<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL PERIOD ENDED DECEMBER 31, 1996 COMMISSION FILE NUMBER 0-19829
CALUMET BANCORP, INC.
DELAWARE 36-3785272
(State of incorporation) (I.R.S. Employer Identification Number)
1350 EAST SIBLEY BOULEVARD, DOLTON, ILLINOIS 60419
TELEPHONE NUMBER (708) 841-9010
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
<TABLE>
<S><C>
COMMON STOCK, PAR VALUE $.01 PER SHARE NASDAQ
(Title of Class) (Name of each exchange on which registered)
</TABLE>
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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
As of March 1, 1997 there were issued and outstanding 2,238,147 shares of the
registrant's Common Stock. The aggregate market value of the voting stock held
by non-affiliates of the registrant, based on the closing sales price of the
registrant's Common Stock as quoted on the NASDAQ/NMS on March 1, 1997 was
$79,454,219. Solely for purposes of this calculation, all directors and
executive officers of the registrant are considered non-affiliates of the
registrant.
DOCUMENTS INCORPORATED BY REFERENCE
Part III - Portions of the Proxy Statement for the 1996 Annual Meeting of
Stockholders to be held on April 30, 1997 are incorporated by reference into
Part III hereof.
<PAGE> 2
PART I
ITEM 1. DESCRIPTION OF BUSINESS (Dollar amounts in thousands, except per share
data)
THE COMPANY
Calumet Bancorp, Inc. (the "Company"), a Delaware corporation, was organized on
September 20, 1991, to acquire all of the capital stock issued by Calumet
Federal Savings and Loan Association of Chicago (the "Association") upon its
conversion from the mutual to stock form of ownership. On February 20, 1992,
the Company sold 3,536,250 (split adjusted) shares of its common stock to
depositors and employees of the Association. Total proceeds from the
conversion in the amount of $33.9 million was recorded as common stock and
additional paid-in capital. The Company used $14.8 million of the proceeds to
acquire all of the capital stock of the Association.
The Company's principal business activity is the operation of its thrift
subsidiary, and consists of attracting deposits from the public and investing
those deposits, together with funds generated from operations and borrowings,
primarily in residential mortgage loans. The Association operates five
financial services offices -- Dolton, Lansing, Sauk Village and two in
southeastern Chicago. The Association's deposit accounts are insured to the
maximum allowable amount by the FDIC. The Company also invests in equity
securities and in various limited partnerships which have invested in
residential development, residential and commercial rental properties, and
mortgage loan servicing.
The Company's results of operations are dependent primarily on net interest
income, which is the difference between the interest and dividend income earned
on its loan and investment securities portfolios, and its cost of funds,
consisting of interest paid on its deposits and borrowings. The Company has
also invested in several limited partnerships at both the holding company and
subsidiary levels in order to diversify its sources of income. Through these
limited partnerships the Company has generated income from the construction and
sale of homes, rental of apartments and offices, and the servicing of mortgage
loans. In recent years these have become an important source of income.
The Company's operating results are also affected to a lesser extent by loan and
commitment fees, customer service charges, and by the sale of insurance, mutual
funds and annuities through its third tier subsidiaries. Operating expenses of
the Company are primarily employee compensation and benefits, office occupancy
and equipment costs, federal deposit insurance premiums, advertising and
promotion costs, data processing and other administrative expenses. The Company
employs a total of 130 full time equivalent employees as of December 31, 1996,
and management considers its relationship with employees excellent.
The Company's results of operations are further affected by economic and
competitive conditions, particularly changes in market interest rates,
government policies and the actions of regulatory authorities. The Company is
facing increasing competition for retail customer business, including deposit
accounts and loan originations. Competition for deposit accounts comes
primarily from other savings institutions, commercial banks, money market funds,
mutual funds, and insurance company annuity products. Competition for loan
products comes primarily from mortgage brokers, mortgage banking companies,
other savings institutions, and commercial banks.
2
<PAGE> 3
The Company is subject to extensive regulation, supervision and examination by
the Office of Thrift Supervision (OTS), as its chartering authority and primary
federal regulator, and by the Federal Deposit Insurance Corporation (FDIC),
which insures its deposits up to applicable limits. Such regulation and
supervision establish a comprehensive framework of activities in which the
Company can engage and is designed primarily for the protection of the insurance
fund and depositors. The regulatory structure also gives the regulatory
authorities extensive discretion in connection with their supervisory and
enforcement activities. Any change in such regulation, whether by the OTS, the
FDIC or Congress, could have a material inpact on the Company and its
operations.
On September 30, 1996, President Clinton signed legislation which provided for a
special assessment by the FDIC to recapitalize the Savings Association Insurance
Fund (SAIF). The Company paid a $2.3 million special assessment as a result of
this legislation, which reduced net income for 1996 by $1.5 million, net of
income taxes, or approximately $0.56 per share. Management expects that a
reduction of the FDIC assessment rate from 23 cents per $100 of deposits in
1996, to approximately 6.48 cents per $100 of deposits in 1997, will reduce the
Federal deposit insurance premium by approximately $600.
ITEM 2. PROPERTIES (Dollar amounts in thousands)
The following table sets forth information regarding the Company's
administrative, main and branch offices:
<TABLE>
<CAPTION>
Percent of Net Book
Year Total Value at
Opened Deposits 12/31/96
-------------------------------------------
<S> <C> <C> <C>
PROPERTIES:
Administrative Office
1350 East Sibley Boulevard 1976 44.21% $1,184
Dolton, Illinois 60419
Main Office
8905 South Commercial Avenue 1910 11.92% 231
Chicago, Illinois 60617
Branch Offices
3501 East 106th Street 1979 20.72% 495
Chicago, Illinois 60617
2600 Sauk Trail 1978 5.47% 166
Sauk Village, Illinois 60411
17150 South Torrence Avenue 1985 17.68% 1,133
Lansing, Illinois 60438
Other fixed assets 1,111
--------------------------
Total 100.00% $4,320
==========================
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
Periodically, there have been various claims and lawsuits involving the Company
as a defendent, such as claims to enforce liens, condemnation proceedings on
properties in which the Company holds security interests, claims involving the
making and servicing of real property loans and other issues
3
<PAGE> 4
incident to the Company's business. In the opinion of management and the
Company's legal counsel, no significant loss is expected from any of such
pending claims or lawsuits.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Calumet Bancorp, Inc.'s common stock is traded on the NASDAQ National Market
System under the symbol "CBCI". As of March 1, 1997, the Company has 379
stockholders of record (not including approximately 900 persons or entities
holding stock in nominee or street name through various brokerage firms) and
2,238,147 shares of common stock outstanding.
During 1996 the Company repurchased 310,819 shares of its common stock, at an
average cost of $27.95, continuing a share repurchase program begun in 1992.
The Company has repurchased a total of 1,237,313 shares of its common stock for
$26.4 million, or an average cost of $21.36 per share. The repurchase of the
Company's shares at a significant discount to book value enhanced shareholder
value by having the effect of increasing earnings per share and book value per
share for the remaining shares outstanding. At December 31, 1996, the Company
had 2,377,028 shares of common stock outstanding with a book value of $34.40
per share. The closing price of the stock on December 31, 1996, was $33.25 per
share, or 96.7% of book value.
The Company has never paid a cash dividend, and does not anticipate paying a
cash dividend in 1997. The following table sets forth the reported high, low
and closing prices per share of the Company's common stock in 1996:
<TABLE>
<CAPTION>
1996 High Low Close
---- ---- -----
<S> <C> <C> <C>
First quarter $28.50 $27.50 $27.75
Second quarter 28.50 27.50 28.00
Third quarter 28.75 27.75 28.38
Fourth quarter 34.00 28.25 33.25
<CAPTION>
1995 High Low Close
---- ---- -----
<S> <C> <C> <C>
First quarter $26.75 $21.00 $26.50
Second quarter 27.25 26.50 27.25
Third quarter 28.00 26.50 27.50
Fourth quarter 28.50 27.25 27.75
</TABLE>
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth certain summary consolidated financial data at or
for the periods indicated. This information should be read in conjunction with
the Consolidated Financial Statements and notes thereto included at Item 8.
"Financial Statements and Supplementary Data."
4
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<TABLE>
<CAPTION>
Year ended December 31,
FIVE YEAR FINANCIAL SUMMARY ------------------------
(Dollars in thousands, except per share data) 1996 1995 1994 1993 1992
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Interest income $38,919 $38,761 $36,609 $34,750 $36,457
Interest expense 21,054 20,177 16,621 15,545 18,112
-----------------------------------------------------------------
Net interest income 17,865 18,584 19,988 19,205 18,345
Provision for losses on loans 800 800 800 800 400
-----------------------------------------------------------------
Net interest income after provision
for losses on loans 17,065 17,784 19,188 18,405 17,945
Other income 2,992 972 2,593 5,821 2,686
Other expenses 12,231 9,931 10,340 10,302 10,088
Income taxes 2,427 2,860 4,022 4,892 3,846
-----------------------------------------------------------------
Income before cumulative effect of
chance in accounting principle 5,399 5,965 7,419 9,032 6,697
Cumulative effect on prior years of
change in accounting principle -- -- -- 1,500 --
-----------------------------------------------------------------
Net Income $5,399 $5,965 $ 7,419 $10,532 $6,697
=================================================================
Weighted average shares outstanding 2,637,266 2,901,667 2,998,591 3,268,053 3,449,080
Earnings per share (1) $2.05 $2.06 $2.47 $3.22 $1.91
OTHER DATA (2):
Return on average assets 1.08% 1.19% 1.48% 2.24% 1.52%
Return on average equity 6.56 7.20 9.61 14.02 9.96
Average equity to average assets 16.42 16.60 15.36 15.95 15.27
Interest rate spread (3) 3.05 3.21 3.68 3.57 3.53
Net interest margin (4) 3.79 3.94 4.21 4.22 4.31
Non-interest income to average assets 0.60 0.19 0.52 1.24 0.61
Non-interest expense to average assets 2.44 1.98 2.06 2.19 2.29
Net charge-offs to average loans 0.01 0.10 0.35 0.11 0.13
STATEMENT OF FINANCIAL CONDITION DATA:
Total assets $510,217 $509,528 $504,026 $522,040 $440,082
Loans receivable, net 383,770 375,467 360,578 327,465 297,445
Securities available-for-sale (5) 57,362 68,153 73,491 64,448 52,390
Securities held-to-maturity 27,970 32,620 31,058 77,713 61,476
Cash and interest-bearing deposits 9,175 8,657 9,350 27,182 15,055
Investment in limited partnerships 24,458 16,226 16,911 14,020 5,167
Deposits $360,978 $362,922 $346,668 $408,920 $352,273
Borrowings 59,850 55,140 70,335 28,598 10,269
Stockholders' equity (1) 81,764 84,110 78,286 77,041 69,922
Common shares outstanding 2,377,028 2,672,878 2,791,632 2,980,143 3,191,466
Book value per share $34.40 $31.47 $28.04 $25.85 $21.91
Allowance for losses on loans to
net loans receivable 1.47% 1.30% 1.23% 1.47% 1.47%
Nonperforming loans to net loans receivable 1.65 1.53 1.33 1.37 2.16
Nonperforming assets to total assets (6) 1.57 1.62 1.36 1.65 1.92
Number of deposit accounts 38,206 37,567 36,763 38,615 39,803
</TABLE>
(1) The Company completed its conversion from a federal mutual savings and loan
charter to its present holding company-federal stock charter on February
20, 1992.
(2) All ratios are based on average monthly balances during the respective
periods.
(3) Computed as the difference between average yield on interest earning assets
and average cost of interest bearing funds.
(4) Net interest income divided by average interest earning assets.
(5) Accounted for at lower-of-cost-or-market prior to 1994, at fair value since
1994.
(6) Nonperforming assets are defined as nonaccrual loans plus real estate owned
acquired through foreclosure.
5
<PAGE> 6
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Dollar amounts in thousands, except per share data.)
The following represents management's discussion and analysis of the results of
operations and financial condition of the Company as of the dates and for the
periods indicated. This discussion should be read in conjunction with the
Company's Consolidated Financial Statements and the Notes thereto and other
financial data appearing elsewhere in this form 10-K.
SAFE HARBOR PROVISION OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The statements contained in this Item 7 - Management's Discussion and Analysis
of Financial Condition and Results of Operations and Item 1 - Description of
Business that are not historical facts are forward-looking statements subject
to the safe harbor created by the Private Securities Litigation Reform Act of
1995. The Company cautions readers of this Annual Report on Form 10-K that a
number of important factors could cause the Company's actual results in 1997
and beyond to differ materially from those expressed in any such
forward-looking statements. These factors include, without limitation, the
general economic and business conditions affecting the Company's customers;
changes in interest rates; the adequacy of the Association's allowance for loan
losses; competition from, among others, commercial banks, savings and loan
associations, mutual funds, money market funds, finance companies, credit
unions, mortgage companies,and the United States Government; federal and state
legislation, regulation and supervision of the Association and its
subsidiaries; the risk of defaults on loans; and contractual, statutory and
regulatory restrictions on the Association's ability to pay dividends to the
Company.
FINANCIAL CONDITION
As of December 31, 1996, total assets increased $689, to $510.2 million, from
$509.5 million at December 31, 1995. An increase of $8.3 million, or 2.2%, in
net loans receivable, to $383.8 million at December 31, 1996, from $375.5
million at December 31, 1995, and an increase of $8.2 million, or 50.7% in
investment in limited partnerships, to $24.5 million at December 31, 1996, from
$16.2 million at December 31, 1995, were funded primarily through sales and
maturities of securities, which decreased $15.4 million, or 15.3%, to $85.3
million at December 31, 1996, from $100.8 million at December 31, 1995.
Deposits decreased $1.9 million, or 0.5%, to $361.0 million at December 31,
1996, from $362.9 million at December 31, 1995, while advances from the Federal
Home Loan Bank of Chicago increased $4.7 million, or 8.5%, to $59.9 million at
December 31, 1996, from $55.1 million at December 31, 1995. The intensity of
competition for deposit funds in the south Chicago and suburban market, not
only from other depository institutions, but from insurance companies, mutual
funds and the stock market, has grown significantly during 1996, and shows no
sign of abatement in 1997. The result will be increased pressure on the cost
of funds.
Stockholders' equity decreased $2.3 million, or 2.8%, to $81.8 million at
December 31, 1996, from $84.1 million at December 31, 1995, primarily as the
result of $5.4 million in earnings for 1996, reduced by $8.7 million in
Treasury stock purchases, and reduced by $184 of net unrealized losses on
securities available for sale. The exercise of options added $351 to
stockholders' equity and amortization and allocation of stock based benefits
another $775.
6
<PAGE> 7
The Company's stock repurchase program in 1996 enhanced shareholder value by
increasing earnings per share and book value per share through the repurchase
of shares at a significant discount to book value. The Company repurchased
310,819 shares of its common stock at an average cost of $27.95. The closing
price of the Company's common stock on December 31, 1996, was $33.25, or 96.7%
of its book value of $34.40 per share.
LENDING
Loans receivable, net, increased by $8.3 million, or 2.2%, to $383.8 million at
December 31, 1996, from $375.5 million at December 31, 1995. The increase in
net loans receivable came primarily from funding of loans-in-process, which
decreased $7.1 million, to $6.4 million at December 31, 1996, from $13.5
million at December 31, 1995. Investment in commercial real estate loans
increased by $10.0 million, or 11.5%, to $97.1 million at December 31, 1996,
from $87.1 million at December 31, 1995, while residential mortgage loans and
(primarily) residential construction loans decreased $7.6 million, or 2.6%, to
$282.6 million at December 31, 1996, from $290.2 million at December 31, 1995.
The increase in commercial real estate loans (including commercial construction
loans) was spread over several familiar market areas, primarily $4.1 million
in Illinois, $3.0 million in New Mexico, $1.5 million in Colorado, and $1.1
million in Florida.
Loans receivable, net, increased by $14.9 million, or 4.1%, to $375.5 million
at December 31, 1995, from $360.6 million at December 31, 1994. The Company
increased its efforts to originate loans in Illinois and neighboring states,
increasing those loans by $8.8 million during 1995. During 1995 the Company
closed its loan origination subsidiary in Illinois and sold another loan
origination subsidiary in New Mexico when these operations became unprofitable.
The Company increased its efforts to originate loans through its subsidiary in
Idaho and continues to purchase loans through former subsidiaries in Colorado
and New Mexico.
The Company's lending activities have been concentrated primarily in
residential real property secured by first liens on such property. At December
31, 1996, approximately 57.1% of the Company's mortgage loans are secured by
one-to-four family dwellings, 14.3% by multifamily income producing properties,
and 28.6% by commercial real estate properties and land. This compares to
57.6%, 16.3%, and 26.1%, respectively, at December 31, 1995.
During 1996 the Company invested $86.7 million in the origination and purchase
of primarily mortgage loans, which exceeded loan fees and repayments of $79.0
million by $7.7 million, with increases in the portfolio coming primarily in
commercial real estate loans. Commercial real estate loans improve the
interest rate sensitivity of the Company's loan portfolio because they are
generally made for a shorter term than residential mortgage loans, carry a
higher yield, and reprice more frequently. Loans secured by commercial real
estate properties are generally larger and involve a greater degree of risk
than residential mortgage loans. Because payments on loans secured by
commercial real estate properties are often dependent on the successful
operation and management of the properties, repayment of such loans may be
subject to adverse conditions in the real estate market or the economy. The
Company seeks to minimize these risks by lending primarily on existing
income-producing properties, analyzes the financial condition of the borrower
and the reliability and predictability of the net income generated by the
security property in determining whether to extend credit, and generally
requires a net operating income to debt service ratio of at least 1.20 times.
7
<PAGE> 8
During 1995 the Company invested $83.5 million in the origination and purchase
of primarily mortgage loans, which exceeded loan fees and repayments of $68.5
million by $15.0 million, with increases in the portfolio coming primarily in
multifamily residential and (residential) construction loans. Construction
loans improve the interest rate sensitivity of the Company's loan portfolio and
yield higher rates than those afforded by loans on existing properties. The
higher yields correspond to higher risks attributable to the fact that loan
funds are advanced upon the security of the project under construction, which is
of uncertain value prior to its completion. Because of the uncertainties
inherent in estimating construction costs as well as the market value of the
completed project, it is relatively difficult to evaluate accurately the total
funds required to complete a project and the related loan-to-value ratio. As a
result, construction lending often involves the disbursement of substantial
funds with repayment dependent, in part, on the success of the completed
project, rather than the ability of the borrower or guarantor to repay the loan.
The Company has attempted to address these risks through its conservative
underwriting and construction disbursement procedures, and limits its
construction lending to primarily residential properties.
The following table sets forth the composition of the Company's loan portfolio
by type of loan at the dates indicated.
<TABLE>
<CAPTION>
At December 31,
---------------------------------------
1996 1995 1994 1993 1992
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Mortgage loans:
One-to-four family residential (1) $207,697 $204,970 $204,246 $202,190 $218,817
Multi-family residential 47,510 54,216 49,900 47,234 25,394
Commercial real estate 97,093 87,066 84,388 66,403 46,492
Construction 27,442 31,055 21,711 16,501 9,485
Land 13,760 13,739 13,371 6,353 3,323
-------------------------------------------------------------
Total mortgage loans 393,502 391,046 373,616 338,681 303,511
Other loans:
Commercial business 1,208 2,342 1,981 505 1,916
Consumer 976 703 631 697 802
-------------------------------------------------------------
Total other loans 2,184 3,045 2,612 1,202 2,718
-------------------------------------------------------------
Total loans receivable 395,686 394,091 376,228 339,883 306,229
Accrued interest net of reserve
for uncollected interest 2,570 2,521 2,391 2,076 2,010
Less:
Loans-in-process 6,386 13,531 10,419 6,511 3,476
Unearned discounts, premiums
and deferred loan fees, net 2,470 2,744 3,193 3,158 2,933
Allowance for losses on loans 5,630 4,870 4,429 4,825 4,385
-------------------------------------------------------------
Total loans receivable, net $383,770 $375,467 $360,578 $327,465 $297,445
=============================================================
FHA and VA loans included in
one-to-four family residential $416 $597 $747 $1,004 $1,217
Second mortgages included in
total mortgage loans $2,698 $2,596 $113 $1,173 $165
</TABLE>
(1) Includes construction loans converted to permanent loans.
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The following table sets forth certain information at December 31, 1996
regarding the dollar amount of loans maturing in the Company's loan portfolio
based on contractual terms to maturity, but does not include scheduled payments
or potential prepayments. Demand loans, loans having no stated schedule of
repayments and no stated maturity are reported as due in one year or less.
<TABLE>
<CAPTION>
After one After five
One year year through years After
or less five years ten years ten years Total
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MORTGAGE LOANS:
One-to-four family residential $6,551 $10,198 $10,633 $180,315 $207,697
Multifamily residential 4,329 13,321 19,990 9,870 47,510
Commercial real estate 1,698 18,098 47,551 29,746 97,093
Construction 25,799 1,643 -- -- 27,442
Land 4,443 9,002 162 153 13,760
OTHER LOANS:
Commerical business 1,087 3 118 -- 1,208
Consumer 669 29 22 256 976
----------------------------------------------------------------------
Total loans $44,576 $52,294 $78,476 $220,340 $395,686
======================================================================
</TABLE>
The following table sets forth the dollar amount of all loans at December 31,
1996 and due after December 31, 1997, that have fixed interest rates and those
that have floating or adjustable rates.
<TABLE>
<CAPTION>
Floating or
Adjustable
Fixed Rates Rates Total
----------------------------------------
<S> <C> <C> <C>
MORTGAGE LOANS:
One-to-four family residential $95,914 $105,232 $201,146
Multi-family residential 8,418 34,763 43,181
Commercial real estate 16,292 79,103 95,395
Construction 486 1,157 1,643
Land 1,579 7,738 9,317
OTHER LOANS:
Commerical business 3 118 121
Consumer 51 256 307
----------------------------------------
Total loans $122,743 $228,367 $351,110
========================================
</TABLE>
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At December 31, 1996, the Company's mortgage loan portfolio was geographically
diversified, with concentrations primarily in Illinois (35.0%), Colorado
(26.4%), Idaho (18.5%), and New Mexico (13.7%). Mortgage loans in Indiana and
Michigan, all within the Company's immediate lending area, represent another
3.3% of the portfolio at December 31,1996. At December 31, 1995, these
concentrations were Illinois (37.2%), Colorado (28.0%), Idaho (16.7%), New
Mexico (11.5%), and Indiana/Michigan (3.6%).
At December 31, 1996, approximately $114.2 million or 29.0% of the Company's
$393.5 million mortgage loan portfolio was secured by properties located in
mountain and ski resort areas, the economies of which may be more susceptible
to fluctuations in market and economic conditions. Furthermore, $44.2 million,
or 38.7% of these loans are secured by second homes, which may be more
susceptible to delinquencies than loans secured by primary residences. $29.9
million, or 26.2% of these loans were secured by primary residences, and $40.1
million, or 35.1% were secured by multifamily and commercial properties and
land.
At December 31, 1996, the Company's out-of-state mortgage loan portfolio
included $88.8 million in loans secured by primary residences, $66.8 million
secured by secondary residences, $26.7 million secured by multifamily, and $73.6
million secured by commercial properties and land. The Company has not
experienced unusual losses as a result of geographic diversification or lending
in mountain and ski resort areas. The following table sets forth information
regarding the geographic distribution of the Company's mortgage loan portfolio
at December 31, 1996.
<TABLE>
<CAPTION>
One-to-four family
-------------------------- Total Land and Total
Primary Secondary one-to-four Multifamily Commercial Developed Mortgage
Residential Residential family Residential Real Estate Lots Loans
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Illinois $65,329 $3,663 $68,992 $29,801 $38,678 $126 $137,597
Indiana 3,071 461 3,532 909 - - 4,441
Michigan - 247 247 8,477 - - 8,724
------------------------------------------------------------------------------------------------------------
Subtotal 68,400 4,371 72,771 39,187 38,678 126 150,762
------------------------------------------------------------------------------------------------------------
Idaho
Sun Valley area 26,113 24,435 50,548 144 9,274 9,428 69,394
Other mountain areas 229 368 597 - 1,995 850 3,442
------------------------------------------------------------------------------------------------------------
Subtotal 26,342 24,803 51,145 144 11,269 10,278 72,836
------------------------------------------------------------------------------------------------------------
Colorado
Denver area 26,987 2,582 29,569 12,024 16,740 245 58,578
Other urban areas - - - 1,580 2,363 - 3,943
Aspen area 2,183 10,799 12,982 1,764 6,441 - 21,187
Other mountain areas 1,363 8,557 9,920 - 10,064 149 20,133
------------------------------------------------------------------------------------------------------------
Subtotal 30,533 21,938 52,471 15,368 35,608 394 103,841
------------------------------------------------------------------------------------------------------------
New Mexico 24,761 12,949 37,710 1,220 11,986 2,962 53,878
Florida 966 4,092 5,058 126 1,102 - 6,286
Arizona 2,988 506 3,494 - - - 3,494
Other states 131 1,821 1,952 453 - - 2,405
------------------------------------------------------------------------------------------------------------
Total $154,121 $70,480 $224,601 $56,498 $98,643 $13,760 $393,502
============================================================================================================
</TABLE>
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The following table sets forth information regarding nonaccrual loans and
foreclosed real estate owned by the Company at the dates indicated. The Company
does not accrue interest on loans delinquent 90 days or more. Had nonaccrual
loans been current according to their original terms, the Company would have
recorded $582 of interest income during 1996 and $564 during 1995. Actual
interest income from nonaccrual loans amounted to $384 during 1996 and $257
during 1995.
<TABLE>
<CAPTION>
At December 31,
---------------------------------------
1996 1995 1994 1993 1992
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans:
One-to-four family residential $3,959 $4,006 $4,067 $4,427 $5,615
Multifamily residential 242 58 216 61 61
Commercial real estate 1,707 -- -- -- 730
Construction -- 549 499 -- --
Land 426 -- -- -- --
Commercial business -- 1,143 -- -- --
Consumer -- 2 5 5 14
-----------------------------------------------------------
Total nonaccrual loans 6,334 5,758 4,787 4,493 6,420
-----------------------------------------------------------
Real estate owned:
One-to-four family residential 1,665 2,483 1,196 2,091 787
Multifamily residential -- -- 20 41 --
Commercial real estate -- -- 865 1,968 1,250
Land -- -- -- -- --
-----------------------------------------------------------
Total real estate owned 1,665 2,483 2,081 4,100 2,037
-----------------------------------------------------------
Total nonperforming assets $7,999 $8,241 $6,868 $8,593 $8,457
===========================================================
Ratio of nonaccrual loans to
net loans receivable 1.65% 1.53% 1.33% 1.37% 2.16%
Ratio of nonperforming assets to
total assets 1.57% 1.62% 1.36% 1.65% 1.92%
</TABLE>
At December 31, 1996, the Company had two related loans that were considered to
be impaired under Statement of Financial Accounting Standard (SFAS) No. 114
with a recorded investment of $1.1 million. These loans have been placed in
nonaccrual status. One of the loans has been fully reserved in the amount of
$365, the other does not have a specific reserve. The average recorded
investment in impaired loans during the year ended December 31, 1996, was
approximately $654. For the year ended December 31, 1996, the Company
recognized interest income (using the cash basis method of income recognition)
on those impaired loans of $98.
At December 31, 1995, the Company had one loan that was considered to be
impaired under SFAS No. 114 with a recorded investment of $365. This loan has
been placed in nonaccrual status, and as a result of write-downs it does not
have a specific allowance for loss. The average recorded investment in
impaired loans during the year ended December 31, 1995, was approximately $471.
For the year ended December 31, 1995, the Company recognized interest income
(using the cash basis method of income recognition) on those impaired loans of
$70.
The following table sets forth an analysis of the Company's allowance for
losses on loans for the periods indicated. Where specific loan loss allowances
have been established, any difference between the loss allowance and the amount
of the loss realized has been charged to the allowance for losses on loans.
11
<PAGE> 12
<TABLE>
<CAPTION>
For the year ended December 31,
--------------------------------
1996 1995 1994 1993 1992
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance at beginning of year $4,870 $4,429 $4,825 $4,385 $4,369
Provision for losses on loans 800 800 800 800 400
Charge-offs:
Residential real estate 114 238 -- 72 126
Commercial real estate -- 236 1,054 -- 317
Construction -- -- -- -- --
Land -- -- -- -- --
Commercial business -- -- 152 301 --
Consumer -- -- -- -- --
----------------------------------------------------------
Total charge-offs 114 474 1,206 373 443
Recoveries 74 115 10 13 59
----------------------------------------------------------
Net charge-offs 40 359 1,196 360 384
----------------------------------------------------------
Allowance at end of year $5,630 $4,870 $4,429 $4,825 $4,385
==========================================================
Ratio of allowance to net loans
receivable at end of year 1.47% 1.30% 1.23% 1.47% 1.47%
Ratio of net charge-offs to average
loans during the year 0.01% 0.10% 0.35% 0.11% 0.13%
Ratio of allowance to nonaccural
loans at end of year 88.89% 84.58% 92.52% 107.39% 68.30%
</TABLE>
The Company regards the allowance for loan losses as a general reserve which is
available to absorb losses from all loans. However, for purposes of complying
with disclosure requirements of the Securities and Exchange Commission, the
following table presents an allocation of the allowance for loan losses among
the various loan categories and sets forth the percentage of loans in each
category to gross loans. The allocation of the allowance for loan losses as
shown in the table should neither be interpreted as an indication of future
charge-offs, nor as an indication that charge-offs in future periods will
necessarily occur in these amounts or in the indicated proportions.
<TABLE>
<CAPTION>
December 31
----------------------------------------------------------------------
1996 1995 1994 1993 1992
-----------------------------------------------------------------------------------------------
Percent of Percent of Percent of Percent of Percent of
Loans in Loans in Loans in Loans in Loans in
Category Category Category Category Category
to Total to Total to Total to Total to Total
Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MORTGAGE LOANS:
Residential $1,494 64.50% $1,490 65.77% $1,352 67.55% $1,504 73.39% $1,512 79.75%
Commercial 3,224 24.54% 2,351 22.09% 2,637 22.43% 2,466 19.54% 2,116 15.18%
Construction -- 6.94% -- 7.88% -- 5.77% -- 4.85% -- 3.10%
Land 275 3.47% 275 3.49% 334 3.55% 159 1.87% 92 1.09%
OTHER LOANS:
Commercial business 50 0.30% 487 0.59% 101 0.53% 15 0.15% 97 0.63%
Consumer 13 0.25% 7 0.18% 5 0.17% 6 0.20% 10 0.25%
Unallocated 574 -- 260 -- -- -- 675 -- 558 --
----------------------------------------------------------------------------------------------
Total $5,630 100.00% $4,870 100.00% $4,429 100.00% $4,825 100.00% $4,385 100.00%
==============================================================================================
</TABLE>
12
<PAGE> 13
SECURITIES
The following table sets forth securities classified as available-for-sale, at
fair value at the dates indicated.
<TABLE>
<CAPTION>
At December 31,
---------------
1996 1995 1994
---------------------- ---------------------- -----------------------
Fair Percent of Fair Percent of Fair Percent of
Value Portfolio Value Portfolio Value Portfolio
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Government and agency securities $10,986 19.15% $13,107 19.23% $23,255 31.64%
U.S. Government securities fund(1) 16,411 28.61% 15,871 23.29% 14,240 19.37%
Money market fund 888 1.55% 6,596 9.68% 7,450 10.14%
ARM securities fund 5,187 9.04% 10,694 15.69% 5,057 6.88%
CMO/REMIC securities 11,520 20.08% 13,265 19.46% 15,683 21.34%
Municipal bonds 861 1.50% -- -- -- --
Preferred stock 9,387 16.37% 6,779 9.95% 6,582 8.96%
Common Stock 2,122 3.70% 1,841 2.70% 1,224 1.67%
---------------------------------------------------------------------------------
Total fair value $57,362 100.00% $68,153 100.00% $73,491 100.00%
=================================================================================
</TABLE>
(1) The U.S. Government securities fund is a diversified bond fund which
invests in U.S. Treasury and Federal Agency securities with remaining
maturities of five years or less, which are permissible under applicable
federal law for federal savings associations, national banks, and federal
credit unions.
The following table sets forth the maturities and weighted average yields of
the securities in the Company's available-for-sale portfolio at December 31,
1996. Mutual funds and equity securities have no stated maturity and are
included in the total column only.
<TABLE>
<CAPTION>
After one year After five years
through five years through ten years After ten years Total
Amount Yield Amount Yield Amount Yield Amount Yield
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government and agency securities $7,037 6.62% $2,004 7.50% $ 1,945 7.30% $10,986 6.91%
U.S. Government securities fund -- -- -- -- -- -- 16,411 5.96%
Money market fund -- -- -- -- -- -- 888 5.41%
ARM securities fund -- -- -- -- -- -- 5,187 6.38%
CMO/REMIC securities -- -- -- -- 11,520 5.73% 11,520 5.73%
Municipal bonds -- -- -- -- 861 1.43% 861 1.43%
Preferred stock -- -- -- -- -- -- 9,387 7.78%
Common stock(1) -- -- -- -- -- -- 2,122 5.96%
-----------------------------------------------------------------------------------
Total fair value $7,037 6.62% $2,004 7.50% $14,326 5.68% $57,362 6.35%
===================================================================================
</TABLE>
(1) Yield for common stocks based on current dividends paid, if any.
13
<PAGE> 14
The following table sets forth securities classified as held-to-maturity, at
amortized cost at the dates indicated.
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
Amortized Percent of Amortized Percent of Amortized Percent of
Cost Portfolio Cost Portfolio Cost Portfolio
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Government and
agency securities $5,000 17.88% $5,000 15.32% $ -- --%
FHLMC/FNMA mortgage-backed
pass-through securities 17,209 61.52% 20,820 63.83% 23,788 76.59%
CMO/REMIC securities 2,406 8.60% 3,012 9.23% 3,533 11.38%
Municipal bonds 145 0.52% 149 0.46% 153 0.49%
Federal Home Loan Bank stock 3,210 11.48% 3,639 11.16% 3,584 11.54%
---------------------------------------------------------------------------
Total amortized cost $27,970 100.00% $32,620 100.00% $31,058 100.00%
===========================================================================
Total fair value $27,375 $32,278 $28,719
========= ========= =========
</TABLE>
The following table sets forth the maturities and weighted average yields of
the securities in the Company's held-to-maturity portfolio at December 31,
1996. Federal Home Loan Bank stock has no stated maturity and is included in
the total column only.
<TABLE>
<CAPTION>
After five years
through ten years After ten years Total
Amount Yield Amount Yield Amount Yield
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Government and agency
securities $ -- --% $5,000 8.00% $5,000 8.00%
FHLMC/FNMA mortgage-backed
pass-through securities 70 8.00% 17,139 6.29% 17,209 6.29%
CMO/REMIC securities -- -- 2,406 6.53% 2,406 6.53%
Municipal bonds -- -- 145 6.40% 145 6.40%
Federal Home Loan Bank stock -- -- -- -- 3,210 7.00%
------------------------------------------------------------------------------
Total amortized cost $70 8.00% $24,690 6.67% $27,970 6.71%
==============================================================================
</TABLE>
14
<PAGE> 15
LIMITED PARTNERSHIPS
The following table sets forth the Company's investment in limited partnerships
by type of investment at December 31, 1996 and 1995, and the related net income
(before income taxes) for the three years ended December 31, 1996:
<TABLE>
<CAPTION>
December 31,
------------------------
1996 1995
------------------------
<S> <C> <C>
INVESTMENT IN:
Residential construction and sale $ 6,679 $ 2,848
Residential investment (rental) property 2,377 3,249
Commercial investment (rental) property 1,065 935
Mortgage loan servicing 14,337 9,194
------------------------
Total $24,458 $16,226
========================
<CAPTION>
For the year ended December 31,
-------------------------------
1996 1995 1994
-------------------------------
<S> <C> <C> <C>
INCOME FROM:
Residential construction and sale $1,223 $133 $1,111
Residential investment (rental) property (470) (1,086) (406)
Commercial investment (rental) property 231 145 112
Mortgage loan servicing 655 683 388
-------------------------------
Total $1,639 ($125) $1,205
===============================
</TABLE>
The Company invests in limited partnerships through both its holding company
and its subsidiaries. These limited partnerships engage in single family
residential development, rental of apartment and office buildings, condominium
conversion and sale, and mortgage loan servicing. The Company's investment in
limited partnerships increased $8.2 million, or 50.7%, to $24.5 million at
December 31, 1996, from $16.2 million at December 31, 1995. The increased
investment came primarily from the investment in construction and sale of
single family homes located in Illinois, which increased $3.9 million, to $6.7
million at December 31, 1996, from $2.8 million at December 31, 1995, and in
mortgage loan servicing, which increased $5.1 million, to $14.3 million at
December 31, 1996, from $9.2 million at December 31, 1995. The construction
and sale of single family homes in the suburban Chicago market was in
partnership with a nationally known builder with whom the Company has completed
several previous projects. The increased investment in mortgage loan servicing
was through the same limited partnership in which the Company has invested
since 1993.
During 1996 the Company invested in three (two new) single family construction
projects located in Illinois. One new project will build and sell 166 single
family homes in Lake Villa, Illinois, with homes priced in the $220 to $250
range. At December 31, 1996, 25 homes have been delivered. Sellout of the
project is projected to be three years. The Company invested $2.1 million in
this project. The other new project will build and sell 132 single family homes
in Naperville, Illinois, with homes priced in the $330 to $370 range. Sellout of
the project is projected to be two years. The Company invested $3.2 million in
this project. The Company also invested $1.0 million in a new phase of an
existing single family project, which will add 83 homes to 820 homes in prior
phases. At December 31, 1996, 733 of the 903 homes had been delivered. (Also
see "Subsidiary Activities".)
15
<PAGE> 16
During 1996 the Company purchased a $5.0 million limited partnership interest
in a mortgage servicing partnership which represents the fourth such investment
by the Company using this investment vehicle. The servicing rights purchased
by these partnerships are considered by management to be both a source of
stable income and a hedge against the adverse effects of rising interest rates
on the Company's interest earning assets.
At December 31, 1996, the Company owned a $2.3 million limited partnership
interest in a 288 unit apartment complex in Fort Lauderdale, Florida. The
partnership was organized in 1993 to purchase the apartment complex and convert
it to condominium units for sale. The Company originally invested $4.3
million in the partnership. Various problems with the conversion resulted in a
decision to resell the property instead of converting it. Sale of the property
was held up by litigation with a potential buyer, and as of December 31, 1996,
the property was being held for rental. The property has a positive cash flow,
but depreciation and conversion cost write-offs have resulted in annual losses
to the Company amounting to $1.4 million over four years. The Company's
investment balance was further reduced by partnership distributons in the
amount of $615. The property is again being marketed for sale.
During 1995 the Company's investment in limited partnerships decreased $685, or
4.1%, to $16.2 million at December 31, 1995, from $16.9 million at December 31,
1994. The Company withdrew from a condominium conversion limited partnership
located in Florida on which it also had a mortgage loan. The withdrawal cost
the Company $402 and 19 units from the conversion were classified as real
estate acquired through foreclosure in the amount of $1.2 million. As of
December 31, 1996, three units remain with a fair value of $147. Management
expects to sell the remaining units in 1997.
During 1995 the Company invested $1.5 million in the Algonquin single family
development project, adding 118 homes to the 702 homes already planned. As of
December 31, 1995, 594 of the 820 homes had been delivered. The Company also
invested $3.0 million in mortgage loan servicing through the limited
partnership arrangement in which it has made prior investments of $3.0 million
in 1994 and $2.0 million in 1993.
DEPOSITS
Total deposits at December 31, 1996, were $361.0 million, a decrease of $1.9
million, or 0.5%, from $362.9 million at December 31, 1995. The Company
promoted various certificate of deposit programs to maintain its market share,
which was a significant factor in the increase in its cost of funds. (See "Net
Interest Income".) A new cash dispensing ATM was installed at a Mobile gas
station in Hammond, Indiana, and the Company plans to offer more of these at
convenient locations for its customers.
Total deposits at December 31, 1995, were $362.9 million, an increase of $16.2
million, or 4.7%, from $346.7 million at December 31, 1994. The Company bid
more aggressively for deposit funds during 1995 than it did during 1994, which
contributed both to the increase in deposit balances and the squeeze in net
interest margin during the year. The Company expanded its ATM network during
1995 and added a totally free checking account to its product offerings in order
to combat intense competition for deposit balances within its market area.
Funds from deposit increases were used to repay FHLB advances and originate
loans.
16
<PAGE> 17
The following table sets forth the average balance of deposit categories and
the average rates paid for each of the periods indicated.
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------
1996 1995 1994
---- ---- ----
Balance Rate Balance Rate Balance Rate
------- ---- ------- ---- ------- ----
<S> <C> <C> <C> <C> <C> <C>
Non interest bearing demand $5,073 --% $5,017 --% $5,419 --%
Interest bearing demand 25,369 3.02% 26,558 3.17% 36,673 2.77%
Passbook accounts 64,919 2.72% 65,771 2.79% 74,343 2.91%
Certificates of deposit 268,599 5.89% 258,662 5.54% 255,351 4.31%
----------------------------------------------------------------
Total $363,960 5.04% $356,008 4.78% $371,786 3.82%
================================================================
</TABLE>
The following table sets forth the maturities of certificates of deposit (time
deposits) of $100,000 or more at December 31, 1996:
Three months or less $5,002
Over three months through six months 3,859
Over six months through twelve months 5,931
Over twelve months 4,273
-------
Total $19,065
=======
SHORT TERM BORROWINGS
Substantially all of the Company's borrowing needs are satisfied through
advances from the Federal Home Loan Bank which are available on terms with
maturities from daily to ten years. At December 31, 1996, the Company had $4.0
million in daily advances, $26.7 million in term advances maturing in 1997 and
$29.2 million in term advances maturing in 1998 through 2003. The following
table sets forth certain information regarding Federal Home Loan Bank (FHLB)
advances for the dates indicated.
<TABLE>
<CAPTION>
December 31,
------------
1996 1995 1994
------------------------------------------
<S> <C> <C> <C>
Average balance outstanding $45,136 $51,591 $46,252
Maximum amount outstanding at any month end 59,850 65,335 70,335
Balance outstanding at end of year 59,850 55,140 70,335
Weighted average interest rate during year 6.00% 6.14% 5.24%
Weighted average interest rate at end of year 6.14% 5.95% 5.90%
</TABLE>
17
<PAGE> 18
RESULTS OF OPERATIONS
Net income for the year ended December 31, 1996 was $5.4 million, compared to
$6.0 million for the year ended December 31, 1995. The primary reason for the
decrease in earnings for 1996 was the payment of a $2.3 million FDIC special
assessment to recapitalize the SAIF pursuant to legislation signed by President
Clinton on September 30, 1996. The reduction in earnings due to the FDIC
special assessment was partially offset by a $1.8 million change in income from
limited partnership investments, from a $125 loss in 1995 to a $1.6 million
profit for the year ended December 31, 1996. Earnings per share decreased to
$2.05 for the year ended December 31, 1996, compared to $2.06 for 1995. The
FDIC special assessment, net of income taxes, reduced earnings per share by
$0.56 for the year ended December 31, 1996. Management expects that a
reduction of the FDIC assessment rate from 23 cents per $100 of deposits in
1996 to approximately 6.48 cents per $100 of deposits in 1997 will reduce the
FDIC premium assessment by approximately $600.
Return on average assets (ROA) decreased to 1.08% for the year ended December
31, 1996, from 1.19% in 1995. ROA would have been 1.37% without the FDIC
special assessment. Return on average stockholders' equity (ROE) for 1996 was
6.56%, compared to 7.20% in 1995. ROE would have been 8.35% without the FDIC
special assessment.
NET INTEREST INCOME
Net interest income decreased by $719, or 3.9%, to $17.9 million for the year
ended December 31, 1996, compared to $18.6 million for the year ended December
31, 1995. The Company's net interest margin decreased to 3.79% of average
interest earning assets during 1996, compared to 3.94% during 1995. The average
yield on interest earning assets increased to 8.26% during 1996, from 8.22% in
1995, while the average cost of funds increased to 5.21% during 1996, from
5.01% during 1995, resulting in a decrease in the rate spread to 3.05% in 1996,
from 3.21% in 1995. The general decrease in interest rates during the last
half of 1996 has reduced the average cost of funds more quickly than the
average yield on loans and investments, and should reduce the rate of spread
compression in 1997.
Net interest income decreased by $1.4 million, or 7.0%, to $18.6 million for
the year ended December 31, 1995, compared to $20.0 million for the year ended
December 31, 1994. The Company's net interest margin decreased to 3.94% of
average interest earning assets during 1995, compared to 4.21% during 1994. The
average yield on interest earning assets increased to 8.22% during 1995, from
7.71% in 1994, while the average cost of funds increased to 5.01% during 1995,
from 4.03% during 1994, resulting in a decrease in the rate spread to 3.21% in
1995, from 3.68% in 1994.
18
<PAGE> 19
<TABLE>
<CAPTION>
For the year ended December 31,
-------------------------------
1996 1995 1994
---- ---- ----
Interest Average Interest Average Interest Average
Average and Yield/ Average and Yield/ Average and Yield/
Balance Dividends Cost Balance Dividends Cost Balance Dividends Cost
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS:
Mortgage loans (1) $372,231 $32,507 8.73% $362,663 $31,743 8.75% $341,599 $29,120 8.52%
Consumer loans (1) 832 63 7.57% 716 48 6.70% 687 49 7.13%
Commercial loans (1) 1,866 240 12.86% 2,381 164 6.89% 1,671 126 7.54%
--------------------------------------------------------------------------------------
Total loans 374,929 32,810 8.75% 365,760 31,955 8.74% 343,957 29,295 8.52%
--------------------------------------------------------------------------------------
Mortgage-backed securities (2) 34,111 2,098 6.15% 40,716 2,588 6.36% 47,861 2,830 5.91%
Investment securities (2) 56,944 3,844 6.75% 57,818 3,875 6.70% 71,871 4,148 5.77%
Daily interest-bearing deposits 5,276 167 3.17% 7,381 343 4.65% 10,871 336 3.09%
--------------------------------------------------------------------------------------
Total investments 96,331 6,109 6.34% 105,915 6,806 6.43% 130,603 7,314 5.60%
--------------------------------------------------------------------------------------
TOTAL INTEREST-EARNING ASSETS 471,260 38,919 8.26% 471,675 38,761 8.22% 474,560 36,609 7.71%
Office properties and equipment 4,170 4,272 4,407
Real estate 2,069 2,084 3,137
Other assets 23,647 21,182 20,507
-------- -------- --------
TOTAL ASSETS $501,146 $499,213 $502,611
======== ======== ========
INTEREST BEARING LIABILITIES:
Passbook accounts $ 64,919 $ 1,767 2.72% $ 65,771 $ 1,833 2.79% $ 74,343 $ 2,161 2.91%
NOW accounts 18,515 551 2.98% 18,385 553 3.01% 18,418 450 2.44%
Money market accounts 6,854 215 3.14% 8,173 289 3.54% 18,255 566 3.10%
Certificates of deposit 268,599 15,815 5.89% 258,662 14,332 5.54% 255,351 11,018 4.31%
--------------------------------------------------------------------------------------
Total deposits 358,887 18,348 5.11% 350,991 17,007 4.85% 366,367 14,195 3.87%
Borrowings 45,136 2,706 6.00% 51,591 3,170 6.14% 46,441 2,426 5.22%
--------------------------------------------------------------------------------------
TOTAL INTEREST-BEARING LIABILITIES 404,023 21,054 5.21% 402,582 20,177 5.01% 412,808 16,621 4.03%
Non-interest-bearing deposits 5,073 5,017 5,419
Other liabilities 9,758 8,731 7,179
-------- -------- --------
TOTAL LIABILITIES 418,854 416,330 425,406
Stockholders' equity 82,292 82,883 77,205
-------- -------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $501,146 $499,213 $502,611
======== ------- ======== ------- ======== -------
Net interest income $17,865 $18,584 $19,988
======= ======= =======
Interest rate spread 3.05% 3.21% 3.68%
Net interest margin 3.79% 3.94% 4.21%
Ratio of average interest-earning assets
to average interest-bearing liabilities 116.64% 117.16% 114.96%
</TABLE>
(1) Includes nonaccrual loans.
(2) Includes securities available-for-sale at amortized cost.
RATE/VOLUME ANALYSIS
The table below presents the extent to which changes in interest rates and
changes in the volume of interest-earning assets and interest-bearing
liabilities have affected the Company's interest income and interest expense
during the periods indicated. Information is provided in each category with
respect to (i) changes attributable to changes in volume (changes in volume
multiplied by prior rate); (ii) changes attributable to changes in rate
(changes in rate multiplied by prior volume), and (iii) the net change.
The changes attributable to the combined impact of volume and rate have been
allocated proportionately to the changes due to volume and the changes due to
rate.
19
<PAGE> 20
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------
1996 vs. 1995 1995 vs. 1994
------------------------------- ------------------------------
Increase (Decrease) Increase (Decrease)
------------------------------- ------------------------------
Due to Due to Due to Due to
Rate Volume Net Rate Volume Net
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS:
Mortgage loans ($ 71) $ 835 $ 764 $ 794 $ 1,829 $ 2,623
Consumer loans 7 8 15 (3) 2 (1)
Commercial loans 118 (42) 76 (12) 50 38
--------------------------------------------------------------------
Total loan interest 54 801 855 779 1,881 2,660
--------------------------------------------------------------------
Mortgage-backed securities (81) (409) (490) 202 (444) (242)
Investment securities 27 (58) (31) 610 (883) (273)
Daily interest-bearing deposits (93) (83) (176) 136 (129) 7
--------------------------------------------------------------------
Total investment interest (147) (550) (697) 948 (1,456) (508)
--------------------------------------------------------------------
Total interest income (93) 251 158 1,727 425 2,152
--------------------------------------------------------------------
INTEREST BEARING LIABILITIES:
Interest-bearing deposits 843 498 1,341 3,257 (445) 2,812
Borrowings (75) (389) (464) 457 287 744
--------------------------------------------------------------------
Total interest expense 768 109 877 3,714 (158) 3,556
--------------------------------------------------------------------
Net interest income ($861) $ 142 ($719) ($1,987) $ 583 ($1,404)
====================================================================
</TABLE>
ASSET/LIABILITY MANAGEMENT
The matching of assets and liabilities may be analyzed by examining the extent
to which such assets and liabilities are "interest rate sensitive" and by
monitoring an institution's interest rate sensitivity "gap". An asset or
liability is said to be interest rate sensitive within a specific time period
if it will mature or reprice within that time period. The interest rate
sensitivity gap is defined as the difference between the amount of interest
earning assets anticipated, based upon certain assumptions, to mature or
reprice within a specific time period and the amount of interest bearing
liabilities anticipated, based upon certain assumptions, to mature or reprice
within that time period. A gap is considered positive when the amount of
interest rate sensitive assets exceeds the amount of interest rate sensitive
liabilities, and negative when the amount of interest rate sensitive
liabilities exceeds the amount of interest rate sensitive assets.
During a period of rising interest rates, a positive gap would tend to result
in an increase in net interest income, while a negative gap would tend to
adversely affect net interest income. During a period of falling interest
rates, a negative gap would tend to result in an increase in net interest
income, while a positive gap would tend to adversely affect net interest
income.
At December 31, 1996, total interest earning assets maturing or repricing
within one year exceeded total interest bearing liabilities maturing or
repricing within one year by $11.8 million, representing a positive one year
gap ratio of 2.32%. If interest rates continue to fall in 1997, as they have
in 1996, the positive gap would indicate decreased net interest income in 1997.
20
<PAGE> 21
<TABLE>
<CAPTION>
December 31, 1996
-----------------
Within Over 1-3 Over 3-5 Over
1 year year year 5 years Total
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS:
Loans receivable $208,099 $113,746 $21,355 $46,100 $389,300
Mortgage-backed securities 14,177 5,382 3,608 7,967 31,134
Other securities 45,844 -- -- 8,354 54,198
Interest earning deposits 6,154 -- -- -- 6,154
--------------------------------------------------------------------------
Total interest earning assets 274,274 119,128 24,963 62,421 480,786
--------------------------------------------------------------------------
INTEREST BEARING LIABILITIES:
NOW accounts 4,574 6,004 3,377 4,342 18,297
Money market accounts 1,887 2,478 1,394 1,792 7,551
Passbook accounts 16,170 21,222 11,937 15,348 64,677
Certificates of deposit 209,121 43,743 11,446 -- 264,310
FHLB advances 30,675 28,000 -- 1,175 59,850
--------------------------------------------------------------------------
Total interest bearing liabilities 262,427 101,447 28,154 22,657 414,685
--------------------------------------------------------------------------
INTEREST SENSITIVITY GAP $ 11,847 $ 17,681 ($3,191) $39,764 $ 66,101
==========================================================================
Cumulative interest sensitivity gap $ 11,847 $ 29,528 $26,337 $66,101
=========================================================
Cumulative gap as a percentage
of total assets 2.32% 5.79% 5.16% 12.96%
Cumulative interest earning assets as a
percentage of interest bearing liabilities 104.51% 108.11% 106.72% 115.94%
</TABLE>
The above table sets forth the amount of interest earning assets and interest
bearing liabilities outstanding at December 31, 1996, which are expected to
reprice or mature in each of the future time periods shown, based on certain
assumptions. Except as stated, the amounts of assets and liabilities shown
which reprice or mature during a particular period were determined in
accordance with the earlier of term to repricing or the contractual terms of
the asset or liability. Equity securities and mutual fund investments held as
available-for-sale are included in the "within 1 year" column; FHLB stock is
included in "over 5 years". Fixed rate loans with short maturities are assumed
to prepay at the rate of 14%; those with longer maturities are assumed to
prepay at rates of 10% to 19%, dependent upon the interest rate of the loan.
Adjustable rate loans are assumed to prepay at 20% to 24%, dependent upon the
repricing frequency. Multifamily and commercial real estate loans are assumed
to prepay at 12% for fixed rate and 16% for adjustable rate loans. The Company
has assumed transaction accounts reprice at the rate of 25% in year one, 58%
(cumulatively) by year three, 76% by year five, and 94% by year 10. Fixed
rate/maturity accounts reprice at maturity.
PROVISION FOR LOAN LOSSES
The allowance for losses on loans is established through a provision for loan
losses based on management's evaluation of the risk inherent in its loan
portfolio and the general economy. Management's evaluation includes a review
of all loans on which full collectibility may not be reasonably assured, the
estimated fair value of the underlying collateral, economic conditions,
historical loan loss experience, review of larger and known problem loans, and
the Company's internal credit review process.
The Company maintained its annual provision for losses on loans at $800 for the
three years ended December 31, 1996. Average net charge-offs during this
period were $532, or 66.5% of the provision,
21
<PAGE> 22
although individual year's charge-offs were highly variable, from a high of $1.2
million in 1994, to a low of $40 in 1996. This variability is due primarily to
the Company's commercial real estate lending, where individual loans can have a
significant impact on any one year. Although improved loss experience in 1996
and 1995 might warrant a reduction in the provision, the increase in commercial
real estate lending in 1996 and 1995, as well as the increase in nonperforming
loans during these two years, warrant an increase, with the net result being
management's decision to maintain the same provision for all three years.
Nonaccrual loans to net loans receivable increased to 1.65% at December 31,
1996, from 1.53% at December 31, 1995, and nonperforming assets to total assets
decreased to 1.57% at December 31, 1996, from 1.62% at December 31, 1995. The
allowance for losses amounted to 88.89% of nonaccrual loans at December 31,
1996, increased from 84.58% at December 31, 1995. Net charges-offs to the
allowance for losses on loans amounted to $40 for 1996. The allowance for
losses on loans increased to 1.47% of net loans receivable at December 31,
1996, compared to 1.30% at December 31, 1995.
Nonaccrual loans to net loans receivable increased to 1.53% at December 31,
1995, from 1.33% at December 31, 1994, and nonperforming assets to total assets
increased to 1.62% at December 31, 1995, from 1.36% at December 31, 1994. The
increase was due primarily to an increase in delinquent loans secured by a
hotel located in Florida. The allowance for losses amounted to 84.58% of
nonaccrual loans at December 31, 1995, decreased from 92.52% at December 31,
1994, again due to these same loans. Net charges-offs to the allowance for
losses on loans amounted to $359 for 1995. Charges to the allowance were due
primarily to the reduced fair value of a condominium project located in
Florida, in which the Company owns a number of foreclosed units. The allowance
for losses on loans increased to 1.30% of net loans receivable at December 31,
1995, compared to 1.23% of total loans at December 31, 1994.
OTHER INCOME
Other income increased to $3.0 million for the year ended December 31, 1996,
from $972 for the year ended December 31, 1995, primarily due to the $1.8
million increase in income from limited partnerships, a $175 decrease in losses
on sales of real estate acquired through foreclosure, and a $136 change from
losses to gains on sales of securities. The significant improvement in income
from limited partnerships comes primarily from the Company's investments in
single family development projects located in Illinois, although there has also
been an improvement in the performance of its Colorado investments, as well as
consistent income from loan servicing investments.
Gains on loans sold decreased $171, to $220 for the year ended December 31,
1996, from $391 in 1995, primarily due to a decrease in loans sold in the
secondary market, and also to a more competitive fee structure. Miscellaneous
other income included a $250 increase in losses on the operation of real estate
acquired through foreclosure, to $292 for the year ended December 31, 1996,
compared to $42 for 1995, which was offset by a $250 one-time release fee
recorded in the third quarter of 1996. Transaction account and ATM fees
increased $87 in 1996, to $477, from $390 in 1995.
Other income decreased to $972 for the year ended December 31, 1995, from $2.6
million in 1994, primarily due to a $1.3 million decrease in income from
limited partnerships, a $308 decrease in income from sales of real estate
acquired through foreclosure, and offset by an increase of $172 in gains on
loans sold generated by a mortgage brokerage subsidiary. The $155 decrease in
miscellaneous
22
<PAGE> 23
other income included a loss of $49 to close the Company's Illinois mortgage
brokerage subsidiary, a $57 increase in the net cost of operating real estate
acquired through foreclosure, and a $51 decrease in credit enhancement fees. An
$87 increase in ATM and transaction account fees was offset by decreases in
various other fee and commission income.
The decrease in limited partnership income came primarily from repair costs at
an apartment complex investment in Colorado, development expense write-offs on
a Florida apartment complex originally planned for condominium conversion and
now being held as an investment, and poor sales at an Illinois single family
development project. During 1995 the Company withdrew from another limited
partnership investment in a Florida condominium conversion at a cost of $402.
The Company also recorded a $105 loss on a low-income housing project expected
to generate significant low-income housing tax credits in future years.
OPERATING EXPENSES
Operating expenses increased $2.3 million for the year ended December 31, 1996
to $12.2 million, from $9.9 million in 1995, primarily due to the $2.3 million
FDIC special assessment. Compensation and benefit expense increased $149, to
$5.3 million in 1996, from $5.1 million in 1995, due to normal salary and wage
increases, while outside professional fees decreased $209, to $472 in 1996,
from $681 in 1995, due primarily to reductions in legal and audit fees.
Operating expenses as a percent of average assets increased to 2.44% in 1996,
but decreased to 1.98% before the special assessment, from 1.99% in 1995. Net
non-interest expense as a percent of average assets improved to 1.38% (before
the FDIC special assessment) for 1996, from 1.79% in 1995. The Company's
efficiency ratio improved to 49.4% (before the FDIC special assessment) in
1996, compared to 52.9% in 1995.
Operating expenses decreased $409, to $9.9 million for the year ended December
31, 1995, from $10.3 million in 1994, Compensation and benefit expense
decreased $320, to $5.1 million in 1995, compared to $5.5 million, due primarily
to elimination of mortgage banking operations in Illinois and New Mexico. FDIC
insurance of accounts premiums decreased $66 due to lower deposit levels at the
end of 1994 and early in 1995. Operating expenses decreased to 1.99% of average
assets for 1995, compared to 2.06% for 1994. The Company's efficiency ratio
declined in 1995 to 52.9%, from 47.5% in 1994, due primarily to the poor
performance of its limited partnership investments.
INCOME TAXES
During 1996 the Company accrued low income housing tax credits in the amount of
$218, and a dividends received deduction in the amount of $519, which resulted
in a net income tax benefit of $394. This reduced the Company's effective
income tax rate from 36.0% to 31.0 % for 1996. During 1995 the Company revised
its estimates of current and deferred income tax liabilities, which resulted in
a $367 credit to income tax expense and reduced the effective income tax rate
from 36.6% to 32.4%.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds are deposits, proceeds from principal
and interest payments on loans, investment securities, including
mortgage-backed securities, and Federal Home Loan Bank advances. While
maturities and scheduled amortization of loans and mortgage-backed securities
are predictable sources of funds, deposit flows and mortgage prepayments are
greatly influenced by general
23
<PAGE> 24
interest rates, economic conditions, and competition. The Company's liquidity,
represented by cash equivalents, is a product of its operating, investing and
financing activities. These activities for the years ended December 31, 1996,
1995, and 1994 are summarized in the following table.
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------
1996 1995 1994
------------------------------------
<S> <C> <C> <C>
Operating activities:
Net income $5,399 $5,965 $7,419
Adjustments to reconcile net income to net cash
provided by (used) in operating activities 85 4,903 (1,351)
Net cash provided by (used in) investing activities 701 (7,967) 1,073
Net cash used in financing activities (5,667) (3,594) (24,973)
------------------------------------
Net increase (decrease) in cash and cash 518 (693) (17,832)
Cash and cash equivalents at beginning of year 8,657 9,350 27,182
------------------------------------
Cash and cash equivalents at end of year $9,175 $8,657 $9,350
====================================
</TABLE>
The primary investing activity of the Company is the origination and purchase of
mortgage loans for its own portfolio. The Company originated or purchased $86.7
million, $83.5 million, and $107.4 million in loans for the years ended December
31, 1996, 1995, and 1994, respectively. The large volume of originations in
1994 was due to a drop in mortgage rates which precipitated a significant amount
of refinance activity.
The Company also made significant investments in both debt and equity
securities, and in mortgage-backed securities. The company invested $30.8
million, $32.5 million, and $29.7 million in these securities for the years
ended December 31, 1996, 1995, and 1994, respectively. However, proceeds from
sales, repayments and maturities of $45.8 million, $39.9 million, and $63.3
million for these same periods was also used to fund increases in the loan
portfolio and investments in limited partnerships.
Financing activities during 1996 included a $4.7 million increase in Federal
Home Loan Bank advances, offset by a $1.9 million decrease in deposits and the
repurchase of 310,819 shares of Treasury stock for $8.7 million, at an average
cost of $27.95 per share.
Financing activities during 1995 included a $15.1 million increase in deposits,
offset by $15.2 million decrease in Federal Home Loan Bank advances and the
repurchase of 124,300 shares of Treasury stock for $3.4 million, at average
cost $27.29 per share.
Financing activities during 1994 included a $62.3 million decrease in deposit
accounts which management funded with a $44.0 million increase in Federal Home
Loan Bank advances and liquidation of investment securities; refunding of the
ESOP's third party debt with a $2.3 million loan from the Company; and the
repurchase of 244,587 shares of the Company's common stock for $5.4 million, at
an average cost of $22.08 per share.
At December 31, 1996, the Company had approved mortgage loan commitments
totalling $5.7 million, $6.4 million of undisbursed loans-in-process, a $1.7
million commitment to invest in low income housing, $6.3 million in credit
enhancement arrangements (secured by securities and a letter of credit
24
<PAGE> 25
from the Federal Home Loan Bank), $19.4 million in unused lines of credit,
primarily to mortgage brokers, and $1.4 million in letters of credit to
builders.
Federal regulations require a savings institution to maintain an average daily
balance of liquid assets (cash and eligible investments) equal to at least 5%
of the average daily balance of its net withdrawable deposits and short term
borrowings. In addition, short term liquid assets currently must constitute 1%
of the sum of net withdrawable deposits and short term borrowings. Management
has consistently maintained liquidity levels in excess of these regulatory
requirements. The Association's average liquidity ratios were 7.9%, 8.3%, and
11.0% during 1996, 1995, and 1994, respectively. The Association's average
short term liquidity ratios were 2.2%, 2.7%, and 4.8% for these same years.
The Association is also required to maintain specific amounts of capital
pursuant to federal regulations. As of December 31, 1996, the Association was
in compliance with all regulatory capital requirements with tangible and core
capital of 9.9%, and risk-based capital of 16.6%, well above the requirements
of 1.5%, 3.0%, and 8.0%, respectively.
SUBSIDIARY ACTIVITIES
Calumet Residential Corporation (CRC) is a second tier subsidiary of the
Company, formed for the purpose of investing in real estate development and
sale. CRC is currently invested as a limited partner in three Illinois single
family home developments in Algonquin, Lake Villa and Naperville Illinois.
As of December 31, 1996, the Algonquin development has completed and closed 733
of 903 single family homes, with 170 homesites remaining. During 1996 the
project generated $891 income to CRC as a limited partner, and $2.4 million
project to date. CRC made an additional $1.0 million investment in a new phase
of this project during 1996, and has a remaining investment of $1.8 million at
December 31, 1996.
During 1996 the Company invested in two new single family construction projects
located in Illinois. The first new project will build and sell 166 single
family homes in Lake Villa, Illinois, with homes priced in the $220 to $250
range. At December 31, 1996, 25 homes have been delivered, with $206 income
to CRC as a limited partner. Sellout of the project is projected to be three
years. The Company invested $2.1 million in this project.
The second new project will build and sell 132 single family homes in
Naperville,Illinois, with homes priced in the $330 to $370 range. Sellout of
the project is projected to be two years. The Company invested $3.2 million in
this project. Construction will begin in the first quarter of 1997.
During 1996 CRC recognized $126 additional income from development projects
completed in prior years. CRC also participates as a limited partner in an
office building rental property in a suburb of Denver, Colorado. During 1996
the investment generated $29 income, and at December 31, 1996 had a remaining
investment balance of $224.
Calumet Savings Service Corporation (CSSC) is a second tier subsidiary of the
Company and is engaged in the sale of insurance, annuity and investment
products through its independent insurance agency and through its franchise
arrangement with Invest Financial Services. Income attributed to this
25
<PAGE> 26
source decreased to $7 in 1996, from $48 in 1995, primarily due to increased
commission and payroll expenses during 1996.
Calumet Mortgage Corporation of Idaho (CMCID) was formed as a subsidiary of
CSSC in January, 1995, to incorporate the existing loan origination office of
the Association located in Ketchum, Idaho. This office originates and sells
mortgage loans, primarily in Sun Valley and the surrounding areas. The Company
increased its portfolio of Idaho mortgage loans by $7.4 million, or 11.3%, to
$72.8 million at December 31, 1996, from $65.4 million at December 31, 1995,
primarily through this subsidiary. CMCID originated $33.3 million in mortgage
loans in 1996, compared to $33.2 million in 1995.
26
<PAGE> 27
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Calumet Bancorp, Inc.
We have audited the accompanying consolidated statement of financial condition
of Calumet Bancorp, Inc. as of December 31, 1996, and the related consolidated
statements of income, stockholders' equity, and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit. The accompanying consolidated financial
statements of the Company as of December 31, 1995, and for the two years then
ended, were audited by other auditors whose report dated February 5, 1996,
expressed an unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the 1996 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Calumet
Bancorp, Inc. at December 31, 1996, and the consolidated results of its
operations and its cash flows for the year then ended, in conformity with
generally accepted accounting principles.
Crowe, Chizek and Company LLP
Oak Brook, Illinois
January 31, 1997
27
<PAGE> 28
CALUMET BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
(Dollars in thousands) December 31,
------------
1996 1995
----------------------
<S> <C> <C>
ASSETS:
Cash $3,021 $2,616
Interest bearing deposits 6,154 6,041
----------------------
CASH AND CASH EQUIVALENTS 9,175 8,657
Securities available-for-sale 57,362 68,153
Securities held-to-maturity
(fair value: $27,375 (1996); $32,278 (1995)) 27,970 32,620
Loans receivable, net 383,770 375,467
Investment in limited partnerships 24,458 16,226
Real estate held for sale acquired
through foreclosure 1,665 2,483
Office properties and equipment, net 4,320 4,267
Other assets 1,497 1,655
----------------------
TOTAL ASSETS $510,217 $509,528
======================
LIABILITIES:
Deposits $360,978 $362,922
Federal Home Loan Bank advances 59,850 55,140
Advance payments by borrowers for
taxes and insurance 3,124 3,058
Income taxes 742 529
Other liabilities 3,759 3,769
----------------------
TOTAL LIABILITIES 428,453 425,418
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 2,000,000
shares authorized -- --
Common stock, $.01 par value, 4,200,000 shares
authorized 3,614,341 (1996) and 3,599,372
(1995) shares issued 36 36
Additional paid-in capital 35,090 34,665
Unrealized gains on securities available for
sale, net of income tax expense of $149 and $217 239 423
Retained earnings - substantially restricted 73,817 68,418
Unearned ESOP shares (849) (1,414)
Stock held for management recognition plan (137) (273)
Treasury stock (1,237,313 shares (1996); 926,494
shares (1995)) (26,432) (17,745)
----------------------
TOTAL STOCKHOLDERS' EQUITY 81,764 84,110
----------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $510,217 $509,528
======================
</TABLE>
See notes to consolidated financial statements.
28
<PAGE> 29
CALUMET BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------------------
1996 1995 1994
---------------------------------------
<S> <C> <C> <C>
INTEREST AND DIVIDEND INCOME:
Loans $32,810 $31,955 $29,295
Securities and deposits 6,109 6,806 7,314
---------------------------------------
Total interest and dividend income 38,919 38,761 36,609
INTEREST EXPENSE:
Deposits 18,348 17,007 14,195
Federal Home Loan Bank advances 2,706 3,170 2,426
---------------------------------------
Total interest expense 21,054 20,177 16,621
---------------------------------------
NET INTEREST INCOME 17,865 18,584 19,988
Provision for losses on loans 800 800 800
---------------------------------------
Net interest income after provision for losses 17,065 17,784 19,188
OTHER INCOME:
Gain on loans sold 220 391 219
Gain (loss) on sales of real estate (4) (179) 129
Gain (loss) on sales of securities 53 (83) (47)
Income (loss) from limited partnership 1,639 (125) 1,205
Insurance commissions 227 239 203
Other 857 729 884
---------------------------------------
Total other income 2,992 972 2,593
OTHER EXPENSES:
Compensation and benefits 5,291 5,142 5,462
Office occupancy and equipment 1,302 1,340 1,375
Federal insurance premiums 801 818 884
FDIC special assessment for SAIF 2,316 -- --
Advertising and promotion 375 357 341
Data processing 444 389 356
Other 1,702 1,885 1,922
---------------------------------------
Total other expenses 12,231 9,931 10,340
---------------------------------------
Income before income taxes 7,826 8,825 11,441
Income taxes 2,427 2,860 4,022
---------------------------------------
NET INCOME $ 5,399 $ 5,965 $ 7,419
=======================================
EARNINGS PER SHARE $ 2.05 $ 2.06 $ 2.47
=======================================
</TABLE>
See notes to consolidated financial statements.
29
<PAGE> 30
CALUMET BANCORP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in thousands)
<TABLE>
<CAPTION>
Net Unrealized
Gains (Losses)
Additional on Securities Unearned Stock Total
Common Paid -in Available Retained ESOP Held for Treasury Stockholders'
Stock Capital for Sale Earnings Shares MRP Stock Equity
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1993 $23 $33,946 -- $55,034 ($2,263) ($745) ($8,954) $77,041
Adjustment to beginning balance
for change in accounting method,
net of income taxes of $603 -- -- 991 -- -- -- -- 991
Transfer resulting from stock split 12 (12) -- -- -- -- -- --
Change in unrealized losses on
securities available-for-sale net of
income tax benefit of $1,872 -- -- (2,944) -- -- -- -- (2,944)
Proceeds from exercise of stock
options - 56,139 shares 1 560 -- -- -- -- -- 561
Amortization of purchase price
of MRP stock -- -- -- -- -- 335 -- 335
Allocation of shares to ESOP
participants -- -- -- -- 283 -- -- 283
Repurchase of 244,587 shares
of treasury stock -- -- -- -- -- -- (5,400) (5,400)
Net income -- -- -- 7,419 -- -- -- 7,419
--------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1994 36 34,494 (1,953) 62,453 (1,980) (410) (14,354) 78,286
Change in unrealized losses on
securities available-for-sale net of
income tax expense of $1,486 -- -- 2,376 -- -- -- -- 2,376
Proceeds from conversion
litigation settlement -- 52 -- -- -- -- -- 52
Proceeds from exercise of stock
options - 5,546 shares -- 74 -- -- -- -- -- 74
Amortization of purchase price
of MRP stock -- 45 -- -- -- 137 -- 182
Allocation of shares to ESOP
participants -- -- -- -- 566 -- -- 566
Repurchase of 124,300 shares
of treasury stock -- -- -- -- -- -- (3,391) (3,391)
Net income -- -- -- 5,965 -- -- -- 5,965
--------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1995 36 34,665 423 68,418 (1,414) (273) (17,745) 84,110
Changed in unrealized losses on
securities available-for-sale net of
income tax expense of $68 -- -- (184) -- -- -- -- (184)
Proceeds from exercise of stock
options - 14,969 shares -- 351 -- -- -- -- -- 351
Amortization of purchase price
of MRP stock -- 74 -- -- -- 136 -- 210
Allocation of shares to ESOP
participants -- -- -- -- 565 -- -- 565
Repurchase of 310,819 shares
of treasury stock -- -- -- -- -- -- (8,687) (8,687)
Net income -- -- -- 5,399 -- -- -- 5,399
--------------------------------------------------------------------------------------------------
Balance at December 31, 1996 $36 $35,090 $239 $73,817 ($849) ($137) ($26,432) $81,764
==================================================================================================
</TABLE>
See notes to consolidated financial statements.
30
<PAGE> 31
CALUMET BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------
1996 1995 1994
----------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 5,399 $ 5,965 $ 7,419
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for losses on loans 800 800 800
Provision for depreciation 361 337 378
Amortization of deferred loan and commitment fees (939) (893) (1,079)
Amortization and accretion of premiums and discounts 233 224 749
Amortization and allocation of stock based benefits 701 703 618
Loss (gain) on sales of securities available-for-sale (53) 83 47
Equity in loss (income) from limited partnerships (1,639) 388 (1,192)
Net loss (gain) on sale of real estate 4 179 (129)
Originations of loans held for sale (5,945) (10,355) (50,902)
Gain on loans sold (220) (391) (219)
Proceeds from loans sold 6,165 10,746 51,121
Decrease (increase) in interest receivable 28 223 (315)
(Decrease) increase in interest payable 20 1,093 (4)
Change in operating assets and liabilities:
(Increase) decrease in other assets 150 2,484 (2,103)
Increase (decrease) in income taxes 473 (156) 693
Increase (decrease) in other liabilities (54) (562) 186
----------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 5,484 10,868 6,068
INVESTING ACTIVITIES:
Securities available-for-sale:
Purchases (30,238) (27,486) (27,624)
Proceeds from sale 35,075 15,452 41,923
Repayments and maturities 5,755 21,128 10,074
Securities held-to-maturity:
Purchases (557) (5,055) (2,085)
Repayments and maturities 4,974 3,292 11,306
Principal and fees collected on loans 79,034 68,460 74,498
Loans originated (83,116) (76,920) (102,588)
Loans purchased (3,567) (6,577) (4,835)
Investments in limited partnerships (11,563) (4,664) (7,527)
Return of investment in limited partnerships 4,970 3,761 5,828
Proceeds from sales of real estate 348 730 2,554
Purchases of office property and equipment (414) (88) (451)
----------------------------------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 701 (7,967) 1,073
</TABLE>
See notes to consolidated financial statements.
31
<PAGE> 32
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Dollars in thousands)
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------
1996 1995 1994
------------------------------------------------
<S> <C> <C> <C>
FINANCING ACTIVITIES:
Net increase (decrease) in demand and passbook accounts $ 1,602 ($9,894) ($32,476)
Net increase (decrease) in certificates of deposit (3,523) 24,985 (29,776)
Proceeds of Federal Home Loan Bank advances 100,675 60,290 44,000
Repayment of Federal Home Loan Bank advances (95,965) (75,485) --
Repayment of ESOP loan obligation -- -- (2,263)
Net increase (decrease) in advance payments by
borrowers for taxes and insurance 66 (208) 381
Net proceeds from exercise of stock options 165 57 561
Proceeds from conversion litigation settlement -- 52 --
Purchase of treasury stock (8,687) (3,391) (5,400)
------------------------------------------------
NET CASH USED IN FINANCING ACTIVITIES (5,667) (3,594) (24,973)
------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 518 (693) (17,832)
Cash and cash equivalents at beginning of year 8,657 9,350 27,182
------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 9,175 $ 8,657 $ 9,350
================================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for interest on deposits $ 18,371 $15,844 $14,199
Cash paid during the year for interest on notes payable 2,663 3,240 2,215
------------------------------------------------
$ 21,034 $19,084 $16,414
================================================
Cash paid during the year for income taxes $ 2,382 $ 3,328 $ 3,208
================================================
Noncash transactions:
Loans to facilitate sales of real estate owned $ 935 $ 973 $ 1,580
Loans transferred to real estate owned 553 1,257 1,986
Investment in limited partnership
transferred to real estate owned -- 1,200 --
</TABLE>
See notes to consolidated financial statements.
32
<PAGE> 33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
The Company's principal business activity is the operation of its thrift
subsidiary, and consists of attracting deposits from the public and investing
those deposits, together with funds generated from operations and borrowings,
primarily in residential mortgage loans. The Association operates five
financial services offices -- Dolton, Lansing, Sauk Village and two in
southeastern Chicago. The Association's deposit accounts are insured to the
maximum allowable amount by the FDIC. The Company also invests in equity
securities and in various limited partnerships which have invested in
residential development, residential and commercial rental properties, and
mortgage loan servicing.
The Company's results of operations are dependent primarily on net interest
income, which is the difference between the interest income earned on its loan
and investment securities portfolios, and its cost of funds, consisting of
interest paid on its deposits and borrowings. The Company's operating results
are also affected to a lesser extent by loan and commitment fees, customer
service charges, and by the sale of real estate, insurance and annuities
through its third tier subsidiaries. Operating expenses of the Company are
primarily employee compensation and benefits, office occupancy and equipment
costs, federal deposit insurance premiums, advertising and promotion costs,
data processing and other administrative expenses.
The accounting policies of Calumet Bancorp, Inc. (the Company) and subsidiaries
which significantly affect the determination of consolidated financial position
and results of operations are described below.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts and results of
operations of the Company, and its wholly owned subsidiary, Calumet Federal
Savings and Loan Association of Chicago (the Association) and the Association's
three first-tier subsidiaries, Calumet Mortgage Corporation (of Illinois,75%
owned), wholly owned Calumet Residential Corporation, which owns 51% of Calumet
United Limited Liability Company, and wholly owned Calumet Savings Service
Corporation, which wholly owns Calumet Mortgage Corporation of Idaho and
Calumet Mortgage Corporation of New Mexico. Calumet Mortgage Corporation of
New Mexico was dissolved August 1, 1996. Calumet Mortgage Corporation (of
Illinois) was dissolved April 27, 1995.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents represent highly liquid investments with maturities
of 90 days or less at the time of purchase and include cash and
interest-bearing deposits.
33
<PAGE> 34
SECURITIES
The Company adopted Statement of Financial Accounting Standards (SFAS) No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" for
securities held as of or acquired after January 1, 1994. In accordance with
SFAS No. 115, prior period financial statements have not been restated to
reflect the change in accounting principle. The cumulative effect as of
January 1, 1994 of adopting SFAS No. 115 increased the opening balance of
stockholders' equity by $991 (net of $603 in deferred income taxes) to reflect
the net unrealized holding gains on securities classified as available-for-sale
previously carried at the lower of cost or market.
Securities classified as held-to-maturity are carried at amortized cost if
management has the positive intent and ability to hold the securities to
maturity. Securities not classified as held-to-maturity are designated
securities available-for-sale and carried at fair value with unrealized gains
and losses reflected net of deferred income taxes in stockholders' equity.
The carrying value of securities reflects amortization of premiums and
accretion of discounts over the estimated lives of the securities using the
level yield method. Such amortization is included in interest income.
Interest and dividends are included in interest income from securities as
earned. Realized gains and loses on all securities are computed using the
specific identification method. Securities are written down to fair value when
a decline in fair value is not temporary.
LOANS RECEIVABLE
Loans receivable are stated at outstanding unpaid principal balances net of any
deferred fees or costs on originated loans or unamortized premiums or discounts
on purchased loans.
Premiums paid and discounts received in connection with mortgage loans
purchased are deferred and amortized to income over the estimated life of the
loans using the level-yield method. Loan origination fees and certain direct
origination costs related to processing successful loan applications are
deferred and the net amount amortized to income over the contractual life of
the loans as an adjustment to interest income using the level yield method.
Costs associated with processing unsuccessful loan applications are charged to
expense as incurred.
ALLOWANCE FOR LOSSES ON LOANS
The Company provides for losses on loans based on evaluations of the loan
portfolio, past credit loss experience, current economic conditions, the amount
and timing of future cash flows expected to be received on impaired loans, and
other pertinent factors which form a basis for determining the adequacy of the
allowance for losses. Management believes that the allowance for losses on
loans is adequate to absorb potential losses in the portfolio; however, future
additions to the allowance may be necessary based on changes in economic
conditions. In addition, various regulatory agencies, as an integral part of
their examination process, periodically review the Company's allowance for
losses on loans. Such agencies may require the Company to recognize additions
to the allowance based on their judgments of information available to them at
the time of their examination.
34
<PAGE> 35
The Company adopted SFAS No. 114, "Accounting by Creditors for Impairment of a
Loan" as amended in SFAS No. 118, "Accounting by Creditors for Impairment of
Loan-Income Recognition and Disclosure" as of January 1, 1995. In accordance
with SFAS No. 114, prior period financial statements have not been restated to
reflect the change in accounting principle. The allowance for losses related
to loans that are identified for evaluation in accordance with SFAS No. 114,
generally multifamily and commercial mortgages, is based on discounted cash
flows using the loan's initial effective interest rate or the fair value of the
collateral for certain collateral dependant loans. The Company generally
considers one-to-four family residential mortgages to be smaller balance
homogeneous loans that are evaluated collectively for impairment. Prior to
adopting SFAS No. 114, the allowance for losses related to these loans was
based on undiscounted cash flows or the fair value of the collateral for
collateral dependent loans. The adoption did not have any material effect on
operating results or financial position.
INTEREST ON LOANS
Interest on loans is recorded when earned. The Company places loans (including
loans impaired under SFAS No. 114) on nonaccrual status when they have been
delinquent 90 or more days. When a loan is placed on nonaccrual status,
previously accrued but uncollected interest is fully reserved.
REAL ESTATE ACQUIRED THROUGH FORECLOSURE
Real estate which has been acquired through, or in lieu of, foreclosure is
carried at the lower of fair value, less estimated selling costs, or the
related loan balance at the date of foreclosure. Valuations are periodically
performed by management and the carrying value is reduced by a charge to
operations if the carrying value of a property exceeds its estimated fair value
less estimated selling costs determined by management on valuation dates
subsequent to foreclosure. A loan is classified as real estate-owned when the
Company has taken possession of the collateral even though foreclosure
proceedings may not have been completed.
OFFICE PROPERTIES AND EQUIPMENT
Office properties and equipment are stated at cost, less accumulated
depreciation. Provisions for depreciation are computed using the straight-line
method over the estimated useful lives of the assets. Useful lives for office
buildings are 30 to 40 years and for furniture, fixtures and equipment, 3 to 10
years.
INVESTMENT IN LIMITED PARTNERSHIPS
The Company invests in limited partnerships engaged in real estate development
and sale and in loan servicing. As a limited partner without a controlling
interest, the Company accounts for these investments using the equity method.
The Company periodically reviews these investments for impairment based on
review of independent appraisals, financial statements, and other relevant
operating data.
35
<PAGE> 36
INCOME TAXES
The Company and its subsidiaries file a consolidated federal income tax return.
Deferred income taxes are provided for all significant items of income and
expense that are recognized in different periods for financial reporting
purposes and income tax reporting purposes. The asset and liability approach
is used for the financial accounting and reporting of income taxes. This
approach requires companies to take into account changes in income tax rates
when valuing the deferred income tax accounts recorded on the balance sheet.
In addition, it provides that a deferred income tax liability or asset shall be
recognized for the estimated future tax effects attributable to "temporary
differences" and loss and tax credit carryforwards. Temporary differences
include differences between financial statement income and tax return income
which are expected to reverse in future periods as well as differences between
tax bases of assets and liabilities and their amounts for financial reporting
purposes which are also expected to be settled in future periods. To the
extent a deferred tax asset is established which, more likely than not, is not
expected to be realized, a valuation allowance shall be established against
such account.
FINANCIAL INSTRUMENTS
In the ordinary course of business the Company has entered into off-balance
sheet financial instruments consisting of commitments to extend credit and
standby letters of credit. Such financial instruments are recorded in the
financial statements when they are funded or related fees are incurred or
received.
NEW ACCOUNTING PRONOUNCEMENTS
In 1995, the Financial Accounting Standards Board (FASB) issued SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
To be Disposed Of." The Company was required to adopt this new method of
accounting for long-lived assets in 1996. Adoption of SFAS No. 121 did not
have a material effect on the Company's financial position or results of
operations.
Also in 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation." SFAS No. 123 is effective for transactions entered into in
fiscal years that begin after December 15, 1995. This statement defines a fair
value based method of accounting for employee stock options or similar equity
instruments and encourages all entities to adopt that method of accounting for
their employee stock compensation plans. It also allows an entity to continue
to measure compensation costs for those plans using the intrinsic value based
method of accounting prescribed by APB No. 25, "Accounting for Stock Issued to
Employees." Companies which decide to continue accounting for employee stock
option plans under the provisions of APB No. 25 must make pro forma disclosures
of net income and, if presented, earnings per share, as if the fair value based
method of accounting defined in SFAS No. 123 had been applied. The Company has
elected to adopt only the disclosure requirements of SFAS No. 123.
Consequently, adoption of SFAS No. 123 will not have a material effect on the
Company's financial position or results of operations.
In 1996 the FASB issued SFAS No. 125, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities." It revises the
accounting for transfers of financial assets, such as loans and securities, and
for distinguishing between sales and secured borrowings. SFAS No. 125, as
amended by SFAS No. 127, is effective on a prospective basis for some
transactions in 1997 and others
36
<PAGE> 37
in 1998. Adoption of SFAS No. 125 is not expected to have a material effect on
the Company's financial position or results of operations.
EARNINGS PER SHARE
Earnings per share of common stock has been determined by dividing net income
for each period by the weighted average number of shares of common stock and
common stock equivalents outstanding. Common stock equivalents assume the
exercise of stock options and the use of proceeds to purchase treasury stock at
the average market price for the period. Shares of common stock purchased by
the Company's Employee Stock Ownership Plan ("ESOP") prior to December 31,
1992, are included in shares outstanding for purposes of calculating earnings
per share. Shares committed to be released to the ESOP during the year are
expensed during the year based on original cost. The ESOP did not purchase any
shares subsequent to December 31, 1992, which would be subject to AICPA
Statement of Position 93-6, "Employers' Accounting for Employee Stock Ownership
Plans."
<TABLE>
<CAPTION>
1996 1995 1994
---------------------------------------
<S> <C> <C> <C>
Weighted average shares of common stock and
common stock equivalents 2,637,266 2,901,667 2,998,591
Average common stock equivalents included above 138,364 134,627 147,352
Average unearned ESOP shares included above 113,160 171,508 212,175
</TABLE>
RECLASSIFICATION
Certain items in the 1994 and 1995 financial statements have been reclassified
to conform to the 1996 presentation.
37
<PAGE> 38
2. SECURITIES
Securities at December 31, 1996 are summarized as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------------------------------------------------------------
<S> <C> <C> <C> <C>
AVAILABLE-FOR-SALE
U.S. Government and agency securities $ 10,962 $ 83 $ 59 $10,986
U.S. Government securities fund 16,975 -- 564 16,411
Money market fund 888 -- -- 888
ARM securities fund 5,222 -- 35 5,187
REMIC securities 11,628 -- 108 11,520
Municipal bonds 861 -- -- 861
Equity securities 10,438 1,109 38 11,509
----------------------------------------------------------------
Total $ 56,974 $1,192 $804 $57,362
================================================================
HELD-TO-MATURITY
U.S. Government and agency securities $ 5,000 $ -- $ 3 $ 4,997
FHLMC/FNMA mortgage securities 17,209 45 627 16,627
CMO securities 2,406 -- 10 2,396
Municipal bonds 145 -- -- 145
Federal Home Loan Bank stock 3,210 -- -- 3,210
----------------------------------------------------------------
Total $ 27,970 $ 45 $640 $27,375
================================================================
<CAPTION>
Securities at December 31, 1995 are summarized as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------------------------------------------------------------
<S> <C> <C> <C> <C>
AVAILABLE-FOR-SALE
U.S. Government and agency securities $ 12,956 $ 199 $ 48 $13,107
U.S. Government securities fund 16,018 -- 147 15,871
Money market fund 6,596 -- -- 6,596
ARM securities fund 10,699 -- 5 10,694
REMIC securities 13,063 8 131 12,940
CMO securities 325 -- -- 325
Equity securities 7,856 790 26 8,620
----------------------------------------------------------------
Total $ 67,513 $ 997 $357 $68,153
================================================================
HELD-TO-MATURITY
U.S. Government and agency securities $ 5,000 $ 57 $ -- $ 5,057
FHLMC/FNMA mortgage securities 20,820 52 438 20,434
CMO securities 3,012 -- 13 2,999
Municipal bonds 149 -- -- 149
Federal Home Loan Bank stock 3,639 -- -- 3,639
----------------------------------------------------------------
Total $ 32,620 $ 109 $451 $32,278
================================================================
</TABLE>
38
<PAGE> 39
Securities with carrying amounts of $7,312 and $6,508 at December 31, 1996 and
1995, respectively, are pledged under credit enhancement agreements.
The amortized cost and fair value of debt securities available-for-sale and
held-to-maturity at December 31, 1996, by contractual maturity are shown below.
Expected maturities may differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call or
prepayment penalties.
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
------------------------
<S> <C> <C>
AVAILABLE-FOR-SALE
Due in one year or less $ -- $ --
Due after one year through five years 6,962 7,037
Due after five years through ten years 2,000 2,004
Due after ten years 14,489 14,326
------------------------
23,451 23,367
Equity securities 10,438 11,509
Mutual funds 23,085 22,486
------------------------
Total $ 56,974 $ 57,362
========================
HELD-TO-MATURITY
Due in one year or less $ -- $ --
Due after one year through five years -- --
Due after five years through ten years 70 73
Due after ten years 24,690 24,092
------------------------
24,760 24,165
Federal Home Loan Bank stock 3,210 3,210
------------------------
$ 27,970 $ 27,375
========================
</TABLE>
The table below provides information concerning sales of securities
available-for-sale.
<TABLE>
<CAPTION>
1996 1995 1994
----------------------------------------
<S> <C> <C> <C>
Gross proceeds from sales $ 35,075 $ 15,572 $ 41,923
Gross realized gains 68 137 742
Gross realized losses 15 220 789
Income tax expense (credit) arising from net gains (losses) 19 (29) (30)
</TABLE>
39
<PAGE> 40
3. LOANS RECEIVABLE
Loans receivable consisted of the following:
<TABLE>
<CAPTION>
December 31,
------------
1996 1995
------------------------
<S> <C> <C>
MORTGAGE LOANS:
One-to-four family residential $207,697 $204,970
Multifamily residential 47,510 54,216
Commercial real estate 97,093 87,066
Construction loans 27,442 31,055
Land loans 13,760 13,739
------------------------
TOTAL MORTGAGE LOANS 393,502 391,046
Other loans 2,184 3,045
------------------------
TOTAL LOANS RECEIVABLE 395,686 394,091
Accrued interest net of reserve for uncollected interest 2,570 2,521
Less: Undisbursed portion of loan proceeds (6,386) (13,531)
Unearned income (2,470) (2,744)
Allowance for losses on loans (5,630) (4,870)
------------------------
NET LOANS RECEIVABLE $383,770 $375,467
========================
</TABLE>
The Company has pledged residential mortgage loans as collateral to borrowings
from the Federal Home Loan Bank of Chicago in an amount not less than 170% of
outstanding advances and letters of credit.
The Company's lending activities have been concentrated primarily in
residential real property secured by first liens on such property. The Company
requires collateral on all loans and generally maintains loan-to-value ratios
of no greater than 80% on mortgage loans. At December 31, 1996, the Company's
mortgage loan portfolio was geographically diversified, with concentrations
primarily in Illinois (35%), Colorado (26%), Idaho (19%), and New Mexico (14%).
Mortgage loans in Indiana and Michigan, all within the company's immediate
lending area, represent another 3% of the portfolio at December 31, 1996. At
December 31, 1995, these concentrations were: Illinois (37%); Colorado (28%);
Idaho (17%); New Mexico (11%); and Indiana/Michigan (4%).
4. ALLOWANCE FOR LOSSES ON LOANS
Changes in the allowance for losses on loans are as follows:
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------
1996 1995 1994
---------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $4,870 $4,429 $ 4,825
Provision for losses 800 800 800
Charge-offs (114) (474) (1,206)
Recoveries 74 115 10
---------------------------------------
Balance at end of year $5,630 $4,870 $ 4,429
=======================================
</TABLE>
40
<PAGE> 41
At December 31, 1996, the Company had two related loans that were considered to
be impaired under SFAS No. 114 with a recorded investment of $1.1 million.
These loans have been placed in nonaccrual status. One of the loans has been
fully reserved in the amount of $365, the other does not have a specific
reserve. The average recorded investment in impaired loans during the year
ended December 31, 1996, was approximately $654. For the year ended December
31, 1996, the Company recognized interest income (using the cash basis method
of income recognition) on those impaired loans of $98.
At December 31, 1995, the Company had one loan that was considered to be
impaired under SFAS No. 114 with a recorded investment of $365. This loan has
been placed in nonaccrual status, and as a result of write-downs it does not
have a specific allowance for loss. The average recorded investment in
impaired loans during the year ended December 31, 1995, was approximately $471.
For the year ended December 31, 1995, the Company recognized interest income
(using the cash basis method of income recognition) on those impaired loans of
$70.
5. OFFICE PROPERTIES AND EQUIPMENT
Office properties and equipment at December 31 are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
----------------------
<S> <C> <C>
Land $ 936 $ 938
Buildings 4,190 4,018
Furniture and equipment 3,218 3,197
----------------------
8,344 8,153
Less accumulated depreciation 4,024 3,886
----------------------
Office properties and equipment, net $ 4,320 $ 4,267
======================
</TABLE>
6. DEPOSITS
Deposits at December 31 are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
----------------------
<S> <C> <C>
Non-interest-bearing deposits $ 2,495 $ 2,536
N.O.W. accounts 18,297 18,423
Money market accounts 7,551 6,906
Passbook savings 64,677 63,553
Certificates of deposit 264,310 267,833
----------------------
357,330 359,251
Accrued interest 3,648 3,671
----------------------
Total deposits $360,978 $362,922
======================
Deposit accounts with balances in excess of $100,000 $ 24,452 $ 24,968
======================
</TABLE>
41
<PAGE> 42
Scheduled maturities of certificates of deposit at December 31, 1996 are as
follows:
<TABLE>
<CAPTION>
Maturity dates
--------------
<S> <C>
1997 $209,121
1998 34,644
1999 9,099
2000 8,260
2001 2,240
After 2001 946
--------
Total $264,310
========
</TABLE>
Substantially all of the Association's depositors are residents of the State of
Illinois.
7. FEDERAL HOME LOAN BANK ADVANCES
Federal Home Loan Bank advances at December 31 consist of the following:
<TABLE>
<CAPTION>
Maturity Dates 1996 1995
-------------- --------------------
<S> <C> <C>
1996 $ -- $27,290
1997 30,675 19,675
1998 16,000 7,000
1999 12,000 --
2003 1,175 1,175
--------------------
Total $59,850 $55,140
====================
</TABLE>
Federal Home Loan Bank advances all have fixed rates of interest, except for
$4.0 million of overnight advances at December 31, 1996, which have a daily
floating rate. At December 31, 1996, the interest rates on fixed rate advances
ranged from 5.25% to 8.14%, with a weighted average rate of 6.14%. At December
31, 1995, the interest rates on fixed rate advances ranged from 4.70% to 8.14%,
with a weighted average rate of 5.95%. The Company is required to maintain
qualifying loans in its portfolio of at least 170% of outstanding advances and
letters of credit as collateral to notes payable to the Federal Home Loan Bank
of Chicago (FHLB). FHLB stock is also pledged as collateral.
42
<PAGE> 43
8. INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
Year ended December 31
----------------------
1996 1995 1994
---------------------------------------
<S> <C> <C> <C>
CURRENT EXPENSE:
Federal $2,771 $1,954 $3,457
State 264 303 452
DEFERRED EXPENSE (BENEFIT) (608) 603 113
---------------------------------------
Total income tax expense $2,427 $2,860 $4,022
=======================================
</TABLE>
Reconciliations of the income tax expense included in the consolidated
financial statements and amounts computed by applying the statutory federal
income tax rate are as follows:
<TABLE>
<CAPTION>
Year ended December 31
----------------------
1996 1995 1994
--------------------------------
<S> <C> <C> <C>
Federal income taxes at the statutory rate $2,661 $3,001 $3,856
Items affecting federal income tax rate:
State income taxes 152 206 390
Dividends received deduction (176) (137) (127)
Other, net (210) (210) (97)
--------------------------------
Total $2,427 $2,860 $4,022
================================
</TABLE>
Significant components of the deferred tax assets and liabilities at December
31 are as follows:
<TABLE>
<CAPTION>
1996 1995
---------------------------
<S> <C> <C>
DEFERRED TAX ASSETS:
Loan fees $ 49 $ 109
Allowance for losses on loans 1,846 1,755
---------------------------
1,895 1,864
---------------------------
DEFERRED TAX LIABILITIES:
Depreciation (378) (382)
Stock dividends on FHLB stock (104) (162)
Tax effect of tax bad debt reserves in excess of base year (556) (606)
Net unrealized gains on securities available-for-sale (149) (217)
Loan fees -- (45)
Income from limited partnerships (296) (550)
Other, net (16) (182)
---------------------------
(1,499) (2,144)
---------------------------
Net deferred tax asset (liability) $ 396 ($280)
===========================
</TABLE>
The net deferred tax asset (liability) is included in other assets and income
taxes payable on the Consolidated Statements of Financial Condition in 1996 and
1995, respectively.
43
<PAGE> 44
Retained earnings at December 31, 1996 includes approximately $6.7 million for
which no provision for federal income taxes has been recognized. Tax
legislation passed in August 1996 now requires all thrift institutions to
deduct a provision for bad debts for tax purposes based on actual loss
experience and recapture the excess bad debt reserve accumulated in the tax
years after 1986. The related amount of excess reserves which must be
recaptured is $1.5 million and will be recaptured over a six year period
beginning in 1998.
9. REGULATORY MATTERS
The Association is subject to regulatory capital requirements administered by
federal regulatory agencies. Capital adequacy guidelines and prompt corrective
action regulations involve quantitative measures of assets, liabilities, and
certain off-balance-sheet items calculated under regulatory accounting
practices. Capital amounts and classifications are also subject to qualitative
judgments by regulators about components, risk weightings, and other factors,
and the regulators can lower classifications in certain cases. Failure to meet
various capital requirements can initiate regulatory action that could have a
direct material effect on the financial statements.
The prompt corrective action regulations provide five classifications,
including well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized, and critically undercapitalized, although these
terms are not used to represent overall financial condition. If adequately
capitalized, regulatory approval is required to accept brokered deposits. If
undercapitalized, capital distributions are limited, as is asset growth and
expansion, and plans for capital restoration are required. The minimum
requirements are:
<TABLE>
<CAPTION>
Capital to risk-weighted assets
------------------------------- Tier 1 capital to
Total Tier 1 adjusted total assets
--------------------------------------------------------
<S> <C> <C> <C>
Well capitalized 10% 6% 5%
Adequately capitalized 8 4 4
Undercapitalized 6 3 3
</TABLE>
At December 31, actual capital levels and minimum required levels of the
Association were:
<TABLE>
<CAPTION>
Minimum Required To
Be Well Capitalized
Minimum Required for Under Prompt
Actual Capital Adequacy Corrective Action
-------------------------------------------------------------------------
Amount Ratio Amount Ratio Amount Ratio
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1996
Total capital (to risk-weighted assets) $51,365 16.6% $24,765 8.0% $30,956 10.0%
Tier 1 (core) capital (to risk-weighted assets) 47,481 15.3 12,382 4.0 18,573 6.0
Tier 1 (core) capital (to average assets) 47,481 9.9 19,110 4.0 23,888 5.0
Tier 1 (core) capital (to adjusted total assets) 47,481 9.9 14,325 3.0 N/A
Tangible capital (to adjusted total assets) 47,481 9.9 7,162 1.5 N/A
1995
Total capital (to risk-weighted assets) $59,943 19.6% $24,420 8.0% $30,525 10.0%
Tier 1 (core) capital (to risk-weighted assets) 56,116 18.4 12,210 4.0 18,315 6.0
Tier 1 (core) capital (to average assets) 56,116 11.7 19,240 4.0 24,050 5.0
Tier 1 (core) capital (to adjusted total assets) 56,116 11.7 14,408 3.0 N/A
Tangible capital (to adjusted total assets) 56,116 11.7 7,204 1.5 N/A
</TABLE>
44
<PAGE> 45
As of December 31, 1996, the most recent notification from the Office of Thrift
Supervision categorized the association as well capitalized under the
regulatory framework for prompt corrective action. There are no conditions or
events since that notification that management believes have changed the
Association's category.
The Association meets the Qualified Thrift Lender test, which requires at least
65% of assets to be housing-related or other specified assets. A failure to
meet the QTL test places limits on growth, branching, new investment, FHLB
advances and dividends.
10. EMPLOYEE BENEFIT PLANS
The Company maintains a profit-sharing plan which covers all employees with one
year of service who are at least 21 years of age. Contributions to the
profit-sharing plan are made at the discretion of the Board of Directors.
There were no contributions to the plan in 1996, 1995 or 1994.
The Company has a nonqualified benefit plan which provides key officers with
retirement benefits in excess of qualified plan limits imposed by federal tax
law. Obligations under the plan are fully funded. $100 was charged to expense
under the plan for 1994; there were no charges for 1995 or 1996.
The Company sponsors an employee stock ownership plan (ESOP) that covers all
employees with one year of service who are at least 21 years of age. The ESOP
is funded by discretionary contributions made by the Association. At December
31, 1996, there were 56,580 shares committed to be released for 1996, and
84,870 unallocated shares. The Association recorded $565, $566 and $283 of
compensation expense during 1996, 1995 and 1994, respectively, based on the
cost of shares released for those years. Unearned ESOP shares are considered
to be outstanding for purposes of computing earnings per share. The average
unearned ESOP shares outstanding during 1996, 1995, and 1994 were 113,160,
171,508 and 212,175, respectively.
In connection with the conversion to stock ownership, the Company adopted a
Management Recognition and Retention Plan (MRP). The Association contributed
$1.4 million allowing the MRP to acquire 124,950 shares of common stock of the
Company, at an average cost of $11.32 per share. Under the MRP, 88,716 shares
of common stock were awarded to key employees in 1992. One third of these
shares vested in 1992, 1993, and 1994 at an amortized cost of $335 each year.
The remaining 36,234 shares were awarded in 1995 and vested in 1995, 1996, and
1997. The amortized cost of the vested shares was $136 and $137 in 1996 and
1995, respectively. The unamortized cost of shares not yet earned (vested) is
reported as a reduction of stockholders' equity.
The Company has a stock option plan under the terms of which 353,625 shares of
the Company's common stock were reserved for issuance. The options become
exercisable on a cumulative basis in equal installments over a five year period
from the date of grant. The options expire ten years from the date of grant.
45
<PAGE> 46
A summary of the status of the Company's stock option plan as of December 31,
1996, 1995, and 1994, and changes during the years then ended is presented
below:
<TABLE>
<CAPTION>
Weighted- Weighted- Weighted-
average average average
1996 Exercise 1995 Exercise 1994 Exercise
Shares Price Shares Price Shares Price
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 289,733 $11.38 263,444 $10.00 322,412 $10.00
Granted -- 32,542 22.38 --
Exercised (14,969) 11.03 (5,546) 10.16 (56,139) 10.00
Forfeited -- 10.00 (707) -- (2,829) 10.00
-------------------------------------------------------------------------------
Outstanding at end of year 274,764 $11.41 289,733 $11.39 263,444 $10.00
===============================================================================
Options exercisable at end of year 255,984 $10.60 200,685 $10.40 136,708 $10.00
Weighted-average fair value of
options granted during year -- -- 32,542 $10.71 -- --
</TABLE>
Of the outstanding options at December 31, 1996, 243,536 relate to options
granted in 1992 at an exercise price of $10.00 and having a remaining life of
5.1 years before expiration. All of these options are fully vested and
exercisable. The remaining 31,228 options outstanding at December 31, 1996,
relate to those granted in 1995 at an exercise price of $22.38 and have a
remaining life of 8.1 years before expiration. These options vest in equal
installments over a five year period from the date of grant and were 40% vested
at December 31, 1996. Of these options, 12,449 were exercisable at December
31, 1996. The Company applies APB Opinion 25 and related Interpretations in
accounting for its stock option plan. Accordingly, no compensation cost has
been recognized at the date of grant. If the stock options granted in 1995 had
been valued under SFAS No. 123 at their fair value at the date of grant, those
options would have been valued at $10.71 per share and resulted in an annual
cost of $70 for 1995 through 1999.
Had compensation cost been determined based on the fair value at the grant
dates for awards under the stock option plan in 1995, consistent with the
method of SFAS No. 123 "Accounting for Stock-Based Compensation," the Company's
net income and earnings per share would have been reduced to the proforma
amounts in the table below. For purposes of proforma disclosure, the estimated
fair value of the stock options awarded is amortized to expense over their
respective vesting periods.
<TABLE>
<CAPTION>
1996 1995
----------------------
<S> <C> <C>
Proforma net income $5,349 $5,915
Proforma earnings per share $ 2.03 $ 2.04
</TABLE>
The fair value of options granted in 1995 was estimated at the date of grant
using a Black-Scholes option pricing model using the following assumptions:
dividend yield of 0%; expected volatility factor of the expected market price
of the Company's common stock of 0.22; risk-free interest rate of 7.98%; and
expected option term of 7 years.
46
<PAGE> 47
The Black-Scholes option pricing valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in
the subjective input assumptions can materially affect the fair value estimate,
in management's opinion, the existing models do not necessarily provide a
reliable single measure of the fair value of its employee stock options. The
current year proforma amounts may not be indicative of future amounts if
additional stock options are granted.
11. COMMITMENTS AND CONTINGENCIES
The Company had outstanding commitments at December 31 as follows:
<TABLE>
<CAPTION>
1996 1995
------------------------
<S> <C> <C>
Residential property loans $ 4,088 $ 5,255
Nonresidential property loans 1,634 1,875
Credit enhancements 6,279 7,260
Lines of credit 19,447 19,325
Letters of credit 1,425 382
Residential property investment 1,693 1,967
</TABLE>
At December 31, 1996, the Company's residential property loan commitments
included approximately $1.6 million of adjustable rate mortgages and $2.5
million of fixed rate mortgages. Interest rates on the fixed rate commitments
ranged from 7.38% to 8.50%. The Company's residential loan commitments include
$1.1 million of commitments as a result of its mortgage banking activities.
These loans will be sold to third-party investors under existing investor
commitments to purchase. The nonresidential property loan commitments included
$244 in a fixed rate commitment at a rate of 10.00%.
The Company has entered into two credit enhancement agreements with local
municipalities to guarantee the repayment of an aggregate of $6.3 million of
municipal revenue bonds which are secured by first mortgages on an apartment
and on a commercial office building project. To secure its guaranty of the
bonds, the Company has agreed to pledge and deposit with the designated
trustees certain investment securities or has provided an irrevocable standby
letter of credit from the FHLB as security. In the event of default on the
bonds, the Company's maximum liability is the amount of the credit guaranty.
Fees for providing these credit enhancements were $67, $84, and $115 for the
years ended December 31, 1996, 1995 and 1994, respectively.
The Company has committed to invest $2.0 million in low income housing projects
located in the Chicago area. The investment is being made through a limited
partnership and will be funded over a ten year period. At December 31, 1996,
the Company has funded $307 of the $2.0 million commitment. The projects
qualify for the low income housing income tax credit
The Company and its subsidiaries are involved in litigation arising in the
ordinary course of business. The resolution of these matters is not expected,
either individually or in the aggregate, to have a material effect on the
Company's financial condition or results of operations.
47
<PAGE> 48
12. STOCKHOLDERS' EQUITY
In connection with its conversion to stock ownership, the Company established a
liquidation account in the amount of $36.6 million for the benefit of eligible
account holders who continue to maintain their accounts at the Company after
the conversion. The liquidation account will be reduced annually to the extent
that eligible account holders have reduced their qualifying deposits.
Subsequent increases will not restore an eligible account holder's interest in
the liquidation account. In the event of a complete liquidation, each account
holder would be entitled to receive a distribution from the liquidation account
in an amount proportionate to the current adjusted qualifying balances for
accounts then held.
The Company may not declare or pay cash dividends on or repurchase any of its
shares of common stock if the effect thereof would cause stockholders' equity
to be reduced below the balance of the liquidation account or if such
declaration would otherwise violate regulatory requirements.
During 1996, the Company repurchased 310,819 shares of its common stock at an
average cost of $27.95 per share. During 1995, the Company repurchased 124,300
shares of its common stock at an average cost of $27.29 per share. On October
25, 1994, the Board of Directors of the Company declared a three-for-two common
stock split in the form of a 50% common stock dividend to stockholders of
record on November 4, 1994. A total of 930,502 new shares were issued.
13. FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107 "Disclosures about Fair Values of Financial Instruments" requires
disclosures of information about the fair value of financial instruments for
which it is practicable to estimate a value, whether or not such value is
recognized in the consolidated statements of financial condition.
The carrying value and the estimated fair value of financial instruments are as
follows:
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
------------------------ ------------------------
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 9,175 $ 9,175 $ 8,657 $ 8,657
Securities available-for-sale 57,362 57,362 68,153 68,153
Securities held-to-maturity 27,970 27,375 32,620 32,278
Loans receivable 383,770 387,327 375,467 377,144
LIABILITIES
Demand, NOW and savings deposits $ 93,020 $ 93,020 $ 91,418 $ 91,418
Certificates of deposit (time deposits) 267,958 269,409 271,504 273,252
FHLB advances 59,850 59,760 55,140 55,441
</TABLE>
Whenever possible, quoted market prices are used to develop fair values. Where
quoted market prices are not available, market prices of similar instruments are
used for reference and to develop indices of estimated fair value. In other
cases, it is necessary to use present values or other valuation techniques.
Fair values derived can be significantly affected by the assumptions used,
including the similarity of other instruments, discount rates, and estimates of
future cash flows. Therefore, in many cases, the
48
<PAGE> 49
estimated fair values may not be realized in an immediate sale of the
instrument. SFAS No. 107 excludes certain financial instruments and all
nonfinancial instruments from its disclosure requirements. Therefore, the
aggregate of the estimated fair value amounts is not intended to represent the
underlying market value of the Company.
General methods utilized to estimate fair values are summarized below:
Cash and cash equivalents: The carrying amounts shown approximate fair value.
Securities: Quoted market values were used to estimate fair values. FHLB
stock is carried at its redemption value.
Loans receivable: The fair value of fixed rate mortgage loans was estimated by
discounting projected cash flows at market interest rates. The fair value of
adjustable rate mortgage loans was estimated by using carrying amounts for
loans repricing within one year and by discounting projected cash flows at
market interest rates for loans repricing beyond one year. The fair value of
commercial and consumer loans was estimated by discounting projected cash flows
at market interest rates. The carrying amounts of accrued interest on loans
approximates fair value.
Demand, NOW, and savings deposits. All such account balances are withdrawable
on demand without penalty; therefore, for purposes of SFAS No. 107, the
carrying amount is deemed to be fair value.
Certificates of deposit (time deposits): The fair value of time deposit
accounts which have fixed rates of interest was estimated using a discounted
cash flow calculation and current interest rates for similar accounts with the
same remaining term to maturity. The Company does not have any material,
variable rate time deposits. The carrying value of accrued interest on
deposits approximates fair value.
FHLB advances: The fair value of fixed rate FHLB advances was estimated using
a discounted cash flow calculation and current interest rates for advances with
the same remaining term to maturity. The carrying amounts of variable rate
advances and accrued interest on advances approximates fair value.
Commitments: The fair value of commitments to extend credit and standby
letters of credit is estimated using the fees currently charged to enter into
similar agreements, taking into account the remaining terms of the agreements
and the present creditworthiness of the counterparties. For fixed rate loan
commitments, fair value also considers the difference between current levels of
interest rates and the committed rates. The fair value of these commitments is
not material.
49
<PAGE> 50
14. CONDENSED PARENT COMPANY ONLY FINANCIAL INFORMATION
Condensed statements of financial condition, income, and cash flows for Calumet
Bancorp, Inc. (parent company only) are presented below and should be read in
connection with the consolidated financial statements and notes thereto.
<TABLE>
<CAPTION>
December 31
-----------
STATEMENTS OF FINANCIAL CONDITION 1996 1995
---------------------------
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 138 $ 228
Securities available-for-sale 9,367 12,110
Loan receivable from ESOP 849 1,414
Loan receivable from Association 2,000 --
Equity in net assets of Association 53,668 58,374
Investment in limited partnerships 17,393 13,068
Real estate held for sale 147 1,200
Other assets 89 358
-------------------------
TOTAL ASSETS $ 83,651 $ 86,752
=========================
LIABILITIES AND STOCKHOLDERS' EQUITY:
Other liabilities $ 901 $ 955
Common stock 36 36
Additional paid-in capital 35,090 34,665
Retained earnings 73,817 68,418
Net unrealized gains on securities available-
for-sale, including unrealized losses of the
Association of $414 in 1996 and $12 in 1995 239 423
Treasury stock (26,432) (17,745)
-------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 83,651 $ 86,752
=========================
</TABLE>
<TABLE>
<CAPTION>
Year ended December 31
STATEMENTS OF INCOME 1996 1995 1994
----------------------------------
<S> <C> <C> <C>
Dividends received from the
Association $ 9,000 $ -- $ 9,000
Interest and dividend income 886 1,083 680
Gain on sale of real estate 70 -- --
Gain on sale of securities available-
for-sale 68 137 260
Income (loss) from limited partnerships 613 (207) 69
Equity in undistributed
(overdistributed) earnings of
Association (4,358) 5,675 (1,870)
----------------------------------
Total income 6,279 6,688 8,139
General and administrative expenses 612 701 723
----------------------------------
Income before income taxes 5,667 5,987 7,416
Income tax expense (benefit) 268 22 (3)
----------------------------------
NET INCOME $ 5,399 $5,965 $ 7,419
==================================
</TABLE>
50
<PAGE> 51
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1996 1995 1994
-------------------------------------------
<S> <C> <C> <C>
STATEMENTS OF CASH FLOWS
OPERATING ACTIVITIES:
Net income $ 5,399 $ 5,965 $ 7,419
Equity in earnings of Association (4,642) (5,675) (7,130)
Gain on sale of real estate (70) -- --
Gain on sales of securities (68) (137) (260)
Equity (income) loss from limited partnerships (613) 207 (69)
Decrease (increase) in other assets 269 (306) (3)
Increase (decrease) in other liabilities (12) 595 198
-------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 263 649 155
INVESTING ACTIVITIES:
Purchase of securities (23,883) (7,086) (10,314)
Proceeds of sales and maturities of securities 27,076 12,046 10,625
Loans originated (7,000) 0 (2,263)
Principal payments on loans receivable 5,565 566 283
Investments in limited partnerships (5,000) (3,100) (3,498)
Return of investment in limited partnerships 1,288 357 927
Proceeds from sale of real estate 1,123 -- --
Dividends paid by Association 9,000 -- 9,000
-------------------------------------------
NET CASH PROVIDED BY INVESTING ACTIVITIES 8,169 2,783 4,760
FINANCING ACTIVITIES:
Net proceeds from exercise of stock options 165 57 561
Proceeds from conversion litigation settlement -- 52 --
Purchase of treasury stock (8,687) (3,391) (5,400)
-------------------------------------------
NET CASH USED IN FINANCING ACTIVITIES (8,522) (3,282) (4,839)
-------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (90) 150 76
Cash and cash equivalents at beginning of year 228 78 2
-------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 138 $ 228 $ 78
===========================================
</TABLE>
51
<PAGE> 52
15. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Year ended December 31, 1996 Year ended December 31, 1995
---------------------------- ----------------------------
Three months ended Three months ended
-----------------------------------------------------------------------------------------------
March 31 June 30 Sept. 30 Dec. 31 March 31 June 30 Sept. 30 Dec. 31
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income $9,917 $9,717 $9,616 $9,669 $9,754 $9,614 $9,638 $9,755
Interest expense 5,259 5,218 5,227 5,350 4,576 4,974 5,251 5,376
-----------------------------------------------------------------------------------------------
Net interest income 4,658 4,499 4,389 4,319 5,178 4,640 4,387 4,379
Provision for losses
on loans 200 200 200 200 200 200 200 200
-----------------------------------------------------------------------------------------------
Net interest income
after provision for
losses on loans 4,458 4,299 4,189 4,119 4,978 4,440 4,187 4,179
Gains (losses) on
sales of securities 20 -- (15) 48 (112) 33 (4) --
Other income 814 816 656 653 315 301 403 36
SAIF assessment (1) -- -- 2,316 -- -- -- -- --
Other expenses 2,854 2,351 2,356 2,354 2,814 2,522 2,329 2,266
-----------------------------------------------------------------------------------------------
Income before income
taxes 2,438 2,764 158 2,466 2,367 2,252 2,257 1,949
Income taxes 849 850 (49) 777 889 840 404 727
-----------------------------------------------------------------------------------------------
Net income $1,589 $1,914 $ 207 $1,689 $1,478 $1,412 $1,853 $1,222
===============================================================================================
Earnings per share $ 0.57 $ 0.71 $ 0.08 $ 0.67 $ 0.51 $ 0.48 $ 0.63 $ 0.43
===============================================================================================
Reported stock prices
High $28.50 $28.50 $28.75 $34.00 $26.75 $27.25 $28.00 $28.50
Low 27.50 27.50 27.75 28.25 21.00 26.50 26.50 27.25
Close 27.75 28.00 28.38 33.25 26.50 27.25 27.50 27.75
</TABLE>
(1) On September 30, 1996, President Clinton signed legislation which provided
for a special assessment by the FDIC to recapitalize the SAIF. The Company paid
a $2.3 million special assessment as a result of this legislation.
52
<PAGE> 53
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND OFFICERS OF REGISTRANT
The information contained on pages 4 through 7 of Calumet Bancorp, Inc.'s Proxy
Statement dated March 27, 1997 with respect to directors and executive officers
of the Registrant is incorporated herein by reference in response to this item.
ITEM 11. EXECUTIVE COMPENSATION
The information contained on pages 7 through 13 of Calumet Bancorp, Inc.'s
Proxy Statement dated March 27, 1997 with respect to executive compensation is
incorporated herein by reference in response to this item.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information contained on pages 3 through 5 of Calumet Bancorp, Inc.'s Proxy
Statement dated March 27, 1997 with respect to security ownership of certain
beneficial owners and management is incorporated herein by reference in
response to this item.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained on pages 17 through 18 of Calumet Bancorp, Inc.'s
Proxy Statement dated March 27, 1997 with respect to certain relationships and
related transactions is incorporated herein by reference in response to this
item.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
The following consolidated financial statements of the registrant and its
subsidiaries are filed as a part of this document under Item 8. Financial
Statements and Supplementary Data.
Consolidated Statements of Financial Condition at December 31, 1996 and
1995
Consolidated Statements of Income for the years ended December 31, 1996,
1995,and 1994
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1996, 1995, and 1994
53
<PAGE> 54
Consolidated Statements of Cash Flows for the years ended December 31, 1996,
1995, and 1994
Notes to Consolidated Financial Statements
Report of Independent Auditor at December 31, 1996, and for the year then
ended
(a)(2) All schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions, are inapplicable or the required information has been
included elsewhere herein, and therefore have been ommitted.
(a)(3) Listing of Exhibits
(3)(i) and (ii) The registrant hereby incorporates by reference its Articles of
Incorporation and By-Laws as exhibits to its registration statement on form
S-1, which was filed with the Securities and Exchange Commission.
(21) Subsidiaries of the Registrant
(23) Consent of Independent Auditors
(b) Reports on Form 8-K
At the September 24, 1996, meeting of the Board of Directors of the Registrant,
the Board of Directors terminated the service of Ernst & Young LLP as the
Registrant's independent certified public accountants. There were no
disagreements between the Registrant and Ernst & Young LLP on any matter of
accounting principles or practice, financial statement disclosure, or auditing
scope or procedure. On September 25, 1996, the Registrant engaged the firm of
Crowe, Chizek and Company LLP as independent certified public accountants for
the Registrant. Form 8-K was filed on October 1, 1996, with the United States
Securities and Exchange Commission. Amendment No. 1 to Form 8-K was filed on
October 11, 1996.
54
<PAGE> 55
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereto duly authorized.
CALUMET BANCORP, INC.
Date: March 27, 1997 By: /s/ Thaddeus Walczak
-------------------------
Thaddeus Walczak
Chairman of the Board and
Chief Executive Officer
(Duly Authorized Representative)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
By: /s/ Carole J. Lewis By: /s/ Thaddeus Walczak
-------------------------- --------------------------
Carole J. Lewis Thaddeus Walczak
President, Chief Operating Chairman of the Board and
Officer and Director Chief Executive Officer
Date: March 27, 1997 Date: March 27, 1997
By: /s/ John L. Garlanger By: /s/ William A. McCann
-------------------------- --------------------------
John L. Garlanger William A. McCann
Senior Vice President and Director
Treasurer Date: March 27, 1997
(Principal Financial and
Accounting Officer)
Date: March 27, 1997
By: /s/ Dr. Henry J. Urban By: /s/ Tytus R. Bulicz
-------------------------- --------------------------
Dr. Henry J. Urban Tytus R. Bulicz
Director Director
Date: March 27, 1997 Date: March 27, 1997
By: /s/ Louise Czarobski By: /s/ Daryl Erlandson
-------------------------- --------------------------
Louise Czarobski Daryl Erlandson
Director Director
Date: March 27, 1997 Date: March 27, 1997
55
<PAGE> 1
EXHIBIT 13
LOGO
CALUMET BANCORP, INC.
1996 ANNUAL REPORT
<PAGE> 2
CORPORATE PROFILE
Calumet Bancorp, Inc., headquartered in Dolton, Illinois, is the holding
company of Calumet Federal Savings and Loan Association of Chicago. Founded in
1910, Calumet Federal operates a community-based savings and loan with five
full-service offices located in southeastern Cook County, two offices in
Chicago and three suburban locations, currently serving over 16,000 households.
Calumet Federal offers a wide range of quality financial products and services
to meet the needs of the communities it serves. Calumet Federal's primary
business objective is making residential home loans and assisting customers to
save and to plan for their financial future.
The common stock of Calumet Bancorp, Inc. trades under the symbol CBCI on the
NASDAQ National Market System.
TABLE OF CONTENTS
Letter to Shareholders 2
Directors and Officers 5
Shareholders' Information 6
Form 10-K 7
1
<PAGE> 3
TO OUR SHAREHOLDERS,
I am very pleased to report that 1996 was a successful year for Calumet
Bancorp, Inc. 1996 marks our fifth year as a profitable public company and our
86th year in the financial services industry. Shareholder value has increased
each year since our stock conversion in February, 1992, with book value also
steadily growing. Our stock price was at its highest in five years as of
December 31, 1996.
We attribute these excellent results to our sound, conservative management
philosophy which strives to maintain the highest level of safety and soundness
commensurate with making a profit. Our primary goal is to enhance shareholder
value. We feel we can accomplish this goal by doing what we know best - - -
managing the business of a financial institution.
YEAR-END RESULTS
Net income for 1996 was $5.4 million, down from $6.0 million in 1995. The
primary reason for the decrease in earnings for 1996 was the payment of a $2.3
million FDIC special assessment to recapitalize the Savings Association
Insurance Fund pursuant to legislation signed by President Clinton on September
30, 1996. The reduction in earnings due to the FDIC special assessment was
partially offset by a $1.8 million change in income from limited partnership
investments, from a $125,000 loss in 1995 to a $1.6 million profit for the year
ended December 31, 1996.
The Company's net interest margin decreased to 3.79% of average interest
earning assets in 1996, from 3.94% in 1995, primarily due to increased
competition for deposits. If we eliminate the effect of the one-time FDIC
special assessment, return on average assets increased to 1.37% in 1996, from
1.19% in 1995, and return on average equity increased to 8.35% in 1996, from
7.20% in 1995. The Company's efficiency ratio also improved to 49.4% in 1996,
from 52.9% in 1995. All of these ratios indicated we are doing a better job of
investing assets, controlling expenses, and leveraging stockholders' equity.
REPURCHASE PROGRAMS
Believing that investing in ourselves is a sound strategy, during 1996 we
purchased 310,819 shares of our common stock, at an average price of $27.95 per
share. Repurchasing shares at less than book value increases earnings per
share and book value per share for remaining shareholders. Book value at the
close of business on December 31, 1996 was $34.40 per share. We plan to
continue to repurchase shares in 1997.
STOCK PRICE PERFORMANCE
Our stock price has steadily increased since our initial offering of stock on
February 20, 1992. On December 31, 1996, our stock price closed at $33.25,
compared to a close of $27.75 on December 31, 1995.
CALUMET'S ROLE IN THE COMMUNITY
The financial services industry has gone through dramatic changes since
Calumet's beginning. What has not changed is our customer's need for safety
and security of their funds. Our customers look to us for financial guidance
and assistance in attaining specific goals, whether those goals are to purchase
a home, secure a comfortable retirement, or save for their children's
education.
Calumet has been a successful home lender since 1910. We understand market
conditions and home buyer's
2
<PAGE> 4
concerns and adapt our loan programs to fit those requirements. This year we
brought back the First Time Home Owner Loan Program, introduced both
Pre-Qualification and Pre-Approval Programs, and have advertised our
competitive rates aggressively in the community.
Beginning in 1997, Calumet will offer FHA loans. We also established Calumet
Financial Corporation which will offer car, RV, and boat loans, as well as
personal and debt consolidation loans. Calumet makes every attempt to answer
the loan needs of the community. These new loan products are in response to
those needs.
The competition for residential loans has been intense for the past several
years. However, responsible lending and quality service are our strengths.
Our borrowers are not strangers to us nor we to them. We build strong
relationships with our customers, and continue that relationship through
generations.
Savings accounts, checking, certificates of deposit, and retirement plans are
the "bread and butter" of our traditional thrift. We introduced the tiered
Money Market Edge product this year which gives our depositors the opportunity
to earn higher interest based on increased deposit levels. Money Market
accounts give the account holder flexibility while also offering the safety and
security of insured funds.
Saving for specific goals is probably more important today than ever. People
are taking charge of their own finances and plan short-term, mid-range, and
long-term goals. Calumet serves in this regard as well. Our Savings
Counselors are ready and able to assist individuals in setting up the types of
savings, checking, and retirement plans best for their financial situation.
Convenience and customer service remain watchwords for the financial services
industry. Having all the products in the world will not satisfy today's
customer if that customer is unable to obtain those services. Automatic Teller
Machines, Bank-By-Phone and Bank-By-Mail are just some of the services we offer
to our customers. We brought a cash-dispensing ATM to a Mobil gas station in
Hammond this year and we're looking into offering more of these at convenient
locations. CALVIN, our 24-Hour Information Line, is accessible 24 hours a day,
7 days a week to receive account balance and check clearing information, access
current loan balance and payment information, and learn about current interest
rates. This Bank-By-Phone service has proved to be very popular.
Calumet has entered cyberspace! Calumet Bancorp's new website is
HTTP://WWW.CALUMETBANCORP.COM and is now on the Internet. This just proves
that we'll even go out of this world to bring information, convenience, and
service to existing and potential customers. We look to be continually updating
and refining our web presence.
We also offer non-traditional financial and investment products through a
full-service brokerage firm located at our offices. Licensed professionals
offer free financial plans and are ready to assist you in buying and selling
stocks, bonds, mutual funds, and other investment alternatives. In 1997,
Investor Services, Inc. will handle this role for us.
Calumet Savings Service Corporation is our full-service insurance agency and
offers all types of insurance to cover consumer's individual and business
insurance needs. In addition to the usual fire, commercial, general liability,
auto and homeowners coverage,
3
<PAGE> 5
Calumet Savings Service Corporation also offers business coverage and a variety
of very popular tax-deferred insurance company annuities.
COMMUNITY INVOLVEMENT
The officers and employees of Calumet Federal have a sense of responsibility
and dedication to the community. They take a very active role by holding
office on the boards of organizations, and giving generously of their time and
effort to help others.
We are actively involved with various community groups promoting new and
rehabilitated housing to low and middle income areas in Chicago and the
southern suburbs. Some of these include the Claretian Associates Neighborhood
Development Office, The Chicago Southland Regional Economic Development
Coordinating Corporation, South Chicago Neighborhood Housing Collaboration, the
South East Chicago Development Commission, and the South Action Conference-New
Cities Development.
Our officers hold positions with the Neighborhood Housing Services, South East
Alcohol and Drug Abuse Center, The Dorchester Foundation, Our Savior's
Apartments developed through Lutheran Social Services of Illinois, and
Metropolitan Family Services.
Calumet is there for the community and continually looks for new opportunities
to help with resources to better improve and enrich the lives of the residents
of the community.
CALUMET'S OFFICERS, DIRECTORS, AND EMPLOYEES
Our employees are a major factor in the success of Calumet Federal. Their hard
work and dedication has made our Company what it is. Our employees are also
owners of the Company through their employee benefit plans, which hold over
286,000 shares of Calumet Bancorp stock. That's over 12% of the outstanding
shares. The prosperity of the Company is every employee's goal.
Also this year, one of the Company's longtime directors took a well-deserved
retirement. Sylvester Lulinski left us after faithfully serving thirty-four
years as a Director of Calumet Federal. We are indebted to his devotion and
service. In his place, Darryl Erlandson, Vice President of Calumet Federal
Savings, was appointed to replace Mr. Lulinski.
LOOK TO THE FUTURE
It is fine to look back on the performance of the past year, but we are looking
to the future with high expectations. We feel that we have the resources of a
strong customer base, the support of the community, and the dedication and hard
work of our officers, directors, and employees to face the challenges ahead.
At this time I would like to thank all those who have placed their confidence
and trust in Calumet Bancorp. We will continue to work to increase shareholder
value and to keep your support.
Sincerely,
/s/ Thaddeus Walczak
Thaddeus Walczak
Chairman of the Board
Chief Executive Officer
4
<PAGE> 6
DIRECTORS AND OFFICERS
CALUMET BANCORP, INC. OFFICERS
THADDEUS WALCZAK CAROLE J. LEWIS JOHN GARLANGER
Chairman of the Board President Senior Vice President/
Chief Executive Officer Treasurer
SUSAN M. LINKUS JEAN A. ADAMS GERALD EBERHARDT
Vice President/Secretary Vice President/ Vice President
General Counsel
CALUMET BANCORP, INC./CALUMET FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHICAGO
DIRECTORS
<TABLE>
<S><C>
THADDEUS WALCZAK CAROLE J. LEWIS DR. HENRY J. URBAN DARRYL ERLANDSON
Chairman of the Board President Dentist Vice President
Chief Executive Officer Calumet Federal Savings
WILLIAM A. MCCANN LOUISE CZAROBSKI TYTUS R. BULICZ
President Retired Executive Secretary Senior Project Engineer
William A. McCann Associates, Inc. Continental Bank of Illinois Navistar International
</TABLE>
CALUMET FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHICAGO OFFICERS
THADDEUS WALCZAK RONALD S. THEIS ELVIA PEREZ
Chairman of the Board Vice President Vice President
Chief Executive Officer Accounting South Chicago Office
Manager
CAROLE J. LEWIS DUANE D. TSCHETTER
President Vice President ELSA P. CORTEZ
Chief Appraiser Vice President
JOHN GARLANGER Training and Sales
Senior Vice President DIANE R. HANCZAR
Treasurer Vice President JOHN E. ZART
Marketing Vice President
SUSAN M. LINKUS Community
Vice President DEBORAH V. CATTONI Reinvestment Officer
Secretary Vice President
Compliance Officer GENIE MARCZAK
JEAN A. ADAMS Administrative Personnel Vice President
Vice President Officer Accounting
General Counsel
JOAN KONAR STEVEN M. STRAKA
MICHAEL A. YORK Vice President Vice President
Vice President East Side Office Manager Lending
Controller
DOLORES MATHEWS KATHLEEN J. LUCZAK
LORRAINE STRAKA Vice President Vice President
Vice President Sauk Village Office Lansing Office Manager
Lending Manager
DARRYL ERLANDSON
Vice President
5
<PAGE> 7
SHAREHOLDERS' INFORMATION
CORPORATE HEADQUARTERS
Calumet Bancorp, Inc.
1350 East Sibley Boulevard
Dolton, Illinois 60419
(708) 841-9010
GENERAL COUNSEL
Kemp, Grzelakowski & Lorenzini, Ltd.
Oak Brook, Illinois
STOCK TRANSFER AGENT AND REGISTRAR
Inquiries regarding stock transfer, registration, lost certificates or changes
in name and address should be directed to the stock transfer agent and
registrar by writing:
Harris Trust and Savings Bank
Attention: Shareholder Services
Post Office Box 755
Chicago, Illinois 60690
INDEPENDENT AUDITORS
Crowe, Chizek and Company LLP
Oak Brook, Illinois
INVESTOR INFORMATION
Shareholders, investors, and analysts interested in additional information may
contact: John Garlanger, Senior Vice President and Treasurer, at the corporate
headquarters.
ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of the Shareholders of Calumet Bancorp, Inc. will be held at
1:00 P.M., April 30, 1997, at the following location:
Corporate Headquarters
Calumet Bancorp, Inc.
1350 East Sibley Boulevard
Dolton, Illinois 60419
All shareholders are cordially invited to attend.
At March 1, 1997, the Corporation had 379 shareholders of record and
approximately 900 beneficial owners registered in street name.
6
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
PARENT
Calumet Bancorp, Inc.
<TABLE>
<CAPTION>
PERCENTAGE JURISDICTION OR
SUBSIDIARY OWNED STATE OF INCORPORATION
- ---------- ---------- ----------------------
<S> <C> <C>
Calumet Federal Savings and
Loan Association of Chicago 100% United States
Calumet Savings Service
Corporation ("CSSC") (1) 100% Illinois
Calumet Residential
Corporation ("CRC") (1) 100% Illinois
Calumet Mortgage Corporation
of Idaho ("CMCID") (2) 100% Idaho
Calumet United Limited Liability
Corporation ("CULLC") (3) 51% Wyoming
</TABLE>
(1) First tier subsidiary of Calumet Federal Savings
(2) First tier subsidiary of Calumet Savings Service Corporation
(3) 51% owned by Calumet Residential Corporation and 49% by two individuals
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-43063) pertaining to Calumet Bancorp, Inc. 1992 Stock Option
Plan of our report dated January 31, 1997, with respect to the consolidated
financial statements of Calumet Bancorp, Inc. included elsewhere herein.
CROWE, CHIZEK AND COMPANY LLP
Oak Brook, Illinois
March 24, 1997
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 3,021
<INT-BEARING-DEPOSITS> 6,154
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 57,362
<INVESTMENTS-CARRYING> 27,970
<INVESTMENTS-MARKET> 27,375
<LOANS> 391,870
<ALLOWANCE> 5,630
<TOTAL-ASSETS> 510,217
<DEPOSITS> 360,978
<SHORT-TERM> 30,675
<LIABILITIES-OTHER> 7,625
<LONG-TERM> 29,175
0
0
<COMMON> 36
<OTHER-SE> 81,728
<TOTAL-LIABILITIES-AND-EQUITY> 510,217
<INTEREST-LOAN> 32,810
<INTEREST-INVEST> 6,109
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 38,919
<INTEREST-DEPOSIT> 18,348
<INTEREST-EXPENSE> 21,054
<INTEREST-INCOME-NET> 17,865
<LOAN-LOSSES> 800
<SECURITIES-GAINS> 53
<EXPENSE-OTHER> 12,231
<INCOME-PRETAX> 7,826
<INCOME-PRE-EXTRAORDINARY> 7,826
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,399
<EPS-PRIMARY> 2.05
<EPS-DILUTED> 2.05
<YIELD-ACTUAL> 3,797
<LOANS-NON> 6,334
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,870
<CHARGE-OFFS> 114
<RECOVERIES> 74
<ALLOWANCE-CLOSE> 5,630
<ALLOWANCE-DOMESTIC> 5,630
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
