<PAGE> 1
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 MARCH 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission File 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 May 8, 1998, the Company has 3,141,497 shares of $0.01 par value
common stock outstanding.
1
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PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS PAGE NO.
-------
Consolidated Statements of Financial Condition
as of March 31, 1998 and December 31, 1997 3
Consolidated Statements of Income
for the three months ended March 31, 1998 and 1997 4
Consolidated Statements of Cash Flows
for the three months ended March 31, 1998 and 1997 5
Consolidated Statements of Stockholders' Equity
and Other Comprehensive Income
for the three months ended March 31, 1998 and 1997 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 15
ITEM 2 - CHANGES IN SECURITIES 15
ITEM 3 - DEFAULT UPON SENIOR SECURITIES 15
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 15
ITEM 5 - OTHER INFORMATION 15
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 15
SIGNATURE PAGE 15
2
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CALUMET BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands)
<TABLE>
<CAPTION>
(UNAUDITED)
MARCH 31, DECEMBER 31,
1998 1997
--------------------------
<S> <C> <C>
ASSETS:
Cash $ 3,034 $ 2,932
Interest bearing deposits 6,468 5,351
--------------------------
CASH AND CASH EQUIVALENTS 9,502 8,283
Securities available-for-sale 52,010 46,967
Securities held-to-maturity
(fair value: $17,725 (1998); $18,606 (1997)) 17,887 18,768
Loans receivable, net 374,376 376,988
Investment in limited partnerships 24,190 24,645
Real estate held for sale acquired
through foreclosure 3,878 2,491
Office properties and equipment, net 4,707 4,468
Accrued interest receivable and other assets 3,718 4,016
--------------------------
TOTAL ASSETS $ 490,268 $ 486,626
==========================
LIABILITIES:
Deposits $ 347,979 $ 348,461
Federal Home Loan Bank advances 45,060 45,060
Advance payments by borrowers for
taxes and insurance 2,375 3,237
Income taxes 2,728 1,229
Accrued interest payable and other liabilities 6,364 7,025
--------------------------
TOTAL LIABILITIES 404,506 405,012
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 2,000,000 shares authorized - -
Common stock, $.01 par value, 4,200,000 shares authorized,
3,616,090 shares issued 36 36
Additional paid-in capital 35,217 35,217
Retained earnings - substantially restricted 60,780 56,786
Accumulated other comprehensive income, net of tax 1,315 1,303
Unearned ESOP shares (141) (283)
Treasury stock (474,593 shares) (11,445) (11,445)
--------------------------
TOTAL STOCKHOLDERS' EQUITY 85,762 81,614
--------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 490,268 $ 486,626
==========================
</TABLE>
See notes to consolidated financial statements.
3
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CALUMET BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
-----------------
1998 1997
-----------------
<S> <C> <C>
INTEREST AND DIVIDEND INCOME:
Loans $8,422 $8,396
Securities and deposits 1,112 1,360
-----------------
Total interest and dividend income 9,534 9,756
INTEREST EXPENSE:
Deposits 4,278 4,353
Federal Home Loan Bank advances 708 878
-----------------
Total interest expense 4,986 5,231
-----------------
NET INTEREST INCOME 4,548 4,525
Provision for losses on loans 106 200
-----------------
Net interest income after provision for losses 4,442 4,325
OTHER INCOME:
Gain on loans sold 38 18
Losses on sales of real estate - (42)
Gains on sales of securities 25 31
Income from limited partnerships 4,125 881
Insurance commissions 63 23
Other 281 104
-----------------
Total other income 4,532 1,015
OTHER EXPENSES:
Compensation and benefits 1,678 1,774
Office occupancy and equipment 319 307
Federal insurance premiums 55 60
Advertising and promotion 57 58
Data processing 139 125
Other 496 424
-----------------
Total other expenses 2,744 2,748
-----------------
Income before income taxes 6,230 2,592
Income taxes 2,236 821
-----------------
NET INCOME $3,994 $1,771
=================
BASIC EARNINGS PER SHARE $ 1.27 $ 0.52
=================
DILUTED EARNINGS PER SHARE $ 1.17 $ 0.48
=================
</TABLE>
See notes to consolidated financial statements.
4
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CALUMET BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
--------------------
1998 1997
--------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 3,994 $ 1,771
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for losses on loans 106 200
Provision for depreciation 92 85
Amortization of deferred loan and commitment fees (154) (139)
Amortization and accretion of premiums and discounts 38 50
Amortization and allocation of stock based benefits 142 176
Gain on sales of securities available-for-sale (25) (31)
Equity in income from limited partnerships (4,125) (881)
Net loss on sale of real estate - 42
Originations of loans held for sale (4,160) (2,907)
Gain on loans sold (38) (18)
Proceeds from loans sold 4,198 2,925
Change in operating assets and liabilities:
Decrease (increase) in accrued interest receivable and other assets 298 (48)
Increase (decrease) in income taxes 1,589 (16)
Decrease in accrued interest payable and other liabilities (661) (747)
---------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,294 462
INVESTING ACTIVITIES:
Securities available-for-sale:
Purchases (15,992) (10,558)
Proceeds from sale 8,410 14,530
Repayments and maturities 2,500 1,634
Securities held-to-maturity:
Purchases - -
Repayments and maturities 830 1,002
Principal and fees collected on loans 22,261 21,117
Loans originated (20,729) (14,886)
Loans purchased (260) (593)
Investments in limited partnerships (2,742) (545)
Return of investment in limited partnerships 7,322 1,119
Proceeds from sales of real estate - 50
Purchases of office property and equipment (331) (121)
---------------------
NET CASH PROVIDED BY INVESTING ACTIVITIES 1,269 12,749
</TABLE>
See notes to consolidated financial statements.
5
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CALUMET BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
--------------------
1998 1997
--------------------
<S> <C> <C>
FINANCING ACTIVITIES:
Net increase (decrease) in demand and passbook accounts $ 2,121 $ (937)
Net decrease in certificates of deposit (2,603) (6,843)
Proceeds of Federal Home Loan Bank advances 14,000 8,500
Repayment of Federal Home Loan Bank advances (14,000) (11,800)
Net decrease in advance payments by
borrowers for taxes and insurance (862) (897)
Net proceeds from exercise of stock options - -
Purchase of treasury stock - (4,694)
--------------------
NET CASH USED IN FINANCING ACTIVITIES (1,344) (16,671)
--------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,219 (3,460)
Cash and cash equivalents at beginning of year 8,283 9,175
--------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 9,502 $ 5,715
====================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for interest on deposits $ 4,357 $ 4,244
Cash paid during the year for interest on notes payable 698 884
--------------------
$ 5,055 $ 5,128
====================
Cash paid during the year for income taxes $ 640 $ 552
====================
Noncash transactions:
Loans transferred to real estate owned $ 1,387 $ 440
</TABLE>
See notes to consolidated financial statements.
6
<PAGE> 7
CALUMET BANCORP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
AND OTHER COMPREHENSIVE INCOME
(Dollars in thousands)
<TABLE>
<CAPTION>
(UNAUDITED)
COMPREHENSIVE INCOME STOCKHOLDERS' EQUITY
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, MARCH 31,
------------------------------------------
1998 1997 1998 1997
------------------------------------------
<S> <C> <C> <C> <C>
Common stock:
Beginning and end of period $ 36 $ 36
-------------------
Additional paid-in capital:
Beginning of period 35,217 35,090
Tax benefit of MRP deduction - 25
-------------------
End of period 35,217 35,115
-------------------
Retained earnings:
Beginning of period 56,786 73,817
NET INCOME $3,994 $1,771 3,994 1,771
-------------------
End of period 60,780 75,588
-------------------
Accumulated other comprehensive income:
Beginning of period unrealized gains on securities,
net of income taxes 1,303 239
Unrealized holding losses on securities arising
during period, net of income taxes (34) (177)
Reclassification adjustment for gains on securities
included in net income, net of income taxes (16) (21)
Effect of tax rate adjustment on unrealized gains 62 -
----------------
Other comprehensive income 12 (198) 12 (198)
---------------------------------------
End of period accumulated other comprehensive income 1,315 41
COMPREHENSIVE INCOME $4,006 $1,573 -------------------
================
Less unearned ESOP shares:
Beginning of period (283) (849)
Shares to be released 142 142
-------------------
End of period (141) (707)
-------------------
Less stock held for MRP:
Beginning of period - (137)
Amortization - 35
-------------------
End of period - (102)
-------------------
Less treasury stock:
Beginning of period (11,445) (26,432)
Purchases - (4,694)
-------------------
End of period (11,445) (31,126)
-------------------
Total stockholders' equity $85,762 $78,845
===================
</TABLE>
See notes to consolidated financial statements.
7
<PAGE> 8
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 ended March 31, 1998 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1998. Certain 1997 amounts have been reclassified to conform to 1998
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, 1997.
NOTE B - EARNINGS PER SHARE
In 1997, the FASB issued SFAS No. 128, Earnings per Share. SFAS No. 128 is
effective for the quarter ending December 31, 1997, and all prior earnings per
share amounts have been restated to be comparable. All earnings per share data
prior to the Company's November 17, 1997 three-for-two stock split have been
restated to be comparable. Basic 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 outstanding. Diluted earnings per share has
been determined by dividing net income for the period by the weighted average
number of shares of common stock outstanding and additional shares issuable
under stock options. Common stock issuable under stock options assumes 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." 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 the three months ended March 31, 1998 and 1997
were 31,826 and 116,697 respectively.
The following table presents a reconciliation of the denominators used to
compute basic earnings per share and diluted earnings per share for the three
months ended March 31, 1998 and 1997.
<TABLE>
<CAPTION>
Three months ended
March 31,
-----------------------
(Dollars in thousands, except per share data) 1998 1997
-----------------------
<S> <C> <C>
Weighted average shares of common stock outstanding 3,141,497 3,435,890
Dilutive effects of assumed stock option exercises 258,823 229,854
-----------------------
Weighted average shares of common stock and
common stock equivalents 3,400,320 3,665,744
=======================
Earnings per share:
Net income available to common shareholders $ 3,994 $ 1,771
Basic earnings per share $ 1.27 $ 0.52
Earnings per share assuming dilution:
Net income available to common shareholders $ 3,994 $ 1,771
Diluted earnings per share $ 1.17 $ 0.48
</TABLE>
8
<PAGE> 9
NOTE C - COMPREHENSIVE INCOME
During the first quarter of 1998 the Company adopted Statement of Financial
Accounting Standards No. 130, Reporting Comprehensive Income. Comprehensive
income is defined as the change in equity of a business enterprise during a
period from transactions and other events and circumstances from nonowner
sources. It includes all changes in equity during a period except those
resulting from investments by owners and distributions to owners.
Specifically, the Company has reported the change in unrealized gains and
losses on securities as an addition to (deduction from) net income to arrive at
comprehensive income of $4.0 million for the first quarter of 1998, compared to
$1.6 million for the first quarter of 1997.
NOTE D - COMMITMENTS AND CONTINGENCIES
At March 31, 1998, the Company had approved loan commitments totalling $9.5
million to originate loans, $5.9 million in undisbursed loans-in-process, $15.6
million in unused lines of credit, and $9.4 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. (the "Company") 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, 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 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 expenses of the Association are
primarily employee compensation and benefits, equipment and occupancy costs,
federal deposit insurance 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 increased $3.7 million, or 0.8%, to $490.3 million at March 31,
1998, from $486.6 million at December 31, 1997. Net loans receivable decreased
$2.6 million, or 0.7%, to $374.4 million at March 31, 1998, from $377.0 million
at December 31, 1997, with originations and purchases of $21.0 million, and
repayments of $22.3 million, during the first quarter.
9
<PAGE> 10
The Company's lending activities have been concentrated primarily in
residential real estate secured by first liens. At March 31, 1998,
approximately 59.4% of the Company's mortgage loans were secured by one-to-four
family residential properties, 12.2% by multifamily income producing
properties, and 28.4% by commercial properties and land. At December 31, 1997,
these concentrations were 58.7%, 12.4%, and 28.9%, respectively. At March 31,
1998, the Company's mortgage loan portfolio was geographically distributed
primarily in Illinois (33.8%), Colorado (21.9%), Idaho (20.9%), and New Mexico
(16.2%). At December 31, 1997, these distributions were 33.1%, 24.1%, 20.6%,
and 14.9%, respectively.
Deposits decreased $482,000, or 0.1%, to $348.0 million at March 31, 1998, from
$348.5 million at December 31, 1997. Federal Home Loan Bank advances remained
at $45.1 million at March 31, 1998, the same as at December 31, 1997.
Stockholders' equity increased $4.1 million, or 5.1%, to $85.8 million at March
31, 1998, from $81.6 million at December 31, 1997, primarily as the result of
$4.0 million in net income. The Company has 3,141,497 shares of common stock
(including 21,218 unallocated ESOP shares) outstanding on March 31, 1998, with
a book value of $27.30 per share.
ASSET QUALITY
The allowance for losses on loans decreased to 1.50% of loans receivable at
March 31, 1998, from 1.54% of loans receivable at December 31, 1997, primarily
due to the chargeoff of a $350,000 loan which had been previously fully
reserved. Nonperforming loans to loans receivable decreased to 0.83% at March
31, 1998, from 1.39% at December 31, 1997, primarily due to the foreclosure of
three large related loans, including the $350,000 loan referenced above.
Nonperforming assets to total assets decreased to 1.45% at March 31, 1998, from
1.64% at December 31, 1997. The allowance for losses on loans amounted to
181.22% of nonperforming loans at March 31, 1998, increased from 110.93% at
December 31, 1997.
RESULTS OF OPERATIONS
The Company reported net income of $4.0 million for the first quarter of 1998,
compared to $1.8 million net income for the first quarter of 1997. Basic
earnings per share (BEPS) of common stock for the first quarter of 1998
increased to $1.27, compared to $0.52 for the first quarter of 1997, and
diluted earnings per share (DEPS) increased to $1.17, compared to $0.48, for
the same periods. The primary reason for the increase was the sale of a
limited partnership investment property at a gain of $3.6 million, which
resulted in after tax net income of $2.3 million, or BEPS of $0.74 and DEPS of
$0.69.
Operating expenses as a percent of average assets increased to 2.25% in 1998,
from 2.18% in 1997. The Company's efficiency ratio improved to 30.6% during
the first quarter of 1998, from 51.5% during the first quarter of 1997.
Adjusted to eliminate the effect of partnership investment gains during both
periods, the efficiency ratio improved to 51.5% during 1998, from 54.5% in
1997. Return on average assets for the first quarter of 1998 was 3.28% (1.36%
adjusted ), compared to 1.41% (1.25% adjusted) for the same quarter last year.
Return on average stockholders' equity for the first quarter of 1998 was 19.43%
(8.17% adjusted), compared to 8.88% (7.87% adjusted) for the same quarter last
year.
NET INTEREST INCOME
Net interest income remained at $4.5 million during the first quarter of 1998,
the same as the first quarter of 1997. The average yield on interest earning
assets increased to 8.47% during the first quarter of 1998, from 8.35% during
the first quarter of 1997, while the average cost of funds increased to 5.13%,
from 5.12% for these same periods, resulting in an increase in the rate spread
to 3.34% in 1998, from 3.23% in 1997. The net interest margin increased to
4.04% for the first quarter of 1998, compared to 3.87% for the first quarter of
1997.
10
<PAGE> 11
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 Company's quarterly provision for losses on loans was reduced to
$106,000 for the first quarter of 1998, from $200,000 for the first quarter of
1997. Nonperforming loans to loans receivable decreased to 0.83% at March 31,
1998, from 1.39% at December 31, 1997. Nonperforming assets to total assets
decreased to 1.45% at March 31, 1998, from 1.64% at December 31, 1997. The
allowance for losses on loans amounted to 181.22% of nonperforming loans at
March 31, 1998, increased from 110.93% at December 31, 1997.
OTHER INCOME
Other income increased $3.5 million, to $4.5 million during the first quarter
of 1998, from $1.0 million in the first quarter of 1997, primarily due to a
$3.2 million increase in income from limited partnerships. The Company closed
out a partnership investment in a 288 unit apartment complex located in Fort
Lauderdale, Florida, with the sale of the property, realizing a gain of $3.6
million, and offsetting $1.9 million in losses recognized in prior periods.
The following table presents additional detail on miscellaneous other income
for the periods indicated.
<TABLE>
<CAPTION>
Three months ended
March 31,
---------------------------
1998 1997
---------------------------
<S> <C> <C>
Miscellaneous other income:
Rental income $ 33 $ 39
Income from real estate owned, net - (104)
Checking and ATM/debit card fees 140 124
Credit enhancement fees 30 10
Investment commissions 46 15
Other miscellaneous 32 20
---------------------------
Total miscellaneous other income $ 281 $ 104
===========================
</TABLE>
11
<PAGE> 12
OPERATING EXPENSES
Operating expenses remained constant at $2.7 million for the first quarters of
1998 and 1997. Compensation expense decreased $96,000, or 5.4%, to $1.7
million in 1998, from $1.8 million in 1997, offsetting various other expenses
which increased a net $92,000, including a $39,000 increase in professional
fees paid. The following table presents additional detail on miscellaneous
other expenses for the periods indicated.
<TABLE>
<CAPTION>
Three months ended
March 31,
---------------------------
1998 1997
---------------------------
<S> <C> <C>
Miscellaneous other expense:
Stationery and supplies $ 77 $ 95
Telephone and postage 74 68
Loan expense 7 6
Insurance 26 32
Security 27 23
Audit and examination fees 54 48
Legal fees 39 18
Consulting fees 32 10
Benefit plan administration fees 8 18
Dues and subscriptions 19 6
Checking and ATM/debit card expenses 47 32
Minority interest 11 8
Other 75 60
---------------------------
Total miscellaneous other expense $ 496 $ 424
===========================
</TABLE>
INCOME TAXES
The Company's effective income tax rate for the first quarter of 1998 was 35.9%
compared to 31.7% for the first quarter of 1997. During the first quarter of
1997, low income housing credits and dividends received deductions reduced the
Company's effective tax rate. The increase in effective tax rate for the first
quarter of 1998 was due to the reduced benefit of low income housing tax
credits and dividends received deductions because of the significant increase
in pretax income as a result of the large gain realized during the first
quarter of 1998.
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 quarter of
1998 and 1997, the Company originated and purchased mortgage loans in the
amounts of $21.0 million and $15.5 million, respectively. Loan repayments for
these same two periods were $22.3 million and $21.1 million, respectively. The
net reduction in loans receivable was the result of seasonal reduction of loan
originations during the winter months, and increasing competition from mortgage
brokers.
During the first quarter of 1998 the Company's deposits decreased by $482,000.
Short term borrowings from the FHLB of $14.0 million during the first quarter
of 1998 were repaid within the quarter.
12
<PAGE> 13
Federal regulations require a savings institution to maintain an average daily
balance of liquid assets equal to at least 4% of the average daily balance of
its 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 three months of 1998 and
1997 were 11.1% and 8.1%, respectively.
The Association is also required to maintain specific amounts of capital
pursuant to federal regulations. As of March 31, 1998, the Association was in
compliance with all regulatory capital requirements, with tangible and core
capital of 10.7%, risk-based capital of 17.5%, and tier one capital of 16.2%,
well above the requirements for capital adequacy of 1.5%, 3.0%, 8.0%, and 4.0%,
respectively. The minimum requirement for well capitalized institutions under
the prompt corrective action regulations are 10.0% risk-based capital and 6.0%
tier one capital.
DISCLOSURES ABOUT MARKET RISK
The business of the Company and the composition of its balance sheet consists
of investments in interest-earning assets (primarily loans, mortgage-backed
securities, and other securities) which are primarily funded by
interest-bearing liabilities (deposits and borrowings). Such financial
instruments have varying levels of sensitivity to changes in market interest
rates resulting in market risk. All of the financial instruments of the
Company are for other than trading purposes. Approximately 95% of the
Company's financial assets and 100% of its financial liabilities are held and
managed by the Association. The following discussion pertains primarily to the
financial instruments held by the Association.
In order to measure the market risk inherent in the Association's financial
assets and liabilities, management utilizes a quarterly report ("model")
prepared for the Association by the Office of Thrift Supervision ("OTS") based
on information provided by the Association which measures the Association's
exposure to interest rate risk. The model calculates the present value of
assets, liabilities, off-balance sheet financial instruments, and equity at
current interest rates, and at hypothetical higher and lower interest rates at
one percent intervals. The present value of each major category of financial
instrument is calculated by the model using estimated cash flows based on
weighted average contractual rates and terms at discount rates representing the
estimated current market interest rate for similar financial instruments. The
resulting present value of longer term fixed-rate financial instruments are
more sensitive to change in a higher or lower market interest rate scenario,
while adjustable-rate financial instruments largely reflect only a change in
present value representing the difference between the contractual and
discounted rates until the next interest rate repricing date. For further
information regarding the underlying assumptions of the model, as well as its
shortcomings, refer to management's discussion and analysis included in the
Calumet Bancorp, Inc. Annual Report on Form 10-K for the year ended December
31, 1997.
The following table reflects the estimated present value of interest-earning
assets, interest-bearing liabilities, and off-balance sheet financial
instruments as calculated by the OTS for the Association as of December 31,
1997, at then current interest rates and at hypothetical higher and lower
interest rates of one and two percent.
13
<PAGE> 14
<TABLE>
<CAPTION>
Present Value at December 31, 1997
============================================================
Down 2% Down 1% Current Up 1% Up 2%
============================================================
<S> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Mortgage loans, including mortgage-
backed securities:
Adjustable rate $228,046 $225,376 $222,736 $219,929 $216,675
Fixed rate 173,247 170,385 165,515 158,982 152,010
Commercial and consumer loans 9,925 9,882 9,840 9,800 9,759
Securities 46,676 45,407 44,101 42,663 41,139
------------------------------------------------------------
TOTAL INTEREST-EARNING ASSETS 457,894 451,050 442,192 431,374 419,583
Other assets 22,640 22,767 22,928 23,076 23,201
------------------------------------------------------------
Total assets $480,534 $473,817 $465,120 $454,450 $442,784
============================================================
INTEREST BEARING LIABILITIES:
Passbook accounts $ 60,775 $ 60,538 $ 59,044 $ 56,944 $ 54,995
NOW accounts 24,046 23,632 22,976 22,357 21,779
Money market accounts 8,412 8,322 8,215 8,110 8,006
Certificates of deposit 261,784 259,691 257,663 255,653 253,706
------------------------------------------------------------
TOTAL DEPOSITS 355,017 352,183 347,898 343,064 338,486
Borrowings 46,411 45,685 44,976 44,283 43,606
------------------------------------------------------------
TOTAL INTEREST-BEARING LIABILITIES 401,428 397,868 392,874 387,347 382,092
Other liabilities 8,706 8,705 8,705 8,704 8,703
------------------------------------------------------------
Total liabilities $410,134 $406,573 $401,579 $396,051 $390,795
============================================================
Loan commitments $ 315 $ 230 $ 99 $ (62) $ (237)
============================================================
NET PORTFOLIO VALUE (NPV) $ 70,715 $ 67,474 $ 63,640 $ 58,337 $ 51,752
============================================================
RATIO OF NPV TO PV OF TOTAL ASSETS 14.72% 14.24% 13.68% 12.84% 11.69%
============================================================
</TABLE>
14
<PAGE> 15
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
Not applicable.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
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.
CALUMET BANCORP, INC.
DATE: MAY 8, 1998 /s/THADDEUS WALCZAK
------------------------------
THADDEUS WALCZAK,
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
DATE: MAY 8, 1998 /s/JOHN GARLANGER
------------------------------
JOHN GARLANGER,
CHIEF FINANCIAL OFFICER
15
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 3,034
<INT-BEARING-DEPOSITS> 6,468
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 52,010
<INVESTMENTS-CARRYING> 17,887
<INVESTMENTS-MARKET> 17,725
<LOANS> 381,985
<ALLOWANCE> 5,828
<TOTAL-ASSETS> 490,268
<DEPOSITS> 347,979
<SHORT-TERM> 27,000
<LIABILITIES-OTHER> 11,467
<LONG-TERM> 18,060
0
0
<COMMON> 36
<OTHER-SE> 85,726
<TOTAL-LIABILITIES-AND-EQUITY> 490,268
<INTEREST-LOAN> 8,422
<INTEREST-INVEST> 1,112
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 9,534
<INTEREST-DEPOSIT> 4,278
<INTEREST-EXPENSE> 4,986
<INTEREST-INCOME-NET> 4,548
<LOAN-LOSSES> 106
<SECURITIES-GAINS> 25
<EXPENSE-OTHER> 2,744
<INCOME-PRETAX> 6,230
<INCOME-PRE-EXTRAORDINARY> 3,994
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,994
<EPS-PRIMARY> 1.27
<EPS-DILUTED> 1.17
<YIELD-ACTUAL> 4.04
<LOANS-NON> 3,216
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 6,070
<CHARGE-OFFS> 350
<RECOVERIES> 2
<ALLOWANCE-CLOSE> 5,828
<ALLOWANCE-DOMESTIC> 5,828
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
