SECURITIES AND EXCHANGE COMMIS SION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Act of 1934
Date of Report (Date of earliest event reported) January 26, 1998
COVEST BANCSHARES, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 0-20160 36-3820609
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(State or other (Commission File No.) (I.R.S. Employer
Jurisdictionn) Number)
749 Lee Street, Des Plaines, Illinois 60016
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 294-6500
Item 5. OTHER EVENTS
On Monday, January 26, 1998, the Company issued a press release
pertaining to Fourth Quarter 1997 results. The text of the press
release is attached hereto as Exhibit 99.l.
Item 7. Exhibit 99.1
Dated: January 26, 1998
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 hereunto duly authorized.
Dated: January 26, 1998
By: /s/ Larry G. Gillie
Name: Larry G. Gillie
Title: President & Chief Executive Officer
By: /s/ Paul A. Larsen
Name: Paul A. Larsen
Title: Senior Vice President and
Chief Financial Officer
Item 7 EXHIBIT 99.1
CoVest Bancshares, Inc. announces Fourth Quarter Result
DES PLAINES, IL Jan. 26, 1998 -- CoVest Bancshares, Inc.
(Nasdaq/COVB), the holding company for CoVest Banc, Des
Plaines, Illinois, announced today results for the fourth
quarter of 1997. In the fourth quarter of 1997, the
Company reevaluated its methodology in providing for
possible loan losses. The Company evaluated its loan
mix, rescored its credit card portfolio, reviewed its
recent loan loss experience, and decided to provide an
extra $2.4 million in loan loss provision during the
quarter. This resulted in the Company experiencing a net
loss for the three months ended December 31, 1997 of
$735,000. This compares to net income of $605,000 for
the comparable period in 1996. Returns on average assets
and average equity during the fourth quarter were -0.13%
and -1.52% respectively during 1997 compared to 0.42% and
4.76% in 1996.
CoVest's loss per share was 18 cents (basic) in the
fourth quarter of 1997, but earnings of 61 cents per
share (basic) for the full year. This compares with 13
cents per share (basic) and 34 cents per share (basic) in
the comparable periods of 1996.
Net interest income increased by $203,000, or 5%, for the
fourth quarter of 1997 compared to the fourth quarter of
1996. The Company's net interest margin increased 24
basis points, or almost 9%, to 2.91% for the fourth
quarter of 1997 from 2.67% for the 1996 fourth quarter.
The interest rate spread and margin averaged 2.42% and
2.94% respectively during 1997, a 70 and 72 basis point
increase from 1.72% and 2.22% respectively during 1996.
This represents increases of 41% in interest rate spread
and 32% in net interest margin growth. In the current
interest rate environment, management expects margins to
increase from the 1997 levels as the loan composition of
commercial and commercial real estate loans become a
larger percentage of the overall loan portfolio and
assets mix.
Non interest income increased $422,000, or 94%, to
$872,000 from the comparable quarter last year. A
continuing increase in loan charges and servicing fees of
$110,000 and deposit related charges and fees of $51,000
was realized during the fourth quarter of 1997 as
compared to the fourth quarter of 1996. Increases in
realized gains on securities of $67,000 were recorded.
These gains totaled $57,000 during the fourth quarter of
1997 compared to a loss of $10,000 for the comparable
quarter in 1996. Finally, a non-recurring death benefit
of $187,000 was recorded.
Non-interest expense increased $388,000, or 14% for the
fourth quarter of 1997 from the comparable quarter in
1996 primarily as a result of increases in costs related
to compensation and employee benefits of $254,000 and a
data processing conversion of main frame applications of
$149,000.
Net income for the twelve months ended December 31, 1997,
totaled a record $2.6 million, or $.61 per share (basic),
compared to $1.6 million, or $.34 per share (basic).
The Company attributed the 64% increase in annual
earnings primarily to an increase of $2.3 million in net
interest income on balance sheet which averaged $67
million less in average earning assets when compared to
1996. Other non-interest income which mainly includes
loan charges and servicing fees, and deposit related fees,
increased 43% or almost $735,000, while operating
expenses excluding the special 1996 FDIC assessment
increased by only 4.5% or $486,000. The Company also
recognized $1.3 million less in net security gains in
1997 as compared to 1996. In addition, earnings were
positively impacted by the absence of the $3 million pre-
tax special assessment in 1996 made by the FDIC to
recapitalize the Savings Association Insurance Fund,
which was partially offset by an increase in the 1997
loan loss provision of $2,675,000.
Returns on average assets and average equity during 1997
were 0.48% and 5.40% respectively compared to 0.26% and
2.94% in 1996.
At December 31, 1997, total non-performing assets
amounted to $ 1.3 million, or 0.35% of net loans
receivable compared to $ 856,000, or 0.22% in non-
performing assets at December 31, 1996.
At December 31, 1997, the allowance for loan losses
amounted to almost $4 million, or 305% of non-performing
loans as compared to a 166% coverage at December 31,
1996.
The Company's assets increased 8% to $583 million as of
December 31, 1997, from $ 541 million at December 31,
1996. An arbitrage was begun in late November, 1997,
using Federal Home Loan Bank borrowings which mature in
late 1998 to fund two large mortgage backed security
pools. This arbitrage accounts for $50 million in
increased volume at year-end and has an average spread of
72 basis points. Total deposits decreased 7% to $372
million from $ 402 million at December 31, 1996.
Stockholders equity in CoVest Bancshares, Inc. totaled
$48 million at December 31, 1997. The number of common
shares outstanding was 4,365,761 and the book value per
common share outstanding was $11.06. Approximately
108,000 shares remain to be repurchased under the current
stock repurchase program.
The Company reported its earnings per share on a post-
split basis (3 for 2 paid December 1, 1997) and, in
compliance with a new Financial Accounting Standards
Statement which requires such disclosure, on the basic earnings
per share basis. "Basic" earnings per share takes into
account only actual shares outstanding.
As part of the continuing balance sheet restructuring,
Larry G. Gillie, President, made the following
announcement: "In our continuing effort to provide
exceptional service to new and existing customers, and to
accommodate requests for lower rates when purchasing or
refinancing a home, we are pleased to announce the
opening of a mortgage center in McHenry, Illinois. This
center will open mid-February, 1998, and will have more
than thirty sources from which to place end mortgages at
rates that will challenge the current market."
COVEST BANCSHARES, INC.
FINANCIAL HIGHLIGHTS (financials in thousands, except per share)
12/31/97 12/31/96 Change
Selected Financial Condition Data: (unaudited)
TOTAL ASSETS $ 582,722 $ 541,169 8%
Investment Securities 181,972 172,876 5%
Loans Receivable, net 377,509 338,545 12%
Deposits 371,752 402,090 -8%
Stockholders' Equity 48,293 49,944 -3%
Selected Asset Quality Ratios:
Total non-performing loans 1,304 856 52%
Non-performing loans to Loans
Receivable, Net 0.35% 0.22% 57%
Total non-performing assets 1,306 856 53%
Non-performing assets to
Total Assets 0.35% 0.16% 116%
Total Allowance for Loan Losses 3,979 1,424 179%
Allowance for Loan Losses to
non-performing loans 3.05x 1.66x 84%
Twelve Months Ended December 31 1997 1996
Selected Income Data: (unaudited)
Net Interest Income $ 15,450 $ 13,136 18%
Provision for loan losses 4,072 1,397 191%
Net Interest Income after
provision for loan losses 11,378 11,739 -3%
Non-interest income 3,672 4,242 -13%
Non-interest expense 11,305 13,852 -18%
Income before income taxes 3,745 2,129 76%
Income tax expense 1,135 540 110%
Net income $ 2,610 $ 1,589 64%
Earnings per share:
Basic $ 0.61 $ 0.34 82%
Selected Operating Ratios:
Return on Average Assets 0.48% 0.26% 84%
Return on Average Equity 5.40% 2.94% 84%
Operating expenses to
average assets 2.08% 2.29% -9%
Net interest rate spread 2.42% 1.72% 41%
Net interest rate margin 2.94% 2.22% 32%
Three Months Ended December 31 1997 1996
Selected Income Data: (unaudited)
Net Interest Income $ 3,901 $ 3,698 5%
Provision for loan losses 2,889 565 411%
Net Interest Income after
provision for loan losses 1,012 3,133 -68%
Non-interest income 872 450 94%
Non-interest expense 3,260 2,872 14%
Income before income taxes (1,376) 711 -294%
Income tax expense (641) 106 -705%
Net income $ (735) $ 605 -221%
Earnings per share:
Basic ($0.18) $ 0.13 -233%
Selected Operating Ratios:
Return on Average Assets -0.13% 0.42% -131%
Return on Average Equity -1.52% 4.76% -132%
Operating expenses to
average assets 2.33% 2.01% 16%
Net interest rate spread 2.43% 2.23% 9%
Net interest rate margin 2.91% 2.67% 9%
