SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 for the
Quarterly Period Ended December 31, 1996
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 0-19794
Advantage Bancorp, Inc.
(Exact name of registrant as specified in its charter)
Wisconsin 39-1714425
(State of Incorporation) (I.R.S. Employer Identification No.)
5935 7th Avenue
Kenosha, Wisconsin 53140
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (414) 658-4861
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
The number of shares outstanding of the issuer's common stock, par value
$.01 per share, was 3,263,172 at January 31, 1997.
<PAGE>
ADVANTAGE BANCORP, INC. AND SUBSIDIARIES
FORM 10-Q
Part I. Financial Information
Item 1 Financial Statements (unaudited):
Consolidated Statements of Financial Condition as of
December 31, 1996 and September 30, 1996 . . . . . . . . 3
Consolidated Statements of Income for the Three Months
ended December 31, 1996 and 1995 . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows for the Three
Months ended December 31, 1996 and 1995 . . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . 7
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of 8
Operations . . . . . . . . . . . . . . . . . . . . . . .
Part II. Other Information
Item 1 Legal Proceedings . . . . . . . . . . . . . . . . . . . . 13
Item 2 Changes in Securities . . . . . . . . . . . . . . . . . . 13
Item 3 Default Upon Senior Securities . . . . . . . . . . . . . 13
Item 4 Submission of Matters to a Vote of Security Holders . . . 13
Item 5 Other Information . . . . . . . . . . . . . . . . . . . . 13
Item 6 Exhibits and Reports on Form 8-K . . . . . . . . . . . . 13
Signature Page . . . . . . . . . . . . . . . . . . . . . 13
<PAGE>
ADVANTAGE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(unaudited)
December 31 September 30
ASSETS 1996 1996
Cash and cash equivalents (includes
interest-earning deposits of
$31,363,024, Dec. 31, 1996;
$17,714,761 - Sept. 30, 1996) . . . . $ 47,891,116 $35,445,646
Certificates of deposit (approximates
market value) . . . . . . . . . . . . 611,149 611,067
U.S. government and agency securities
available for sale (at market value) . 25,946,003 29,385,356
Mortgage-backed securities available
for sale (at market value) . . . . . 135,048,854 140,086,665
Mortgage-backed securities held to
maturity (market value of $10,764,853
- Dec. 31, 1996; $11,159,367 -
Sept. 30, 1996) . . . . . . . . . . . 10,598,615 11,011,238
Mortgage-related securities available
for sale (at market value) . . . . . . 14,999,272 15,226,120
Mortgage-related securities held to
maturity (market value of $177,415,943
- Dec. 31,1996; $172,913,430 -
Sept. 30, 1996) . . . . . . . . . . . 174,294,242 171,470,022
Marketable equity securities (at market
value) . . . . . . . . . . . . . . . . 5,833,368 5,043,091
Loans held for sale (at lower of cost
or market) . . . . . . . . . . . . . . 3,561,740 3,056,000
Loans receivable . . . . . . . . . . . 568,114,412 559,725,640
Foreclosed properties and properties
subject to foreclosure . . . . . . . . 2,423,268 1,403,440
Investments in and advances to
unconsolidated partnerships . . . . . 7,302,044 7,397,416
Office properties and equipment . . . 12,281,896 12,531,601
Federal Home Loan Bank stock - at cost. 8,795,600 8,795,600
Accrued interest on investments and
mortgage-related securities . . . . . 3,082,996 2,640,672
Intangible assets . . . . . . . . . . . 6,635,634 6,902,259
Deferred income tax . . . . . . . . . . 1,766,873 2,641,659
Prepaid expenses and other assets . . . 2,033,616 3,012,020
-------------- --------------
$1,031,220,698 $1,016,385,512
============== ==============
LIABILITIES
Deposits . . . . . . . . . . . . . . . $690,498,789 $ 680,850,865
Notes payable to Federal Home
Loan Bank . . . . . . . . . . . . . 153,510,000 175,910,000
Securities sold under agreements
to repurchase . . . . . . . . . . . . 80,917,861 48,355,457
Advance payments by borrowers for
taxes and insurance . . . . . . . . . 5,946,338 8,496,925
Accrued interest on deposit accounts . 2,587,379 3,711,995
Accrued interest on notes payable
and other borrowings . . . . . . . . . 2,112,440 1,377,204
Other liabilities . . . . . . . . . . . 3,585,418 8,419,561
Accrued income taxes . . . . . . . . . 1,902,553 397,102
-------------- --------------
Total liabilities . . . . . . . . 941,060,778 927,519,109
STOCKHOLDERS' EQUITY
Serial preferred stock, $.01 par
value; authorized 5,000,000
shares; none outstanding . . . . . . - -
Common stock, $.01 par value;
authorized 10,000,000 shares;
issued 4,124,780 shares;
outstanding shares: 3,275,135
- Dec. 31, 1996; 3,326,768 -
Sept. 30, 1996 . . . . . . . . . . . 33,000 33,000
Additional paid-in capital . . . . . . 37,751,499 37,751,499
Loan to Employee Stock Ownership Plan . (1,704,941) (1,704,941)
Unearned restricted stock awarded . . . (843,777) (894,777)
Treasury stock, at cost (849,645
shares - Dec. 31, 1996; 798,102
shares - Sept. 30, 1996) . . . . . . (19,666,559) (17,627,105)
Unrealized gain (loss) on
securities available for
sale - net . . . . . . . . . . . . . . 484,243 (699,857)
Retained earnings . . . . . . . . . . 74,106,455 72,008,584
-------------- --------------
Total stockholders' equity . . . . 90,159,920 88,866,403
-------------- --------------
$1,031,220,698 $1,016,385,512
============== ==============
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
ADVANTAGE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Three Months Ended December 31,
1996 1995
Interest income:
Interest on loans . . . . . . . . . . . . . $12,047,448 $11,089,579
Interest on mortgage-related securities . . 6,109,856 6,303,428
Interest and dividends on
investment securities . . . . . . . . . . 663,013 716,693
Other interest income . . . . . . . . . . . 330,392 288,255
----------- -----------
Total interest income . . . . . . . . . . . 19,150,709 18,397,955
Interest expense:
Interest on deposits . . . . . . . . . . . 7,899,191 8,054,872
Interest on notes payable and
other borrowings . . . . . . . . . . . . . 3,553,533 2,942,065
----------- -----------
Total interest expense . . . . . . . . . . 11,452,724 10,996,937
----------- -----------
Net interest income . . . . . . . . . . . . . 7,697,985 7,401,018
Provision for losses on loans . . . . . . . . 80,000 120,000
----------- -----------
Net interest income after
provision for losses on loans . . . . . . . 7,617,985 7,281,018
Non-interest income:
Loan fees and service charges . . . . . . . 170,420 150,734
Mortgage brokerage commissions . . . . . 471,137 429,902
Service charges on deposit accounts . . . . 699,247 564,665
Gain on sales of loans - net . . . . . . . 203,691 255,478
Gain on sale of securities
available for sale . . . . . . . . . . . . 218,116 488,948
Equity in net income of
unconsolidated partnerships . . . . . . . 44,500 29,200
Other . . . . . . . . . . . . . . . . . . . 266,126 215,630
----------- -----------
Total non-interest income . . . . . . . . . 2,073,237 2,134,557
Non-interest expenses:
Compensation and employee benefits . . . . 2,708,882 2,442,334
Occupancy . . . . . . . . . . . . . . . . . 814,668 704,110
Data processing . . . . . . . . . . . . . . 181,154 153,872
Advertising . . . . . . . . . . . . . . . . 210,608 133,101
Federal deposit insurance premiums . . . . 315,963 396,232
Amortization of intangible assets . . . . . 266,625 849,568
Professional services . . . . . . . . . . . 113,668 116,064
Other . . . . . . . . . . . . . . . . . . . 1,182,356 1,034,585
----------- -----------
Total non-interest expenses . . . . . . . . 5,793,924 5,829,866
----------- -----------
Income before income taxes . . . . . . . . . 3,897,298 3,585,709
Income taxes . . . . . . . . . . . . . . . . 1,444,199 1,305,229
----------- -----------
Net income . . . . . . . . . . . . . . . . . $2,453,099 $2,280,480
========== ==========
Earnings per share . . . . . . . . . . . $0.70 $0.62
========== ==========
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
ADVANTAGE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended December 31
1996 1995
Operating activities:
Net income . . . . . . . . . . . . . . . . . $2,453,099 $2,280,480
Provision for losses on loans . . . . . . . 80,000 120,000
Provision for depreciation . . . . . . . . 328,712 249,188
Amortization of intangible assets . . . . . 266,625 849,568
Equity in net income of
unconsolidated partnerships . . . . . . . (44,500) (29,200)
Net amortization of mortgage-related
securities discounts and premiums . . . . (185,912) (234,321)
Decrease in deferred income tax liability . - (114,814)
Increase (decrease) in accrued
income taxes . . . . . . . . . . . . . . 1,505,451 37,612
Decrease (increase) in interest
receivable . . . . . . . . . . . . . . . . (411,476) (299,955)
Decrease in accrued FDIC SAIF
special assessment . . . . . . . . . . . . (4,434,589) -
Decrease in interest payable . . . . . . . (389,380) (709,923)
Loans originated for sale . . . . . . . . . (11,367,545) (17,516,694)
Proceeds from sales of loans . . . . . . . 10,861,805 15,179,694
Amortization of cost of restricted
stock benefit plan . . . . . . . . . . . . - 75,850
Other . . . . . . . . . . . . . . . . . . . (1,018,373) 965,832
----------- ----------
Net cash provided by (used in)
operating activities . . . . . . . . . . . . (2,356,083) 853,317
Investing activities:
Proceeds from sales and maturities of
U.S. government and agency securities
available for sale . . . . . . . . . . . . 3,500,000 2,000,000
Proceeds from sales of marketable
equity securities . . . . . . . . . . . . 488,711 1,135,525
Purchases of certificates of deposit . . . - (500,052)
Purchases of U.S. agency securities
available for sale . . . . . . . . . . . . - (3,000,000)
Purchases of mortgage-related
securities held to maturity . . . . . . . (6,697,476) (10,348,940)
Principal repayments on
mortgage-related securities
held to maturity . . . . . . . . . . . . . 4,025,226 4,226,612
Principal repayments on mortgage-
backed securities held to maturity . . . . 483,353 1,582,208
Loan principal repayments . . . . . . . . . 59,897,014 52,330,496
Loans originated . . . . . . . . . . . . . (67,768,809) (54,064,481)
Purchases of marketable equity
securities . . . . . . . . . . . . . . . . (871,716) (792,720)
Principal repayments on mortgage-
backed securities available for sale . . 6,432,972 7,092,510
Principal repayments on mortgage-
related securities available for sale . . 385,854 376,926
Proceeds from sale of foreclosed
properties . . . . . . . . . . . . . . . . 500 246,872
Principal repayments on loans to
unconsolidated partnership . . . . . . . . 32,609 43,218
Cash distributions from
unconsolidated partnerships . . . . . . . 107,263 -
Additions to office properties
and equipment . . . . . . . . . . . . . . (79,007) (438,799)
----------- ----------
Net cash used in investing activities . . . . (63,506) (110,625)
Financing activities:
Net increase in deposits . . . . . . . . . 9,647,924 3,009,144
Proceeds from notes payable to
the Federal Home Loan Bank . . . . . . . . 5,000,000 -
Repayment of notes payable to the
Federal Home Loan Bank . . . . . . . . . . (27,400,000) (1,600,000)
Net increase in securities sold
under agreements to repurchase . . . . . . 32,562,404 22,880
Net decrease in advance payments
by borrowers for taxes and insurance . . . (2,550,587) (4,890,679)
Purchases of treasury stock . . . . . . . . . (2,300,950) -
Dividends paid . . . . . . . . . . . . . . . (263,117) (220,775)
Proceeds from exercise of
stock options . . . . . . . . . . . . . . . 169,385 -
----------- ----------
Net cash provided by (used in)
financing activities . . . . . . . . . . . . 14,865,059 (3,679,430)
----------- ----------
Increase (decrease) in cash and
cash equivalents . . . . . . . . . . . . . . 12,445,470 (2,936,738)
Cash and cash equivalents:
At beginning of period . . . . . . . . . . 35,445,646 32,510,205
----------- ----------
At end of period . . . . . . . . . . . . . $47,891,116 $29,573,467
=========== ===========
Supplemental disclosures of cash
flow information:
Interest paid (including amounts
credited to deposits) . . . . . . . . . . . $11,503,997 $11,706,860
Income taxes paid (refunded) . . . . . . . (61,252) 1,382,434
Supplemental schedule of noncash
investing activities:
Loans receivable transferred to
foreclosed properties . . . . . . . . . . . 1,020,328 621,820
Securities transferred from
held-to-maturity to
available-for-sale . . . . . . . . . . . . 37,300,000
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
ADVANTAGE BANCORP, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
Three Months Ended December 31, 1996
(1) 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 Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by GAAP for complete
financial statements. In the opinion of management, all adjustments
necessary for a fair presentation have been included. All adjustments are
of a normal recurring nature. The unaudited consolidated financial
statements presented herein should be read in conjunction with the audited
consolidated financial statements and related notes thereto for the fiscal
year ended September 30, 1996 included in the Annual Report on Form 10-K
as filed by Advantage Bancorp, Inc. (the "Company") with the Securities
and Exchange Commission.
The results of operations and other data for the three months ended
December 31, 1996 are not necessarily indicative of results that may be
expected for the entire fiscal year ending September 30, 1997.
The unaudited consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiary, Advantage Bank, FSB (the
"Bank"), and the Bank's wholly-owned subsidiaries, Advantage Financial
Center, Inc., Advantage Real Estate Services, Inc., Advantage Investments,
Inc., Advantage Financial Services and Insurance, Inc., and Amity Service
Corporation. All material intercompany accounts and transactions have
been eliminated in consolidation.
(2) Earnings Per Share Information
Earnings per share of common stock have been computed based on the
consolidated net income and weighted average shares of outstanding stock
of the Company.
Three Months Ended December 31
1996 1995
Net income . . . . . . . . . . . . $2,453,099 $2,280,480
========== ==========
Weighted average shares outstanding 3,287,295 3,464,355
Net effect of dilutive stock options
based on the treasury stock method
using average market price . . . . 209,880 226,878
---------- ----------
Total weighted average common shares
and equivalents. . . . . . . . . . 3,497,175 3,691,233
========== ==========
Earnings per share (primary) . . . $0.70 $0.62
========== ==========
Weighted average shares outstanding 3,287,295 3,464,355
Net effect of dilutive stock options
based on the treasury stock method
using quarter-end market price . . 210,959 235,884
---------- ----------
Total outstanding shares for
fully diluted purposes . . . . . . 3,498,254 3,700,239
========== ==========
Earnings per share (fully diluted) $0.70 $0.62
========== ==========
(3) Commitments and Contingencies
Commitments to originate mortgage loans of $7.1 million at December 31,
1996 represent amounts which the Bank plans to fund within the normal
commitment period of thirty to ninety days. Commitments to sell fixed-
rate mortgage loans were $3.3 million as of December 31, 1996. The Bank
had unissued credit under existing home equity line-of-credit loans and
commercial line-of-credit loans of $28.5 million and $22.0 million,
respectively, as of December 31, 1996.
(4) Stockholders' Equity
Under federal law and regulations, the Bank is required to meet certain
tangible, core, and risk-based capital requirements. Tangible capital
generally consists of stockholders' equity minus certain intangible assets
and investments in and advances to "nonincludable" subsidiaries and joint
ventures. Core capital generally consists of tangible capital plus
qualifying intangible assets. The risk-based capital requirements address
credit risk related to both recorded assets and off-balance sheet
commitments and obligations. Risk-weighted assets, for regulatory
measurement purposes, at December 31, 1996, totaled $473,384,000.
The following table summarizes the Bank's capital amounts and capital
ratios, and the capital ratios required by federal law and regulations at
December 31, 1996 (dollars in thousands):
Actual Required Actual Required
Amount Amount Excess Ratio Ratio Excess
Tangible capital $64,036 $15,147 $48,889 6.34% 1.50% 4.84%
Core capital 64,036 30,295 33,741 6.34 3.00 3.34
Risk-based
capital 69,785 37,871 31,914 14.74 8.00 6.74
The Bank's regulatory capital as of December 31, 1996 was as follows (in
thousands):
Tangible Core Risk-Based
Capital Capital Capital
Total consolidated stockholders' equity $90,160 $90,160 $90,160
Add unrealized loss on securities
available for sale (Bank only) . . . 5 5 5
Less parent company stockholders'
equity not includable in
regulatory capital . . . . . . . . . (21,748) (21,748) (21,748)
Loan loss allowances (limited to 1%
of loans) . . . . . . . . . . . . . . - - 5,749
Nonallowable intangibles . . . . . . . (6,845) (6,845) (6,845)
Income tax effect of intangibles . . . 2,464 2,464 2,464
-------- ------- -------
Regulatory capital . . . . . . . . . . $64,036 $64,036 $69,785
======== ======= =======
(5) Reclassifications
Certain amounts in the prior year consolidated financial statements have
been reclassified to conform with the fiscal 1997 presentation.
(6) Dividends
On January 21, 1996, the Company announced the declaration of a $0.10 per
share cash dividend on the Company's common stock payable February 21,
1997 to shareholders of record on February 7, 1997.
ADVANTAGE BANCORP, INC. AND SUBSIDIARIES
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
The Company's only active business is the business of the Bank. The
Bank's principal business is attracting retail deposits from the general
public and using such deposits to originate residential loans in its
primary market area. The Bank also originates commercial real estate,
multi-family, construction, consumer and commercial business loans. In
addition, the Bank also invests in mortgage-related securities, investment
securities, certificates of deposit, short-term liquid assets and real
estate. Finally, the Bank offers, on an agency basis, certain securities
brokerage services and insurance products to its customers. The Bank
operates out of 15 locations. It has seven full service offices located
in Kenosha, Wisconsin and full service branch offices located in Lake
Geneva, Paddock Lake, and Racine, Wisconsin; and Burbank, Gurnee, North
Chicago, Tinley Park and Zion, Illinois. The Bank also operates loan
origination facilities in Kenosha, Racine and Wauwatosa, Wisconsin and
Grayslake and Naperville, Illinois. The Bank owns five service
corporations, Advantage Real Estate Services, Inc., which owns interests
in two real estate partnerships, Advantage Investments, Inc., which
invests in mortgage-related securities, Advantage Financial Services and
Insurance, Inc. which is engaged in the business of selling non-insured
investments and insurance and providing financial planning, and Amity
Service Corporation, which formerly operated an insurance agency and is
now inactive. Deposits of the Bank are insured up to the maximum
allowable amount by the Federal Deposit Insurance Corporation (the
"FDIC"). The Bank is subject to regulation by the Office of Thrift
Supervision ("OTS") and the FDIC.
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, mortgage-related securities and investment portfolios
and its cost of funds, consisting of interest paid on its deposits and
borrowings. When interest-bearing liabilities mature or reprice more
quickly than interest-earning assets in a given period, a significant
increase in market rates of interest could adversely affect net interest
income. Conversely, when interest-earning assets mature or reprice more
quickly than interest-bearing liabilities, falling interest rates could
result in a decrease in net interest income. In managing its asset-
liability mix, the Company intends to continue to emphasize, subject to
future conditions, the origination of adjustable rate mortgage loans and
the purchase of short-term and intermediate-term mortgage-related
securities and other assets.
The Company's results of operations are also significantly affected by
general economic and competitive conditions, particularly changes in
market interest rates, government policies and actions of regulatory
authorities.
Liquidity and Capital Resources
The Company's most liquid assets are cash and cash equivalents, which
include investments in highly liquid, short-term investments. The level
of these assets is dependent on the Company's operating, financing and
investing activities during any given period. Cash and cash equivalents
totalled $47.9 million and $29.6 million as of December 31, 1996 and 1995,
respectively.
The Company's primary sources of funds are deposits, proceeds from
principal and interest payments on loans and mortgage-related securities,
notes payable to Federal Home Loan Bank of Chicago ("FHLB") and, to a
lesser extent, reverse repurchase agreements. While maturities and
scheduled amortization of loans and mortgage-related securities are a
predictable source of funds, deposit flows and mortgage prepayments are
greatly influenced by general interest rates, economic conditions and
competition.
A primary investing activity of the Company is the origination of mortgage
and other loans. During the three months ended December 31, 1996 and
1995, the Company originated and purchased loans (including loans
originated for sale) in the amounts of $79.1 million and $71.6 million,
respectively. Other investing activities include the purchase of
mortgage-related securities (including securities available for sale)
which totalled $6.7 million and $10.3 million for the three months ended
December 31, 1996 and 1995, respectively.
During the three months ended December 31, 1996 and 1995, these activities
were funded primarily by (1) principal repayments on loans and mortgage-
related securities totalling $71.3 million and $65.7 million,
respectively, (2) net increases in deposits of $9.6 million and $3.0
million, respectively, (3) proceeds from sales of loans of $10.9 million
and $15.2 million, respectively, and (4) net proceeds from borrowings
under repurchase agreements of $32.6 million and $23,000, respectively.
These items were partially offset by net repayments of notes payable to
the Federal Home Loan Bank during the three months ended December 31, 1996
and 1995 of $21.6 million and $1.6 million, respectively. Borrowings
under repurchase agreements increased during the 1996 quarter due to new
repurchase agreements with local customers.
The Bank is required to maintain minimum levels of liquid assets as
defined by OTS regulations. This requirement, which may be varied at the
direction of the OTS depending upon economic conditions and deposit flows,
is based upon a percentage of deposits and short-term borrowings. The
current required ratio is 5.0%. The Bank's liquidity ratio was 10.27% for
the month of December 1996. Excess funds are generally invested in short-
term investments such as federal funds. In the event that the Bank should
require funds beyond its ability to generate them internally, additional
sources of funds are available through the use of FHLB advances,
repurchase agreements, and brokered deposits.
As of December 31, 1996, the Bank's capital exceeded all capital
requirements of the OTS as mandated by federal law and regulations. See
Note 4 of the Notes to Unaudited Consolidated Financial Statements.
Changes in Financial Condition
Total assets increased $15.0 million from $1.016 billion at September 30,
1996 to $1.031 million at December 31, 1996.
Loans receivable increased $8.4 million from $559.7 million as of
September 30, 1996 to $568.1 million as of December 31, 1996.
Mortgage-related securities decreased $2.9 million from $337.8 million as
of September 30, 1996 to $334.9 million at December 31, 1996. This
decrease was due to the Bank's strategy of investing most of the funds
received from principal repayments on mortgage-related securities in loans
receivable since loans generally have higher yields than mortgage-related
securities.
Deposits increased $9.6 million from $680.9 million at September 30, 1996
to $690.5 million at December 31, 1996.
Notes payable to the FHLB decreased $22.4 million from $175.9 million as
of September 30, 1996 to $153.5 million as of December 31, 1996. This
decrease was more than offset by a $32.5 million increase in securities
sold under agreement to repurchase during the same period.
Stockholders' equity increased from $88.9 million as of September 30, 1996
to $90.2 million as of December 31, 1996. Stockholders' equity was
increased by: (1) net income of $2.5 million, and (2) an increase of $1.2
million in the unrealized gain (net of income tax effect) relating to
securities available for sale. Stockholders' equity was reduced by: (1)
the open market repurchase of $2.3 million of Company stock, and (2) the
payment of $263,000 in cash dividends.
Asset Quality
The Company and the Bank regularly review assets to determine proper
valuation. Management's monitoring of the asset portfolio includes a
review of historical loss experience, known and inherent risks in the
portfolio, the value of any underlying collateral, and prospective
economic conditions. Loans are placed on nonaccrual status when loans are
contractually delinquent more than 90 days or earlier if warranted based
on management's assessment of the loan. When loans are placed on
nonaccrual status, interest previously accrued is reversed with a charge
to interest income. The following table sets forth information regarding
the Company's nonaccrual loans and foreclosed properties at the dates
indicated (dollars in thousands). All loans which are contractually past
due more than 90 days are included in nonaccrual loans.
Dec. 31 Sept. 30 June 30 Mar. 31 Dec. 31
1996 1996 1996 1996 1995
Nonperforming loans:
One- to four-family . . . $1,851 $666 $1,959 $948 $608
Commercial real estate . 1,138 616 1,393 2,094 1,608
Construction and land . . - 1,774 - 72 72
Commercial business . . . 23 274 42 89 46
Consumer and other . . . 271 84 102 72 40
------ ------ ------ ------ ------
Total non-performing loans. $3,283 $3,414 $3,496 $3,275 $2,374
====== ====== ====== ====== ======
Foreclosed properties:
One-to four-family . . . $1,452 $894 $1,165 $1,568 $1,617
Commercial real estate . 971 534 534 558 558
Construction and land . - - 280 280 280
------ ------ ------ ------ ------
Total foreclosed
properties. . . . . . . . $2,423 $1,428 $1,979 $2,406 $2,455
====== ====== ====== ====== ======
Total non-performing assets $5,706 $4,842 $5,475 $5,681 $4,829
====== ====== ====== ====== ======
Non-performing loans to
total loans . . . . . . . . 0.57% 0.61% 0.64% 0.62% 0.46%
====== ====== ====== ====== ======
Non-performing assets to
total assets . . . . . . . 0.55% 0.48% 0.55% 0.58% 0.50%
====== ====== ====== ====== ======
Allowance for Losses on Loans
The following table sets forth an analysis of the Company's allowance for
losses on loans (dollars in thousands):
Three Months Year Year
Ended Ended Ended
Dec. 31, Sept. 30, Sept. 30,
1996 1996 1995
Balance at beginning of period $5,773 $ 5,271 $ 5,327
Additions charged to
operations:
One- to four-family . . . - - 30
Multi-family and commercial
real estate . . . . . . . . - - 60
Consumer . . . . . . . . . - - 50
Commercial business . . . 80 480 320
------- ------- -------
80 480 460
Additions from business
acquisitions:
One- to four-family . . . - - 469
Multi-family and commercial
real estate . . . . . . . . - - 49
------- ------- -------
0 0 518
Recoveries:
One- to four-family - 40 14
Consumer . . . . . . . . . - 21 12
Commercial business . . . 9 1 12
------- ------- -------
9 62 38
Charge-offs:
One- to four-family . . . (97) (29) (40)
Multi-family and commercial
real estate . . . . . . . . - - (841)
Consumer . . . . . . . . . (1) (8) (32)
Commercial business . . . - (3) (159)
------- ------- -------
(98) (40) (1,072)
------- ------- -------
Net recoveries (charge-offs) (89) 22 (1,034)
------- ------- -------
Balance at end of period . . $5,764 $5,773 $5,271
======= ======= ======
Ratio of net charge-offs to
average loans outstanding
during the period (annualized) 0.06% -0.00% 0.21%
======= ======= ======
Allowance for losses on loans
to non-performing loans at end
of the period . . . . . . . . 175.6% 169.1% 219.0%
======= ======= ======
Allowance for losses on loans
to total loans at end of the
period . . . . . . . . . . . 1.01% 1.03% 1.03%
======= ======= ======
While management believes that it uses the best information available to
determine the allowance for losses on loans, unforeseen changes in market
conditions could result in adjustments and net earnings could be
significantly affected if circumstances differ substantially from the
assumptions used in determining the allowance.
Results of Operations - Comparison of the Three months Ended
December 31, 1996 and 1995
General
Net income for the three months ended December 31, 1996 was $2.45 million
compared to $2.28 million for the comparable 1995 quarter.
Net Interest Income
The following table presents certain information related to net interest
income (dollars in thousands):
For the Three Months
Ended December 31
1996 1995
Average interest-earning assets . . . . . $977,136 $927,160
Total interest income . . . . . . . . . . 19,151 18,398
Average yield on interest-earning assets 7.84% 7.94%
Average interest-bearing liabilities . . $918,558 $866,574
Total interest expense . . . . . . . . . 11,453 10,997
Average rate on interest-bearing 4.99% 5.08%
liabilities . . . . . . . . . . . . . . .
Average net earning assets . . . . . . . $58,578 $60,586
Net interest income before provision for 7,698 7,401
loan losses . . . . . . . . . . . . . . .
Net interest rate spread . . . . . . . . 2.85% 2.86%
Net interest margin (net interest income
divided by average interest-earning
assets) . . . . . . . . . . . . . . . . . 3.15% 3.19%
Net interest income before provision for loan losses was $7.70 million for
the three months ended December 31, 1996, compared with $7.40 million for
the comparable 1995 quarter, an increase of $300,000. This increase was
primarily due to a $50.0 million increase in average interest-earning
assets from the 1995 quarter to the 1996 quarter.
The net interest rate spread decreased slightly from 2.86% for the 1995
quarter to 2.85% for the 1996 quarter. This represents the offsetting
effects of (1) an increase in spread relating to the Company's strategy of
increasing its commercial and consumer loans, which have higher margins
than 1-4 family mortgage loans, and (2) a decrease in spread relating to
greater competition for 1-4 family mortgage loans and deposit accounts.
While commercial and consumer loans have higher interest rates than 1-4
family mortgage loans, they also have higher credit risk. While the
Company's credit losses on these loans have been minimal in the past,
there can be no assurance that such losses will remain minimal in the
future.
Provision for Losses on Loans
The provision for losses on loans was $80,000 for the three months ended
December 31, 1996 compared to $120,000 for the comparable 1995 quarter.
Nonperforming loans decreased from $3.4 million as of September 30, 1996
to $3.3 million as of December 31, 1996.
Non-interest Income
Non-interest income decreased slightly to $2.07 million for the three
months ended December 31, 1996 compared to $2.13 million for the
comparable 1995 quarter. The largest increase was a $134,000 increase in
service charges on deposit accounts relating to an increase in the number
of checking accounts. The largest decrease was a decrease of $271,000 in
gains on sale of securities available for sale. Non-interest income
excluding gains on sales of securities increased 13% to $1.86 million for
the 1996 quarter compared to $1.65 million for the 1995 quarter.
Non-interest Expense
Non-interest expense decreased slightly to $5.79 million for the three
months ended December 31, 1996 compared to $5.83 million for the
comparable 1995 quarter. The largest increase was a $267,000 increase
(11%) in compensation and employee benefits relating to a general increase
in the Company's business. The largest decrease was a $583,000 decrease
(69%) in amortization of intangible assets based on the current
amortization schedule. Non-interest expense excluding amortization of
intangible assets increased 11% to $5.53 million for the 1996 quarter
compared to $4.98 million for the 1995 quarter.
Income Taxes
The Company's effective income tax rate was 37.1% for the quarter ended
December 31, 1996 compared to 36.4% for the quarter ended December 31,
1995.
Part II - Other Information
Item 1 Legal Proceedings
From time to time the Company (through the Bank) is a party to legal
proceedings arising out of its lending activities and other operations.
However, there are no pending legal proceedings to which the Bank is a
party which, if determined adversely to the Bank, would have a material
adverse effect on the consolidated financial position of the Company.
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
Not applicable
Item 6 Exhibits and Reports on Form 8-K
(a) Reference is made to the Exhibit Index with respect to the exhibit
filed with this Form 10-Q. In addition, see Note 3 to the
Unaudited Consolidated Financial Statements for the information
required by Exhibit 11 - Computation of Earnings Per Share
(b) There were no reports on Form 8-K filed during the quarter for
which this report is filed.
* * * * * * * * * * * * * * * * * * * * * *
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Advantage Bancorp, Inc.
(registrant)
Date: February 10, 1997 By: /s/ Paul P. Gergen
Paul P. Gergen
Chairman of the Board
Chief Executive Officer
By: /s/ John Stampfl
John Stampfl
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
ADVANTAGE BANCORP, INC.
FORM 10Q
Quarterly Period Ended December 31, 1996
Exhibit No. Exhibit
27 Financial Data Schedule [Edgar version only]
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF ADVANTAGE BANCORP, INC. AS OF AND
FOR THE PERIOD ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 16,528
<INT-BEARING-DEPOSITS> 31,363
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 181,827
<INVESTMENTS-CARRYING> 184,893
<INVESTMENTS-MARKET> 188,181
<LOANS> 571,676
<ALLOWANCE> 5,764
<TOTAL-ASSETS> 1,031,221
<DEPOSITS> 690,499
<SHORT-TERM> 80,918
<LIABILITIES-OTHER> 16,134
<LONG-TERM> 153,510
0
0
<COMMON> 90,160
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 1,031,221
<INTEREST-LOAN> 12,047
<INTEREST-INVEST> 6,773
<INTEREST-OTHER> 331
<INTEREST-TOTAL> 19,151
<INTEREST-DEPOSIT> 7,899
<INTEREST-EXPENSE> 11,453
<INTEREST-INCOME-NET> 7,698
<LOAN-LOSSES> 80
<SECURITIES-GAINS> 218
<EXPENSE-OTHER> 5,794
<INCOME-PRETAX> 3,897
<INCOME-PRE-EXTRAORDINARY> 3,897
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,453
<EPS-PRIMARY> 0.70
<EPS-DILUTED> 0.70
<YIELD-ACTUAL> 7.84
<LOANS-NON> 3,283
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 5,773
<CHARGE-OFFS> 98
<RECOVERIES> 9
<ALLOWANCE-CLOSE> 5,764
<ALLOWANCE-DOMESTIC> 5,764
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
