<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarter ended June 30, 1996
Commission file number: 0-26350
ALLEGIANT BANCORP, INC.
(Exact name of registrant as specified in its charter)
Missouri 43-1519382
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7801 Forsyth Boulevard
St. Louis, Missouri 63105
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (314) 726-5000
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
On August 13, 1996, the registrant had 1,995,792 outstanding shares of
Common Stock, $.01 par value.
<PAGE> 2
ALLEGIANT BANCORP, INC.
FORM 10-QSB
<TABLE>
<CAPTION>
INDEX
Page
----
PART I. FINANCIAL INFORMATION
<S> <C>
ITEM 1. Financial Statements
Balance Sheets - June 30, 1996 and December 31, 1995 3
Statements of Income - Three Months Ended June 30, 1996 and 1995
and Six Months Ended June 30, 1996 and 1995 4
Statements of Cash Flows - Six Months Ended June 30, 1996 and 1995 5
Notes to Financial Statements 6
ITEM 2. Management's Discussion and Analysis 7
PART II. OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders 20
ITEM 6. Exhibits and Reports on Form 8-K 20
SIGNATURES 21
</TABLE>
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<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
ALLEGIANT BANCORP, INC.
CONSOLIDATED BALANCE SHEETS (unaudited)
June 30, December 31,
1996 1995
----------- ------------
(in thousands, except share and per share data)
<S> <C> <C>
ASSETS:
- ------
Cash and due from banks $ 6,856 $ 5,483
Federal funds sold and
other overnight investments 0 14,200
Investment securities:
Available for sale (at estimated
market value) 21,269 28,000
Held to maturity (approximate market
value of $35,186,000 and
$45,042,000, respectively) 35,531 45,211
Loans 222,805 181,544
Less allowance for possible loan losses (2,290) (2,130)
-------- --------
Net loans 220,515 179,414
Bank premises and equipment 4,717 4,603
Accrued interest and other assets 3,012 2,906
Cost in excess of fair value of
net assets acquired 521 569
-------- --------
Total $292,421 $280,386
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
- ------------------------------------
Deposits:
Non-interest bearing $ 22,229 $ 21,966
Interest bearing 184,744 176,203
Certificates of deposit of $100,000 or more 30,506 33,140
-------- --------
Total deposits 237,479 231,309
-------- --------
Short-term borrowings 22,557 14,108
Long-term debt 16,680 19,719
Accrued expenses and other liabilities 1,017 1,312
-------- --------
Total liabilities 277,733 266,448
Commitments and contingencies
Stockholders' equity:
Common Stock, $.01 par value - shares
authorized, 7,800,000; issued and outstanding,
1,995,792 and 1,989,034, respectively 20 18
Capital surplus 11,380 11,369
Retained earnings 3,442 2,642
Net unrealized depreciation on securities
available for sale (154) (91)
-------- --------
Total stockholders' equity 14,688 13,938
-------- --------
Total liabilities and stockholders' equity $292,421 $280,386
======== ========
See notes to consolidated financial statements.
</TABLE>
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<PAGE> 4
<TABLE>
ALLEGIANT BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
------------------------- -------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
(in thousands except share and per share amounts)
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans $ 4,878 $ 4,083 $ 9,598 $ 7,632
Investment securities 804 890 1,742 1,451
Federal funds sold and
overnight investments 49 38 117 77
---------- ---------- ---------- ----------
Total interest income 5,731 5,011 11,457 9,160
---------- ---------- ---------- ----------
Interest Expense:
Interest on deposits 2,749 2,335 5,574 4,028
Interest on short-term debt 221 476 433 717
Interest on long-term debt 360 176 748 298
---------- ---------- ---------- ----------
Total interest expense 3,330 2,987 6,755 5,043
---------- ---------- ---------- ----------
Net interest income 2,401 2,024 4,702 4,117
Provision for possible loan losses 251 245 431 507
---------- ---------- ---------- ----------
Net interest income after
provision for possible loan losses 2,150 1,779 4,271 3,610
---------- ---------- ---------- ----------
Other Income:
Service charges and other fees 218 133 392 252
Net gain on sale of securities 17 -- 17 --
---------- ---------- ---------- ----------
Total other income 235 133 409 252
---------- ---------- ---------- ----------
Other Expenses:
Salaries and employee benefits 783 624 1,588 1,281
Operating expenses 924 765 1,631 1,559
---------- ---------- ---------- ----------
Total other expenses 1,707 1,389 3,219 2,840
---------- ---------- ---------- ----------
Income before income taxes 678 523 1,461 1,022
Provision for income taxes 253 209 566 403
---------- ---------- ---------- ----------
Net income $ 425 $ 314 $ 895 $ 619
========== ========== ========== ==========
Primary earnings per share:
Average common shares outstanding 2,156,936 1,807,998 2,155,810 1,644,022
Net income $ .20 $ .17 $ .42 $ .38
Fully diluted earnings per share:
Average common shares outstanding 2,156,936 1,807,998 2,155,810 1,644,022
Net income $ .20 $ .17 $ .42 $ .38
See notes to consolidated financial statements.
</TABLE>
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<PAGE> 5
<TABLE>
ALLEGIANT BANCORP, INC.
CONSOLIDATED STATEMENTS
OF CASH FLOWS
(unaudited)
<CAPTION>
Six Months Ended
June 30,
-----------------------
1996 1995
-------- --------
(in thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
- --------------------
Net income $ 895 $ 619
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 348 187
Provision for loan losses 431 507
Loan recoveries 52 3
Net gain on sale of securities (17) --
Changes in assets and liabilities:
Accrued interest receivable and
other assets (106) (1,082)
other liabilities (288) (40)
-------- --------
Cash provided by operating activities 1,315 194
-------- --------
INVESTING ACTIVITIES:
- --------------------
Proceeds from maturities of securities held to maturity 35,871 29,619
Purchase of investment securities held to maturity (26,191) (30,059)
Proceeds from maturities of securities available for sale 42,255 --
Proceeds from sales of securities available for sale 1,763 --
Purchase of investments securities available for sale (37,334) (405)
Loans made to customers, net of repayments (41,584) (47,484)
Additions to premises and equipment (414) (294)
-------- --------
Cash used in investing activities (25,634) (48,623)
-------- --------
FINANCING ACTIVITIES:
- --------------------
Net increase in deposits 6,170 48,636
Net increase (decrease) in short-term debt 8,449 (2,502)
Repayment of long-term debt (3,039) (7,535)
Proceeds from issuance of long-term debt -- 16,650
Proceeds from issuance of Common Stock -- 4,380
Payment of dividends (88) (42)
-------- --------
Cash provided by financing activities 11,492 59,587
-------- --------
Net (decrease) increase in cash and cash equivalents (12,827) 11,158
Cash and cash equivalents, beginning of period 19,683 5,778
-------- --------
Cash and cash equivalents, end of period $ 6,856 $ 16,936
======== ========
See notes to consolidated financial statements.
</TABLE>
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<PAGE> 6
ALLEGIANT BANCORP, INC.
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts
of Allegiant Bancorp, Inc. (the "Company") and its subsidiaries, Allegiant
Bank, Allegiant State Bank (which was merged into Allegiant Bank on January
27, 1995) (as used herein the "Bank" refers to Allegiant Bank for periods
subsequent to such merger and to Allegiant Bank and Allegiant State Bank,
collectively, prior to such time) and Allegiant Mortgage Company (the
"Mortgage Company"). The financial statements have been prepared in
conformity with generally accepted accounting principles and with general
practice within the banking industry. Significant intercompany
transactions and amounts have been eliminated.
The consolidated balance sheet at June 30, 1996, the consolidated
statements of income for the three and six months ended June 30, 1996 and
1995, respectively, and the consolidated statements of cash flows for the
six months ended June 30, 1996 and 1995, respectively, are unaudited, but,
in the opinion of the Company, reflect all adjustments (consisting only of
normal recurring accruals) necessary for a fair presentation. Reference is
hereby made to the notes to consolidated financial statements contained in
the Company's Annual Report for the year ended December 31, 1995. The
results of operations for the six months ended June 30, 1996 are not
necessarily indicative of the results which may be obtained for the full
year ending December 31, 1996.
2. EARNINGS PER SHARE
Primary earnings per share is based on the average number of common
shares and common share equivalents outstanding during each quarter with
the elimination of interest and dividends paid on the common share
equivalents.
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<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OVERVIEW
The Company is a bank holding company which owns all of the capital
stock of Allegiant Bank. The Bank provides personal and commercial banking
and related financial services from six locations in the St. Louis Standard
Metropolitan Statistical Area ("St. Louis SMSA"), the 16th largest
metropolitan area in the United States, and two locations in Northeast
Missouri. The Mortgage Company is a wholly-owned subsidiary of the Bank
and offers residential loans primarily to customers in the St. Louis
market.
The Company was organized in May 1989 and acquired Allegiant State Bank
at that time. The Company acquired Allegiant Bank in 1990. In November
1994, Allegiant Bank acquired the Mortgage Company. Effective January
1995, Allegiant State Bank merged into Allegiant Bank.
RESULTS OF OPERATIONS
Net Income
For the second quarter of 1996, the Company reported net income of
$425,000, compared to net income of $314,000 for the second quarter of
1995. This increase of $111,000 represented a 35% increase. On a per
share basis, net income was $.20 for the three months ended June 30, 1996
and $.17 for the corresponding quarter of 1995, an increase of 18%, despite
the 35% increase in net income for the 1996 period. This lower percentage
growth on a per share basis was due to increased weighted average shares
outstanding resulting from the private placement of 510,000 shares of
Common Stock in June 1995.
For the six-month period ended June 30, 1996, the Company reported
earnings of $895,000, compared to $619,000 for the period ended June 30,
1995, an increase of $276,000, or 45%. On a per share basis, net income
increased $.04, from $.38 in the 1995 period to $.42 for the six months
ended June 30, 1996. This 11% increase was achieved despite the 31% increase
in weighted average common shares outstanding from 1,644,000 to 2,155,810
during the respective periods.
Net Interest Income
Net interest income before provision for loan losses for the three
months ended June 30, 1996 was $2.4 million, an increase of $377,000, or
19%, from $2.0 million for the corresponding quarter in 1995. This
increase was largely due to an increase in interest and fees earned on
loans which increased $795,000 from $4.1 million at June 30, 1995 to $4.9
million on June 30, 1996. Total interest income for the three-month period
ended June 30, 1996 was $5.7 million, which represented a 14% or $720,000
increase compared to $5.0 million for the three months ended June 30, 1995.
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<PAGE> 8
Interest expense for the three months ended June 30, 1996 totaled $3.3
million compared to $3.0 million for the three months ended June 30, 1995,
an increase of $343,000 or 11%. Interest paid on deposits increased 18%,
from $2.3 million for the three months ended June 30, 1995 to $2.7 million
for the same period in 1996. Partially offsetting this increase in
interest paid to depositors was a decrease in interest expense on total
borrowings which decreased $71,000 from $652,000 for the quarter ended June
30, 1995 to $581,000 in the second quarter on 1996.
For the six-month period ended June 30, 1996, net interest income before
provision for loan losses increased 14% to $4.7 million from $4.1 million
at June 30, 1995. This growth was attributable to the 25% increase in
total interest income, which increased from $9.2 million for the first six
months of 1995 to $11.5 million for the same period in 1996. The largest
segment of this growth in interest income was due to the $2.0 million
increase in interest and fees earned on loans. For the six months ended
June 30, 1995, interest and fees earned on loans totaled $7.6 million
compared to $9.6 million earned in the corresponding period in 1996. The
largest percentage increase in total interest income occurred in interest
earned on federal funds sold, which increased 52% from $77,000 for the six
months ended June 30, 1995 to $117,000 for the corresponding period at
June 30, 1996.
Total interest expense for the six months ended June 30, 1996 increased
34% to $6.8 million compared to total interest expense of $5.0 million for
the corresponding period of 1995. Interest paid to depositors increased
38%, from $4.0 million at June 30, 1995 to $5.6 million at June 30, 1996.
Interest paid on short-term borrowings decreased 40% from $717,000 to
$433,000 for the year-to-date periods of 1995 and 1996, respectively, while
interest paid on long-term borrowings increased 151% from $298,000 during
the year-to-date period of 1995 to $748,000 for the 1996 period.
Net Interest Margin
Increases in total interest income for the quarter and six-month period
ended June 30, 1996 were offset in part by tightening spreads and
increasing cost of funds. As a result of these trends, along with the
growth in deposits and competitive market pressures, the Company's net
interest margin for the first six months of 1996 decreased 51 basis points
from 4.08% for the six months ended June 30, 1995 to 3.57% for the
corresponding period in 1996. The tightening spreads experienced by the
Company resulted from four factors: (i) a shift in interest rates; (ii) an
extremely competitive market for retail deposit pricing; (iii) an increased
concentration in the portfolio of one-to four-family adjustable rate
mortgages; and (iv) increases in total borrowings outstanding.
The Bank has sought to manage its credit risk by increasing its
portfolio of one-to four-family adjustable rate mortgages. Management
prefers to hold one-to four-family adjustable rate mortgage loans due to
the lower credit risk generally associated with this type of loan, as well
as the lower interest rate risk resultant of the frequent periodic
adjustments of the mortgage coupon payments. Along with the reduced credit
risk and interest rate protection, the Bank also has observed a lower level
of the non-preforming loans associated with one-to four-family mortgages
compared the Bank's portfolio of loans as a whole. Given these attributes
of lower risk, the Bank has accepted
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<PAGE> 9
a lower average yield compared to loans with a higher level of risk.
The Bank anticipates the continued addition of one-to four-family loans in the
Bank's investment loan portfolio.
For the six months ended June 30, 1996, the annualized yield on total
average loans outstanding was 9.77% compared to 10.44% for the six-month
period ended June 30, 1995. This lower yield reflected several movements in
the prime lending rate, which has decreased from 9.00% on June 30, 1995 to
8.25% on June 30, 1996. The majority of the Bank's commercial loans have
repriced in response to this decrease in interest rates. In addition to
lower interest rates, the Bank has increased its holdings of one-to
four-family mortgage loans, which tend to yield less than commercial or
consumer loans. The Bank has chosen to absorb this decrease in yield in an
effort to establish relationship banking with these new retail customers by
offering a complete line of consumer banking products.
One such product is Bank's new Home Equity Credit Line ("HECL") which
was introduced in the second quarter of 1996. As of June 30, 1996, the
Bank had exceeded expectations in both commitments and balances outstanding
with commitments of $8.4 million in HECL's and $2.6 million in balances
outstanding. These loans are tied to the prime lending rate and were
originated at a special low introductory rate, which will subsequently
reprice in the first quarter of 1997, thus providing some relief to
tightening pressures on the net interest margin in 1997.
When compared to the Bank's peers in other geographical regions, the
St. Louis SMSA is substantially more competitive with respect to consumer
deposit pricing. The Company does not foresee a change in this market
condition in the near future. In addition to the competitive deposit
market, the Bank ran a successful money market deposit promotion in the
fourth quarter of 1995 which resulted in the largest increase in yield for
interest paid to depositors. For the six months ended June 30, 1996 the
yield on money market accounts increased to 5.01%, from 3.56% for the six
months ended June 30, 1995. This increase resulted from the higher yields paid
in order to attract deposits in an extremely competitive market. Subsequently,
the Bank has lowered by 75 basis points the interest rate paid on the highest
tier for the Allegiant Green money market accounts, allowing the new rate to
fall within market averages. This adjustment was intended to help alleviate
the pressures on the net interest margin in the third and fourth quarters of
1996.
The Bank increased its holdings of short-term debt in anticipation of
the future opening of an additional branch. The Bank opened its eighth
branch in May 1996 in South Saint Louis County. As this branch becomes
fully operational, the anticipated increase in the deposit base will fund
the planned retirement of a substantial portion of the short-term debt.
The following tables show the condensed average balance sheets for the
periods reported and the average yield for each category used to calculate
the net interest margin:
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<PAGE> 10
<TABLE>
DISTRIBUTION OF AVERAGE ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY AND INTEREST RATES
<CAPTION>
Six Months Ended June 30,
-----------------------------------------------------------------------
1996 1995
--------------------------------- --------------------------------
Average Int Earned/ Yield/ Average Int Earned/ Yield/
Balance Expense Rate<F1> Balance Expense Rate<F1>
--------------------------------- --------------------------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Assets:
Interest-earning assets:
Loans<F1> $196,571 $19,196 9.77% $146,160 $15,262 10.44%
Taxable investment securities 62,724 3,484 5.55% 52,891 2,902 5.49%
Federal funds sold 4,236 234 5.52% 2,601 154 5.92%
-------- ------- ---- -------- ------- -----
Total interest earning assets 263,531 22,914 8.69% 201,652 18,318 9.08%
-------- ------- ---- -------- ------- -----
Non-interest-earning assets:
Cash and due from banks 6,829 5,741
Bank premises and equipment 4,669 2,729
Other assets 3,850 3,881
Allowance for possible loan losses (2,188) (1,641)
-------- --------
Total assets $276,691 $212,362
======== ========
Liabilities and stockholders' equity:
Interest bearing liabilities:
Money market accounts $ 58,358 $ 2,926 5.01% $ 14,164 $ 504 3.56%
NOW accounts 9,359 226 2.41% 8,240 190 2.31%
Savings deposits 7,474 256 3.43% 4,957 158 3.19%
Certificates of deposit 96,299 5,712 5.93% 93,001 5,264 5.66%
Certificates of deposit over $100,000 28,795 1,592 5.53% 30,464 1,650 5.42%
I R A certificates 7,242 438 6.05% 5,319 288 5.41%
-------- ------- ---- -------- ------- -----
Total interest bearing deposits 207,527 11,150 5.37% 156,145 8,054 5.16%
-------- ------- ---- -------- ------- -----
Federal funds purchased, repurchase
agreements, and other short-term
borrowings 14,941 866 5.80% 12,609 760 6.03%
Long-term borrowings 18,944 1,496 7.90% 15,706 1,272 8.10%
-------- ------- ---- -------- ------- -----
Total interest bearing liabilities 241,412 13,512 5.60% 184,460 10,086 5.47%
-------- ------- ---- -------- ------- -----
Non-interest bearing liabilities:
Demand deposits 19,357 16,486
Other liabilities 1,578 1,708
Stockholders' equity 14,344 9,708
-------- --------
Total liabilities and
stockholders' equity $276,691 $212,362
======== ========
Net interest income $ 9,402 $ 8,232
======= =======
Net interest margin 3.57% 4.08%
==== =====
<FN>
- -------------------------
<F1> Interest on non-accruing loans is not included for purposes of calculating yields which have been annualized.
</TABLE>
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<PAGE> 11
Provision for Loan Losses
Consistent with the Bank's written loan policy, an allowance is
recognized to provide for possible future loan losses. This reserve is
provided for on a monthly basis at a rate determined by management based
upon its review of the loan portfolio. For the quarter ended June 30,
1996, the Bank provided $251,000 to the loan loss reserve, compared to
$245,000 for the corresponding quarter in 1995. This provision represented
an increase of 2% compared to the second quarter in 1995. For the
six-month period ended June 30, 1996, the provision for loan losses was
$431,000 compared to $507,000 for the six months ended June 30, 1995, a
decrease of 15% or $76,000.
The relatively small percentage increase for the recently
completed quarter and the decrease in the provision for six months ended
June 30, 1996 was due to the risk weighting process associated with changes
in the portfolio mix, which reflected an increase in the amount of one-to
four-family mortgage loans. The relatively lower levels of credit risk
associated the one-to four-family mortgages resulted in the lower provision for
loan losses in the period presented. See "--Asset Quality." Additionally, the
Bank intends to securitize a block of FNMA eligible loans into one or more
securities in the third quarter of 1996.
Non-interest Income and Expense
Non-interest income for the second quarter of 1996 was $235,000
compared to $133,000 for the second quarter of 1995. This increase of
$102,000, or 77%, was due to both the increased number of deposit accounts
and the increase in service chargeable products offered to the Company's
customers. The Company has engaged in a cost improvement program which
includes a revamping of the Bank's fee structure. Management expects
continued growth in non-interest income as new products are developed and
offered to the Bank's customers along with the implementation of new
policies formulated as a result of the cost improvement program. Also
included in this increase in non-interest income is $17,000 in net gains
from the sale of securities.
For the six months ended June 30, 1996, non-interest income was
$409,000, an increase of $157,000 from $252,000 for the corresponding
period of 1995. This 62% increase was attributable to increased service
charges stemming from an expanded product base and an increase in service
chargeable deposits. Newly adopted service charge policies, previously
mentioned, also played a key role in the growth in non-interest income.
For the quarter ended June 30, 1996, total non-interest expense
increased $318,000 or 23% to $1.7 million from $1.4 million for the quarter
ended June 30, 1995. This increase included a 25% increase in salaries and
employee benefits and a 21% increase in other operating expenses. The
increase in salary and employee benefits resulted from a change in the
employee mix. Full-time support staff positions were reduced while
management level employees were hired to increase efficiency and expand the
Company's market coverage. In addition, experienced customer service
representatives were hired to operate the new South County branch. This
change in the personnel profile was reflected in the increased costs
associated with salaries and employee benefits despite showing only a
modest increase in the number of full-time employees. As of June 30, 1996,
Allegiant Bank employed 92 full-time equivalent employees compared to 87
full-time equivalent employees at June 30, 1995. A large portion of the
increase in other operating expenses resulted from the costs associated
with the purchase of equipment and supplies needed for the opening of the
South County branch, which opened in May.
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<PAGE> 12
In the second quarter of 1996 the efficiency ratio increased
slightly to 64.76% for the quarter ended June 30, 1996, from 64.39% during the
second quarter 1995. The Company attributes a substantial portion of this
increase to the operational costs associated with the opening of the new South
County branch, despite the increased efficiency resulting from the cost
improvement program undertaken in the first half of 1996. Management expects
this trend to continue as new cost efficiencies are identified and implemented.
In addition to the Bank's increased efficiency, in 1995, the Federal Deposit
Insurance Corporation ("FDIC") announced that deposit insurance premiums would
be reduced from $.23 per $100 to the base amount of $2,000 per year. As a
result, the Company's deposit insurance premiums expense decreased $143,000 in
the first half of 1996.
For the six months ended June 30, 1996, total non-interest
expense increased to $3.2 million from $2.8 million at June 30, 1995. This
increase of $379,000 or 13% was due to a 24% increase in salaries and other
employee benefits and a 5% increase in other operating expenses. The
additional costs incurred for salaries and employee benefits was due to the
previously mentioned change in the employee mix. The increase in operating
expenses directly reflected addition of the South County branch.
The decrease during the first six months of 1996 in other
operating expenses, less construction and equipment costs for the new
branch, was reflected in the efficiency ratio. The efficiency ratio
improved to 62.98% for the six months ended June 30, 1996, from 65.00%
during the corresponding period in 1995. The Company attributes a
substantial portion of these efficiency gains to the cost improvement
program that it has currently undertaken. Management anticipates future
improvement in this area.
FINANCIAL CONDITION
At June 30 , 1996, the Bank's total assets were $292.4 million,
an increase of $12.0 million or 4% from December 31, 1995. This increase
was primarily attributable to a $41.3 million increase in loans
outstanding. A substantial portion of these loans were in the form of
one-to four-family and other real estate mortgages. Fed funds sold
decreased 100% during the six months ended June 30, 1996, from $14.2 million
at December 31, 1995. This decrease was due to the increased loan production.
Investment securities decreased 22% ($16.4 million) from $73.2 million at
December 31, 1995 to $56.8 million at June 30, 1996. This decrease was
mainly attributable to the maturity of short-term securities, temporally
purchased to maximize the spread to fed funds. The proceeds from these
maturities were used to fund the slight deposit run off resulting from the
second quarter repricing of the deposit promotion offered in the fourth
quarter of 1995 and the increased loan growth experienced in the first half
of 1996.
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<PAGE> 13
Loans
Loans, the largest component of interest earning assets,
increased 23% during the first six months of 1996. This increase was
attributable to an 78% increase in consumer loans, a 26% increase in
commercial loans and a 19% increase in real estate loans. The growth in
consumer loans was attributable to improved marketing and management along
with the introduction of the new HECL product. In the first year of
production, 112 loans have been originated with $8.4 million committed and
$2.6 million in balances outstanding. Performance in this area has
exceeded Management's expectations. These loans were offered at a low
introductory rate and will reprice in the first quarter of 1997.
The increase in commercial loans was largely due to marketing
efforts of the Bank's commercial loan team, strengthened by the addition of
personnel from competing banks in the area. Many of these loan officers
were able to bring business relationships with them. Commercial loans
increased $10.7 million, from $40.5 million on December 31, 1996 to $51.2
million on June 30, 1996. The majority of these loans are tied to
Allegiant's Corporate Market rate (which moves with the prime lending rate)
and tend to be the Bank's most profitable loans.
Real estate loans increased $23.7 million during the fist six
months of 1996 ending the quarter at $147.8 million compared to $124.1
million at December 31, 1995. The majority of this increase was in one-to
four-family mortgages which tend to be lower risk in nature. This
increased production includes approximately $6.2 million in conforming FNMA
loans, which could be used as an additional source of liquidity. The
Mortgage Company was the key contributor to this increase in mortgage loan
production, posting a record six month period with $31.4 million in loans
originated. The Company expects this trend to continue as the Mortgage
Company increases its market share while benefitting from a strengthened
economy.
The composition of the loan portfolio is summarized as follows:
<TABLE>
LENDING AND CREDIT MANAGEMENT<F1>
<CAPTION>
June 30, December 31, June 30,
1996 1995 1995
-------------------- -------------------- --------------------
Percent Percent Percent
of Total of Total of Total
Amount Loans Amount Loans Amount Loans
-------- ---------- -------- ---------- -------- ----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial, agricultural
municipal and industrial
development $ 51,198 22.98% $ 40,518 22.32% $ 36,594 21.67%
Real estate construction 9,091 4.08 8,777 4.83 8,852 5.24
Real estate mortgage
one-to four-family 85,593 38.42 71,260 39.25 73,250 43.39
multi-family 62,194 27.91 52,795 29.08 41,750 24.73
Consumer and other 14,884 6.68 8,379 4.62 8,612 5.10
Less unearned income (155) (.07) (185) (0.10) (221) (0.13)
--------- ------ --------- ------ -------- ------
Total loans $ 222,805 100.00% $ 181,544 100.00% $168,837 100.00%
========= ====== ========= ====== ======== ======
<FN>
- ---------
<F1> The Bank had no outstanding foreign loans at the dates reported.
</TABLE>
- 13 -
<PAGE> 14
Investments
Investment securities decreased $16.4 million in the first six
months of 1996, from $73.2 million at December 31, 1995 to $56.8 million at
June 30, 1996. A substantial portion of this decrease was due to the
maturity of short-term investments used to fund the increased loan growth.
The Bank generally invests in these short-term (less than 90 days) discount
notes in order to maximize yield versus simply investing the funds in the
overnight fed funds market. Some longer term securities were called away
from the Bank as well due to the relative decrease in interest rates during
the first quarter of 1996. The Bank will continue to target a laddered
investment strategy, purchasing a mix of fixed rate U.S. treasury and
agency issues as well as callable agency securities.
The book value of investment securities and the maturities and
yield information on the investment portfolio is as follows:
<TABLE>
INVESTMENT SECURITIES PORTFOLIO
<CAPTION>
June 30, December 31,
1996 1995
---------- -------------
(in thousands)
<S> <C> <C>
United States Treasury securities $ 8,932 $ 5,017
Obligations of United States government agencies 44,211 64,697
Federal Home Loan Bank stock 2,698 2,645
States and political subdivisions 1,124 930
less unrealized loss on securities held
available for sale (234) (136)
Other 69 58
---------- ----------
Total investment securities $ 56,800 $ 73,211
========== ==========
</TABLE>
- 14 -
<PAGE> 15
ASSET QUALITY
The Bank's total allowance for possible loan loss increased 8%
from $2.1 million on December 31, 1995 to $2.3 million on June 30, 1996.
The majority of this increase was due to the provision of $431,000 to the
reserve for possible loan losses during the first six months of 1996. The
reserve for loan loss is budgeted by using a risk weighting system based
upon the different risk categories of loans. This process has adjusted for
the increased aggregate levels of one-to four-family mortgage loans, which
tend to be associated with lower levels of credit risk.
The allowance for loan loss to total loans decreased to 1.03%
at June 30, 1996 from 1.17% at December 30, 1995. This level takes into
account the planned securitization of one-to four-family mortgages that
should be packaged into one or more MBS in the third quarter of 1996. The
Company believes that the allowance for possible loan losses at June 30,
1996 was adequate. See "--Provision for Loan Losses."
Non-performing assets increased to $638,000 at June 30, 1996,
an increase of $330,000 from $308,000 on December 31, 1995. The ratio of
non-preforming loans to total loans increased from 0.17% to 0.29%, for the
periods ended December 31, 1995 and June 30, 1996 respectively. This
increase in non-preforming loans was attributable to loans originated to
one real estate developer. Management believes that the problem assets
associated with this developer will be liquidated in the third quarter of
1996 and a special reserve has been recorded for the potential losses
associated with these loans. Management believes that the Bank is
adequately reserved for these specific problem loans and that the increase
in non-performing loans is an isolated occurrence.
Loans charged off during the first six months of 1996 were
$323,000 compared to $40,000 in the corresponding period of 1995. This
increase includes a large charge off associated with the specific real
estate loans discussed in the previous paragraph. Total recoveries for the
six months ended June 30, 1996 were $52,000 compared to $3,000 in the
corresponding period in 1995.
- 15 -
<PAGE> 16
The following table summarizes, for the periods indicated,
activity in the Bank's allowance for possible loan losses, including
amounts of loans charged off, amounts of recoveries and additions to the
allowance charged to operating expenses:
<TABLE>
SUMMARY OF LOAN LOSS EXPERIENCE AND RELATED INFORMATION--ALLOCATION
OF THE ALLOWANCE FOR LOAN LOSSES
<CAPTION>
June 30, December 31, June 30,
1996 1995 1995
--------- ------------ ----------
(dollars in thousands)
<S> <C> <C> <C>
Allowance for possible loan losses
(beginning of period) $2,130 $1,455 $1,455
Loans charged off:
Commercial, financial, agricultural,
municipal and industrial development (41) (183) (20)
Real estate construction (277) -- --
Real estate mortgage -- (82) --
Installment and consumer (5) (58) (20)
Other loans -- -- --
------ ------ ------
Total loans $ (323) $ (323) $ (40)
------ ------ ------
Recoveries of loans previously charged off:
Commercial, financial, agricultural,
municipal and industrial development $ 47 $ 11 $ --
Real estate construction 3 -- --
Real estate mortgage -- -- --
Installment and consumer 2 10 3
Other loans -- -- --
------ ------ ------
Total loans 52 21 3
------ ------ ------
Net loans charged off ( 271) (302) (37)
------ ------ ------
Provision for possible loan losses 431 977 507
------ ------ ------
Allowance for possible loan losses (end of period) $2,290 $2,130 $1,925
====== ====== ======
Loans outstanding:
Average $196,571 $158,503 $144,518
End of period 222,805 181,544 168,837
Ratio of allowance for loan loss
to total loans outstanding:
Average 1.16% 1.34% 1.33%
End of period 1.03% 1.17% 1.14%
Ratio of net charge-offs to average
loans outstanding 0.14% 0.19% 0.03%
Percent of categories to total end of period loans:
Commercial, financial, agricultural,
municipal and industrial development 22.98% 22.32% 21.67%
Real estate construction 4.08% 4.83% 5.24%
Real estate mortgage, one-to four-family 38.42% 39.25% 43.39%
Real estate mortgage, other real estate 27.91% 29.08% 24.73%
Consumer and other 6.68% 4.62% 5.10%
Less unearned income -0.07% -0.10% -0.13%
------ ------ ------
Total loans 100.00% 100.00% 100.00%
====== ====== ======
</TABLE>
- 16 -
<PAGE> 17
LIQUIDITY AND CAPITAL RESOURCE MANAGEMENT
Corresponding to the increase in assets for the six months
ended June 30, 1996, total liabilities increased by $12.0 million. A
substantial portion of this increase was represented by a $8.4 million
increase in short-term borrowings from the Federal Home Loan Bank ("FHLB").
A portion of this increase was due to a reclassification of longer-term
advances which will now mature within one year and as such was classified
as short term.
Deposits
During the first six months of 1996, total deposits increased
3%, or $6.1 million to $237.5 million from $231.3 million at December 31,
1995. This increase was principally attributable to a 15% increase in
money market accounts and a 1% increase in certificates of deposit.
Offsetting these increases was a 23% decrease in savings accounts, most of
which was due to the re-pricing of Allegiant Green savings accounts. The
majority of these funds was moved to the higher yielding money market
accounts within the Bank. The Bank also experienced a 8% decrease in
certificates of deposit over $100,000, from $33.1 million at December 31,
1995 to $30.5 million on June 30, 1996.
The Bank anticipates deposit growth will increase in the third
and fourth quarters as the South County branch attracts new depositors. In
addition to the new branch, the Bank plans to continue offering new
products in its effort to increase core deposits and attract long-term
banking relationships. In 1996, the bank began offering the following new
products: the Allegiant Bank debit card, the previously discussed HECL
and free checking. The Bank has committed to the development of
innovative products and marketing strategies and plans to utilize the
Internet through its home page as well as exploring all aspects of
electronic banking. The following table summarizes deposit activity:
<TABLE>
DEPOSIT LIABILITY COMPOSITION
<CAPTION>
June 30, December 31,
1996 1995
------------------- -------------------
Percent Percent
of Total of Total Dollar Percent
Amount Deposits Amount Deposits Change Change
-------- -------- -------- -------- -------- ---------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Demand deposits $ 22,229 9.36% $ 21,966 9.50% $ 263 1.20%
NOW accounts 9,696 4.08 9,087 3.93 609 6.70
Money market accounts 62,084 26.13 53,905 23.30 8,179 15.17
Savings deposits 6,828 2.88 8,896 3.85 (2,068) (23.25)
Certificates of deposit 98,498 41.48 97,460 42.13 1,038 1.07
Certificates of deposit
over $100,000 30,506 12.85 33,140 14.33 (2,634) (7.95)
IRA certificates 7,638 3.22 6,855 2.96 783 11.42
-------- ------ -------- ------ -------- -------
Total Deposits $237,479 100.00% $231,309 100.00% $ 6,170 2.67%
======== ====== ======== ====== ======== =======
</TABLE>
- 17 -
<PAGE> 18
The Bank needs to maintain a level of liquidity which will
provide a readily available source of funds for new loans and meet loan
commitments and other obligations on a timely basis. Historically, the
Bank has been loan driven, which means that as loans have increased to
between 90% and 95% of deposits, the Bank has taken action to increase the
level of core deposits. This action generally involves the use of deposit
promotions, paying premium rates coupled with advertising to attract new
customers to the Bank. Where possible, the Bank has timed a deposit
promotion to coincide with the opening of a new branch in order to achieve
maximum growth in deposits. It has been the Bank's experience that the
majority of deposits raised through these promotions have remained at the
Bank after the promotion is over and so have provided a steadily growing
base of core deposits at the Bank. In addition, the steady flow of
maturing securities provides a source of liquidity. The Bank's loan to
deposit ratio at June 30, 1996 was 94%.
Management anticipates continued loan demand in the Bank's
market area as bank consolidation continues and fewer middle market lenders
serve the area. In order to maintain the flexibility to fund this growth,
the Company intends to strengthen its equity capital position through
retained earnings and the issuance of debt and/or equity securities as
deemed advisable. In addition, the Company has entered into an agreement
with the FHLB providing the Bank a credit facility secured by the Bank's
assets with current availability of $46 million of which $25 million was
outstanding as of June 30, 1996. These capital resources will provide the
Bank the opportunity to further expand the loan portfolio with the
flexibility to increase deposits when conditions best match the Bank's
needs and resources.
The analysis of capital is dependent upon a number of factors
including asset quality, earnings strength, liquidity, economic conditions
and combinations thereof. The Federal Reserve Bank has issued standards
for measuring capital adequacy for bank holding companies. These standards
are designed to provide risk-responsive capital guidelines and to
incorporate a consistent framework for use by financial institutions. At
this time, the two primary criteria in effect are the risk-based capital
guidelines and the minimum capital to total assets or leverage ratio
requirement.
In general the standards require banks and bank holding
companies to maintain capital based on "risk adjusted" assets so that
categories of assets with potentially higher credit risk will require more
capital backing than categories with lower credit risk. In addition, banks
and bank holding companies are required to maintain capital to support
off-balance sheet activities such as loan commitments.
The standards also classify total capital for this risk-based
measure into two tiers referred to as Tier 1 and Tier 2. For the Company,
Tier 1 capital includes total stockholders' equity less goodwill. Tier 2
capital is comprised of the reserve for loan and lease losses (within
certain limits), perpetual preferred stock not included in Tier 1, hybrid
capital instruments, term subordinated debt and intermediate-term preferred
stock.
- 18 -
<PAGE> 19
Bank holding companies are required to meet a minimum ratio of
8% of qualifying total capital to risk-adjusted assets and a minimum ratio
of 4% of qualifying Tier 1 capital to risk-adjusted assets. Capital that
qualifies as Tier 2 capital is limited in amount to 100% of Tier 1 capital.
As of June 30, 1996, the Company's risked-based and Tier 1
capital ratios were 8.26% and 7.12%, respectively. Identical capital
standards apply to the Bank. As of June 30, 1996, the Bank's risked-based
capital and Tier 1 capital ratios were 12.57% and 11.42%, respectively.
The minimum acceptable ratio of Tier 1 capital to tangible
assets, or leverage ratio, has been established by the FRB at 4%. As of
June 30, 1996, the Company's leverage ratio was 5.08%.
- 19 -
<PAGE> 20
PART II - OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders
The Company held its Annual Meeting of Shareholders on May 15,
1996, at which the Company's Shareholders elected three directors to serve
for a term of three years and voted upon approval of the Allegiant Bancorp,
Inc. 1996 Stock Option Plan and the Allegiant Bancorp, Inc. Directors Stock
Option Plan.
At the Company's Annual Meeting of Shareholders, Charles E.
Polk, Leland B. Curtis and Shaun R. Hayes were elected to serve as
directors for a term of three years with each receiving 1,221,400 votes for
and 134,814 votes against. The Company's other directors are Marvin S.
Wool, Kevin R. Farrell, C. Virginia Kirkpatrick, Lee S. Wielansky, Leon A.
Felman and John T. Straub.
The Company's shareholders also approved the Allegiant Bancorp,
Inc. 1996 Stock Option Plan (with 1,210,650 votes for, 139,954 votes against
and 5,610 votes abstaining) and Allegiant Bancorp, Inc. Directors Stock
Option Plan (with 1,200,706 votes for, 145,954 votes against and 8,754 votes
abstaining). No other matters were submitted to the Company's shareholders
for a vote.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
No. 27 Financial Data Schedule
(b) Reports on Form 8-K
None
- 20 -
<PAGE> 21
SIGNATURE
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.
ALLEGIANT BANCORP, INC.
(Registrant)
August 14, 1996 By: /s/ Shaun R. Hayes
----------------------
Shaun R. Hayes, President and
Principal Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
1996 Second Quarter Form 10-QSB
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 6,856
<INT-BEARING-DEPOSITS> 184,744
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 21,269
<INVESTMENTS-CARRYING> 35,531
<INVESTMENTS-MARKET> 35,186
<LOANS> 222,805
<ALLOWANCE> 2,290
<TOTAL-ASSETS> 292,421
<DEPOSITS> 237,479
<SHORT-TERM> 22,557
<LIABILITIES-OTHER> 1,017
<LONG-TERM> 16,680
0
0
<COMMON> 20
<OTHER-SE> 14,668
<TOTAL-LIABILITIES-AND-EQUITY> 14,688
<INTEREST-LOAN> 9,598
<INTEREST-INVEST> 1,742
<INTEREST-OTHER> 49
<INTEREST-TOTAL> 5,731
<INTEREST-DEPOSIT> 2,749
<INTEREST-EXPENSE> 3,330
<INTEREST-INCOME-NET> 2,401
<LOAN-LOSSES> 251
<SECURITIES-GAINS> 17
<EXPENSE-OTHER> 1,707
<INCOME-PRETAX> 678
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 425
<EPS-PRIMARY> .20
<EPS-DILUTED> .20
<YIELD-ACTUAL> 8.69
<LOANS-NON> 559
<LOANS-PAST> 79
<LOANS-TROUBLED> 0<F1>
<LOANS-PROBLEM> 0<F1>
<ALLOWANCE-OPEN> 2,130
<CHARGE-OFFS> 323
<RECOVERIES> 52
<ALLOWANCE-CLOSE> 2,290
<ALLOWANCE-DOMESTIC> 1,913
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 377
<FN>
<F1>Only reported at year end.
</TABLE>
