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 20, 2000
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 20, 2000, the Company issued a press release
pertaining to Fourth Quarter 1999 results. The text of the press release
is attached hereto as Exhibit 99.1.
Item 7. 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 20, 2000 COVEST BANCSHARES, INC.
By: /s/ James L. Roberts
James L. Roberts
President and
Chief Executive Officer
By: /s/ Paul A. Larsen
Paul A. Larsen
Executive Vice President and
Chief Financial Officer
CoVest Bancshares, Inc. Announces Fourth Quarter Results
DES PLAINES, IL January 20, 2000 - 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, 1999. The net income totaled $1,042,000, or $0.26 (basic) and $0.25
(diluted) earnings per share, versus net income of $989,000 for the
three months ended December 31, 1998, or $0.24 (basic) and $0.23
(diluted) earnings per share.
Cash earnings (net earnings adjusted for the after tax impact of
amortization of goodwill) for the fourth quarter of 1999 were
$1,074,000, or $0.26 (basic) and $0.25 (diluted) earnings per share,
compared to $1,021,000 or $0.25 (basic) and $0.24 (diluted)
earnings per share for the same period in 1998.
Returns on average equity and average assets during the fourth quarter,
1999, were 9.08% and 0.74% respectively compared to 8.44% and 0.71% in
1998. Cash earnings for the fourth quarter of 1999 represented returns
on average equity and average tangible assets of 9.36% and 0.76%
respectively, compared to 8.72% and 0.73% respectively for the fourth
quarter of 1998.
Net interest income increased by $256,000, or 6%, for the fourth quarter
of 1999 compared to the fourth quarter of 1998. Total earning assets
were $10 million higher in the fourth quarter of 1999 versus the like
period in 1998. The Company's net interest rate spread and margin
averaged 2.89% and 3.19% respectively during the fourth quarter of 1999,
an 18 and 20 basis point increase from 2.71% and 2.99% respectively
during the fourth quarter of 1998. This represented increases of 7% in
net interest rate spread and 7% in net interest rate margin growth. The
Company's cost of funds increased from 4.65% in the third quarter of
1999 to 4.77% in the fourth quarter of 1999. Consequently, the Company
does not expect its margin growth to continue at the same speed for at
least the next several quarters.
In the fourth quarter of 1999, the Company recognized $291,000 as a
provision for possible loan losses. No provision was made during the
fourth quarter of 1998, when the Company sold its credit card portfolio
and reallocated the reserve for credit card losses to other loan types.
Non interest income decreased $661,000, or 44%, to $832,000 from the
comparable quarter in 1998. In the fourth quarter of 1998, the Company
realized $672,000 in non-recurring income related to the sale of its
credit card portfolio. During the fourth quarter of 1999, the Company
recognized security gains of $5,000 compared to losses of $574,000
incurred during the fourth quarter of 1998. In November, 1998, the
Company sold securities to repay borrowings associated with an arbitrage
transaction the Company initiated in the fourth quarter of 1997. Loan
prepayment fees declined $176,000 during the fourth quarter of 1999
versus the same period in 1998. Loan charges and servicing fees
decreased by $77,000, primarily due to the sale of the credit card
portfolio in the fourth quarter of 1998 as well as a reduction in
mortgage loan volume. Mortgage Center income decreased by $369,000
during the fourth quarter of 1999 versus 1998, as volume dropped in
conjunction with increases in mortgage interest rates.
Non-interest expense decreased $700,000, or 18%, for the fourth quarter
of 1999 over the comparable quarter in 1998. Compensation and benefit
expenses declined $510,000, primarily as a result of headcount
reduction, and to a lesser extent, an increase in deferred expenses in
1999 associated with loan origination, as required by FASB 91. During
the first quarter of 1999, certain employee positions were eliminated to
bring operating costs more in line with the revenues of the Bank. In
the fourth quarter of 1998, the Company incurred $137,000 in additional
expense related to the sale of the credit card portfolio.
The Company earned $3,935,000 for the twelve months ended December 31,
1999, versus $3,871,000 for the twelve months ended December 31, 1998.
This represented $0.96 (basic) and $0.93 (diluted) earnings per share
versus $0.92 (basic) and $0.87 (diluted) earnings per share for the
twelve months of 1998, an increase of 4% and 7% respectively from 1998.
Cash earnings for 1999 were $4,061,000, or $0.99 (basic) and $0.95
(diluted) earnings per share, compared to $3,997,000 or $0.95 (basic)
and $0.89 (diluted) earnings per share in 1998.
Returns on average equity and average assets for the year ended December
31, 1999, were 8.49% and 0.72% respectively compared to 8.15% and 0.67%
in 1998. Cash earnings for 1999 represented returns on average equity
and average tangible assets of 8.77% and 0.75% respectively, compared to
8.41% and 0.70% respectively for 1998.
Net interest income increased by $132,000 or 1% in 1999 versus 1998,
even though average earning assets were $30 million less in 1999 versus
1998. In 1999, average loans receivable were $419 million versus $407
million in 1998. Higher yielding multi-family loans continued to
increase while mortgage loans outstanding decreased. Lower yielding
investments, including securities and overnight deposits, averaged $105
million in 1999 versus $147 million in 1998.
The Company's net interest rate spread and margin averaged 2.84% and
3.18% respectively during 1999, a 30 basis point increase in the net
interest rate spread and 25 basis point increase in the net interest
rate margin from 2.54% and 2.93% respectively during 1998. This
represented an increase of 12% in net interest rate spread and 9% in net
interest rate margin. Due to anticipated higher costs of funds, the
Company does not expect this rate of growth to continue during the next
year.
The provision for possible loan losses decreased $435,000, or 28% in
1999 versus 1998. The Company sold its credit card portfolio in the
fourth quarter of 1998 and reallocated the reserve for credit card
losses to other loan types. During 1998, the Company experienced net
loan losses from its credit card portfolio of $1.1 million out of total
net chargeoffs of $1.2 million.
Non interest income declined $1,542,000, or 28%, versus 1998. In 1998,
the Company recognized $672,000 in non-recurring income related to the
sale of its credit card portfolio. In 1998, security gains of $225,000
were realized, compared to a $10,000 loss in 1999. Mortgage Center
income declined $257,000 in 1999 versus 1998, as volume dropped by $4
million in response to increases in mortgage interest rates. Insurance
and discount brokerage income declined $178,000 in 1999 versus 1998, as
annuity and security sale volume declined by $3 million and customers
migrated to products offering lower commissions. Loan prepayment fees
declined $231,000 in 1999 versus 1998. Other loan servicing fees
decreased $314,000 as a result of the sale of the credit card portfolio
in 1998 and a reduction in mortgage loans outstanding.
Operating expenses decreased 7% or $1.0 million. Compensation and
benefit expense decreased $850,000. During the first quarter of 1999
certain employee positions were eliminated to bring operating costs more
in line with the revenues of the Bank. Additionally, in 1999 the Company
deferred $403,000 more in compensation expenses associated with loan
origination, as required by FASB 91, than during the same period in
1998. Advertising expenses in 1999 exceeded the 1998 level by $177,000,
as the Company initiated several advertising campaigns to generate
additional deposits. In 1998, the Company recognized $137,000 of
additional expense related to the sale of the credit card portfolio.
At December 31, 1999, total non-performing assets amounted to $0.8
million, or 0.17% of net loans receivable compared to $1.0 million, or
0.25% in non-performing assets at December 31, 1998.
At December 31, 1999, the allowance for possible loan losses amounted to
$4.8 million, or 631% of non-performing loans as compared to $4.3
million, or 433% coverage at December 31, 1998.
The Company's assets increased 4% to $568 million as of December 31,
1999, from $549 million at December 31, 1998. At December 31, 1999,
loans receivable, net represented 81.4% of total assets, while
investment securities represented 13.5%, compared to 73.3% and 16.0%
respectively as of December 31, 1998. The 1999 increase was primarily
due to $60 million growth in the loan portfolio. Increases were
achieved in: commercial loans, $9 million; commercial real estate loans,
$8 million; multi family loans, $70 million; construction loans, $6
million, and consumer loans, $5 million. Mortgage loans declined $24
million. Leases outstanding decreased by $13 million. The increase in
loans receivable was partially offset by an $11 million decrease in
investment securities and a $29 million decrease in cash and cash
equivalents.
Total deposits increased 9% to $398 million from $365 million at
December 31, 1998, as a result of an increase in purchased money
deposits, which amounted to $44 million at December 31, 1999. These
replaced long term borrowings called by the Federal Home Loan Bank and
had a lower cost than borrowings for a similar time period offered by
the Federal Home Loan Bank. These purchased money deposits have
maturities ranging from 30 days to 3 years.
Long term borrowings (over one year) with the Federal Home Loan Bank
amounted to $20 million at December 31, 1999 versus $120 million at
December 31, 1998. During 1999, the Federal Home Loan Bank called $75
million in callable borrowings held by the Company. The Company
replaced these long term callable borrowings with Federal Home Loan Bank
term non-callable advances and purchased money deposits.
Stockholders' equity in CoVest Bancshares, Inc. totaled $46 million at
December 31, 1999. The number of common shares outstanding was
4,104,007 and the book value per common share outstanding was $11.28.
The Company completed its latest stock repurchase program on June 30,
1999. Year to date, 296,788 shares were repurchased.
The Company operates full-service offices in Arlington Heights, Des
Plaines and Schaumburg, and a loan production office in McHenry.
This release may contain forward looking statements. Forward looking
statements are identifiable by the inclusion of such qualifications as
expects, intends, believes, may, may not, likely, or other indications
that the particular statements are not based on facts but are rather
based upon the Company's beliefs as of the date of this release. Actual
events and results may differ significantly from those described in such
forward looking statements.
COVEST BANCSHARES, INC.
FINANCIAL HIGHLIGHTS
(financials in thousands, except per share)
12/31/99 12/31/98 Change
Selected Financial Condition Data: (unaudited)
TOTAL ASSETS $568,496 $548,697 4%
Investment Securities 76,990 88,017 -13%
Loans Receivable, net 462,697 402,329 15%
Deposits 398,055 364,535 9%
Stockholders' Equity 46,274 46,951 -1%
Selected Asset Quality Ratios:
Total non-performing loans 766 996 -23%
Non-performing loans to Loans
Receivable, Net 0.17% 0.25% -33%
Total non-performing assets 766 996 -23%
Non-performing assets to
Total Assets 0.13% 0.18% -26%
Total Allowance for Loan Losses 4,833 4,312 12%
Allowance for Loan Losses to
non-performing loans 6.31x 4.33x 46%
Three Months Ended December 31 1999 1998
Selected Income Data: (unaudited)
Net Interest Income $4,268 $4,012 6%
Provision for loan losses 291 - 100%
Net Interest Income after
provision for loan losses 3,977 4,012 -1%
Non-interest income 832 1,493 -44%
Non-interest expense 3,210 3,910 -18%
Income before income taxes 1,599 1,595 0%
Income tax expense 557 606 -8%
Net income $1,042 $989 5%
Earnings per share:
Basic $0.26 $0.24 8%
Diluted $0.25 $0.23 9%
Selected Operating Ratios:
Return on Average Equity 9.08% 8.44% 8%
Return on Average Assets 0.74% 0.71% 4%
Operating expenses to
average assets 2.27% 2.80% -19%
Net interest rate spread 2.89% 2.71% 7%
Net interest rate margin 3.19% 2.99% 7%
Twelve Months Ended December 31 1999 1998 Change
Selected Income Data: (unaudited)
Net Interest Income $16,336 $16,204 1%
Provision for loan losses 1,132 1,567 -28%
Net Interest Income after
provision for loan losses 15,204 14,637 4%
Non-interest income 4,037 5,579 -28%
Non-interest expense 13,259 14,245 -7%
Income before income taxes 5,982 5,971 0%
Income tax expense 2,047 2,100 -3%
Net income $3,935 $3,871 2%
Earnings per share:
Basic $0.96 $0.92 4%
Diluted $0.93 $0.87 7%
Selected Operating Ratios:
Return on Average Equity 8.49% 8.15% 4%
Return on Average Assets 0.72% 0.67% 7%
Operating expenses to
average assets 2.43% 2.48% -2%
Net interest rate spread 2.84% 2.54% 12%
Net interest rate margin 3.18% 2.93% 9%
