<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
450 5TH STREET, N.W.
WASHINGTON, D. C. 20549
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FORM 10-QSB
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- -----
ACT OF 1934
For the quarterly period ended DECEMBER 31, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to Commission File No. 0-23571
-------- --------
PROGRESSIVE BANCORP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 36-4178818
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
601-617 COURT STREET, PEKIN, ILLINOIS 61554
- --------------------------------------- ----------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (309)-347-5101
NOT APPLICABLE
- ---------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X . No .
--- ---
Indicate the number of shares outstanding of the issuer's classes of common
stock, as of the latest practicable date.
CLASS OUTSTANDING DECEMBER 31, 1998
- -------------------------------------- -----------------------------
Common Stock, par value $.01 per share 174,473
<PAGE>
PROGRESSIVE BANCORP, INC. AND SUBSIDIARIES
INDEX
PAGE
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets as of
December 31, 1998 (Unaudited) and
September 30, 1998...............................1
Condensed Consolidated Statements of Income
(Unaudited) for the Three months ended
December 31, 1998 and 1997.......................2
Condensed Consolidated Statements of Cash Flows
(Unaudited) for the Three months ended
December 31, 1998 and 1997.......................4
Notes to Condensed Consolidated Financial Statements..5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS..............7
PART II. OTHER INFORMATION
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PROGRESSIVE BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
1998 SEPTEMBER 30,
(UNAUDITED) 1998
------------ -------------
(IN THOUSANDS)
ASSETS
<S> <C> <C>
Cash and amounts due from banks $ 1,901 $ 1,639
Interest-bearing deposits 4,677 2,308
Money market investments and investment securities:
Held-to-maturity, at amortized cost (estimated fair value
of $3,300,000 and $4,299,000, respectively) 3,246 4,235
Available-for-sale, at fair value 7,802 6,827
Mortgage-backed securities:
Held-to-maturity, at amortized cost (estimated fair value
of $2,650,000 and $3,215,000, respectively) 2,627 3,183
Available-for-sale, at fair value 4,690 4,484
Loans receivable, net of allowance for loan loss of
$232,000 and $228,000, respectively 61,891 61,999
Other assets 2,802 2,577
---------- ----------
TOTAL ASSETS $ 89,636 $ 87,252
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 71,870 $ 69,791
Borrowed funds 9,500 9,500
Accrued expenses and other liabilities 1,564 1,308
---------- ----------
Total liabilities 82,934 80,599
---------- ----------
Stockholders' equity:
Serial preferred stock, $.10 par value, 50,000 shares
authorized, no shares issued and outstanding - -
Common stock, $.01 par value, 250,000 shares authorized,
174,473 shares issued at December 31, 1998 and
September 30, 1998 2 2
Paid-in surplus 1,430 1,430
Retained earnings, substantially restricted 6,543 6,452
Net unrealized gain on available-for-sale securities,
net of taxes 27 69
---------- ----------
8,002 7,953
Treasury stock, 25,000 shares at cost (1,300) (1,300)
---------- ----------
Total stockholders' equity 6,702 6,653
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 89,636 $ 87,252
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to condensed consolidated
financial statements.
1
<PAGE>
PROGRESSIVE BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT INCOME PER SHARE DATA)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
--------------------
1998 1997
---- ----
<S> <C> <C>
INTEREST INCOME
Loans receivable:
First mortgage loans $ 927 $ 896
Other loans 284 283
Mortgage-backed securities 110 128
Interest-bearing deposits 49 52
Money market investments and investment securities 174 192
------------ -------------
Total interest income 1,544 1,551
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INTEREST ON DEPOSITS 884 879
INTEREST ON BORROWED FUNDS 138 116
------------ -------------
Total interest expense 1,022 995
------------ -------------
Net interest income 522 556
PROVISION FOR LOAN LOSSES 4 3
------------ -------------
Net interest income after provision
for loan losses 518 553
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NONINTEREST INCOME
Travel agency fees 687 693
Net gain on sales of loans held-for-sale - 21
Loan origination fees 35 26
Other 69 71
------------ -------------
Total noninterest income 791 811
------------ -------------
NONINTEREST EXPENSE
Travel agency cost of sales 663 667
Compensation and benefits 247 237
Other operating expenses 200 213
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Total noninterest expense 1,110 1,117
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</TABLE>
2
<PAGE>
PROGRESSIVE BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT INCOME PER SHARE DATA)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
--------------------
1998 1997
---- ----
<S> <C> <C>
Income before income taxes and
cumulative effect of change
in accounting principle $ 199 $ 247
INCOME TAXES 75 89
------------ ---------
Income before cumulative effect of
change in accounting principle 124 158
CUMULATIVE EFFECT ON PRIOR YEARS
(TO SEPTEMBER 30, 1998) OF EXPENSING
ORGANIZATIONAL COSTS AS INCURRED,
NET OF INCOME TAXES OF $21 33 -
------------ ---------
NET INCOME $ 91 $ 158
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BASIC INCOME PER SHARE
Before cumulative effect of accounting change $ .83 $ .94
Accounting change (.22) -
------------ ---------
Basic income per share $ .61 $ .94
------------ ---------
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DILUTED INCOME PER SHARE
Before cumulative effect of accounting change $ .80 $ .89
Accounting change (.21) -
------------ ---------
Diluted income per share $ .59 $ .89
------------ ---------
------------ ---------
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING
Basic 149,473 168,172
------------ ---------
------------ ---------
Diluted 154,712 178,757
------------ ---------
------------ ---------
</TABLE>
See accompanying notes to condensed consolidated
financial statements.
3
<PAGE>
PROGRESSIVE BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
-------------------------
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash provided by (used in) operating activities $ (20) $ 135
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CASH FLOWS FROM INVESTING ACTIVITIES
Principal received on mortgage-backed securities 816 728
Proceeds from the maturity of investment securities 2,000 500
Purchase of investment securities (1,997) (1,124)
Purchase of mortgage-backed securities (492) (502)
Net decrease (increase) in loans receivable 47 (546)
Other - (5)
---------- ---------
Net cash provided by (used in) investing
activities 374 (949)
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CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits 2,079 (148)
Other 198 176
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Net cash provided by financing activities 2,277 28
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NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 2,631 (786)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 3,947 4,968
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,578 $ 4,182
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the periods for:
Interest on deposits and borrowed funds $ 1,022 $ 995
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---------- ---------
Income taxes, net of refunds $ 194 $ -
---------- ---------
---------- ---------
SUPPLEMENTAL DISCLOSURES OF NONCASH
INVESTING ACTIVITIES
Transfers from loans to real estate acquired through
foreclosure $ 57 $ 241
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---------- ---------
</TABLE>
See accompanying notes to condensed consolidated
financial statements.
4
<PAGE>
PROGRESSIVE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The Company's unaudited consolidated financial statements were prepared in
accordance with the instructions for Form 10-QSB and, therefore, do not include
information or footnotes necessary for a complete presentation of financial
position, results of operations, and cash flows in conformity with generally
accepted accounting principles. In the opinion of management of the Company,
however, the consolidated financial statements reflect all adjustments
(consisting of only normal recurring accruals) which are necessary to present
fairly the consolidated financial position and the consolidated results of
operations of the Company. The consolidated results of operations for the three
month periods ended December 31, 1998 and 1997 are not necessarily indicative of
the results which may be expected for an entire year.
NOTE 2 - EARNINGS PER COMMON SHARE
Basic earnings per share is computed based upon the weighted average number of
common shares outstanding during the period. Diluted income per share is
computed based upon the weighted average number of shares outstanding during the
period plus the shares that would be outstanding assuming the exercise of the
dilutive stock options.
NOTE 3 - YEAR 2000 COMPLIANCE
The Company presently believes that with modifications to existing software and
conversion to new software, the year 2000 issue will not pose significant
operational problems for the Company's business operations. To date, management
believes the systems conversion finalized in November 1998 brought its major
operating system into year 2000 compliance status. In addition, the Company
outsources its computer systems to a third party supplier, who has informed the
Company that it expects to be year 2000 compliant in mid-1999. Implementation of
the Company's plan to test in-house and out-sourced software has been underway
since the first quarter of 1998. Testing of applications considered to be
"mission critical" are scheduled for completion by the first quarter of 1999.
Total compliance for all systems, including the Company's outsourced computer
systems, is expected by management to be completed by the third quarter of 1999;
management currently estimates that such compliance will cost $50,000. The plan
implementation team is responsible for progress and will continue to provide a
status report to the board of directors on a monthly basis through December 31,
1999. However, if such modifications and conversions are not made, or are not
completed timely, the year 2000 issue could have a material adverse impact on
the operations of the Company. The Company has in place a contingency plan in
the event its outsourced computer systems are not year 2000 compliant on a
timely basis. In addition, there can be no assurance that unforeseen problems in
the Company's outsourced computer systems will not have an adverse effect on the
Company's systems or operations. The Company does not have sufficient
information accumulated from customers to enable the Company to assess the
degree to which customers' operations are susceptible to potential problems
relating to the year 2000 issue.
5
<PAGE>
PROGRESSIVE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 4 - COMPREHENSIVE INCOME
Effective October 1, 1998, the Company adopted SFAS No. 130, REPORTING
COMPREHENSIVE INCOME. Statement 130 establishes new rules for the reporting and
display of comprehensive income and its components. The adoption of this
Statement had no impact on the Company's net income or shareholders' equity.
Statement 130 requires the Company's net change in unrealized gain (loss) on
available-for-sale securities, which prior to adoption were reported separately
in shareholders' equity, to be included in other comprehensive income. Total
comprehensive income, which was comprised of net income and net change in
unrealized gain (loss) on available-for-sale securities, was approximately
$28,000 and $175,000 for the three months ended December 31, 1998 and 1997,
respectively.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
Total assets increased by $2.4 million or 2.7 percent from September 30, 1998 to
December 31, 1998. Interest-bearing deposits increased $2.4 million or 102.6
percent. All money market investments and investment securities decreased
$14,000. All mortgage-backed securities decreased $350,000 or 4.6 percent for
the same period. Loans receivable decreased $108,000 or 0.2 percent. The
Company's deposits increased $2.1 million or 3.0 percent from September 30, 1998
to December 31, 1998.
CAPITAL
Total stockholders' equity increased $49,000 or 0.7 percent to $6.7 million
during the three months ended December 31, 1998. The FDIC requires that the
Company meet minimum amounts and ratios of total and Tier I Capital (as defined
in the regulations) to risk-weighted assets (as defined), and Tier I Capital (as
defined) to average assets (as defined). As of December 31, 1998, the Company
had total capital of $6.9 million or 15.8 percent of risk-weighted assets and
Tier I Capital of $6.7 million or 15.3 percent of risk-weighted assets and 7.6
percent of average assets. As of December 31, 1998, the Company was in full
compliance with all three minimum capital requirements.
LIQUIDITY
FDIC regulations require that savings banks maintain an average daily balance of
liquid assets (cash, certain time deposits, bankers' acceptances, and specified
United States Government, state, or federal agency obligations) equal to a
monthly average of not less than 5 percent of its net withdrawable deposits plus
short-term borrowing. At December 31, 1998, the Company's average liquidity
position was $13.3 million or 17.8 percent compared to $13.6 million or 18.2
percent at September 30, 1998. The Company adjusts its liquidity levels in order
to meet funding needs for deposit outflows, payment of real estate taxes
escrowed on mortgage loans, repayment of borrowing, when applicable, and loan
commitments. The Company also adjusts liquidity as appropriate to meet its
asset, liability, and management objectives.
7
<PAGE>
RESULTS OF OPERATIONS
INTEREST INCOME
Interest income decreased 0.5 percent or $7,000 for the three months ended
December 31, 1998, compared to the three months ended December 31, 1997.
Contributing to this decrease, the average yield on interest earning assets was
7.6 percent for the three months ended December 31, 1998, compared to 7.8
percent for the three months ended December 31, 1997. Offsetting this decrease,
the Company's average earnings assets were $84.5 million for a $2.3 million
increase for the three months ended December 31, 1998, compared to $82.2 million
for the three months ended December 31, 1997.
INTEREST EXPENSE
Interest expense increased 2.7 percent or $27,000 for the three months ended
December 31, 1998, compared to the three months ended December 31, 1997. This
increase resulted from an increase in the Company's average deposit base of $3.3
million from $76.9 million for the three months ended December 31, 1997 to $80.2
million for the three months ended December 31, 1998. The Company's average cost
of deposits and borrowed funds was 5.1 percent for the three months ended
December 31, 1998, compared to 5.2 percent for the three months ended December
31, 1997.
NET INTEREST INCOME
Net interest income decreased 6.1 percent or $34,000 for the three months ended
December 31, 1998, compared to the three months ended December 31, 1997. This
decrease was affected by the net increase of the average deposit base over the
average earnings assets of $1 million for the respective three months ended
December 31, 1998 and 1997. Also contributing to the decrease, the Company's net
interest spread decreased to 2.50 percent for the three months ended December
31, 1998, compared to an interest rate spread of 2.62 percent for the three
months ended December 31, 1997. The interest rate yield curve continued at flat
levels for the three months ended December 31, 1998. The ten year treasury note
averaged 4.66 percent and the thirty year treasury bond averaged 5.09 percent
for the three months ended December 31, 1998. For the three months ended
December 31, 1997, the average rate on the ten year treasury note was 5.92
percent and the average rate on the thirty year treasury bond was 6.16 percent.
The rates received on the Company's earning assets followed these lower rate
trends; however, because of competition from local credit unions and other
financial institutions with alternative savings and investment products, the
Company was not able to lower rates paid on its savings products as much. The
Company's interest rate spread continued to narrow.
PROVISION FOR LOAN LOSSES
The Company continues to make provisions for loan losses as needed based on its
"Policy Statement Regarding General Valuation Allowances." Loss provisions of
$4,000 and $3,000 were made for the respective three month periods ended
December 31, 1998 and 1997.
8
<PAGE>
NONINTEREST INCOME
Noninterest income decreased 2.5 percent or $20,000 for the three months ended
December 31, 1998, compared to the three months ended December 31, 1997.
Contributing to this decrease, the Company had no net gain on sale of loans
held-for-sale for the three months ended December 31, 1998, compared to gains of
$21,000 for the three months ended December 31, 1997. Because of lower rates
being offered on other investment products, the Company chose to hold the
originated loans in its portfolio.
NONINTEREST EXPENSE
Noninterest expense decreased 0.6 percent or $7,000 for the three months ended
December 31, 1998, compared to the three months ended December 31, 1997. Travel
agency cost of sales decreased $4,000 for the three months ended December 31,
1998, compared to the three months ended December 31, 1997. Compensation and
benefits increased $10,000 for the comparable three month periods ended December
31, 1998 and 1997, respectively. This was due primarily as a result of regular
compensation merit increases. Other operating expenses decreased $13,000 for the
three months ended December 31, 1998, compared to the three months ended
December 31, 1997. Real estate owned expenses, including loss provision on real
estate, decreased $5,000. This decrease was a result of less activity in real
estate owned for the comparable three month periods ended December 31, 1998 and
1997.
CUMULATIVE EFFECT ON PRIOR YEARS (TO SEPTEMBER 30, 1998) OF EXPENSING
ORGANIZATIONAL COSTS AS INCURRED
On October 1, 1998, in accordance with Statement of Position 98-5, REPORTING ON
THE COSTS OF START-UP ACTIVITIES, the Company elected to expense the remaining
unamortized balance of $54,000 for organizational costs incurred in the
formation of the bank holding company, Progressive Bancorp, Inc.
NET INCOME
Net income decreased 42.4 percent or $67,000 for the three months ended December
31, 1998, compared to the three months ended December 31, 1997. The decrease was
a result of the narrowing of the Company's net interest margin. Net interest
income decreased $34,000 for the three months ended December 31, 1998, compared
to the same period ended December 31, 1997. Also contributing to the decrease
was the expensing of unamortized organizational costs associated with the
formation of the bank holding company. This amounted to $33,000, net of income
taxes, for the three months ended December 31, 1998.
9
<PAGE>
PROGRESSIVE BANCORP, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDING
There are no material legal proceedings to which the Company or the Bank
is a party or of which any of their property is subject. From time to
time, the Bank is a party to various legal proceedings incident to its
business.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: none
(b) Reports on Form 8-K: none
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PROGRESSIVE BANCORP, INC.
(Registrant)
DATE: February 12, 1999 BY: /S/ ARTHUR E. KRILE, JR.
------------------------
Arthur E. Krile, Jr.,
President and Chief
Executive Officer
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 1,901
<INT-BEARING-DEPOSITS> 4,677
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 12,492
<INVESTMENTS-CARRYING> 5,873
<INVESTMENTS-MARKET> 5,950
<LOANS> 64,672
<ALLOWANCE> 232
<TOTAL-ASSETS> 89,636
<DEPOSITS> 71,870
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,564
<LONG-TERM> 9,500
0
0
<COMMON> 2
<OTHER-SE> 6,700
<TOTAL-LIABILITIES-AND-EQUITY> 89,636
<INTEREST-LOAN> 1,211
<INTEREST-INVEST> 284
<INTEREST-OTHER> 49
<INTEREST-TOTAL> 1,544
<INTEREST-DEPOSIT> 884
<INTEREST-EXPENSE> 1,022
<INTEREST-INCOME-NET> 522
<LOAN-LOSSES> 4
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,110
<INCOME-PRETAX> 199
<INCOME-PRE-EXTRAORDINARY> 124
<EXTRAORDINARY> 0
<CHANGES> 33
<NET-INCOME> 91
<EPS-PRIMARY> .61
<EPS-DILUTED> .60
<YIELD-ACTUAL> 2.47
<LOANS-NON> 0
<LOANS-PAST> 361
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 729
<ALLOWANCE-OPEN> 228
<CHARGE-OFFS> 9
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 232
<ALLOWANCE-DOMESTIC> 232
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
