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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark one)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission File Number 0-19829
CALUMET BANCORP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 36-3785272
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
1350 EAST SIBLEY BOULEVARD, DOLTON, ILLINOIS 60419
(Address of principal executive offices) (Zip Code)
(708) 841-9010
(Registrant's telephone number, including area code)
Indicate by check mark whether 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 __
As of August 8, 1997, the Company has 2,110,797 shares of $0.01 par value
common stock issued and outstanding.
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PART I - FINANCIAL INFORMATION
PAGE NO.
ITEM 1 - FINANCIAL STATEMENTS
Consolidated Statements of Financial Condition
as of June 30, 1997 and December 31, 1996 3
Consolidated Statements of Income
for the three months ended June 30, 1997 and 1996,
and for the six months ended June 30, 1997 and 1996 4
Consolidated Statements of Cash Flows
for the six months ended June 30, 1997 and 1996 5
Consolidated Statements of Stockholders' Equity
for the six months ended June 30, 1997 and 1996 7
Notes to Consolidated Financial Statements 8
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 9
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS 14
ITEM 2 - CHANGES IN SECURITIES 14
ITEM 3 - DEFAULT UPON SENIOR SECURITIES 14
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 14
ITEM 5 - OTHER INFORMATION 15
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 15
SIGNATURE PAGE 16
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CALUMET BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
------------------------
<S> <C> <C>
ASSETS:
Cash $2,459 $3,021
Interest bearing deposits 6,983 6,154
-----------------------
CASH AND CASH EQUIVALENTS 9,442 9,175
Securities available-for-sale 49,791 57,362
Securities held-to-maturity 26,068 27,970
Loans receivable, net 372,290 381,200
Investment in limited partnerships 27,490 24,458
Real estate held for sale acquired through foreclosure 2,167 1,665
Office properties and equipment, net 4,288 4,320
Other assets 5,025 4,067
-----------------------
TOTAL ASSETS $496,561 $510,217
=======================
LIABILITIES:
Deposits $354,118 $357,330
Federal Home Loan Bank advances and other borrowings 54,950 59,850
Advance payments by borrowers for taxes and insurance 2,414 3,124
Income taxes 1,675 742
Other liabilities 6,432 7,407
----------------------
TOTAL LIABILITIES 419,589 428,453
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 2,000,000 shares authorized -- --
Common stock, $.01 par value, 4,200,000 shares authorized
3,615,841 (1997) and 3,614,341 (1996) shares issued 36 36
Additional paid-in capital 35,160 35,090
Unrealized gains on securities available for sale,
net of income tax expense of $257 and $149 425 239
Retained earnings - substantially restricted 77,653 73,817
Unearned ESOP shares (566) (849)
Stock held for management recognition plan (68) (137)
Treasury stock (1,505,044 shares (1997); 1,237,313 shares (1996)) (35,668) (26,432)
----------------------
TOTAL STOCKHOLDERS' EQUITY 76,972 81,764
----------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $496,561 $510,217
======================
</TABLE>
See notes to consolidated financial statements.
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CALUMET BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
(UNAUDITED) (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------------------------
1997 1996 1997 1996
-------------------------------------------
<S> <C> <C> <C> <C>
INTEREST AND DIVIDEND INCOME:
Loans $8,443 $8,171 $16,839 $16,476
Securities and deposits 1,333 1,546 2,693 3,158
-------------------------------------------
Total interest and dividend income 9,776 9,717 19,532 19,634
INTEREST EXPENSE:
Deposits 4,379 4,566 8,732 9,143
Federal Home Loan Bank advances
and other borrowings 900 652 1,778 1,334
-------------------------------------------
Total interest expense 5,279 5,218 10,510 10,477
-------------------------------------------
NET INTEREST INCOME 4,497 4,499 9,022 9,157
Provision for losses on loans 200 200 400 400
-------------------------------------------
Net interest income after provision
for losses on loans 4,297 4,299 8,622 8,757
OTHER INCOME:
Gain on loans sold 53 52 71 105
Gain on sales of real estate 80 12 38 58
Gain on sales of securities 69 -- 100 20
Income from limited partnerships 649 534 1,530 1,054
Insurance commissions 40 79 63 110
Other 129 139 233 303
-------------------------------------------
Total other income 1,020 816 2,035 1,650
OTHER EXPENSES:
Compensation and benefits 1,238 1,195 3,012 2,886
Office occupancy and equipment 307 323 614 647
Federal insurance premiums 59 210 119 423
Advertising and promotion 78 71 136 121
Data processing 128 117 253 221
Other 375 435 799 907
-------------------------------------------
Total other expenses 2,185 2,351 4,933 5,205
-------------------------------------------
Income before income taxes 3,132 2,764 5,724 5,202
Income taxes 1,067 850 1,888 1,699
-------------------------------------------
NET INCOME $2,065 $1,914 $3,836 $3,503
===========================================
EARNINGS PER SHARE $0.90 $0.71 $1.62 $1.27
===========================================
</TABLE>
See notes to consolidated financial statements.
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CALUMET BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
-----------------
1997 1996
-----------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $3,836 $3,503
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for losses on loans 400 400
Provision for depreciation 172 159
Amortization of deferred loan and commitment fees (350) (572)
Amortization and accretion of premiums and discounts 97 126
Amortization and allocation of stock based benefits 351 351
Gain on sales of securities available-for-sale (100) (20)
Equity in income from limited partnerships (1,530) (1,054)
Net gain on sale of real estate (38) (58)
Originations of loans held for sale (3,111) (4,925)
Gain on loans sold (71) (52)
Proceeds from loans sold 3,183 4,977
Increase in interest receivable (128) (12)
Increase in interest payable 113 59
Change in operating assets and liabilities:
(Increase) decrease in other assets (830) 88
Increase in income taxes 880 406
Increase (decrease) in other liabilities (1,088) 764
----------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,786 4,140
INVESTING ACTIVITIES:
Securities available-for-sale:
Purchases (29,085) (23,396)
Proceeds from sale 35,232 18,514
Repayments and maturities 1,826 1,099
Securities held-to-maturity:
Repayments and maturities 1,797 3,297
Principal and fees collected on loans 44,478 50,279
Loans originated (35,740) (37,816)
Loans purchased (593) (3,312)
Investments in limited partnerships (3,732) (3,387)
Return of investment in limited partnerships 2,230 1,491
Proceeds from sales of real estate 251 212
Purchases of office property and equipment (140) (114)
-----------------
NET CASH PROVIDED BY INVESTING ACTIVITIES 16,524 6,867
</TABLE>
See notes to consolidated financial statements.
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CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Dollars in thousands)
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
--------------------------
1997 1996
--------------------------
<S> <C> <C>
FINANCING ACTIVITIES:
Net increase in demand and passbook accounts $ 2,305 $ 5,496
Net increase (decrease) in certificates of deposit (5,517) 1,082
Proceeds of Federal Home Loan Bank advances
and other borrowings 32,440 19,900
Repayment of Federal Home Loan Bank advances
and other borrowings (37,340) (31,200)
Net decrease in advance payments by
borrowers for taxes and insurance (710) (700)
Net proceeds from exercise of stock options 15 6
Purchase of treasury stock (9,236) (7,003)
--------------------------
NET CASH USED IN FINANCING ACTIVITIES (18,043) (12,419)
--------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 267 (1,412)
Cash and cash equivalents at beginning of period 9,175 8,657
--------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 9,442 $ 7,245
==========================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest on deposits $ 8,609 $ 9,031
Cash paid during the period for interest on notes payable 1,788 1,386
--------------------------
$ 10,397 $ 10,417
==========================
Cash paid during the period for income taxes $ 1,685 $ 912
Noncash transactions: ==========================
Loans to facilitate sales of real estate owned $ 88 $ 552
Loans transferred to real estate owned 803 107
</TABLE>
See notes to consolidated financial statements.
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CALUMET BANCORP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in thousands)
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
----------------------
1997 1996
----------------------
<S> <C> <C>
COMMON STOCK:
Beginning and end of period $36 $36
------------------------
ADDITIONAL PAID-IN CAPITAL:
Beginning of period 35,090 34,665
Proceeds of option stock issued 15 6
Tax benefits of MRP/option deductions 55 35
------------------------
End of period 35,160 34,706
------------------------
UNREALIZED GAINS ON SECURITIES AVAILABLE FOR SALE:
Beginning of period, net of income tax expense
of $149 and $217 239 423
Change in unrealized gains, net of income tax
benefit of $108 and $292 186 (495)
------------------------
End of period 425 (72)
------------------------
RETAINED EARNINGS:
Beginning of period 73,817 68,418
Net income 3,836 3,503
------------------------
End of period 77,653 71,921
------------------------
LESS UNEARNED ESOP SHARES:
Beginning of period (849) (1,414)
Shares to be released 283 283
End of period ------------------------
(566) (1,131)
-------------------------
LESS STOCK HELD FOR MRP:
Beginning of period (137) (273)
Amortization 69 68
------------------------
End of period (68) (205)
------------------------
LESS TREASURY STOCK:
Beginning of period (26,432) (17,745)
Purchases (9,236) (7,003)
------------------------
End of period (35,668) (24,748)
------------------------
TOTAL STOCKHOLDERS' EQUITY $76,972 $80,507
=========================
</TABLE>
See notes to consolidated financial statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles ("GAAP")
for interim financial information and with the instructions to Form 10-Q and
Regulation S-X. Accordingly, they do not include all of the information
required by GAAP for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for fair presentation have been included. The results of
operations for the three months and the six months ended June 30, 1997 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1997. Certain 1996 amounts have been reclassified to conform to
1997 presentation. For further information, refer to the consolidated
financial statements and notes thereto included in the Calumet Bancorp, Inc.
(the "Company") Annual Report on Form 10-K for the year ended December 31,
1996.
NOTE B - EARNINGS PER SHARE
Earnings per share of Common Stock outstanding for the three months and
the six months ended June 30, 1997 and 1996, respectively, have been determined
by dividing net income for the period by the weighted average number of shares
of common stock and common stock equivalents outstanding. Common stock
equivalents assume the exercise of stock options and use of proceeds to
purchase Treasury Stock at the average market price for the period. The
weighted average number of shares of common stock and common stock equivalents
outstanding used for this calculation were 2,302,267 and 2,700,192 for the
three months ended June 30, 1997 and 1996, and 2,373,048 and 2,755,793 for the
six months ended June 30, 1997 and 1996, respectively. The average number of
uncommitted (unearned) shares held for the Company's Employee Stock Ownership
Plan ("ESOP") and included in the weighted average shares outstanding for these
same periods were 63,653, 120,233, 70,725 and 127,305, respectively. Shares
committed to be released to the ESOP are expensed during the period based on
original cost.
In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share." The
overall objective of SFAS No. 128 is to simplify the calculation of earnings
per share (EPS). Under this statement, primary EPS computed in accordance with
APB Opinion No. 15 will be replaced with a new, simpler calculation called
basic EPS. Basic EPS will be calculated by dividing income available to common
shareholders (i.e., net income less preferred stock dividends, if applicable)
by the weighted average common shares outstanding without consideration for
common stock equivalents such as options, warrants and convertible securities.
Fully diluted EPS will not change significantly but has been renamed diluted
EPS.
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SFAS No. 128 is effective for both interim and annual financial statements
for periods ending after December 15, 1997. Earlier application is not
permitted. Upon adoption, the Company will be required to change the method
currently used to compute EPS and to restate all prior periods. The impact of
SFAS No. 128 on the calculation of primary and fully diluted EPS is not
expected to be material.
NOTE C - COMMITMENTS AND CONTINGENCIES
At June 30, 1997, the Company had approved loan commitments totalling $9.2
million to originate loans, $700,000 to sell loans, $8.1 million in undisbursed
loans-in-process, $18.3 million in unused lines of credit, and $7.6 million in
credit enhancement arrangements. Commitments to fund loans and those under
credit enhancement arrangements have credit risk essentially the same as that
involved in extending loans to customers and are subject to the Company's
normal credit policies.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
Calumet Bancorp, Inc. completed its initial public offering of Common
Stock on February 20, 1992. It owns all of the outstanding Common Stock of
Calumet Federal Savings and Loan Association of Chicago (the "Association"), a
federally chartered stock savings and loan association which operates five
financial services offices in the Chicago area -- in Dolton, Lansing, Sauk
Village, and two in southeastern Chicago. The Association owns two first tier
subsidiaries, Calumet Savings Service Corporation and Calumet Residential
Corporation, both wholly owned. Calumet Residential Corporation owns 51% of a
second tier subsidiary, Calumet United Limited Liability Company. Calumet
Savings Service Corporation owns two second tier subsidiaries, Calumet Mortgage
Corporation of Idaho and Calumet Financial Corporation (of Illinois), both
wholly owned.
The Company's business activities currently consist of investment in
equity securities, participation as a limited partner in real estate investment
and loan servicing partnerships, and operation of the Association. The
Association's principal business consists of attracting deposits from the
public and investing these deposits, together with funds generated from
operations and borrowings, primarily in residential mortgage loans. The
Association's deposit accounts are insured to the maximum allowable by the
FDIC.
The Association'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 Association's operating
results are also affected by the sale of insurance, annuities and real estate
through its second tier subsidiaries, and to a lesser extent, loan commitment
fees, customer service charges and other income. Operating
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expenses of the Association are primarily employee compensation and benefits,
equipment and occupancy costs, federal insurance of accounts premiums,
advertising, data processing, and other administrative expenses. The
Association's results of operations are further affected by economic and
competitive conditions, particularly changes in market interest rates,
government policies and actions of regulatory authorities.
FINANCIAL CONDITION
Total assets decreased $13.7 million, or 2.7%, to $496.6 million at June
30, 1997, from $510.2 million at December 31, 1996. Net loans receivable
decreased $8.9 million, or 2.3%, to $372.3 million at June 30, 1997, from
$381.2 million at December 31, 1996, with originations and purchases of $36.3
million during the first six months of 1997.
The Company's lending activities have been concentrated primarily in
residential real estate secured by first liens. At June 30, 1997,
approximately 57.6% of the Company's mortgage loans were secured by one-to-four
family residential properties, 13.1% by multifamily income producing
properties, and 29.3% by commercial properties and land. At December 31, 1996,
these concentrations were 57.1%, 14.4%, and 28.6%, respectively. At June 30,
1997, the Company's mortgage loan portfolio was geographically distributed
primarily in Illinois (34.1%), Colorado (25.2%), Idaho (20.5%), and New Mexico
(14.2%). At December 31, 1996, these distributions were 35.0%, 26.4%, 18.5%,
and 13.7%, respectively.
Deposits decreased $3.2 million, or 0.9%, to $354.1 million at June 30,
1997, from $357.3 million at December 31, 1996. Funds generated from
operations and asset reductions, were used to pay down Federal Home Loan Bank
advances as they became due, reducing advances by $4.9 million, or 8.2%, to
$55.0 million at June 30, 1997, from $59.9 million at December 31, 1996.
Stockholders' equity decreased $4.8 million, or 5.9%, to $77.0 million at
June 30, 1997, from $81.8 million at December 31, 1996. The decrease came
primarily from treasury stock purchases of $9.2 million, offset by earnings of
$3.8 million, $422,000 in credits from employee benefit plans, and $186,000 in
net unrealized gains on securities. During the first six months of 1997 the
Company repurchased 267,731 shares of its stock at an average price of $34.50
per share. The Company has 2,110,797 shares of common stock (including 63,653
unearned ESOP shares) outstanding on June 30, 1997, with a book value of $36.47
per share.
ASSET QUALITY
The allowance for losses on loans increased to 1.59% of net loans
receivable at June 30, 1997, from 1.48% of net loans receivable at December 31,
1996. Nonperforming loans to net loans receivable decreased to 0.97% at June
30, 1997, from 1.66% at December 31, 1996 , while nonperforming assets to total
assets decreased to
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1.16% at June 30, 1997, from 1.57% at December 31, 1996. The allowance for
losses on loans amounted to 163.97% of nonperforming loans at June 30, 1997,
increased from 88.89% at December 31, 1997. The significant decrease in
nonperforming loans at June 30, 1997, was due to the recent improvement in
several large loans which have had periodic performance problems in recent
years.
RESULTS OF OPERATIONS
The Company reported net income of $2.1 million for the second quarter of 1997,
compared to $1.9 million net income for the second quarter of 1996. Earnings
per share of common stock for the second quarter of 1997 were $0.90, compared
to $0.71 for the second quarter of 1996. Net income for the six months ended
June 30, 1997 was $3.8 million, compared to $3.5 million for the six months
ended June 30, 1996, while earnings per share increased to $1.62 for the first
six months of 1997, from $1.27 for the first six months of 1996.
Return on average assets increased to 1.67% for the second quarter of
1997, from 1.53% for the same quarter last year. Return on average
stockholders' equity for the second quarter of 1997 was 10.81%, compared to
9.23% for the same quarter last year. Return on average assets increased to
1.53% for the first half of 1997, from 1.40% in the first half of 1996. Return
on average stockholders' equity for the first half of 1997 was 9.84%, compared
to 8.35% in 1996.
NET INTEREST INCOME
Net interest income was $4.5 million for the second quarter of 1997,
approximately the same as the $4.5 million earned during the second quarter of
1996. A $59,000 increase in interest income was offset by a $61,000 increase
in the cost of funds. The average yield on interest earning assets increased
to 8.52% during the second quarter of 1997, from 8.23% in 1996, while the
average cost of funds increased to 5.21%, from 5.17% for these same periods,
resulting in an increase in the rate spread to 3.31% in 1997, from 3.06% in
1996. The increase in the yield on interest earning assets resulted in an
increase of approximately $251,000 in interest income, but was offset by a
decrease of approximately $192,000 in interest income due to a $13.3 million
decrease in the volume of average interest earning assets. The increase in the
cost of funds was due to both rate and volume increases in the cost of
borrowings of $248,000, not entirely offset by rate and volume decreases in the
cost of deposits of $187,000.
Net interest income decreased by $135,000, to $9.0 million during the
first six months of 1997, compared to $9.2 million during the first six months
of 1996, primarily due to a $102,000 decrease in interest income and a $33,000
increase in the cost of funds. The average yield on interest earning assets
increased to 8.43% during the first half of 1997, compared to 8.31% for the
first half of 1996, while the average cost of funds decreased to 5.16% in 1997,
from 5.20% in 1996, resulting in an increase in the rate spread to 3.27% in
1997, compared to 3.11% in 1996. The increased yield on interest
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earning assets added approximately $143,000 to interest income, but an $8.6
million reduction in the volume of interest earning assets reduced interest
income by approximately $245,000. The increased volume of borrowings added
approximately $444,000 to the cost of funds, while both rate and volume
decreases reduced the cost of deposits by approximately $411,000.
PROVISION FOR LOAN LOSSES
The allowance for losses on loans is established through a provision for
losses on loans based on management's evaluation of the risk inherent in its
loan portfolio and general economic conditions. 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 and the Company's internal
credit review process. The provision for losses on loans has been maintained at
$200,000 per quarter for 1997, the same as for 1996. Net chargeoffs to the
allowance for losses on loans amounted to $104,000 during the first half of
1997. Net recoveries credited to the allowance for losses on loans amounted to
$45,000 during the first half of 1996.
OTHER INCOME
Other income increased by $204,000, to $1.0 million during the second
quarter of 1997, from $816,000 in the second quarter of 1996, primarily due to
a $115,000 increase in income from limited partnerships, a $68,000 increase in
gains on sales of real estate acquired through foreclosure, and a $69,000
increase in gains on sales of securities. Other income increased by $385,000,
to $2.0 million during the first half of 1997, from $1.7 million during the
first half of 1996, primarily due to a $476,000 increase in income from limited
partnerships, and an $80,000 increase in gains on the sales of securities, but
offset by decreases in insurance commissions of $47,000, brokerage commissions
of $68,000, and gains on loans sold of $34,000. The increase in income from
limited partnerships was due in part to an increase of $9.6 million in
investment in limited partnerships from June 30, 1996 to June 30, 1997, and
also due to a $298,000 gain on the sale of an investment property by one of the
partnerships in 1997.
OPERATING EXPENSES
Operating expenses decreased by $166,000, to $2.2 million during the
second quarter of 1997, from $2.4 million during the second quarter of 1996,
primarily as the result of a $151,000 decrease in Federal deposit insurance
premiums and a $47,000 decrease in legal expenses, offset by a $43,000, or
3.60% increase in compensation expense. Operating expenses as a percent of
average assets decreased to 1.76% in the second quarter of 1997, from 1.87% in
1996. Net non-interest expense as a percent of average assets improved to
0.94% for the second quarter of 1997, from 1.22% for the
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second quarter of 1996. The Company's efficiency ratio was 41.1% for the second
quarter of 1997, compared to 46.0% in 1996.
Operating expenses decreased by $272,000, to $4.9 million during the first
half of 1997, from $5.2 million in the first half of 1996, primarily as the
result of a $304,000 decrease in Federal deposit insurance premiums and a
$99,000 decrease in legal fees, offset by a $126,000, or 4.37% increase in
compensation expense. Operating expenses as a percent of average assets
decreased to 1.97% in the first half of 1997, from 2.08% in the first half of
1996. Net non-interest expense as a percent of average assets improved to
1.16% for the first half of 1997, from 1.42% in the first half of 1996. The
Company's efficiency ratio was 46.3% for the first half of 1997, compared to
50.0% in 1996.
INCOME TAXES
During the second quarter of 1997 the Company accrued additional state
income taxes due to a change in interstate income allocation factors which had
the effect of increasing the Company's effective income tax rate to 34.07% for
the quarter and 32.98% for the first half of 1997, compared to 30.75% and
32.66% for the comparable 1996 periods. The Company's effective tax rate is
less than statutory rates primarily due to the dividend received deduction and
low income housing credits.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds include deposits and Federal Home
Loan Bank advances, principal and interest payments on loans and securities,
maturing investment securities, and sales of securities from the
available-for-sale portfolio. While maturities and scheduled amortization of
loans and mortgage-backed securities are a predictable source of funds, deposit
flows and mortgage prepayments are greatly influenced by interest rates,
general economic conditions, and competition.
The primary investing activity of the Company is the origination and
purchase of mortgage loans and the purchase of securities. During the first
half of 1997 the Company originated and purchased mortgage loans in the amount
of $36.3 million, compared to $41.1 million during the first half of 1996.
Loan repayments of $44.5 million in 1997 compare to $50.3 million in 1996.
During the first half of 1997 the Company purchased securities in the amount of
$29.1 million, compared to $23.4 million during the first half of 1996. The
Company sold $35.2 million of securities during the first half of 1997,
compared to $18.5 million during 1996. The Company also invested an additional
$3.7 million in 1997, compared to $3.4 million in 1996, in limited partnerships
developing residential and commercial properties in Illinois. Net proceeds
from the reduction in loans and investments was used primarily to fund a $3.2
million decrease in deposits (primarily due to better rates available to
customers in other types of financial instruments and the continuing success of
the stock market) and to repay a net $4.9 million in borrowings.
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Federal regulations require a savings institution to maintain an average
daily balance of liquid assets 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 must constitute 1% of net withdrawable
deposits and short term borrowings. Management has consistently maintained
levels in excess of the regulatory requirement. The Association's average
liquidity ratios for the first six months of 1997 and 1996 were 8.1% and 8.1%,
respectively. The Association's average short term liquidity ratios for these
same periods were 2.9% and 2.1%, respectively.
The Association is also required to maintain specific amounts of capital
pursuant to federal regulations. On April 30, 1997, the Board of Directors of
the Association declared a $6.0 million dividend payable to the Company on June
30, 1997. As of June 30, 1997, and after payment of the dividend to the
Company, the Association was in compliance with all regulatory capital
requirements, with tangible and core capital of 9.2%, and risk-based capital of
15.5%, well above the requirements of 1.5%, 3.0%, and 8.0%, respectively.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Holding Company and the Association are not engaged in any legal
proceedings of a material nature at the present time.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULT UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Company held its annual meeting of shareholders on
April 30,1997.
(b) The names of each director elected at the annual meeting are as
follows:
William A. McCann Darryl Erlandson
The names of each director whose term of office continued after the
annual meeting are as follows:
Thaddeus Walczak Dr. Henry J Urban
Carole J. Lewis Louise Czarobski
14
<PAGE> 15
Tytus R. Bulicz
(c) The following matters were voted upon at the annual meeting and the
number of votes cast with respect to the matter follows:
(i) Ratification of the appointment of Crowe, Chizek & Company LLP
as the Company's independent auditors for the fiscal year ending
December 31, 1997:
For Against Abstain
--------- ------------ -----------
2,044,977 15,055 12,941
(ii) Approval of the Calumet Bancorp, Inc. 1997 Stock Option Plan:
For Against Abstain
--------- ------------- ------------
1,782,414 15,260 275,299
(d) None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
15
<PAGE> 16
SIGNATURES
Pursuant to the requirement 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.
DATE: AUGUST 8, 1997 CALUMET BANCORP, INC.
/S/THADDEUS WALCZAK
-------------------------
THADDEUS WALCZAK,
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
DATE: AUGUST 8, 1997 /S/JOHN GARLANGER
-------------------------
JOHN GARLANGER,
CHIEF FINANCIAL OFFICER
16
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