized. The Company will begin to incur more expenses, including
depreciation, when the branch is put into service.
Forward Looking
- ---------------
This report contains certain forward looking statements consisting of estimates
with respect to the financial condition, results of operations and business of
the Company that are
21
<PAGE>
subject to various factors which could cause actual results to differ from these
estimates. These factors include, but are not limited to, changes in: general
economic conditions, interest rates, legislative or regulatory changes, loan
demand and depositor preferences. These risks and uncertainties should be
considered in evaluating forward-looking statements.
22
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders was held May 5, 1998 at 1400 Sixteenth
Street, Oak Brook Bank Conference Center, Oak Brook, Illinois.
Matters presented to the shareholders for vote were the election of directors,
the approval of an amendment to the certificate of incorporation, the approval
of an amendment to the Company's Amended and Restated 1987 Employee Stock Option
Plan and the ratification of the selection of the independent auditors. The
results of the votes on these matters as restated for the stock dividend
declared on July 21, 1998 are as follows:
<TABLE>
<CAPTION>
ELECTION OF DIRECTORS
- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
For Directors
EUGENE RICHARD FRANK MIRIAM GEOFFREY ROBERT MICHAEL STUART
HEYTOW RIESER PARIS FITZGERALD STONE WROBEL STEIN GREENBAUM
--------- --------- --------- ---------- --------- --------- --------- ---------
Total Common Votes 2,570,160 2,570,160 2,570,160 2,570,160 2,570,160 2,570,160 2,570,160 2,570,160
Total Class A Votes 139,340 138,200 139,360 139,340 139,278 139,300 139,240 139,132
--------- --------- --------- --------- --------- --------- --------- ---------
Total Votes 2,709,500 2,708,360 2,709,520 2,709,500 2,709,438 2,709,460 2,709,400 2,709,292
Percent of Total Vote 87% 87% 87% 87% 87% 87% 87% 87%
Votes Withheld
EUGENE RICHARD FRANK MIRIAM GEOFFREY ROBERT MICHAEL STUART
HEYTOW RIESER PARIS FITZGERALD STONE WROBEL STEIN GREENBAUM
--------- --------- --------- ---------- --------- --------- --------- ---------
Total Common Votes 2,324 2,324 2,324 2,324 2,324 2,324 2,324 2,324
Total Class A Votes 322 1,462 302 322 384 362 422 530
--------- --------- --------- --------- --------- --------- --------- ---------
Total Votes 2,646 3,786 2,626 2,646 2,708 2,686 2,746 2,854
Percent of Total
Vote .09% .12% .08% .09% .09% .09% .09% .09%
</TABLE>
23
<PAGE>
FIRST OAK BROOK BANCSHARES, INC. AND SUBSIDIARY
CONSIDERATION AND APPROVAL OF AN AMENDMENT TO CERTIFICATE OF INCORPORATION TO
INCREASE AUTHORIZED SHARES OF COMMON AND CLASS A COMMON STOCK
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
---------- -------- --------
<S> <C> <C> <C>
Total Common
Votes 2,541,778 21,608 9,530
Total Class A
Votes 133,798 6,932 2,664
--------- ------ ------
Total Votes 2,675,576 28,540 12,194
Percent of Total
Vote 86.98% .92% .39%
</TABLE>
CONSIDERATION AND APPROVAL OF AN AMENDMENT TO THE COMPANY'S AMENDED AND RESTATED
1987 EMPLOYEE STOCK OPTION PLAN
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
---------- -------- --------
<S> <C> <C> <C>
Total Common
Votes 2,460,668 21,940 8,630
Total Class A
Votes 85,232 10,860 3,612
--------- ------ ------
Total Votes 2,545,900 32,800 12,242
Percent of Total
Vote 81.81% 1.05% .39%
</TABLE>
RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS FOR
THE COMPANY
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
---------- -------- --------
<S> <C> <C> <C>
Total Common
Votes 2,563,916 2,676 6,324
Total Class A
Votes 139,888 926 2,580
--------- ------ ------
Total Votes 2,703,804 3,602 8,904
Percent of Total
Vote 86.88% .12% .29%
</TABLE>
The number of Common and Class A Common shares eligible to vote were 2,923,330
and 3,774,480 respectively. The Class A Common shares represent 188,724 votes
because each share is entitled to 1/20th of one vote.
24
<PAGE>
FIRST OAK BROOK BANCSHARES, INC. AND SUBSIDIARY
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
Exhibit (3) Articles of Incorporation including amendments thereto
and By Laws of First Oak Brook Bancshares, Inc.
Exhibit (10.1) Loan agreement between First Oak Brook Bancshares, Inc.
and LaSalle National Bank dated December 1, 1991 as
amended May 1, 1998 filed herewith.
Exhibit (27) Financial Data Schedule
B. Reports on Form 8-K
Item 4. Changes in Registrants certifying accountants filed on July
28, 1998.
25
<PAGE>
FIRST OAK BROOK BANCSHARES, INC. AND SUBSIDIARY
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.
FIRST OAK BROOK BANCSHARES, INC.
--------------------------------
(Registrant)
Date August 12, 1998 /s/RICHARD M. RIESER, JR.
----------------- --------------------------------
Richard M. Rieser, Jr.,
President, Assistant
Secretary, and Director
Date August 12, 1998 /s/ROSEMARIE BOUMAN
----------------- -------------------------------
Rosemarie Bouman,
Vice President, Chief
Financial Officer and
Chief Accounting Officer
26
<PAGE>
EXHIBIT (3)
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
FIRST OAK BROOK BANCSHARES, INC.
----------------------------------------------
Adopted in accordance with the provisions of
Section 242 of the General Corporation Law
of the State of Delaware
----------------------------------------------
We, Richard M. Rieser, Jr. and William E. Navolio, President and Secretary,
respectively, of FIRST OAK BROOK BANCSHARES, INC., a corporation existing under
the laws of the State of Delaware, do hereby certify as follows:
FIRST: That the Certification of Incorporation of said corporation has been
amended as follows:
By striking out the whole of Article IV thereof as it now exists and
inserting in lieu and instead thereof, a new Article IV, reading as follows:
ARTICLE IV
----------
The total number of shares of stock which the Corporation is authorized to
issue is (4,110,000) shares, consisting of three (3) classes. The designation
of each class, the series, if any, of the shares of each class, the par value,
if any, of the shares of each class, or a statement that the shares of any class
are without par value, are as follows:
Class Series No. of Shares Par Value Per Share
- -------------------------------------------------------------
Class A None 2,000,000 --
Common $2.00
Common None 2,000,000 $2.00
Preferred A 10,000 None
Preferred B 100,000 --
1
<PAGE>
A. Class A Common Stock and Common Stock.
-------------------------------------
There shall be two classes of common stock of the Corporation. One class
shall be known as Class A Common Stock. The other class shall be known as
Common Stock. Except as otherwise provided herein, all shares of Class A Common
Stock and Common Stock will be identical and will entitle the holders thereof to
the same rights and privileges.
(1) Dividends. Subject to any rights to receive dividends to which the
---------
holders of the shares of the Preferred Stock may be entitled, the
holders of shares of Class A Common Stock and Common Stock shall be
entitled to receive dividends, if and when declared payable from time
to time by the Board of Directors from any funds legally available
therefor. No dividend, other than a dividend payable in shares of
Common Stock, may be declared or paid on shares of Common Stock,
unless simultaneously therewith, there is or has been declared and
paid, as the case may be, a dividend on the shares of Class A Common
Stock of at least 120% of the dividend on the shares of Common Stock.
Dividends may be declared and paid on shares of Class A Common Stock,
even if dividends are not declared on shares of Common Stock. In the
event that dividends are declared which are payable in shares of Class
A Common Stock or Common Stock, dividends will be declared which are
payable at the same rate on both classes of common stock, and the
dividends payable in shares of Class A Common Stock will be payable to
holders of Class A Common Stock and the dividends payable in shares of
Common Stock will be payable to holders of Common Stock.
(2) Voting Rights. Except as otherwise required by law, the holders of
-------------
Class A Common Stock will be entitled to one-twentieth of one vote per
share on all matters to be voted on by the Corporation's stockholders,
and the holders of Common Stock will be entitled to one vote per share
on any matters to be voted on by the Corporation's stockholders. The
shares of Class A Common Stock and Common Stock vote together as a
single class on all matters; except (0 the holders of Class A Common
Stock and Common Stock will be entitled to vote as separate classes on
any merger, consolidation, sale of assets, liquidation or business
combination, which requires the approval of the stockholders and in
which the consideration per share to be received by holders of Class A
Common Stock is determined by the Board of Directors (whose
determination shall be final unless manifestly unfair) to be less than
the consideration per share to be received by the holders of Common
Stock and (ii) as otherwise required by law.
(3) Liquidation. In the event of any voluntary or involuntary
-----------
liquidation, dissolution, or winding up of the affairs of the
Corporation, after there shall have been paid to the holders of shares
of Preferred Stock the full amounts to which they shall be entitled,
the holders of record of the then outstanding shares of Class A Common
Stock shall be entitled to receive out of the assets of the
Corporation available for distribution to its stockholders, pro rata,
an amount equal to the price per share paid by the public in the
initial public offering of the Class A Common Stock before any amount
is paid to the holders of the Common Stock. After such preferential
amount has been paid to the holders of Class A Common Stock, the
holders of the Common Stock shall be
2
<PAGE>
entitled to receive, out of the assets available for distribution to
the holders of Common Stock, an amount per share equal to the amount
per share received by the holders of Class A Common Stock pursuant to
the previous sentence before any further distribution shall be paid to
the holders of Class A Common Stock. Thereafter, the holders of Class
A Common Stock and Common Stock shall be entitled to share ratably in
the distribution of the Corporation's remaining assets. The Board of
Directors may distribute in kind to the holders of the shares of Class
A Common Stock and Common Stock such remaining assets of the
Corporation or may sell, transfer or otherwise dispose of all or any
part of such remaining assets to any other corporation, trust or other
entity and receive payment therefor in cash, stock or obligations of
any other corporation, trust or entity, or any combination thereof,
and may sell all or any part of the consideration so received and
distribute any balance thereof in kind to holders of the shares of
Class A Common Stock and Common Stock. For purposes of this
subparagraph A(3), the consolidation or merger of the Corporation with
or into another corporation shall not constitute, nor shall the sale,
lease, or conveyance of all or substantially all of the assets of the
Corporation as an entirety in and of itself constitute a liquidation,
dissolution, or winding up of the affairs of the Corporation as such
terms are used herein.
(4) Conversion.
----------
(a) Conversion of Common Stock. Each record holder of Common Stock is
--------------------------
entitled at any time to convert any or all of the shares of such holder's
Common Stock into the same number of shares of Class A Common Stock.
(b) Conversion Procedure.
--------------------
(i) Each conversion of shares of Common Stock into shares of Class A
Common Stock will be effected by the surrender of the certificate or
certificates representing the shares to be converted at the principal
office of the Corporation at any time during normal business hours,
together with a written notice by the holder of such Common Stock stating
that such holder desires to convert the shares, or a stated number of the
shares, of Common Stock represented by such certificate or certificates
into Class A Common Stock and that upon such conversion such holder and its
affiliates will not directly or indirectly own, control or have the power
to vote a greater quantity of securities of any kind issued by the
Corporation than such holder and its affiliates are permitted to own,
control or have the power to vote under any applicable law, regulation,
rule or other governmental requirement. Such statement will obligate the
Corporation to issue such Class A Common Stock. Such conversion will be
deemed to have been effected as of the close of business on the date on
which such certificate or certificates have been surrendered and such
notice has been received, and at such time the rights of the holder of the
converted Common Stock as such holder will cease and the person or persons
in whose name or names the certificate or certificates for shares of Class
A Common Stock are to be issued upon such conversion will be deemed to have
become the holder or holders of record of the shares of the Class A Common
Stock represented thereby.
(ii) Promptly after such surrender and the receipt of such written notice,
the Corporation will issue and deliver in accordance with the surrendering
holder's instructions (a) the
3
<PAGE>
certificate or certificates for the Class A Common Stock issuable upon such
conversion and (b) a certificate representing any Common Stock which was
represented by the certificate or certificates delivered to the Corporation
in connection with such conversion but which was not converted.
(iii) If the Corporation in any manner subdivides or combines the
outstanding shares of one class of common stock, the outstanding shares of
the other class of common stock will be proportionately subdivided or
combined.
(iv) The issuance of certificates for Class A Common Stock upon conversion
of Common Stock will be made without charge to the holders of such shares
for any issuance tax in respect thereof or other cost incurred by the
Corporation in connection with such conversion and the related issuance of
Class A Common Stock.
(v) The Corporation will not close its books against the transfer of
Common Stock or of Class A Common Stock issued or issuable upon conversion
of Common Stock in any manner which would interfere with the timely
conversion of Common Stock.
(5) Registration of Transfer. The Corporation will keep at its principal
------------------------
office (or such other place as the Corporation reasonably designates) a
register for the registration of shares of common stock. Upon the
surrender of any certificate representing shares of any class of common
stock at such place, the Corporation will, at the request of the registered
holder of such certificate, execute and deliver a new certificate or
certificates in exchange therefor representing in the aggregate the number
of shares of such class represented by the surrendered certificate, and the
Corporation forthwith will cancel such surrendered certificate. Each such
new certificate will be registered in such name and will represent such
number of shares of such class as is requested by the holder of the
surrendered certificate and will be substantially identical in form to the
surrendered certificate. The issuance of new certificates will be made
without charge to the holders of the surrendered certificates for any
issuance tax in respect thereof or other cost incurred by the Corporation
in connection with such issuance.
B Series A Preferred Stock.
------------------------
The rights, preferences and voting powers of the Series A Preferred Stock,
with restrictions and qualifications thereof, are as follows:
(1) Each share of Series A Preferred Stock will have equal voting rights
with each share of Common Stock. As long as any shares of the Series A
Preferred Stock are outstanding, no amendment, alteration or repeal of any
of the express terms of this Preferred Stock may be made without the
consent of the holders of at least two-thirds of the total of the then
outstanding Series A Preferred Stock. Holders of the Series A Preferred
Shares shall have pre-emptive rights to subscribe for additional shares of
the same class and series of stock.
(2) If and when declared payable from time to time by the Board of
Directors of the Corporation from funds legally available therefor, the
holders of shares of Series A Preferred Stock shall be entitled to receive
preferential cash dividends at the rate per share of Series A
4
<PAGE>
Preferred Stock of One Dollar and Sixty-Five Cents per annum ($1.65), and
no more, before any dividends shall be declared, set apart for or paid upon
the Series B Preferred Stock, the Class A Common Stock or the Common Stock.
The right to such a Series A Preferred Stock dividend is cumulative, and
those preferential cash dividends currently due as well as all those past
due must be declared, and set aside or fully paid before any distribution,
by dividend or otherwise, is paid on, declared or set apart for the Series
B Preferred Stock, the Class A Common Stock or the Common Stock and before
any shares of the Series B Preferred Stock, the Class A Common Stock or the
Common Stock shall be purchased, redeemed, or otherwise acquired for value
by the Corporation.
(3) In the event of any voluntary or involuntary liquidation,
dissolution, or winding up of the affairs of the Corporation, the holders
of record of the then outstanding shares of Series A Preferred Stock shall
be entitled to receive, out of the assets of the Corporation available for
distribution to its stockholders, whether from capital, surplus, or
earnings, an amount equal to Nineteen Dollars and Thirty-Three Cents
($19.33) for each of such shares of Series A Preferred Stock, plus the
amount of all accrued and unpaid cumulative dividends up to the date of
such liquidation, dissolution, or winding up, whether or not earned or
declared, and no more. If, upon any such liquidation, dissolution, or
winding up of the Corporation, the assets thus distributable among the
holders of the Series A Preferred Stock shall be insufficient to permit the
payment of such preferential amount to the holders of the Series A
Preferred Stock, then the entire assets of the Corporation thus
distributable shall be distributed ratably among the holders of the Series
A Preferred Stock. After payment to the holders of the Series A Preferred
Stock of the amount payable to them as aforesaid, the remaining assets of
the Corporation shall be payable to and distributed among the holders of
Series B Preferred Stock in amounts set in accordance with any terms,
conditions, preferences, rights, qualifications, limitation or restrictions
as the Board of Directors may have prescribed. If the assets thus
distributable among the holders of the Series B Preferred Stock shall be
insufficient to permit the payment of such amounts to the holders of the
Series B Preferred Stock, then the assets of the Corporation thus
distributable shall be distributed ratably among the holders of the Series
B Preferred Stock. After payment to the holders of the Series B Preferred
Stock of the amount payable to them as aforesaid, the remaining assets of
the Corporation shall be payable to and distributed among the holders of
record of the Class A Common Stock and Common Stock as set forth in
subparagraph A(3). However, the Corporation may declare and pay dividends
upon any class or classes of stock, as provided in subparagraph B(2) above,
without being required to accumulate any reserve or otherwise provide in
advance for any such payment of a liquidation preference to the holders of
the Series A Preferred Stock. For purposes of this subparagraph B(3), the
consolidation or merger of the Corporation with or into another corporation
shall not constitute, nor shall the sale, lease, or conveyance of all or
substantially all of the assets of the Corporation as an entirety in and of
itself constitute a liquidation, dissolution, or winding up of the affairs
of the Corporation as such terms are used herein.
(4) The outstanding shares of the Series A Preferred Stock shall be
converted into Common Stock of the Corporation, at the conversion ratio of
two shares of Common Stock for each share of Series A Preferred Stock
between August 9, 1987 and August 8, 1992. The exact time of the conversion
between these dates shall be determined by the Board of
5
<PAGE>
Directors of the Corporation in its sole discretion. No additional payment
will be required at the time of the conversion of the Series A Preferred
Stock into Common Stock.
(5) In case the Corporation shall (i) pay a dividend or make a
distribution in shares of Common Stock, (ii) subdivide its outstanding
shares of Common Stock, (iii) combine its outstanding shares of Common
Stock into a smaller number of shares, or (iv) issue any shares by
reclassification of its shares of Common Stock, the conversion ratio in
effect at the time of the record date for such dividend or distribution or
the effective date of such subdivision, combination or reclassification
shall be adjusted immediately following such record or effective date so
that the holder of any shares of the Series A Preferred Stock shall be
entitled to receive for such shares if surrendered for conversion after
such time the number of shares of capital stock of the Corporation which
such holder would have held following such record or effective date had
such shares of the Series A Preferred Stock been converted immediately
prior to such time. The new conversion ratio shall be calculated to the
nearest one-tenth of one share.
(6) If at any time or from time to time there shall be a capital
reorganization of the Common Stock (other than as provided in subparagraph
B(5)) or a merger or consolidation of the Corporation with or into another
corporation, or the sale of all or substantially all of the Corporation's
properties and assets to any other person, then, as a part of such
reorganization, merger, consolidation or sale, provision shall be made so
that the holders of the Series A Preferred Stock shall thereafter be
entitled to receive upon conversion of the Series A Preferred Stock, the
number of shares of stock or other securities or property of the
Corporation, or of the successor corporation resulting from such merger or
consolidation or sale, to which a holder of Common Stock deliverable upon
conversion would have been entitled on such capital reorganization, merger,
consolidation, or sale. In any such case, appropriate adjustment shall be
made in the application of the provisions of this subparagraph B(6) with
respect to the rights of the holders of the Series A Preferred Stock after
the reorganization, merger, consolidation or sale to the end that the
provisions of this subparagraph B(6) shall be applicable after that event
in as nearly equivalent a manner as may be practicable.
(7) No fractional shares of Common Stock shall be issued upon conversion
of shares of the Series A Preferred Stock, but the Corporation shall pay a
cash adjustment in lieu of fractional shares of Common Stock to be
determined by the Board of Directors (whose determination will be final
unless manifestly unfair).
C. Series B Preferred Stock.
------------------------
The Series B Preferred Stock of the Corporation shall be issued and sold
from time to time as the Board of Directors may elect; and upon such terms and
conditions, and with such voting powers, designations, preferences and relative,
participating, optional or other rights, or qualifications, limitations or
restrictions, as the Board of Directors may prescribe and which shall be
endorsed upon the certificates representing said stock.
SECOND: That such amendment has been duly adopted in accordance with the
provisions of the General Corporation Law of the State of Delaware by the
written consent of
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stockholders owning at least a majority of the shares of stock of the
Corporation, in accordance with the provisions of Sections 228 and 242 of the
General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, we have signed this certificate this 13th day of
November, 1985.
R.M. Rieser, Jr.
-------------------------
President
ATTEST:
William E. Navolio
--------------------------
Secretary
7
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
First Oak Brook Bancshares, Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of First Oak Brook
Bancshares, Inc., resolutions were duly adopted setting forth a proposed
amendment of the Certificate of Incorporation of said corporation, declaring
said amendment to be advisable and placing said amendment on the agenda for the
next annual meeting of the stockholders of said corporation for consideration
thereof. The resolution setting forth the proposed amendment is as follows:
RESOLVED, that the Certificate of Incorporation of this corporation be
amended by changing the Article thereof numbered "IX" so that, as amended
said Article shall be and read as follows:
"A. No director shall be liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, provided,
however, that this paragraph shall not eliminate or limit the
liability of a director (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholder, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (iii) under Section 174 of the General
Corporation Law of the State of Delaware, or (iv) for any transaction
from which the director derived an improper personal benefit. This
paragraph shall not eliminate or limit the liability of a director for
any act or omission occurring prior to the date when this paragraph
becomes effective."
"B. The Corporation shall, to the fullest extent permitted by Section 145
of the General Corporation Law of the State of Delaware, as the same
may be amended and supplemented, indemnify any and all persons whom it
shall have power to indemnify under said section from and against any
and all of the expenses, liabilities or other matters referred to in
or covered by said section."
"C. Expenses incurred by an officer or director in defending a civil or
criminal action, suit or proceeding shall be paid by the Corporation
in advance of the final disposition of such action, suit or proceeding
upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that
he or she is not entitled to be indemnified by the Corporation as
mandated in this paragraph. Such expenses incurred by other employees
and agents may be so paid upon such terms and conditions, if any, as
the Board of Directors deems appropriate."
8
<PAGE>
"D. The indemnification and advancement of expenses provided for herein
shall not be deemed exclusive of any other rights to which those
seeking indemnification and advancement of expenses may be entitled
under any By-Law, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and
as to action in another capacity while holding such office, and shall
continue as to a person who has ceased to be director, officer,
employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person."
SECOND: That thereafter, pursuant to resolution of its Board of
Directors, the annual meeting of the stockholders of said corporation was duly
called and held, upon notice in accordance with Section 222 of the General
Corporation Law of the State of Delaware, at which meeting the necessary number
of shares as required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
FOURTH: That the capital of said corporation shall not be reduced under
or by reason of said amendment.
IN WITNESS WHEREOF, said First Oak Brook Bancshares, Inc. has caused this
certificate to be signed by Richard M. Rieser, Jr., its President, and William
E. Navolio, its Secretary, this 2nd day of June, 1987.
BY: /s/ R.M. Rieser, Jr.
----------------------
President
ATTEST: /s/ William E. Navolio
-----------------------
Secretary
2
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
First Oak Brook Bancshares, Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of First Oak Brook
Bancshares, Inc., resolutions were duly adopted setting forth a proposed
amendment of the Certificate of Incorporation of said corporation, declaring
said amendment to be advisable and placing said amendment on the agenda for the
next annual meeting of the stockholders of said corporation for consideration
thereof. The resolution setting forth the proposed amendment is as follows:
RESOLVED, that the Certificate of Incorporation of this corporation be
amended by changing the Article thereof numbered "IV" Section 1 so that, as
amended said Article shall be and read as follows:
"The total number of shares of all classes of stock which this corporation
shall have authority to issue is 5,100,000 shares. The classes and
aggregate number of shares of stock of each class which this corporation
shall have authority to issue are as follows:
(i) 3,000,000 Shares of Class A Common Stock, $2.00 par value per
share;
(ii) 2,000,000 Shares of Common Stock, $2.00 par value per share;
and
(iii) 100,000 Shares of Preferred Series B Stock without par value."
SECOND: That thereafter, pursuant to resolution of its Board of
Directors, the annual meeting of the stockholders of said corporation was duly
called and held, upon notice in accordance with Section 222 of the General
Corporation Law of the Sate of Delaware at which meeting the necessary number of
shares as required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
1
<PAGE>
IN WITNESS WHEREOF, said Corporation has caused this certificate to be
signed by Richard M. Rieser, Jr., its President, and William E. Navolio, its
Secretary, this fifth day of May, 1993.
BY: /s/ R.M. Rieser, Jr.
---------------------
President
ATTEST: /s/ William E. Navolio
-----------------------
Secretary
2
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
First Oak Brook Bancshares, Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of First Oak Brook
Bancshares, Inc., resolutions were duly adopted setting forth a proposed
amendment of the Certificate of Incorporation of said corporation, declaring
said amendment to be advisable and placing said amendment on the agenda for the
next annual meeting of the stockholders of said corporation for consideration
thereof. The resolution setting forth the proposed amendment is as follows:
RESOLVED, that the Certificate of Incorporation of this corporation be
amended by changing the Article thereof numbered "IV" Section 1 so that, as
amended said Article shall be and reason as follows:
"The total number of shares of all classes of stock which this corporation
shall have authority to issue is 7,100,000 shares. The classes and
aggregate number of shares of stock of each class which this corporation
shall have authority to issue are as follows:
(i) 4,000,000 Shares of Class A Common Stock, $2.00 par value per
share;
(ii) 3,000,000 Shares of Common Stock, $2.00 par value per share;
(iii) 100,000 Shares of Preferred Series B Stock without par value."
SECOND: That thereafter, pursuant to a resolution of its Board of
Directors, the annual meeting of the stockholders of said corporation was duly
called and held, upon notice in accordance with Section 222 of the General
Corporation Law of the State of Delaware at which meeting the necessary number
of shares as required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
1
<PAGE>
IN WITNESS WHEREOF, said Corporation has caused this certificate to be
signed by Richard M. Rieser, Jr., its President, and William E. Navolio, its
Secretary, this third day of May, 1994.
BY: /s/ R.M. Rieser, Jr.
---------------------
President
ATTEST: /s/ William E. Navolio
-----------------------
Secretary
2
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
FIRST OAK BROOK BANCSHARES, INC.
First Oak Brook Bancshares, Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the directors of First Oak Brook Bancshares, Inc. by written
consent, filed with the minutes of the board, duly adopted resolutions, setting
forth a proposed amendment to the Certification of Incorporation of said
corporation, declaring said amendment to be advisable and calling a meeting of
the stockholders of said corporation for consideration thereof. The resolutions
setting forth the proposed amendment are as follows:
RESOLVED, that Section 1 of Article IV of the Company's Certificate of
Incorporation be and it is hereby amended to read as follows:
Section 1 of Article IV. The total number of shares of all classes of
stock which this corporation shall have authority to issue is 16,100,000 of
which 10,000,000 shares shall be Class A Common Stock, $2.00 par value per
share, 6,000,000 shares shall be Common Stock, $2.00 par value per share and
100,000 shares shall be Preferred Series B Stock, without par value.
SECOND: That the aforesaid amendment was duly adopted in accordance with
the applicable provisions of Section 228 and 242 of the General Corporation Law
of the State of Delaware.
IN WITNESS WHEREOF, said First Oak Brook Bancshares, Inc. has caused this
Certificate to be signed and attested by Richard M. Rieser, Jr., its President,
and William E. Navolio, its Secretary, this 5th day of May, 1998.
FIRST OAK BROOK BANCSHARES, INC.
By: /s/ R.M. Rieser, Jr.
---------------------
President
ATTEST:
By: /s/ William E. Navolio
-----------------------
Secretary
1
<PAGE>
CERTIFICATE OF INCORPORATION
----------------------------
OF
--
FIRST OAK BROOK BANCSHARES, INC.
--------------------------------
The undersigned, a natural person, for the purpose of organizing a
corporation for conducting the business and promoting the purposes hereinafter
stated, under the provisions and subject to the requirements of the laws of the
State of Delaware (particularly Chapter 1 of Title 8 of the Delaware Code and
the acts amendatory thereof and supplemental thereto, and known, identified and
referred to as the "General Corporation Law of the State of Delaware"), hereby
certifies that:
ARTICLE I
---------
The name of the corporation (hereinafter called the "Corporation") is First
Oak Brook Bancshares, Inc.
ARTICLE II
----------
The address, including street, number, city and county, of the registered
office of the Corporation in the State of Delaware is 229 South State Street,
City of Dover, County of Kent; and the name of the registered agent of the
Corporation in the State of Delaware at such address is The Prentice-Hall
Corporation System, Inc.
ARTICLE III
-----------
The nature of the business and the purposes to be conducted and promoted by
the Corporation, which shall be in addition to the authority of the Corporation
to conduct any lawful business, to promote any lawful purpose, and to engage in
any lawful act or activity for which corporations may be organized under the
General Corporation Law of the State of Delaware, is as follows:
A. To purchase, receive, take by grant, gift, devise, bequest or
otherwise, lease, or otherwise acquire, own, hold, improve, employ,
use and otherwise deal in and with real or personal property, or any
interest therein, wherever situated, and to sell, convey, lease,
exchange, transfer or otherwise dispose of, or mortgage or pledge, all
or any of its property and assets, or any interest therein, wherever
situated.
B. To guarantee, purchase, take, receive, subscribe for, and otherwise
acquire, own, hold, use, and otherwise employ, sell, lease, exchange,
transfer, and otherwise dispose of, mortgage, lend, pledge, and
otherwise deal in and with, securities (which term, for the purpose of
this Article THIRD, includes, without limitation of the generality
thereof, any shares of stock, bonds, debentures, notes, mortgages,
other obligations, and any certificates, receipts or other instruments
representing rights to receive, purchase or subscribe for the same, or
representing any other rights or interests therein or in any property
or assets) of any persons, domestic and foreign firms, associations,
and corporations, and by any government or agency or instrumentality
thereof; to
1
<PAGE>
make payment therefor in any lawful manner, and, while owner of any
such securities, to exercise any and all rights, powers and privileges
in respect thereof, including the right to vote.
C. To acquire by purchase, exchange or otherwise, all, or any part of, or
any interest in, the properties, assets, business and good will of any
one or more persons, firms, associations or corporations heretofore or
hereafter engaged in any business for which a corporation may now or
hereafter be organized under the laws of the State of Delaware; to pay
for the same in cash, property or its own or other securities; to
hold, operate, reorganize, liquidate, sell or in any manner dispose of
the whole or any part thereof; and in connection therewith, to assume
or guarantee performance of any liabilities, obligations or contracts
of such persons, firms, associations or corporations, and to conduct
the whole or any part of any business thus acquired.
D. To organize, as an incorporator, or cause to be organized under the
laws of the State of Delaware, or of any other State of the United
States of America, or of the District of Columbia, or of any
commonwealth, territory, dependency, colony, possession, agency, or
instrumentality of the United States of America, or of any foreign
country, a corporation or corporations for the purpose of conducting
and promoting any business or purpose for which corporations may be
organized, and to dissolve, wind up, liquidate, merge or consolidate
any such corporation or corporations or to cause the same to be
dissolved, wound up, liquidated, merged or consolidated.
E. To promote and exercise all or any part of the foregoing purposes and
powers in any and all parts of the world, and to conduct its business
in all or any of its branches as principal, agent, broker, factor,
contractor, and in any other lawful capacity, either alone or through
or in conjunction with any corporations, associations, partnerships,
firms, trustees, syndicates, individuals, organizations, and other
entities in any part of the world, and, in conducting its business and
promoting any of its purposes, to maintain offices, branches and
agencies in any part of the world, to make and perform any contracts
and to do any acts and things, and to carry on any business, and to
exercise any powers and privileges suitable, convenient, or proper for
the conduct, promotion, and attainment of any of the business and
purposes herein specified or which at any time may be incidental
thereto or may appear conducive to or expedient for the accomplishment
of any of such business and purposes and which might be engaged in or
carried on by a corporation incorporated or organized under the
General Corporation Law of the State of Delaware, and to have and
exercise all of the powers conferred by the laws of the State of
Delaware upon corporations incorporated or organized under the General
Corporation Law of the State of Delaware.
The foregoing provisions of this Article THIRD shall be construed both as
purposes and powers and each as an independent purpose and power. The foregoing
enumeration of specific purposes and powers shall not be held to limit or
restrict in any manner the purposes and powers of the Corporation, and the
purposes and powers herein specified shall, except when otherwise provided in
this Article THIRD, be in no wise limited or restricted by reference to, or
inference from, the terms of any provision of this or any other Article of this
Certificate of Incorporation; provided, that the Corporation shall not conduct
any business, promote any purpose, or exercise any power or privilege within or
without the State of Delaware which, under the laws thereof, the Corporation may
not lawfully conduct, promote, or exercise.
2
<PAGE>
ARTICLE IV
----------
The total number of shares of stock which the Corporation is authorized to
issue is One Million One Hundred Ten Thousand (1,110,000) shares, consisting of
two (2) classes. The designation of each class, the series, if any, of the
shares of each class, the par value, if any, of the shares of each class, or a
statement that the shares of any class are without par value, are as follows:
Class Series No. of Shares Par Value Per Share
- --------------------------------------------------------------
Common None 1,000,000 $2.00
Preferred A 10,000 None
Preferred B 100,000 --
A. The Common Stock.
----------------
(1) Each outstanding share of Common Stock of the Corporation shall entitle the
holder thereof to one vote on each matter submitted to a vote at a meeting
of the stockholders.
(2) Subject to any rights to receive dividends to which the holders of the
shares of the Preferred Stock may be entitled, the holders of shares of
Common Stock shall be entitled to receive dividends, if and when declared
payable from time to time by the Board of Directors from any funds legally
available therefor.
(3) In the event of any dissolution, liquidation or winding up of the
Corporation, whether voluntary or involuntary, after there shall have been
paid to the holders of shares of Preferred Stock the full amounts to which
they shall be entitled, the holders of the then outstanding shares of
Common Stock shall be entitled to receive, pro rata, all of the remaining
assets of the Corporation available for distribution to its stockholders.
The Board of Directors may distribute in kind to the holders of the shares
of Common Stock such remaining assets of the Corporation or may sell,
transfer or otherwise dispose of all or any part of such remaining assets
to any other corporation, trust or other entity and receive payment
therefore in cash, stock or obligations of such other corporation, trust or
entity, or any combination thereof, and may sell all or any part of the
consideration so received and distribute any balance thereof in kind to
holders of the shares of Common Stock. The merger or consolidation of the
Corporation into or with any other corporation, or the merger of any other
corporation into it, or any purchase or redemption of shares of stock of
the Corporation of any class, shall not be deemed to be a dissolution,
liquidation or winding up of the Corporation for the purpose of this
subparagraph A (3).
B. Series A Preferred Stock.
------------------------
The rights, preferences and voting powers of the Series A Preferred Stock, with
restrictions and qualifications thereof, are as follows:
(1) Each share of Series A Preferred Stock will have equal voting rights with
each share of Common Stock. As long as any shares of the Series A Preferred
Stock are outstanding, no amendment, alteration or repeal
3
<PAGE>
of any of the express terms of this Preferred Stock may be made without the
consent of the holders of at least two-thirds of the total of the then
outstanding Series A Preferred Stock. Holders of the Series A Preferred
Shares shall have pre-emptive rights to subscribe for additional shares of
the same class and series of stock.
(2) If and when declared payable from time to time by the Board of Directors of
the Corporation from funds legally available therefor, the holders of
shares of Series A Preferred Stock shall be entitled to receive
preferential cash dividends at the rate per share of Series A Preferred
Stock of One Dollar and Sixty-Five Cents per annum ($1.65), and no more,
(a) before any dividends shall be declared, set apart for or paid upon the
Series B Preferred Stock or the Common Stock, and (b) before any shares of
the Series B Preferred Stock or the Common Stock shall be purchased,
redeemed, or otherwise acquired for value by the Corporation. The right to
such a Series A Preferred Stock dividend is cumulative, and those
preferential cash dividends currently due as well as all those past due
must be declared, and set aside or fully paid before any distribution, by
dividend or otherwise, is paid on, declared or set apart for the Series B
Preferred Stock or the Common Stock.
(3) In the event of any voluntary or involuntary liquidation, dissolution, or
winding up of the affairs of the Corporation, the holders of record of the
outstanding Series A Preferred Stock shall be entitled to be paid, out of
the assets of the Corporation available for distribution to its
stockholders, whether from capital, surplus, or earnings, an amount equal
to Nineteen Dollars and Thirty-Three Cents ($19.33) for each of such shares
of Series A Preferred Stock, plus the amount of all accrued cumulative
dividends up to the date of such liquidation, dissolution, or winding up,
whether or not earned or declared, and no more. If, upon any such
liquidation, dissolution, or winding up of the Corporation, the assets thus
distributable among the holders of the Series A Preferred Stock shall be
insufficient to permit the payment of such preferential amount to the
holders of the Series A Preferred Stock, then the entire assets of the
Corporation thus distributable shall be distributed ratably among the
holders of the Series A Preferred Stock. After payment to the holders of
the Series A Preferred Stock of the amount payable to them as aforesaid,
the remaining assets of the Corporation shall be payable to and distributed
among the holders of Series B Preferred Stock in amounts set in accordance
with any terms, conditions, preferences, rights, qualifications, limitation
or restrictions as the Board of Directors may have prescribed. If the
assets thus distributable among the holders of the Series B Preferred Stock
shall be insufficient to permit the payment of such amounts to the holders
of the Series B Preferred Stock, then the assets of the Corporation thus
distributable shall be distributed ratably among the holders of the Series
B Preferred Stock. After payment to the holders of the Series B Preferred
Stock of the amount payable to them as aforesaid, the remaining assets of
the Corporation shall be payable to and distributed pro rata among the
holders of record of the Common Stock. However, the Corporation may
declare and pay dividends upon any class or classes of stock, as provided
in subparagraph (2) above, without being required to accumulate any reserve
or otherwise provide in advance for any such payment of a liquidation
preference to the holders of the Series A Preferred Stock. For purposes of
this subparagraph (3), the consolidation or merger of the Corporation with
or into another corporation shall not constitute, nor shall the sale,
lease, or conveyance of all or substantially all of the assets of the
Corporation as an entirety in and of itself constitute, a liquidation,
dissolution, or winding up of the affairs of the Corporation as such terms
used herein.
4
<PAGE>
(4) The outstanding shares of the Series A Preferred Stock shall be converted
into Common Stock of the Corporation, at the conversion ratio of one share
of Common Stock for each share of Series A Preferred Stock, between August
9, 1987 and August 8, 1992. The exact time of the conversion between these
dates shall be determined by the Board of Directors of the Corporation in
its sole discretion. No additional payment will be required at the time of
the conversion of the Series A Preferred Stock into Common Stock.
C. Series B Preferred Stock.
------------------------
The Series B Preferred Stock of the Corporation shall be issued and sold from
time to time as the Board of Directors may elect; and upon such terms and
conditions, and with such voting powers, designations, preferences and relative,
participating, optional or other rights, or qualifications, limitations or
restrictions, as the Board of Directors may prescribe and which shall be
endorsed upon the certificates representing said stock.
ARTICLE V
---------
The name and the mailing address of the Incorporator are as follows:
NAME ADDRESS
----------------------------------------------------------------
Scott J. Lederman 208 South LaSalle Street
Suite 1100
Chicago, Illinois 60604
ARTICLE VI
----------
The powers of the Incorporator shall terminate upon the filing of this
Certificate of Incorporation. The names and mailing addresses of the persons
who shall serve as directors until the first annual meeting of the stockholders
or until their successors have been duly elected and qualified are as follows:
NAME ADDRESS
--------------------------------------------------
Eugene P. Heytow c/o Amalgamated Trust & Savings Bank
One West Monroe Street
Chicago, Illinois 60603
Marcel M. Lutwak McCormick City Limited Partnership
c/o McCormick Inn
2300 South Lake Shore Drive
Chicago, Illinois 60616
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<PAGE>
Frank M. Paris 1100 Keystone
River Forest, Illinois 60305
Richard M. Rieser, Jr. c/o Oak Brook Bank
2021 Spring Road
Oak Brook, Illinois 60521
ARTICLE VII
-----------
The Corporation is to have perpetual existence.
ARTICLE VIII
------------
For the management of the business and for the conduct of the affairs of
the Corporation, and in further definition, limitation and regulation of the
powers of the Corporation and of its directors and of its stockholders or any
class thereof, as the case may be, it is further provided:
A. The management of the business and the conduct of the affairs of the
Corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be
fixed by, or in the manner provided in, the By-Laws. The phrase
"whole Board" shall be deemed to have the same meaning, to wit, the
total number of directors which the Corporation would have if there
were no vacancies. No election of directors need be by written
ballot.
B. After the original or other By-Laws of the Corporation have been
adopted, amended, or repealed, as the case may be, in accordance with
the provisions of Section 109 of the General Corporation Law of the
State of Delaware, and after the Corporation has received any payment
for any of its stock, the power to adopt, amend, or repeal the By-Laws
of the Corporation may be exercised by the Board of Directors of the
Corporation; provided, however, that any provision for the
classification of directors of the Corporation for staggered terms
pursuant to the provisions of subsection (d) of Section 141 of the
General Corporation Law of the State of Delaware shall be set forth in
an initial By-Law or in a By-Law adopted by the stockholders entitled
to vote of the Corporation, unless provisions for such classification
shall be set forth in this Certificate of Incorporation.
C. Whenever the Corporation shall be authorized to issue only one class
of stock, each outstanding share shall entitle the holder thereof to
notice of, and the right to vote at, any meeting of stockholders.
Whenever the Corporation shall be authorized to issue more than one
class of stock, no outstanding share of any class of stock which is
denied voting power under the provisions of this Certificate of
Incorporation shall entitle the holder thereof to the right to vote at
any meeting of stockholders except as the provisions of paragraph (c)
(2) of Section 242 of the General Corporation Law of the State of
Delaware shall otherwise require; provided, that no share of any such
class which is otherwise denied voting power shall entitle the holder
thereof to vote upon the increase or decrease in the number of
authorized shares of said class.
6
<PAGE>
ARTICLE IX
----------
The Corporation shall, to the fullest extent permitted by Section 145 of
the General Corporation Law of the State of Delaware, as the same may be amended
and supplemented, indemnify any and all persons whom it shall have power to
indemnify under said section from and against any and all of the expenses,
liabilities or other matters referred to in or covered by said section, and the
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any By-Law, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
ARTICLE X
---------
A director of the Corporation shall not in the absence of fraud be
disqualified by his office from dealing or contracting with the Corporation
either as a vendor, purchaser or otherwise, nor in the absence of fraud shall a
director of the Corporation be liable to account to the Corporation for any
profit realized by him from or through any transaction or contract of the
Corporation by reason of the fact that he, or any firm of which he is a member,
or any corporation of which he is an officer, director or stockholder, was
interested in such transaction or contract if such transaction or contract has
been authorized, approved or ratified in the manner provided in the General
Corporation Law of Delaware for contracts between the Corporation and one or
more of its directors or officers, or between the Corporation and any other
corporation, partnership, association, or other organization in which one or
more of its directors or officers are directors or officers, or have a financial
interest.
ARTICLE XI
----------
Whenever a compromise or arrangement is proposed between this Corporation
and its creditors or any class of them and/or between this Corporation and its
stockholders or any or all of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of this
Corporation or of any creditor or stockholder thereof, or on the application of
any receiver or receivers appointed for this Corporation under the provision of
Section 291 of Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for this Corporation under
Section 279 of Title 8 of the Delaware Code, order a meeting of the creditor or
class of creditors, and/or of the stockholders or class of stockholders of the
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in value of the
creditors, or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this Corporation as a consequence of
such compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders of this Corporation, as the case
may be, and also on this Corporation.
7
<PAGE>
ARTICLE XII
-----------
From time to time any of the provisions of this Certificate of
Incorporation may be amended, altered or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed by said laws, and all
rights at any time conferred upon the stockholders of the Corporation by this
Certificate of Incorporation are granted subject to the provisions of this
Article XII.
Signed on March 2, 1983
/s/ Scott J. Lederman
---------------------
Scott J. Lederman
Incorporator
8
<PAGE>
EXHIBIT (10.1)
SIXTH AMENDMENT TO REVOLVING CREDIT AGREEMENT
THIS SIXTH AMENDMENT TO REVOLVING CREDIT AGREEMENT (this "Amendment")
dated as of May 1, 1998, is between FIRST OAK BROOK BANCSHARES, INC. (the
"Company") and LASALLE NATIONAL BANK (the "Bank").
R E C I T A L S:
WHEREAS, the parties have previously entered into a Revolving Credit
Agreement dated as of December 1, 1991, as amended by that certain First
Amendment dated as of January 31, 1993, that certain Second Amendment dated as
of March 31, 1994, that certain Third Amendment dated as of April 1, 1995, that
certain Fourth Amendment dated April 1, 1996 and that certain Fifth Amendment
dated May 1, 1997 (collectively, the "Agreement"); and
WHEREAS, at the present time the Company requests, and the Bank is
agreeable to amending the Agreement pursuant to the terms and conditions
hereinafter set forth:
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements hereinafter set forth, it is agreed by the parties hereto as follows:
1. DEFINITIONS. All capitalized terms used herein without definition
shall have the respective meanings set forth in the Agreement.
2. AMENDMENTS TO AGREEMENT.
2.1 Amendment to Section 1. Section 1 is amended by deleting the
---------------------- ---------
reference to the date "May 1, 1998" and inserting a reference to the date "May
1, 1999" in substitution therefor.
2.2 Replacement of Exhibit A. Exhibit A attached to the Agreement
------------------------ ---------
is hereby deleted in its entirety and Exhibit A attached hereto is hereby
---------
substituted therefor.
3. WARRANTIES. To induce the Bank to enter into this Amendment, the
Company warrants that:
3.1 Authorization. The Company is duly authorized to execute and
-------------
deliver this Amendment and is and will continue to be duly authorized to borrow
monies under the Agreement, as amended hereby, and to perform its obligations
under the Agreement, as amended hereby.
3.2 No Conflicts. The execution and delivery of this Amendment and
------------
the performance by the Company of its obligations under the Agreement, as
amended hereby, do not and will not conflict with any provision of law or of the
charter or by-laws of the Company or of any agreement binding upon the Company.
3.3 Validity and Binding Effect. The Agreement, as amended hereby,
---------------------------
is a legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency or other similar laws of general application affecting
the enforcement of creditors' rights or by general principles of equity limiting
the availability of equitable remedies.
3.4 No Default. As of the closing date hereof, no Event of Default
----------
under Section 9 of the Agreement, as amended by this Amendment, or event or
---------
condition which, with the giving of notice or the passage of time, shall
constitute an Event of Default, has occurred or is continuing.
<PAGE>
3.5 Warranties. As of the closing date hereof, the representations
----------
and warranties in Section 6 of the Agreement are true and correct as though made
---------
on such date, except for such changes as are specifically permitted under the
Agreement.
4. CONDITIONS PRECEDENT. This Amendment shall become effective as of the
date above first written after receipt by the Bank of the following documents:
(a) This Amendment duly executed by the Company; and
(b) A Replacement Promissory Note in the form of Exhibit A attached
---------
hereto duly executed by the Company.
5. GENERAL.
5.1 Law. This Amendment shall be construed in accordance with and
---
governed by the laws of the State of Illinois.
5.2 Successors. This Amendment shall be binding upon the Company
----------
and LaSalle and their respective successors and assigns, and shall inure to the
benefit of the Company and the Bank and its successors and assigns.
5.3 Confirmation of Loan Agreement. Except as amended hereby, the
------------------------------
Agreement shall remain in full force and effect and is hereby ratified and
confirmed in all respects.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first above written.
LASALLE NATIONAL BANK FIRST OAK BROOK BANCSHARES, INC.
By: By:
----------------------------------- -------------------------------
Its: Its:
---------------------------------- ------------------------------
2
<PAGE>
EXHIBIT A
---------
REPLACEMENT PROMISSORY NOTE
$5,000,000.00 as of May 1, 1998
FIRST OAK BROOK BANCSHARES, INC., (the "Maker), for value received,
promises to pay to the order of LASALLE NATIONAL BANK (the "Bank") the lesser
of: the principal sum of Five Million Dollars ($5,000,000.00), or the aggregate
unpaid principal amount outstanding under that certain Revolving Credit
Agreement dated December 1, 1991 between the Maker and the Bank, as amended by
that certain First Amendment dated March 31, 1993, that certain Second Amendment
dated March 31, 1994, that certain Third Amendment dated April 1, 1995, that
certain Fourth Amendment dated April 1, 1996, that certain Fifth Amendment dated
May 1, 1997 and that certain Sixth Amendment of even date herewith (the "Loan
Agreement") made available by the Bank to the Maker at the maturity or
maturities and in the amount or amounts as stated on the records of the Bank
together with interest (computed on actual days elapsed on the basis of a 360
day year) on any and all principal amounts outstanding hereunder from time to
time from the date hereof until maturity. Interest shall be payable at the
Maker's option at the rates and times set forth in the Loan Agreement. In no
event shall any principal amount have a maturity later that May 1, 1999.
This Revolving Credit Note shall be available for direct advances and
for Bankers' Acceptances.
Principal and interest shall be paid to the Bank at its office at 135
South LaSalle Street, Chicago, Illinois, or at such other place as the holder of
this Note may designate in writing to the undersigned. This Note may be prepaid
in whole or in part as provided for in the Loan Agreement.
This Note evidences indebtedness incurred under the Loan Agreement
(and if amended, under all amendments thereto) to which reference is hereby made
for a statement of the terms and conditions under which the due date of the Note
or any payment thereon may be accelerated. The holder of this Note is entitled
to all of the benefits and security provided for in said Loan Agreement.
The undersigned agrees that in any action or proceeding instituted to
collect or enforce collection of this Note, the amount endorsed by the Bank on
the reverse side of this Note shall be prima-facie evidence of the unpaid
principal balance of this Note.
This Note is in substitution for, and not in repayment of, that
certain Revolving Credit Note, dated as of May 1, 1997, in the amount of
$5,000,000.00, executed by the Maker in favor of the Bank.
FIRST OAK BROOK BANCSHARES, INC.
By:
---------------------------------
Its:
--------------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND> This schedule contains summary financial information extracted from
SEC Form 10-Q and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> JUN-30-1998 JUN-30-1997
<CASH> 38,812 47,697
<INT-BEARING-DEPOSITS> 11,335 10,124
<FED-FUNDS-SOLD> 70,209 58,000
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 174,922 153,232
<INVESTMENTS-CARRYING> 131,258 134,479
<INVESTMENTS-MARKET> 133,343 135,831
<LOANS> 501,128 375,407
<ALLOWANCE> 3,953 4,904
<TOTAL-ASSETS> 953,666 800,676
<DEPOSITS> 742,399 635,164
<SHORT-TERM> 73,526 78,658
<LIABILITIES-OTHER> 8,272 11,508
<LONG-TERM> 56,000 10,000
<COMMON> 14,567 14,542
0 0
0 0
<OTHER-SE> 58,902 57,119
<TOTAL-LIABILITIES-AND-EQUITY> 953,666 800,676
<INTEREST-LOAN> 18,933 19,321
<INTEREST-INVEST> 9,056 7,823
<INTEREST-OTHER> 1,421 306
<INTEREST-TOTAL> 29,410 27,450
<INTEREST-DEPOSIT> 0 11,280
<INTEREST-EXPENSE> 16,165 12,962
<INTEREST-INCOME-NET> 13,245 14,488
<LOAN-LOSSES> 150 1,550
<SECURITIES-GAINS> 79 (9)
<EXPENSE-OTHER> 11,011 10,466
<INCOME-PRETAX> 5,979 14,387
<INCOME-PRE-EXTRAORDINARY> 5,979 14,387
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 4,259 9,339
<EPS-PRIMARY> .64 1.42
<EPS-DILUTED> .62 1.38
<YIELD-ACTUAL> 3.37 4.39
<LOANS-NON> 310 168
<LOANS-PAST> 0 1,402
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 4,329 4,109
<CHARGE-OFFS> 655 856
<RECOVERIES> 129 101
<ALLOWANCE-CLOSE> 3,953 4,904
<ALLOWANCE-DOMESTIC> 3,953 4,904
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