<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1999
-----------------------------------------------
Commission file number 0-26350
-------------------------------------------------------
ALLEGIANT BANCORP, INC.
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
MISSOURI 43-1519382
- -------------------------------- -------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or
organization)
2122 KRATKY ROAD
ST. LOUIS, MISSOURI 63114
- ------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(314) 692-8200
- ------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
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. /X/ Yes / / No
Number of shares
Title of class outstanding as of April 30, 1999
- ----------------------------------- -------------------------------------
Common stock, $0.01 par value 6,561,615
<PAGE> 2
ALLEGIANT BANCORP, INC.
FORM 10-Q
<TABLE>
INDEX
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 1
Consolidated Balance Sheets - March 31, 1999 and 1998 (Unaudited)
and December 31, 1998 1
Consolidated Statements of Income (Unaudited) - Three Months Ended
March 31, 1999 and 1998 2
Consolidated Statement of Shareholders' Equity (Unaudited) - Three Months Ended
March 31, 1999 3
Consolidated Statements of Cash Flows (Unaudited) - Three Months Ended
March 31, 1999 and 1998 4
Notes to Condensed Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 6
Distribution of Average Assets, Liabilities and Shareholders' Equity
and Interest Rates - Three Months Ended March 31, 1999 and 1998 8
Rate/Volume Analysis - Quarter Ended March 31, 1999 9
Investment Securities Portfolio - March 31, 1999 and 1998 and December 31, 1998 10
Lending and Credit Management - March 31, 1999 and 1998 and December 31, 1998 10
Deposit Liability Composition - March 31, 1999 and 1998 and December 31, 1998 11
Summary of Loan Loss Experience and Related Information--Allocation of the
Allowance for Loan Losses - Three Months Ended March 31, 1999 and 1998 13
Risk Elements--Nonaccrual, Past Due and Restructured Loans - March 31, 1999
and 1998 and December 31, 1998 14
Capital Resources and Liquidity 16
Year 2000 16
Item 3. Quantitative and Qualitative Disclosures About Market Risk 18
i
<PAGE> 3
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 19
SIGNATURES 19
EXHIBIT INDEX 20
</TABLE>
ii
<PAGE> 4
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
<TABLE>
ALLEGIANT BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 31, December 31, March 31,
1999 1998 1998
(Unaudited) (Unaudited)
----------- ------------ -----------
(In thousands)
<S> <C> <C> <C>
ASSETS:
- ------
Cash and due from banks $ 12,855 $ 13,693 $ 12,890
Federal funds sold and other overnight investments 4,475 3,430 7,940
Investment securities:
Available-for-sale (at estimated market value) 45,075 42,740 35,348
Held-to-maturity (estimated market value of
$10,927, $12,132 and $22,999, respectively) 10,852 12,040 22,843
Loans, net of allowance for possible loan losses of
$6,767, $6,442 and $5,425, respectively 513,539 489,227 501,731
Bank premises and equipment, net of accumulated
depreciation 10,866 11,010 10,987
Accrued interest and other assets 10,747 11,438 12,377
Cost in excess of fair value of net assets acquired 12,448 12,696 13,484
---------- ---------- ----------
Total assets $ 620,857 $ 596,274 $ 617,600
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY:
- ------------------------------------
Deposits:
Non-interest bearing $ 51,627 $ 55,417 $ 44,262
Interest bearing 396,378 364,176 390,803
Certificates of deposit of $100,000 or more 33,033 31,173 44,711
---------- ---------- ----------
Total deposits 481,038 450,766 479,776
---------- ---------- ----------
Short-term borrowings 47,039 53,542 51,038
Long-term borrowings 40,275 40,275 38,275
Accrued expenses and other liabilities 3,446 3,587 5,494
---------- ---------- ----------
Total liabilities 571,798 548,170 574,583
---------- ---------- ----------
Shareholders' equity:
Common Stock, $0.01 par value - shares
authorized, 20,000,000; shares issued, 6,558,015,
6,536,164 and 6,168,000, respectively 65 65 61
Capital surplus 42,026 41,898 39,760
Retained earnings 7,057 6,058 3,060
Accumulated other comprehensive income (89) 83 136
---------- ---------- ----------
Total shareholders' equity 49,059 48,104 43,017
---------- ---------- ----------
Total liabilities and shareholders' equity $ 620,857 $ 596,274 $ 617,600
========== ========== ==========
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
1
<PAGE> 5
<TABLE>
ALLEGIANT BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<CAPTION>
Three Months Ended
March 31,
----------------------------------
1999 1998
---------- ----------
(In thousands, except share and per share data)
<S> <C> <C>
Interest income:
Interest and fees on loans $ 11,073 $ 11,142
Investment securities 773 1,086
Federal funds sold and overnight investments 79 42
---------- ----------
Total interest income 11,925 12,270
---------- ----------
Interest expense:
Interest on deposits 4,856 5,618
Interest on short-term borrowings 639 564
Interest on long-term debt 593 659
---------- ----------
Total interest expense 6,088 6,841
---------- ----------
Net interest income 5,837 5,429
Provision for possible loan losses 562 400
---------- ----------
Net interest income after
provision for possible loan losses 5,275 5,029
---------- ----------
Other income:
Service charges and other fees 1,254 1,097
Net gain on sale of securities -- 12
---------- ----------
Total other income 1,254 1,109
---------- ----------
Other expenses:
Salaries and employee benefits 2,445 2,314
Occupancy and other operating expenses 2,413 2,804
---------- ----------
Total other expenses 4,858 5,118
---------- ----------
Income before income taxes 1,671 1,020
Provision for income taxes 669 393
---------- ----------
Net income $ 1,002 $ 627
========== ==========
Per share data:
Basic:
Weighted average basic
common shares outstanding 6,551,835 6,128,196
Net income $ 0.15 $ 0.10
Diluted:
Weighted average diluted
common shares outstanding 6,680,485 6,632,426
Net income $ 0.15 $ 0.09
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
2
<PAGE> 6
<TABLE>
ALLEGIANT BANCORP, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)
<CAPTION>
Accumulated
Other
Common Capital Retained Comprehensive Total Share- Comprehensive
Stock Surplus Earnings Income holders' Equity Income
------ ------- -------- ------------- --------------- -------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance December 31, 1998 $ 65 $ 41,898 $ 6,058 $ 83 $ 48,104
Net income -- -- 1,002 -- 1,002 $ 1,002
Unrealized losses on available-for-sale
Securities, net of reclassification
adjustment (see below) -- -- -- (172) (172) (172)
Comprehensive income -- -- -- --
Stock dividend -- -- -- --
Warrants exercised -- 10 -- 10
New shares issued -- 52 -- 52
Options exercised -- 66 -- 66
Dividends -- -- (3) (3)
----- -------- -------- ------ --------- --------
Balance March 31, 1999 $ 65 $ 42,026 $ 7,057 $ (89) $ 49,059 $ 830
===== ======== ======== ====== ========= ========
Reclassification adjustments:
Unrealized losses on
available-for-sale securities $ (172)
Less:
Reclassification adjustment for gains
realized, included in net income --
------
Net unrealized losses on
available-for-sale $ (172)
======
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
3
<PAGE> 7
<TABLE>
ALLEGIANT BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<CAPTION>
Three Months Ended
March 31,
--------------------------------------
1999 1998
--------- ---------
(In thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
- --------------------
Net income $ 1,002 $ 627
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 873 723
Provision for loan losses 562 400
Changes in assets and liabilities:
Accrued interest receivable and
other assets 577 (1,435)
Other liabilities (128) 945
--------- ---------
Cash provided by operating activities 2,886 1,260
--------- ---------
INVESTING ACTIVITIES:
- --------------------
Proceeds from maturities of securities held-to-maturity 1,188 9,111
Proceeds from maturities of securities available-for-sale 9,659 9,888
Proceeds from sales of securities available-for-sale -- 1,230
Purchase of investment securities available-for-sale (12,281) (1,500)
Loans made to customers, net of repayments (24,874) (22,693)
Additions to premises and equipment (266) (676)
--------- ---------
Cash used in investing activities (26,574) (4,640)
--------- ---------
FINANCING ACTIVITIES:
- --------------------
Net increase (decrease) in deposits 30,273 (4,865)
Net decrease in short-term borrowings (6,503) (2,541)
Proceeds from issuance of long-term debt -- 15,000
Proceeds from issuance of common stock 128 266
Payment of dividends (3) (122)
--------- ---------
Cash provided by financing activities 23,895 7,738
--------- ---------
Net increase in cash and cash equivalents 207 4,358
Cash and cash equivalents, beginning of period 17,123 16,472
--------- ---------
Cash and cash equivalents, end of period $ 17,330 $ 20,830
========= =========
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
4
<PAGE> 8
ALLEGIANT BANCORP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1999
Basis of Presentation
The accompanying consolidated financial statements include the
accounts of Allegiant Bancorp, Inc. (the "Company") and its subsidiaries:
Allegiant Bank (the "Bank") and Edge Mortgage Services, Inc. ("Edge"). The
results of operations of Edge are included through March 19, 1999, the date
Edge was sold to a former officer of the Company. The sale had no material
effect on the consolidated financial statements of the Company. Unless the
context requires otherwise, a reference to the Company includes Allegiant
Bancorp, Inc. and its subsidiaries.
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three-month period ended March 31, 1999 are not
necessarily indicative of the results that may be expected for the year
ending December 31, 1999.
The balance sheet at December 31, 1998 has been derived from the
audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's Annual Report to
Shareholders for the year ended December 31, 1998.
Comprehensive Income
During the first quarter of 1999 and 1998, total comprehensive
income amounted to $830 thousand and $678 thousand, respectively.
5
<PAGE> 9
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This report contains certain forward-looking statements with
respect to the financial condition, results of operations and business of the
Company and its subsidiaries. These forward-looking statements involve
certain risks and uncertainties. For example, by accepting deposits at fixed
rates, at different times and for different terms, and lending funds at fixed
rates for fixed periods, a bank accepts the risk that the cost of funds may
rise and interest on loans and investment securities may be at a fixed rate.
Similarly, the cost of funds may fall, but a bank may have committed by
virtue of the term of a deposit to pay what becomes an above-market rate.
Investments may decline in value in a rising interest rate environment.
Loans have the risk that the borrower will not repay all funds in a timely
manner as well as the risk of total loss. Collateral may or may not have the
value attributed to it. The loan loss reserve, while believed adequate, may
prove inadequate if one or more large borrowers, or numerous smaller
borrowers, or a combination of both, experience financial difficulty for
individual, national or international reasons. Because the business of
banking is highly regulated, decisions of governmental authorities, such as
the rate of deposit insurance, can have a major effect on operating results.
Unanticipated events associated with Year 2000 compliance, relating to work
on developments or modifications to computer systems and to software,
including work performed by suppliers or vendors, could affect the Company's
future financial condition and operating results. All of these
uncertainties, as well as others, are present in a banking operation and
shareholders are cautioned that management's view of the future on which it
prices its products, evaluates collateral, sets loan reserves and estimates
costs of operation and regulation may prove to be other than anticipated.
Results of Operations
Net income for the three months ended March 31, 1999 was $1.002
million, a 59.8% increase over the $627 thousand earned for the first quarter
of 1998. Both basic earnings per share and diluted earnings per share were
$0.15 for the first quarter of 1999 compared to basic and diluted earnings
per share for the first quarter of 1998 of $0.10 and $0.09, respectively.
The annualized return on average assets for the first quarter of 1999 was
0.67% and represents a 63.4% improvement over the 0.41% annualized return on
average assets reported for the first quarter of 1998. The return on average
equity on an annualized basis was 8.41% for the first quarter of 1999
compared to 5.98% for the first quarter of 1998.
The balance sheet categories as of March 31, 1999 showed modest
growth compared to December 31, 1998 balances. Period end total assets
increased $24.583 million, or 4.1%, from December 31, 1998 to March 31, 1999.
Asset growth during the period was primarily in loans which before allowance
for possible loan losses, increased $24.637 million, or 5.0%. Deposit
balances increased $30.272 million, or 6.7%, from December 31, 1998 to March
31, 1999. Money market accounts increased $29.523 million representing the
majority of the net deposit growth during the quarter. This growth was a
result of promotion of a new money market product and resulted in a shift in
deposits from maturing CD's. Certificates of deposit increased by a net of
$5.714 million during the first quarter of 1999, including a $20 million
increase in brokered CD's issued in February.
6
<PAGE> 10
Net Interest Income
Net interest income for the three months ended March 31, 1999 was
$11.925 million, a 2.81% decrease compared to the $12.270 million reported
for the first quarter of 1998. This $345 thousand decline was attributable
to a slightly lower earning asset yield and a reduction of $10.563 million in
average earning assets. The change in average earning assets reflected a
decrease in investment securities of $16.175 million from the first quarter
of 1998 to the first quarter of 1999. The reduction in investment securities
provided funds for maturing certificates of deposit which were not renewed or
shifted into other deposit accounts. The decrease in investment securities
was partially offset by a $2.212 million increase in average loans and a
$3.400 million increase in average overnight investments.
Net interest margin for the first quarter of 1999 increased 36
basis points compared to the first quarter of 1998. The earning assets yield
declined 8 basis points while the Company's efforts to shift maturing
certificates of deposit into other deposit accounts at lower rates resulted
in a 41 basis point reduction in the overall interest rate paid on interest
bearing deposits. The net interest spread increased 33 basis points
comparing the first quarter 1999 to the first quarter 1998 results.
Interest expense on deposits declined $762 thousand due to a
$20.902 million decline in average interest bearing deposits and due to a
decline in the rate paid on deposits from 5.23% in the first quarter of 1998
to 4.75% for the comparable period in 1999. The decrease in interest expense
on deposits consisted primarily of a $1.054 million decline in interest
expense on certificates of deposit, offset by a $344 thousand increase in
interest expense on money markets and NOW accounts. The average balance in
certificates of deposit decreased by $56.728 million from the first quarter
of 1998 to the first quarter of 1999 and the rate paid declined 44 basis
points between those periods. The decrease in average deposits included the
$39.992 million reduction from the December 1998 sale of the Company's
branches located outside the St. Louis metropolitan area.
The rate paid on long-term borrowings also contributed to the net
interest margin improvement. The rate paid on long-term borrowings declined
from 7.60% for the first quarter of 1998 to 5.97% for the first quarter of
1999. During October 1999, the Company refinanced a portion of its long-term
debt and all outstanding subordinated debentures with a $13.650 million,
7.00% fixed rate, three-year note. This refinancing caused the rate paid on
long-term borrowings to decline 183 basis points in the first quarter of 1999
compared to the first quarter of the previous year.
7
<PAGE> 11
The following table sets forth the condensed average balance sheets
for the periods reported and the percentage of each principal category of
assets, liabilities and shareholders' equity to total assets. Also shown is
the average yield on each category of interest earning assets and the average
rate paid on interest bearing liabilities for each of the periods reported:
<TABLE>
DISTRIBUTION OF AVERAGE ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY AND INTEREST RATES
<CAPTION>
Three Months Ended March 31,
-----------------------------------------------------------------------------
1999 1998
----------------------------------- ----------------------------------
Average Int. Earned/ Yield/ Average Int. Earned/ Yield/
Balance Paid Rate Balance Paid Rate
------- ------------ ------ ------- ----------- ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Assets:
Interest earning assets:
Loans $ 507,830 $ 11,074 8.84% $ 505,618 $ 11,142 8.94%
Taxable investment securities 51,217 755 5.90 67,330 1,072 6.37
Non-taxable investment securities 1,416 17 4.87 1,478 14 3.84
Federal funds sold 6,807 79 4.71 3,407 42 5.00
--------- -------- --------- --------
Total interest earning assets 567,270 11,925 8.53 577,833 12,270 8.61
--------- -------- --------- --------
Non-interest earning assets:
Cash and due from banks 15,476 9,876
Bank premises and equipment 10,967 10,615
Other assets 23,667 28,650
Reserve for possible loan losses (6,325) (5,349)
--------- ---------
Total assets $ 611,055 $ 621,625
========= =========
Liabilities and shareholders' equity:
Interest bearing liabilities:
Money market/NOW accounts $ 155,055 1,530 4.00% $ 116,030 1,186 4.15%
Savings deposits 14,877 79 2.15 16,322 109 2.71
Certificates of deposit 192,664 2,575 5.42 233,878 3,356 5.82
Certificates of deposit
over $100,000 33,474 399 4.83 48,988 672 5.56
IRA certificates 18,669 273 5.93 20,423 295 5.86
--------- ------- --------- --------
Total interest bearing deposits 414,739 4,856 4.75 435,641 5,618 5.23
--------- -------- --------- --------
Federal funds purchased, repurchase
agreements, and other short-term
borrowings 51,936 639 4.99 54,429 564 4.20
Long-term borrowings 40,275 593 5.97 35,163 659 7.60
--------- -------- --------- --------
Total interest bearing liabilities 506,950 6,088 4.87 525,233 6,841 5.28
--------- -------- --------- --------
Non-interest bearing liabilities:
Demand deposits 51,796 45,846
Other liabilities 3,996 8,002
Shareholders' equity 48,313 42,544
--------- ---------
Total liabilities and
shareholders' equity $ 611,055 $ 621,625
========= =========
Net interest income $ 5,837 $ 5,429
======== ========
Net interest spread 3.66% 3.33%
Net interest margin 4.17% 3.81%
</TABLE>
8
<PAGE> 12
The following table sets forth for the periods indicated the changes
in interest income and interest expense which were attributable to change in
average volume and changes in average rates.
<TABLE>
RATE/VOLUME ANALYSIS
Quarter Ended March 31,1999
Compared to the
Quarter Ended March 31,1998
---------------------------
<CAPTION>
Volume Rate Net Change
------ ---- ----------
(In thousands)
<S> <C> <C> <C>
Interest earned on:
Loans $ 49 $ (117) $ (68)
Taxable investment securities (242) (75) (317)
Non-taxable securities (1) 4 3
Federal funds sold and
other investments 40 (3) 37
------ ------- -------
Total interest income (154) (191) (345)
------ ------- -------
Interest paid on:
Money Market and
NOW accounts 386 (42) 344
Savings deposits (9) (21) (30)
Certificates of deposit (562) (219) (781)
Certificates of deposit
over $100,000 (193) (80) (273)
IRA certificates (26) 4 (22)
Federal funds purchased and
other short-term borrowings (27) 102 75
Long-term borrowings 88 (154) (66)
------ ------- -------
Total interest expense (343) (410) (753)
------ ------- -------
Net interest income $ 189 $ 219 $ 408
====== ======= =======
</TABLE>
Note: The change in interest due to the combined rate-volume variance
has been allocated to rate and volume changes in proportion to
the absolute dollar amounts of the changes in each.
9
<PAGE> 13
The composition of the investment portfolio is summarized as follows:
<TABLE>
INVESTMENT SECURITIES PORTFOLIO
<CAPTION>
March 31, December 31, March 31,
1999 1998 1998
--------- ------------ ---------
(In thousands)
<S> <C> <C> <C>
United States governmental and agency securities $ 39,424 $ 37,021 $ 33,833
Mortgage-backed securities 10,792 11,930 14,322
Federal Home Loan Bank stock 3,574 3,574 7,033
States and municipal securities 1,346 1,464 1,555
Other securities 791 791 1,448
--------- --------- ---------
Total investment securities $ 55,927 $ 54,780 $ 58,191
========= ========= =========
</TABLE>
The composition of the loan portfolio is summarized as follows:
<TABLE>
LENDING AND CREDIT MANAGEMENT<F1>
<CAPTION>
March 31, December 31, March 31,
1999 1998 1998
----------------------- ------------------------ --------------------
Percent Percent Percent
Amount of Total Amount of Total Amount of Total
------ -------- ------ -------- ------ --------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial,
agricultural, municipal and
industrial development $ 129,523 24.89% $ 126,239 25.47% $ 93,888 18.51%
Real estate--construction 46,717 8.98 36,590 7.38 26,622 5.25
Real estate--mortgage
One- to four-family 117,894 22.66 116,291 23.46 224,758 44.32
Multi-family and commercial 205,192 39.44 196,545 39.65 145,808 28.75
Consumer and other 21,749 4.18 20,908 4.22 16,605 3.27
Less unearned income (769) (.15) (904) (.18) (525) (0.10)
--------- ------- --------- ------ --------- ------
Total loans<F1> $ 520,306 100.00% $ 495,669 100.00% $ 507,156 100.00%
========= ======= ========= ====== ========= ======
<FN>
- ------------------------
<F1> The Company had no outstanding foreign loans at the dates reported.
</TABLE>
10
<PAGE> 14
The following table summarizes deposit activity:
<TABLE>
DEPOSIT LIABILITY COMPOSITION
March 31, December 31, March 31,
1999 1998 1998
-------------------- --------------------- --------------------
Percent Percent Percent
Amount of Total Amount of Total Amount of Total
------ -------- ------ -------- ------ --------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Demand deposits $ 51,627 11.19% $ 55,417 12.29% $ 44,262 9.23%
NOW accounts 17,422 3.60 19,075 4.23 19,066 3.97
Money market accounts 153,350 31.71 123,827 27.47 101,859 21.23
Savings deposits 15,031 3.11 14,917 3.31 16,666 3.47
Certificates of deposit 191,740 39.66 187,886 41.68 233,120 48.59
Certificates of deposit
over $100,000 33,033 6.83 31,173 6.92 44,711 9.32
IRA certificates 18,835 3.90 18,471 4.10 20,092 4.19
--------- ------ --------- ------ --------- ------
Total deposits $ 481,038 100.00% $ 450,766 100.00% $ 479,776 100.00%
========= ====== ========= ====== ========= ======
</TABLE>
11
<PAGE> 15
Allowance for Loan Losses
The provision for loan losses was $562 thousand during the first
three months of 1999 compared to $400 thousand for the first quarter of 1998.
Net charge-offs were $238 thousand for the three months ended March 31, 1999
compared to $168 thousand for the first quarter of 1998. Net charge-offs for
the first three months of 1999 represented 0.05% of average loans, compared
to 0.03% of average loans for the first three months of 1998.
The allowance for loan losses increased to $6.767 million at March
31, 1999 compared to $5.425 million at March 31, 1998. As a percentage of
loans outstanding, the allowance represented 1.30% of loans at March 31, 1999
and December 31, 1998 and 1.07% at March 31, 1998.
The higher expense provision and the higher allowance percentage
were the result of the change in the loan mix compared to the loan mix at
March 31, 1998. The Company has been focused on generating higher yielding
loans from the commercial and industrial underwriting areas rather than lower
yielding residential mortgage loans. This change in risk was reflected in
the higher provision and higher allowance as a percentage of loans
outstanding in the first quarter of 1999 as compared to the first quarter of
1998.
Non-performing assets increased to $1.910 million at March 31,
1999 compared to $1.778 million at December 31, 1998 and $1.413 million at
March 31, 1998. This increase includes a greater number of nonaccrual
residential mortgage loans. The non-performing assets at March 31, 1999
include one loan of $655 thousand on a single family residential property
which management believes will be collected without incurring a loss.
Non-performing assets as a percentage of total assets increased to 0.31% at
March 31, 1999 from 0.23% at March 31, 1998. From year-end 1998, the
percentage increased one basis point.
The Company continually monitors the quality of its loan portfolio
to ensure the timely charge-off of problem loans and to determine the
adequacy of the level of the allowance for loan losses. The Company believes
that its asset quality, as measured by the statistics in the following table,
continues to be very high and that its reserve is adequate to absorb future
potential losses.
12
<PAGE> 16
The following table summarizes, for the periods indicated, activity
in the 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>
Three Months Ended March 31,
------------------------------
1999 1998
-------- --------
(In thousands)
<S> <C> <C>
Allowance for possible loan losses
(beginning of period) $ 6,442 $ 5,193
Loans charged off:
Commercial, financial, agricultural,
municipal and industrial development (132) (105)
Real estate--mortgage (69) (49)
Installment and consumer (34) (17)
Other loans (5) (4)
--------- ---------
Total loans (240) (175)
--------- ---------
Recoveries of loans previously charged off:
Commercial, financial, agricultural,
municipal and industrial development -- 1
Real estate--mortgage 1 --
Installment and consumer 2 1
Other loans -- 5
--------- ---------
Total recoveries 3 7
--------- ---------
Net loans charged off (238) (168)
--------- ---------
Provision for possible loan losses 562 400
--------- ---------
Allowance for possible loan losses (end of period) $ 6,767 $ 5,425
========= =========
Loans outstanding:
Average $ 507,830 $ 505,618
End of period 520,305 507,156
Ratios:
Net charge-offs to average loans outstanding 0.05% 0.03%
Net charge-offs to provision for loan losses 42.35 42.00
Provision for loan losses to average loans outstanding 0.11 0.08
Allowance for loan loss to total loans outstanding 1.30 1.07
Allocation for possible loan losses at end of period:
Commercial, financial, agricultural, municipal and
industrial development $ 1,459 $ 1,248
Real estate - construction 528 303
Residential real estate loans, first deeds of trust 4,122 2,159
Installment loans to individuals 201 130
All other loans 34 33
Unallocated 423 1,552
--------- ---------
Total $ 6,767 $ 5,425
========= =========
</TABLE>
13
<PAGE> 17
<TABLE>
RISK ELEMENTS--NONACCRUAL, PAST DUE AND RESTRUCTURED LOANS
March 31, December 31, March 31,
1999 1998 1998
--------- ------------ ---------
(Dollars in thousands)
<S> <C> <C> <C>
Commercial, financial, agricultural and all other loans:
Past due 90 days or more $ -- $ -- $ --
Nonaccrual 394 962 319
Restructured terms -- -- --
Real estate--construction:
Past due 90 days or more -- -- --
Nonaccrual -- -- 24
Restructured terms -- -- --
Real estate--mortgage:
Past due 90 days or more 396 283 491
Nonaccrual 1,090 471 113
Restructured terms -- -- --
Installment loans to individuals:
Past due 90 days or more -- -- 30
Nonaccrual 30 62 14
Restructured terms -- -- --
------- ------ -------
Total non-performing loans: 1,910 1,778 991
Other real estate -- -- 422
------- ------ -------
Total non-performing assets $ 1,910 1,778 1,413
======= ====== =======
Ratios:
Non-performing loans to total loans outstanding 0.37% 0.36% 0.20%
Non-performing assets to total assets 0.31 0.30 0.23
Non-performing loans to shareholders' equity 3.89 3.70 2.30
Reserve for possible loan losses to total loans 1.30 1.30 1.07
Reserve for possible loan losses
to non-performing loans 354.24 362.32 547.43
</TABLE>
14
<PAGE> 18
Non-Interest Income
Non-interest income increased by $145 thousand to $1.254 million
for the three months ended March 31, 1999 compared to $1.109 million in the
first quarter in 1998.
Service charge income for the three-month period ended March 31,
1999 increased $109 thousand, or 43.1%, compared to the first quarter of
1998. This increase was attributable to the Company's focus on revenue
enhancement programs.
Operating lease income increased 4.2% to $295 thousand for the
quarter ended March 31, 1999 from $283 thousand for the comparable period in
1998. This product line was first offered in 1997. The small increase in
income was related to the decision to decrease production of operating leases
in the latter half of 1998.
For the quarter ended March 31, 1999 mortgage banking revenue was
$359 thousand compared to $489 thousand for the quarter ended March 31, 1998,
a 26.6% decrease. The change occurred mainly in servicing fee income as a
result of bulk mortgage loan sales in the second and third quarters of 1998.
Other non-interest income increased 183.3% for the three-month
period ended March 31, 1999 to $238 thousand, compared to $84 thousand for
the first quarter of 1998. In the first quarter of 1999, a gain on sale of
other real estate owned was recorded for $64 thousand and ATM fee income
increased $44 thousand compared to the first quarter of 1998.
Other Expenses
For the three months ended March 31, 1999 compared to the first
quarter of 1998, other expenses decreased $260 thousand to $4.858 million
from $5.118 million, a 5.1% decline.
Salaries and employee benefits increased 5.7% to $2.445 million
for the three months ended March 31, 1999 compared to $2.314 million for the
three months ended March 31, 1998. Additional expenses were incurred due to
management and support staff additions during the first quarter of 1999 while
the number of employees decreased due to the sale in December 1998 of
branches outside the St. Louis metropolitan area. The Company had 228
full-time equivalent ("FTE") employees at March 31, 1999 compared to 255 FTE
employees at March 31, 1998. Total annualized cost per FTE employee was $42,895
for the three months ended March 31, 1999 compared to $36,298 for the
corresponding period of 1998.
Expenses associated with premises and equipment decreased for the
three-month periods ended March 31, 1999 and 1998, with occupancy expense
decreasing $54 thousand and furniture and equipment decreasing $16 thousand.
Supplies expense decreased 48.3% from $147 thousand for the
quarter ended March 31, 1998 to $76 thousand for the same period in 1999.
This change was related to additional sales locations opened or acquired in
late 1997, and expenditures in the first quarter of 1998 to purchase new
supplies for these locations.
Advertising costs decreased 40.3% from first quarter 1998 to the
comparable period of 1999. In early 1998, management made a decision to
commit additional resources to promote the larger
15
<PAGE> 19
organization due to the significant growth that occurred from 1997 to 1998.
Advertising costs through March 31, 1999 were $86 thousand compared to $144
thousand for the first quarter of 1998.
Operating lease depreciation decreased by $80 thousand to $215
thousand for the three months ended March 31, 1999 from $295 thousand for the
three months ended March 31, 1998. This decrease also was reflective of the
Bank's decision to decrease production of operating leases in the latter half
of 1998.
Goodwill amortization was $250 thousand for the three months ended
March 31, 1999, up $17 thousand or 7.3% from the comparable period in 1998.
Total other expenses for the three months ended March 31, 1999
decreased $129 thousand, or 11.2%, totaling $1.022 million compared to $1.151
million for the three months ended March 31, 1998. The decline in other
expenses was a direct result of the Company's efforts to control operating
costs.
The Company's efficiency ratio was 68.5% for the quarter ended
March 31, 1999 compared to 78.3% for the first quarter of 1998. This
positive change in the efficiency ratio was a direct result of the Company's
commitment to improving its overall efficiency by continuing to emphasize
revenue growth while decreasing its current level of operating expense.
Capital Resources and Liquidity
The Company experienced net growth in assets of 4.1% during the
first three months of 1999, while deposits increased 6.7% during the same
period. Total assets and liabilities were relatively unchanged in totals
from March 31, 1998 to March 31, 1999 and actually increased subsequent to
the sale of the three branches in December 1998. The branch sale resulted in
a reduction of $13.515 million in loans and $39.992 million in deposits. The
Company continues to emphasize growth in stable core deposits while utilizing
the Federal Home Loan Bank as necessary to balance liquidity and cost
effectiveness. The Company closely monitors its level of liquidity to meet
expected future needs.
The Company's commitment to maintaining adequate capital is
evident by the significant increase in its average equity to average asset
ratio which improved to 7.90% for the quarter ended March 31, 1999 compared
to 6.84% for the first quarter of 1998. The Company remains committed to
maintaining a strong equity base while executing its controlled expansion
plans.
Regulatory guidelines require that Tier I capital equal at least
4.00% of risk weighted assets and that total capital equal at least 8.00% of
risk weighted assets. At March 31, 1999, Tier I capital was 7.24% and total
risk based capital was 8.49%. This compares to Tier I capital of 6.52% and
7.42% and total risk based capital of 8.29% and 8.68% at March 31, 1998 and
December 31, 1998, respectively.
Year 2000
General Description of the Year 2000 Issue and Company Readiness.
The Year 2000 issue is a result of computer programs being written using two
digits rather than four digits to define the applicable year. Any of the
Company's computer programs or hardware that have date-sensitive software or
embedded chips may recognize a date using "00" as the year 1900 rather than the
year 2000. This could result in a system failure or miscalculations causing
16
<PAGE> 20
disruptions of operations including, among other things, a temporary inability
to process transactions, or engage in similar normal business activities. To
mitigate the risk of disruption, a Year 2000 plan has been developed and
implemented. The plan is comprised of five phases, with completion of all five
necessary to protect the Company against potential Year 2000 failures.
The Company's plan to resolve the Year 2000 issue involves the
following five phases: awareness, assessment, remediation, testing and
implementation. During the awareness phase, a comprehensive strategy for
addressing the Year 2000 issue was formulated. The Company has fully
completed its assessment of all systems that could be significantly affected
by the Year 2000. The completed assessment indicated that most of the
significant information technology systems could be affected, including the
loan, deposit, general ledger and billing systems. All software and hardware
systems have been provided by third party vendors; therefore, the remediation
of systems primarily involves the installation of upgraded systems that have
been certified by the vendors as Year 2000 compliant. The Company is in the
process of testing all hardware and software systems to validate that systems
have been renovated. In addition, testing will validate the compatibility of
system interfaces. After all testing is completed, all systems will be
implemented, which will include certification that all systems are Year 2000
compliant.
Year 2000 Status, Including Timetable for Completion. To date, the
awareness and assessment phases are 100% complete. The remediation phase is
substantially complete, with only two lesser significant software systems
requiring upgrades. It is anticipated that these systems will be upgraded no
later than September 30, 1999. Testing of the Company's systems are
accomplished after upgrades are provided by and certified as Year 2000
compliant by a third party vendor. To date, approximately 85% of all internal
systems have been tested. The testing of mission critical systems was
substantially complete by December 31, 1998. Except for the two systems
identified above, it is anticipated that testing of all systems will be
substantially completed by June 30, 1999, with the implementation phase to be
completed by July 31, 1999.
Importance of Third Parties and Their Exposure to the Year 2000.
The Company has some systems that interface directly with significant third
party vendors. This would include the Electronic Fund Transfer (EFT) systems
related to wire transfers, automated teller machine and debit card
transactions, in addition to Trust system software. These third parties have
completed, or are in the process of making their systems Year 2000 compliant.
The Company is working with these third party vendors to ensure that the third
party systems interface properly with the Company's systems. Testing for these
systems will be accomplished using actual and proxy testing. Proxy testing is
testing that takes place in a controlled environment using similar
software/hardware that the Company and third party vendors utilize. These
tests are anticipated to be completed by June 30, 1999.
The Company also has gathered information about the Year 2000
compliance status of customers with significant credit relationships. In
addition, significant suppliers and other third parties that do not share
information with the Company's systems (external agents) have been queried to
assess their Year 2000 status. To date, there is no evidence of any
significant customers or external agents that would materially impact the
Company's operations, liquidity or capital resources. However, the Company
has no means of ensuring that these entities will be Year 2000 compliant. The
inability of third parties and external agents to complete their Year 2000
resolution process in a timely fashion, could materially impact the Company.
The effect of non-compliant third parties and external agents is not
determinable.
17
<PAGE> 21
Year 2000 Costs. The Company has utilized and will continue to
utilize both internal and external resources to reprogram, replace, test and
implement the software and operating equipment for Year 2000 modifications.
The total cost of the Year 2000 project is estimated at $232,000 and is being
funded through operating cash flows. To date, the Company has incurred
approximately $201,000 ($106,000 expensed and $95,000 capitalized for new
systems and equipment), related to all phases of the Year 2000 project. The
total remaining project costs, which approximates $31,000, is attributable to
the testing and validation phases of the project and will be expensed as
incurred.
Overall Year 2000 Risks. Management believes it has an effective
program in place to resolve the Year 2000 issue in a timely manner. As noted
above, all necessary phases of the Year 2000 program have not yet been
completed. In the event that such phases are not completed, the Company could
experience system failures that may have a significant impact on the Company's
financial condition. In addition, disruptions in the economy generally
resulting from Year 2000 issues also could materially adversely affect the
Company. The Company could be subject to litigation for computer system
product failures. The amount of potential liability and lost revenue cannot be
reasonably estimated at this time.
Contingency Planning. The Company has contingency plans for certain
mission critical applications and is working on plans for all other systems.
These contingency plans involve, among other actions, manual workarounds and
adjusting staffing strategies. In addition, funding plans are being
developed to assure adequate levels of liquid assets are available in the
event of significant customer withdrawals of cash items as a result of Year
2000 issues.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes from the information provided in
the Company's Annual Report on Form 10-K for the year ended December 31,
1998.
18
<PAGE> 22
PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: See Exhibit Index attached hereto.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter
ended March 31, 1999.
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. The undersigned signs
this report in his dual capacities as a duly authorized officer of the
registrant and also as the registrant's Chief Financial Officer.
ALLEGIANT BANCORP, INC. (Registrant)
May 14, 1999 By: /s/ Thomas A. Daiber
------------------------------
Thomas A. Daiber, Senior Vice
President and Chief Financial
Officer
19
<PAGE> 23
EXHIBIT INDEX
Exhibit No. Description
- ---------- -----------
11.1 Computation of Earnings Per Share
27 Financial Data Schedule for the quarter ended
March 31, 1999
20
<PAGE> 1
Exhibit 11.1
<TABLE>
COMPUTATION OF EARNINGS PER SHARE
<CAPTION>
Three Months Ended
March 31,
----------------------
1999 1998
---- ----
(In thousands, except share and per share data)
<S> <C> <C>
Average common shares outstanding 6,551,835 6,128,196
Average common stock equivalents of
warrants and options outstanding-
based on the treasury stock method
using market price 128,650 504,230
---------- ----------
6,680,485 6,632,426
========== ==========
Net income $ 1,002 $ 627
Basic earnings per common share $ 0.15 $ 0.10
Diluted earnings per common share $ 0.15 $ 0.09
</TABLE>
21
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THE SCHEDULE BELOW CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF ALLEGIANT BANCORP, INC. FILED AS PART
OF THE COMPANY'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED
MARCH 31, 1999.
</LEGEND>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<S> <C>
<CASH> 12,855,000
<INT-BEARING-DEPOSITS> 42,941,000
<FED-FUNDS-SOLD> 4,475,000
<TRADING-ASSETS> 55,927,000
<INVESTMENTS-HELD-FOR-SALE> 45,075,000
<INVESTMENTS-CARRYING> 10,852,000
<INVESTMENTS-MARKET> 10,927,000
<LOANS> 520,306,000
<ALLOWANCE> 6,767,000
<TOTAL-ASSETS> 620,857,000
<DEPOSITS> 481,038,000
<SHORT-TERM> 47,039,000
<LIABILITIES-OTHER> 3,446,000
<LONG-TERM> 40,275,000
0
0
<COMMON> 65,000
<OTHER-SE> 48,994,000
<TOTAL-LIABILITIES-AND-EQUITY> 620,857,000
<INTEREST-LOAN> 11,073,000
<INTEREST-INVEST> 773,000
<INTEREST-OTHER> 79,000
<INTEREST-TOTAL> 11,925,000
<INTEREST-DEPOSIT> 4,856,000
<INTEREST-EXPENSE> 6,088,000
<INTEREST-INCOME-NET> 5,837,000
<LOAN-LOSSES> 562,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4,858,000
<INCOME-PRETAX> 1,671,000
<INCOME-PRE-EXTRAORDINARY> 1,002,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,002,000
<EPS-PRIMARY> 0.153
<EPS-DILUTED> 0.150
<YIELD-ACTUAL> 8.53
<LOANS-NON> 1,514,000
<LOANS-PAST> 396,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 6,442,000
<CHARGE-OFFS> 240,000
<RECOVERIES> 3,000
<ALLOWANCE-CLOSE> 6,767,000
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
