NORTH BANCSHARES INC
10QSB, 1997-05-02
SAVINGS INSTITUTION, FEDERALLY CHARTERED
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<PAGE 1>
=============================================================================
                   U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                  FORM 10-QSB

(X)  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

     For the quarterly period ended March 31, 1997

                                           
( )  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

     For the transition period from              to               

                              Commission File Number 0-22800


                                   NORTH BANCSHARES, INC.


           (Exact name of small business issuer as specified in its charter)
                                                     
        Delaware                                     36-3915073
(State or other jurisdiction                       I.R.S. Employer
of Incorporation or organization                Identification Number


100 West North Avenue, Chicago, Illinois             60610-1399
(Address of Principal Executive Offices)             (Zip Code)

                               (312) 664-4320
              (Registrant's telephone number, including area code)

Check whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.

                         Yes (X)                 No ( )

   As of April 30, 1997, there were 1,027,308 outstanding shares of the
Registrant's Common Stock.
        
   Transitional Small Business Disclosure Format (Check one): Yes ( )  No (X)

=============================================================================
<PAGE 2>


                                    NORTH BANCSHARES, INC.

                                       Table of Contents




Part I - FINANCIAL INFORMATION (UNAUDITED)
           Item 1. Consolidated Financial Statements                      3
                   Notes to Consolidated Financial Statements             6

           Item 2. Management's Discussion and Analysis of
                   Financial Condition and Results of Operations          7

Part II - OTHER INFORMATION                                              12
           Item 1. Legal Proceedings                                     12
           Item 6. Exhibits and Reports on Form 8-K                      12

FORM 10-QSB SIGNATURE PAGE                                               14

<PAGE 3>



Part I. Financial Information

Item 1. Consolidated Financial Statements


                                        NORTH BANCSHARES, INC.
                            CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                                           (IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS                                       MARCH 31, 1997   DEC 31, 1996
                                               (UNAUDITED)     
<S>                                               <C>           <C>
Cash and due from banks                           $   559       $   618
Interest-bearing deposits                           2,545         2,644
Federal funds sold                                    375         4,800
Investment in dollar denominated mutual funds       2,129           547
                                                    -----         -----
   TOTAL CASH AND CASH EQUIVALENTS                  5,608         8,609

Investment securities available for sale           29,327        24,426
Mortgage-backed securities held-to-maturity         7,138         7,465
Loans receivable, net of allowance for loan
 losses of $208 at March 31, 1997 and
 at December 31, 1996                              74,096        73,378
Accrued interest receivable                         1,084         1,025
Premises and equipment, net                         1,074         1,061
Stock in Federal Home Loan Bank of Chicago          1,390         1,205
Other assets                                          294           304 
                                                   ------        ------
   TOTAL ASSETS                                  $120,011      $117,473
                                                  =======       =======
LIABLITIES AND STOCKHOLDERS' EQUITY

Deposit accounts                                 $ 72,124       $73,611
Borrowed funds                                     27,800        24,100
Advance payments by borrowers for
 taxes and insurance                                  815         1,203 
Other liabilities                                   1,739           736
                                                   ------        ------
   TOTAL LIABILITIES                              102,478        99,650

STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value. 500,000   
 shares authorized; none outstanding                   -             -
Common stock, $.01 Par value. 3,500,000 
 shares authorized; 1,437,501 shares issued,
 1,034,950 outstanding at March 31, 1997 and      
 1,057,950 outstanding at December 31, 1996            14            14
Additional paid-in capital                         13,709        13,688
Retained earnings, substantially restricted        11,090        10,988
Treasury stock at cost (402,551 shares at 
 March 31, 1997 and 379,551 shares at       
 December 31, 1996)                                (5,764)       (5,340)
Unrealized loss on securities
 available for sale, net of tax effect               (714)         (678)
Additional pension liability, net of tax             (108)         (108)
Common stock acquired by Employee Stock
   Ownership Plan                                    (639)         (667)
Deferred compensation                                 (55)          (74)
                                                   ------        ------
   TOTAL STOCKHOLDERS' EQUITY                      17,533        17,823
                                                   ------        ------
TOTAL LIABILITIES AND
   STOCKHOLDERS' EQUITY                          $120,011      $117,473
                                                  =======       =======
</TABLE>


      SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

<PAGE 4>


                                NORTH BANCSHARES, INC.
                    CONSOLIDATED STATEMENTS OF OPERATIONS(UNAUDITED)
                                    (IN THOUSANDS)


<TABLE>
<CAPTION>
                                                     THREE MONTHS ENDED MARCH 31,                          
                                                         1997          1996
<S>                                                  <C>           <C> 
INTEREST INCOME
  Loans receivable                                   $1,449        $1,133
  Interest-bearing deposits and federal funds sold       48            86
  Investment securities available-for-sale              465           488
  Investment securities held-to-maturity                  -             2
  Mortgage-backed securities available-for-sale           -            90
  Mortgage-backed securities held-to-maturity           125           159
  Dollar denominated mutual funds                        34            20
  Dividends on FHLB of Chicago stock                     22            13
                                                      -----         -----
TOTAL INTEREST INCOME                                 2,143         1,991
                                                      -----         -----
INTEREST EXPENSE
  Deposit accounts                                      773           831
  Borrowed funds                                        401           260  
                                                      -----         -----
TOTAL INTEREST EXPENSE                                1,174         1,091 
                                                      -----         -----

NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES    969           900 

PROVISION FOR LOAN LOSSES                                 -             8  
                                                      -----         -----
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES     969           892 
                                                      -----         -----

NON-INTEREST INCOME
  Gain (loss) on sale of investment securities
   available-or-sale                                     48            (1)
  Fees and service charges                               46            45 
  Other                                                   4             6 
                                                      -----         -----
TOTAL NON-INTEREST INCOME                                98            50
                                                      -----         -----
NON-INTEREST EXPENSE
  Compensation and benefits                             394           335 
  Occupancy expense                                     113            98 
  Professional fees                                      38            41 
  Data processing                                        42            27 
  Advertising and promotion                              31            31
  Federal deposit insurance premium                      12            52
  Recognition and retention plan                         19            19
  Other                                                  97            63 
                                                      -----         ----- 
TOTAL NON-INTEREST EXPENSE                              746           666 
                                                      -----         -----

INCOME BEFORE TAXES                                     321           276

INCOME TAX EXPENSE                                       92            89 
                                                      -----         -----
NET INCOME                                            $ 229         $ 187 
                                                      =====         =====


EARNINGS PER SHARE PRIMARY                             $.22          $.16 
EARNINGS PER SHARE FULLY DILUTED                       $.22          $.16 
WEIGHTED AVERAGE SHARES OUTSTANDING               1,036,803     1,184,109 

</TABLE>


       SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

<PAGE 5>



                                   NORTH BANCSHARES, INC.
                           CONSOLIDATED STATEMENTS OF CASH FLOWS
                                       (UNAUDITED)
                                      (IN THOUSANDS)

<TABLE>
<Cation>


                                             FOR THE THREE MONTHS ENDED MARCH 31,
                                                      1997          1996

<S>                                                   <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                         $  229        $  187
   Adjustments to reconcile net income to net 
    cash provided by (used in) operating activities:
      Depreciation and amortization                       36            25
      Provision for loan losses                            -             8 
      Deferred loan fees, net of amortization             (1)          (29)
      Amortization of premiums and discounts              11            69 
      Amortization of cost of stock benefit plans         47            47 
      Loss (gain) on sale of investment securities
        and mutual funds available for sale              (48)            1 
      Changes in assets and liabilities:
        Increase in accrued interest
          receivable                                     (59)          (74)
        Increase in other assets, net                     10          (390)
        Increase in other liabilities                   1,024          419 
                                                        -----        -----
Net cash provided by operating activities               1,249          263 
                                                        -----        -----
CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of investment securities
       available for sale                              (5,225)      (8,992)
   Proceeds from sales of investment securities
       and mutual funds available for sale                326            -
   Proceeds from sales of mortgage-backed securities
       available for sale                                   -        6,496
   Maturities of investment securities
       available for sale                                   -        5,500
   Maturities of investment securities
       held to maturity                                     -          500
   Loan originations                                   (2,420)      (5,004)
   Loan repayments                                      1,703        2,966
   Repayments of mortgage-backed securities               326          741
   Purchase of Federal Home Loan Bank of Chgo Stock      (185)        (213)
   Purchase of premises and equipment                     (49)         (41)
   Decrease in payable to brokers                           -         (650)
                                                        -----        -----
Net cash provided by (used in) investing activities    (5,524)       1,303 
                                                        -----        -----
CASH FLOWS FROM FINANCING ACTIVITIES:
   Decrease in deposit accounts                        (1,487)        (214)
   Decrease in advance payments by borrowers
     for taxes and insurance                             (388)        (351)
   Increase in borrowings                               3,700        5,000 
   Purchase of treasury stock                            (472)        (922)
   Dividends paid                                        (127)        (123)
                                                        -----        -----
Net cash provided by financing activities               1,274        3,390 
                                                        -----        -----
Net increase (decrease) in cash and cash equivalents   (3,001)       4,956 

Cash and cash equivalents at beginning of period        8,609        8,293
                                                        -----        -----
Cash and cash equivalents at end of period             $5,603      $13,249
                                                        =====       ======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
   Cash payments during the period for:
     Interest                                             667          680
</TABLE>


        SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

<PAGE 6>


                                     NORTH BANCSHARES, INC.
                        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                                         

(1)  Basis of Presentation

     The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB and
Article 10 of Regulation S-X  Accordingly, they do not include all the
information and notes required by generally accepted accounting principles
for complete financial statements.

     In the opinion of management, the audited and unaudited consolidated
financial statements contain all adjustments (which are normal and recurring
in nature) necessary for a fair presentation of the financial condition as
of March 31, 1997 and December 31, 1996 and results of operations for the
three-month period ended March 31, 1997 and March 31, 1996, but are not
necessarily indicative of the results which may be expected for the entire
year.

(2)  Principles of Consolidation

     The accompanying unaudited consolidated financial statements include the
accounts of North Bancshares, Inc. (the "Company"), and its wholly-owned
subsidiary North Federal Savings Bank (the "Bank"), and its subsidiary North
Financial Corporation.  All significant intercompany accounts and
transactions have been eliminated in consolidation.

(3)  Earnings Per Share

     Earnings per share of common stock have been determined by dividing net
income for the period by the weighted average number of shares of common
stock and common stock equivalents outstanding for the three months ended
March 31, 1997 and March 31, 1996.  Stock options are treated as common stock
equivalents and are therefore considered in both primary and fully diluted
earnings per share calculations.  Shares purchased by the Employee Stock
Ownership Plan but not allocated to participants have been excluded from the
primary and fully diluted earnings per share calculation. Common stock
equivalents are computed using the treasury stock method and committed ESOP
shares are computed using the released shares outstanding method.  

(4) Stock Repurchase Program

     On January 21, 1997, the Company announced a stock repurchase program of
100,000 shares or approximately 9.5% of its outstanding shares of Common
Stock.  The shares will be repurchased in open market transactions or in
privately negotiated transactions over a one year period.  Management
continues to believe that stock repurchase programs provide enhanced value to
both the Stockholders and the Company.

(5) Reclassifications

     Certain amounts in the 1996 consolidated financial statements have been
reclassified to conform with the 1997 presentation.

(6) Commitments and Contingencies

     At March 31, 1997 the Bank had outstanding commitments to originate
mortgage loans in the amount of $2.2 million. 

<PAGE 7>
     As a credit enhancement, the Bank has guaranteed the repayment of $1.0
million of a $17.0 million municipal revenue bond secured by a first mortgage
loan on a 216 unit apartment building project, which includes retail space on
the ground floor of the building.  At March 31, 1996 the Bank has pledged
U. S. Government securities with an amortized cost of $1.2 million.  At March
31, 1997, the Bank has allocated $160,000 to a specific reserve for the
project based on a proposed repurchase of the outstanding bonds at a discount
   

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

GENERAL
    
     The Company is a Delaware corporation which was organized in 1993 by the
Bank for the purpose of becoming a savings and loan holding company.  The
Company owns all of the outstanding stock of the Bank issued on December 21,
1993, in connection with the completion of its conversion from the mutual to
the stock form of organization.  The Company issued 1,388,625 shares of
common stock at $10.00 per share with an additional 48,876 shares of common
stock issued from authorized and unissued shares as part of a Management
Recognition and Retention Plan.  
 
     The primary business of the Company is that of a independent community
- -oriented financial institution offering a variety of financial services to
meet the needs of the communities it serves.  The Company attracts deposits
from the general public, borrows funds or enters into reverse repurchase
agreements and uses such funds to originate or acquire one-to-four family
residential mortgages, or loans secured by small apartment buildings or
mixed use properties.  To a lesser extent, the Company originates consumer
loans in its primary market area.  The Company also invests in federal agency
mortgage-backed securities, U. S. Government and agency securities,
investment grade securities, common stocks of other financial institutions
and money market accounts.

     The Company's consolidated results of operations are primarily dependent
on net interest income, which is the difference between the interest income
earned on interest-earning assets and the interest paid on deposits and other
borrowings, and to a lesser degree on non-interest income and non-interest
expense.  The Company's operating expenses consist principally of employee
compensation and benefits, occupancy expenses, federal insurance premiums
and other general and administrative expenses.  The Company's results of
operations are also significantly affected by general economic and
competitive conditions, particularly changes in market interest rates,
government policies and actions of regulatory authorities.

    The Company's net loans receivable increased $718,000 or 1.0% from $73.4
million at December 31, 1996 to $74.1 million at March 31, 1997.  The Bank is
currently focusing its marketing efforts on both owner occupied and non-owner
occupied one-to-four unit dwellings and small apartment buildings.  In order
to more effectively compete for loan originations in its market area, the 
Bank offers 80% financing on non-owner occupied properties with a cash
out feature.  The Bank also offers low down payment mortgages to homebuyers
accompanied with appropriate mortgage insurance.  The Bank has a First Time
Homebuyer Program for purchases within its delineated community, acquires
loans from mortgage brokers or purchases loans or participations from other
financial institutions.  For the three months ended March 31, 1997 the Bank
originated $2.4 million in mortgage, consumer and commercial loans of which
$1.7 million or 71.0% were adjustable rate or balloon type mortgages.
Approximately 40% of these loans are located within the Bank's CRA assessment
area.  Of the $2.4 million in mortgage, consumer and commercial loans
originated during the three months ended March 31, 1997, $2.1 million were
for the purchase of properties and $330,000 were refinancings.  None of the
refinancings were loans from the Bank's existing portfolio.  At March 31,
1997, the Bank had $6.5 million in loan applications pending approval and
closing.  

     The Company continues to believe that maintaining loan delinquencies at
the lowest possible levels is imperative to achieving adequate profitability,
and will continue its policy of underwriting loans that it originates and
acquires in what it believes is a conservative and consistent manner.  At
March 31, 1997 and December 31, 1996, there were no loans delinquent 90 days
or more.  The allowance for loan losses at March 31, 1997 remains at $208,000. 
 
<PAGE 8>
FORWARD-LOOKING STATEMENTS

     When used in this 10-QSB, and in future filings by the Company with the
SEC, in the Company's press releases or other public or shareholder
communications, and in oral statements made with the approval of an
authorized executive officer, the words or phrases "will likely result", "are
expected to", "will continue", "is anticipated", "estimate", "project" or
similar expressions are intended to identify "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
Such statements are subject to certain risks and uncertainties - including,
changes in economic conditions in the Company's market area, changes in
policies by regulatory agencies, fluctuations in interest rates, demand for 
oans in the Company's market area and competition, that could cause actual
results to differ materially from historical earnings and those presently
anticipated or projected.  The Company wishes to caution readers not to place
undue reliance on any such forward-looking statements, which speak only as of
the date made.  The Company wishes to advise readers that the factors listed
above could affect the Company's financial performance and could cause the
Company's actual results for future periods to differ materially from any
opinions or statements expressed with respect to future periods in any
current statements.

     The Company does not undertake -- and specifically disclaims any
obligation -- to publicly release the result of any revisions which may be
made to any forward-looking statements to reflect events or circumstances
after the date of such statements or to reflect the occurrence of anticipated
or unanticipated events.
     

LIQUIDITY AND CAPITAL RESOURCES

     The Company's primary sources of funds are deposits, amortization and
prepayment of loans and mortgage-backed securities, sales and maturities of
other investment securities, borrowings from the Federal Home Loan Bank
of Chicago and to a limited extent, reverse repurchase agreements.  The
Company uses its liquid resources to fund loan commitments, to meet operating
expenses, to purchase investment securities and to fund deposit withdrawals. 
Management believes that these sources of funds will be adequate to meet the
liquidity needs of the Company for the balance of the fiscal year.

     The OTS requires minimum levels of liquid assets.  OTS regulations
currently require the Bank to maintain an average daily balance of liquid
assets equal to at least 5% of the sum of its average daily balance of net
withdrawable accounts and borrowings payable in one year or less.  At March
31, 1997 the Bank's liquidity ratio was 10.75% compared with 15.6% at
December 31, 1996.  In addition, the Bank is required to maintain short term
liquid assets equal to at least 1.0% of the average sum of net withdrawable
deposits and other borrowings.  The Bank's short term liquidity ratio was
7.55% at March 31, 1997 compared with 12.4% at December 31, 1996. These
levels are expected to continue to decline slightly as new loan originations
replace short and medium term investments.

     The primary investing activities of the Company are lending on single
family and small multi-family residential properties, purchases of mortgage
- -backed securities and the purchase of U.S. government and agency securities.
The Company's loan origination marketing efforts and mortgage broker
relationships have maintained adequate loan demand.  Management believes that
adequate liquidity will be available to fund any increased loan demand.  The
Company does not have the same regulatory restrictions on investments as the
Bank and makes investments in debt and equity securities of financial service
firms.

<PAGE 9>
 
     Current regulatory standards impose the following capital requirements
on the Bank and other thrifts: a tangible capital ratio expressed as a
percentage of total adjusted assets, a leverage ratio of core capital to
total adjusted assets, and a risk-based capital standard expressed as a
percentage of risk-adjusted assets.   At March 31, 1997, the Bank exceeded
its regulatory capital standards.  At such date, the Bank's tangible capital,
core capital and risk-based capital of $14.3 million, $14.3 million and $14.5
million, respectively, exceeded the applicable minimum requirements by $12.5
million or 10.7%, $10.7 million or 9.2% and $10.9 million or 24.4%,
respectively.  


CHANGES IN FINANCIAL CONDITION 

     Total assets increased $2.5 million or 2.1% from $117.5 million at
December 31, 1996 to $120.0 million at March 31, 1997.  The increase was
primarily attributable to a $5.6 million increase in investment securities
and net loans receivable, partially offset by a $3.0 million decrease in cash
and cash equivalents.

     Net loans receivable increased $718,000 or 1.0% from $73.4 million at
December 31, 1996 to $74.1 million at March 31, 1997.  The Company originated
$2.4 million in mortgage, consumer and commercial loans during the three
months ended March 31, 1997.  Repayments of loans during the three months
ended March 31, 1997 amounted to $1.7 million.

     Investment securities increased $4.9 million or 20.1% from $24.4 million
at December 31, 1996 to $29.3 million at March 31, 1997.  The increase was
primarily attributable to the purchase of $5.2 million in investment
securities, which included a $3.7 million U. S. Government callable security
leveraged with a Federal Home Loan Bank advance, partially offset by the sale
of $326,000 of available-for-sale securities.  These leveraged transactions
are done to increase interest income at little or no risk by securing FHLB
advances to purchase U. S. Government securities, in order to secure an
attractive interest rate spread. 

     Deposit accounts decreased $1.5 million or 2.0% from $73.6 million at
December 31, 1996 to $72.1 million at March 31, 1997.  The decrease was
proportionate to all classes of deposit accounts and can generally be
attributed to payments for real estate taxes and income taxes.  The number of
checking accounts and money market accounts increased by 2.3%, a result of
the continued marketing of a "Free Checking Account" and a more attractive
method of interest payment on the Bank's money market accounts.  Management
expects to experience some additional deposit shifting from certificates, and
interest-bearing checking accounts to non-interest bearing checking accounts
as it continues to promote free checking accounts.  Management believes that
checking accounts provide a more stable source of funds and additionally
produce fee income.  

     Borrowed funds increased by $3.7 million from $24.1 million at December
31, 1996 to $27.8 million at March 31, 1997.  The $3.7 million increase was
used in a leveraged securities transaction at an interest rate spread of 1.80%
to the maturity of the advance.

     Other liabilities increased by $1.0 million, or 136.3% from $736,000 at
December 31, 1996 to $1.7 million at March 31, 1997.  The increase was
primarily attributable to accrued interest payable on certificates of deposit
that pay interest annually on December 31st of each year and outstanding
checks.

<PAGE 10>    
     Stockholders' Equity totaled $17.5 million or 14.6% of total assets at
March 31, 1997.  Retained earnings increased by $102,000 from $11.0 million
at December 31, 1996 to $11.1 million at March 31, 1997, a result of $229,000
in net earnings for the three months ended March 31, 1997 partially offset by
a $127,000 dividend payment.  A total of $714,000 in unrealized losses, net
of related tax effect, on securities available for sale at March 31, 1997
have been recorded as a component of Stockholders' Equity.  The majority of
securities that have unrealized losses are short, intermediate, and long term
securities that, in all likelihood will not produce a loss unless sold prior
to maturity.  Treasury stock increased by $424,000 or 7.9% from $5.3 million
at December 31, 1996 to $5.8 million at March 31, 1997, due to the repurchase
of 23,000 shares at an average cost of $18.42 per share, as part of the
ongoing stock repurchase program.  



COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND
MARCH 31, 1996

     GENERAL.  Net income increased $42,000 or 22.5% from $187,000 for the
three months ended March 31, 1996 to $229,000 for the three months ended
March 31, 1997.  Earnings per primary share increased $.06 or 37.5% from $.16
per share for the three months ended March 31, 1996 to $.22 for the three
months ended March 31, 1997.  The increase was primarily attributable to a
$49,000 increase in gains on the sale of investment securities.   

     INTEREST INCOME.  Interest income increased $152,000 or 7.6% from $2.0
million for the three months ended March 31, 1996 to $2.1 million for the
three months ended March 31, 1997.  The increase was primarily attributable
to a $316,000 increase in interest on loans receivable, partially offset by a
$149,000 decrease in interest on investment securities and mortgage-backed
securities.  In addition, there was an increase in the annualized yield on
average interest-earning assets from 7.27% for the three months ended March
31, 1996 to 7.35% for the three months ended March 31, 1997.  Management
believes the Company will continue to experience modest increases in interest
income during 1997 compared with 1996 as a result of the reallocation of
lower yielding investments into mortgage, consumer and commercial loans.  
           
     INTEREST EXPENSE.  Interest expense increased $83,000 or 7.6% from $1.1
million for the three months ended March 31, 1996 to $1.2 million for the
three months ended March 31, 1997.  The increase was primarily attributable
to a $141,000 increase in interest on borrowed funds as a result of $10.0
million in leveraged securities transactions using Federal Home Loan Bank
advances, conducted during 1996 and $3.7 million during the first quarter of
1997.  This increase was partially offset by a $58,000 decrease in interest
on deposit accounts.  The decrease in interest on deposit accounts reflects
the shift in deposit accounts from higher cost certificates of deposit to non
- -interest bearing checking accounts, lower cost money market accounts, and a
decrease in total average outstanding balances of interest-bearing deposit
accounts.  In addition there was a decrease in the annualized average cost of
interest-bearing liabilities from 4.91% for the three months ended March 31,
1996 to 4.82% for the three months ended March 31, 1997, due to the
refinance of a $5.0 million FHLB advance at a reduced interest rate and a
$3.4 million decrease in the average outstanding balance of certificate
accounts. 
  
     PROVISION FOR LOAN LOSSES.  The Company did not add to its allowance for
loan losses for the three months ended March 31, 1997 compared with $8,000
for the three months ended March 31, 1996.  The allowance for loan losses to
net loans receivable amounted to .28% at March 31, 1997, however, there were
no loans delinquent 90 days or more at March 31, 1997.  Future additions to
the Company's allowance for loan losses and any change in the related ratio
of the allowance for loan losses to non-performing loans are dependent upon
the performance of the Company's loan portfolio, the economy, changes in real
estate values, interest rates, and the view of the regulatory authorities
toward reserve levels and inflation.

<PAGE 11>
     NON-INTEREST INCOME.  Non-interest income increased $48,000 or 96.0%
from $50,000 for the three months ended March 31, 1996 to $98,000 for the
three months ended March 31, 1997.  The inrease was attributable to a $49,000
increase in gains on the sale of investment securities, available-for-sale.

     NON-INTEREST EXPENSE.  Non-interest expense increased by $80,000 or
12.0% from $666,000 for the three months ended March 31, 1996 to $746,000 for
the three months ended March 31, 1997.  The increase was primarily
attributable to a $59,000 increase in compensation and benefits expense which
was due primarily to an increase in staff and an increase in ESOP expense
related to an increase in the price of the Company's stock to be released
during 1997.  In addition, $34,000 in other expense was recorded as a
specific reserve for the Arlington Heights credit enhancement, previously
discussed.

     INCOME TAX EXPENSE.  The allocation for federal and state income taxes
increased by $3,000 from $89,000 for the three months ended March 31, 1996 to
$92,000 for the three months ended March 31, 1997.  The increase was
primarily attributable to a $45,000 increase in net income before taxes.  The
effective tax rate decreased from 32.3% for the three months ended March 31,
1996 to 28.7% for the three months ended March 31, 1997 due primarily to 
$48,000 of income for the three months ended March 31, 1997 which represented
capital gains on securities sales that were used to offset a capital loss
carry-forward and therefore not taxed.


IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS AND OTHER REGULATORY ISSUES

     In June 1996, FASB Statement No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities" (Statement
125), was issued and is applicable to all entities, both public and non-public
 .  Statement 125 provides accounting and reporting standards for transfers
and servicing of financial assets and extinguishments of liabilities based on
consistent application of a financial-components approach that focuses on
control.  It distinguishes transfers of financial assets that are sales from
transfers that are secured borrowings.  Under the financial-components
approach, after a transfer of financial assets, an entity recognizes all
financial and servicing assets it controls and liabilities it has incurred
and derecognizes financial assets it no longer controls and liabilities that
have been extinguished.  Statement 125 provides standards to determine
whether transfers of financial assets are to be accounted for as sales or
secured borrowings.  This statement is effective for transfers and servicing
of financial assets and extinguishments of liabilities occurring after
December 31, 1996.  In December 1996, the FASB issued SFAS No. 127, "Deferral
of the Effective Date of Certain Provisions of FASB Statement No. 125."  This
statement is effective December 31, 1996 and amends FASB Statement No. 125 by
delaying for one year the effective date for the following types of transfers
of financial assets:  secured borrowings and collateral, repurchase
agreements, dollar-rolls and securities lending.  The Company adopted both
Statements on January 1, 1997, and does not expect them to have a material
effect on the Company's financial position 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.  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 cpaital 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 disluted EPS under APB 15.

     Statment 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 footnotes 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.


RECAPITALIZATION OF FDIC

    Legislation to recapitalize the Federal Deposit Insurance Corporation
(FDIC) Savings Association Insurance Fund (SAIF), that was signed into law on
September 30, 1996, resulted in the recording of a charge to the Bank's
earnings of $285,000, net of tax, during 1996.  The Bank's strong capital
position was minimally affected by this one time charge and an anticipated
reduction in the annual FDIC-SAIF premium assessment from $.23 to
approximately $.065 per $100 of deposits will help to improve the Bank's
short and long term earnings outlook and place the Bank in a more competitive
position with commercial banks.  In addition, other pending legislation
includes a requirement that federally chartered thrifts convert to national
banks or state chartered institutions.  Management cannot predict or
determine the ultimate form of any legislation or the impact such final
legislation would have on the Company and its operations.




<PAGE 12>     

PART II - OTHER INFORMATION

          Item 1. Legal Proceedings

          There are no material pending legal proceedings to which the Company
          or any of its subsidiaries is a party other than ordinary routine
          litigation incidental to their respective businesses.


          Item 6. Exhibits and Reports on Form 8-K

          (A)  Exhibits:
               EX-27 Financial Data Schedule
               North Bancshares, Inc. Stock Option Plan as amended by the
                Board of Directors on January 21, 1997.
               North Bancshares, Inc. Management Recognition and Retention
                Plan as amended by the Board of Directors on January 21, 1997

          (B)  1. Form 8-K dated January 21, 1997, Registrant issued press
                  release dated January 21, 1997 regarding fourth quarter
                  1996 earnings, an increase in the regular quarterly
                  dividend and a stock repurchase program.
              





<PAGE 13>


                                                    SIGNATURES

      In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.


                                              NORTH BANCSHARES,INC.
                                                  (Registrant)



Date    May 2, 1997                            /S/ Joseph A. Graber     
                                                 Joseph A. Graber
                                                 President   
                                                                        


Date    May 2, 1997                            /S/ Martin W. Trofimuk   
                                                 Martin W. Trofimuk
                                                 Vice President and
                                                 Treasurer


<TABLE> <S> <C>

<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Statement of Condition at March 31, 1997 (unaudited) and the
Consolidated Statement of Operations for the three months ended March 31, 1997
(unaudited) and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
       
<S>                             <C>
<PERIOD-TYPE>                   3-MOS
<FISCAL-YEAR-END>                          DEC-31-1997
<PERIOD-END>                               MAR-31-1997
<CASH>                                             559
<INT-BEARING-DEPOSITS>                           2,545
<FED-FUNDS-SOLD>                                   375
<TRADING-ASSETS>                                     0
<INVESTMENTS-HELD-FOR-SALE>                     29,327
<INVESTMENTS-CARRYING>                          30,459
<INVESTMENTS-MARKET>                            29,327
<LOANS>                                         74,096
<ALLOWANCE>                                        208
<TOTAL-ASSETS>                                 120,011
<DEPOSITS>                                      72,124
<SHORT-TERM>                                    19,700
<LIABILITIES-OTHER>                              2,554
<LONG-TERM>                                      8,100
                                0
                                          0
<COMMON>                                            14
<OTHER-SE>                                      17,519
<TOTAL-LIABILITIES-AND-EQUITY>                 120,011
<INTEREST-LOAN>                                  1,449
<INTEREST-INVEST>                                  590
<INTEREST-OTHER>                                   104
<INTEREST-TOTAL>                                 2,143
<INTEREST-DEPOSIT>                                 773
<INTEREST-EXPENSE>                                 401
<INTEREST-INCOME-NET>                              969
<LOAN-LOSSES>                                        0
<SECURITIES-GAINS>                                  48
<EXPENSE-OTHER>                                    746
<INCOME-PRETAX>                                    321
<INCOME-PRE-EXTRAORDINARY>                         321
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                       229
<EPS-PRIMARY>                                      .22
<EPS-DILUTED>                                      .22
<YIELD-ACTUAL>                                    5.12
<LOANS-NON>                                          0
<LOANS-PAST>                                         0
<LOANS-TROUBLED>                                     0
<LOANS-PROBLEM>                                      0
<ALLOWANCE-OPEN>                                   208
<CHARGE-OFFS>                                        0
<RECOVERIES>                                         0
<ALLOWANCE-CLOSE>                                  208
<ALLOWANCE-DOMESTIC>                               208
<ALLOWANCE-FOREIGN>                                  0
<ALLOWANCE-UNALLOCATED>                            208
        



                                                                               
                                                       
                       NORTH BANCSHARES, INC.

                1993 Stock Option and Incentive Plan


   1. Plan Purpose.  The purpose of the Plan is to promote the long-term
interests of the Corporation and its stockholders by providing a means for
attracting and retaining directors, officers and employees of the Corporation and
its Affiliates.  It is intended that designated Options granted pursuant to
the provisions of this Plan to persons employed by the Corporation or its
Affiliates will qualify as Incentive Stock Options.  Options granted to
persons who are not employees will be Non-Qualified Stock Options.

   2. Definitions.  The following definitions are applicable to the Plan:

      "Affiliate" - means any "parent corporation" or "subsidiary
corporation" of the Corporation, as such terms are defined in Section 424(e)
and (f), respectively, of the Code.

      "Bank" - means North Federal Savings Bank and any successor entity.

      "Award" - means the grant of an Incentive Stock Option, a Non-Qualified
Stock Option, a Stock Appreciation Right, a Limited Stock Appreciation Right,
or of Restricted Stock, or any combination thereof, as provided in the Plan.

      "Code" - means the Internal Revenue Code of 1986, as amended.

      "Committee" - means the Committee referred to in Section 3 hereof.

      "Continuous Service" - means the absence of any interruption or
termination of service as a director, advisory director, officer or employee
of the Corporation or an Affiliate, except that when used with respect to
persons granted an Incentive Option means the absence of any interruption or
termination of service as an employee of the Corporation or an Affiliate.
Service shall not be considered interrupted in the case of sick leave,
military leave or any other leave of absence approved by the Corporation or
in the case of transfers between payroll locations of the Corporation or
between the Corporation, its parent, its subsidiaries or its successor.  With
respect to any advisory director, continuous service shall plan mean
availability to perform such functions as may be required of the Bank's
advisory directors.

      "Corporation" - means North Bancshares, Inc., a Delaware corporation.

      "Employee" - means any person, including an officer or director, who is
employed by the Corporation or any Affiliate.

      "ERISA" - means the Employee Retirement Income Security Act of 1974, as
amended.

      "Exercise Price" - means (i) in the case of an Option, the price per
Share at which the Shares subject to such Option may be purchased upon
exercise of such Option and (ii) in the case of a Right, the price per Share
(other than the Market Value per Share on the date of exercise and the Offer
Price per Share as defined in Section 10 hereof) which, upon grant, the
Committee determines shall be utilized in calculating the aggregate value
which a Participant shall be entitled to receive pursuant to Sections 9, 10
or 13 hereof upon exercise of such Right.

      "Incentive Stock Option" - means an option to purchase Shares granted
by the Committee pursuant to Section 6 hereof which is subject to the
limitations and restrictions of Section 8 hereof and is intended to qualify
under Section 422 of the Code.

      "Limited Stock Appreciation Right" - means a stock appreciation right
with respect to Shares granted by the Committee pursuant to Sections 6 and 10
hereof.

      "Market Value" - means the average of the high and low quoted sales
price on the date in question (or, if there is no reported sale on such date,
on the last preceding date on which any reported sale occurred) of a Share on
the Composite Tape for the New York Stock Exchange-Listed Stocks, or, if on
such date the Shares are not quoted on the Composite Tape, on the New York
Stock Exchange, or, if the Shares are not listed or admitted to trading on
such Exchange, on the principal United States securities exchange registered
under the Securities Exchange Act of 1934 on which the Shares are listed or
admitted to trading, or, if the Shares are not listed or admitted to trading
on any such exchange, the mean between the closing high bid and low asked
quotations with respect to a Share on such date on the National Association
of Securities Dealers, Inc. Automated Quotations System, or any similar
system then in use, or, if no such quotations are available, the fair market
value on such date of a Share as the Committee shall determine.

      "Non-Employee Director" - means a director who a) is not currently
an officer or employee of the Corporation; b) is not a former employee of the
Corporation who receives compensation for prior services (other than from a
tax-qualified retirement plan); c) has not been an officer of the Corporation
d) does not receive remuneration from the Corporation in any capacity other
than as a director; and e) does not possess an interest in any other
transactions or is not engaged in a business relationship for which
disclosure would be required under Item 404(a) or (b) of Regulation S-K.

      "Non-Qualified Stock Option" - means an option to purchase Shares
granted by the Committee pursuant to Section 6 hereof, which option is not
intended to qualify under Section 422(b) of the Code.

      "Option" - means an Incentive Stock Option or a Non-Qualified Stock
Option.

      "Participant" - means any officer or employee of the Corporation or any
Affiliate who is selected by the Committee to receive an Award, any director
or advisory director of the Corporation who is granted an Award pursuant to
Section 21 hereof or any advisory director of the Corporation who is a former
officer, director or employee of the Corporation.

      "Plan" - means the 1993 Stock Option and Incentive Plan of the
Corporation.

      "Related" - means (i) in the case of a Right, a Right which is granted
in connection with, and to the extent exercisable, in whole or in part, in
lieu of, an Option or another Right and (ii) in the case of an Option, an
Option with respect to which and to the extent a Right is exercisable, in
whole or in part, in lieu thereof has been granted.

      "Restricted Period" - means the period of time selected by the
Committee for the purpose of determining when restrictions are in effect under
Section 11 hereof with respect to Restricted Stock awarded under the Plan.

      "Restricted Stock" - means Shares which have been contingently awarded
to a Participant by the Committee subject to the restrictions referred to in
Section 11 hereof, so long as such restrictions are in effect.

      "Right" - means a Limited Stock Appreciation Right or a Stock
Appreciation Right.

      "Shares" - means the shares of common stock of the Corporation.

      "Stock Appreciation Right" - means a stock appreciation right with
respect to Shares granted by the Committee pursuant to Sections 6 and 9 hereof.

      "Ten Percent Beneficial Owner" - means the beneficial owner of more
than ten percent of any class of the Corporation's equity securities
registered pursuant to Section 12 of the Securities Exchange Act of 1934.

   3. Administration.  The Plan shall be administered by a Committee
consisting of two or more members, each of whom shall be a Non-Employee
Director.  The members of the Committee shall be appointed by the Board of
Directors of the Corporation.  Except as limited by the express provisions of the
Plan, the Committee shall have sole and complete authority and discretion to
(i) select Participants and grant Awards; (ii) determine the number of Shares
to be subject to types of Awards generally, as well as to individual Awards
granted under the Plan; (iii) determine the terms and conditions upon which
Awards shall be granted under the Plan; (iv) prescribe the form and terms of
instruments evidencing such grants; and (v) establish from time to time
regulations for the administration of the Plan, interpret the Plan, and make
all determinations deemed necessary or advisable for the administration of
the Plan.  The Committee may maintain, and update from time to time as
appropriate, a list designating selected directors as Non-Employee Director.
The purpose of such list shall be to evidence the status of such individuals
as Non-Employee Directors, and the Board of Directors may appoint to the
Committee any individual actually qualifying as a Non-Employee Director,
regardless of whether identified as such on said list.

   A majority of the Committee shall constitute a quorum, and the acts of a
majority of the members present at any meeting at which a quorum is present,
or acts approved in writing by a majority of the Committee without a meeting,
shall be acts of the Committee.

   4. Participation in Committee Awards.  The Committee may select from time
to time Participants in the Plan from those directors, officers and employees
of the Corporation or its Affiliates who, in the opinion of the Committee,
have the capacity for contributing to the successful performance of the
Corporation or its Affiliates.

   5. Shares Subject to Plan.  Subject to adjustment by the operation of
Section 12 hereof, the maximum number of Shares with respect to which Awards
may be made under the Plan is 10% of the total Shares issued in the Bank's
conversion to the capital stock form.  The Shares with respect to which Awards
may be made under the Plan may be either authorized and unissued shares or
issued shares heretofore or hereafter reacquired and held as treasury shares. 
Shares which are subject to Related Rights and Related Options shall be
counted only once in determining whether the maximum number of Shares with
respect to which Awards may be granted under the Plan has been exceeded.  An
Award shall not be considered to have been made under the Plan with respect
to any Option or Right which terminates or with respect to Restricted Stock
which is forfeited, and new Awards may be granted under the Plan with respect
to the number of Shares as to which such termination or forfeiture has
occurred. 

   6. General Terms and Conditions of Options and Rights.  The Committee
shall have full and complete authority and discretion, except as expressly
limited by the Plan, to grant Options and/or Rights and to provide the terms
and conditions (which need not be identical among Participants) thereof.  In
particular, the Committee shall prescribe the following terms and conditions:
(i) the Exercise Price of any Option or Right, which shall not be less than
the Market Value per Share at the date of grant of such Option or Right, (ii)
the number of Shares subject to, and the expiration date of, any Option or
Right, which expiration date shall not exceed ten years from the date of
grant, (iii) the manner, time and rate (cumulative or otherwise) of exercise
of such Option or Right, and (iv) the restrictions, if any, to be placed upon
such Option or Right or upon Shares which may be issued upon exercise of such
Option or Right.  The Committee may, as a condition of granting any Option or
Right, require that a Participant agree not to thereafter exercise one or
more Options or Rights previously granted to such Participant.

   7. Exercise of Options or Rights.

      (a)Except as provided herein, an Option or Right granted under the Plan
shall be exercisable during the lifetime of the Participant to whom such 
Option or Right was granted only by such Participant and, except as provided
in paragraphs (c) and (d) of this Section 7, no such Option or Right may be
exercised unless at the time such Participant exercises such Option or Right,
such Participant has maintained Continuous Service since the date of grant of
such Option or Right.  

      (b)To exercise an Option or Right under the Plan, the Participant to
whom such Option or Right was granted shall give written notice to the
Corporation in form satisfactory to the Committee (and, if partial exercises
have been permitted by the Committee, by specifying the number of Shares with
respect to which such Participant elects to exercise such Option or Right)
together with full payment of the Exercise Price, if any and to the extent
required.  The date of exercise shall be the date on which such notice is
received by the Corporation.  Payment, if any is required, shall be made
either (i) in cash (including check, bank draft or money order) or (ii) by
delivering (A) Shares already owned by the Participant and having a fair
market value equal to the applicable exercise price, such fair market value
to be determined in such appropriate manner as may be provided by the
Committee or as may be required in order to comply with or to conform to
requirements of any applicable laws or regulations, or (B) a combination of
cash and such Shares.

      (c)If a Participant to whom an Option or Right was granted shall cease
to maintain Continuous Service for any reason (including total or partial
disability and normal or early retirement, but excluding death and
termination of employment by the Corporation or any Affiliate for cause),
unless the Committee shall otherwise determine, such Participant may, but
only within the period of two years immediately succeeding such cessation of
Continuous Service and in no event after the expiration date of such Option
or Right, exercise such Option or Right to the extent that such Participant
was entitled to exercise such Option or Right at the date of such cessation,
provided, however, that such right of exercise after cessation of Continuous
Service shall not be available to a Participant if the Committee otherwise
determines and so provides in the applicable instrument or instruments
evidencing the grant of such Option or Right.  If the Continuous Service of a
Participant to whom an Option or Right was granted by the Corporation is
terminated for cause, all rights under any Option or Right of such
Participant shall expire immediately upon the giving to the Participant of
notice of such termination.

      (d)In the event of the death of a Participant while in the Continuous
Service of the Corporation or an Affiliate or within the two year period
referred to in paragraph (c) of this Section 7, the person to whom any Option
or Right held by the Participant at the time of his or her death is
transferred by will or the laws of descent and distribution, or in the case
of an Award other than an Incentive Stock Option, pursuant to a qualified
domestic relations order, as defined in the Code or Title 1 of ERISA or the
rules thereunder may, but only to the extent such Participant was entitled to
exercise such Option or Right immediately prior to his or her death, exercise
such Option or Right at any time within a period of one year succeeding the
date of death of such Participant, but in no event later than ten years from
the date of grant of such Option or Right.  Following the death of any
Participant to whom an Option was granted under the Plan, irrespective of
whether any Related Right shall have theretofore been granted to the
Participant or whether the person entitled to exercise such Related Right
desires to do so, the Committee may, as an alternative means of settlement of
such Option, elect to pay to the person to whom such Option is transferred by
will or by the laws of descent and distribution, or in the case of an Option
other than an Incentive Stock Option, pursuant to a qualified domestic
relations order, as defined in the Code or Title I of ERISA or the rules
thereunder, the amount by which the Market Value per Share on the date of
exercise of such Option shall exceed the Exercise Price of such Option,
multiplied by the number of Shares with respect to which such Option is
properly exercised.  Any such settlement of an Option shall be considered an
exercise of such Option for all purposes of the Plan.

   8. Incentive Stock Options.  Incentive Stock Options may be granted only
to Participants who are Employees.  Any provision of the Plan to the contrary
notwithstanding, (i) no Incentive Stock Option shall be granted more than ten
years from the date the Plan is adopted by the Board of Directors of the
Corporation and no Incentive Stock Option shall be exercisable more than ten
years from the date such Incentive Stock Option is granted, (ii) the Exercise
Price of any Incentive Stock Option shall not be less than the Market Value
per Share on the date such Incentive Stock Option is granted, (iii) any
Incentive Stock Option shall not be transferable by the Participant to whom
such Incentive Stock Option is granted other than by will or the laws of
descent and distribution, and shall be exercisable during such Participant's
lifetime only by such Participant, (iv) no Incentive Stock Option shall be
granted to any individual who, at the time such Incentive Stock Option is
granted, owns stock possessing more than ten percent of the total combined
voting power of all classes of stock of the Corporation or any Affiliate
unless the Exercise Price of such Incentive Stock Option is at least 110
percent of the Market Value per Share at the date of grant and such Incentive
Stock Option is not exercisable after the expiration of five years from the
date such Incentive Stock Option is granted, and (v) the aggregate Market
Value (determined as of the time any Incentive Stock Option is granted) of
the Shares with respect to which Incentive Stock Options are exercisable for
the first time by a Participant in any calendar year shall not exceed
$100,000.  

   9. Stock Appreciation Rights.  A Stock Appreciation Right shall, upon
its exercise, entitle the Participant to whom such Stock Appreciation Right
was granted to receive a number of Shares or cash or combination thereof, as
the Committee in its discretion shall determine, the aggregate value of which
(i.e., the sum of the amount of cash and/or Market Value of such Shares on
date of exercise) shall equal (as nearly as possible, it being understood
that the Corporation shall not issue any fractional shares) the amount by
which the Market Value per Share on the date of such exercise shall exceed
the Exercise Price of such Stock Appreciation Right, multiplied by the number
of Shares with respect of which such Stock Appreciation Right shall have been
exercised.  A Stock Appreciation Right may be Related to an Option or may be
granted independently of any Option as the Committee shall from time to time
in each case determine.  At the time of grant of an Option the Committee
shall determine whether and to what extent a Related Stock Appreciation Right
shall be granted with respect thereto; provided, however, and notwithstanding
any other provision of the Plan, that if the Related Option is an Incentive
Stock Option, the Related Stock Appreciation Right shall satisfy all the
restrictions and limitations of Section 8 hereof as if such Related Stock
Appreciation Right were an Incentive Stock Option and as if other rights
which are Related to Incentive Stock Options were Incentive Stock Options.
In the case of a Related Option, such Related Option shall cease to be
exercisable to the extent of the Shares with respect to which the Related
Stock Appreciation Right was exercised.  Upon the exercise or termination of
a Related Option, any Related Stock Appreciation Right shall terminate to the
extent of the Shares with respect to which the Related Option was exercised
or terminated.  

   10.Limited Stock Appreciation Rights.  At the time of grant of an Option
or Stock Appreciation Right to any Participant, the Committee shall have full
and complete authority and discretion to also grant to such Participant a
Limited Stock Appreciation Right which is Related to such Option or Stock
Appreciation Right; provided, however and notwithstanding any other provision
of the Plan, that if the Related Option is an Incentive Stock Option, the
Related Limited Stock Appreciation Right shall satisfy all the restrictions
and limitations of Section 8 hereof as if such Related Limited Stock
Appreciation Right were an Incentive Stock Option and as if all other Rights
which are Related to Incentive Stock Options were Incentive Stock Options.  
Notwithstanding any other provision of the Plan, a Limited Stock Appreciation
Right shall be exercisable only during the period beginning on the first day
following the date of expiration of any "offer" (as such term is hereinafter
defined) and ending on the forty-fifth day following such date.

   A Limited Stock Appreciation Right shall, upon its exercise, entitle the
Participant to whom such Limited Stock Appreciation Right was granted to
receive an amount of cash equal to the amount by which the "Offer Price per
Share" (as such term is hereinafter defined) or the Market Value on the date
of such ex-ercise, as shall have been provided by the Committee in its
discretion at the time of grant, shall exceed the Exercise Price of such
Limited Stock Appreciation Right, multiplied by the number of Shares with
respect to which such Limited Stock Appreciation Right shall have been
exercised.  Upon the exercise of a Limited Stock Appreciation Right, any
Related Option and/or Related Stock Appreciation Right shall cease to be
exercisable to the extent of the Shares with respect to which such Limited
Stock Appreciation Right was exercised.  Upon the exercise or termination of
a Related Option or Related Stock Appreciation Right, any Related Limited
Stock Appreciation Right shall terminate to the extent of the Shares with
respect to which such Related Option or Related Stock Appreciation Right was
exercised or terminated.

   For the purposes of this Section 10, the term "Offer" shall mean any
tender offer or exchange offer for Shares other than one made by the
Corporation, provided that the corporation, person or other entity making the
offer acquires pursuant to such offer either (i) 25% of the Shares outstanding
immediately prior to the commencement of such offer or (ii) a number of Shares
which, together with all other Shares acquired in any tender offer or exchange
offer (other than one made by the Corporation) which expired within sixty days
of the expiration date of the offer in question, equals 25% of the Shares
outstanding immediately prior to the commencement of the offer in question.
The term "Offer Price per Share" as used in this Section 10 shall mean the
highest price per Share paid in any Offer which Offer is in effect any time
during the period beginning on the sixtieth day prior to the date on which a
Limited Stock Appreciation Right is exercised and ending on the date on which
such Limited Stock Appreciation Right is exercised.  Any securities or
property which are part or all of the consideration paid for Shares in the
Offer shall be valued in determining the Offer Price per Share at the higher
of (A) the valuation placed on such securities or property by the corporation
, person or other entity making such Offer or (B) the valuation placed on
such securities or property by the Committee.

   11.Terms and Conditions of Restricted Stock.  The Committee shall have
full and complete authority, subject to the limitations of the Plan, to grant
awards of Restricted Stock and, in addition to the terms and conditions
contained in paragraphs (a) through (f) of this Section 11, to provide such
other terms and conditions (which need not be identical among Participants)
in respect of such Awards, and the vesting thereof, as the Committee shall
determine and provide in the agreement referred to in paragraph (d) of this
Section 11.

      (a)At the time of an award of Restricted Stock, the Committee
shall establish for each Participant a Restricted Period during which or at the
expiration of which, as the Committee shall determine and provide in the
agreement referred to in paragraph (d) of this Section 11, the Shares awarded
as Restricted Stock shall vest.  Subject to any such other terms and
conditions as the Committee shall provide, shares of Restricted Stock may not
be sold, assigned, transferred, pledged or otherwise encumbered by the
Participant, except as hereinafter provided, during the Restricted Period.
Except for such restrictions, and subject to paragraphs (c), (d) and (e) of
this Section 11 and Section 12 hereof, the Participant as owner of such
shares shall have all the rights of a stockholder, including but not limited
to the right to receive all dividends paid on such shares and the right to
vote such shares.  The Committee shall have the authority, in its discretion,
to accelerate the time at which any or all of the restrictions shall lapse
with respect to any shares of Restricted Stock prior to the expiration of the
Restricted Period with respect thereto, or to remove any or all of such
restrictions, whenever it may determine that such action is appropriate by
reason of changes in applicable tax or other laws or other changes in
circumstances occurring after the commencement of such Restricted Period.

      (b)Except as provided in Section 14 hereof, if a Participant ceases
to maintain Continuous Service for any reason (other than death, total or
partial disability or normal or early retirement), unless the Committee shall
otherwise determine, all shares of Restricted Stock theretofore awarded to
such Participant and which at the time of such termination of Continuous
Service are subject to the restrictions imposed by paragraph (a) of this
Section 11 shall upon such termination of Continuous Service be forfeited and
returned to the Corporation.  Unless the Committee shall have provided in the
agreement referred to in paragraph (d) of this Section 11 for a ratable lapse
of restrictions with respect to an award of shares of Restricted Stock during
the Restricted Period, if a Participant ceases to maintain Continuous Service
by reason of death, total orpartial disability or normal or early retirement,
such portion of such shares of Restricted Stock awarded to such Participant
which at the time of such termination of Continuous Service are subject to
the restrictions imposed by paragraph (a) of this Section 11 as shall be
equal to the portion of the Restricted Period with respect to such shares
which shall have elapsed at the time of such termination of Continuous
Service shall be free of restrictions and shall not be forfeited.

      (c)Each certificate in respect of shares of Restricted Stock awarded
under the Plan shall be registered in the name of the Participant and
deposited by the Participant, together with a stock power endorsed in blank,
with the Corporation and shall bear the following (or a similar) legend:

      "The transferability of this certificate and the shares of stock
   represented hereby are subject to the terms and conditions (including
   forfeiture) contained in the 1993 Stock Option and Incentive Plan of North
   Bancshares, Inc. and an Agreement entered into between the registered
   owner and North Bancshares, Inc.  Copies of such Plan and Agreement are
   on file in the offices of the Secretary of North Bancshares, Inc., 100 West
   North Avenue at Clark, Chicago, Illinois 60610."

      (d)At the time of an award of shares of Restricted Stock, the
Participant shall enter into an Agreement with the Corporation in a form
specified by the Committee, agreeing to the terms and conditions of the award
and such other matters as the Committee shall in its sole discretion
determine.

      (e)At the time of an award of shares of Restricted Stock, the Committee
may, in its discretion, determine that the payment to the Participant of
dividends declared or paid on such shares, or specified portion thereof, by
the Corporation shall be deferred until the earlier to occur of (i) the
lapsing of the restrictions imposed under paragraph (a) of this Section 11 or
(ii) the forfeiture of such shares under paragraph (b) of this Section 11,
and shall be held by the Corporation for the account of the Participant until
such time.  In the event of such deferral, there shall be credited at the end
of each year (or portion thereof) interest on the amount of the account at
the beginning of the year at a rate per annum as the Committee, in its
discretion, may determine. Payment of deferred dividends, together with
interest accrued thereon as aforesaid, shall be made upon the earlier to
occur of the events specified in (i) and (ii) of the immediately preceding
sentence.

      (f)At the expiration or lapse of the restrictions imposed by paragraph
(a) of this Section 11, the Corporation shall redeliver to the Participant
(or where the relevant provision of paragraph (b) of this Section 11 applies
in the case of a deceased Participant, to his legal representative,
beneficiary or heir) the certificate(s) and stock power deposited with it
pursuant to paragraph (c) of this Section 11 and the Shares represented by
such certificate(s) shall be free of the restrictions referred to in
paragraph (a) of this Section 11.

   12.Adjustments Upon Changes in Capitalization.  In the event of any change
in the outstanding Shares subsequent to the effective date of the Plan by
reason of any reorganization, recapitalization, stock split, stock dividend,
combination or exchange of shares, merger, consolidation or any change in the
corporate structure or Shares of the Corporation, the maximum aggregate number
and class of shares as to which Awards may be granted under the Plan and the
number and class of shares with respect to which Awards theretofore have been
granted under the Plan shall be appropriately adjusted by the Committee, whose
determination shall be conclusive.  Any shares of stock or other securities
received, as a result of any of the foregoing, by a Participant with respect
to Restricted Stock shall be subject to the same restrictions and the
certificate(s) or other instruments representing or evidencing such shares or
securities shall be legended and deposited with the Corporation in the manner
provided in Section 11 hereof.

   13.Effect of Merger.  In the event of any merger, consolidation or
combination of the Corporation (other than a merger, consolidation or
combination in which the Corporation is the continuing entity and which does
not result in the outstanding Shares being converted into or exchanged for
different securities, cash or other property, or any combination thereof)
pursuant to a plan or agreement the terms of which are binding upon all
stockholders of the Corporation (except to the extent that dissenting
stockholders may be entitled, under statutory provisions or provisions
contained in the certificate of incorporation, to receive the appraised or
fair value of their holdings), any Participant to whom an Option or Right has
been granted shall have the right (subject to the provisions of the Plan and
any limitation applicable to such Option or Right), thereafter and during the
term of each such Option or Right, to receive upon exercise of any such
Option or Right an amount equal to the excess of the fair market value on the
date of such exercise of the securities, cash or other property, or
combination thereof, receivable upon such merger, consolidation or
combination in respect of a Share over the Exercise Price of such Right or
Option, multiplied by the number of Shares with respect to which such Option
or Right shall have been exercised.  Such amount may be payable fully in cash
, fully in one or more of the kind or kinds of property payable in such
merger, consolidation or combination, or partly in cash and partly in one or
more of such kind or kinds of property, all in the discretion of the Committee
 .  Unless the Committee shall have provided otherwise in the agreement
referred to in paragraph (d) of Section 11 hereof, in the event of any such
merger, consolidation or combination any Restricted Period shall lapse with
respect to Shares of Restricted Stock awarded, all such Shares shall be fully
vested in the Participants to whom such Shares were awarded, and the holders
of such Shares shall be eligible to receive in respect thereof the full
amount receivable per Share in such merger, consolidation or combination.

   14.Effect of Change in Control.  Each of the events specified in the
following clauses (i) through (iii) of this Section 14 shall be deemed a
"change of control":  (i) any third person, including a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934, shall become the
beneficial owner of shares of the Corporation with respect to which 25% or
more of the total number of votes for the election of the Board of Directors
of the Corporation may be cast, (ii) as a result of, or in connection with,
any cash tender offer, exchange offer, merger or other business combination,
sale of assets or contested election, or combination of the foregoing, the
persons who were directors of the Corporation shall cease to constitute a
majority of the Board of Directors of the Corporation or (iii) the
shareholders of the Corporation shall approve an agreement providing either
for a transaction in which the Corporation will cease to be an independent
publicly owned entity or for a sale or other disposition of all or
substantially all the assets of the Corporation; provided, however, that the
occurrence of any such events shall not be deemed a "change in control" if,
prior to such occurrence, a resolution specifically approving such occurrence
shall have been adopted by at least a majority of the Board of Directors of
the Corporation.  If the Continuous Service of any Participant of the
Corporation or any Affiliate is involuntarily terminated for whatever reason,
at any time within eighteen months after a change in control, unless the
Committee shall have otherwise provided in the agreement referred to in
paragraph (d) of Section 11 hereof, any Restricted Period with respect to
Restricted Stock theretofore awarded to such Participant shall lapse upon
such termination and all Shares awarded as Restricted Stock shall become
fully vested in the Participant to whom such Shares were awarded.  If a
tender offer or exchange offer for Shares (other than such an offer by the
Corporation) is commenced, or if the event specified in clause (iii) above
shall occur, unless the Committee shall have otherwise provided in the
instrument evidencing the grant of an Option or Stock Appreciation Right, all
Options and Stock Appreciation Rights theretofore granted and not fully
exercisable shall become exercisable in full upon the happening of such event
and shall remain so exercisable for a period of sixty days following such
date, after which they shall revert to being exercisable in accordance with
their terms; provided, however, that no Option or Stock Appreciation Right
which has previously been exercised or otherwise terminated shall become
exercisable.

   15.Assignments and Transfers.  No Award nor any right or interest of a
Participant under the Plan in any instrument evidencing any Award under the
Plan may be assigned, encumbered or transferred except, in the event of the
death of a Participant, by will or the laws of descent and distribution or in the
case of Awards other than Incentive Stock Options pursuant to a qualified
domestic relations order, as defined in the Code or Title I of ERISA or the
rules thereunder.

   16.Employee Rights Under the Plan.  No director, officer or employee
shall have a right to be selected as a Participant nor, having been so
selected, to be selected again as a Participant and no director, officer,
employee or other person shall have any claim or right to be granted an Award
under the Plan or under any other incentive or similar plan of the
Corporation or any Affiliate.  Neither the Plan nor any action taken
thereunder shall be construed as giving any employee any right to be retained
in the employ of the Corporation or any Affiliate.

   17.Delivery and Registration of Stock.  The Corporation's obligation to
deliver Shares with respect to an Award shall, if the Committee so requests,
be conditioned upon the receipt of a representation as to the investment
intention of the Participant to whom such Shares are to be delivered, in such
form as the Committee shall determine to be necessary or advisable to comply
with the provisions of the Securities Act of 1933 or any other Federal, state
or local securities legislation or regulation.  It may be provided that any
representation requirement shall become inoperative upon a registration of
the Shares or other action eliminating the necessity of such representation
under such Securities Act or other securities legislation.  The Corporation
shall not be required to deliver any Shares under the Plan prior to (i) the
admission of such shares to listing on any stock exchange on which Shares may
then be listed, and (ii) the completion of such registration or other
qualification of such Shares under any state or Federal law, rule or
regulation, as the Committee shall determine to be necessary or advisable.

   18.Withholding Tax.  Upon the termination of the Restricted Period with
respect to any shares of Restricted Stock (or at any such earlier time, if any
, that an election is made by the Participant under Section 83(b) of the Code
, or any successor provision thereto, to include the value of such shares in
taxable income), the Corporation shall retain a sufficient number of shares
held by it to cover the amount required to be withheld.  The Corporation
shall have the right to deduct from all dividends paid with respect to shares
of Restricted Stock the amount of any taxes which the Corporation is required
to withhold with respect to such dividend payments.

   The Corporation shall have the right to deduct from all amounts paid in
cash with respect to the exercise of a Right under the Plan any taxes required
by law to be withheld with respect to such cash payments.  Where a Participant
or other person is entitled to receive Shares pursuant to the exercise of an
Option or Right pursuant to the Plan, the Corporation shall have the right to
require the Participant or such other person to pay the Corporation the amount
of any taxes which the Corporation is required to withhold with respect to
such Shares.

   19.Amendment or Termination.  The Board of Directors of the Corporation
may amend, suspend or terminate the Plan or any portion thereof at any time,
but (except as provided in Section 12 hereof) no amendment shall be made
without approval of the stockholders of the Corporation which shall (i)
materially increase the aggregate number of Shares with respect to which
Awards may be made under the Plan, (ii) materially increase the aggregate
number of Shares which may be subject to Awards to Participants who are not
Employees or (iii) change the class of persons eligible to participate in the
Plan; provided, however, that no such amendment, suspension or termination
shall impair the rights of any Participant, without his consent, in any Award
theretofore made pursuant to the Plan.

   20.Effective Date and Term of Plan.  The Plan shall become effective
upon its adoption by the Board of Directors of the Corporation, subject to the
Bank converting to a stock institution and approval of the Plan by stockholders
of the Corporation.  It shall continue in effect for a term of ten years
unless sooner terminated under Section 19 hereof.

   21.Initial Grant.  By, and simultaneously with, the adoption of this Plan,
each member of the Board of Directors of the Corporation at the time of the
Bank's conversion to stock form who is not an Employee, is hereby granted a
ten year, Non-Qualified Stock Option to purchase a number of shares equal to
 .5% of the shares issued in the conversion at an Exercise Price per share
equal to the per share price at which Shares are sold in the conversion.  In
addition, each non-employee director of the Corporation elected after the
completion of the Bank's conversion to stock form is hereby granted as of the
date he or she is elected and qualified ("election date") a ten year Non-
Qualified Stock Option to Purchase 100 Shares.  Each such Option shall be
evidenced by a Non-Qualified Stock Option Agreement in a form approved by the
Board of Directors and shall be subject in all respects to the terms and
conditions of this Plan, which are controlling.  All options granted pursuant
to this Section 21 shall be rounded down to the nearest whole share to the
extent necessary to ensure that no options to purchase stock representing
fractional shares are granted.

                                                                          
                                                                  
                          NORTH BANCSHARES, INC.

                 Management Recognition and Retention Plan


      1.  Plan Purpose.  The purpose of the Plan is to promote the long-term
interests of the Corporation and its stockholders by providing a means for
attracting and retaining executive officers and directors of the Corporation
and its Affiliates.

      2.  Definitions.  The following definitions are applicable to the Plan:
           
           "Award" - means the grant by the Committee of Restricted Stock, as
provided in the Plan.

           "Affiliate" - means any "parent corporation" or "subsidiary
corporation" of the Corporation, as such terms are defined in Section 424(e)
and (f), respectively, of the Code.

           "Bank" - means North Federal Savings Bank, a savings institution
and its predecessors and successors.

           "Code" - means the Internal Revenue Code of 1986, as amended.
   
           "Committee" - means the Committee referred to in Section 7 hereof.

           "Continuous Service" - means the absence of any interruption or
termination of service as a director, advisory director, executive officer or
employee of the Corporation or any Affiliate.  Service shall not be considered
interrupted in the case of sick leave, military leave or any other leave of
absence approved by the Corporation or any Affiliate or in the case of
transfers between payroll locations of the Corporation or between the
Corporation, its subsidiaries or its successor.  

           "Corporation" - means North Bancshares, Inc., a Delaware
corporation.

           "ERISA" - means the Employee Retirement Income Security Act of
1974, as amended.

           "Non-Employee Director" - means a director who a) is not currently
an officer or employee of the Corporation; b) is not a former employee of the
Corporation who receives compensation for prior services (other than from a
tax-qualified retirement plan); c) has not been an officer of the Corporation
; d) does not receive remuneration from the Corporation in any capacity other
than as a director; and e) does not possess an interest in any other
transactions or is not engaged in a business relationship for which
disclosure would be required under Item 404(a) or (b) of Regulation S-K.

           "Participant" - means any director, advisory director, executive
officer or employee of the Corporation or any Affiliate who is selected by the
Committee to receive an Award. 

           "Plan" - means the Management Recognition and Retention Plan of the
Corporation.

           "Restricted Period" - means the period of time selected by the
Committee for the purpose of determining when restrictions are in effect under
Section 3 hereof with respect to Restricted Stock awarded under the Plan.

           "Restricted Stock" - means Shares which have been contingently
awarded to a Participant by the Committee subject to the restrictions referred
to in Section 3 hereof, so long as such restrictions are in effect.

           "Shares" - means the common stock, par value $0.01 per share, of
the Corporation.

      3.  Terms and Conditions of Restricted Stock.  The Committee shall have
full and complete authority, subject to the limitations of the Plan, to grant
awards of Restricted Stock and, in addition to the terms and conditions
contained in paragraphs (a) through (e) of this Section 3, to provide such
other terms and conditions (which need not be identical among Participants)
in respect of such Awards, and the vesting thereof, as the Committee shall
determine.

           (a)  At the time of an award of Restricted Stock, the Committee
shall establish for each Participant a Restricted Period, during which or at
the expiration of which, as the Committee shall determine and provide in the
agreement referred to in paragraph (d) of this Section 3, the Shares awarded
as Restricted Stock shall vest, and subject to any such other terms and
conditions as the Committee shall provide, shares of Restricted Stock may not
be sold, assigned, transferred, pledged or otherwise encumbered by the
Participant, except as hereinafter provided, during the Restricted Period.
Except for such restrictions, and subject to paragraphs (c) and (d) of this
Section 3 and Section 4 hereof, the Participant as owner of such shares shall
have all the rights of a stockholder, including but not limited to the right
to receive all dividends paid on such shares and the right to vote such
shares.  The Committee shall have the authority, in its discretion, to
accelerate the time at which any or all of the restrictions shall lapse with
respect thereto, or to remove any or all of such restrictions, whenever it
may determine that such action is appropriate by reason of changes in
applicable tax or other laws or other changes in circumstances occurring
after the commencement of such Restricted Period.

           (b)  Except as provided in Section 5 hereof, if a Participant
ceases to maintain Continuous Service for any reason (other than death, total
or partial disability or normal or early retirement), unless the Committee
shall otherwise determine, all Shares of Restricted Stock theretofore awarded
to such Participant and which at the time of such termination of Continuous
Service are subject to the restrictions imposed by paragraph (a) of this
Section 3 shall upon such termination of Continuous Service be forfeited and
returned to the Corporation.  If a Participant ceases to maintain Continuous
Service by reason of death, total or partial disability or normal or early
retirement, unless the Committee shall otherwise determine, Restricted Stock
then still subject to restrictions imposed by paragraph (a) of this Section 3
will be free of those restrictions in proportion to the portion of the
restricted period which shall have elapsed at the time of such termination of
Continuous Service.

           (c)  Each certificate in respect of Shares of Restricted Stock
awarded under the Plan shall be registered in the name of the Participant and
deposited by the Participant, together with a stock power endorsed in blank,
with the Corporation and shall bear the following (or a similar) legend:

           "The transferability of this certificate and the shares of stock
      represented hereby are subject to the terms and conditions
      (including forfeiture) contained in the Management Recognition and
      Retention Plan of North Bancshares, Inc.  Copies of such Plan are on
      file in the offices of the Secretary of North Bancshares, Inc., 100
      West North Avenue at Clark, Chicago, Illinois 60610."

           (d)   At the time of an award of shares of Restricted Stock, the
Committee may, in its discretion, determine that the payment to the
Participant of dividends declared or paid on such shares, or specified
portions thereof, by the Corporation shall be deferred until the earlier to
occur of (i) the lapsing of the restrictions imposed under paragraph (a) of
this Section 3 or (ii) the forfeiture of such shares under paragraph (b) of
this Section 3, and shall be held by the Corporation for the account of the
Participant until such time.  In the event of such deferral, there shall be
credited at the end of each year (or portion thereof) interest on the amount
of the account at the beginning of the year at a rate per annum as the
Committee, in its discretion, may determine.  Payment of deferred dividends,
together with interest accrued thereon, shall be made upon the earlier to
occur of the events specified in (i) and (ii) of the immediately preceding
sentence.

           (e)  At the expiration of the restrictions imposed by paragraph (a)
of this Section 3, the Corporation shall redeliver to the Participant (or
where the relevant provision of paragraph (b) of this Section 3 applies in
the case of a deceased Participant, to his legal representative, beneficiary
or heir) the certificate(s) and stock power deposited with it pursuant to
paragraph (c) of this Section 3 and the Shares represented by such
certificate(s) shall be free of the restrictions referred to in paragraph (a)
of this Section 3.

      4.  Adjustments Upon Changes in Capitalization.  In the event of any
change in the outstanding Shares subsequent to the effective date of the Plan
by reason of any reorganization, recapitalization, stock split, stock dividend
, combination or exchange of shares, merger, consolidation or any change in
the corporate structure or Shares of the Corporation, the maximum aggregate
number and class of shares as to which Awards may be granted under the Plan
and the number and class of shares with respect to which Awards theretofore
have been granted under the Plan shall be appropriately adjusted by the
Committee, whose determination shall be conclusive.  Any shares of stock or
other securities received, as a result of any of the foregoing, by a
Participant with respect to Restricted Stock shall be subject to the same
restrictions and the certificate(s) or other instruments representing or
evidencing such shares or securities shall be legended and deposited with the
Corporation in the manner provided in Section 3 hereof.

      5.  Effect of Change in Control.  Each of the events specified in the
following clauses (i) through (iii) of this Section 5 shall be deemed a
"change of control":  (i) any third person, including a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934, shall become the
beneficial owner of Shares of the Corporation or the Bank with respect to
which 25% or more of the total number of votes which may be cast for the
election of the Board of Directors of the Corporation, (ii) as a result of,
or in connection with, any cash tender offer, merger or other business
combination, sale of assets or contested election, or combination of the
foregoing, the persons who were directors of the Corporation or the Bank
shall cease to constitute a majority of the Board of Directors of the
Corporation, or (iii) the shareholders of the Corporation shall approve an
agreement providing either for a transaction in which the Corporation will
cease to be an independent publicly owned entity or for a sale or other
disposition of all or substantially all the assets of the Corporation or the
Bank; provided, however, that the occurrence of any such events shall not be
deemed a "change in control" if, prior to such occurrence, a resolution
specifically approving such occurrence shall have been adopted by at least a
majority of the "Disinterested Directors" (as that term is defined in the
Corporation's Certificate of Incorporation) of the Corporation.  If the
Continuous Service of any Participant of the Corporation is involuntarily
terminated for whatever reason, at any time within twelve months after a
change in control, unless the Committee shall have otherwise provided, any
Restricted Period with respect to Restricted Stock theretofore awarded to
such Participant shall lapse upon such termination and all Shares awarded as
Restricted Stock shall become fully vested in the Participant to whom such
Shares were awarded. 

      6.  Assignments and Transfers.  No Award nor any right or interest of a
Participant under the Plan in any instrument evidencing any Award under the
Plan may be assigned, encumbered or transferred except, in the event of the
death of a Participant, by will or the laws of descent and distribution or
pursuant to a qualified domestic relations order as defined in the Code or
Title I of ERISA or the rules thereunder.

      7.  Administration.  The Plan shall be administered by a Committee
consisting of two or more members, each of whom shall be a Non-Employee
Director.  The members of the Committee shall be appointed by the Board of
Directors of the Corporation.  Except as limited by the express provisions of
the Plan, the Committee shall have sole and complete authority and discretion
to (i) select Participants and grant Awards; (ii) determine the number of
shares to be subject to types of Awards generally, as well as to individual
Awards granted under the Plan; (iii) determine the terms and conditions upon
which Awards shall be granted under the Plan; (iv) prescribe the form and
terms of instruments evidencing such grants; and (v) establish from time to
time regulations for the administration of the Plan, interpret the Plan, and
make all determinations deemed necessary or advisable for the administration
of the Plan.  The Committee may maintain, and update from time to time as
appropriate, a list designating selected directors as Non-Employee Directors.
The purpose of such list shall be to evidence the status of such individuals
as Non-Employee Directors, and the Board of Directors may appoint to the
Committee any individual actually qualifying as a Non-Employee Director,
regardless of whether identified as such on said list.

      A majority of the Committee shall constitute a quorum, and the acts of a
majority of the members present at any meeting at which a quorum is present,
or acts approved in writing by a majority of the Committee without a meeting,
shall be acts of the Committee.

      8.   Shares Subject to Plan.  Subject to adjustment by the operation of
Section 4 hereof, the maximum number of Shares with respect to which Awards
may be made under the Plan is 4% of the total Shares issued in the Bank's
conversion to stock form.  The shares with respect to which Awards may be made
under the Plan may be either authorized and unissued shares or issued shares
heretofore or hereafter reacquired and held as treasury shares.  An Award
shall not be considered to have been made under the Plan with respect to
Restricted Stock which is forfeited and new Awards may be granted under the
Plan with respect to the number of Shares as to which such forfeiture has
occurred.

      9.   Employee Rights Under the Plan.  No director, officer or employee
shall have a right to be selected as a Participant nor, having been so
selected, to be selected again as a Participant and no director, officer,
employee or other person shall have any claim or right to be granted an Award
under the Plan or under any other incentive or similar plan of the
Corporation or any Affiliate.  Neither the Plan nor any action taken
thereunder shall be construed as giving any employee any right to be retained
in the employ of the Corporation, the Bank or any Affiliate.

      10.  Withholding Tax.  Upon the termination of the Restricted Period
with respect to any shares of Restricted Stock (or at any such earlier time,
if any, that an election is made by the Participant under Section 83(b) of
the Code, or any successor provision thereto, to include the value of such
shares in taxable income), the Corporation shall withhold from any payment or
distribution made under this Plan sufficient Shares to cover any applicable
withholding and employment taxes.  The Corporation shall have the right to
deduct from all dividends paid with respect to shares of Restricted Stock the
amount of any taxes which the Corporation is required to withhold with
respect to such dividend payments.  No discretion or choice shall be
conferred upon any Participant with respect to the form, timing or method of
any such tax withholding.

      11.  Amendment or Termination.  The Board of Directors of the
Corporation may amend, suspend or terminate the Plan or any portion thereof
at any time; provided, however, that no such amendment, suspension or
termination shall impair the rights of any Participant, without his consent,
in any Award theretofore made pursuant to the Plan. 

      12.  Term of Plan.  The Plan shall become effective upon its adoption by
the Board of Directors of the Corporation, subject to the Bank's completion of
the conversion to stock form.  It shall continue in effect for a term of ten
years unless sooner terminated under Section 11 hereof.

      13.  Initial Grants.  By, and simultaneously with, the adoption of this
Plan, each member of the Board of Directors of the Corporation at the time of
the Bank's conversion to stock form, who is not a full-time Employee, is
hereby granted an Award equal to 0.2% of the shares issued in the mutual to
stock conversion of the Bank.  Each such Award shall be evidenced by a
Restricted Stock Agreement in a form approved by the Board of Directors and
shall be subject in all respects to the terms and conditions of this Plan,
which are controlling.  All Awards of Restricted Stock granted pursuant to
this Section 13 shall be rounded down to the nearest whole share to the
extent necessary to ensure that no shares of Restricted Stock representing
fractional shares are issued.  Except as provided in this paragraph 13, the
Awards granted hereunder shall vest at the rate of 20% of the restricted
stock granted per year, beginning the year of the completion of the
Conversion, as long as the Director maintains Continuous Service with the
Bank after the Conversion; provided, however, no Plan Shares shall be earned
in any fiscal year in which the Bank fails to meet all of its fully phased-in
capital requirements.



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