<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 September 30, 1999
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 0-20082
Alliance Bancorp
(Exact name of registrant as specified in its charter)
Delaware 36-3811768
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Grant Square, Hinsdale, Illinois 60521
(Address of principal executive offices) (Zip Code)
(630) 323-1776
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all the reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO______
----
Indicate the number of shares outstanding of each of the issuer's classes of
stock, as of the latest practicable date.
Common Stock, $0.01 par value -10,360,751 shares outstanding as of November
8, 1999.
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<PAGE>
Alliance Bancorp and Subsidiaries
Form 10-Q
Index
-----
<TABLE>
<CAPTION>
Part I. Financial Information Page
- ------- --------------------- ----
<S> <C>
Item 1. Financial Statements (unaudited)
Consolidated Statements of Financial Condition
as of September 30, 1999 and December 31, 1998 1
Consolidated Statements of Income for the Three
and Nine Months Ended September 30, 1999 and 1998 2
Consolidated Statements of Changes in Stockholders' Equity
for the Nine Months Ended September 30, 1999 and 1998 3
Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 1999 and 1998 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk
See "Management's Discussion and Analysis of Financial Condition
and Results of Operations," "Asset/Liability Management" 14
Part II. Other Information
- -------- -----------------
Item 1. Legal Proceedings 20
Item 2. Changes in Securities and Use of Proceeds 20
Item 3. Defaults upon Senior Securities 20
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 21
Signature Page 22
</TABLE>
<PAGE>
Alliance Bancorp and Subsidiaries
Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>
September 30, December 31,
(In thousands, except share data) 1999 1998
- --------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
Assets
Cash and due from banks $ 19,817 17,195
Interest-bearing deposits 39,072 63,802
Investment securities available for sale, at fair value 79,208 61,516
Mortgage-backed securities available for sale, at fair value 416,288 332,347
Loans, net of allowance for losses of $6,251 at
September 30, 1999 and $6,350 at December 31, 1998 1,297,186 1,333,401
Accrued interest receivable 10,167 10,759
Real estate 20,122 20,185
Premises and equipment, net 12,645 12,590
Stock in Federal Home Loan Bank of Chicago, at cost 26,632 24,523
Due from broker - 71,336
Other assets 44,852 34,842
- --------------------------------------------------------------------------------------------------------------------
$ 1,965,989 1,982,496
====================================================================================================================
Liabilities and Stockholders' Equity
Liabilities:
Deposits $ 1,241,355 1,298,044
Borrowed funds 527,650 464,450
Advances by borrowers for taxes and insurance 13,734 12,935
Accrued expenses and other liabilities 18,174 21,130
- --------------------------------------------------------------------------------------------------------------------
Total liabilities 1,800,913 1,796,559
- --------------------------------------------------------------------------------------------------------------------
Stockholders' Equity:
Preferred stock, $.01 par value; authorized 1,500,000 shares; none outstanding - -
Common stock, $.01 par value; authorized 21,000,000 shares;
11,660,773 shares issued and 10,538,751 outstanding at September 30, 1999
11,617,903 shares issued and 11,463,881 outstanding at December 31, 1998 117 116
Additional paid-in capital 107,630 107,130
Retained earnings, substantially restricted 89,380 80,219
Treasury stock, at cost; 1,122,022 shares at September 30, 1999 and
154,022 at December 31, 1998 (21,630) (1,511)
Accumulated other comprehensive loss (10,421) (17)
- --------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 165,076 185,937
- --------------------------------------------------------------------------------------------------------------------
Commitments and contingencies
- --------------------------------------------------------------------------------------------------------------------
$ 1,965,989 1,982,496
====================================================================================================================
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
1
<PAGE>
Alliance Bancorp and Subsidiaries
Consolidated Statements of Income
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
(In thousands, except per share amounts) 1999 1998 1999 1998
- -------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C>
Interest Income:
Loans $ 24,125 25,011 71,437 72,304
Mortgage-backed securities 7,208 8,012 19,792 20,580
Investment securities 1,747 2,391 5,078 7,545
Interest-bearing deposits 447 152 2,619 2,163
- -------------------------------------------------------------------------------------------------------------------
Total interest income 33,527 35,566 98,926 102,592
- -------------------------------------------------------------------------------------------------------------------
Interest Expense:
Deposits 12,699 15,292 39,381 45,631
Borrowed funds 7,070 7,136 19,803 17,826
Collateralized mortgage obligations - 6 - 44
- -------------------------------------------------------------------------------------------------------------------
Total interest expense 19,769 22,434 59,184 63,501
- -------------------------------------------------------------------------------------------------------------------
Net interest income 13,758 13,132 39,742 39,091
Provision for loan losses 50 50 150 212
- -------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 13,708 13,082 39,592 38,879
- -------------------------------------------------------------------------------------------------------------------
Noninterest Income:
Gain on sales of loans 5 339 474 491
Gain (loss) on sales of mortgage-backed securities
available for sale - - (22) 326
Gain (loss) on sales of investment securities
available for sale (16) - (16) 178
Income from real estate operations 1,007 384 2,735 1,285
Servicing fee income, net 16 (69) 247 83
ATM fee income 463 489 1,490 1,457
Other fees and commissions 3,686 3,623 13,200 11,683
Other, net 23 (81) 459 208
- -------------------------------------------------------------------------------------------------------------------
Total noninterest income 5,184 4,685 18,567 15,711
- -------------------------------------------------------------------------------------------------------------------
Noninterest Expense:
Compensation and benefits 6,599 6,138 20,968 20,785
Occupancy expense 1,912 1,757 5,528 4,819
Federal deposit insurance premiums 186 204 579 608
Advertising expense 332 275 874 754
ATM expense 304 309 984 1,145
Computer services 289 345 953 1,350
Other 2,624 2,272 8,011 7,645
- -------------------------------------------------------------------------------------------------------------------
Total noninterest expense 12,246 11,300 37,897 37,106
- -------------------------------------------------------------------------------------------------------------------
Income before income taxes 6,646 6,467 20,262 17,484
Income tax expense 2,018 2,623 6,526 7,062
- -------------------------------------------------------------------------------------------------------------------
Net income $ 4,628 3,844 13,736 10,422
===================================================================================================================
Basic earnings per share $ 0.43 0.34 1.24 0.92
Diluted earnings per share $ 0.41 0.32 1.18 0.87
===================================================================================================================
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
2
<PAGE>
Alliance Bancorp and Subsidiaries
Consolidated Statements of Changes in Stockholders' Equity
<TABLE>
<CAPTION>
Common
Additional Stock
Comprehensive Common Paid-in Retained Treasury Purchased
(In thousands, except per share amounts) Income Stock Capital Earnings Stock By ESOP
- ------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Nine Months Ended September 30, 1998
Balance at December 31, 1997 $ 114 104,178 70,851 (1,527) (320)
Net income 10,422 - - 10,422 - -
Other comprehensive income, net of tax
Change in unrealized gain (loss) on securities
available for sale, net of reclassification
adjustment 1,184 - - - - -
--------------
Total comprehensive income 11,606
Cash dividends declared, $0.36 per share - - (4,127) - -
Cash paid in lieu of fractional shares - - (5) - -
Treasury stock distributed under employee
benefit plan - (17) - 16 -
Issuance of stock (71,866 shares) 1 1,499 - - -
Proceeds from exercise of stock options 1 639 - - -
Tax benefit from stock related compensation - 743 - - -
Principal payment on ESOP loan - - - - 320
- ------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1998 $ 116 107,042 77,141 (1,511) -
==============================================================================================================================
Nine Months Ended September 30, 1999
Balance at December 31, 1998 $ 116 107,130 80,219 (1,511) -
Net income 13,736 - - 13,736 - -
Other comprehensive income, net of tax
Change in unrealized gain (loss) on securities
available for sale, net of reclassification
adjustment (10,404) - - - - -
--------------
Total comprehensive loss 3,332
Cash dividends declared, $0.42 per share - - (4,575) - -
Purchase of treasury stock - - - (20,119) -
Proceeds from exercise of stock options 1 301 - - -
Tax benefit from stock related compensation - 199 - - -
- ------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1999 $ 117 107,630 89,380 (21,630) -
==============================================================================================================================
<CAPTION>
Accumulated
Other
Comprehensive
(In thousands, except per share amounts) Income (Loss) Total
- -------------------------------------------------------------------------------
<S> <C> <C>
Nine Months Ended September 30, 1998
Balance at December 31, 1997 1,630 174,926
Net income - 10,422
Other comprehensive income, net of tax
Change in unrealized gain (loss) on securities
available for sale, net of reclassification
adjustment 1,184 1,184
Total comprehensive income
Cash dividends declared, $0.36 per share - (4,127)
Cash paid in lieu of fractional shares - (5)
Treasury stock distributed under employee
benefit plan - (1)
Issuance of stock (71,866 shares) - 1,500
Proceeds from exercise of stock options - 640
Tax benefit from stock related compensation - 743
Principal payment on ESOP loan - 320
- -------------------------------------------------------------------------------
Balance at September 30, 1998 2,814 185,602
===============================================================================
Nine Months Ended September 30, 1999
Balance at December 31, 1998 (17) 185,937
Net income - 13,736
Other comprehensive income, net of tax
Change in unrealized gain (loss) on securities
available for sale, net of reclassification
adjustment (10,404) (10,404)
Total comprehensive loss
Cash dividends declared, $0.42 per share - (4,575)
Purchase of treasury stock - (20,119)
Proceeds from exercise of stock options - 302
Tax benefit from stock related compensation - 199
- -------------------------------------------------------------------------------
Balance at September 30, 1999 (10,421) 165,076
===============================================================================
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
3
<PAGE>
Alliance Bancorp and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
(In thousands) 1999 1998
===========================================================================================================================
(unaudited)
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 13,736 10,422
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization 1,982 1,440
Provision for loan losses 150 212
Amortization of premiums, discounts, and deferred loan fees 1,127 545
Originations of loans held for sale (473,637) (542,269)
Sale of loans originated for resale 579,962 467,016
Gain on sales of loans (474) (491)
(Gain) loss on sales of mortgage-backed securities available for sale 22 (326)
(Gain) loss on sales of investment securities available for sale 16 (178)
(Increase) decrease in accrued interest receivable 592 (2,015)
Increase in other assets (4,659) (9,036)
Increase (decrease) in accrued expenses and other liabilities (2,627) 739
- ---------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 116,190 (73,941)
- ---------------------------------------------------------------------------------------------------------------------------
Cash Flows From Investing Activities:
Loans originated or purchased for investment (331,638) (383,127)
Purchases of:
Mortgage-backed securities available for sale (237,351) (359,763)
Investment securities available for sale (74,840) (66,569)
Stock in Federal Home Loan Bank of Chicago (3,560) (10,902)
Premises and equipment (2,037) (3,004)
Proceeds from sale of:
Mortgage-backed securities available for sale 114,022 51,046
Investment securities available for sale 12,016 234
Stock in Federal Home Loan Bank of Chicago 1,451 -
Loans held for investment 20,027 3,491
Proceeds from maturities of investment securities available for sale 42,640 104,025
Net increase in real estate joint ventures (389) (3,768)
Principal collected on loans 241,621 276,760
Principal collected on mortgage-backed securities available for sale 96,952 74,370
- ---------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (121,086) (317,207)
- ---------------------------------------------------------------------------------------------------------------------------
Cash Flows From Financing Activities:
Net decrease in deposits (56,689) (1,245)
Proceeds from borrowed funds 134,327 481,187
Repayment of borrowed funds (71,127) (116,200)
Repayment of collateralized mortgage obligations - (869)
Net increase in advance payments by borrowers for taxes and insurance 799 2,349
Purchase of treasury stock (20,119) -
Proceeds from sale of treasury stock - 1,500
Cash dividends paid (4,705) (3,749)
Cash paid in lieu of fractional shares - (5)
Decrease in ESOP loan - 320
Proceeds from exercise of stock options 302 640
- ---------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (17,212) 363,928
- ---------------------------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (22,108) (27,220)
Cash and cash equivalents at beginning of period 80,997 58,513
- ---------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 58,889 31,293
===========================================================================================================================
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ 59,061 62,346
Income taxes 9,935 10,203
Supplemental Disclosures of Noncash Activities:
Loans exchanged for mortgage-backed securities $ 473 39,037
Additions to real estate acquired in settlement of loans $ 270 878
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
4
<PAGE>
Alliance Bancorp and Subsidiaries
Notes to Consolidated Financial Statements
(unaudited)
Nine Months Ended September 30, 1999 and 1998
(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 (consisting of only normal recurring
accruals) necessary for a fair presentation have been included.
The unaudited consolidated financial statements include the accounts of
Alliance Bancorp (the "Company") and its wholly-owned subsidiaries. All material
intercompany balances and transactions have been eliminated.
(2) Comprehensive Income
The following table sets forth the required disclosures of the
reclassification amounts as presented in the statements of changes in
stockholders' equity and the related tax effects allocated to each component of
other comprehensive income for the periods indicated:
<TABLE>
<CAPTION>
Before Tax Net
Tax (Expense) of Tax
(In thousands) Amount or Benefit Amount
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Nine Months Ended September 30, 1998
Disclosure of reclassification amount:
Unrealized holding gain (loss) on securities arising during
the period $ 2,324 (837) 1,487
Less: reclassification adjustment for gain (loss) included in
net income 504 (201) 303
- ------------------------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on securities $ 1,820 (636) 1,184
- ------------------------------------------------------------------------------------------------------------------
Nine Months Ended September 30, 1999
Disclosure of reclassification amount:
Unrealized holding gain (loss) on securities arising during
the period $ (16,044) 5,615 (10,429)
Less: reclassification adjustment for gain (loss) included in
net income (38) 13 (25)
- ------------------------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on securities $ (16,006) 5,602 (10,404)
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
Alliance Bancorp and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
(unaudited)
Nine Months Ended September 30, 1999 and 1998
(3) Earnings per Share
The following table sets forth the computation of basic and diluted earnings
per share for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------------------------------------
(In thousands, except share data) 1999 1998 1999 1998
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Numerator:
Net income $ 4,628 3,844 13,736 10,422
Denominator:
Basic earnings per share-weighted average shares 10,846,200 11,441,186 11,092,453 11,366,104
Effect of dilutive securities-stock options 526,087 537,904 522,981 607,592
Diluted earnings per share-adjusted weighted average
shares 11,372,287 11,979,090 11,615,434 11,973,696
Basic earnings per share $ 0.43 0.34 1.24 0.92
Diluted earnings per share $ 0.41 0.32 1.18 0.87
</TABLE>
(4) Commitments and Contingencies
At September 30, 1999, the Company had outstanding commitments to originate
or purchase loans of $109.1 million. Unused equity lines of credit available to
customers were $104.6 million at September 30, 1999.
(5) Operating Segments
The Company's operations include two primary segments: banking and mortgage
brokerage. Through its banking subsidiary's network of 19 retail banking
facilities in Chicago; north, west and southwestern Cook County; and DuPage
County in Illinois, the Company provides traditional community banking services
such as accepting deposits and making loans. Mortgage brokerage activities
conducted through the Bank's subsidiary, Preferred Mortgage Associates, Ltd.
("Preferred") include the origination of primarily residential mortgage loans
for sale to various investors as well as to the Bank. The Company's two
reportable segments are strategic business units that are separately managed as
they offer different products and services and have different marketing
strategies. Smaller operating segments are combined and consist of financial
advice and brokerage services, insurance, joint venture real estate
developments, and holding company investments. Assets and results of operations
are based on generally accepted accounting principles, with profit and losses of
equity method investees excluded. Inter-segment revenues and expenses are
eliminated in reporting consolidated results of operations.
Operating segment information is as follows:
<TABLE>
<CAPTION>
Mortgage Inter-segment Consolidated
(In thousands) Banking Brokerage Other Eliminations Total
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
THREE MONTHS ENDED SEPTEMBER 30, 1999
Interest income $ 33,424 697 210 (804) 33,527
Interest expense 19,844 602 127 (804) 19,769
- ------------------------------------------------------------------------------------------------------------------------
Net interest income 13,580 95 83 - 13,758
Provision for loan losses 50 - - - 50
- ------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for
loan losses 13,530 95 83 - 13,708
Other fees and commissions 1,139 2,785 577 (336) 4,165
Other noninterest income 67 - 1,001 (49) 1,019
Noninterest expense 8,621 3,281 729 (385) 12,246
- ------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes 6,115 (401) 932 - 6,646
Income tax expense (benefit) 1,801 (156) 373 - 2,018
- ------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 4,314 (245) 559 - 4,628
- ------------------------------------------------------------------------------------------------------------------------
Assets $ 1,970,997 40,787 52,481 (98,276) 1,965,989
- ------------------------------------------------------------------------------------------------------------------------
Investment in equity method investees $ 9,180 - 142,032 - -
========================================================================================================================
</TABLE>
6
<PAGE>
Alliance Bancorp and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
(unaudited)
Nine Months Ended September 30, 1999 and 1998
<TABLE>
<CAPTION>
Mortgage Inter-segment Consolidated
(In thousands) Banking Brokerage Other Eliminations Total
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NINE MONTHS ENDED SEPTEMBER 30, 1999
Interest income $ 98,602 2,255 546 (2,477) 98,926
Interest expense 59,286 2,036 339 (2,477) 59,184
- ----------------------------------------------------------------------------------------------------------------------
Net interest income 39,316 219 207 - 39,742
Provision for loan losses 150 - - - 150
- ----------------------------------------------------------------------------------------------------------------------
Net interest income after provision for
loan losses 39,166 219 207 - 39,592
Other fees and commissions 3,785 10,917 1,826 (1,591) 14,937
Other noninterest income 712 - 3,067 (149) 3,630
Noninterest expense 26,610 10,961 2,066 (1,740) 37,897
- ----------------------------------------------------------------------------------------------------------------------
Income before income taxes 17,053 175 3,034 - 20,262
Income tax expense 5,250 68 1,208 - 6,526
- ----------------------------------------------------------------------------------------------------------------------
Net income $ 11,803 107 1,826 - 13,736
- ----------------------------------------------------------------------------------------------------------------------
Assets $ 1,970,997 40,787 52,481 (98,276) 1,965,989
- ----------------------------------------------------------------------------------------------------------------------
Investment in equity method investees $ 9,180 - 142,032 - -
======================================================================================================================
THREE MONTHS ENDED SEPTEMBER 30, 1998
Interest income $ 35,486 1,350 231 (1,501) 35,566
Interest expense 22,470 1,345 120 (1,501) 22,434
- ----------------------------------------------------------------------------------------------------------------------
Net interest income 13,016 5 111 - 13,132
Provision for loan losses 50 - - - 50
- ----------------------------------------------------------------------------------------------------------------------
Net interest income after provision for
loan losses 12,966 5 111 - 13,082
Other fees and commissions 1,056 4,410 639 (2,062) 4,043
Other noninterest income 417 - 283 (58) 642
Noninterest expense 8,843 3,903 674 (2,120) 11,300
- ----------------------------------------------------------------------------------------------------------------------
Income before income taxes 5,596 512 359 - 6,467
Income tax expense 2,291 199 133 - 2,623
- ----------------------------------------------------------------------------------------------------------------------
Net income $ 3,305 313 226 - 3,844
- ----------------------------------------------------------------------------------------------------------------------
Assets $ 2,011,257 125,750 41,199 (78,647) 2,099,559
- ----------------------------------------------------------------------------------------------------------------------
Investment in equity method investees $ 11,077 - 166,550 - -
======================================================================================================================
NINE MONTHS ENDED SEPTEMBER 30, 1998
Interest income $ 102,149 3,578 969 (4,104) 102,592
Interest expense 63,677 3,543 373 (4,092) 63,501
- ----------------------------------------------------------------------------------------------------------------------
Net interest income 38,472 35 596 (12) 39,091
Provision for loan losses 212 - - - 212
- ----------------------------------------------------------------------------------------------------------------------
Net interest income after provision for
loan losses 38,260 35 596 (12) 38,879
Other fees and commissions 3,567 11,161 1,773 (3,278) 13,223
Other noninterest income 1,402 - 1,316 (230) 2,488
Noninterest expense 27,428 9,967 3,231 (3,520) 37,106
- ----------------------------------------------------------------------------------------------------------------------
Income before income taxes 15,801 1,229 454 - 17,484
Income tax expense 6,007 479 576 - 7,062
- ----------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 9,794 750 (122) - 10,422
- ----------------------------------------------------------------------------------------------------------------------
Assets $ 2,011,257 125,750 41,199 (78,647) 2,099,559
- ------------------------------------------------------------------ --------------------------------------------------
Investment in equity method investees $ 11,077 - 166,550 - -
======================================================================================================================
</TABLE>
(6) Reclassifications
Certain reclassifications of prior year amounts have been made to conform
with the current year presentation.
7
<PAGE>
Alliance Bancorp and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of
Operations
General
Alliance Bancorp (the "Company") is a registered savings and loan holding
company incorporated under the laws of the state of Delaware and is engaged in
the business of providing financial services and products to the public through
its wholly-owned subsidiary, Liberty Federal Bank (the "Bank").
The Bank, a Federal savings bank chartered under the authority of the Office
of Thrift Supervision ("OTS"), originally was organized in 1934, and changed its
charter from a federal savings and loan association to a federal savings bank in
1991. The Bank is a member of the Federal Home Loan Bank ("FHLB") System and its
deposit accounts are insured to the maximum allowable amount by the Federal
Deposit Insurance Corporation ("FDIC"). The Bank is regulated by the OTS and the
FDIC and is further regulated by the Board of Governors of the Federal Reserve
System as to reserves required to be maintained against deposits and certain
other matters.
The Bank is a community-oriented company providing financial services
through nineteen full service retail banking facilities in Chicago; north, west
and southwestern Cook County; and DuPage County in Illinois. The Bank offers a
variety of deposit products in an attempt to attract funds from the general
public in highly competitive market areas surrounding its offices. In addition
to deposit products, the Bank also offers its customers financial advice and
security brokerage services through INVEST Financial Corporation ("INVEST"). The
Bank invests its retail deposits primarily in mortgage and consumer loans,
investment securities and mortgage-backed securities, secured primarily by one-
to four-family residential loans.
The earnings of the Bank are primarily dependent on its net interest income,
which is the difference between the interest income earned on its loans,
mortgage-backed and investment securities portfolios, and its cost of funds,
consisting of the interest paid on its deposits and borrowings.
On May 31, 1995, the Company acquired Preferred Mortgage Associates, Ltd.
("Preferred"), one of the largest mortgage brokers in the Chicago metropolitan
area. Preferred has three mortgage origination offices including its
headquarters in Downers Grove, Illinois. The acquisition of Preferred has
resulted in increases in both noninterest income and noninterest expense.
The Bank's earnings are also affected by noninterest income, including
income related to loan origination fees contributed by Preferred and the
noncredit consumer related financial services offered by the Bank, such as net
commissions received by the Bank from securities brokerage services, commissions
from the sale of insurance products, loan servicing income, fee income on
transaction accounts, and interchange fees from its shared ATMs. The Bank's
noninterest income has also been affected by gains from the sale of various
assets, including loans, mortgage-backed securities, investment securities, loan
servicing, and real estate. Noninterest expense consists principally of employee
compensation and benefits, occupancy expense, federal deposit insurance
premiums, and other general and administrative expenses of the Bank and
Preferred.
On February 10, 1997, the Company (then named Hinsdale Financial
Corporation) and Liberty Bancorp, Inc., the holding company for Liberty Federal
Savings Bank, consummated a merger in a stock-for-stock exchange. In connection
with that transaction, Liberty Federal Savings Bank was merged into Hinsdale
Federal Bank for Savings, and the resulting Bank operates under the name Liberty
Federal Bank. The transaction was accounted for under the purchase method of
accounting and 1.054 shares of Alliance Bancorp common stock were exchanged for
each share of Liberty Bancorp outstanding common stock. There were 3,930,405
shares of common stock of Alliance Bancorp issued for 3,733,013 shares of
Liberty Bancorp common stock. Liberty Bancorp had total assets of $680 million
and deposits of $516 million at the date of the merger. The fair value of the
net assets acquired approximated the purchase price, accordingly; no goodwill
was recorded.
8
<PAGE>
On June 30, 1998, the Company consummated the acquisition of Southwest
Bancshares the holding company for Southwest Federal Savings and Loan
Association of Chicago ("the Association"). The transaction was accounted for
under the pooling-of-interests method of accounting and 1.1981 shares of
Alliance Bancorp common stock were exchanged for each share of Southwest
Bancshares outstanding common stock. There were 3,411,500 shares of Alliance
Bancorp shares issued for 2,847,585 shares of Southwest Bancshares. Southwest
Bancshares had total assets of $391 million and deposits of $308 million at the
date of acquisition. The consolidated financial statements of Alliance Bancorp
for periods prior to the combination have been restated to include the accounts
and the results of operations of Southwest Bancshares for all periods presented.
The Bank'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.
Forward-Looking Statements
This Quarterly Report on Form 10-Q may contain certain forward-looking
statements consisting of estimates with respect to the financial condition,
results of operations and business of the Company that are subject to various
factors which could cause actual results to differ materially from these
estimates. These factors include, but are not limited to, general economic
conditions, changes in interest rates, deposit flows, loan demand, real estate
values, and competition; changes in accounting principles, policies, or
guidelines; changes in legislation or regulation; and other economic,
competitive, governmental, regulatory, and technological factors affecting the
Company's operations, pricing, products and services, including Year 2000
issues.
Liquidity/Capital Resources
The Company's primary sources of funds are deposits, borrowings, principal
and interest payments on loans and mortgage-backed securities and the sale of
loans, mortgage-backed and investment securities. 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
rate cycles and economic conditions.
The Bank is required by regulation to maintain specific minimum levels of
liquid investments. Regulations currently in effect require the Bank to maintain
liquid assets at least equal to 4.0% of the sum of its average daily balance of
net withdrawable accounts and short-term borrowed funds. This regulatory
requirement may be changed from time to time by the OTS to reflect current
economic conditions and deposit flows. The Bank's average liquidity ratio was
11.20% for the quarter ended September 30, 1999.
The Company's most liquid assets are cash and cash equivalents, which
include investments in highly liquid, short-term investments and interest-
bearing deposits. The levels of these assets are dependent on the Company's
operating, financing, lending and investing activities during any given period.
At September 30, 1999, cash and cash equivalents totaled $58.9 million.
Liquidity management for the Company is both a daily and long-term function
of the Company's management strategy. Excess funds are generally invested in
short-term investments and interest-bearing deposits. In the event that the
Company should require funds beyond its ability to generate them internally,
additional sources of funds are available through the use of Federal Home Loan
Bank of Chicago ("FHLB") advances.
The Company's cash flows are comprised of three classifications: cash flows
from operating activities, cash flows from investing activities, and cash flows
from financing activities. Net cash related to operating activities, consisting
primarily of interest and dividends received less interest paid on deposits, and
the origination and sale of loans, provided $116.2 million for the nine months
ended September 30, 1999. Net cash related to investing activities, consisting
primarily of disbursements for loans originated or purchased for investment,
purchases of mortgage-backed and investment securities available for sale,
offset by sales of mortgage-backed securities available for sale, maturities of
investment securities available for sale, principal collections on loans and
mortgage-backed securities, utilized $121.1 million for the nine months ended
September 30, 1999. Net cash utilized by financing activities, consisting
primarily of net activity in deposit and escrow accounts, net proceeds from
borrowed funds, the payment of dividends and the purchase of treasury stock,
totaled $17.2 million for the nine months ended September 30, 1999.
9
<PAGE>
In connection with the Company's loan origination activities, the Company's
interest rate risk management policy specifies the use of certain hedging
activities in an attempt to reduce exposure to changes in loan market prices
from the time of commitment until securitization. The Company may engage in
hedging transactions as a method of reducing its exposure to interest rate risk
present in the secondary market. The Company's hedging transactions are
generally forward commitments to sell fixed-rate mortgage-backed securities at a
specified future date. The loans securitized through the Federal National
Mortgage Association ("FNMA") are generally used to satisfy these forward
commitments. The sale of fixed-rate mortgage-backed securities for future
delivery presents a risk to the Company that, if the Company is not able to
deliver the mortgage-backed securities on the specified delivery date, it may be
required to repurchase the forward commitment to sell at the then current market
price. At September 30, 1999 the Company had no forward commitments to sell FNMA
mortgage-backed securities.
The Bank's tangible capital ratio at September 30, 1999 was 6.53%. This
exceeded the tangible capital requirement of 1.5% of adjusted assets by $98.3
million. The Bank's leverage capital ratio at September 30, 1999 was 6.53%. This
exceeded the leverage capital requirement of 3.0% of adjusted assets by $68.9
million. The Bank's risk-based capital ratio was 11.65% at September 30, 1999.
The Bank currently exceeds the risk-based capital requirement of 8.0% of risk-
weighted assets by $41.6 million.
Changes in Financial Condition
The Company had total assets of $2.0 billion at September 30, 1999, a
decrease of $16.5 million, or 0.8%, from December 31, 1998. Mortgage-backed and
investment securities increased $101.6 million offset by a decrease in cash and
cash equivalents and due from broker of $93.4 million. Loans decreased $36.2
million. Loans held for sale were $35.1 million at September 30, 1999 compared
to $110.6 million at December 31, 1998, a decrease of $75.5 million.
Loans totaled $1.3 billion at September 30, 1999, a decrease of $36.2
million from December 31, 1998. Loan originations were $805.3 million for the
nine months ended September 30, 1999, offset by loan sales of $600 million and
principal repayments of $241.6 million.
Deposits totaled $1.2 billion at September 30, 1999, a decrease of $56.7
million. The deposit base and the interest paid on deposits continues to be
affected by alternative investment products and competition within the Company's
market areas. Borrowed funds totaled $528 million at September 30, 1999, an
increase of $63.2 million. This increase was necessitated as a result of the
decrease in the deposit base.
Stockholders' equity totaled $165.1 million at September 30, 1999, a
decrease of $20.9 million. On February 2, 1999, the Company announced a stock
repurchase plan under which the Company is authorized to repurchase up to
1,146,000 shares of its outstanding common stock. At September 30, 1999, 968,000
shares had been repurchased for a total cost of $20.1 million, which is
reflected as a reduction in stockholders' equity. In addition, stockholders'
equity was reduced by $10.4 million as a result of changes in the market values
of investment securities and mortgage-backed securities available for sale, net
of tax. At September 30, 1999, the number of common shares outstanding was
10,538,751 and the book value per common share outstanding was $15.66 per share.
On September 17, 1999, the Company declared a $0.14 per share cash dividend
payable October 14, 1999 to shareholders of record on September 30, 1999.
Year 2000
The Company has established a Year 2000 Project plan to address systems and
facilities changes necessary to properly recognize dates after 1999, has
assigned implementation responsibilities, and has established management and
Board reporting processes. All of the Company's significant financial accounting
systems are provided under contract with major national banking systems
providers who are progressing under their own Year 2000 plans. Most significant
systems changes have been completed as of September 30, 1999. The Company's plan
follows the five step approach required by its regulators: Awareness,
Assessment, Modification, Verification, and Implementation. The Company's
project also addresses its other suppliers, customers, and other constituents,
as well as remediation and business resumption contingency plans. The costs of
the project, and the date on which the Company plans to complete the Year 2000
modifications are based on management's best estimates, which were derived
utilizing numerous assumptions of future events including the continued
availability of certain resources, third party
10
<PAGE>
modification plans and other factors. However, there can be no guarantee that
these estimates will be achieved and actual results could differ materially from
those plans. The primary uncertainty facing the Company is the ability of third
party systems providers to identify and modify software as planned. Specific
factors that might cause material differences from plans include, but are not
limited to, the availability and cost of personnel trained in this area, the
ability to locate and correct all relevant computer codes, and similar
uncertainties.
Additional information about the Company's Year 2000 status at September 30,
1999 was as follows:
Readiness: The Company's plan includes both information technology ("IT")
and non-IT systems. Most of the Company's primary Year 2000 exposures relate to
IT systems, primarily to the vendor of its account processing systems. The
Company utilizes a national third party provider for the bulk of its data
processing needs. As a result, a large part of the Company's mission critical
Year 2000 testing is for products and services processed by that service
provider. The service provider has completed the remediation and testing of its
system and has had its Year 2000 compliant systems in production since June 30,
1998. The Company continues to independently test its activities on that system
to verify that the service provider's system functions in the Year 2000 for
those services used by the Company. In November 1998, the Company successfully
completed the first phase of that testing. Testing of the second phase was
successfully completed in April 1999.
Costs: The Company has not incurred material costs specifically related to
its Year 2000 program and does not expect these costs to have a significant
impact on the Company's results of operations, liquidity or capital resources.
Direct costs of the Year 2000 issue have been estimated to not exceed $250,000
per year for the years ended December 31, 1998, 1999 and 2000. The primary
direct costs include compensation and benefits paid to staff dedicated solely to
the Year 2000 issues, direct costs paid to vendors or others related to Year
2000 preparedness and the income statement effect of hardware and software
purchased to replace items not Year 2000 compliant. The figure does not include
costs considered by the Company to be indirect costs. The primary indirect cost
includes the time and effort of many of the Company's employees to prepare for
the Year 2000 in addition to performing their normal work routine. The costs of
the Year 2000 project are based on the Company's best estimates, which include
numerous assumptions about future events. Actual costs may differ due to actual
events being different than those assumed at the time the cost estimates were
prepared.
Risks: The most significant risk anticipated by the Company is the
possibility of interruptions to its account processing systems. Due to the
progress described above, the Company does not presently foresee any material
interruptions to these systems. The next most significant risk relates to
interruptions in the payment processing systems, which are integrated with the
Company's account processing systems. The Company is working with its payment
processing vendors, the most significant of which are reported to be making
satisfactory progress in complying with federal regulatory guidelines for Year
2000 readiness.
Contingency Plans: The Company has taken actions to comply with federal
regulatory requirements for Year 2000 contingency planning. The Company
presently believes that the compliance effort can and will be completed prior to
the Year 2000. However, if required product or service upgrades are not complete
by that time, the Year 2000 issues could disrupt normal business operations.
Although not expected at this time, the most likely worst case scenario includes
the Company being unable to process some or all of its transactions on a
temporary basis. Because of the nature of this scenario, the Company established
contingency plans for all mission critical services. Those contingency plans
will also be tested as part of the Company's Year 2000 preparedness, which is
scheduled for the fall of 1999. Additionally, a business resumption plan has
been developed to mitigate risks associated with the failure of mission critical
systems. The Year 2000 business resumption contingency plan is designed to
ensure that mission critical core banking processes will continue if one or more
supporting systems fail and to allow for limited transaction processing until
the Year 2000 problems are fixed.
Readers should be cautioned that forward looking statements contained in the
Year 2000 disclosure should be read in conjunction with the Company's
disclosures regarding "Forward-Looking Statements".
Recent and Proposed Changes in Accounting Rules
In June 1998, FASB issued SFAS No. 133, "Accounting for Derivatives and
Similar Financial Instruments and for Hedging Activities," which is effective
for fiscal years beginning after June 15, 1999. The statement requires all
11
<PAGE>
derivatives to be measured at fair value and to be recognized as either assets
or liabilities in the statement of financial position. In June 1999, FASB issued
SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities-
Deferral of the Effective Date of FASB Statement No. 133, an Amendment of FASB
Statement No. 133." This statement defers the effective date for one year.
Management, at this time, has not determined the impact of adopting this
statement on January 1, 2001.
Asset Quality
Non-performing Assets
The following table sets forth information as to non-accrual loans and real
estate owned at the dates indicated. The Company discontinues the accrual of
interest on loans ninety days or more past due, at which time all accrued but
uncollected interest is reversed. There were no loans at September 30, 1999 nor
during the quarter ended September 30, 1999, which met the definition of an
impaired loan. A loan is considered impaired when it is probable that a creditor
will be unable to collect contractual principal and interest due according to
the contractual terms of the loan agreement. Loans considered for impairment do
not include residential mortgage and consumer installment loans as these are
considered small, homogenous loans.
<TABLE>
<CAPTION>
Quarter Ended
-----------------------------------------------------------------------
September 30, June 30, March 31, December 31, September 30,
(Dollars in thousands) 1999 1999 1999 1998 1998
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Non-accrual mortgage loans
90 days or more past due $ 3,656 3,416 4,513 3,117 3,363
Non-accrual commercial loans
90 days or more past due - 250 - - -
Non-accrual consumer loans
90 days or more past due 302 177 157 165 61
-----------------------------------------------------------------------
Total non-performing loans 3,958 3,843 4,670 3,282 3,424
Total foreclosed real estate 78 164 148 514 212
-----------------------------------------------------------------------
Total non-performing assets $ 4,036 4,007 4,818 3,796 3,636
-----------------------------------------------------------------------
Total non-performing loans
to total loans 0.30% 0.30 0.37 0.25 0.24
Total non-performing assets
to total assets 0.21% 0.21 0.25 0.19 0.17
</TABLE>
Classification of Assets
The Company regularly reviews the assets in its portfolio to determine
whether any assets require classification in accordance with applicable
regulations.
As of September 30, 1999 the Company had total classified assets of $3.9
million, of which $3.6 million were classified "substandard" and $330,000 were
classified as "doubtful." The assets so classified consisted of auto loans,
mortgage and consumer loans and foreclosed single family residential loans (real
estate owned).
Asset/Liability Management
The Company's asset and liability management strategy attempts to minimize
the risk of a significant decrease in net interest income caused by changes in
the interest rate environment without penalizing current income. Net interest
income, the primary source of the Company's earnings, is affected by interest
rate movements. To mitigate the impact of changes in interest rates, a balance
sheet must be structured so that repricing opportunities exist for both assets
and liabilities in approximately equivalent amounts at basically the same time
intervals.
The Company seeks to reduce the volatility of its net interest income by
managing the relationship of interest rate sensitive assets to interest rate
sensitive liabilities. To accomplish this, the Company has attempted to increase
the percentage of assets, whose interest rates adjust more frequently, and to
reduce the average maturity of such assets. A principal focus in recent years
has been the origination of adjustable-rate residential real estate loans and
consumer loans, which generally have shorter maturities than fixed-rate
residential real estate loans. The Company
12
<PAGE>
also originates shorter maturity fixed-rate commercial real estate loans and
purchases commercial leases, which generally mature or reprice more quickly than
fixed-rate residential real estate loans.
However, adjustable-rate loans are nearly as likely to refinance in low
interest rate environments as fixed-rate loans. Often, interest rate cycles
allow for these refinancings before the adjustable-rate loans can adjust to
fully indexed market rates. In such declining interest rate environments, that
result in high levels of loan refinancings, the Company may decide to acquire
longer fixed-rate mortgage loans or mortgage-backed securities. To provide an
acceptable level of interest rate risk, the Company will implement a funding
strategy using long-term Federal Home Loan Bank borrowings. Imbalances in
repricing opportunities at any point in time constitute an interest sensitivity
gap, which is the difference between interest sensitive assets and interest
sensitive liabilities. These static measurements do not reflect the results of
any potential activity and are best used as early indicators of potential
interest rate exposures.
As part of its asset/liability strategy, the Company has implemented a
policy to maintain its cumulative one-year interest sensitivity gap ratio within
a range of (15%) to 15% of total assets, which reflects the current interest
rate environment and allows the Company to maintain an acceptable net interest
rate spread. The gap ratio will fluctuate as a result of market conditions and
management's expectation of future interest rate trends.
Interest Rate Sensitivity Gap Analysis
<TABLE>
<CAPTION>
At September 30, 1999
----------------------------------------------------------------------
More Than More Than
1 Year 1 Year 3 Years More Than
(Dollars in thousands) or Less To 3 Years To 5 Years 5 Years Total
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest-Earning Assets:
Mortgage loans (1) $ 320,497 182,253 165,900 397,874 1,066,524
Equity lines of credit (1) 94,289 - - - 94,289
Consumer loans and leases (1) 9,551 29,743 88,383 10,906 138,583
Mortgage-backed securities (2) 143,949 74,485 53,597 157,605 429,636
Interest-bearing deposits 39,072 - - - 39,072
Investment securities (2) 28,660 952 4,129 74,529 108,270
- ------------------------------------------------------------------------------------------------------------------------
Total interest-earning assets 636,018 287,433 312,009 640,914 1,876,374
Interest-Bearing Liabilities:
Savings accounts 35,039 53,222 34,696 83,157 206,114
NOW interest-bearing accounts 22,210 20,330 5,440 12,046 60,026
Money market accounts 67,089 9,344 4,448 4,042 84,923
Certificate accounts 596,216 230,230 11,075 - 837,521
Borrowed funds 146,950 168,200 112,500 100,000 527,650
- ------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 867,504 481,326 168,159 199,245 1,716,234
- ------------------------------------------------------------------------------------------------------------------------
Interest sensitivity gap $ (231,486) (193,893) 143,850 441,669 160,140
- ------------------------------------------------------------------------------------------------------------------------
Cumulative interest sensitivity gap $ (231,486) (425,379) (281,529) 160,140
- ------------------------------------------------------------------------------------------------------------------------
Cumulative interest sensitivity gap as a
percentage of total assets (11.68)% (21.46) (14.21) 8.08
Cumulative net interest-earning assets as a
percentage of interest-bearing liabilities 73.32 % 68.46 81.44 109.33
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For purposes of the gap analysis, mortgage, equity and consumer loans and
leases are not reduced by the allowance for loan losses and are reduced for
non-performing loans.
(2) Mortgage-backed and investment securities are not increased (decreased) by
unrealized gains (losses) resulting from the accounting for available for
sale securities under SFAS No. 115.
Certain shortcomings are inherent in the method of analysis presented in the
foregoing table. For example, although certain assets and liabilities may have
similar maturities or periods to repricing, they may react in different degrees
to changes in market interest rates. Also, the interest rates on certain types
of assets and liabilities may fluctuate in advance of changes in market interest
rates, while interest rates on other types may lag behind changes in market
rates. Additionally, certain assets, such as ARM loans, have features which
restrict changes in interest
13
<PAGE>
rates on a short-term basis and over the life of the asset. Further, in the
event of a change in interest rates, prepayment and early withdrawal levels
would likely deviate significantly from those assumed in calculating the table.
Finally, the ability of many borrowers to service their debt may decrease in the
event of an interest rate increase.
Quantitative and Qualitative Disclosures About Market Risk
As its primary interest rate risk planning tool, the Bank utilizes a market
value model. The model measures the Bank's interest rate risk by approximating
the Bank's net portfolio value ("NPV"), which is the net present value of
expected cash flows from assets, liabilities and any off-balance sheet
contracts, under a range of interest rate scenarios, which range from an
immediate 300 basis point increase to an immediate 300 basis point decrease in
market interest rates (measured in 100 basis point increments). The Bank's asset
and liability structure results in a decrease in NPV in a rising interest rate
scenario and an increase in NPV in a declining interest rate scenario. During
periods of rising interest rates, the value of monetary assets declines more
rapidly than the value of monetary liabilities rises. Conversely, during periods
of falling interest rates, the value of monetary assets rises more rapidly than
the value of monetary liabilities declines. However, the amount of change in
value of specific assets and liabilities due to changes in interest rates is not
the same in a rising rate environment as in a falling interest rate environment
(i.e., the amount of value increase under a specific rate decline may not equal
the amount of value decrease under an identical upward interest rate movement).
There have been no material changes in market risk since December 31, 1998,
as reported in the Company's Form 10-K for the year ended December 31, 1998.
Analysis of Net Interest Income
Net interest income represents the difference between income on interest-
earning assets and expense on interest-bearing liabilities. Net interest income
depends upon the volume of interest-earning assets and interest-bearing
liabilities and the interest rate earned or paid on them.
14
<PAGE>
Average Balance Sheets
The following table sets forth certain information relating to the Company's
Consolidated Statements of Financial Condition and reflects the average yield on
assets and the average cost of liabilities for the periods indicated. Such
yields and costs are derived by dividing income or expense by the average
balance of assets or liabilities, respectively, for the periods shown. Average
balances are derived from average daily balances and include non-performing
loans. The yields and costs include fees which are considered adjustments to
yields.
<TABLE>
<CAPTION>
Three Months Ended September 30,
-----------------------------------------------------------------------------
1999 1998
----------------------------------- -------------------------------------
Average Average
Average Yield/ Average Yield/
(Dollars in thousands) Balance Interest Cost Balance Interest Cost
- -------------------------------------------------------------------------------------- -------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Interest-earning assets:
Mortgage loans, net $ 1,063,287 $ 19,852 7.47% $ 1,182,781 $ 21,685 7.33%
Equity lines of credit 95,985 1,812 7.49 95,410 1,915 7.96
Consumer loans and leases 122,250 2,461 8.00 67,376 1,411 8.38
Mortgage-backed securities 447,762 7,208 6.44 489,178 8,012 6.55
Interest-bearing deposits 34,443 447 5.08 10,779 152 5.52
Investment securities 101,327 1,747 6.88 134,851 2,391 7.09
- --------------------------------------------------------------------------------------------------------------------------------
Total interest-earning assets 1,865,054 33,527 7.18 1,980,375 35,566 7.18
Noninterest-earning assets 96,741 60,087
- --------------------------------------------------------------------------------------------------------------------------------
Total assets $ 1,961,795 $ 2,040,462
================================================================================================================================
Liabilities and Stockholders' Equity:
Interest-bearing liabilities:
Deposits:
Savings accounts $ 1,023,140 $ 11,820 4.58% $ 1,085,204 $ 14,210 5.20%
NOW interest-bearing accounts 64,929 152 0.93 70,707 181 1.02
Money market accounts 86,729 727 3.33 109,479 901 3.27
- --------------------------------------------------------------------------------------------------------------------------------
Total deposits 1,174,798 12,699 4.29 1,265,390 15,292 4.79
Funds borrowed:
Borrowed funds 521,397 7,070 5.31 503,380 7,136 5.55
Collateralized mortgage
obligations - - - 208 6 11.54
- --------------------------------------------------------------------------------------------------------------------------------
Total funds borrowed 521,397 7,070 5.31 503,588 7,142 5.55
- --------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 1,696,195 19,769 4.60 1,768,978 22,434 5.01
Noninterest-bearing liabilities 93,919 88,698
- --------------------------------------------------------------------------------------------------------------------------------
Total liabilities 1,790,114 1,857,676
Stockholders' equity 171,681 182,786
- --------------------------------------------------------------------------------------------------------------------------------
Total liabilities and
stockholders' equity $ 1,961,795 $ 2,040,462
- --------------------------------------------------------------------------------------------------------------------------------
Net interest income/
interest rate spread $ 13,758 2.58% $ 13,132 2.17%
- --------------------------------------------------------------------------------------------------------------------------------
Net interest-earning assets/
net interest margin $ 168,859 2.95% $ 211,397 2.65%
- --------------------------------------------------------------------------------------------------------------------------------
Interest-earning assets to
interest-bearing liabilities 1.10 X 1.12 X
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Nine Months Ended September 30,
----------------------------------------------------------------------------
1999 1998
----------------------------------- ------------------------------------
Average Average
Average Yield/ Average Yield/
(Dollars in thousands) Balance Interest Cost Balance Interest Cost
- ------------------------------------------- ----------------------------------- ------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Interest-earning assets:
Mortgage loans, net $ 1,076,690 $ 59,793 7.40% $ 1,128,450 $ 63,291 7.48%
Equity lines of credit 95,393 5,226 7.32 94,135 5,610 7.97
Consumer loans and leases 105,321 6,418 8.14 54,476 3,403 8.33
Mortgage-backed securities 417,887 19,792 6.31 412,966 20,580 6.64
Interest-bearing deposits 74,547 2,619 4.63 50,652 2,163 5.63
Investment securities 99,462 5,078 6.81 143,831 7,545 6.99
- ------------------------------------------- ----------------------------------------------------------------------------
Total interest-earning assets 1,869,300 98,926 7.06 1,884,510 102,592 7.26
Noninterest-earning assets 95,354 76,851
- ------------------------------------------- ----------------------------------------------------------------------------
Total assets $ 1,964,654 $ 1,961,361
=========================================== ============================================================================
Liabilities and Stockholders' Equity:
Interest-bearing liabilities:
Deposits:
Savings accounts $ 1,043,407 $ 36,828 4.72% $ 1,087,649 $ 42,426 5.22%
NOW interest-bearing accounts 62,364 464 0.99 70,909 551 1.04
Money market accounts 85,538 2,089 3.27 110,527 2,654 3.21
- ------------------------------------------- ----------------------------------------------------------------------------
Total deposits 1,191,309 39,381 4.42 1,269,085 45,631 4.81
Funds borrowed:
Borrowed funds 494,109 19,803 5.29 421,232 17,826 5.58
Collateralized mortgage
obligations - - - 505 44 11.68
- ------------------------------------------- ----------------------------------------------------------------------------
Total funds borrowed 494,109 19,803 5.29 421,737 17,870 5.59
- ------------------------------------------- ----------------------------------------------------------------------------
Total interest-bearing liabilities 1,685,418 59,184 4.67 1,690,822 63,501 5.00
Noninterest-bearing liabilities 100,130 90,970
- ------------------------------------------- ----------------------------------------------------------------------------
Total liabilities 1,785,548 1,781,792
Stockholders' equity 179,106 179,569
- ------------------------------------------- ----------------------------------------------------------------------------
Total liabilities and
stockholders' equity $ 1,964,654 $ 1,961,361
- ------------------------------------------- ----------------------------------------------------------------------------
Net interest income/
interest rate spread $ 39,742 2.39% $ 39,091 2.26%
- ------------------------------------------- ----------------------------------------------------------------------------
Net interest-earning assets/
net interest margin $ 183,882 2.83% $ 193,688 2.77%
- ------------------------------------------- ----------------------------------------------------------------------------
Interest-earning assets to
interest-bearing liabilities 1.11 X 1.11 X
- ------------------------------------------- ----------------------------------------------------------------------------
<CAPTION>
At September 30,
1999
---------------------
Yield/
(Dollars in thousands) Balance Cost
- ------------------------------------------- ----------------------
<S> <C> <C>
Assets:
Interest-earning assets:
Mortgage loans, net $ 1,063,904 7.47%
Equity lines of credit 94,397 7.93
Consumer loans and leases 138,885 7.97
Mortgage-backed securities 416,288 6.63
Interest-bearing deposits 39,072 5.44
Investment securities 105,841 6.93
- ------------------------------------------- ----------------------
Total interest-earning assets 1,858,387 7.27
Noninterest-earning assets 107,602
- ------------------------------------------- ----------------------
Total assets $ 1,965,989
=========================================== ======================
Liabilities and Stockholders' Equity:
Interest-bearing liabilities:
Deposits:
Savings accounts 1,043,635 4.78%
NOW interest-bearing accounts 60,026 0.95
Money market accounts 84,923 3.39
- ------------------------------------------- ----------------------
Total deposits 1,188,584 4.49
Funds borrowed:
Borrowed funds 527,650 5.29
Collateralized mortgage
obligations -- --
- ------------------------------------------- ----------------------
Total funds borrowed 527,650 5.29
- ------------------------------------------- ----------------------
Total interest-bearing liabilities 1,716,234 4.73
Noninterest-bearing liabilities 84,679
- ------------------------------------------- ----------------------
Total liabilities 1,800,913
Stockholders' equity 165,076
- ------------------------------------------- ----------------------
Total liabilities and
stockholders' equity $ 1,965,989
- ------------------------------------------- ----------------------
Net interest income/
interest rate spread 2.54%
- ------------------------------------------- ------
Net interest-earning assets/
net interest margin
- -------------------------------------------
Interest-earning assets to
interest-bearing liabilities
- -------------------------------------------
</TABLE>
15
<PAGE>
Rate/Volume Analysis
The following table presents the extent to which changes in interest rates
and changes in the volume of interest-earning assets and interest-bearing
liabilities have affected the Company's interest income and interest expense
during the periods indicated. Information is provided in each category with
respect to (i) changes attributable to changes in volume (changes in volume
multiplied by prior rate), (ii) changes attributable to changes in rate (changes
in rate multiplied by prior volume), and (iii) the net change. The changes
attributable to the combined impact of volume and rate have been allocated
proportionately to the changes due to volume and the changes due to rate.
<TABLE>
<CAPTION>
Three Months Ended September 30, 1999 Nine Months Ended September 30, 1999
Compared To Compared To
Three Months Ended September 30, 1998 Nine Months Ended September 30, 1998
------------------------------------- ------------------------------------
Increase (Decrease) Increase (Decrease)
In Net Interest Income In Net Interest Income
Due To Due To
------------------------------------- ------------------------------------
(In thousands) Volume Rate Net Volume Rate Net
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest-Earning Assets:
Mortgage loans, net $ (2,238) 405 (1,833) (2,837) (661) (3,498)
Equity lines of credit 11 (114) (103) 75 (459) (384)
Consumer loans and leases 1,116 (66) 1,050 3,095 (80) 3,015
Mortgage-backed securities (670) (134) (804) 243 (1,031) (788)
Interest-bearing deposits 308 (13) 295 883 (427) 456
Investment securities (575) (69) (644) (2,277) (190) (2,467)
- ------------------------------------------------------------------------------------------------------------------------
Total (2,048) 9 (2,039) (818) (2,848) (3,666)
- ------------------------------------------------------------------------------------------------------------------------
Interest-Bearing Liabilities:
Deposits (1,055) (1,538) (2,593) (2,691) (3,559) (6,250)
Funds borrowed 241 (313) (72) 2,907 (974) 1,933
- ------------------------------------------------------------------------------------------------------------------------
Total (814) (1,851) (2,665) 216 (4,533) (4,317)
- ------------------------------------------------------------------------------------------------------------------------
Net change in net interest income $ (1,234) 1,860 626 (1,034) 1,685 651
========================================================================================================================
</TABLE>
Comparison of Operating Results for the Three Months Ended
September 30, 1999 and September 30, 1998
General
Net income totaled $4,628,000, or $0.41 per diluted share for the three
months ended September 30, 1999, as compared to $3,844,000, or $0.32 per diluted
share reported for the quarter ended September 30, 1998. Net interest income for
the three months ended September 30, 1999 was $13.8 million, an increase of
$626,000, or 4.8%, from the September 30, 1998 quarter of $13.1 million.
Interest Income
Interest income for the quarter ended September 30, 1999 totaled $33.5
million, a decrease of $2.0 million, or 5.7%, from the prior year's quarter.
Interest income on mortgage loans, the largest component of interest-earning
assets, decreased $1.8 million, or 8.5%, to $19.9 million from the September
1998 quarter. The average balance of the mortgage portfolio decreased $119.5
million. The decrease in the average mortgage portfolio is primarily attributed
to the decrease in loans held for sale which decreased $67.2 million. However,
this decrease had a positive effect on the average yield. The Bank's mortgage
loan portfolio for the year ago period was affected by market conditions which
prevailed whereby, higher yielding loans were repaid and replaced by lower
yielding loans. The annualized average yield on the mortgage loan portfolio
increased to 7.47% for the three months ended September 30, 1999 from 7.33% for
the 1998 period. Interest income on equity lines of credit decreased $103,000,
or 5.4%, to $1.8 million from the prior year's quarter. The Bank's home equity
line of credit product is priced based on the prime rate, which for the current
quarter was an average of 8.00% as compared to 8.50% for the comparable quarter
a year ago. The average balance of equity lines of credit increased slightly
from the September
16
<PAGE>
1998 quarter. Interest income on consumer loans and leases increased $1.1
million for the three months ended September 30, 1999. The average balance of
the consumer loans and leases increased $54.9 million, or 81.4% from the 1998
period, primarily as a result of indirect auto lending. Interest income on
mortgage-backed securities for the three months ended September 30, 1999
decreased $804,000 to $7.2 million and the average balance of the mortgage-
backed securities portfolio decreased $41.4 million from the September 1998
period. The annualized average yield on the mortgage-backed securities portfolio
decreased to 6.44% for the three months ended September 30, 1999 from 6.55% for
the 1998 period. Interest income on investment securities for the three months
ended September 30, 1999 decreased $644,000 to $1.7 million and the average
balance of the investment securities portfolio decreased $33.5 million from the
September 1998 period. The annualized average yield on the investment securities
portfolio decreased to 6.88% for the three months ended September 30, 1999 from
7.09% for the 1998 period. Until recently, market interest rates had been
declining, leading to rapid repayment of mortgage-backed securities and the
maturity of callable Federal Home Loan Bank notes. The net cash received from
these portfolios was reinvested at then current market rates resulting in lower
yields. Purchases of mortgage-backed and investment securities for the three
months ended September 30, 1999 totaled $10.2 million offset by maturities,
sales and principal repayments of $66.3 million.
Interest Expense
Interest expense on deposit accounts decreased $2.6 million, or 17.0%, to
$12.7 million, for the quarter ended September 30, 1999 compared to the prior
year's quarter. The decrease is related to both a decrease in the average
interest-bearing deposit base and the annualized average cost of deposits. The
annualized average cost of deposits for the three months ended September 30,
1999 was 4.29%, a decrease from the annualized average cost of 4.79% for the
September 1998 period. The average interest-bearing deposit base decreased
$90.6 million to $1.2 billion during the 1999 period. For the quarter ended
September 30, 1999, the Company recorded interest expense on borrowed funds of
$7.1 million on an average balance of $521.4 million at an annualized cost of
5.31% primarily related to FHLB borrowings. Additional net proceeds from FHLB
borrowings for the three months ended September 30, 1999 totaled $10.7 million.
Net Interest Income
Net interest income for the three months ended September 30, 1999 increased
$626,000 or 4.8%, to $13.8 million from the 1998 period. The annualized average
yield on interest-earning assets remained unchanged at 7.18%. The annualized
average cost of interest-bearing liabilities decreased from 5.01% to 4.60%.
This resulted in an annualized average net interest rate spread of 2.58% for the
three-month period ended September 30, 1999 compared to 2.17% for the prior
year's period. Both the average balance of interest-earning assets and
interest-bearing liabilities decreased during the three months ended September
30, 1999 compared to the 1998 period.
Provision for Loan Losses
Based on management's evaluation of the loan portfolio, a provision of
$50,000 for loan losses was recorded during the quarter ended September 30, 1999
and 1998. The allowance for loan losses represents 0.48% of total loans
receivable at September 30, 1999. The amount of non-performing loans at
September 30, 1999, was $4.0 million, or 0.30% of total loans, compared to $3.4
million or 0.24% of total loans at September 30, 1998.
Noninterest Income
Total noninterest income for the three months ended September 30, 1999 was
$5.2 million, an increase of $499,000 from the 1998 period. Income from real
estate operations increased $623,000 from the year ago period, primarily due to
income generated from additional investments in joint venture partnerships
entered into in 1998. Other fees and commissions increased $63,000, primarily
due to loan origination fees contributed by Preferred. Net gains on sales of
loans, mortgage-backed and investment securities totaled $339,000 for the 1998
quarter as compared to a loss of $11,000 for the current 1999 quarter. The
three months ended September 30, 1998 included a valuation reserve of $108,000
related to mortgage servicing rights and a write-down of $83,500 in value of
various equity securities, reflecting decreases in their respective market
values.
17
<PAGE>
Noninterest Expense
Noninterest expense for the quarter ended September 30, 1999 totaled $12.2
million, an increase of $946,000, or 8.4% from the prior year's quarter.
Compensation and benefits increased $461,000, or 7.5%. This increase is
primarily related to the origination, sale and delivery of loans by Preferred.
Occupancy expense increased $155,000 primarily due to depreciation expense on
additional equipment. Other noninterest expense increased $352,000. This
increase is primarily attributable to consulting fees related to operational
efficiency studies and other loan servicing and loan origination costs.
Income Tax Provision
The provision for income taxes for the three months ended September 30, 1999
was $2.0 million. The effective tax rate for the three months ended September
30, 1999 was 30.4% compared to the effective tax rate of 40.6% for the prior
year quarter. The decrease in the current quarter's income tax provision
reflects lower state taxable income. This benefit is a direct result of certain
structural changes initiated by the Company in order to position itself for
future business opportunities.
Comparison of Operating Results for the Nine Months Ended
September 30, 1999 and September 30, 1998
General
Net income totaled $13,736,000, or $1.18 per diluted share for the nine
months ended September 30, 1999, as compared to $10,422,000, or $0.87 per
diluted share reported for the nine months ended September 30, 1998. On June 30,
1998, the Company completed its acquisition of Southwest Bancshares, which was
accounted for as a pooling-of-interests. The prior year period included
acquisition related costs, totaling $3,795,000, reducing net income by
$2,679,000, resulting in a decrease in diluted earnings per share by $0.22.
These costs included professional fees, data processing conversion penalties and
employee severance. Net interest income for the nine months ended September 30,
1999 was $39.7 million, an increase of $651,000 from the September 30, 1998
period.
Interest Income
Interest income for the nine months ended September 30, 1999 totaled $98.9
million, a decrease of $3.7 million, or 3.6%, from the prior year's period.
Interest income on mortgage loans, the largest component of interest-earning
assets, decreased $3.5 million, or 5.5%, to $59.8 million from the September
1998 period. The average balance of the mortgage portfolio decreased $51.8
million. This decrease in the average mortgage portfolio is primarily due to a
decrease in loans held for sale. The annualized average yield on the mortgage
loan portfolio decreased to 7.40% for the nine months ended September 30, 1999
from 7.48% for the 1998 period. The Bank's mortgage loan portfolio is being
affected by market conditions which prevailed over the period of June 1998
through March 1999, whereby, higher yielding loans were repaid and replaced by
lower yielding loans. Interest income on equity lines of credit decreased
$384,000, or 6.8%, to $5.2 million from the prior year's period. The Bank's
home equity line of credit is priced based on the prime rate, which for the
current nine months was an average of 7.83% as compared to 8.50% for the
comparable period a year ago. The average balance of equity lines of credit
increased $1.3 million, or 1.3%, to $95.4 million from $94.1 million from the
September 1998 period. Interest income on consumer loans and leases increased
$3.0 million to $6.4 million for the nine months ended September 30, 1999. The
average balance of the consumer loans and leases increased $50.8 million from
the 1998 period, primarily as a result of the continued growth of indirect auto
lending. Interest income on mortgage-backed securities for the nine months
ended September 30, 1999 decreased $788,000 to $19.8 million and the average
balance of the mortgage-backed securities portfolio increased $4.9 million from
the September 1998 period. Interest income on investment securities for the
nine months ended September 30, 1999 decreased $2.5 million to $5.1 million and
the average balance of the investment securities portfolio decreased $44.4
million from the September 1998 period. The decreases in the average annualized
yields on the mortgage-backed and investment portfolios can be attributed to the
market interest rates which had been declining, until recently, leading to rapid
repayment of mortgage-backed securities and the maturity of callable Federal
Home Loan Bank notes. The net cash received from these portfolios was
reinvested at current market rates resulting in lower yields. Purchases of
mortgage-backed and investment securities for the nine months ended September
30, 1999 totaled $312.2 million offset by maturities, sales and
18
<PAGE>
principal repayments of $265.6 million. The average balance of interest-bearing
cash increased $23.9 million, to $74.5 million primarily as a result of
repositioning the investment portfolios to accommodate the cash flow and
liquidity needs of the Bank.
Interest Expense
Interest expense on deposit accounts decreased $6.3 million, or 13.7%, to
$39.4 million, for the nine months ended September 30, 1999 compared to the
prior year's period. The decrease is related to both a decrease in the average
interest-bearing deposit base and the annualized average cost of deposits. The
annualized average cost of deposits for the nine months ended September 30, 1999
was 4.42%, a decrease from the annualized average cost of 4.81% for the
September 1998 period. The average interest-bearing deposit base decreased
$77.8 million to $1.2 billion during the 1999 period. For the nine months ended
September 30, 1999, the Company recorded interest expense on borrowed funds of
$19.8 million on an average balance of $494.1 million at an annualized cost of
5.29% primarily related to FHLB borrowings. Additional net proceeds from FHLB
borrowings for the nine months ended September 30, 1999 totaled $63.2 million.
Net Interest Income
Net interest income for the nine months ended September 30, 1999 increased
$651,000. The annualized average yield on interest-earning assets decreased
from 7.26% to 7.06% when comparing the 1998 and 1999 periods. The annualized
average cost of interest-bearing liabilities decreased from 5.00% to 4.67%.
This resulted in an annualized average net interest rate spread of 2.39% for the
nine-month period ended September 30, 1999 compared to 2.26% for the prior
year's period. Both the average balance of interest-earning assets and
interest-bearing liabilities decreased during the nine months ended September
30, 1999 compared to the 1998 period.
Provision for Loan Losses
Based on management's evaluation of the loan portfolio, a provision of
$150,000 for loan losses was recorded during the nine months ended September 30,
1999 as compared to $212,000 recorded during the nine months ended September 30,
1998. The allowance for loan losses represents 0.48% of total loans receivable
at September 30, 1999. The amount of non-performing loans at September 30,
1999, was $4.0 million, or 0.30% of total loans, compared to $3.4 million or
0.24% of total loans at September 30, 1998.
Noninterest Income
Total noninterest income for the nine months ended September 30, 1999 was
$18.6 million, an increase of $2.9 million from the 1998 period. Other fees and
commissions increased $1.5 million due to an increase in loan origination fees
contributed by Preferred. The current nine months includes gains on sales of
loans, mortgage-backed and investment securities of $436,000, compared to
$995,000 for the 1998 period. Income from real estate operations for the nine
months ended September 30, 1999 increased $1.5 million, primarily due to income
generated from additional investments in joint venture partnerships entered into
in 1998. Real estate income for the 1998 period included income of $474,000
related to the termination of a real estate venture. Other income for the nine
months ended September 30, 1999, includes a gain on the sale of Liberty
Financial Services Inc.'s insurance book of business of $250,000.
Noninterest Expense
Noninterest expense for the nine months ended September 30, 1999 totaled
$37.9 million, an increase of $791,000 from the prior year's period. The nine
months ended September 30, 1998 included acquisition costs including
professional fees, data processing conversion penalties and employee severance
of $3.8 million. Exclusive of these expenses, noninterest expense increased $4.6
million. Compensation and benefits increased $2.4 million, or 12.8%, exclusive
of the prior year acquisition costs. This increase is primarily related to the
origination, sale and delivery of loans by Preferred for a total of $1.7
million. Occupancy expense increased $709,000 primarily due to depreciation
expense on additional equipment. Computer services expense decreased $94,000,
exclusive of year ago acquisition costs. Other noninterest expense increased
$1.7 million, exclusive of year ago acquisition
19
<PAGE>
costs. This increase is primarily attributable to consulting fees related to
operational efficiency studies and other loan servicing and loan origination
costs.
Income Tax Provision
The provision for income taxes for the nine months ended September 30, 1999
was $6.5 million. The effective tax rate for the nine months ended September
30, 1999 was 32.2% compared to the effective tax rate of 40.4% for the nine
months ended September 30, 1998. The lower effective tax rate for the current
period was due to a reduction in the provision of $700,000 as a result of the
completion of a review of the Company's tax liability and lower state taxable
income. This benefit is a direct result of certain structural changes initiated
by the Company in order to position itself for future business opportunities.
The effective tax rate for the prior year's period included certain acquisition
costs which were not tax deductible.
Part II - Other Information
Item 1. Legal Proceedings
Not Applicable.
Item 2. Changes in Securities and Use of Proceeds
Not Applicable.
Item 3. Defaults Upon Senior Securities
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable.
Item 5. Other Information
Not Applicable.
20
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit No. 11 Statement re: Computation of Per Share Earnings
<TABLE>
<CAPTION>
Three Months Ended
September 30, 1999 September 30, 1998
----------------------------------------------
<S> <C> <C>
Net income $ 4,628,000 3,844,000
----------------------------------------------
Basic earnings per share-weighted average shares 10,846,200 11,441,186
Effect of dilutive securities-stock options 526,087 537,904
----------------------------------------------
Diluted earnings per share-adjusted weighted average shares 11,372,287 11,979,090
----------------------------------------------
Basic earnings per share $ 0.43 0.34
----------------------------------------------
Diluted earnings per share $ 0.41 0.32
----------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended
September 30, 1999 September 30, 1998
----------------------------------------------
<S> <C> <C>
Net income $ 13,736,000 10,422,000
----------------------------------------------
Basic earnings per share-weighted average shares 11,092,453 11,366,104
Effect of dilutive securities-stock options 522,981 607,592
----------------------------------------------
Diluted earnings per share-adjusted weighted average shares 11,615,434 11,973,696
----------------------------------------------
Basic earnings per share $ 1.24 0.92
----------------------------------------------
Diluted earnings per share $ 1.18 0.87
----------------------------------------------
</TABLE>
(b) Reports on Form 8-K.
None.
21
<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.
Alliance Bancorp
Dated: November 8, 1999 /s/ Kenne P. Bristol
------------------------ ---------------------------------
Kenne P. Bristol
President and
Chief Executive Officer
Dated: November 8, 1999 /s/ Richard A. Hojnicki
------------------------ ---------------------------------
Richard A. Hojnicki
Executive Vice President and
Chief Financial Officer
22
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 19,817
<INT-BEARING-DEPOSITS> 39,072
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 495,496
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 1,303,437
<ALLOWANCE> 6,251
<TOTAL-ASSETS> 1,965,989
<DEPOSITS> 1,241,355
<SHORT-TERM> 146,950
<LIABILITIES-OTHER> 412,608
<LONG-TERM> 0
0
0
<COMMON> 117
<OTHER-SE> 164,959
<TOTAL-LIABILITIES-AND-EQUITY> 1,965,989
<INTEREST-LOAN> 71,437
<INTEREST-INVEST> 24,870
<INTEREST-OTHER> 2,619
<INTEREST-TOTAL> 98,926
<INTEREST-DEPOSIT> 39,381
<INTEREST-EXPENSE> 59,184
<INTEREST-INCOME-NET> 39,742
<LOAN-LOSSES> 150
<SECURITIES-GAINS> 436
<EXPENSE-OTHER> 37,897
<INCOME-PRETAX> 20,262
<INCOME-PRE-EXTRAORDINARY> 20,262
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,736
<EPS-BASIC> 1.24
<EPS-DILUTED> 1.18
<YIELD-ACTUAL> 2.83
<LOANS-NON> 3,958
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 6,350
<CHARGE-OFFS> 279
<RECOVERIES> 30
<ALLOWANCE-CLOSE> 6,251
<ALLOWANCE-DOMESTIC> 3,311
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,940
</TABLE>
