<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C 20549
----------------------
FORM 10-Q
(MARK ONE)
[X] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the Quarterly Period Ended March 31, 1996.
or
[ ] Transition Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the Transition Period From to .
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Commission File Number 0-20804
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KANKAKEE BANCORP, INC.
----------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 36-3846489
- ----------------------------------- -----------------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
310 SOUTH SCHUYLER AVENUE, KANKAKEE, ILLINOIS 60901
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(815) 937-4440
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Check whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
--- ---
As of May 10, 1996, there were 1,439,318 issued and outstanding shares of the
Issuer's Common Stock (exclusive of 310,682 shares of the Issuer's Common Stock
held as treasury stock).
<PAGE>
KANKAKEE BANCORP, INC.
INDEX
Page
Number
Part I. FINANCIAL INFORMATION
Item 1. Consolidated Financial
Statements (Unaudited)
Statements of Financial Condition,
March 31, 1996 and December 31, 1995 1
Statements of Income, Three Months
Ended March 31, 1996 and 1995 2
Statements of Cash Flows, Three Months
Ended March 31, 1996 and 1995 3 - 4
Notes to Financial Statements 5
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 6 - 12
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of
Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
<PAGE>
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED)
KANKAKEE BANCORP, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
------------ ------------
<S> <C> <C>
Assets
Cash and amounts due from banks $ 9,397,423 $ 8,849,933
Federal funds sold 13,310,000 13,090,000
Money market funds 3,756,596 3,754,576
------------ ------------
Cash and cash equivalents 26,464,019 25,694,509
Certificates of deposit 250,000 287,500
Securities available-for-sale - at market 55,149,006 47,710,703
Investment securities (fair value: March 31, 1996 and
December 31, 1995 - $74,545) 74,545 74,545
Mortgage-backed securities available-for-sale - at market 35,564,120 36,118,544
Mortgage-backed securities (fair value: March 31, 1996
- $346,476; December 31, 1995 - $378,182) 334,122 362,843
Nonmarketable equity securities 551,100 551,100
Loans 232,434,469 232,274,230
Less: Allowance for losses on loans 2,374,332 2,387,856
------------ ------------
Net loans 230,060,137 229,886,374
Loans held for sale 1,226,874 581,054
Real estate held for sale 163,292 834,136
Federal Home Loan Bank stock, at cost 1,956,000 1,546,500
Office properties and equipment 4,890,615 5,099,536
Accrued interest receivable 2,472,358 2,483,548
Prepaid expenses and other assets 1,458,923 1,269,868
Intangible assets 2,567,184 2,602,237
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Total assets $363,182,295 $355,102,997
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------------ ------------
Liabilities and stockholders' equity
Liabilities
Deposits $294,079,596 $286,079,750
Short term borrowings 19,610,000 20,370,000
Other borrowings 9,925,000 9,275,000
Advance payments by borrowers for taxes and insurance 2,748,793 1,630,066
Other liabilities 1,238,032 1,297,494
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Total liabilities 327,601,421 318,652,310
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Stockholders' equity
Preferred stock, $.01 par value; authorized, 500,000
shares; none outstanding - -
Common stock, $.01 par value; authorized, 3,500,000
shares; issued and outstanding: March 31, 1996 -
1,439,318; December 31, 1995 - 1,453,418 17,500 17,500
Additional paid-in capital 16,181,726 16,186,914
Retained income, substantially restricted 26,266,790 26,015,559
Unrealized gains (losses) on available-for-
sale securities, net of related income tax (653,226) 188,849
Employee Stock Ownership Plan loan (756,055) (756,055)
Bank Incentive Plan and Trusts (65,706) (75,434)
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40,991,029 41,577,333
Less treasury stock at cost 5,410,155 5,126,646
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Total stockholders' equity 35,580,874 36,450,687
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Total liabilities and stockholders' equity $363,182,295 $355,102,997
------------ ------------
------------ ------------
</TABLE>
See notes to consolidated financial statements (unaudited)
1
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
KANKAKEE BANCORP, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
Three Months Ended March 31,
--------------------------------
1996 1995
------------ ------------
<S> <C> <C>
Interest income
Loans $ 4,685,358 $ 4,101,231
Mortgage-backed securities 572,664 107,805
Investments 1,142,099 1,108,406
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Total interest income 6,400,121 5,317,442
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Interest expense:
Deposits 3,393,072 2,714,138
Borrowed funds 435,058 -
------------ ------------
Total interest expense 3,828,130 2,714,138
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Net interest income 2,571,991 2,603,304
Provision for losses on loans 9,447 60,570
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Net interest income after provision for losses on loans 2,562,544 2,542,734
Other income:
Net gain (loss) on sale of investment and
mortgage-backed securities (19,434) 21,593
Net gain (loss) on sales of real estate held for sale 17,718 (4,890)
Net gain on sales of loans 10,336 326
Fee income 171,722 156,234
Insurance commissions 20,097 10,206
Other 63,756 92,040
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Total other income 264,195 275,509
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Other expenses
Compensation and benefits 1,182,040 961,796
Occupancy 182,345 185,370
Furniture and equipment 63,938 68,950
Federal insurance premiums 156,393 146,380
Advertising 15,128 49,371
Data processing services 104,556 55,931
Telephone and postage 85,790 56,394
Other general and administrative 517,885 391,376
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Total other expenses 2,308,075 1.915,568
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Income before income taxes 518,664 902,675
Income tax expense 122,091 307,000
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Net income $ 396,573 $ 595,675
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------------ ------------
Earnings per share $ 0.26 $ 0.38
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</TABLE>
2
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CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
KANKAKEE BANCORP, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
Three Months Ended March 31,
--------------------------------
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 396,573 $ 595,675
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for losses on loans 9,447 60,570
Provision for losses on real estate held for sale - -
Depreciation and amortization 145,934 127,347
Amortization of investment premiums and discounts-net 99,679 (1,187)
Accretion of loan fees and discounts (13,906) (34,977)
Deferred income tax provision (benefit) (433,791) 139,735
Originations of loans held for sale (1,575,676) (63,678)
Proceeds from sales of loans 940,192 64,004
Decrease in interest receivable 11,190 302,733
Increase (decrease) in interest payable on deposits 10,446 34,708
Proceeds from sales of trading securities 17,922,500 -
Purchase of trading securities (18,135,469) -
Net gain on sales of loans (10,336) (326)
Net (gain) loss on sales of securities 19,434 (21,593)
Net (gain) loss on sales of real estate held for sale (17,718) 5,073
Other, net 354,423 (330,153)
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Net cash provided (used) by operating activities (277,078) 877,931
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Cash flows from investing activities
Investment securities:
Available-for-sale:
Purchases (16,973,668) (3,020,458)
Proceeds from sales 4,189,375 11,984,219
Proceeds from maturities 4,500,000 -
Held-to-maturity:
Purchases - (2,000,000)
Proceeds from maturities - 3,000,000
Mortgage-backed securities:
Available-for-sale:
Purchases (2,967,588)
Proceeds from maturities 3,185,991
Held-to-maturity:
Proceeds from maturities 28,721 282,584
Purchases of certificates of deposit (450,000) (187,500)
Proceeds from maturities of certificates of deposit 487,500 687,500
Proceeds from sales of real estate 787,324 21,018
Net loan fees deferred 38,280 2,466
Loans originated (13,902,937) (21,087,134)
Loans purchased (200,000) (3,136)
Principal collected on loans 13,819,562 13,424,250
Purchases of office properties and equipment-net (37,192) (20,916)
Payment of acquisition costs (22,868) -
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Net cash provided (used) by investing activities (7,517,500) 3,082,893
------------- ------------
</TABLE>
3
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CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) (continued)
KANKAKEE BANCORP, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
Three Months Ended March 31,
--------------------------------
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from financing activities
Net (decrease) increase in non-certificate
of deposit accounts 3,100,695 (9,223,491)
Net increase in certificates of deposit 4,888,705 9,886,423
Increase in advance payments by borrowers for
taxes and insurance 1,118,727 1,232,721
Proceeds from short-term borrowing 1,900,000 -
Repayments of short-term borrowed funds (2,660,000) -
Proceeds from other borrowings 650,000 -
Proceeds from exercise of stock options 6,912 -
Dividends paid (145,342) (152,292)
Purchase of treasury stock (295,609) -
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Net cash provided by financing activities 8,564,088 1,743,361
------------ ------------
Increase (decrease) in cash and cash equivalents 769,510 5,704,185
Cash and cash equivalents:
Beginning of period 25,694,509 14,047,105
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End of period $26,464,109 $19,751,290
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------------ ------------
Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest on deposits $ 3,382,600 $ 2,679,400
------------ ------------
------------ ------------
Interest on borrowed funds $ 262,800
------------
------------
Supplemental disclosures of non-cash investing activities:
Real estate acquired through foreclosure $ 98,958 $ 10,235
------------ ------------
------------ ------------
</TABLE>
See notes to consolidated financial statements (unaudited)
4
<PAGE>
KANKAKEE BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1996
Note 1 - Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with instructions to Form 10-Q. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. The statement of condition
at December 31, 1995 has been derived from the audited financial statements at
that date, but does not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements.
Operating results for the three-month period ended March 31, 1996 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1996. For further information, refer to the consolidated financial
statements and footnotes thereto included in the annual report for Kankakee
Bancorp, Inc. (the "Company") on Form 10-K for the year ended December 31, 1995.
Note 2 - Earnings Per Share
Earnings per share of common stock have been determined by dividing net
income for the period by the weighted average number of shares of common stock
and common stock equivalents outstanding. Common stock equivalents assume
exercise of stock options and the calculation assumes purchase of treasury stock
with the option proceeds at the average market price for the period (when
dilutive). The Company adopted an incentive stock option plan for the benefit of
directors, officers and employees and on December 30, 1992 awarded stock options
subject to stockholder approval. The stockholders approved the plan at their
annual meeting on April 23, 1993. Earnings per share have been determined
considering the stock options granted, net of stock options which have been
exercised.
Note 3 - Accounting for Certain Investments in Debt and Equity Securities
At March 31, 1996, in accordance with the requirements of Statement of
Financial Accounting Standards No. 115 ("SFAS 115"), "Accounting for Certain
Investments in Debt and Equity Securities", stockholders' equity has been
reduced by $653,226. This represents the amount by which the book value of the
available-for-sale securities and the available-for-sale mortgage-backed
securities exceeded the market value, net of an income tax benefit of $336,505.
An increase in market interest rates during the quarter ended March 31, 1996
resulted in a $842,075 decrease in the market value, net of income tax effect,
of the available-for-sale securities and the available-for-sale mortgage-backed
securities during the quarter. At the end of 1995, the market value of the
available-for-sale securities portfolio exceeded the book value by $188,849, net
of income tax benefit.
5
<PAGE>
KANKAKEE BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company was formed in late 1992 under the laws of the State of Delaware
for the purpose of becoming the savings and loan holding company of Kankakee
Federal Savings Bank (the "Bank"), the Company's principal subsidiary.
The Bank was originally chartered in 1885 as an Illinois savings and loan
association and was converted to a federally chartered thrift institution in
1937. The Bank serves the financial needs of families and local businesses in
its primary market areas through its main office at 310 South Schuyler Avenue,
Kankakee, Illinois and nine branch offices located in the communities of Ashkum,
Bourbonnais, Carlyle, Champaign, Dwight, Herscher, Hoopeston, Manteno and
Momence, Illinois. The Bank's business involves attracting deposits from the
general public and using such deposits to originate residential mortgage loans
and, to a lesser extent, commercial real estate, consumer, commercial business,
multi-family and construction loans in its primary market areas. The Bank also
invests in investment securities, mortgage-backed securities and various types
of short term liquid assets.
FINANCIAL CONDITION
Total assets of the Company increased by $8.1 million, or 2.3%, to $363.2
million at March 31, 1996 from $355.1 million at December 31, 1995.
Cash and cash equivalents increased by $770,000, or 3.0%, from $25.7
million at December 31, 1995 to $26.5 million at March 31, 1996. The increase
was primarily attributable to an increase in deposits and an increase in advance
payments by borrowers for taxes and insurance, which were partially offset by
increases in investment securities available-for-sale and loans held for sale.
During the three-month period ended March 31, 1996, net loans receivable
remained stable, increasing from $229.9 million to $230.1 million. This was
primarily the result of the origination (or purchase) of $6.8 million of real
estate loans and the origination (or purchase) of $7.3 million of consumer and
commercial business loans, offset by loan repayments which totaled $13.8
million.
Securities available-for-sale increased by $7.4 million to $55.1 million at
March 31, 1996 from $47.7 million at December 31, 1995 as the result of the
purchase of $17.0 million in such securities, partially offset by the sale of
$4.2 million and maturity of $4.5 million in such securities, and by the change
in market value adjustment.
Deposits increased by $8.0 million, or 2.8% to $294.1 million at March 31,
1996 from $286.1 million at December 31, 1995. The increase resulted from a $4.9
million increase in certificates of deposit and a $3.1 million increase in
passbook, NOW and money market accounts.
6
<PAGE>
During 1995, the Board of Directors authorized the borrowing of
approximately $30.0 million for the purpose of purchasing mortgage-backed
securities. The mortgage-backed securities purchased with borrowed money are
categorized as available-for-sale and subject to market value adjustments under
SFAS 115. At March 31, 1996, mortgage-backed securities available-for-sale
totaled $35.6 million and borrowed money totaled $29.5 million. The borrowed
money consisted of $9.9 million in advances from the Federal Home Loan Bank of
Chicago and $19.6 million in funds borrowed using mortgage-backed securities as
collateral.
ASSET/LIABILITY MANAGEMENT
Management attempts to control fluctuations in net interest income which
result from an imbalance in the amounts of assets and liabilities that reprice
during a period of time. The Company attempts to mitigate its interest rate
exposure, to the extent consistent with the maintenance of an adequate interest
rate spread, by retaining adjustable rate loans and selling, in the secondary
market (with servicing retained), the majority of 30-year fixed-rate mortgage
loans which it originates. In addition, the Company has continued to build its
portfolio of adjustable rate commercial real estate and multi-family loans. The
Company has also increased its origination of commercial business and
construction loans having adjustable or floating interest rates and/or
relatively short terms to maturity in an effort to control interest rate risk.
NON-PERFORMING ASSETS AND ALLOWANCE FOR LOSSES ON LOANS
The Company's non-performing assets decreased to $2.1 million at March 31,
1996 as compared to $2.3 million at December 31, 1995. Non-performing assets
represented 0.59% and 0.64% of total assets at March 31, 1996 and December 31,
1995, respectively. During the three-month period foreclosed assets and non-
performing one-to-four family loans decreased by $671,000 and $69,000,
respectively. These decreases were substantially offset by increases of
$474,000, $91,000 and $29,000 in non-performing construction and development
loans, consumer loans and commercial business loans, respectively. The ratio of
the allowance for losses on loans to non-performing loans was 119.7% as of March
31, 1996 as compared to 163.5% as of December 31, 1995. The decrease in this
ratio, which excludes foreclosed assets, is primarily the result of an increase
of $522,000 in non-performing loans.
The Company classified $2.4 million of its assets as Special Mention, $4.1
million as Substandard and $218,000 as Loss as of March 31, 1996. No assets
were classified as Doubtful at March 31, 1996. This represents a decrease of
$149,000 in the Special Mention category and a net decrease of $687,000 in the
other categories from the December 31, 1995 totals for classified assets. The
ratio of classified assets to total assets (including items classified as
Special Mention) was 1.87% as of March 31, 1996 as compared to 2.15% as of
December 31, 1995. The ratio of the allowance for losses on loans to classified
assets was 34.9% as of March 31, 1996 as compared to 31.3% as of December 31,
1995.
During 1993, the Company was advised by the lead lender with respect to a
loan secured by a property in Kent, Washington, that the borrower did not intend
to continue to make up the deficiency resulting from the failure of the property
to generate sufficient operating income to cover debt service requirements. On
August 2, 1993, the lead lender filed receivership
7
<PAGE>
proceedings on the basis of a nonjudicial foreclosure. The property became Real
Estate Owned by the lead lender in June 1994. During the quarter ended March
31, 1996, the Company sold its interest in the property to the lead lender at
its carrying value.
The allowance for losses on loans is established through a provision for
losses on loans based on management's evaluation of the risk inherent in the
loan portfolio and changes in the nature and volume of its loan activity. Such
evaluation, which includes a review of all loans with respect to which full
collectibility may not be reasonably assured, considers the fair value of the
underlying collateral, economic conditions, historical loan loss experience and
other factors that warrant recognition in providing for an adequate allowance
for losses on loans. The Bank also requires additional reserves for delinquent
and classified loans. These policies have had the effect of increasing the
Company's allowance for losses on loans in recent years.
While management believes that it uses the best information available to
determine the allowance for losses on loans, unforeseen market conditions could
result in adjustments to the allowance for losses on loans and net earnings
could be significantly affected if circumstances differ substantially from the
assumptions used in establishing the allowance for losses on loans.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
Net income for the three-month period ended March 31, 1996 was $397,000
compared to $596,000 for the same period in 1995. The difference in net income
of $199,000 represents a 33.4% decrease in net income for the 1996 period. The
decrease in net income resulted from a $31,000 decrease in net interest income,
a $393,000 increase in operating expenses and an $12,000 decrease in other
income, partially offset by a $52,000 decrease in the provision for losses on
loans and an $185,000 decrease in federal income tax expense.
Net interest income, which decreased $31,000, was approximately $2.6
million for both the three-month period ended March 31, 1996 and the three-month
period ended March 31, 1995. The decrease was attributable to a decrease in the
interest rate spread from 3.28% during the 1995 period to 2.68% during the 1996
period and to a decrease in average net earning assets of $96,000 to $24.0
million during the 1996 period from $24.1 million during the 1995 period.
The table ("Table I") presented on page 12, sets forth an analysis of the
Company's net interest income for the three-month periods ended March 31, 1996
and 1995.
As Table I indicates, interest income increased $1.1 million, or 20.4%, to
$6.4 million for the three-month period ended March 31, 1996 from $5.3 million
for the same period in 1995. The increase in interest income was the result of
an increase in the yield earned on interest-earning assets and an increase in
the average balance of interest-earning assets to 7.50% and $343.1 million,
respectively, during the 1996 period from 7.40% and $291.2 million,
respectively, during the 1995 period. The increase in yield was due to the
reinvestment of proceeds from maturing and prepaying assets at interest rates
higher than the rates earned on those maturing and prepaying assets, and, to a
lesser extent, from upward rate adjustments on adjustable rate mortgage loans.
8
<PAGE>
Interest expense increased $1.1 million, or 41.0%, to $3.8 million for the
three-month period ended March 31, 1996 from $2.7 million for the same period in
1995. The increase in interest expense was the result of an increase in the
average yield on interest-bearing liabilities and an increase in the average
outstanding balance of interest-bearing liabilities to 4.82% and $319.1 million,
respectively, during the 1996 period from 4.12% and $267.1 million,
respectively, during the 1995 period. The increase in the average yield on
interest-bearing liabilities was attributable to a change in the composition of
average interest-bearing liabilities during the 1996 period as compared to the
1995 period. Higher yielding interest-bearing liabilities, consisting of
certificates of deposit and borrowings, represented 66.9% of interest-bearing
liabilities during the 1996 period as compared to 56.6% during the 1995 period.
There were no outstanding borrowings during the 1995 period.
The provision for losses on loans totaled $9,000 for the three-month period
ended March 31, 1996 compared to $61,000 for the same period in 1995. The
decrease was primarily attributed to modest growth in loans receivable, relative
stability in the mix of loans in loans receivable and minimal net charges-offs
during the 1996 period.
Other income for the three-month period ended March 31, 1996 decreased
$12,000, or 4.1%, to $264,000 compared to $276,000 for the same period in 1995.
Other expenses for the three-month period ended March 31, 1996 increased
$393,000 from the same period in 1995. Compensation and benefits expense
increased $220,000, or 22.9%. The 1995 figure reflected a one-time expense
reduction of $275,000 which resulted from the decision to discontinue funding a
portion of the cost of post-retirement health benefits for retired employees.
Expense for data processing services for the three-month period ended March 31,
1996 increased $48,000, or 86.9%, due to costs associated with temporary data
center management required during the quarter and the amortization of software
licensing and prepaid maintenance associated with an upgrade of the computer
system. Telephone and postage expense increased $29,000, or 52.1%, during the
1996 period, primarily due to increased use of direct mail marketing of products
and services. Other general and administrative expenses increased during the
1996 period by $127,000, or 32.3%, primarily due to amortization of intangible
assets related to the Momence branch acquisition and an increase in fees paid
for outsourced services.
Federal income taxes decreased $185,000, or 60.2%, to $122,000 for the
three-month period ended March 31, 1996, compared to $307,000 for the same
period in 1995. The decrease in income taxes was primarily the result of the
decrease in pre-tax income.
LIQUIDITY AND CAPITAL RESOURCES
The Bank maintains a certain level of cash and other liquid assets to fund
normal volumes of loan commitments, deposit withdrawals and other obligations.
The Office of Thrift Supervision ("OTS") requires thrifts to maintain a minimum
liquidity ratio (cash and cash equivalent investments to net withdrawable
deposits and borrowings due within one year) of 5%. At March 31, 1996, the
Bank's liquidity ratio was 19.7%, which was in excess of the minimum regulatory
requirement.
9
<PAGE>
The Bank's primary sources of funds are deposits and proceeds from payments
of principal and interest on loans and the sale or maturity of investment
securities and mortgage-backed securities. Management considers current
liquidity and additional sources of funds adequate to meet outstanding liquidity
needs.
Federally insured savings banks, such as the Bank, are required to maintain
a minimum level of regulatory capital. The OTS has established the following
capital requirements: a risk-based capital ratio, a core capital ratio and a
tangible capital ratio. The capital regulations of the OTS exclude the effect
of SFAS 115 for the purpose of calculating regulatory capital.
The capital regulations currently require tangible capital of at least 1.5%
of adjusted total assets (as defined by regulation). Tangible capital generally
includes common stockholders' equity and retained income and certain non-
cumulative perpetual preferred stock and related income less intangible assets
(other than specified amounts of purchased mortgage servicing rights) and
certain non-includable investments in subsidiaries. The capital regulations also
currently require core capital equal to at least 3.0% of adjusted total assets
(as defined by regulation). Core capital generally consists of tangible capital
plus specified amounts of certain intangible assets. The OTS risk-based
requirement currently requires associations to have total capital of at least
8.0% of risk-weighted assets. Total capital consists of core capital plus
supplementary capital, which consists of, among other things, maturing capital
instruments, such as subordinated debt and mandatorily redeemable preferred
stock, and a portion of the Bank's general allowance for losses on loans. As of
March 31, 1996, the Bank exceeded all current minimum regulatory capital
standards.
At March 31, 1996, the Bank's tangible capital was $31.0 million, or 8.6%,
of adjusted total assets, which exceeded the 1.5% requirement by $25.6 million.
In addition, at March 31, 1996, the Bank had core capital of $31.0 million, or
8.6%, of adjusted total assets, which exceeded the 3.0% requirement by $20.2
million. The Bank had risk-based capital of $33.1 million at March 31, 1996, or
16.6%, of risk-adjusted assets, which exceeded the minimum risk-based capital
requirement by $17.1 million.
STOCK REPURCHASE
On January 30, 1996, the Company announced that its Board of Directors had
authorized the repurchase of up to 150,000 shares of its common stock. The
Company repurchased 14,800 shares of its common stock during the first quarter
of 1996 at a total cost of $296,000. Through March 31, 1996, a total of 329,957
shares of common stock of the Company had been purchased under the current and
previously completed repurchase programs at a total cost of $5.7 million. As of
March 31, 1996, the Company held 310,682 shares of its common stock as treasury
stock.
EXERCISE OF STOCK OPTIONS
During the first quarter of 1996, stock options for 700 shares of common
stock were exercised. Between March 31, 1996 and May 10, 1996, no notice was
received from holders of options of their intent to exercise options.
10
<PAGE>
DIVIDENDS
During January, 1995, the Company began a regular quarterly dividend
program and declared the first cash dividend since becoming a public company.
Cash dividends of $.10 per share have been paid during each quarter since the
Company announced the dividend program. In April, 1996, a cash dividend of $.10
per share was declared payable on May 31, 1996 to stockholders of record as of
May 15, 1996. Future dividends will depend primarily upon earnings, financial
condition and need for funds, as well as restrictions imposed by regulatory
authorities regarding dividend payments and capital requirements.
BRANCH SALE
On February 5, 1996, the Bank announced that it had entered into an
agreement to sell its branch in Carlyle, Illinois to Centralia Savings Bank,
Centralia, Illinois ("Centralia"). The branch had approximately $9 million in
deposits at March 31, 1996. In addition to assuming the deposit liabilities
attributable to the branch, Centralia has agreed to acquire certain assets
associated with the branch, including the real property. The purchase by
Centralia is subject to regulatory approval. All required applications have
been filed and the Company expects to complete the transaction during June or
July of this year.
11
<PAGE>
<TABLE>
<CAPTION>
TABLE I
NET INTEREST INCOME ANALYSIS (UNAUDITED)
KANKAKEE BANCORP, INC. AND SUBSIDIARY
Three Months Ended March 31,
------------------------------------------------------------------------
1996 1995
----------------------------------- -----------------------------------
Average Average
Outstanding Interest Yield/ Outstanding Interest Yield/
Balance Earned/Paid Rate Balance Earned/Paid Rate
----------------------------------- -----------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable (1) $230,531 $ 4,685 8.17% $216,317 $ 4,101 7.69%
Mortgage-backed securities 35,486 573 6.49% 6.219 108 7.04%
Investments securities (2) 51,416 808 6.32% 55,085 905 6.66%
Other interest-earning assets 24,065 301 5.03% 12,221 181 6.01%
FHLB stock 1,649 33 8.05% 1,401 22 6.37%
-------- ------- -------- -------
Total interest-earning assets 343,147 6,400 7.50% 291,243 5,317 7.40%
-------- ------- -------- -------
Other assets 15,698 13,660
-------- --------
Total assets $358,845 $304,903
-------- --------
-------- --------
Interest-bearing liabilities:
Time deposits $183,743 2,646 5.79% $151,218 1,922 5.15%
Savings deposits 54,085 358 2.66% 60,664 366 2.45%
Demand and NOW deposits 51,708 389 3.03% 55,217 426 3.13%
Borrowings 29,563 435 5.92% - -
-------- ------- -------- -------
Total interest-bearing liabilities 319,099 3,828 4.82% 267,099 2,714 4.12%
-------- ------- -------- -------
Other liabilities 3,534 1,918
-------- --------
Total liabilities 322,633 269,017
-------- --------
Stockholders' equity 36,212 35,886
-------- --------
Total liabilities and
stockholders' equity $358,845 $304,903
-------- --------
-------- --------
Net interest income $ 2,572 $ 2,603
------- -------
------- -------
Net interest rate spread 2.68% 3.28%
----- -----
----- -----
Net earning assets $ 24,048 $ 24,144
-------- --------
-------- --------
Net yield on average interest-
earning assets (net interest
margin) 3.01% 3.62%
----- -----
----- -----
Average interest-earning assets to
average interest-bearing liabilities 107.54% 109.04%
------- -------
------- -------
</TABLE>
(1) Calculated including loans held for sale, and net of deferred loan fees,
loan discounts, loans in process and loan loss reserves.
(2) Calculated including investment securities available-for-sale.
12
<PAGE>
KANKAKEE BANCORP, INC.
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS - None
Item 2. CHANGES IN SECURITIES - None
Item 3. DEFAULTS UPON SENIOR SECURITIES - None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - None
Item 5. OTHER INFORMATION - None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits - Exhibit 27 - Financial Data Schedule
Reports on Form 8-K - None
13
<PAGE>
KANKAKEE BANCORP, INC.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the Registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
KANKAKEE BANCORP, INC.
Registrant
Date: May 10, 1996 /s/ JAMES G. SCHNEIDER
------------------ ------------------------------------
Chairman, President and Chief Executive
Officer (Principal Executive
and Operating Officer)
Date: May 10, 1996 /s/ RONALD J. WALTERS
------------------ ------------------------------------
Vice President and Treasurer
(Principal Financial
and Accounting Officer)
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 9,397
<INT-BEARING-DEPOSITS> 4,007
<FED-FUNDS-SOLD> 13,310
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 90,713
<INVESTMENTS-CARRYING> 409
<INVESTMENTS-MARKET> 0
<LOANS> 232,434
<ALLOWANCE> 2,374
<TOTAL-ASSETS> 363,182
<DEPOSITS> 294,080
<SHORT-TERM> 19,610
<LIABILITIES-OTHER> 3,986
<LONG-TERM> 9,925
0
0
<COMMON> 16,199
<OTHER-SE> 19,382
<TOTAL-LIABILITIES-AND-EQUITY> 363,182
<INTEREST-LOAN> 4,685
<INTEREST-INVEST> 1,142
<INTEREST-OTHER> 573
<INTEREST-TOTAL> 6,400
<INTEREST-DEPOSIT> 3,393
<INTEREST-EXPENSE> 3,828
<INTEREST-INCOME-NET> 2,572
<LOAN-LOSSES> 9
<SECURITIES-GAINS> (19)
<EXPENSE-OTHER> 2,308
<INCOME-PRETAX> 519
<INCOME-PRE-EXTRAORDINARY> 122
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 397
<EPS-PRIMARY> .26
<EPS-DILUTED> .26
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
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