<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
TRANSITION PERIOD FROM _________ TO ___________
---------------------------------------------------
For the Quarterly Period Ended March 31, 1997 Commission File No. 0-25914
---------------------------------------------------
CASTLE BANCGROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 36-3238190
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) NUMBER)
208 West Locust Street 60115
DeKalb, Illinois (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
Registrant's telephone number, including area code: (815) 758-7007
---------------------------------------
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 [ ]
The registrant had 2,076,246 shares of Common Stock outstanding as of March
31, 1997.
1
<PAGE>
<TABLE>
<CAPTION>
PART I
ITEM 1 - FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
ASSETS Mar. 31, 1997 Dec. 31, 1996
Unaudited
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
Cash and due from banks $ 10,676,001 10,616,722
Excess funds sold 550,000 1,950,000
- ------------------------------------------------------------------------------------------------------------------------
Total cash and cash equivalents 11,226,001 12,566,722
- ------------------------------------------------------------------------------------------------------------------------
Investment securities (note 2) 134,961,357 133,071,980
Mortgage loans held for sale, lower of cost or market 14,492,770 20,342,698
Loans (note 3) 296,672,861 292,340,920
Less:
Allowance for possible loan losses (note 3) 3,957,493 3,775,108
Unearned income and deferred loan fees 3,062,299 3,172,278
- ------------------------------------------------------------------------------------------------------------------------
Net loans 289,653,069 285,393,534
Premises and equipment 10,536,144 10,233,862
Goodwill, net of amortization 4,932,115 5,062,350
Other assets 6,701,225 6,752,528
- ------------------------------------------------------------------------------------------------------------------------
$ 472,502,681 473,423,674
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------------------------------------------------------------------------------------------
Liabilities:
Deposits:
Noninterest-bearing $ 43,252,449 43,232,861
Interest-bearing 359,864,778 360,876,356
- ------------------------------------------------------------------------------------------------------------------------
Total deposits 403,117,227 404,109,217
Short-term borrowings 21,860,692 19,588,237
Long-term debt 10,150,000 10,150,000
Other liabilities 3,103,877 4,614,454
- ------------------------------------------------------------------------------------------------------------------------
Total liabilities 438,231,796 438,461,908
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Stockholders' equity:
Preferred stock, no par value; authorized 100,000 shares :
7.75% cumulative preferred stock; 2,600 shares
issued and outstanding 2,600,000 2,600,000
Common stock, $.33 par value; 5,000,000 shares authorized, 2,076,246 and
2,064,608 shares issued and outstanding in 1997 and 1996, respectively 692,082 690,873
Additional paid-in capital 5,079,815 5,001,343
Net unrealized gain/(loss) on investment securities (note 2) (670,473) 447,057
Retained earnings 26,569,461 26,222,493
- ------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 34,270,885 34,961,766
Commitments and contingent liabilities
- ------------------------------------------------------------------------------------------------------------------------
$ 472,502,681 473,423,674
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF EARNINGS
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Unaudited
3 Months Ended
Mar. 31, 1997 Mar. 31, 1996
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest income:
Interest and fees on loans $ 6,838,863 6,087,590
Interest and dividends on investment securities:
Taxable 1,993,196 1,750,565
Nontaxable 156,613 198,771
Interest on time deposits 0 9,359
Interest on excess funds sold 47,209 120,622
Interest on mortgage loans held for sale 237,441 348,737
- ------------------------------------------------------------------------------------------------------------------------
Total interest income 9,273,322 8,515,644
- ------------------------------------------------------------------------------------------------------------------------
Interest expense:
Interest on deposits 4,034,306 3,892,340
Interest on short-term borrowings 309,210 241,371
Interest on long-term debt 182,863 237,387
- ------------------------------------------------------------------------------------------------------------------------
Total interest expense 4,526,379 4,371,098
- ------------------------------------------------------------------------------------------------------------------------
Net interest income before provision
for possible loan losses 4,746,943 4,144,546
Provision for possible loan losses 205,084 156,031
- ------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for possible loan losses 4,541,859 3,988,515
- ------------------------------------------------------------------------------------------------------------------------
Other operating income
Trust fees 148,378 135,839
Deposit service charges 90,444 107,198
Other service charges 261,543 264,376
Data processing fees 1,173 78,228
Investment securities gains (losses), net (note 2) (7,165) 37,933
Mortgage loan origination income 1,073,062 1,442,290
Other income 200,574 312,773
- ------------------------------------------------------------------------------------------------------------------------
Total other operating income 1,768,009 2,378,637
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Other operating expenses:
Salaries and employee benefits 3,717,474 3,879,266
Net occupancy expense of premises 434,546 361,108
Furniture and fixtures 413,009 292,345
Office supplies 100,263 116,171
Outside services 232,184 254,497
Advertising expense 139,670 154,861
FDIC insurance assessment 13,983 3,000
Amortization expense - goodwill 130,900 130,235
Other expenses 596,996 600,795
- ------------------------------------------------------------------------------------------------------------------------
Total other operating expenses 5,779,025 5,792,278
- ------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes 530,843 574,874
Income tax expense 133,500 243,034
- ------------------------------------------------------------------------------------------------------------------------
Net earnings $ 397,343 331,840
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Net earnings applicable to common stock $ 346,967 281,465
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Per common share data based on weighted average common
shares outstanding of 2,073,658 shares in 1997, 2,059,404
shares in 1996 $ 0.17 0.14
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
</TABLE>
3
<PAGE>
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Net unrealized
gain (loss)
on
Preferred Common investment Retained
stock stock Surplus securities earnings Total
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997 $2,600,000 690,873 5,001,343 447,057 26,222,493 34,961,766
Issuance of 3,627 shares of common stock -- 1,209 78,472 -- -- 79,681
Change in unrealized gain/(loss) on investment
securities -- -- -- (1,117,530) -- (1,117,530)
Net earnings -- -- -- -- 397,343 397,343
Cash dividends on preferred stock -- -- -- -- (50,375) (50,375)
- -------------------------------------------------------------------------------------------------------------------------------
Balance at March 31, 1997 $2,600,000 692,082 5,079,815 (670,473) 26,569,461 34,270,885
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------------------------
Unaudited
3 Months Ended
Mar. 31, 1997 Mar. 31, 1996
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Interest received $ 9,212,815 8,520,467
Fees received 1,792,501 2,426,347
Net increase/(decrease) in mortgage loans held for sale 5,849,928 (29,416,758)
Interest paid (4,480,457) (4,381,267)
Cash paid to suppliers and employees (6,108,682) (5,928,204)
Income taxes paid (587,483) (260,000)
- --------------------------------------------------------------------------------------------------
Net cash provided by operating activities 5,678,622 (29,039,415)
- --------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from:
Maturities and calls of investment securities 7,795,490 19,689,850
Sales of investment securities 5,259,709 8,951,910
Purchases of investment securities (16,387,427) (13,495,253)
Net increase in loans (4,370,713) (7,670,420)
Premises and equipment expenditures (626,480) (471,470)
- --------------------------------------------------------------------------------------------------
Net cash used by investing activities (8,329,421) 7,004,617
- --------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net change in demand deposits,
NOW accounts, and savings accounts (8,040,094) (6,145,195)
Net change in certificates of deposit 7,048,105 864,811
Dividends paid on preferred stock (50,375) (50,375)
Net proceeds from short-term debt 2,272,455 16,961,324
Proceeds from issuance of common stock 79,681 134,587
- --------------------------------------------------------------------------------------------------
Net cash provided by financing activities 1,309,772 11,765,152
- --------------------------------------------------------------------------------------------------
Net change in cash and cash equivalents (1,340,721) (10,269,646)
Cash and cash equivalents at beginning of year 12,566,722 21,049,903
- --------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of the period $ 11,226,001 10,780,257
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
Reconciliation of net earnings to net cash provided by
operating activities:
Net earnings $ 397,343 331,840
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 512,860 480,802
Provision for possible loan losses 205,084 156,031
Losses on sale of investment securities 5,731 37,933
Increase (decrease) in:
Income taxes payable (453,983) (16,966)
Interest payable 45,922 (10,169)
Unearned income (109,978) 33,474
Other liabilities (842,516) (423,064)
Decrease (increase) in:
Interest receivable 8,865 327,194
Other assets 18,761 (381,886)
Decrease (increase) in mortgage loans held for sale 5,849,928 (29,416,758)
Discount accretion recorded as income (51,394) (244,016)
Premium amortization charged against income 91,999 86,170
- --------------------------------------------------------------------------------------------------
$ 5,678,622 (29,039,415)
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED STATEMENTS
THREE MONTHS ENDED MARCH 31, 1997
- ------------------------------------------------------------------------------
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The unaudited consolidated financial statements of Castle BancGroup,
Inc. (Company) and subsidiaries are prepared in conformity with
generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. These financial statements should be read in
conjunction with the Company's 1996 Annual Report on Form 10-K. In the
opinion of management, all normal recurring adjustments necessary for a
fair presentation of the financial position and the results of
operations for the periods presented, have been included. Results of
operations for interim periods are not necessarily indicative of the
results that may be expected for the year.
For the 1996 presentation, certain accounts have been reclassified to
present consistent account classification with 1997.
(2) INVESTMENT SECURITIES
Investments in debt and equity securities are classified as available
for sale and reported at fair value, adjusted for amortization of
premiums and accretion of discounts using a method that approximates
level yield.
A comparison of amortized cost and fair value of investment securities
available-for-sale at March 31, 1997 and December 31, 1996 follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Unaudited
March 31, 1997
--------------------------------------------------------
Gross Gross
Amortized unrealized unrealized Fair
cost gains losses value
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury and agency obligations $ 108,018,988 528,894 (1,759,898) 106,787,984
Obligations of state and political subdivisions 9,987,062 240,701 (77,739) 10,150,024
Mortgage-backed securities 16,359,223 209,137 (248,686) 16,319,674
- ---------------------------------------------------------------------------------------------------------------
Total debt securities 134,365,273 978,732 (2,086,323) 133,257,682
- ---------------------------------------------------------------------------------------------------------------
Federal Home Loan Bank stock 1,370,100 0 0 1,370,100
Equity securities 333,575 0 0 333,575
- ---------------------------------------------------------------------------------------------------------------
Total securities 136,068,948 978,732 (2,086,323) 134,961,357
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED STATEMENTS
THREE MONTHS ENDED MARCH 31, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, 1996
---------------------------------------------------------
Gross Gross
Amortized unrealized unrealized Fair
cost gains losses value
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
U.S. Treasury and agency
obligations $ 101,080,871 897,567 (634,488) 101,343,950
Obligations of state and political
subdivisions 10,627,931 350,110 (72,682) 10,905,359
Mortgage-backed securities 19,574,597 290,026 (133,177) 19,731,446
- ---------------------------------------------------------------------------------------------------------
Total debt securities 131,283,399 1,537,703 (840,347) 131,980,755
Federal Home Loan Bank stock 966,600 - - 966,600
Equity securities 124,625 - - 124,625
- ---------------------------------------------------------------------------------------------------------
Total securities $ 132,374,624 1,537,703 (840,347) 133,071,980
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
The amortized cost and fair value of securities available-for-sale at
March 31, 1997 and December 31, 1996 by contractual maturity, are shown
below. Actual maturities may differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without
call or prepayment penalties.
<TABLE>
- ---------------------------------------------------------------------------------------------------------
<CAPTION>
Available-for-sale
------------------------------------------------------
Unaudited
March 31, 1997 December 31, 1996
------------------------ -----------------------
Amortized Fair Amortized Fair
cost value cost value
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Due in one year or less $ 13,167,150 13,181,117 14,872,387 14,907,813
Due after one year through five years 48,450,467 48,280,846 54,661,029 54,954,129
Due after five years through ten years 47,889,394 47,223,180 42,175,386 42,387,367
Due after ten years 8,499,038 8,242,795 - -
- ---------------------------------------------------------------------------------------------------------
118,006,049 116,927,938 111,708,802 112,249,309
Mortgage-backed securities 16,359,224 16,329,744 19,574,597 19,731,446
- ---------------------------------------------------------------------------------------------------------
Total debt securities 134,365,273 133,257,682 131,283,399 131,980,755
Federal Home Loan Bank stock 1,370,100 1,370,100 966,600 966,600
Equity securities 333,575 333,575 124,625 124,625
- ---------------------------------------------------------------------------------------------------------
Total securities $ 136,068,948 134,961,357 132,374,624 133,071,980
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
Gross losses of approximately $13,391 and $19,329 occurred from
security activity during the three months ended March 31, 1997 and 1996,
respectively. Gross gains of $6,226 and $57,262 occurred from security
activity during the three month period that ended March 31, 1997 and 1996,
respectively. All security gains and losses that occurred during 1997 and
1996 were as a result of transactions involving available-for-sale
securities.
7
<PAGE>
NOTES TO CONSOLIDATED STATEMENTS
THREE MONTHS ENDED MARCH 31, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Investment securities carried at approximately $77,024,000 and
$66,519,000 at March 31, 1997 and December 31, 1996, respectively, were
pledged to secure deposits and for other purposes permitted or required by
law.
(3) LOANS
The composition of the loan portfolio at the dates shown is as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
Unaudited
Mar. 31, 1997 Dec. 31, 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Commercial, financial, and agricultural $ 66,452,405 69,594,462
Real estate mortgage (primarily residential) 195,161,953 186,612,809
Consumer 34,207,481 35,242,151
Lease financing receivable 851,022 891,498
- ----------------------------------------------------------------------------------------------------
Total loans, gross $ 296,672,861 292,340,920
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
At March 31, 1997 and December 31, 1996, the following items existed:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
Unaudited
Mar. 31, 1997 Dec. 31, 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Non-accrual loans $ 2,063,000 2,348,000
Loans past due 90 days or more and still accruing 455,000 201,000
Restructured loans still accruing and less than 90 days past due 310,000 314,000
- ----------------------------------------------------------------------------------------------------
Total non-performing loans $ 2,828,000 2,863,000
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
The following is a summary of activity in the allowance for possible loan
losses:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Unaudited
3 months ended Year ended
Mar. 31, 1997 Dec. 31, 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance, beginning of year $ 3,775,108 3,308,721
Provision charged to expense 205,084 1,112,836
Additions to dealer reserves 20,547 118,253
Recoveries on loans previously charged off 126,681 341,153
- ----------------------------------------------------------------------------------------------------
4,127,420 4,880,963
Less loans charged off 169,927 1,105,855
- ----------------------------------------------------------------------------------------------------
Balance, end of period $ 3,957,493 3,775,108
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
NOTES TO CONSOLIDATED STATEMENTS
THREE MONTHS ENDED MARCH 31, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The following is a summary of loan loss experience for the three months
ended March 31, 1997, including an allocation of the allowance, by loan
category, at period end:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
(DOLLAR FIGURES IN THOUSANDS)
Commercial Real
and Agricultural Estate Consumer Other Unalloc. Total
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 $ 1,391 1,130 1,054 0 200 3,775
Provision charged to expense 10 0 195 0 0 205
Additions to dealer reserve 0 0 21 0 0 21
Recoveries on loans previously
charged off 67 0 59 0 0 126
- ---------------------------------------------------------------------------------------------------------
Less loans charged off (35) 0 (135) 0 0 (170)
Balance, March 31, 1997 $ 1,433 1,130 1,194 0 200 3,957
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Ratios:
Loans in category to total loans 22.40% 65.78% 11.53% 0.29% N/A 100.0%
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
The allocation of the allowance for loan losses is based on historical trends
in charge-offs, general economic conditions, peer comparisons and management
experience.
9
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company posted year-to-date net earnings of $397,343 at March 31, 1997 an
increase of $65,503 or 19.7% more than year-to-date earnings of $331,840 at
March 31, 1996. This increase in earnings can be attributed to increased
interest and fees on loans. The increase in interest and fees was due to
increased volume in the loan portfolio which was up 12% when comparing March
31, 1997, net loans to March 31, 1996. The increase in interest and fees on
loans were partially off-set by a decrease in mortgage loan origination
income as compared to year-to-date at March 31, 1996. Mortgage demand was
negatively impacted by the higher rate environment prevalent during the first
quarter of 1997.
Year-to-date earnings per common share was $.17 at March 31, 1997, up $.03
per share from March 31, 1996 earnings per common share of $.14. The
increase in earnings per share is due primarily to the increased interest and
fees on loans as described above. Net earnings applicable to common stock of
$346,967 year-to-date at March 31, 1997 compares to $281,465 at March 31,
1996. This represents a $65,502 increase. Year-to-date preferred stock
dividends were $50,375 at March 31, 1997 as compared to $50,310 at March 31,
1996.
To improve operating results, the Company continues its attempt to control
holding company expenses as well as improve subsidiary earnings through
economies of scale and earnings enhancement opportunities. The Company's
strategy for future growth is based on internal growth of its subsidiaries.
The introduction of "Check Card," an on-line debit card product, was
completed during the first quarter of 1997. Major renovation at the Sandwich
State Bank facility was also completed during the first quarter of 1997.
Both of these efforts reinforce the idea that providing quality customer
service remains a top priority for the Company.
The following discussion of performance for the three month period ending
March 31, 1997 as compared to the corresponding period in 1996 highlights
significant points of interest, trends in operations, and management's
operating philosophies. (Unless otherwise stated, all averages are simple
daily averages.)
INTEREST INCOME
Net interest income for the first three months of 1997 increased
approximately $758,000 to $9,273,322 as compared to $8,515,644 at March 31,
1996. This increase can be attributed to the interest earnings on the
Company's portfolio of real estate mortgages, with a portfolio balance at
March 31, 1997 of $195,161,953 as compared to the March 31, 1996 balance of
$166,520, 417.
The average net interest margin, on a tax equivalent basis (including
non-accruing loans), remained consistent for the first three months of 1997
and 1996 at 4.39%. Increases in short term interest rates and local
competition continue to put pressure on the subsidiaries' net interest
margins.
10
<PAGE>
The ratio of average earning assets to average total assets increased to
93.8% for the first three months of 1997 as compared to 93.6% for the same
period in 1996. The mortgage loans held for sale portfolio decreased $5.9
million from $20.3 million at March 31, 1996 to $14.4 million at March 31,
1997. The decrease is due to higher long-term mortgage rates which slowed
customer demand. The subsidiaries originate long-term fixed-rate mortgage
loans which are sold in the secondary market, servicing released and without
recourse. This line of business not only provides needed services for
customers, but also generates fee income and reduces the Company's exposure
to long-term interest rate risk. The Company no longer participates in
hedging activities which produced net losses during 1996. The subsidiaries
also continue efforts to improve the net interest margin by increasing the
loan portfolio, traditionally higher yielding assets, with quality credits.
As mentioned above, the gross loan portfolio has increased $31.4 million, or
11.8%, from March 31, 1996 to March 31, 1997.
Management believes that net interest margins will continue to narrow as
competitive pressures in the market place expand. Competition from both
financial institutions and non-traditional competitors, as well as general
economic trends, will continue to impact future earnings. Earning asset mix,
as well as the net interest margin, are monitored and evaluated by management
to develop strategies to help maintain and improve earnings.
PROVISION FOR POSSIBLE LOAN LOSSES
The subsidiaries establish a provision for loan losses which management
believes is sufficient to maintain adequate reserve levels. The provision is
a result of credit analysis, historical trends in net charges to the
allowance, loan portfolio configuration and loan growth. Management follows
conservative credit standards and closely monitors loan quality to minimize
loan losses. The Company's loan review program closely monitors credit
conditions of specific loans, historical trends in charge-offs at the
subsidiaries as well as companies within their peer group, experience and
quality of lending staff, and general economic conditions in the communities
that the subsidiaries serve. This system allows management to assess the
requirements of the allowance for loan losses. The allowance for loan losses
as a percentage of net outstanding loans increased slightly to 1.35% at March
31, 1997 as compared to 1.31% at December 31, 1996. The allowance level was
at 1.30% of net loans at December 31, 1995. The provision for loan losses
recorded during the first three months of 1997 was $205,084 as compared to
$156,031 during the same period in 1996. Management's desire is to maintain
the allowance level at 1.35%. Management intends to continue its
conservative loan policies and to maintain the Company's allowance for loan
losses at levels deemed to be sufficient based on the evaluation of the above
factors.
Management continues to closely monitor and control asset quality.
Non-performing assets, defined as loans 90 days or more past due and still
accruing, loans in non-accrual status, restructured loans, and other real
estate owned, represented 0.64% of total assets as of March 31, 1997, which
has increased slightly from 0.62% at December 31, 1996. The following table
summarizes the components of non-performing assets at March 31, 1997 and at
December 31, 1996.
11
<PAGE>
<TABLE>
<CAPTION>
MARCH 31, 1997 DECEMBER 31, 1996
-------------- -----------------
<S> <C> <C>
Non-accrual loans $2,063,000 $2,348,000
Loans past due 90+ days & still accruing 455,000 201,000
Restructured loans, performing according
to terms of restructure agreement 310,000 314,000
Other real estate owned 182,000 75,000
---------- ----------
TOTAL NON-PERFORMING ASSETS $3,010,000 $2,938,000
---------- ----------
---------- ----------
</TABLE>
Other real estate consists of one single family residence located in
Yorkville, Illinois. Complete recovery of principal, interest, and disposal
costs is anticipated based on the current appraisal value of the property.
$182,000 of the decrease in non-accrual loans at March 31, 1997, as compared
to December 31, 1996, was due to the property in Yorkville being moved from
non-accrual to other real estate owned. The remaining decrease in
non-accrual loans was due to repayments and pay downs on non-accrual loans.
$338,000 of loans 90+ days past due and still accruing at March 31, 1997
relate to three residential real estate loans at Castle Mortgage, Inc.
Foreclosure proceedings have started on all three properties. Based on the
collateral value of these three loans, complete recovery of the principal,
interest, and collection costs are anticipated and, as a result, in
accordance with Company policy, interest income is still being accrued.
Year-to-date charge-offs at March 31, 1997 totaled $43,246 as compared to
$104,058 at March 31, 1996. Management continues to closely monitor all past
dues and to improve collection efforts.
OTHER OPERATING INCOME
Other income, excluding security gains and losses, totaled $1,775,000 for the
first three months of 1997 as compared to $2,341,000 for the same period in
1996. Approximately $369,000 of the $566,000 decrease over the prior year
period relates to fee income earned by Castle Mortgage, Inc. and the other
subsidiaries on the origination of mortgages sold into the secondary market.
Net securities losses of ($7,165) were recognized during the first three
months of 1997 as compared to net gains of $37,933 during the first three
months of 1996. For both periods, all recognized gains and losses related to
the sale or call of securities classified as available for sale.
The subsidiaries continue to work on improving non-interest revenues by
collection of fee income and periodic reevaluation of fee schedules to ensure
that they are fair to the customer and adequately compensate the Company for
costs incurred and risk assumed.
12
<PAGE>
OTHER OPERATING EXPENSES
Other operating expenses decreased approximately $13,253 year to date at
March 31, 1997 over the corresponding three month period in 1996. Decreases
in employee salaries and benefit expense accounted for $162,000 of the
decrease. The majority of the salary decrease was due to lower mortgage loan
origination production during the quarter which caused lower commissions to
be paid to commissioned employees. The decrease in employee salaries and
benefit expense was partially offset by an increase in furniture and fixture
expenditure.
Subsidiary management continues to control overhead expenses by emphasizing
cost containment and by taking advantage of available economies of scale at
the holding company level. However, management's cost containment measures
are tempered by the need to maintain consistently high levels of customer
service and the need to attract and retain qualified staff. During the first
quarter of 1997, increased efficiencies in the operations area of the holding
company have allowed reductions in personnel without compromising the level
of quality service being delivered to the customer.
ACCOUNTING STANDARDS
In October of 1995, the Financial Accounting Standards Board (FASB) adopted
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation." This statement required implementation of either
a change to a fair value based method accounting or a proforma disclosure of
the effects of such a change for fiscal years beginning after December 15,
1995. The Company has elected not to implement the new fair value based
method in determining compensation expense. Therefore, the implementation of
this Statement had no effect on the financial results of the Company. Based
on current information, a proforma disclosure of the effect of the change in
accounting to a fair value based method would require a proforma increase to
compensation expense of approximately $25,000 (after tax effect) for the
period ending December 31, 1996.
The FASB also issued Statement No. 121, "Accounting for the Impairment of
Long-lived Assets and for Long-lived Assets to be Disposed Of." This
statement provides guidance for recognition and measurement of impairment of
long-lived assets, certain intangible assets and goodwill related both to
assets to be held and used, and assets of which are to be disposed.
Statement No. 121 is effective for fiscal years beginning after December 15,
1995. Implementation of this statement had no impact on the financial
results of the Company.
In 1995 the FASB also issued SFAS No. 122, "Accounting for Mortgage Servicing
Rights," which requires capitalization of servicing rights on mortgage loans
when the loans are to be sold and the servicing retained. In addition, SFAS
No. 125, "Accounting for Transfer and Servicing of Financial Assets and
Extinguishments of Liabilities," Supplements SFAS No. 122 and is effective in
1997. Currently, the Company primarily sells all mortgage loans with
servicing released, thus implementation of both of these accounting
statements is not expected to be material to the Company's business practices
or results of operations.
In February 1997, FASB Statement No. 128, "Earnings Per Share" (Statement
128), was issued. Statement 128 supersedes APB Opinion No. 15, "Earnings Per
Share" and specifies the computation, presentation, and disclosure
requirements for earnings per share (EPS) for entities with publicly held
common stock or potential common stock. Statement 128 was issued to simplify
the computation of EPS and to make the U.S. standard more compatible with the
EPS standards of other countries and that of the International Accounting
Standards Committee. It replaces the presentation of primary EPS with a
presentation of basic EPS and fully diluted EPS with diluted EPS. It also
requires dual presentation of basic and diluted EPS on the face of the income
statement for all entities with complex capital structures and requires a
reconciliation of the numerator and denominator of the basic EPS computation
to the numerator and denominator of the diluted EPS computation.
Basic EPS, unlike primary EPS, excludes dilution and is computed by dividing
income available to common stockholders by the weighted-average number of
common shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common
stock were exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the earnings of the entity.
Diluted EPS is computed similarly to fully diluted EPS under APB 15.
Statement 128 is effective for financial statements for both interim and
annual periods ending after December 15, 1997. Earlier application is not
permitted (although pro forma EPS disclosure in the footnote for periods
prior to required adoption is permitted). After adoption, all prior-period
EPS data presented shall be restated to conform with Statement 128. The
Company does not expect adoption of Statement 128 to have a significant
impact on the Company's financial statements.
13
<PAGE>
FINANCIAL CONDITION
Average assets for the first three months of 1997 increased by $23,953,000 or
approximately 5.4% as compared to the corresponding period in 1996. This
increase is attributed to a $30.4 million increase in the loan portfolio,
off-set by a $8 million decrease in the mortgage loans held for sale
portfolio. This increase was funded primarily with an increase in total
deposits of $19,147,000 or approximately 5.1% over the corresponding period.
The subsidiary Banks are all experiencing significant competition for
deposits which continues to put pressure on each Bank's overall cost of
funds. Management continues to view "core" deposits (individuals,
partnerships and corporate deposits) as the primary long term funding source
for internal growth of the Company. The Company had $2,080,000 of brokered
deposits at March 31, 1997, with interest rates ranging from 6.30% to 6.75%
and maturities ranging from August 1997 through August 2000. Deposit growth
requires the subsidiary Banks to continue to develop and offer high value
deposit products that attract new customer relationships, as well as
maintaining existing relationships.
CAPITAL
The Company is committed to maintaining strong capital positions in each of
its subsidiaries and on a consolidated basis. Management monitors, analyzes
and forecasts capital positions for each entity to ensure that adequate
capital is available to support growth and maintain financial soundness. The
Company's Tier 1 leverage ratio as of March 31, 1997 was 6.49%, a modest
increase from 6.39% at December 31, 1996. The ratio exceeds the regulatory
minimum, and management believes the Company is maintaining a strong capital
position. The Company's March 31, 1997 total risk weighted capital ratio
also increased slightly to 10.96% from 10.66% at December 31, 1996. The Tier
1 capital ratio increased from 9.45% at December 31, 1996 to 9.71% at March
31, 1997. Both the total risk weighted and Tier 1 Capital ratios also
continue to exceed regulatory minimums.
LIQUIDITY
The Company monitors the subsidiaries so that they maintain adequate
liquidity and also provides access to secondary sources of liquidity in case
of unusual or unanticipated demand for funds. Primary bank sources of
liquidity in the normal course of business are repayment of loans, marketable
investments, and the bank's federal funds position. The Company is a
secondary source of liquidity for its subsidiaries through discretionary
access to short-term funding sources in the event of unanticipated demand for
funds.
As presented in the Consolidated Statement of Cash Flows, the Company has
experienced significant changes in the cash flows from operating, investing
and financing activities during the first three months of 1997 as compared to
the same period in 1996. These fluctuations primarily relate to the
significant decrease in the portfolio of mortgage loans held for sale, as
explained
14
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previously, which has allowed the subsidiaries to increase their investment
portfolio holdings, as well as decreased federal funds purchased at the
subsidiary Banks.
INTEREST RATE RISK
Senior management monitors and manages interest rate exposure to minimize the
impact of interest rate fluctuations. Interest rate exposure is reviewed and
managed, to the extent possible and prudent to do so, by matching interest
bearing assets and interest bearing liabilities. Maximization of net
interest income consistent with acceptable risk and liquidity needs are
underlying objectives of asset/liability management.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
15
<PAGE>
PART II
ITEM 1 -- LEGAL PROCEEDINGS
Neither the Company nor any subsidiary is a party to any material legal
proceedings, other than routine litigation incidental to the financial
services industry.
ITEM 2 -- CHANGES IN SECURITIES
Not applicable.
ITEM 3 -- DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4 -- SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5 -- OTHER INFORMATION
Not applicable.
ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
3.1 Certificat of Incorporation, as amended
3.2 Bylaws, as amended
11 Computation of Per Share Earnings
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K
None
16
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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.
/s/ John W. Castle
- ------------------------------------------------
By: John W. Castle, Chairman of the Board
Chief Executive Officer and Director
Castle BancGroup, Inc.
Date: May 14, 1997
- -------------------------------------
/s/ Victoria S. Maher
- ------------------------------------------------
By: Victoria S. Maher, Chief Accounting Officer
and Controller
Castle BancGroup, Inc.
Date: May 14, 1997
- -------------------------------------
/s/ Douglas J. Brucki
- ------------------------------------------------
By: Douglas J. Brucki, Senior Manager -
Reporting and Risk Management
Castle BancGroup, Inc.
Date: May 14, 1997
- -------------------------------------
17
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EXHIBIT INDEX
EXHIBIT 3.1 Certificate of Incorporation, as amended
EXHIBIT 3.2 Bylaws, as amended
EXHIBIT 11 Computation of Per Share Earnings
EXHIBIT 27 Financial Data Schedule
<PAGE>
CERTIFICATE OF INCORPORATION
OF
CASTLE BANCGROUP, INC.
ARTICLE FIRST
NAME
The name of the corporation is Castle BancGroup, Inc.
ARTICLE SECOND
REGISTERED OFFICE AND AGENT
The address of the corporation's registered office in the State of
Delaware is 32 Loockerman Square, Suite L-100, in the City of Dover, County
of Kent. The name of its registered agent at such address is United States
Corporation Company.
ARTICLE THIRD
PURPOSES
The nature of the business or purposes to be conducted or promoted by the
corporation is to engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of the State of Delaware.
ARTICLE FOURTH
CAPITAL STOCK
The total number of shares of all classes of stock which the Corporation
shall have the authority to issue is 5,100,000 shares, which are divided into
two classes as follows:
100,000 shares of Preferred Stock, without par value, and
5,000,000 shares of Common Stock of the par value of $.33 1/3 per
share.
The designations, voting powers, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions of the above classes of stock are as follows:
<PAGE>
I
PREFERRED STOCK
The board of directors is authorized, at any time and from time to time,
to provide for the issuance of shares of Preferred Stock in one or more
series with such designations, preferences and relative, participating,
optional or other special rights and qualifications, limitations or
restrictions thereof as are stated and expressed in the resolution or
resolutions providing for the issue of such Preferred Stock adopted by the
board of directors, including, but not limited to, determination of any of
the following:
(a) the distinctive serial designation and the number of shares
constituting a series;
(b) the dividend rate or rates, whether dividends are cumulative and
from which date, the payment date or dates for dividends, and the
participating or other special rights, if any, with respect to dividends;
(c) in addition to the voting rights provided by law, the voting powers,
full or limited, if any, of the shares of the series, which might include
the right to elect a specified number of directors in any case or if
dividends on the series are not paid for a specified period of time;
(d) whether the shares of the series are redeemable and the price or
prices at which, and the terms and conditions on which, the shares may be
redeemed, which prices, terms and conditions may vary under different
conditions and at different redemption dates;
(e) the amount or amounts, if any, payable upon the shares of the series
in the event of voluntary or involuntary liquidation, dissolution or winding
up of the corporation prior to any payment or distribution of the assets of
the corporation to any class or classes of stock of the corporation ranking
junior to the series;
(f) whether the shares of the series are entitled to the benefit of a
sinking or retirement fund to be applied to the purchase or redemption of
shares of the series and the amount of the fund and the manner of its
application, including the price or prices at which the shares of the series
may be redeemed or purchased through the application of the fund;
(g) whether the shares are convertible into, or exchangeable for, shares
of any other class or classes or of any other series of the same or any other
class or classes of stock of the corporation and the conversion price or
prices, or the rates of exchange, and the adjustments thereof, if any, at
which the conversion or exchange may be made, and any other terms and
conditions of the conversion or exchange; and
(h) any other preferences, privileges and powers, and relative,
participating, optional or other special rights, and qualifications,
limitations or restrictions of a series, as the board of
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directors may deem advisable and as are not inconsistent with the provisions
of this Certificate of Incorporation.
II
COMMON STOCK
A. DIVIDENDS.
Subject to the preferential rights of the Preferred Stock, the holders of
the Common Stock are entitled to receive, to the extent permitted by law,
such dividends as may be declared from time to time by the board of
directors.
B. LIQUIDATION.
In the event of the voluntary or involuntary liquidation, dissolution,
distribution of assets or winding up of the corporation, after distribution
in full of the preferential amounts, if any, to be distributed to the holders
of shares of Preferred Stock, holders of Common Stock shall be entitled to
receive all of the remaining assets of the corporation of whatever kind
available for distribution to stockholders ratably in proportion to the
number of shares of Common Stock held by them respectively. The board of
directors may distribute in kind to the holders 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 therefor in cash, stock or obligations
of such other corporation, trust or other 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 Common Stock. Neither the merger or
consolidation of the corporation into or with any other corporation or
corporations, nor the purchase or redemption of shares of stock of the
corporation of any class, nor the sale or transfer by the corporation of all
or any part of its assets, nor the reorganization or recapitalization of the
corporation, shall be deemed to be a dissolution, liquidation or winding up of
the corporation for the purposes of this paragraph.
C. VOTING RIGHTS.
Except as may be otherwise required by law or this Certificate of
Incorporation, each holder of Common Stock has one vote in respect of each
share of stock held by him of record on the books of the corporation on all
matters voted upon by the stockholders.
D. CUMULATIVE VOTING.
At all elections of directors of the corporation, each stockholder
entitled generally to vote for the election of directors shall be entitled to
as many votes as shall equal the number of votes which (except for this
provision as to cumulative voting) he would be entitled to cast for the
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<PAGE>
election of directors with respect to his shares of stock multiplied by the
number of directors to be elected, and he may cast all of such votes for a
single director or may distribute them among the number to be voted for, or
for any two or more of them as he may see fit.
III
OTHER PROVISIONS
A. NO PREEMPTIVE RIGHTS.
No stockholder shall have any preemptive right to subscribe to an
additional issue of stock of any class or series or to any securities of the
corporation convertible into such stock.
B. CHANGES IN AUTHORIZED CAPITAL STOCK.
Subject to the protective conditions and restrictions of any outstanding
Preferred Stock, any amendment to this Certificate of Incorporation which
increases or decreases the authorized capital stock of any class or classes
may be adopted by the affirmative vote of the holders of a majority of the
outstanding shares of the voting stock of the corporation without regard to
class or series.
C. UNCLAIMED DIVIDENDS.
Any and all right, title, interest and claim in and to any dividends
declared by the corporation, whether in cash, stock or otherwise, which are
unclaimed by the stockholder entitled thereto for a period of six years after
the close of business on the payment date, shall be and be deemed to be
extinguished and abandoned, and such unclaimed dividends in the possession of
the corporation, its transfer agents or other agents or depositaries, shall
at such time become the absolute property of the corporation, free and clear
of any and all claims of any persons whatsoever.
ARTICLE FIFTH
INCORPORATOR AND FIRST BOARD OF DIRECTORS
The name and mailing address of the incorporator of this corporation are:
John W. Castle
208 Miller Avenue
Dekalb, Illinois 60115
The powers of the incorporator shall terminate upon the filing of this
certificate of incorporation. The names and mailing addresses of the persons
who are to serve as directors until
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<PAGE>
the first annual meeting of stockholders or until their respective successors
are elected and qualified are as follows:
NAME MAILING ADDRESS
---- ---------------
John W. Castle 208 Miller Avenue
DeKalb, Illinois 60115
Louis P. Brady 407 North Dekalb Street
Sandwich, Illinois 60548
James N. McInnes 26 Edgebrook Drive
Sandwich, Illinois 60548
Franklyn L. Ament RR#2, Oak Knolls
Sandwich, Illinois 60548
Donald E. Breunig 108 East Arnold Road
Sandwich, Illinois 60548
Armand A. Legner 103 East Arnold Road
Sandwich, Illinois 60548
Nancy D. Castle 208 Miller Avenue
DeKalb, Illinois 60115
ARTICLE SIXTH
BOARD OF DIRECTORS
A. POWERS OF THE BOARD
In furtherance and not in limitation of the powers conferred by statute,
the board of directors of the corporation is expressly authorized:
(a) To make, alter or repeal the by-laws of the corporation.
(b) To authorize and cause to be executed mortgages and liens upon the
real and personal property of the corporation.
(c) To set apart out of any of the funds of the corporation available
for dividends a reserve or reserves for any proper purpose and to abolish any
such reserve in the manner in which it was created.
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<PAGE>
(d) By resolution of a majority of the whole board, to designate one or
more committees, each committee to consist of two or more of the directors of
the corporation. The board may designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified member
at any meeting of the committee. The bylaws may provide that in the absence
or disqualification of any member of such committee or committees, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the board of directors to act at the meeting in the place of any
such absent or disqualified member. Any such committee, to the extent
provided in the resolution or in the by-laws of the corporation, shall have
and may exercise all the powers and authority of the board of directors in
the management of the business and affairs of the corporation, and may
authorize the seal of the corporation to be affixed to all papers which may
require it; and no committee shall have the power or authority to declare a
dividend or to authorize the issuance of stock unless the resolution or
by-laws expressly so provide.
(e) To sell, lease or exchange all or substantially all of the property
and assets of the corporation, including its goodwill and its corporate
franchises, upon such terms and conditions and for such consideration, which
may consist in whole or in part of money or property, including shares of
stock in, and/or other securities of, any other corporation or corporations,
as the board of directors shall deem expedient and for the best interests of
the corporation, when and as authorized by the affirmative vote of the
holders of a majority of the stock of the corporation issued and outstanding
having voting power.
(f) To provide for the indemnification, within the limits permitted by
law, of directors, officers, employees and agents of the corporation (or of
other corporations absorbed into the corporation by merger or consolidation),
and of persons who serve other enterprises in such or similar capacities at
the request of the corporation (or at the request of other corporations
absorbed into the corporation by merger or consolidation), against expenses
and liability for actions they take in such capacities.
B. WRITTEN BALLOT.
Elections of directors need not be by written ballot unless the by-laws
of the corporation shall so provide.
C. CLASSIFIED BOARD OF DIRECTORS.
Section 1. NUMBER, ELECTION AND TERMS OF DIRECTORS. The business and
affairs of the Corporation shall be managed by or under the direction of a
board of directors consisting of not less than five (5) nor more than fifteen
(15) persons. The exact number of directors within the minimum and maximum
limitations specified in the preceding sentence shall be fixed from time to
time by the board of directors pursuant to a resolution adopted by a
majority of the board of directors then in office. The board of directors
shall be divided into three classes, the number of
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<PAGE>
directors in each class to be fixed by the board of directors. The initial
term of office of Class I directors shall expire at the annual meeting of
stockholders to be held in 1998; the initial term of office of Class II
directors shall expire at the annual meeting of stockholders to be held in
1999; and the initial term of office of Class III directors shall expire at
the annual meeting of stockholders to be held in 2000, and in each case until
their respective successors are elected and qualified. At each annual meeting
of stockholders, directors shall be chosen to succeed those whose terms then
expire and shall be elected for a term of office expiring at the third
succeeding annual meeting of stockholders after their election, and in each
case until their respective successors are elected and qualified.
The names of the persons who are to serve as the initial directors of
each class of directors of the Corporation until their successors are elected
and qualified or until their earlier resignation or removal are as follows:
------------------------------------------------
Name Class Designation
------------------------------------------------
John B. Hiatt I
------------------------------------------------
William R. Monat I
------------------------------------------------
Robert T. Boey II
------------------------------------------------
Donald E. Kieso II
------------------------------------------------
James N. McInnes II
------------------------------------------------
Bruce P. Bickner III
------------------------------------------------
John W. Castle III
------------------------------------------------
Peter H. Henning III
------------------------------------------------
Section 2. NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Newly created
directorships resulting from any increase in the authorized number of
directors or any vacancies in the board of directors resulting from death,
resignation, retirement, disqualification, removal from office or other cause
shall be filled by a majority vote of the directors then in office, although
less than a quorum, or by a sole remaining director. Directors so chosen
shall hold office for a term expiring at the annual meeting of stockholders
at which the term of the class to which they have been elected expires. No
decrease in the number of directors constituting the board of directors shall
shorten the term of any incumbent director. Newly created directorships shall
be allocated among the classes of directors so the each class of directors
shall consist, as nearly as possible, of one-third of the total number of
directors.
Section 3. REMOVAL. Subject to the rights of the holders of any class or
series of Preferred Stock of the Corporation, any director, or the entire
board of directors, may be removed from
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<PAGE>
office at any time, but only for cause and only by the affirmative vote of
the holders of at least a majority of the outstanding shares of all classes
of stock of the Corporation generally entitled to vote in the election of
directors, considered for purposes of this Section as one class.
Section 4. AMENDMENT, ALTERATION OR REPEAL. In addition to any
affirmative vote that may be otherwise required, the affirmative vote of the
holders of at least eighty percent (80%) of the outstanding shares of all
classes of stock of the Corporation generally entitled to vote in the
election of directors, considered for purposes of this Section as one class,
shall be required to amend, alter or repeal in any respect, or adopt any
provision inconsistent with, this Subpart C of Article Sixth.
ARTICLE SEVENTH
STOCKHOLDER ACTION BY CONSENT
Action may be taken by the stockholders of the corporation, without a
meeting, by written consent as and to the extent provided at the time by the
General Corporation Law of the State of Delaware, provided that the matter to
be acted upon by such written consent previously has been approved by the
board of directors of the corporation and directed by such board to be
submitted to the stockholders for their action thereon by written consent.
ARTICLE EIGHTH
MERGER, CONSOLIDATION OR DISPOSITION OF ASSETS
In the event that the stockholders of the corporation are asked to vote
on a merger or consolidation with any Person (as hereinafter defined) or on a
proposal that the corporation sell, lease or exchange substantially all of
its assets or business to or with any Person or any affiliate of such Person,
or that any Person or any affiliate of such Person sell, lease or exchange
substantially all of its assets or business to or with the corporation, and
such Person and/or its affiliates singly or in the aggregate, own or control
directly or indirectly shares representing five percent (5%) or more of the
voting power of the corporation at the record date for determining
stockholders entitled to vote, the favorable vote of not less than eighty
percent (80%) of all of the votes which the holders of the issued and
outstanding shares of the voting stock of the corporation, voting as a single
class, are entitled to cast thereon shall be required for the approval of any
such action; provided, however, that the foregoing shall not apply to any
such merger, consolidation or sale, lease or exchange of assets or business
which was approved by resolutions of the board of directors of the
corporation prior to the acquisition of the ownership or control of shares
representing at least five percent (5%) of the voting power of the
corporation by such Person and/or its affiliates, nor shall it apply to any
such merger, consolidation or sale of assets or business between the
corporation and another Person of which shares or other ownership interests
representing fifty percent (50%) or more of the voting power is owned by the
corporation.
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<PAGE>
For the purposes of this Article, a "Person" is any corporation,
partnership, association, trust, business entity, estate or individual; an
"affiliate" is any Person who directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control
with, the Person specified; and "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management
and policies of a person, whether through the ownership of voting securities,
by contract, or otherwise.
This ARTICLE EIGHTH may not be amended, nor may it be repealed in whole
or in part, unless authorized by the favorable vote of not less than eighty
percent (80%) of all the votes entitled to be cast thereon by the holders of
the issued and outstanding shares of voting stock of the corporation voting
as a single class, regardless of class or series of stock.
ARTICLE NINTH
AMENDMENT
The corporation reserves the right to amend its certificate of
incorporation, and to thereby change or repeal any provision therein
contained from time to time, in the manner prescribed at the time by statute,
and all rights conferred upon stockholders by such certificate of
incorporation are granted subject to this reservation.
ARTICLE TENTH
LIMITED LIABILITY OF DIRECTORS
No person who was or is a director of the corporation shall be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for
breach of the duty of loyalty to the corporation or its stockholders;
(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
Delaware General Corporation Law; or (iv) for any transaction from which the
director derived an improper personal benefit. If the Delaware General
Corporation Law is amended after the effective date of this Article Tenth to
further eliminate or limit, or to authorize further elimination or limitation
of, the personal liability of directors for breach of fiduciary duty as a
director, then the personal liability of a director of the corporation to the
corporation or its stockholders shall be eliminated or limited to the full
extent permitted by the Delaware General Corporation Law, as so amended. For
purposes hereof, "fiduciary duty as a director" shall include any fiduciary
duty arising out of serving at the request of the corporation as a director
of another corporation, partnership, joint venture, trust or other
enterprise, and "personally liable to the corporation" shall include any
liability to such other corporation, partnership, joint venture, trust or
other enterprise, and any liability to the corporation in its capacity as a
security holder, joint venturer, partner, beneficiary, creditor or investor
of or in any such other corporation, partnership, joint venture, trust or
other enterprise.
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ARTICLE ELEVENTH
INDEMNIFICATION
A. CERTIFICATE OF INCORPORATION ARTICLE NOT EXCLUSIVE; CHANGE IN LAW.
The indemnification and advancement of costs, charges and other
expenses (including attorneys' fees) ("Expenses") provided by, or granted
pursuant to, this Article Eleventh shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of Expenses may
be entitled under any law (common or statutory), 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 a director or
officer and shall inure to the benefit of the heirs, executors and
administrators of such a person. Notwithstanding the provisions of this
Article Eleventh or the by-laws of the corporation, the corporation shall
indemnify and make advancement of Expenses to each person who is or was or
has agreed to become a director or officer of the corporation, and each
person who is or was serving or has agreed to serve at the request of the
corporation as a director or officer of another corporation, partnership,
joint venture, trust or other enterprise, to the fullest extent permitted
under the laws of the State of Delaware and any other applicable laws, as they
now exist or as they may be amended in the future.
B. CONTRACT RIGHTS.
All rights to indemnification and advancement of Expenses provided by
this Article Eleventh and the by-laws of the corporation shall be deemed to
be a contract between the corporation and each person who is or was or has
agreed to become a director or officer of the corporation, and each person
who is or was serving or has agreed to serve at the request of the
corporation as a director or officer of another corporation, partnership,
joint venture, trust or other enterprise. Any repeal or modification of this
Article Eleventh or the by-laws of the corporation or any repeal or
modification of relevant provisions of the Delaware General Corporation Law
or any other applicable law shall not in any way diminish any rights to
indemnification or advancement of Expenses with respect to any state of facts
then or previously existing or any action, suit or proceeding previously or
thereafter brought or threatened based in whole or in part on such state of
facts.
C. INDEMNIFICATION FOR CERTAIN PERSONS FOR BREACH OF FIDUCIARY DUTY.
In addition to the indemnification provided for in the by-laws of the
corporation, the corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of another corporation, partnership, joint
venture, trust or other enterprise by reason of the fact that he is or was
serving or has agreed to serve at the request of the corporation as a
director of such other corporation, partnership, joint venture, trust or other
enterprise against Expenses, judgments, fines and
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amounts paid in settlement actually and reasonably incurred by him in
connection with such action or suit and any appeal thereof, for breach of
fiduciary duty as such director, except for liability (i) for breach of the
duty of loyalty to such other corporation, partnership, joint venture, trust
or other enterprise; (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law; (iii) for
unlawful payment of a dividend or unlawful purchase or redemption of stock; or
(iv) for any transaction from which the director derived an improper personal
benefit.
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BY-LAWS
OF
CASTLE BANCGROUP, INC.
(A DELAWARE CORPORATION)
ARTICLE I
OFFICES; REGISTERED AGENT
-------------------------
Section 1.1. REGISTERED OFFICE AND AGENT. The corporation shall
maintain in the State of Delaware a registered office and a registered agent
whose business office is identical with such registered office.
Section 1.2. PRINCIPAL BUSINESS OFFICE. The corporation shall have its
principal business office at such location within or without the State of
Delaware as the board of directors may from time to time determine. The
corporation may have other offices within or without the State of Delaware.
ARTICLE 2
THE STOCKHOLDERS
----------------
Section 2.1. ANNUAL MEETING. The annual meeting of the stockholders
shall be held on the fourth Wednesday in April each year, at the hour of 2:00
p.m. or, if such date in any year shall be a legal holiday, such meeting
shall be held on the next succeeding business day, provided, however, that a
different date and/or time for holding the annual meeting of stockholders may
be fixed from time to time by resolution of the Board of Directors. Each
annual meeting of stockholders shall be for the purpose of electing directors
and for the transaction of such other business as may come before the meeting.
Section 2.2. SPECIAL MEETINGS. Special meetings of the stockholders of
the corporation may be called at any time by the board of directors, the
chairman of the board, the president or the vice chairman and shall be called
promptly by or at the direction of the secretary at the request in writing of
the holders of outstanding shares of stock of the corporation having not less
than 33% of the voting power of all of the outstanding shares of stock of the
corporation entitled to vote at elections of directors, provided that such
request shall state the purpose or purposes of the proposed meeting.
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Section 2.3. PLACE OF MEETINGS. The board of directors may designate
any place, either within or without the State of Delaware, as the place of
meeting for any annual meeting or for any special meeting called by the board
of directors, but if no designation is made, or if a special meeting be
otherwise called, the place of meeting shall be the principal business office
of the corporation; provided, however, that for any meeting of the stockholders
for which a waiver of notice designating a place is signed by all of the
stockholders, then that shall be the place for the holding of such meeting.
Section 2.4. NOTICE OF MEETINGS. Written or printed notice stating
the place, date and hour of the meeting of the stockholders and, in the case
of a special meeting, the purpose or purposes for which the meeting is
called, shall be given to each stockholder of record entitled to vote at the
meeting, not less than 10 nor more than 60 days before the date of the
meeting, or in the case of a meeting called for the purpose of acting upon a
merger or consolidation not less than 20 nor more than 60 days before the
meeting. Such notice shall be given by or at the direction of the secretary.
If mailed, such notice shall be deemed to be given when deposited in the
United States mail addressed to the stockholder at his or her address as it
appears on the records of the corporation, with postage thereon prepaid. If
delivered (rather than mailed) to such address, such notice shall be deemed
to be given when so delivered.
When a meeting is adjourned to another time or place, notice need not be
given of the adjourned meeting if the time and place thereof are announced at
the meeting at which the adjournment is taken, unless the adjournment is for
more than 30 days or unless a new record date is fixed for the adjourned
meeting.
Section 2.5. WAIVER OF NOTICE. A waiver of notice in writing signed
by a stockholder entitled to such notice, whether before or after the time
stated therein, shall be deemed equivalent to the giving of such notice.
Attendance of a stockholder in person or by proxy at a meeting of
stockholders shall constitute a waiver of notice of such meeting except when
the stockholder or his or her proxy attends the meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of
any business because the meeting is not lawfully called or convened.
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Section 2.6. MEETING OF ALL STOCKHOLDERS. If all of the stockholders
shall meet at any time and place, either within or without the State of
Delaware, and shall, in writing signed by all of the stockholders, waive
notice of, and consent to the holding of, a meeting at such time and place,
such meeting shall be valid without call or notice, and at such meeting any
corporate action may be taken.
Section 2.7. RECORD DATES.
(a) In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights
in respect of any change, conversion or exchange of stock or for the purpose
of any other lawful action, the board of directors may fix, in advance, a
record date, which shall not be more than 60 nor less than 10 days before the
date of such meeting (or 20 days if a merger or consolidation is to be acted
upon at such meeting), nor more than 60 days prior to any other action.
(b) If a record date has not been fixed as provided in preceding
subsection (a), then:
(i) The record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders of the corporation shall be
at the close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held;
(ii) The record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when no
prior action by the board of directors is necessary, shall be the day on
which the first written consent is expressed; and
(iii) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto.
(c) Only those who shall be stockholders of record on the record date
so fixed as aforesaid shall be entitled
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to such notice of, and to vote at, such meeting and any adjournment thereof,
or to express such consent, or to receive payment of such dividend or other
distribution, or to receive such allotment of rights, or to exercise such
rights, as the case may be, notwithstanding the transfer of any stock on the
books of the corporation after the applicable record date.
Section 2.8. LISTS OF STOCKHOLDERS. The officer who has charge of the
stock ledger of the corporation shall prepare and make, at least 10 days
before each meeting of stockholders, a complete list of the stockholders
entitled to vote thereat, arranged in alphabetical order, and showing the
address of and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least 10 days prior to the meeting, either at a place within the
municipality where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the place where
said meeting is to be held, and the list shall be produced and kept at the
time and place of meeting during the whole time thereof, for inspection by
any stockholder who may be present.
Section 2.9. QUORUM AND VOTE REQUIRED FOR ACTION. A majority of the
outstanding stock of the corporation entitled to vote at the meeting,
represented in person or by proxy, shall constitute a quorum at any meeting
of the stockholders; provided that if a quorum is not present, then holders
who are present in person or by proxy representing a majority of the votes
cast, may adjourn the meeting from time to time without further notice. If a
quorum is present at any meeting of the stockholders, a majority of the votes
entitled to be cast by those stockholders present in person or by proxy shall
be the act of the stockholders, unless a different number of votes is
required by statute or the certificate of incorporation of the corporation.
At any adjourned meeting at which a quorum is present, any business may be
transacted which might have been transacted at the original meeting.
Withdrawal of stockholders from any meeting shall not cause failure of a duly
constituted quorum at that meeting.
Section 2.10 CUMULATIVE VOTING. At all elections of directors of the
corporation each stockholder entitled generally to vote for the election of
directors shall be entitled to as many votes as shall equal the number of
votes which (except for this provision as to cumulative voting) he would be
entitled
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to cast for the election of directors with respect to his shares of stock
multiplied by the number of directors to be elected, and he may cast all of
such votes for a single director or may distribute them among the number to
be voted for, or for any two or more of them as he may see fit.
Section 2.11. PROXIES. Each stockholder entitled to vote at a meeting of
the stockholders or to express consent to corporate action in writing without
a meeting may authorize another person or persons to act for him by proxy,
but no proxy shall be valid after three years from its date unless otherwise
provided in the proxy. Such proxy shall be in writing and shall be filed with
the secretary of the corporation before or at the time of the meeting or the
giving of such written consent, as the case may be.
Section 2.12. VOTING OF SHARES. Each stockholder of the corporation
shall be entitled to such vote (in person or by proxy) for each share of
stock having voting power held of record by such stockholder as shall be
provided in the certificate of incorporation of the corporation or, absent
provision therein fixing or denying voting rights, shall be entitled to one
vote per share.
Section 2.13. VOTING BY BALLOT. Voting in any election of directors
shall be by ballot unless otherwise provided in the certificate of
incorporation of the corporation.
Section 2.14. INSPECTORS. At any meeting of the stockholders the
presiding officer may, or upon the request of any stockholder shall, appoint
one or more persons as inspectors for such meeting. Such inspectors shall
ascertain and report the number of shares represented at the meeting, based
upon their determination of the validity and effect of proxies; count all
votes and report the results; and do such other acts as are proper to conduct
the election and voting with impartiality and fairness to all the
stockholders. Each report of an inspector shall be in writing and signed by
him or a majority of them if there is more than one inspector acting at such
meeting. If there is more than one inspector, the report of a majority shall
be the report of the inspectors. The report of the inspector or inspectors on
the number of shares represented at the meeting and the results of the voting
shall be prima facie evidence thereof.
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ARTICLE 3
DIRECTORS
---------
Section 3.1. POWERS. The business and affairs of the corporation shall be
managed under the direction of its board of directors which may do all such
lawful acts and things as are not by statute or by the certificate of
incorporation of the corporation or by these by-laws directed or required to be
exercised or done by the stockholders.
Section 3.2. NUMBER, ELECTION, AND QUALIFICATIONS. The number of
directors shall be not less than five (5) nor more than fifteen (15), with the
exact number to be fixed from time to time pursuant to a resolution adopted by
a majority of the Board of Directors then in office. The election of directors
is subject to any provisions contained in the Certificate of Incorporation
relating thereto, including any provisions for a classified Board of Directors.
Directors need not be stockholders of the corporation.
Section 3.3. VACANCY. Newly created directorships resulting from any
increase in the authorized number of directors or any vacancies in the board of
directors resulting from death, resignation, retirement, disqualification,
removal from office or other cause shall be filled by a majority vote of the
directors then in office, although less than a quorum, or by a sole remaining
director. Directors so chosen shall hold office for a term expiring at the
annual meeting of stockholders at which the term of the class to which they
have been elected expires. No decrease in the number of directors constituting
the board of directors shall shorten the term of any incumbent director. Newly
created directorships shall be allocated among the classes of directors so that
each class of directors shall consist, as nearly as possible, of one-third of
the total number of directors.
Section 3.4. REGULAR MEETINGS. A regular organizational meeting of the
board of directors shall be held immediately following the close of, and at the
same place as, each annual meeting of stockholders. The board of directors
shall also hold regular monthly meetings at 3:00 p.m. on the third Thursday of
every month. No notice of any such meeting, other than this by-law, shall be
necessary in order legally to constitute the meeting, provided a quorum shall
be present. In the event such meeting is not held at such time and place, the
meeting may be held at such time and place as shall be specified in a notice
given as hereinafter provided for special meetings of the board of directors or
as shall be specified in a written waiver signed by all of the directors. The
board of directors may provide, by resolution, the time and place for the
holding of additional regular meetings without notice other than such
resolution.
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Section 3.5. SPECIAL MEETINGS. Special meetings of the board may be
called by the chairman of the board, the president, the vice chairman or any
three (3) directors. The person or persons calling a special meeting of the
board shall fix the time and place at which the meeting shall be held and such
time and place shall be specified in the notice of such meeting.
Section 3.6. NOTICE. Notice of any special meeting of the board of
directors shall be given at least 12 hours previous thereto by written notice
to each director at his or her business address or such other address as he or
she may have advised the secretary of the corporation to use for such purpose.
If delivered, such notice shall be deemed to be given when delivered to such
address or to the person to be notified. If mailed, such notice shall be
deemed to be given two business days after deposit in the United States mail so
addressed, with postage thereon prepaid. If given by telegraph, such notice
shall be deemed to be given the next business day following the day the
telegram is given to the telegraph company. Such notice may also be given by
telephone or other means not specified herein, and in each such case shall be
deemed to be given when actually received by the director to be notified.
Notice of any meeting of the board of directors shall set forth the time and
place of the meeting. Neither the business to be transacted at, nor the
purpose of, any meeting of the board of directors (regular or special) need be
specified in the notice or waiver of notice of such meeting.
Section 3.7. WAIVER OF NOTICE. A written waiver of notice, signed by a
director entitled to notice of a meeting of the board of directors or of a
committee of such board of which the director is a member, whether before or
after the time stated therein, shall be deemed equivalent to the giving of such
notice to that director. Attendance of a director at a meeting of the board of
directors or of a committee of such board of which the director is a member
shall constitute a waiver of notice of such meeting except when the director
attends the meeting for the express purpose of objecting, at the beginning of
the meeting, to the transaction of any business because the meeting is not
lawfully called or convened.
Section 3.8. QUORUM. At all meetings of the board of directors, a
majority of the number of directors fixed by these by-laws shall constitute a
quorum for the transaction of business and the act of a majority of the
directors present at any meeting at which there is a quorum shall be the act
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of the board of directors except as may be otherwise specifically provided by
statute, the certificate of incorporation of the corporation or these by-laws.
If a quorum shall not be present at any meeting of the board of directors, a
majority of the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
Section 3.9. ATTENDANCE BY CONFERENCE TELEPHONE. Members of the board of
directors or any committee designated by the board may participate in a meeting
of such board or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation in a meeting shall
constitute presence in person at such a meeting.
Section 3.10. PRESUMPTION OF ASSENT. A director of the corporation who
is present at a duly convened meeting of the board of directors at which action
on any corporate matter is taken shall be conclusively presumed to have
assented to the action taken unless his or her dissent shall be entered in the
minutes of the meeting or unless he or she shall file his or her written
dissent to such action with the person acting as the secretary of the meeting
before the adjournment thereof or shall forward such dissent by registered or
certified mail to the secretary of the corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a
director who voted in favor of such action.
Section 3.11. INFORMAL ACTION. Unless otherwise restricted by statute,
the certificate of incorporation of the corporation or these by-laws, any
action required or permitted to be taken at any meeting of the board of
directors or of any committee thereof may be taken without a meeting, if a
written consent thereto is signed by all the directors or by all the members of
such committee, as the case may be, and such written consent is filed with the
minutes of proceedings of the board of directors or of such committee.
Section 3.12. COMPENSATION. The directors may be paid their expenses, if
any, of attendance at each meeting of the board of directors and at each
meeting of a committee of the board of directors of which they are members.
The board of directors, irrespective of any personal interest of any of its
members, shall have authority to fix compensation of all directors for services
to the corporation as directors, officers or otherwise.
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Section 3.13. REMOVAL. Subject to the rights of the holders of any
class or series of Preferred Stock of the Corporation, any director, or the
entire board of directors, may be removed from office at any time, but only
for cause and only by the affirmative vote of the holders of at least a
majority of the outstanding shares of all classes of stock of the Corporation
generally entitled to vote in the election of directors, considered for
purposes of this Section as one class.
ARTICLE 4
COMMITTEES
----------
Section 4.1. COMMITTEES. The board of directors may, by resolution
passed by a majority of the whole board, designate one or more committees,
each committee to consist of one or more of the directors of the corporation,
which, to the extent provided in the resolution, shall have and may exercise
the powers of the board of directors with respect to the management of the
business affairs of the corporation and may authorize the seal of the
corporation to be affixed to all papers which may require it; but no such
committee shall have the power or authority of the board in reference to
amending the certificate of incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange
of all or substantially all of the corporation's property and assets,
recommending to the stockholders a dissolution of the corporate or a
revocation of a dissolution, or amending the by-laws of the corporation, and,
unless the resolution of these by-laws expressly so provide, no such
committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock. Such committee or committees shall have such
name or names as may be determined from time to time by resolution adopted by
the board of directors and the board may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. Additionally, in the absence or
disqualification of any member of such committee or committees, the member or
members thereof present any meeting and not disqualified from voting, whether
or not a quorum, may unanimously appoint another member of the board of
directors to act at the meeting in the place of any such absent or
disqualified member.
Section 4.2 COMMITTEE RECORDS. Each committee shall keep regular
minutes of its meetings and report the same to the board of directors when
required.
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ARTICLE 5
OFFICERS
--------
Section 5.1. DESIGNATION; NUMBER; ELECTION. The board of directors,
at its initial meeting and thereafter at its first regular meeting after each
annual meeting of stockholders, shall choose the officers of the corporation.
Such officers shall be a president, a chairman of the board, and a vice
chairman, (each of whom shall be a director) and a secretary, and a
treasurer, and such vice presidents, assistant secretaries and assistant
treasurers as the board of directors may choose. The chairman of the board,
the president and the vice chairman shall be elected; the other officers may
be appointed by the board of directors. The board of directors may appoint
such other officers and agents as it shall deem necessary who shall hold
their offices for such terms and shall exercise such powers and perform such
duties as shall be determined from time to time by the board. Any two or
more offices may be held by the same person. Except as provided in Article 6,
election or appointment as an officer shall not of itself create contract
rights.
Section 5.2. SALARIES. The salaries of all officers and agents of the
corporation chosen by the board of directors shall be fixed by the board of
directors, and no officer shall be prevented from receiving such salary by
reason of the fact that he is also a director of the corporation.
Section 5.3. TERM OF OFFICE; REMOVAL; VACANCIES. Each officer of the
corporation chosen by the board of directors shall hold office until the next
annual election or appointment of officers by the board of directors and
until his or her successor is appointed and qualifies, or until his or her
earlier death, resignation or removal in the manner hereinafter provided. Any
officer or agent chosen by the board of directors may be removed at any time by
the board of directors whenever in its judgment the best interests of the
corporation would be served thereby, but such removal shall be without prejudice
to the contract rights, if any, of the person so removed. Any vacancy occurring
in any office of the corporation at any time or any new offices may be filled by
the board of directors for the unexpired portion of the term.
Section 5.4. PRESIDENT. The president shall be the principal
executive officer of the corporation and, subject to the direction and
control of the board of directors, shall
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be in charge of the business of the corporation. In general, the president
shall discharge all duties incident to the principal executive office of the
corporation and such other duties as may be prescribed by the board of
directors from time to time. Without limiting the generality of the
foregoing, the president shall see that the resolutions and directions of the
board of directors are carried into effect except in those instances in which
that responsibility is specifically assigned to some other person by the
board of directors; and, except in those instances in which the authority to
execute is expressly delegated to another officer or agent of the corporation
or a different mode of execution is expressly prescribed by the board of
directors, may execute for the corporation certificates for its shares of
stock (the issue of which shall have been authorized by the board of
directors), and any contracts, deeds, mortgages, bonds, or other instruments
which the board of directors has authorized, and may (without previous
authorization by the board of directors) execute such contracts and other
instruments as the conduct of the corporation's business in its ordinary
course requires, and may accomplish such execution in each case either under
or without the seal of the corporation and either individually or with the
secretary, any assistant secretary, or any other officer thereunto authorized
by the board of directors, according to the requirements of the form of the
instrument. The president may vote all securities which the corporation is
entitled to vote except as and to the extent such authority shall be vested
in a different officer or agent of the corporation by the board of directors.
Section 5.5 VICE PRESIDENTS. The vice president (and, in the event
there is more than one vice president, each of the vice presidents) shall
render such assistance to the president in the discharge of his or her
duties as the president may direct and shall perform such other duties as
from time to time may be assigned by the president or by the board of
directors. In the absence of the president or in the event of his or her
inability or refusal to act, the vice president (or in the event there may be
more than one vice president, the vice presidents in the order designated by
the board of directors, or by the president if the board of directors has not
made such a designation, or in the absence of any designation, then in the
order of seniority of tenure as vice president) shall perform the duties of
the president, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the president. Except in those instances
in which the authority to execute is expressly delegated to another officer
or agent of the corpo-
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ration or a different mode of execution is expressly prescribed by the board
of directors or these by-laws, the vice president (or each of them if there
are more than one) may execute for the corporation certificates for its
shares of stock (the issue of which shall have been authorized by the board
of directors), and any contracts, deeds, mortgages, bonds or other
instruments which the board of directors has authorized, and may (without
previous authorization by the board of directors) execute such contracts and
other instruments as the conduct of the corporation's business in its
ordinary course requires, and may accomplish such execution in each case
either under or without the seal of the corporation and either individually
or with the secretary, any assistant secretary, or any other officer
thereunto authorized by the board of directors, according to the requirements
of the form of the instrument.
Section 5.6 CHAIRMAN OF THE BOARD. The chairman of the board shall
preside at all meetings of the board of directors and at all meetings of the
stockholders, including the annual meeting.
Section 5.7 VICE CHAIRMAN OF THE BOARD. The vice chairman of the board
shall preside at all meetings of the board of directors in the absence of the
chairman of the board.
Section 5.8 TREASURER. The treasurer shall be the principal accounting
and financial officer of the corporation and as such shall perform all the
duties incident to the office of treasurer and such other duties as from time
to time may be assigned by the board of directors or the president. Without
limiting the generality of the foregoing, the treasurer shall have charge of
and be responsible for the maintenance of adequate books of account for the
corporation and shall have charge and custody of all funds and securities of
the corporation and be responsible therefor and for the receipt and
disbursement thereof. If required by the board of directors, the treasurer
shall give a bond for the faithful discharge of his or her duties in such
sum and with such surety or sureties as the board of directors may determine.
Section 5.9 SECRETARY. The secretary shall perform all duties incident
to the office of secretary and such other duties as from time to time may be
assigned by the board of directors or the president. Without limiting the
generality of the foregoing, the secretary shall (a) record the minutes of
the meetings of the stockholders and the board of direc-
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tors in one or more books provided for that purpose and shall include in such
books the actions by written consent of the stockholders and the board of
directors; (b) see that all notices are duly given in accordance with the
provisions of these by-laws or as required by statute; (c) be the custodian
of the corporate records and the seal of the corporation; (d) keep a register
of the post office address of each stockholder which shall be furnished to
the secretary by such stockholder; (e) sign with the president, or a vice
president, or any other officer thereunto authorized by the board of
directors, certificates for shares of stock of the corporation (the issue of
which shall have been authorized by the board of directors), and any
contracts, deeds, mortgages, bonds, or other instruments which the board of
directors has authorized, and may (without previous authorization by the
board of directors) sign with such other officers as aforesaid such contracts
and other instruments as the conduct of the corporation's business in its
ordinary course requires, in each case according to the requirements of the
form of the instrument, except when a different mode of execution is
expressly prescribed by the board of directors; and (f) have general charge
of the stock transfer books of the corporation.
SECTION 5.10. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. The
assistant treasurers and assistant secretaries shall perform such duties as
shall be assigned to them by the treasurer, in the case of assistant
treasurers, or the secretary, in the case of assistant secretaries, or by the
board of directors or president in either case. Each assistant secretary may
sign with the president, or a vice president, or any other officer thereunto
authorized by the board of directors, certificates for shares of stock of the
corporation (the issue of which shall have been authorized by the board of
directors), and any contracts, deeds, mortgages, bonds, or other instruments
which the board of directors has authorized, and may (without previous
authorization by the board of directors) sign with such other officers as
aforesaid such contracts and other instruments as the conduct of the
corporation's business in its ordinary course requires, in each case
according to the requirements of the form of the instrument, except when a
different mode of execution is expressly prescribed by the board of
directors. The assistant treasurers shall, if required by the board of
directors, give bonds for the faithful discharge of their duties in such
sums and with such sureties as the board of directors shall determine.
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ARTICLE 6
INDEMNIFICATION
Section 6.1. CLAIM BROUGHT BY THIRD PARTIES. The corporation shall
indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an
action by or in the right of the corporation) by reason of the fact that he
is or was or has agreed to become a director or officer of the corporation,
or is or was serving or has agreed to serve at the request of the corporation
as a director or officer of another corporation, partnership, joint venture,
trust or other enterprise, or by reason of any action alleged to have been
taken or omitted by such person in such capacity, against costs, charges and
other expenses (including attorneys' fees) ("Expenses"), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit, or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in
good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the corporation, and with respect to any
criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
Section 6.2. CLAIM BY OR IN THE RIGHT OF THE CORPORATION. The
corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the corporation to procure a judgment in its
favor by reason of the fact that he is or was or has agreed to become a
director of the corporation, or is or was serving or has agreed to serve at
the request of the corporation as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise, or by
reason of any action alleged to have been taken or omitted by such person in
such capacity, against Expenses actually and reasonably incurred by him in
connection with the investigation, defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery of the State of
Delaware or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such Expenses which the Court of
Chancery of the State of Delaware or such other court shall deem proper.
<PAGE>
Section 6.3. ADDITIONAL INDEMNIFICATION. In addition to the
indemnification provided for in Section 6.1 and Section 6.2, the corporation
shall indemnify any person who was or is a party or is threatened to be made
a party to any threatened, pending or completed action or suit by or in the
right of another corporation, partnership, joint venture, trust or other
enterprise by reason of the fact that he is or was serving or has agreed to
serve at the request of the corporation as a director of such other
corporation, partnership, joint venture, trust or other enterprise against
Expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action or suit and any
appeal thereof for breach of fiduciary duty as such director, except for
liability (i) for breach of the duty of loyalty to such other corporation,
partnership, joint venture, trust or other enterprise; (ii) for acts or
omissions not in good faith or which involve intentional misconduct or
knowing violation of law; (iii) for unlawful payment of a dividend or
unlawful purchase or redemption of stock; or (iv) for any transaction from
which the director derived an improper personal benefit.
Section 6.4. SUCCESSFUL DEFENSE. To the extent that any person
referred to in Section 6.1, Section 6.2 or Section 6.3 has been successful on
the merits or otherwise, including, without limitation, the dismissal of an
action with-out prejudice, in defense of any action, suit or proceeding
referred to therein or in defense of any claim, issue or matter therein, he
shall be indemnified against Expenses actually and reasonably incurred by him
in connection therewith.
Section 6.5. DETERMINATION OF CONDUCT. Any indemnification under
Section 6.1, Section 6.2, or Section 6.3 (unless ordered by a court) shall be
made by the corporation only as authorized in the specific case upon a
determination that indemnification of any person referred to in Section 6.1,
Section 6.2 or Section 6.3 is proper in the circumstances because he has met
the applicable standard of conduct set forth in Section 6.1, Section 6.2 or
Section 6.3. Such determination shall be made (a) by the Board of Directors
by a majority vote of a quorum consisting of directors who were not parties
to such action, suit or proceeding, or (b) if such quorum is not obtainable,
or, even if obtainable and a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, or (c) by the stockholders.
Section 6.6. ADVANCE PAYMENT. Expenses incurred by any person referred
to in Section 6.1, Section 6.2 or Section 6.3 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 by the corporation of any undertaking by or on behalf of such person
to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the corporation as provided in this Article 6.
Section 6.7. BY-LAW NOT EXCLUSIVE; CHANGE IN LAW. The indemnification
and advancement of Expenses provided by, or granted pursuant to, this Article
6 shall not be deemed, exclusive of any other rights to which those seeking
indemnification or advancement of Expenses may be entitled under any law
(common or statutory), by-law, agreement, vote of stockholders or
disinterested directors, or otherwise, both as to action in his official
<PAGE>
capacity and as to action in another capacity while holding such office, and
shall continue as to a person who has ceased to be a director or officer and
shall inure to the benefit of the heirs, executors and administrators of such
a person. Notwithstanding the provisions of this Article 6, the corporation
shall indemnify and make advancement of Expenses to any person referred to in
Section 6.1, Section 6.2 or Section 6.3 to the fullest extent permitted under
the laws of the State of Delaware and any other applicable laws, as they now
exist or as they may be amended in the future.
Section 6.8. CONTRACT RIGHTS. All rights to indemnification and
advancement of Expenses provided by this Article 6 shall be deemed to be a
contract between the corporation and each person referred to in Section 6.1,
Section 6.2 or Section 6.3. Any repeal or modification of this Article 6 or
any repeal or modification of relevant provisions of the General Corporation
Law of the State of Delaware or any other applicable law shall not in any way
diminish any rights to indemnification or advancement of Expenses with
respect to any state of facts then or previously existing or any action, suit
or proceeding previously or thereafter brought or threatened based in whole
or in part on such state of facts.
Section 6.9. INSURANCE. The corporation shall have power to purchase
and maintain insurance on behalf of any person referred to in Section 6.1,
Section 6.2 or Section 6.3 against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under the provision of the Certificate of Incorporation of the
corporation, of this Article 6 or of Section 145 of the General Corporation
Law of the State of Delaware.
Section 6.10. INDEMNIFICATION OF EMPLOYEES OR AGENTS. The Board of
Directors may, by resolution, extend the provisions of this Article 6
pertaining to indemnification and advancement of Expenses to any person who
was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding by reason of the fact that
he is or was or has agreed to become an employee or agent of the corporation,
or is or was serving or has agreed to serve at the request of the corporation
as any employee or agent of another corporation, partnership, joint venture,
trust or other enterprise.
Section 6.11. DEFINITION OF CORPORATION. For purposes of this Article
6, reference to "the corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, employees or agents so that any person who is or was or
has agreed to become a director, officer, employee or agent of such
constituent corporation, or is or was serving or has agreed to serve at the
request of such constituent corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under the provisions of this
Article 6 with respect to the resulting or
<PAGE>
surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
Section 6.12. EMPLOYEE BENEFIT PLANS. For purposes of this Article 6,
reference to "other enterprises" shall include employee benefit plans;
reference to "fines" shall include any excise taxes assessed on a person with
respect to an employee benefit plan; and references to "serving at the
request of the corporation" shall include any service as a director, officer,
employee or agent of the corporation which imposes duties on, or involves
services by, such director, officer, employee or agent with respect to any
employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best interests
of the corporation" as referred to in this Article 6.
<PAGE>
ARTICLE 7
CERTIFICATES OF STOCK AND THEIR TRANSFER
----------------------------------------
Section 7.1. FORM AND EXECUTION OF CERTIFICATES. Every holder of stock
in the corporation shall be entitled to have a certificate signed by, or in the
name of the corporation by the president or a vice president and by the
secretary or an assistant secretary of the corporation, certifying the number
of shares owned. Such certificates shall be in such form as may be determined
by the board of directors. During the period while more than one class of
stock of the corporation is authorized there will be set forth on the face or
back of the certificates which the corporation shall issue to represent each
class or series of stock a statement that the corporation will furnish, without
charge to each stockholder who so requests, the designations, preferences and
relative, participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights. In case any officer, transfer agent or
registrar of the corporation who has signed, or whose facsimile signature has
been placed upon, any such certificate shall have ceased to be such officer,
transfer agent or registrar of the corporation before such certificate is
issued by the corporation, such certificate may nevertheless be issued and
delivered by the corporation with the same effect as if the officer, transfer
agent or registrar who signed, or whose facsimile signature was placed upon,
such certificate has not ceased to be such officer, transfer agent or registrar
of the corporation.
Section 7.2. REPLACEMENT CERTIFICATES. The board of directors may
direct a new certificate to be issued in place of any certificate evidencing
shares of stock of the corporation theretofore issued by the corporation
alleged to have been lost, stolen or destroyed, upon the making of an affidavit
of the fact by the person claiming the certificate to be lost, stolen or
destroyed. When authorizing such issued of a new certificate, the board of
directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate, or
his legal representative, to advertise the same in such manner as it shall
require and may require such owner to give the corporation a bond in such sum
as it may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost, stolen
or destroyed. The board of directors may delegate its authority to direct the
issuance of replacement stock
-15-
<PAGE>
certificates to the transfer agent or agents of the corporation upon such
conditions precedent as may be prescribed by the board.
Section 7.3. TRANSFERS OF STOCK. Upon surrender to the corporation or
the transfer agent of the corporation of a certificate for shares of stock of
the corporation of a certificate for shares of stock of the corporation duly
endorsed or accompanied by proper evidence of succession, assignment, or other
authority to transfer, it shall be the duty of the corporation to issue a new
certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books, provided the corporation or a transfer
agent of the corporation shall not have received a notification of adverse
interest and that the conditions of Section 8-401 of Title 6 of the Delaware
Code have been met.
Section 7.4. REGISTERED STOCKHOLDERS. The corporation shall be entitled
to treat the holder of record (according to the books of the corporation) of
any share or shares of its stock as the holder in fact thereof and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part or any other party whether or not the corporation shall have
express or other notice thereof, except as expressly provided by the laws of
the State of Delaware.
ARTICLE 8
CONTRACTS, LOANS, CHECKS AND DEPOSITS
-------------------------------------
Section 8.1. CONTRACTS. The board of directors may authorize any officer
or officers, agent or agents, to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances; provided, however,
that this Section 8.1 shall not be a limitation on the powers of office granted
under Article 5 of these by-laws.
Section 8.2. LOANS. No loans shall be contracted on behalf of the
corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the board of directors. Such authority may be
general or confined to specific instances.
-16-
<PAGE>
Section 8.3. CHECKS, DRAFTS AND OTHER INSTRUMENTS. All checks, drafts
or other orders for the payment of money and all notes or other evidences of
indebtedness issued in the name of the corporation shall be signed by such
officer or officers or such agent or agents of the corporation and in such
manner as from time to time may be determined by the resolution of the board
of directors or by an officer or officers of the corporation designated by
the board of directors to make such determination.
Section 8.4. DEPOSITS. All funds of the corporation not otherwise
employed shall be deposited from time to time to the credit of the
corporation in such banks, trust companies or other depositaries as the board
of directors, or an officer or officers designated by the board of directors,
may select.
ARTICLE 9
MISCELLANEOUS PROVISIONS
Section 9.1. DIVIDENDS. Subject to any provisions of any applicable
statute or of the certificate of incorporation, dividends may be declared
upon the capital stock of the corporation by the board of directors at any
regular or special meeting thereof; and such dividends may be paid in cash,
property or shares of stock of the corporation.
Section 9.2. RESERVES. Before payment of any dividends, there may be
set aside out of any funds of the corporation available for dividends such
sum or sums as the board of directors from time to time, in its discretion,
determines to be proper as a reserve or reserves to meet contingencies, or
for equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the board of directors shall
determine to be conducive to the interests of the corporation, and the
directors may modify or abolish any such reserve in the manner in which it
was created.
Section 9.3. VOTING STOCK OF OTHER CORPORATIONS. In the absence of
specific action by the board of directors, the president shall have authority
to represent the corporation and to vote, on behalf of the corporation, the
securities of other corporations, both domestic and foreign, held by the
corporation.
-17-
<PAGE>
Section 9.4. FISCAL YEAR. The fiscal year of the corporation shall
begin on the first day of January in each year and end on the last day of the
next following December.
Section 9.5. SEAL. The corporate seal shall have inscribed thereon
the name of the corporation and the words "Corporate Seal, Delaware". The
seal may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise applied.
Section 9.6. SEVERABILITY. If any provision of these by-laws, or its
application thereof to any person or circumstances, is held invalid, the
remainder of these by-laws and the application of such provision to other
persons or circumstances shall not be affected thereby.
Section 9.7. AMENDMENT. These by-laws may be amended or repealed, or
new by-laws may be adopted, by the board of directors of the corporation.
These by-laws may also be amended or repealed, or new by-laws may be adopted,
by action taken by the stockholders of the corporation.
-18-
<PAGE>
EXHIBIT 11
CASTLE BANCGROUP, INC.
COMPUTATION OF PER SHARE EARNINGS
3 MONTHS ENDED
MARCH 31
--------
1997 1996
---- ----
Net income applicable to common stock $346,967 $281,465
-------- --------
-------- --------
Weighted average common shares outstanding 2,073,658 2,059,404
Weighted average common share equivalents (1) 17,520 8,546
--------- ---------
Weighted average common shares and equivalents 2,091,178 2,067,950
--------- ---------
--------- ---------
Net income per common share $.17 $.14
---- ----
---- ----
(1) COMMON SHARE EQUIVALENTS RESULT FROM STOCK OPTIONS BEING TREATED AS IF THEY
HAD BEEN EXERCISED AND ARE COMPUTED BY APPLICATION OF THE TREASURY STOCK
METHOD.
19
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 10,676,001
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 550,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 134,961,357
<INVESTMENTS-CARRYING> 0
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<LOANS> 293,610,562
<ALLOWANCE> 3,957,493
<TOTAL-ASSETS> 472,502,681
<DEPOSITS> 403,117,227
<SHORT-TERM> 21,860,692
<LIABILITIES-OTHER> 3,103,877
<LONG-TERM> 10,150,000
0
2,600,000
<COMMON> 692,082
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<TOTAL-LIABILITIES-AND-EQUITY> 472,502,581
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<INTEREST-TOTAL> 9,273,322
<INTEREST-DEPOSIT> 4,034,306
<INTEREST-EXPENSE> 4,526,379
<INTEREST-INCOME-NET> 4,746,943
<LOAN-LOSSES> 205,084
<SECURITIES-GAINS> (7,165)
<EXPENSE-OTHER> 5,779,025
<INCOME-PRETAX> 530,843
<INCOME-PRE-EXTRAORDINARY> 530,843
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 397,343
<EPS-PRIMARY> .17
<EPS-DILUTED> .17
<YIELD-ACTUAL> 4.39
<LOANS-NON> 2,062,829
<LOANS-PAST> 455,207
<LOANS-TROUBLED> 309,819
<LOANS-PROBLEM> 3,010,316
<ALLOWANCE-OPEN> 3,775,108
<CHARGE-OFFS> 169,927
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<ALLOWANCE-CLOSE> 3,957,493
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<ALLOWANCE-FOREIGN> 0
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