SECURITIES AND EXCHANGE COMMISSION
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 21, 1999
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 (I.R.S.
Employer Jurisdiction Number) Identification
No.) No.)
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 Thursday, January 21, 1999, the Company issued a press release
pertaining to net income for the quarter ended December 31, 1998. The
text of the press release is attached hereto as Exhibit 99.1.
SIGNATURE
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 21, 1999 COVEST BANCSHARES, INC.
By:/s/ R. Kennedy Alger
_______________________
R. Kennedy Alger
Executive Vice President
By:/s/ Paul A. Larsen
_______________________
Paul A. Larsen
Senior Vice President and
Chief Financial Officer
Item 7. EXHIBIT 99.1
CoVest Bancshares, Inc. Announces Fourth Quarter Results
DES PLAINES, IL January 21, 1999 - CoVest Bancshares, Inc.
(Nasdaq/COVB), the holding company for CoVest Banc N.A., Des Plaines,
Illinois, announced today results for the fourth quarter ended December
31, 1998. The net income totaled $989,000, or $0.24 (basic) and $0.23
(diluted) earnings per share, versus a net loss of $735,000 for the
three months ended December 31, 1997, a loss per share of $0.17 (basic)
and a loss of $0.17 (diluted) per share. The loss in the fourth quarter
of 1997 was due to the Company providing an extra $2.4 million in loan
loss provision. This provision was determined by the Company based on a
reevaluation of its methodology in providing for possible loan losses,
review of its loan mix, rescoring of the credit card portfolio, and
historical loan loss experience.
Returns on average assets and average equity during the fourth quarter,
1998, were 0.71% and 8.44% respectively compared to -0.52% and -6.08%
in 1997.
Net interest income increased by $111,000, or 3%, for the fourth quarter
of 1998 compared to the fourth quarter of 1997. The Company's net
interest rate spread and margin averaged 2.60% and 2.99% respectively
during the fourth quarter of 1998, a 17 and 8 basis point increase from
2.43% and 2.91% respectively during the fourth quarter of 1997. This
represented increases of 7% in interest rate spread and 3% in net
interest margin growth.
Non interest income increased $633,000, or 74%, to $1,493,000 from the
comparable quarter in 1997. The Company realized $672,000 in non-
recurring income in the fourth quarter of 1998 from the sale of its
credit card portfolio. During the fourth quarter of 1998, the Company
recognized securities losses of $574,000 versus gains of $57,000 during
the fourth quarter of 1997. In the fourth quarter of 1998, the funding
source for the $50 million arbitrage (entered into during the fourth
quarter of 1997) matured, which resulted in the Company liquidating the
underlying securities. The sale of these securities resulted in
$566,000 of the $574,000 securities loss for the quarter. This loss was
partially offset by the recognition of $220,000 in pre-payment fees from
the early payoff of commercial leases during the fourth quarter of 1998.
Loan charges and servicing fees decreased by $38,000 as the volume of
mortgage loans continued to decrease. Deposit related charges and fees
exceeded the fourth quarter of 1997 by $23,000.
Non-interest expense increased $662,000, or 20%, for the fourth quarter
of 1998 over the comparable quarter in 1997. Of this total, $137,000 in
additional expense was related to the sale of the credit card portfolio.
Commissions and employee sales incentives, mostly attributed to the
mortgage center, grew to $212,000. There was no mortgage center
operation until the first quarter of 1998. The remainder was primarily
the result of increases in costs related to compensation and employee
benefits.
The Company earned $3,871,000 for the twelve months ended December 31,
1998, versus $2,610,000 for the like period in 1997. This represented
$0.92 (basic) and $0.87 (diluted) per share versus $0.61 (basic) and
$0.58 (diluted) per share for the twelve months of 1997, an increase of
over 50% on earnings per share from 1997.
The Company attributed the increase in annual net income of almost $1.3
million to a decrease of $2.5 million (pre-tax) in the provision for
possible loan losses. This decrease was a result of the sale of the
credit card portfolio. After the sale of the credit card portfolio, the
$837,000 credit card reserve was reallocated to other loan types. Non-
interest income, including the mortgage center, which was begun during
the first quarter of 1998, totaled over $1.7 million at year-end. Loan
charges and servicing fees increased by $44,000, and deposit related
fees increased by 15% or $126,000. The Company recognized income of
$672,000 from the sale of its credit card portfolio. This was more
than offset by approximately $1.0 million dollars less in net security
gains in 1998 as compared to 1997.
The Company's net interest rate spread and margin averaged 2.53% and
2.93% respectively during 1998, an 11 basis point increase in the net
interest spread and 1 basis point decrease in the interest rate margin
from 2.42% and 2.94% respectively during 1997. This represented an
increase of 5% in interest rate spread.
Operating expenses grew 26% or $2.9 million. Mortgage center
commissions and incentives totaled $600,000 for 1998 with no comparable
expenses in 1997. The Company recognized $137,000 of additional expense
related to the sale of the credit card portfolio. Salaries and benefits
expense increased by over $1.8 million, or almost 35% for the year.
Most of this increase can be attributed to the beginning of a commercial
loan function started in the third quarter of 1997 and to some fixed
personnel costs associated with the mortgage center operation. In
addition, a portion of the increase was due to expenses related to the
departure of the Chief Executive Officer during the third quarter of
1998.
Returns on average assets and average equity for the year ended December
31, 1998, were 0.67% and 8.15% respectively compared to 0.48% and 5.40%
in 1997.
At December 31, 1998, total non-performing assets amounted to $1.0
million, or 0.25% of net loans receivable compared to $1.3 million, or
0.35% in non-performing assets at December 31, 1997.
At December 31, 1998, the allowance for loan losses amounted to $4.3
million, or 433% of non-performing loans as compared to 305% coverage at
December 31, 1997.
The Company's assets decreased 6% to $549 million as of December 31,
1998, from $583 million at December 31, 1997. This decrease was
primarily due to a $50 million mortgage backed securities arbitrage,
begun in late November 1997 using Federal Home Loan Bank borrowings,
that matured in late 1998.
The composition of the loan portfolio continued to change and commercial
loans represented 2%, commercial real estate loans represented 16%,
multi-family loans represented 14%, construction loans represented 10%,
and leases represented 9% as of year-end 1998. These loans represented
51% of total loans receivable, which was up from 23% at year-end 1997.
As of December 31, 1998, the Bank had $16 million of approved and
accepted commitments outstanding which should be funded in the next 90
days.
During 1998, residential mortgage loans decreased by $86 million, or
over 36% of the December 31, 1997 outstanding balance, as borrowers took
advantage of lower rates and refinanced their mortgages. The CoVest Banc
mortgage centers in McHenry and Aurora, Illinois processed many of the
refinanced mortgages, which were then sold on a service released basis
to the investor market. About 700 loans were processed during 1998,
representing almost $90 million in new investor loan fundings. The
mortgage centers had over $4 million of loans held for sale at December
31, 1998.
Total deposits decreased 2% to $365 million from $ 372 million at
December 31, 1997.
Stockholders' equity totaled $47 million at December 31, 1998. The
number of common shares outstanding was 4,210,615 and the book value per
common share outstanding was $11.15. The Company completed its latest
stock repurchase program on December 29, 1998.
The Company operates full-service offices in Arlington Heights, Des
Plaines and Schaumburg, and loan production offices in Aurora and
McHenry, Illinois.
COVEST BANCSHARES, INC.
FINANCIAL HIGHLIGHTS
(financials in thousands, except per share)
12/31/98 12/31/97 Change
Selected Financial Condition Data: (unaudited)
TOTAL ASSETS $548,697 $582,722 -6%
Investment Securities 88,017 164,172 -46%
Loans Receivable, net 402,329 377,509 7%
Deposits 364,535 371,752 -2%
Stockholders' Equity 46,951 48,294 -3%
Selected Asset Quality Ratios:
Total non-performing loans 996 1,304 -24%
Non-performing loans to Loans
Receivable, Net 0.25% 0.35% -28%
Total non-performing assets 996 1,306 -24%
Non-performing assets to
Total Assets 0.18% 0.22% -19%
Total Allowance for Loan Losses 4,312 3,977 8%
Allowance for Loan Losses to
non-performing loans 4.33x 3.05x 42%
Twelve Months Ended December 31 1998 1997
Selected Income Data: (unaudited)
Net Interest Income $ 16,204 $ 15,450 5%
Provision for loan losses 1,567 4,072 -62%
Net Interest Income after
provision for loan losses 14,637 11,378 29%
Non-interest income 5,579 3,672 52%
Non-interest expense 14,245 11,305 26%
Income before income taxes 5,971 3,745 59%
Income tax expense 2,100 1,135 85%
Net income $3,871 $2,610 48%
Earnings per share:
Basic $0.92 $0.61 51%
Diluted $0.87 $0.58 50%
Selected Operating Ratios:
Return on Average Assets 0.67% 0.48% 40%
Return on Average Equity 8.15% 5.40% 51%
Operating expenses to
average assets 2.48% 2.08% 19%
Net interest rate spread 2.53% 2.42% 5%
Net interest rate margin 2.93% 2.94% 0%
Three Months Ended December 31 1998 1997
Selected Income Data: (unaudited) (unaudited)
Net Interest Income $4,012 $3,901 3%
Provision for loan losses 0 -2,889 -100%
Net Interest Income after
provision for loan losses 4,012 1,012 296%
Non-interest income 1,493 860 74%
Non-interest expense 3,910 3,248 20%
Income before income taxes 1,595 (1,376) 216%
Income tax expense 606 (641) 195%
Net income 989 (735) 235%
Earnings per share:
Basic $0.24 ($0.17) 239%
Diluted $0.23 ($0.17) 235%
Selected Operating Ratios:
Return on Average Assets 0.71% -0.52% 235%
Return on Average Equity 8.44% -6.08% 239%
Operating expenses to
average assets 2.80% 2.32% 21%
Net interest rate spread 2.60% 2.43% 7%
Net interest rate margin 2.99% 2.91% 3%
