<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the quarterly period ended March 31, 1999.
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the transition period from _____________ to _____________
Commission file number: 0-13585
NATIONAL CITY BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
INDIANA 35-1632155
(State or other jurisdiction of incorporation or organization) (I.R.S. Employee Identification No.)
PO BOX 868, EVANSVILLE, INDIANA 47705-0868
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (812) 464-9677
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 shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
<S> <C>
CLASS OUTSTANDING AT MAY 10, 1999
(Common stock, $1.00 Stated Value) 16,890,495
</TABLE>
<PAGE> 2
NATIONAL CITY BANCSHARES, INC.
INDEX
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE NO.
Item 1. Unaudited Financial Statements
<S> <C>
Condensed consolidated statements of financial position-
March 31, 1999, December 31, 1998, and March 31, 1998 3
Condensed consolidated statements of income and
comprehensive income-three months ended March 31, 1999 and 1998 4
Condensed consolidated statements of cash flows-
three months ended March 31, 1999 and 1998 5
Notes to condensed consolidated financial statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures about Market Risk 15
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 16
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. Unaudited Financial Statements
NATIONAL CITY BANCSHARES, INC. and Subsidiaries
Unaudited Condensed Consolidated Statements of Financial Position
(Dollar Amounts Other Than Share Data in Thousands)
<TABLE>
<CAPTION>
March December March
31 31 31
1999 1998 1998
- -------------------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C> <C>
Cash and cash equivalents $ 52,783 $ 67,389 $ 65,422
Time deposits in banks -- 142 3,436
Federal funds sold 311 10,431 20,617
Securities available for sale 341,496 346,514 455,206
Nonmarketable equity securities 18,386 19,327 18,470
Loans 1,617,193 1,648,296 1,520,612
Less: Allowance for loan losses (18,371) (18,443) (14,932)
- -------------------------------------------------------------------------------------------------------------------------
Loans-net 1,598,822 1,629,853 1,505,680
Premises and equipment, net 46,488 46,399 45,005
Intangible assets 39,266 40,185 42,612
Other assets 31,869 34,984 30,667
- -------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 2,129,421 $ 2,195,224 $ 2,187,115
=========================================================================================================================
LIABILITIES
Deposits:
Noninterest-bearing demand $ 225,984 $ 231,623 $ 240,472
Interest-bearing savings and time 1,450,640 1,502,962 1,493,807
- -------------------------------------------------------------------------------------------------------------------------
Total deposits 1,676,624 1,734,585 1,734,279
Short-term borrowings 32,134 33,382 54,314
Other borrowings 133,112 139,545 121,529
Guaranteed preferred beneficial interests
in the Corporation's subordinated debenture 34,500 34,500 34,500
Dividends payable 3,368 3,368 2,956
Deferred income taxes 4,488 3,898 4,406
Other liabilities 14,315 17,623 15,154
- -------------------------------------------------------------------------------------------------------------------------
Total liabilities 1,898,541 1,966,901 1,967,138
COMMON STOCK OWNED BY ESOP(subject to put option) 4,551 10,043 4,111
SHAREHOLDERS' EQUITY
Preferred stock-1,000,000 shares authorized
None outstanding
Common stock 16,842 16,842 16,769
3/31/99 12/31/98 3/31/98
Authorized 29,000,000 29,000,000 20,000,000
Outstanding 16,842,456 16,842,456 16,768,798
Capital surplus 123,677 123,561 92,746
Retained earnings 86,874 83,536 106,764
Accumulated other comprehensive income 3,520 4,436 3,993
Unearned employee stock ownership plan shares (33) (52) (295)
Common stock owned by ESOP(subject to put option) (4,551) (10,043) (4,111)
- -------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 226,329 218,280 215,866
- -------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,129,421 $ 2,195,224 $ 2,187,115
=========================================================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE> 4
NATIONAL CITY BANCSHARES, INC. and Subsidiaries
Unaudited Condensed Consolidated Statements of Income
(Dollar Amounts Other Than Share Data in Thousands)
<TABLE>
<CAPTION>
Three Months
Ended
March 31,
- ---------------------------------------------------------------------------------------------------
1999 1998
- ---------------------------------------------------------------------------------------------------
INTEREST INCOME
<S> <C> P<C>
Interest and fees on loans $ 35,478 $ 32,987
Interest and dividends on securities 5,019 6,232
Interest on federal funds sold 215 312
Interest on other investments 45 82
- ---------------------------------------------------------------------------------------------------
Total interest income 40,757 39,613
INTEREST EXPENSE
Interest on deposits 15,517 15,715
Interest on funds borrowed 3,108 2,443
- ---------------------------------------------------------------------------------------------------
Total interest expense 18,625 18,158
NET INTEREST INCOME 22,132 21,455
Provision for loan losses 1,260 402
- ---------------------------------------------------------------------------------------------------
Net interest income after
provision for loan losses 20,872 21,053
NONINTEREST INCOME
Trust income 520 484
Service charges on deposit accounts 1,828 1,721
Other service charges and fees 1,039 978
Securities gains 3 67
Other 423 416
- ---------------------------------------------------------------------------------------------------
Total noninterest income 3,813 3,666
NONINTEREST EXPENSE
Salaries, wages and other employee benefits 7,462 8,036
Occupancy expense 872 832
Furniture and equipment expense 1,042 1,079
Other 5,484 4,685
- ---------------------------------------------------------------------------------------------------
Total noninterest expense 14,860 14,632
- ---------------------------------------------------------------------------------------------------
Income before income taxes 9,825 10,087
Income taxes 3,120 3,081
- ---------------------------------------------------------------------------------------------------
NET INCOME 6,705 7,006
===================================================================================================
Proforma C Corporation provision for income taxes 3,120 3,307
- ---------------------------------------------------------------------------------------------------
PROFORMA NET INCOME 6,705 6,780
- ---------------------------------------------------------------------------------------------------
Other comprehensive income, net of income taxes:
Unrealized gain (loss) arising in period (914) (502)
Reclassification for realized amount (2) (40)
- ---------------------------------------------------------------------------------------------------
Net unrealized gain (loss) recognized in other
comprehensive income (916) (542)
- ---------------------------------------------------------------------------------------------------
PROFORMA COMPREHENSIVE INCOME $ 5,789 $ 6,238
===================================================================================================
Earnings per share:
Basic $ 0.40 $ 0.41
Diluted $ 0.40 $ 0.40
Weighted average shares outstanding:
Basic 16,837,051 16,708,706
Diluted 16,906,951 16,841,892
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE> 5
NATIONAL CITY BANCSHARES, INC. and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flows
(Dollars Amounts in Thousands)
<TABLE>
<CAPTION>
Three Months
Ended
March 31,
- ---------------------------------------------------------------------------------------------
1999 1998
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES $ 11,587 $ 10,500
- ---------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) decrease in interest-bearing time
deposits in banks 142 257
Proceeds from matured securities available for sale 26,667 33,796
Proceeds from sales of securities available for sale -- 3,783
Proceeds from called investments 8,157 2,907
Purchases of securities available for sale (30,320) (50,756)
Purchases of nonmarketable equity securities (92) --
(Increase) decrease in federal funds sold 10,120 8,477
(Increase) decrease in loans made to customers 29,771 (12,441)
(Increase) decrease in cash surrender value life insurance (15) (11)
Increase in other investments (1,066) (338)
Capital expenditures (808) (2,698)
Proceeds from sale of premises and equipment 25 52
Proceeds from sale of other real estate owned 236 103
Purchase of subsidiary, net of cash and cash
equivalents acquired -- 36,952
- ---------------------------------------------------------------------------------------------
Net cash flows provided by (used in) investing activities 42,817 20,083
- ---------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits (57,961) 8,089
Net increase (decrease) in short-term borrowings (1,248) (38,235)
Proceeds from other borrowings 90 54,812
Payments on other borrowings (6,523) (78,310)
Trust preferred securities -- 33,158
Dividends paid (3,368) (2,186)
Repurchase of common stock -- (876)
Sale of common stock -- 434
Proceeds from exercise of stock options -- 758
- ---------------------------------------------------------------------------------------------
Net cash flows provided by (used in)
financing activities (69,010) (22,356)
- ---------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (14,606) 8,227
- ---------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of period 67,389 57,195
- ---------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 52,783 $ 65,422
=============================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE> 6
NATIONAL CITY BANCSHARES, INC. and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flows (Continued)
(Dollars Amounts in Thousands)
<TABLE>
<CAPTION>
Three Months
Ended
March 31,
- ---------------------------------------------------------------------------------------------------------
1999 1998
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
AND FINANCIAL ACTIVITIES
Change in allowance for unrealized gain
(loss) on securities available for sale (1,505) (1,036)
Increase (decrease) in deferred taxes
attributable to securities available for sale 590 494
Other real estate acquired in settlement of loans 209 273
Purchase of subsidiaries and branches:
Purchase price $ - $ 32,354
=========================================================================================================
Assets acquired:
Cash and cash equivalents 4,598
Securities 39,223
Federal funds sold 8,080
Loans 106,536
Premises and equipment 2,856
Other assets 23,700
Liabilities assumed:
Deposits (193,386)
Short-term borrowings (10,510)
Other borrowings (11,100)
Deferred taxes payable (71)
Other liabilities (2,280)
- ---------------------------------------------------------------------------------------------------------
$ - $ (32,354)
=========================================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
6
<PAGE> 7
NATIONAL CITY BANCSHARES, INC. and Subsidiaries
UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1
The accompanying unaudited condensed consolidated financial statements include
the accounts of National City Bancshares, Inc. and its subsidiaries
(collectively, the "Corporation"). At March 31, 1999, the Corporation had as
subsidiaries, thirteen commercial banks, a leasing corporation, a property
management company, and a Delaware statutory business trust. All significant
intercompany transactions are eliminated in consolidation.
The financial statements have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission ("SEC"). While the
financial statements are unaudited, they do reflect all adjustments which, in
the opinion of management, are necessary for a fair statement of the financial
position, the results of operations, and cash flow for the interim periods. All
such adjustments are of a normal recurring nature. Pursuant to SEC rules,
certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted from these financial statements unless
significant changes have taken place since the end of the most recent fiscal
year. The accompanying financial statements and notes thereto should be read in
conjunction with the Corporation's financial statements and notes for the year
ended December 31, 1998, included in the Corporation's Annual Report on Form
10-K filed with the SEC.
Because the results from commercial banking operations are so closely related
and responsive to changes in economic conditions, the results for any interim
period are not necessarily indicative of the results that can be expected for
the entire year.
In October, 1998, the FASB issued SFAS No. 134, "Accounting for Mortgage Backed
Securities Retained After the Securitization of Mortgage Loans Held For Sale By
a Banking Enterprise." SFAS 134 amends SFAS 65 and SFAS 115. SFAS 134 became
effective during the current reporting quarter. The Corporation has not
securitized any mortgage loans held for sale and, therefore, SFAS 134 did not
have any impact on the accompanying financial statements.
NOTE 2
The Corporation and its subsidiaries are parties to legal actions which arise in
the normal course of their business activities. In the opinion of management,
the ultimate resolution of these matters is not expected to have a materially
adverse effect on the financial position or on the results of operations of the
Corporation and its subsidiaries.
In the normal course of business, there are outstanding various other
commitments and contingent liabilities which are not reflected in the
accompanying financial statements. The Corporation uses the same credit policies
in making commitments and conditional obligations as it does for other
instruments.
<TABLE>
<CAPTION>
3/31/99 12/31/98
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Standby letters of credit $ 19,469,000 $ 18,011,000
Commitments to extend credit $ 264,893,000 $ 285,808,000
</TABLE>
NOTE 3
A five percent stock dividend was paid December 7, 1998, to shareholders of
record November 21, 1998. All weighted average shares and per share data
presented herein have been restated for the effects of this stock dividend.
7
<PAGE> 8
NOTE 4
The calculation of net earnings per share as of March 31 is summarized as
follows:
<TABLE>
<CAPTION>
3/31/99 3/31/98
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Net income $6,705,000 $6,780,000
Basic earnings per share:
Weighted average shares outstanding 16,837,051 16,708,706
Basic earnings per share $0.40 $0.41
Diluted earnings per share:
Weighted average shares outstanding 16,837,051 16,708,706
Common stock equivalents due to stock options 69,900 133,186
Adjusted shares outstanding 16,906,951 16,841,892
Diluted earnings per share $0.40 $0.40
</TABLE>
NOTE 5
On February 17, 1999, a cash dividend of $0.20 was declared and paid April 7,
1999, to shareholders of record as of March 21, 1999.
On February 28, 1998, a cash dividend of $0.17125 was declared and paid April 7,
1998, to shareholders of record as of March 23, 1998.
8
<PAGE> 9
NOTE 6
The Corporation has identified its reportable segments, including the basis of
organization along geographic boundaries served by the Corporation. Banking
services offered are similar in each geographic area served. The accounting
policies of the segments are the same as those described in the summary of
significant accounting policies in the Corporation's annual report for the year
ended December 31, 1998. The Corporation evaluates performance based on profit
or loss from operations before income taxes not including nonrecurring gains and
losses. Operating statistics for each reporting segment is as follows:
<TABLE>
<CAPTION>
Southwest Western Southern Northern
March 31, 1999 Indiana Kentucky Illinois Kentucky Total
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest income $ 19,491 $ 6,194 $ 7,079 $ 8,369 $ 41,133
Interest expense 8,710 3,043 3,288 3,547 18,588
- --------------------------------------------------------------------------------------------------------------------------------
Net interest income 10,781 3,151 3,791 4,822 22,545
Provision for loan losses 720 327 38 127 1,212
Other income 2,134 415 642 662 3,853
Other expense 5,874 1,918 2,779 2,549 13,120
- --------------------------------------------------------------------------------------------------------------------------------
Net income before tax 6,321 1,321 1,616 2,808 12,066
Income tax 2,106 359 537 952 3,954
- --------------------------------------------------------------------------------------------------------------------------------
Net income $ 4,215 $ 962 $ 1,079 $ 1,856 $ 8,112
================================================================================================================================
Other segment information:
Depreciation and
amortization $ 511 $ 277 $ 709 $ 184 $ 1,681
Segment assets 1,016,166 319,511 430,660 413,200 2,179,537
Expenditures for
segment assets 318 259 30 48 655
Southwest Western Southern Northern
March 31, 1998 Indiana Kentucky Illinois Kentucky Total
- --------------------------------------------------------------------------------------------------------------------------------
Interest income $ 19,417 $ 6,149 $ 6,034 $ 8,599 $ 40,199
Interest expense 8,884 3,299 2,728 3,779 18,690
- --------------------------------------------------------------------------------------------------------------------------------
Net interest income 10,533 2,850 3,306 4,820 21,509
Provision for loan losses 498 16 (236) 119 397
Other income 2,166 368 467 609 3,610
Other expense 6,203 2,005 2,279 2,898 13,385
- --------------------------------------------------------------------------------------------------------------------------------
Net income before tax 5,998 1,197 1,730 2,412 11,337
Income tax 1,903 309 505 790 3,507
- --------------------------------------------------------------------------------------------------------------------------------
Net income $ 4,095 $ 888 $ 1,225 $ 1,622 $ 7,830
================================================================================================================================
Other segment information:
Depreciation and
amortization $ 478 $ 264 $ 454 $ 203 $ 1,399
Segment assets 1,014,559 336,999 475,759 413,400 2,240,717
Expenditures for
segment assets 2,459 55 80 73 2,667
</TABLE>
9
<PAGE> 10
A reconciliation of revenues, net income, and assets of the reported segments to
the consolidated financial statements is as follows:
<TABLE>
<CAPTION>
1999 1998
- -----------------------------------------------------------------------------------------------------------------
Net interest income:
<S> <C> <C>
Total net interest income for reportable segments $ 22,545 $ 21,509
Non-bank entities (413) (54)
Eliminations - -
- -----------------------------------------------------------------------------------------------------------------
Total consolidated net interest income $ 22,132 $ 21,455
=================================================================================================================
Net income:
Total net income for reportable segments $ 8,112 $ 7,830
Non-bank entities (1,407) (1,050)
Eliminations - -
- -----------------------------------------------------------------------------------------------------------------
Total consolidated net income $ 6,705 $ 6,780
=================================================================================================================
Assets:
Total assets for reportable segments $ 2,179,537 $ 2,240,717
Non-bank entities 97,934 88,609
Eliminations (148,050) (142,211)
- -----------------------------------------------------------------------------------------------------------------
Total consolidated assets $ 2,129,421 $ 2,187,115
=================================================================================================================
</TABLE>
NOTE 7
On March 30, 1998, the Corporation issued $34,500,000 of trust preferred
securities through NCBE Capital Trust I, a Delaware statutory business trust
created and controlled by the Corporation. The trust preferred securities have a
liquidation amount of $25 per share with a cumulative annual distribution rate
of 8.25%, payable quarterly, and mature on March 31, 2028.
The principal asset of NCBE Capital Trust I is a subordinated debenture of the
Corporation in the principal amount of $34,500,000 with an interest rate and
maturity date substantially identical to those of the trust preferred
securities. The Corporation owns all of the common securities of NCBE Capital
Trust I. The back-up obligations of the Corporation with respect to the trust
preferred securities constitute, in the aggregate, a full and unconditional
guarantee by the Corporation of the obligations of NCBE Capital Trust I under
the trust preferred securities. The Corporation may redeem the subordinated
debenture and thereby cause a redemption of the trust preferred securities in
whole (or in part from time to time) on or after March 31, 2003, or in whole
(but not in part) within 180 days following the occurrence and continuance of
certain adverse federal income tax or capital treatment events.
10
<PAGE> 11
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
INTRODUCTION
Certain statements made in this report may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements to be materially different from the results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the following: management's ability to improve
the profitability of acquired institutions and to realize expected operational
synergies from acquisitions; general, regional and local economic conditions
which may affect interest rates and net interest income; credit risks and risks
from concentrations (geographic and by industry) within the loan portfolio;
changes in regulations affecting financial institutions; competition; and risks
created by the "year 2000 problem."
The Corporation has grown rapidly by acquiring community banks. The financial
results of acquisitions can best be assessed from the Corporation's financial
statements on a quarterly, as-reported basis. After each acquisition accounted
for as a pooling of interests, the Corporation's financial statements are
restated to include the results of the acquiree. Since January 1, 1998, the
Corporation acquired assets of $692,900,000 (measured at the time of each
acquisition) in nine transactions accounted for as poolings of interests.
Since January 1, 1998, the Corporation has also acquired $244,795,000 (measured
at the time of each acquisition) in assets in two transactions accounted for as
purchases. Financial statements are not restated following a transaction
accounted for as a purchase; instead, the Corporation's financial statements
include the results of the acquired entity following acquisition. Transactions
accounted for as purchases typically result in recording intangible assets,
including goodwill, which the Corporation amortizes on a straight-line basis.
The Corporation has recorded $21,072,000 (measured at the time of each
acquisition) in intangible assets as the direct result of purchases consummated
between January 1, 1998, and March 31, 1999.
Management evaluates acquisition opportunities as they arise. However,
management anticipates the pace of acquisition activity will be much lower in
1999 than in 1998. The Corporation plans to devote significant resources to
integrating recently acquired institutions and completing consolidation of back
office operations.
NET INCOME
Net income for the quarter ended March 31, 1999, was $6,705,000 compared to
$6,780,000 in the first quarter of 1998. Basic earnings per share for the first
quarter were $0.40 in 1999 and $0.41 in 1998; and on a diluted basis, first
quarter earnings per share were $0.40 in each year. The weighted average number
of shares outstanding was 16,837,051 and 16,708,706 for the three months ended
March 31, 1999 and 1998, respectively. The weighted average number of shares
outstanding, assuming dilution, was 16,906,951 and 16,841,892 for the three
months ended March 31, 1999 and 1998, respectively.
NET INTEREST INCOME
Net interest income, on a taxable equivalent basis, for the quarter ended March
31, 1999, was $23,701,000, reflecting an increase of $696,000 or 3.0% over the
same period in 1998. Average earning assets were $2,005,495,000 and
$1,908,455,000 during the first quarter of 1999 and 1998, respectively,
representing an increase of $97,040,000, or 5.1%. Loans increased an average of
$189,682,000, or 13.3%; average securities decreased $82,269,000, or 18.8%; and
average federal funds sold decreased $5,969,000, or 17.6%, for the quarter.
Average interest bearing deposits increased $53,333,000, or 3.6%; and average
total borrowings decreased $1,301,000, or 7.4%, for the quarter. The increase in
net interest income for the first quarter was primarily attributable to
increases in earning assets. The net interest margin decreased 10 basis points
from 4.89% in the first quarter of 1998 to 4.79% in the first quarter of 1999.
Rates earned on loans, the largest component of earning assets, decreased in the
first quarter of 1999 compared to the same period of 1998 mainly due to prime
rate cuts after the first quarter of 1998. Prime decreased from 8.5% in the
first quarter of 1998 to 7.75% in the first quarter of 1999.
11
<PAGE> 12
UNDERPERFORMING ASSETS
Listed below is a two-year comparison of underperforming assets.
<TABLE>
<CAPTION>
3/31/99 12/31/98 3/31/98
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Nonaccrual loans $ 9,941,000 $ 9,782,000 $ 7,116,000
Restructured loans 1,429,000 374,000 563,000
90 days past due loans 1,375,000 1,610,000 2,599,000
- ----------------------------------------------------------------------------------------------------------------------
Total underperforming loans 12,745,000 11,766,000 10,278,000
Other real estate held 677,000 715,000 469,000
- ----------------------------------------------------------------------------------------------------------------------
Total underperforming assets $ 13,422,000 $ 12,481,000 $ 10,747,000
======================================================================================================================
</TABLE>
Past due 90 days or more, nonaccrual, and renegotiated loans were 0.8%, 0.7% and
0.7% of total gross loans at March 31, 1999, December 31, 1998, and March 31,
1998, respectively. Of the loans in this category, 57.7%, 65.9%, and 64.0% were
secured by real estate at March 31, 1999, December 31, 1998, and March 31, 1998,
respectively. Potential problem loans, other than underperforming loans,
amounted to $60,798,000 at March 31, 1999.
PROVISION FOR LOAN LOSSES
Net charge-offs amounted to $1,332,000 during the first quarter of 1999,
compared to $410,000 in the corresponding period in the prior year.
The provision for loan losses for the first three months of 1999 was $1,260,000
compared to $402,000 for the first three months of 1998. The provision is based
on a quarterly review of the allowance for loan losses. Some of the factors used
in this review include current economic conditions and forecasts, risk by type
of loan, previous loan loss experience, and evaluation of specific borrowers and
collateral. As of March 31, 1999, management considered the reserve for loan
losses adequate to provide for potential loan losses.
NONINTEREST INCOME
Noninterest income for the first quarter of 1999 increased $147,000, or 4.0%,
from the year-ago period. Trust income increased $36,000, or 7.4%, and service
charges on deposit accounts increased $107,000, or 6.2%, over the first three
months of 1998. Other service charges and fees increased 6.2% from $978,000 in
the first quarter of 1998 to $1,039,000 in the first quarter of 1999.
NONINTEREST EXPENSE
Noninterest expense increased $228,000, or 1.6%, in the first quarter of 1999.
Salaries and employee benefits decreased $574,000, or 7.1%; occupancy expense
increased $40,000, or 4.8%, and expenses of furniture and equipment decreased
$37,000, or 3.4%. Other noninterest expense increased $799,000, or 17.1%, over
the year-ago period, primarily due to professional fees and expenses associated
with the consolidation of certain back office operations.
12
<PAGE> 13
FINANCIAL POSITION
Cash and cash equivalents decreased $14,606,000, or 21.7%. Time deposits in
banks decreased $142,000, or 100.0%, and federal funds sold decreased
$10,120,000, or 97.0%, during the past year.
Securities decreased $5,959,000, or 1.6%, during the first quarter of 1999, with
the largest decrease of $7,906,000, or 12.0% in mortgage-backed securities.
Corporate securities decreased $596,000, or 6.5%; nonmarketable equity
securities decreased $941,000, or 4.9%; and tax-exempt securities decreased
$236,000, or 0.1%. U.S. Government and agency securities increased $3,824,000,
or 5.6%; and taxable municipals increased $350,000, or 11.5%. The market value
adjustment on total securities available for sale at March 31, 1999, was an
unrealized gain of $5,691,000, reflecting a decrease of $1,505,000, from an
unrealized gain of $7,196,000 at December 31, 1998.
Amortized cost and fair values of securities at March 31, 1999, with dollar
amounts in thousands are as follows:
Securities available for sale:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government and agency securities $ 71,624 $ 309 $ 51 $ 71,882
Taxable municipals 3,383 83 - 3,466
Tax-exempt municipals 188,227 6,556 153 194,630
Corporate securities 8,628 101 11 8,718
Mortgage-backed securities 57,766 462 361 57,867
Marketable equity securities 6,177 109 1,353 4,933
- ---------------------------------------------------------------------------------------------------------------------------------
Total available for sale $ 335,805 $ 7,620 $ 1,929 $ 341,496
=================================================================================================================================
</TABLE>
LOANS
Total loans at March 31, 1999, were $1,617,193,000 compared to $1,648,296,000 at
December 31, 1998, reflecting a decrease of $31,103,000 or 1.9%.
DEPOSITS
Total deposits decreased $57,961,000 or 3.3% to $1,676,624,000 at March 31,
1999, from $1,734,585,000 at December 31, 1998. Total noninterest bearing
deposits decreased $5,639,000 or 2.4% and interest bearing deposits decreased
$52,322,000, or 3.5% during the past year.
SHAREHOLDERS' EQUITY
The Corporation and each subsidiary bank have capital ratios which substantially
exceed all regulatory requirements. The Corporation's regulatory capital ratios
are shown below.
<TABLE>
<CAPTION>
Minimum
Requirements 3/31/99 12/31/98 3/31/98
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tier 1 capital to risk-based assets 4.00% 14.08% 13.51% 13.77%
Total capital to risk-based assets 8.00% 15.24% 14.65% 17.06%
Tangible equity to tangible assets 3.00% 8.95% 8.23% 8.08%
</TABLE>
13
<PAGE> 14
YEAR 2000 COMPLIANCE
The year 2000 poses a unique set of challenges to those industries reliant on
information technology. As a result of methods employed by early programmers,
many software applications and operational programs may be unable to distinguish
the year 2000 from the year 1900. If not effectively addressed, this problem
could result in the production of inaccurate data, or, in the worst cases, the
inability of the systems to continue to function altogether. Financial
institutions are particularly vulnerable due to the industry's dependence on
electronic data processing systems.
To address the potential adverse year 2000-related consequences, the banking
regulatory authorities, working cooperatively through the Federal Financial
Institutions Examination Council (FFIEC), have issued a number of specific
guidelines designed to guide financial institutions in their year 2000
compliance efforts. The Corporation has developed a year 2000 compliance program
that it believes is consistent with these guidelines.
The Corporation and its banking subsidiaries are subject to examination with
respect to their year 2000 compliance by various state and federal agencies,
including the Federal Reserve Board, the Comptroller of the Currency, the Office
of Thrift Supervision, the Federal Deposit Insurance Corporation, and state
banking agencies. If a regulatory agency issues a rating of less than
"satisfactory" with respect to an organization's year 2000 compliance efforts,
the organization's ability to obtain regulatory approval of certain actions,
such as proposed acquisitions, may be adversely affected.
The Corporation has established a year 2000 team to monitor progress with
achieving year 2000 compliance. The team reports its progress to the
Corporation's Board of Directors on a monthly basis. In addition, the
Corporation is utilizing an external consulting firm to assist with its year
2000 compliance.
The Corporation's year 2000 project involves five phases; 1. Awareness; 2.
Assessment; 3. Renovation; 4. Validation; and 5. Implementation. The Corporation
has completed the awareness, assessment, validation, and renovation phases. The
implementation phase is expected to be substantially complete by June 30, 1999.
The Corporation prepared its contingency and business resumption plans following
FFIEC guidelines. The Corporation completed contingency planning before the
FFIEC deadline of December 31, 1998.
Management expects total additional out-of-pocket expenditures incurred in year
2000 compliance to be approximately $500,000. This includes fees to outside
consulting firms, costs to upgrade equipment specifically for the purpose of
year 2000 compliance, and certain administrative expenditures. Some amounts are
being expensed as incurred and are not expected to be material to the
Corporation's financial condition or results of operations.
Management believes that the organization has a effective corporate year 2000
compliance program in place and that additional expenditures required to bring
its systems into compliance will not have a materially adverse effect on the
Corporation's operations, cash flow, or financial condition. However, the year
2000 problem is pervasive and complex and can potentially affect any computer
process. Accordingly, no assurance can be given that year 2000 compliance can be
achieved without additional unanticipated expenditures and uncertainties that
might affect future financial results.
IMPACT OF ACCOUNTING PRONOUNCEMENTS
In October, 1998, the FASB issued SFAS No. 134, "Accounting for Mortgage Backed
Securities Retained After the Securitization of Mortgage Loans Held For Sale By
a Banking Enterprise." SFAS 134 amends SFAS 65 and SFAS 115. SFAS 134 became
effective during the current reporting quarter. The Corporation has not
securitized any mortgage loans held for sale, therefore, SFAS 134 did not have
any impact on the accompanying financial statements.
14
<PAGE> 15
Item 3. Quantitative and Qualitative Disclosures about Market Risk
There have been no material changes in market risk exposures that affect the
quantitative and qualitative disclosures presented in the Corporation's Annual
Report on Form 10-K for the year ended December 31, 1998.
15
<PAGE> 16
NATIONAL CITY BANCSHARES, INC. and Subsidiaries
PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
The following exhibits are submitted herewith:
3(ii) By-Laws of National City Bancshares, Inc.
(As Amended Through April 5, 1999)
27 Financial Data Schedule (Electronic Filing Only)
REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the period.
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.
NATIONAL CITY BANCSHARES, INC.
(Registrant)
By /s/ STEPHEN C. BYELICK, JR.
---------------------------------------------
Stephen C. Byelick, Jr.
Secretary and Treasurer
(On behalf of the registrant
and in his capacity as Chief
Accounting Officer.)
May 14, 1999
16
<PAGE> 17
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
- -------------- ----------------------
3(ii) By-Laws of National City Bancshares, Inc.
(As Amended Through April 5, 1999)
27 Financial Data Schedule (Electronic Filing Only)
17
<PAGE> 1
EXHIBIT 3(ii)
BY-LAWS
OF
NATIONAL CITY BANCSHARES, INC.
(As Amended Through April 5, 1999)
ARTICLE I
Offices
Section 1. Principal Office. The principal office of the corporation
shall be at such place in the City of Evansville, Indiana, as may be designated
from time to time by the Board of Directors.
Section 2. Other Offices. The corporation shall also have offices at
such other places without, as well as within, the State of Indiana, as the Board
of Directors may from time to time determine.
ARTICLE II
Meetings of Shareholders
Section 1. Annual Meeting. The annual meeting of the shareholders of
this corporation shall be held at such time as may be designated by resolution
of the Board of Directors, but not later than June 30th of each year.
Section 2. Special Meetings. Special meetings of the shareholders may
be called at any time by the Chairman of the Board of Directors, President, or a
majority of the Board of Directors acting with or without a meeting, or by the
holders of shares in accordance with the Articles of Incorporation.
Section 3. Place of Meetings. Meetings of shareholders shall be held at
the office of the corporation in the City of Evansville, Indiana, unless the
Board of Directors decides that a meeting shall be held at some other place
within or without the State of Indiana and causes the notice thereof to so
state.
Section 4. Notice of Meetings. Unless waived, a written, printed, or
typewritten notice of each annual or special meeting stating the date, hour, and
place and the purpose or purposes thereof shall be served upon or mailed to each
shareholder of record (a) as of the day next preceding the date on which notice
is given or (b) if a record date therefor is duly fixed, as of said date. Such
notice shall be given not more than thirty (30) days, nor less than ten (10)
days before any such meeting. If mailed, it shall be directed to a shareholder
at his address as the name appears upon the records of the corporation.
<PAGE> 2
All notices with respect to any shares of record in the names of two or
more persons may be given to whichever of such persons is named first on the
books of the corporation and notice so given shall be effective as to all the
holders of record of such shares.
Every person who by operation of law, transfer, or otherwise shall
become entitled to any share or right or interest therein, shall be bound by
every notice in respect of such share which, prior to his name and address being
entered upon the books of the corporation as the registered holder of such
share, shall have been given to the person in whose name such share appeared of
record.
Section 5. Waiver of Notice. Any shareholder, either before or after
any meeting, may waive any notice required to be given by law or under these
By-Laws; and whenever all of the shareholders entitled to vote shall meet in
person or by proxy and consent to holding a meeting, it shall be valid for all
purposes without call or notice, and at such meeting any action may be taken.
Section 6. Quorum. At any meeting, the holders of shares entitling them
to exercise a majority of the voting power of the corporation, present in person
or represented by proxy, shall constitute a quorum, except when a greater
proportion is required by law, the Articles of Incorporation or these By-Laws.
At any meeting at which a quorum is present, all questions and business
which shall come before the meeting shall be determined by the vote of the
holders of a majority of such voting shares as are represented in person or by
proxy, except when a greater proportion is required by law or the Articles of
Incorporation.
At any meeting, whether a quorum is present or not, the holders of a
majority of the voting shares represented by shareholders present in person or
by proxy may adjourn from time to time and from place to place without notice
other than by announcement at the meeting. At any such adjourned meeting at
which a quorum is present, any business may be transacted which might be
transacted at the meeting as originally notified or held.
Section 7. Proxies. Any shareholder of record who is entitled to attend
a shareholders' meeting, or to vote thereat or to assent or give consents in
writing, shall be entitled to be represented at such meetings or to vote thereat
or to assent or give consents in writing, as the case may be, or to exercise any
other of his rights, by proxy or proxies appointed by a writing signed by such
shareholder, which need not be sealed, witnessed or acknowledged.
No appointment of a proxy shall be valid after the expiration of eleven
(11) months after it is made, unless the writing specifies the date on which it
is to expire or the length of time it is to continue in force.
<PAGE> 3
Section 8. Voting. At any meeting of shareholders, each shareholder of
the corporation shall, except as otherwise provided by law or by the Articles of
Incorporation or by these By-Laws be entitled to one vote in person or by proxy
for each share of the corporation registered in his name on the books of the
corporation (1) on the date fixed by the Board of Directors as the record date
of ownership, or (2) if no such record date shall have been fixed, then at the
time of such meeting.
Section 9. Business of Shareholder Meetings. At an annual meeting of
the shareholders, only such business shall be conducted as shall have been
properly brought before the meeting. To be properly brought before an annual
meeting, business must be (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors, (b)
otherwise properly brought before the meeting by or at the direction of the
Board of Directors, or (c) otherwise properly brought before the meeting by a
shareholder. For business to be properly brought before an annual meeting by a
shareholder, the shareholder must have the legal right and authority to make the
proposal for consideration at the meeting and the shareholder must have given
timely notice thereof in writing to the Secretary of the corporation. To be
timely, a shareholder's notice must be delivered to or mailed and received at
the principal executive offices of the corporation, not less than ninety (90)
days prior to the meeting; provided, however, that in the event that less than
seventy (70) days' notice or prior public disclosure of the date of the meeting
is given or made to shareholders (which notice or public disclosure shall
include the date of the annual meeting specified in these By-Laws, if such
By-Laws have been filed with the Securities and Exchange Commission and if the
annual meeting is held on such date), notice by the shareholder to be timely
must be so received not later than the close of business on the tenth (10th) day
of following the day on which such notice of the date of the annual meeting was
mailed or such public disclosure was made. A shareholder's notice to the
Secretary shall set forth as to each matter the shareholder proposes to bring
before the annual meeting (a) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (b) the name and record address of the shareholder
proposing such business, (c) the class and number of shares of the corporation's
capital stock which are beneficially owned by the shareholder, and (d) any
material interest of the shareholder in such business. Notwithstanding anything
in these By-Laws to the contrary, no business shall be conducted at an annual
meeting except in accordance with the procedures set forth in this Section 9.
The Chairman of an annual meeting shall, if the facts warrant, determine and
declare to the meeting that business was not properly brought before the meeting
and in accordance with the provisions of this Section 9, and if he should so
determine, he shall so declare to the meeting and any such business not properly
brought before the meeting shall not be transacted. At any special meeting of
the shareholders, only such business shall be conducted as shall have been
specified in the notice
<PAGE> 4
of meeting (or any supplement thereto) or otherwise properly brought before the
meeting by or at the direction of the Board of Directors.
ARTICLE III
Directors
Section 1. Number of Directors. The business of the corporation shall
be managed by a Board of Directors consisting of twelve (12) Directors, which
number may be increased or reduced by resolution adopted by not less than a
majority of the Directors then in office; provided that the number may not be
increased above fifteen (15) or reduced below five (5) and no reduction in
number shall have the effect of shortening the term of any incumbent Director.
Directors need not be shareholders of the Corporation. Except as otherwise
provided by law, in the Articles of Incorporation or by these By-laws, the
Directors of the Corporation shall be elected at the annual meeting of
shareholders in each year by a plurality of the votes cast by shareholders
entitled to vote in the election at the meeting, provided a quorum is present.
The Board of Directors shall be divided into three classes, as nearly equal in
number as the then total number of Directors constituting the whole Board
permits, with the term of office of one class expiring each year.
At each annual meeting of shareholders the successors to the class of
Directors whose term shall then expire shall be elected to hold office for a
term expiring at the third succeeding annual meeting and each Director so
elected shall hold office until such Director's successor is elected and
qualified, or until his or her earlier resignation or removal. If the number of
Directors is changed, any increase or decrease in the number of Directors shall
be apportioned among the three classes so as to make all classes as nearly equal
in number as possible. The term of a Director elected or selected to fill a
vacancy shall expire at the end of the term for which such Director's
predecessor was elected, or if the vacancy arises because of an increase in the
size of the Board of Directors, at the end of the term specified at the time of
election or selection.
Section 2. Vacancies. Vacancies in the Board of Directors, including a
vacancy resulting from an increase in the number of Directors, may be filled by
the remaining members of the Board of Directors, whether or not such remaining
Directors constitute a quorum of the Board. A vacancy that will occur at a
specific later date by reason of a resignation effective at a later date may be
filled before the vacancy occurs but the new Director may not take office until
the vacancy occurs.
<PAGE> 5
Section 3. Meetings of the Board. A meeting of the Board of Directors
shall be held immediately following the adjournment of each shareholder's
meeting at which Directors are elected, and notice of such meeting need not be
given.
The Board of Directors may, by By-Laws or resolution, provide for other
meetings of the Board.
Special meetings of the Board of Directors may be held at any time upon
call of the Chairman of the Board of Directors, the President, or 25% or greater
of the members of the Board of Directors. Not less than twenty-four (24) hours'
notice shall be given to each Director of the date, time and place of the
meeting, which notice need not specify the purpose or purposes of the special
meeting. Such notice may be communicated in person (either in writing or
orally), by telephone, telegraph, teletype, or other form of wire or wireless
communication, or by mail, and shall be effective at the earlier of the time of
its receipt or, if mailed, five (5) days afer its mailing. Notice of any meeting
of the Board may be waived in writing at any time if the waiver is signed by the
Director entitled to the notice and is filed with the minutes or corporate
records. A Director's attendance at or participation in a meeting waives any
required notice to the Director of the meeting, unless the Director at the
beginning of the meeting (or promptly upon the Director's arrival) objects to
holding the meeting or transacting business at the meeting and does not
thereafter vote for or assent to action taken at the meeting.
Meetings of the Board shall be held at the principal office of the
corporation or at such other place, within or without the State of Indiana, as
the Board may determine from time to time and as may be specified in the notice
thereof. Meetings of the Board of Directors may also be held by the utilization
of simultaneous telephonic communications linking all directors present at such
meetings, and all such business conducted via such telephonic communication
shall be considered legally enforceable by the corporation.
Section 4. Quorum. A majority of the Board of Directors shall
constitute a quorum for the transaction of business, provided that whenever less
than a quorum is present at the time and place appointed for any meeting of the
Board, a majority of those present may adjourn the meeting from time to time,
without notice other than by announcement at the meeting, until a quorum shall
be present.
Section 5. Action Without Meeting. Any action which may be authorized
or taken at a meeting of the Directors may be authorized or taken without a
meeting in a writing or writings signed by all the Directors, which writing or
writings shall be filed with or entered upon the records of the corporation.
<PAGE> 6
Section 6. Compensation. The Directors, as such, shall not receive any
salary for their services, but by resolution of the Board, a fixed sum and
expenses of attendance, if any, may be allowed for attendance at each regular or
special meeting of the Board; provided that nothing herein contained shall be
construed to preclude any Director from serving the corporation in any other
capacity and receiving compensation therefor. Members of the executive committee
or of any standing or special committee may by resolution of the Board be
allowed such compensation for their services as the Board may deem reasonable,
and additional compensation may be allowed to Directors for special services
rendered.
Section 7. Retirement. Members of the Board of Directors shall be
required to retire from service on the Board of Directors at the end of the
month in which he or she reaches the age of 70 years.
Section 8. Nominations. Nominations for the election of Directors may
be made by the Board of Directors or by any shareholder entitled to vote in the
election of Directors. However, any shareholder entitled to vote in the election
of Directors at a meeting may nominate a Director only if written notice of such
shareholder's intent to make such nomination or nominations has been given,
either by personal delivery or by United States mail, postage prepaid, to the
Secretary of the Corporation not later than (a) with respect to an election to
be held at an Annual Meeting of Shareholders, ninety (90) days in advance of the
date in the current year, corresponding to the date of the previous year's
annual meeting at which Directors were elected, and (b) with respect to an
election to be held at a Special Meeting of Shareholders for the election of
Directors, the close of business on the seventh (7th) day following the date on
which notice of such meeting is first given to shareholders. Each such notice
shall set forth (a) the name and address of the shareholder who intends to make
the nomination and of the person or persons to be nominated, (b) a
representation that the shareholder is a holder of record of shares of the
Corporation entitled to vote at such meeting and intends to appear in person or
by proxy at the meeting to nominate the person or person specified in the
notice, (c) a description of all arrangements or understandings between the
shareholder and each nominee and any other person or persons (naming such person
or persons) pursuant to which the nomination or nominations are to be made by
the shareholder, (d) such other information regarding each nominee proposed by
such shareholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission had the
nominee been nominated, or intended to be nominated, by the Board of Directors,
and (e) the consent of each nominee to serve as a Director of the Corporation if
so elected. The chairman of the meeting may refuse to acknowledge the nomination
of any person not made in compliance with the foregoing procedure.
<PAGE> 7
ARTICLE IV
Committees
Section 1. Committees. The Board of Directors may by resolution provide
for such standing or special committees as it deems desirable, and discontinue
the same at pleasure. Each such committee shall have such powers and perform
such duties, not inconsistent with law, as may be delegated to it by the Board
of Directors. Vacancies in such committees shall be filled by the Board of
Directors or as it may provide.
Section 2. Ex-Officio Member. The Chief Executive Officer of the
Company shall be a member ex-officio, of all Committees appointed by the Board
of Directors, excepting the Audit Committee, Committees that shall consist
solely of outside directors, and such other Committees as the Board of Directors
may designate by resolution from time to time.
ARTICLE V
Officers
Section 1. General Provisions. The Board of Directors shall elect a
Chairman of the Board of Directors, a President, such number of Vice Presidents
as the Board may from time to time determine, a Secretary, and a Treasurer. The
Board of Directors may from time to time create such officers as it may
determine. The President and the Chairman of the Board shall be, but the other
officers need not be, chosen from among the members of the Board of Directors.
Any two or more of such offices, other than that of President and Vice
President, Secretary and Assistant Secretary, or Treasurer and Assistant
Treasurer, may be held by the same person, but no officer shall execute,
acknowledge or verify any instrument in more than one capacity.
Section 2. Term of Office. The officers of the corporation shall hold
office during the pleasure of the Board of Directors, and unless sooner removed
by the Board of Directors, until the reorganization meeting of the Board of
Directors following the date of their election and until their successors are
chosen and qualified.
The Board of Directors may remove any officer at any time, with or
without cause, by a majority vote.
A vacancy in any office, however created, shall be filled by the Board
of Directors.
<PAGE> 8
Section 3. Compulsory Retirement of Executive Officers. "Executive
Officer" of the corporation means a person who participates or has authority to
participate (other than in the capacity of a Director) in major policymaking
functions of the corporation. Such Executive Officers shall be designated by the
Board of Directors on a yearly basis. All such Executive Officers shall retire
no later than the end of the calendar month in which he/she attains sixty-five
(65) years of age; provided however that this mandatory retirement shall not be
required if such compulsory retirement is in violation of any federal law
regarding age discrimination in employment (Title 12, U.S. Code, Section 621,
et. Seq.) or any other law or regulation. Upon affirmative vote of at least
two-thirds (2/3rds) of the members of the Board of Directors, the compulsory
retirement of an Executive Officer may be waived on a year-to-year basis.
ARTICLE VI
Duties of Officers
Section 1. Chairman of the Board. The Chairman of the Board shall
preside at all meetings of the shareholders and Board of Directors. The Chairman
of the Board shall serve as Chief Executive Officer and shall have such other
powers and duties as may be prescribed by the Board of Directors or prescribed
by law.
Section 2. President. The President shall be the Chief Administrative
Officer of the corporation, and in the absence of the Chairman of the Board, he
shall preside at meetings of the shareholders and Board of Directors, and shall
carry out the general executive powers conferred upon the Chairman. He shall
have authority to sign all certificates for shares and all deeds, mortgages,
bonds, contracts, notes and other instruments requiring his signature, and shall
have all the powers and duties prescribed by law and such others as the Board of
Directors may from time to time assign to him.
Section 3. Vice Presidents. The Vice Presidents shall perform such
duties as are conferred upon them by these By-Laws or as may from time to time
be assigned to them by the Board of Directors, the Chairman of the Board or the
President. At the request of the President, or in his absence or disability, the
Vice President, designated by the President (or in the absence of such
designation, the Vice President designated by the Board), shall perform all the
duties of the President, and when so acting, shall have all the powers of the
President. The authority of Vice Presidents to sign in the name of the
corporation all certificates for shares and authorized deeds, mortgages, bonds,
contracts, notes and other instruments, shall be coordinate with like authority
of the President. Any one or more of the Vice Presidents may be designated as an
"Executive Vice President".
<PAGE> 9
Section 4. Secretary. The Secretary shall keep minutes of all the
proceedings of the shareholders and Board of Directors, and shall make proper
record of the same, which shall be attested by him; sign all certificates for
shares, and all deeds, mortgages, bonds, contracts, notes and other instruments
executed by the corporation requiring his signature; give notice of meetings of
shareholders and Directors; produce on request at each meeting of shareholders
for the election of Directors a certified list of shareholders arranged in
alphabetical order; keep such books as may be required by the Board of
Directors, and file all reports to States, to the Federal Government, and to
foreign countries; and perform such other and further duties as may from time to
time be assigned to him by the Board of Directors, the Chairman of the Board or
by the President.
Section 5. Treasurer. The Treasurer shall have general supervision of
all finances; he shall receive and have in charge all money, bills, notes,
deeds, leases, mortgages and similar property belonging to the corporation, and
shall do with the same as may from time to time be required by the Board of
Directors. He shall cause to be kept adequate and correct accounts of the
business transactions of the corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, stated capital, and shares,
together with such other accounts as may be required, and, upon the expiration
of his term of office, shall turn over to his successor or to the Board of
Directors all property, books, papers and money of the corporation in his hands;
and he shall perform such other duties as from time to time may be assigned to
him by the Board of Directors.
Section 6. Assistant and Subordinate Officers. The Board of Directors
may appoint such assistant and subordinate officers as it may deem desirable.
Each such officer shall hold office during the pleasure of the Board of
Directors, and perform such duties as the Board of Directors may prescribe.
The Board of Directors may, from time to time, authorize any officer to
appoint and remove assistant and subordinate officers, to prescribe their
authority and duties, and to fix their compensation.
Section 7. Duties of Officers may be Delegated. In the absence of any
officer of the corporation, or for any other reason the Board of Directors may
deem sufficient, the Board of Directors may delegate, for the time being, the
powers or duties, or any of them, of such officer to any other officer, or to
any Director.
<PAGE> 10
ARTICLE VII
Stock and Stock Certificates
Section 1. Stock Certificates. Issued shares of the corporation may be
represented by certificates or be uncertificated as determined from time to time
by the Board of Directors. Certificates for shares shall be in such form as
shall be approved by the Board of Directors. Such certificates shall be signed
by the Chairman of the Board of Directors or the President or a Vice President
or by the Secretary or an Assistant Secretary or the Treasurer or an Assistant
Treasurer of the corporation, which certificates shall certify the number and
class of shares held by the shareholder in the corporation, but no certificate
for shares shall be delivered until such shares are fully paid. When such
certificate is countersigned by an incorporated transfer agent or registrar, the
signature of any of said officers of the corporation may be facsimile, engraved,
stamped or printed. Although any officer of the corporation whose manual or
facsimile signature is affixed to a share certificate shall cease to be such
officer before the certificate is delivered, such certificate, nevertheless,
shall be effective in all respects when delivered.
Such certificate for shares shall be transferable in person or by
attorney, but, except as hereinafter provided in the case of lost, mutilated or
destroyed certificates, no transfer of shares shall be entered upon the records
of the corporation until the previous certificate, if any, given for the same
shall have been surrendered and cancelled.
Section 2. Replacement of Lost, Destroyed, and Stolen Certificates.
(a) Where the holder of a share certificate claims that the
certificate has been lost, destroyed or wrongfully taken, the
corporation shall issue a new certificate in place of the original
certificate if the owner so requests before the corporation has notice
that the share has been acquired by a bona fide purchaser; and if the
owner files with the corporation a sufficient indemnity bond; and if
the owner satisfies any other reasonable requirements imposed by the
Board of Directors.
(b) Transfer of Certificated Shares Before Replacement. When a
share certificate has been lost, apparently destroyed or wrongfully
taken and the owner fails to notify the corporation of the fact within
a reasonable time after he has notice of it, and the corporation
registers a transfer of the share represented by the security before
receiving such a notification, the owner is precluded from asserting
against the corporation any claim for registering the transfer or any
claim to a new security.
<PAGE> 11
(c) Transfer of Certificated Shares After Replacement. If,
after the issue of a new certificate as a replacement for a lost,
destroyed or wrongfully taken certificate, a bona fide purchaser of the
original certificate presents it for registration of transfer, the
corporation must register the transfer unless registration would result
in over-issue. In addition to any rights on the indemnity bond, the
corporation may recover the new share certificate from the person to
whom it was issued or any person taking under him except a bona fide
purchaser.
Section 3. Registered Shareholders. A person in whose name shares are
of record on the books of the corporation shall conclusively be deemed the
qualified owner thereof for all purposes and to have capacity to exercise all
rights of ownership. Neither the corporation nor any transfer agent of the
corporation shall be bound to recognize any equitable interest in or claim to
such shares on the part of any other person, whether disclosed upon such
certificate or otherwise, nor shall they be obliged to see to the execution of
any trust or obligation.
ARTICLE VIII
Fiscal Year
The fiscal year of the corporation shall end on the 31st day of
December in each year, or on such other day as may be fixed from time to time by
the Board of Directors.
ARTICLE IX
Seal
The Board of Directors may, in its discretion, provide a suitable seal
containing the name of the corporation. If deemed advisable by the Board of
Directors, duplicate seals may be provided and kept for the purposes of the
corporation.
ARTICLE X
Amendments
These By-Laws may be amended, altered or repealed, at any regular
meeting of the Board of Directors, by a vote of a majority of the full Board of
Directors.
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