<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 June 30, 1998.
or
[ ] Transition Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the Transition Period From __________ to __________.
Commission File Number 1-13676
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KANKAKEE BANCORP, INC.
----------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 36-3846489
- --------------------------------- -----------------------
(State or Other Jurisdiction (I.R.S. Employer
of 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 August 7, 1998, there were 1,379,988 issued and outstanding shares of the
Issuer's Common Stock (exclusive of 370,012 shares of the Issuer's Common Stock
held as treasury stock).
<PAGE>
KANKAKEE BANCORP, INC.
INDEX
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<TABLE>
<CAPTION>
Page
Number
<S> <C> <C>
Part I. FINANCIAL INFORMATION
Item 1. Consolidated Financial
Statements (Unaudited)
Statements of Financial Condition,
June 30, 1998 and December 31, 1997 1 - 2
Statements of Income and Comprehensive Income,
Three Months Ended June 30, 1998 and 1997 3
Statements of Income and Comprehensive Income,
Six Months Ended June 30, 1998 and 1997 4
Statements of Cash Flows, Six Months
Ended June 30, 1998 and 1997 5 - 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 8 - 19
Item 3. Quantitative and Qualitative Disclosure
About Market Risk 10
Part II. OTHER INFORMATION 20
Item 1. Legal Proceedings 20
Item 2. Changes in Securities 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 20
SIGNATURES 21
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED)
KANKAKEE BANCORP, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------- ------------
<S> <C> <C>
Assets
Cash and due from banks $ 18,623,756 $ 9,184,362
Federal funds sold 21,625,000 8,575,000
Money market funds 5,849,728 5,066,530
------------ ------------
Cash and cash equivalents 46,098,484 22,825,892
------------ ------------
Certificates of deposit 50,000 1,602,000
------------ ------------
Securities:
Investment securities:
Available-for-sale, at fair value 58,559,053 36,823,019
Held-to-maturity, at cost (fair value: June 30, 1998 -
$1,264,026; December 31, 1997 - $69,752) 1,271,714 69,752
------------ ------------
Total investment securities 59,830,767 36,892,771
------------ ------------
Mortgage-backed securities:
Available-for-sale, at fair value 25,002,664 28,299,596
Held-to-maturity, at cost (fair value: June 30, 1998 -
$189,784; December 31, 1997 - $207,815) 185,985 203,662
------------ ------------
Total mortgage-backed securities 25,188,649 28,503,258
------------ ------------
Non-marketable equity securities 501,100 501,100
------------ ------------
Loans 248,473,539 240,925,455
Less: Allowance for losses on loans 2,425,268 2,130,146
------------ ------------
Net loans 246,048,271 238,795,309
------------ ------------
Loans held for sale 1,748,150 254,406
Real estate held for sale 1,377,241 1,326,302
Federal Home Loan Bank stock, at cost 1,856,000 1,856,000
Office properties and equipment 8,163,137 5,340,406
Accrued interest receivable 2,821,058 2,465,594
Prepaid expenses and other assets 2,537,861 884,458
Intangible assets 5,713,237 2,161,740
------------ ------------
Total assets $401,933,955 $343,409,236
------------ ------------
------------ ------------
(Continued)
</TABLE>
1
<PAGE>
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED) (continued)
KANKAKEE BANCORP, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------- ------------
<S> <C> <C>
Liabilities and stockholders' equity
Liabilities:
Deposits
Noninterest bearing $ 14,738,222 $ 9,720,181
Interest bearing 322,859,461 270,301,558
Short term borrowings - 8,220,000
Other borrowings 22,900,000 15,275,000
Advance payments by borrowers for taxes and insurance 1,600,947 1,428,880
Other liabilities 603,024 642,250
------------ ------------
Total liabilities 362,701,654 305,587,869
------------ ------------
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: June 30, 1998 -
1,379,988; December 31, 1997 - 1,371,638 17,500 17,500
Additional paid-in capital 16,076,670 16,090,239
Retained income, substantially restricted 30,618,921 29,554,920
Less: Cost of treasury stock (370,012 shares at June 30,
1998; 378,362 shares at December 31, 1997) (7,294,920) (7,459,540)
Unrealized gains on securities available-for-sale, net of
related income taxes 192,157 71,881
------------ ------------
Total stockholders' equity before
Employee Stock Ownership Plan loan 39,610,328 38,275,000
Employee Stock Ownership Plan loan (378,027) (453,633)
------------ ------------
Total stockholders' equity 39,232,301 37,821,367
------------ ------------
Total liabilities and stockholders' equity $401,933,955 $343,409,236
------------ ------------
------------ ------------
</TABLE>
See notes to consolidated financial statements (unaudited)
2
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)
KANKAKEE BANCORP, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
Three Months Ended June 30,
---------------------------
1998 1997
---- ----
<S> <C> <C>
Interest income:
Loans $ 5,186,500 $ 4,680,716
Mortgage-backed securities 433,718 568,970
Investment securities 1,413,811 997,118
------------ ------------
Total interest income 7,034,029 6,246,804
------------ ------------
Interest expense:
Deposits 3,737,526 3,189,921
Borrowed funds 313,065 350,726
------------ ------------
Total interest expense 4,050,591 3,540,647
------------ ------------
Net interest income 2,983,438 2,706,157
Provision for losses on loans - 3,550
------------ ------------
Net interest income after provision for losses on loans 2,983,438 2,702,607
Other income:
Net loss on sale of securities available-for-sale - -
Net gain (loss) on sales of real estate held for sale 16,482 (13,458)
Net gain (loss) on sales of loans held for sale 60,045 5,966
Fee income 449,911 247,225
Insurance commissions 10,018 25,627
Other 106,430 104,983
------------ ------------
Total other income 642,886 370,343
------------ ------------
Other expenses:
Compensation and benefits 1,415,539 1,075,279
Occupancy 260,993 178,046
Furniture and equipment 138,379 124,753
Federal insurance premiums 42,878 54,162
Advertising 136,806 80,918
Provision for losses on foreclosed assets 6,754 -
Data processing services 95,607 70,818
Telephone and postage 84,220 66,218
Amortization of intangible assets 102,320 57,920
Other general and administrative 437,494 325,856
------------ ------------
Total other expenses 2,720,990 2,033,970
------------ ------------
Income before income taxes 905,334 1,038,980
Income taxes 303,052 280,310
------------ ------------
Net income $ 602,282 $ 758,670
------------ ------------
------------ ------------
Net income $ 602,282 $ 758,670
Other comprehensive income:
Unrealized gains (losses) on available-for-sale
securities, net of related income taxes 149,872 616,109
------------ ------------
Comprehensive income $ 752,154 $ 1,374,779
------------ ------------
------------ ------------
Basic earnings per share $0.44 $0.54
------------ ------------
------------ ------------
Diluted earnings per share $0.41 $0.50
------------ ------------
------------ ------------
</TABLE>
See notes to consolidated financial statements (unaudited)
3
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)
KANKAKEE BANCORP, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
Six Months Ended June 30,
------------------------
1998 1997
---- ----
<S> <C> <C>
Interest income:
Loans $10,286,353 $ 9,360,049
Mortgage-backed securities 901,930 1,150,250
Investment securities 2,582,683 2,023,972
----------- -----------
Total interest income 13,770,966 12,534,271
----------- -----------
Interest expense:
Deposits 7,235,505 6,297,168
Borrowed funds 668,309 810,499
----------- -----------
Total interest expense 7,903,814 7,107,667
----------- -----------
Net interest income 5,867,152 5,426,604
Provision for losses on loans - -
----------- -----------
Net interest income after provision for losses on loans 5,867,152 5,426,604
Other income:
Net loss on sale of securities available-for-sale
Net gain (loss on sales of real estate held for sale 16,685 (10,592)
Net gain (loss) on sales of loans held for sale 94,664 11,897
Fee income 866,972 496,186
Insurance commissions 43,745 50,580
Other 220,288 198,035
----------- -----------
Total other income 1,242,354 746,106
----------- -----------
Other expenses:
Compensation and benefits 2,667,507 2,203,372
Occupancy 451,502 355,292
Furniture and equipment 262,022 239,132
Federal insurance premiums 85,114 86,672
Advertising 176,504 113,958
Provision for losses on foreclosed assets 9,292 -
Data processing services 182,611 146,928
Telephone and postage 166,062 126,208
Amortization of intangible assets 196,841 115,841
Other general and administrative 812,913 660,597
----------- -----------
Total other expenses 5,010,368 4,048,000
----------- -----------
Income before income taxes 2,099,138 2,124,710
Income taxes 704,180 596,020
----------- -----------
Net income $1,394,958 $1,528,690
----------- -----------
----------- -----------
Net income $1,394,958 $1,528,690
Other comprehensive income:
Unrealized gains (losses) on available-for-sale
securities, net of related income taxes 120,276 13,241
----------- -----------
Comprehensive income $ 1,515,234 $ 1,541,931
----------- -----------
----------- -----------
Basic earnings per share $1.01 $1.07
----------- -----------
----------- -----------
Diluted earnings per share $0.95 $1.01
----------- -----------
----------- -----------
</TABLE>
See notes to consolidated financial statements (unaudited)
4
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
KANKAKEE BANCORP, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,394,958 $ 1,528,690
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 477,642 375,607
Amortization of investment premiums and discounts, net 127,681 57,924
Accretion of loan fees, costs and discounts, net (42,134) (32,896)
Deferred income tax provision (benefit) - (28,003)
Originations of loans held for sale (25,508,600) (1,790,002)
Proceeds from sales of loans 24,109,520 1,805,708
(Increase) decrease in interest receivable (47,990) 104,331
Increase (decrease) in interest payable on deposits 93,297 (5,243)
Net (gain) loss on sales of loans (94,664) (11,897)
Net gain (loss) on sales of real estate held for sale (16,685) 10,592
Other, net (1,966,479) (54,530)
------------ ------------
Net cash from operating activities (1,473,454) 1,960,281
------------ ------------
Cash flows from investing activities
Investment securities
Available-for sale:
Purchases (20,573,069) (2,183,161)
Proceeds from calls and maturities 14,000,000 5,189,000
Held-to-maturity:
Purchases (1,025,000) -
Proceeds from maturities 2,629 2,471
Mortgage-backed securities:
Available-for-sale:
Purchases (1,997,500) -
Proceeds from maturities and paydowns 5,545,350 2,124,892
Held-to-maturity:
Proceeds from maturities and paydowns 17,678 25,508
Purchases of certificates of deposit (765,692) (505,500)
Proceeds from maturities of certificates of deposit 2,317,692 305,500
Proceeds from sales of real estate 86,953 101,777
Net loan fees and costs deferred 3,289 (96,953)
Loans originated (43,670,647) (39,514,897)
Loans purchased (300,000) (1,295,000)
Principal collected on loans 54,192,137 41,156,459
Purchases of office properties and equipment, net (1,721,688) (464,375)
Payment of acquisition costs (8,080,745) -
------------ ------------
Net cash from investing activities (1,968,613) 4,845,721
------------ ------------
</TABLE>
See notes to consolidated financial statements (unaudited).
5
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (continued)
KANKAKEE BANCORP, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1998 1997
---- ----
<S> <C> <C>
Cash flows from financing activities
Net increase (decrease) in non-certificate
of deposit accounts 1,729,505 (384,602)
Net increase in certificate of deposit accounts 3,888,868 981,613
Net increase (decrease) in advance payments by
borrowers for taxes and insurance 126,184 (6,959)
Proceeds from short-term borrowings - 42,780,000
Repayments of short-term borrowings (8,220,000) (56,900,000)
Proceeds from other borrowings 8,000,000 16,200,000
Repayments of other borrowings (375,000) (12,700,000)
Proceeds from exercise of stock options 151,051 101,219
Dividends paid (330,957) (340,840)
------------ ------------
Net cash from financing activities 4,969,651 (10,269,569)
------------ ------------
Increase (decrease) in cash and cash equivalents 1,527,584 (3,463,567)
Cash and cash equivalents:
Beginning of period 22,825,892 17,160,113
Cash acquired with Coal City National Bank 21,745,008 -
------------ ------------
End of period $ 46,098,484 $ 13,696,546
------------ ------------
------------ ------------
Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest on deposits $ 7,328,800 $ 6,291,900
------------ ------------
------------ ------------
Interest on borrowed funds $ 689,300 $ 880,200
------------ ------------
------------ ------------
Income taxes $ 687,335 $ 799,588
------------ ------------
------------ ------------
Supplemental disclosures of non-cash investing activities:
Real estate acquired through foreclosure $ 124,520 $ 1,328,781
------------ ------------
------------ ------------
Change in unrealized gains (losses) on securities available-for-sale $ 182,236 $ 20,062
------------ ------------
------------ ------------
Change in deferred taxes attributable to the unrealized gains
(Losses) on securities available-for-sale $ (61,960) $ (6,821)
------------ ------------
------------ ------------
Purchase of Coal City National Bank
Cash paid $ (8,080,745)
------------
------------
Assets acquired:
Cash $ 21,745,008
Investments 15,538,921
Loans 17,560,127
Accrued interest receivable 307,474
Premises and equipment 696,288
Other assets 122,646
Liabilities assumed:
Non-certificates of deposit (28,996,351)
Certificates of deposit (22,691,676)
Accrued interest payable (176,247)
Other liabilities (459,339)
Equity (3,646,851)
------------
$ (8,080,745)
------------
------------
</TABLE>
See notes to consolidated financial statements (unaudited).
6
<PAGE>
KANKAKEE BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1998
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, 1997 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 and six-month periods ended June 30, 1998 are not
necessarily indicative of the results that may be expected for the year
ending December 31, 1998. 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, 1997.
Note 2 - Earnings Per Share
Basic earnings per share of common stock have been determined by
dividing net income for the period by the average number of shares of common
stock outstanding. Diluted earnings per share of common stock have been
determined by dividing net income for the period by the 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 has an incentive stock
option plan for the benefit of directors, officers and employees. Diluted
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 June 30, 1998, 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
increased by $192,157. This represents the amount by which the market value
of the available-for-sale securities and the available-for-sale
mortgage-backed securities exceeded the book value, net of an income tax
provision of $99,936. A decrease in market interest rates during the six
months ended June 30, 1998 resulted in a $120,276 increase 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 six months. At the
end of 1997, the market value of the available-for-sale securities portfolio
exceeded the book value by $71,881, net of income tax benefit.
7
<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 Company 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 thirteen branch offices located in the
communities of Ashkum, Bourbonnais, Braidwood, Champaign, Coal City (2),
Diamond, Dwight, Herscher, Hoopeston, Manteno, Momence and Urbana, Illinois.
The Company'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 market areas. The Company also
invests in investment securities, mortgage-backed securities and various
types of short term liquid assets.
BANK ACQUISITION AND OTHER DEVELOPMENTS
On January 29, 1998, the Company completed the acquisition of Coal City
National Bank ("CCNB") from Coal City Corporation, a multi-bank holding
company headquartered in Chicago, Illinois. CCNB was based in Coal City,
Illinois, which is 30 miles northwest of Kankakee, and also had offices in
nearby Braidwood and Diamond, Illinois. All three offices of CCNB became
offices of the Bank upon completion of the merger, and their operating
results have been included with those of the Bank since January 29, 1998.
At the time of purchase, CCNB had total assets of approximately $56.0
million, deposits of approximately $51.7 million and stockholders' equity of
approximately $3.7 million. The cash purchase price, including acquisition
costs, was $8.2 million, and the transaction was accounted for as a purchase.
Intangible assets of about $3.8 million have been recorded as a result of
this purchase.
In addition to the purchase of CCNB, two new branch offices of the Bank
were opened during the first six months of 1998. A branch in a grocery store
in Coal City, Illinois and a stand alone branch in Urbana, Illinois opened
for business in June. The Company is also in the process of completing
construction of a new building to replace its Herscher, Illinois branch. The
new building will be occupied and open for business during the first half of
August 1998.
The Company has notified the Office of Thrift Supervision (the "OTS") of
its intention to open an in-store branch office in Bradley, Illinois.
Management anticipates the Bradley office will open no later than early
fourth quarter of 1998.
During the second quarter of 1998, the Company completed the data
processing conversion of the deposit and loan accounts acquired with the
acquisition of CCNB. Additionally, the Company's item processing was
converted to an in-house operation during the second quarter.
8
<PAGE>
FINANCIAL CONDITION
Total assets of the Company increased by $58.5 million, or 17.0%, to
$401.9 million at June 30, 1998 from $343.4 million at December 31, 1997.
The primary reason for the increase in total assets was the acquisition of
CCNB.
Cash and cash equivalents increased by $23.3 million, or 102.0%, from
$22.8 million at December 31, 1997 to $46.1 million at June 30, 1998. The
increase was primarily attributable to cash and cash equivalents acquired
with the purchase of CCNB.
During the six-month period ended June 30, 1998, net loans receivable
increased by $7.3 million, or 3.0%, from $238.8 million to $246.1 million.
This was primarily the result of the acquisition of $17.6 million in loans
with CCNB, the origination (or purchase) of $21.8 million of real estate
loans and the origination (or purchase) of $22.2 million of consumer and
commercial business loans, offset by loan repayments which totaled $54.2
million.
Loans held for sale increased by $1.5 million, or 587.1%, during the
six-month period ended June 30, 1998, to $1.7 million from $254,000 at
December 31, 1997. The increase was the result of the origination of $24.3
million of such loans, which was partially offset by the sale of $22.8
million of such loans. The increase in origination and sale of loans held for
sale is the result of relatively low market interest rates on mortgage loans,
which have created a new round of refinancings.
As a result of recent legislation which changed the pricing on education
loans purchased by Sallie Mae, Inc., the Company elected to sell its
education loan portfolio. During the quarter ended June 30, 1998, education
loans totaling $867,000 were sold, resulting in a gain of $22,000. The
Company continues to offer student loans.
Securities available-for-sale increased by $21.8 million, or 59.0%, to
$58.6 million at June 30, 1998 from $36.8 million at December 31, 1997 as the
result of the acquisition of $15.1 million of such securities with the
purchase of CCNB, and the purchase of $20.6 million in such securities, which
was partially offset by the maturity of $14.0 million of such securities and
by the net change in market value adjustment.
Mortgage-backed securities available-for-sale decreased by $3.3 million,
or 11.7%, to $25.0 million at June 30, 1998 from $28.3 million at December
31, 1997. The decrease resulted from maturities of $5.5 million of such
securities, which was partially offset by the acquisition of $286,000 of such
securities with the purchase of CCNB, the purchase of $2.0 million of such
securities and the change in market value adjustment.
During the six-month period ended June 30, 1998, intangible assets
increased by $3.6 million, or 164.3%, to $5.7 million from $2.2 million at
December 31, 1997. This increase was a result of the $3.8 million of
intangible assets created by the purchase of CCNB on January 29, 1998, which
was partially offset by amortization of $197,000.
Deposits increased by $57.6 million, or 20.6%, to $337.6 million at June
30, 1998 from $280.0 million at December 31, 1997. The increase resulted from
the acquisition of $51.9 million in deposits with the purchase of CCNB, a
$1.8 million increase in passbook, NOW and money market accounts and a $3.9
million increase in certificate of deposit accounts.
9
<PAGE>
Total borrowings, which decreased by $595,000, or 2.5%, to $22.9 million
at June 30, 1998 from $23.5 million at December 31, 1997, consisted entirely
of advances from the Federal Home Loan Bank of Chicago (the "FHLB").
Real estate held for sale increased by $51,000, or 3.8%, to $1.4 million
at June 30, 1998, from $1.3 million at December 31, 1997. The increase was
the result of the transfer of two single family properties from loans to real
estate held for sale during the six-month period, one of which was disposed
of during the period. Included in real estate held for sale is a commercial
retail building in Champaign, Illinois, which was deeded to the Company in
1997. The borrower has remained liable on the underlying obligation, which
is also secured by additional collateral. The property is fully rented to a
retail operation and a local community college on multi-year leases.
Additionally, negotiations are pending for the sale of the property.
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 typically retained), the
majority of 30-year fixed-rate mortgage loans, and the majority of 15-year
fixed-rate mortgage loans bearing a contractual interest rate of less than
6.75%, which it originates. In addition, the Company has continued, as market
circumstances permit, to build its portfolio of adjustable rate commercial
real estate loans. The Company has also increased, as market circumstances
permit, its origination of installment and home equity consumer loans having
adjustable or floating interest rates and/or relatively short terms to
maturity in an effort to control interest rate risk.
The Company currently does not enter into derivative financial
instruments including futures, forwards, interest rate risk swaps, option
contracts, or other financial instruments with similar characteristics.
However, the Company is party to financial instruments with off-balance sheet
risk in the normal course of business to meet the financing needs of its
customers such as commitments to extend credit and letters of credit.
NON-PERFORMING ASSETS AND ALLOWANCE FOR LOSSES ON LOANS
The Company's non-performing assets decreased to 1.12% of total assets
at June 30, 1998 from 1.27% of total assets at December 31, 1997.
Non-performing assets increased to $4.5 million at June 30, 1998 compared to
$4.3 million at December 31, 1997. During the six-month period ended June
30, 1998, non-performing one-to-four family loans, non-performing commercial
real estate loans and non-performing commercial business loans increased by
$150,000, $15,000 and $170,000, respectively. In addition, foreclosed assets
increased by $51,000. These increases were partially offset by decreases of
$18,000, $29,000 and $186,000 in non-performing construction and development
loans, non-performing consumer loans and restructured debt, respectively.
The ratio of the allowance for losses on loans to non-performing loans
increased to 78.1% as of June 30, 1998 as compared to 75.6% as of December
31, 1997. The increase in this ratio, which excludes foreclosed assets and
restructured troubled debt, was primarily the result of an increase of
$296,000 in the allowance for losses on loans and a decrease of $106,000 in
non-performing loans. The acquisition of CCNB contributed to the increase in
the reserve for losses on loans and had the effect
10
<PAGE>
of increasing total assets, but had no impact on total non-performing assets.
The Company classified $1.6 million of its assets as Special Mention,
$4.8 million as Substandard and $34,000 as Loss as of June 30, 1998. No
assets were classified as Doubtful at June 30, 1998. This represents a
decrease of $152,000 in the Special Mention category and a net increase of
$24,000 in the other categories from the December 31, 1997 totals for
classified assets. The ratio of classified assets to total assets (including
items classified as Special Mention) was 1.58% as of June 30, 1998 as
compared to 1.89% as of December 31, 1997. The ratio of the allowance for
losses on loans to classified assets increased to 38.2% as of June 30, 1998
as compared to 32.9% as of December 31, 1997.
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 Company also requires additional
reserves for delinquent and classified loans.
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 JUNE 30, 1998 AND 1997
Net income for the three-month period ended June 30, 1998 was $602,000
compared to $759,000 for the same period in 1997. This represents a $157,000
decrease in net income for the 1998 period. The decrease in net income
resulted from a $687,000 increase in general and administrative expenses due
primarily to expenses relating to the expansion of the organization, which
was partially offset by increases of $277,000 in net interest income and
$273,000 in other income.
Net interest income increased $277,000, or 10.2%, during the three-month
period ended June 30, 1998, compared to the three-month period ended June 30,
1997.
The table presented on page 18 ("Table I"), sets forth an analysis of
the Company's net interest income for the three-month periods ended June 30,
1998 and 1997.
As Table I indicates, interest income increased $787,000, or 12.6%, to
$7.0 million for the three-month period ended June 30, 1998 from $6.2 million
for the same period in 1997. The increase in interest income was the result
of an increase in the average balance of interest-earning assets to $373.0
million during the 1998 period, primarily resulting from the acquisition of
CCNB, from $328.8 million during the 1997 period. This was partially offset
by a decrease in the yield earned on interest-earning assets to 7.56% during
the 1998 period from 7.62% during the 1997 period. The increase in the
average balance of interest-earning assets was primarily due to increases in
balances of loans and other interest-earning assets during the period.
11
<PAGE>
Interest expense increased $510,000, or 14.4%, to $4.1 million for the
three-month period ended June 30, 1998 from $3.5 million for the same period
in 1997. The increase in interest expense was the result of an increase in
the average outstanding balance of interest-bearing liabilities to $359.8
million during the 1998 period from $303.0 million during the 1997 period.
This increase was partially offset by a decrease in the average yield on
interest-bearing liabilities to 4.52% during the 1998 period from 4.69%
during the 1997 period. The increase in average interest-bearing liabilities
resulted primarily from the CCNB acquisition. The decrease in the average
yield on interest-bearing liabilities resulted from the lower average cost
associated with the CCNB deposits and from a lower cost of borrowings during
the quarter.
No provision for losses on loans was deemed necessary during the second
quarter of 1998 based on management's review of the adequacy of the allowance
for losses on loans subsequent to the acquisition of $398,000 in allowance
for losses on loans as part of the purchase of CCNB in January, 1998. The
provision for losses on loans for the second quarter of 1997 was $4,000.
Other income for the three-month period ended June 30, 1998 increased
$273,000, or 73.6%, to $643,000 compared to $370,000 for the same period in
1997. The increase was attributable to increases of $203,000 in fee income,
$29,000 in gain on sale of real estate, and $54,000 in gain on sale of loans
held for sale, which were partially offset by a decrease of $16,000 in
insurance commissions. The increase in fee income was the result of the
acquisition of CCNB and of an ongoing review of the Company's fee structure.
The increase in gain on the sale of loans held for sale was the result of a
higher volume of sales compared to the year earlier period.
Other expenses for the three-month period ended June 30, 1998 increased
$687,000 or 33.8%, to $2.7 million from $2.0 million during the 1997 period.
The increase was primarily attributable to expenses associated with the
ongoing operation of fourteen (14) offices compared to nine (9) during the
same period in 1997, to non-capital costs associated with the data processing
conversion of the records of CCNB, the return of item processing to an
in-house environment, and the construction of new or replacement office
facilities in Urbana, Herscher and a grocery store location in Coal City, all
in Illinois. There were increases of $340,000 (31.6%) in compensation and
benefits, $44,000 (76.7%) in amortization of intangible assets, $112,000
(34.3%) in other expenses, $83,000 (46.6%) occupancy costs and $56,000
(69.1%) in advertising.
Federal income taxes increased $23,000 to $303,000 for the three-month
period ended June 30, 1998, compared to $280,000 for the same period in 1997.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
Net income for the six-month period ended June 30, 1998 was $1.4 million
compared to $1.5 million for the same period in 1997. This represents a
$134,000 decrease in net income for the 1998 period. The decrease in net
income resulted from increases of $962,000 in general and administrative
expenses due primarily to expenses relating to the expansion of the
organization and $108,000 in federal income tax expense. These items were
partially offset by increases of $441,000 in net interest income and $496,000
in other income.
Net interest income increased $441,000, or 8.1%, during the six-month
period ended June 30, 1998, compared to the six-month period ended June 30,
1997.
12
<PAGE>
The table presented on page 19 ("Table II"), sets forth an analysis of
the Company's net interest income for the six-month periods ended June 30,
1998 and 1997.
As Table II indicates, interest income increased $1.2 million, or 9.9%,
to $13.8 million for the six-month period ended June 30, 1998 from $12.6
million for the same period in 1997. The increase in interest income was the
result of an increase in the average balance of interest-earning assets to
$367.7 million during the 1998 period, primarily resulting from the
acquisition of CCNB, from $331.7 million during the 1997 period. This was
partially offset by a decrease in the yield earned on interest-earning assets
to 7.55% during the 1998 period from 7.62% during the 1997 period. The
increase in the average balance of interest-earning assets was primarily due
to increases in balances of loans and other interest-earning assets during
the period.
Interest expense increased $796,000, or 11.2%, to $7.9 million for the
six-month period ended June 30, 1998 from $7.1 million for the same period in
1997. The increase in interest expense was the result of an increase in the
average outstanding balance of interest-bearing liabilities to $351.6 million
during the 1998 period from $305.9 million during the 1997 period. This
increase was partially offset by a decrease in the average yield on
interest-bearing liabilities to 4.53% during the 1998 period from 4.69%
during the 1997 period. The increase in average interest-bearing liabilities
resulted primarily from the CCNB acquisition. The decrease in the average
yield on interest-bearing liabilities resulted from the lower average cost
associated with the CCNB deposits and from a lower cost of borrowings during
the six-month period.
No provision for losses on loans was deemed necessary during the first
six months of 1998 based on management's review of the adequacy of the
allowance for losses on loans subsequent to the acquisition of $398,000 in
allowance for losses on loans as part of the purchase of CCNB in January,
1998. There was no provision for losses on loans for the first six months of
1997.
Other income for the six-month period ended June 30, 1998 increased
$496,000, or 66.5%, to $1.2 million compared to $746,000 for the same period
in 1997. The increase was attributable to increases of $371,000 in fee
income, $83,000 in gain on sale of loans held for sale, $22,000 in other
income and $27,000 in gain on sale of real estate, which were partially
offset by a decrease of $7,000 in insurance commissions. The increase in fee
income was the result of the acquisition of CCNB and of an ongoing review of
the Company's fee structure. The increase in gain on the sale of loans held
for sale was the result of a higher volume of sales compared to the year
earlier period.
Other expenses for the six-month period ended June 30, 1998 increased
$962,000, or 23.8%, to $5.0 million from $4.0 million during the 1997 period.
The increase for the six-month period was primarily attributable to the items
discussed in "RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 1998 AND
1997" and to the first quarter, 1998 expenses associated with the ongoing
operation of the former CCNB offices. There were increases of $464,000
(21.2%) in compensation and benefits, $81,000 (69.9%) in amortization of
intangible assets, $152,000 (23.1%) in other expenses, $96,000 (27.1%) in
occupancy costs and $62,000 (54.9%) in advertising.
Federal income taxes increased $108,000 to $704,000 for the six-month
period ended June 30, 1998, compared to $596,000 for the same period in 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company maintains a certain level of cash and other liquid assets to
fund normal volumes
13
<PAGE>
of loan commitments, deposit withdrawals and other obligations. The Office of
Thrift Supervision (the "OTS") regulations currently require each savings
association to maintain, for each calendar quarter, an average daily balance
of liquid assets (including cash and cash equivalent investments) equal to at
least 4% of its liquidity base as of the end of the preceding calendar
quarter or the average daily balance of its liquidity base during the
preceding calendar quarter. The liquidity base consists of net withdrawable
accounts plus borrowings repayable in 12 months or less. At June 30, 1998,
the Company's liquidity ratio was 22.5%, which was well in excess of the
minimum regulatory requirement.
The Company'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 by
federal law and OTS regulations to maintain minimum levels of regulatory
capital. The OTS has established the following minimum capital requirements:
a risk-based capital ratio, a core capital ratio and a tangible capital
ratio. In addition to these minimum regulatory capital requirements, another
provision of federal law grants the OTS broad power to take prompt corrective
action to resolve the problems of undercapitalized institutions. The OTS
regulations implementing this statutory authority (the "prompt corrective
action regulations") establish other capital thresholds which determine
whether an institution will be deemed to be "well capitalized", "adequately
capitalized", "undercapitalized", "significantly undercapitalized" or
"critically undercapitalized". The capital category to which an institution
is assigned in turn determines the actions the OTS may take to address the
institution's undercapitalization. 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). Under the prompt
corrective action regulations, however, an institution with a ratio of
tangible capital to total assets below 2.0% is deemed to be "critically
undercapitalized" and, as such, will be subject to a variety of sanctions
under the prompt corrective action regulations, including, without
limitation, limits on asset growth, restrictions on activities and,
ultimately, the appointment of a receiver. 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). Under the
prompt corrective action regulations, however, an institution that with a
ratio of core capital to adjusted total assets of 3.0% will be deemed to be
"adequately capitalized" only if the institution also has a composite rating
of "1" under the Uniform Financial Institutions Rating System ("UFIRS"). All
other institutions must maintain a minimum ratio of core capital to adjusted
total assets of 4.0% in order to be deemed to be "adequately capitalized",
and an institution, regardless of its UFIRS rating, will be deemed to be
"well capitalized" only if it maintains a ratio of core capital to adjusted
total assets of at least 5.0%. If an institution fails to remain at least
"adequately capitalized", the OTS may impose one or more of a variety of
sanctions on the institution to address its undercapitalized condition,
including, without limitation, requiring the submission of a capital plan,
restricting growth and restricting the payment of capital distributions (such
as dividends). Core capital generally consists of tangible capital plus
specified amounts of certain intangible assets.
14
<PAGE>
The OTS risk-based requirement currently requires associations to have
total capital of at least 8.0% of risk-weighted assets. In order to be
considered "well capitalized" under the prompt corrective action regulations,
however, an institution must maintain a ratio of total capital to total
risk-weighted assets of at least 10.0% and a ratio of core capital to total
risk-weighted assets of at least 6.0%. 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 June 30, 1998, the Bank exceeded all current minimum regulatory
capital standards and was deemed to be "well capitalized" for purposes of the
OTS's prompt corrective action regulations. At June 30, 1998, the Bank's
tangible capital was $27.3 million, or 7.0%, of adjusted total assets, which
exceeded the 1.5% requirement by $21.5 million and exceeded the 2.0%
"critically undercapitalized" threshold by $19.5 million. In addition, at
June 30, 1998, the Bank had core capital of $27.3 million, or 7.0%, of
adjusted total assets, which exceeded the 4.0% requirement by $11.7 million
and exceeded the 5.0% "well capitalized" threshold by $7.8 million. The Bank
had risk-based capital of $29.7 million at June 30, 1998, or 13.5%, of
risk-adjusted assets, which exceeded the minimum risk-based capital
requirement by $12.1 million and exceeded the 10.0% "well capitalized"
threshold by $7.6 million. Additionally, the Bank's $27.3 million of core
capital equaled 12.4% of total risk-weighted assets, which exceeded the 6.0%
"well capitalized" threshold by $14.1 million.
STOCK REPURCHASE
On January 13, 1998, the Company's Board of Directors authorized the
repurchase during 1998 of up to 137,000 shares of its common stock. During
the six-month period ending June 30, 1998, no shares of common stock were
repurchased. Through June 30, 1998, a total of 409,357 shares of common
stock of the Company had been purchased under the previously completed
repurchase programs at a total cost of $8.0 million. As of June 30, 1998,
the Company held 370,012 shares of its common stock as treasury stock. There
were no repurchases of shares of its common stock by the Company during the
period from June 30, 1998 through August 7, 1998.
EXERCISE OF STOCK OPTIONS
During the second quarter of 1998, stock options for 2,000 shares of
common stock were exercised. No notice was received between June 30, 1998
and August 7, 1998 from holders of options of their intent to exercise
options.
DIVIDENDS
In January, 1995, the Company began a regular quarterly dividend program
and declared the first cash dividend since becoming a public company. During
1995 and 1996, cash dividends of $.10 per share were paid each quarter.
During 1997 and for the first one-half of 1998, cash dividends of $.12 per
share were paid each quarter. On July 14, 1998, a cash dividend of $.12 per
share was declared payable on September 1, 1998 to stockholders of record as
of August 14, 1998. 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.
15
<PAGE>
YEAR 2000
The federal banking regulators have issued several statements providing
guidance to financial institutions on the steps the regulators expect
financial institutions to take to become Year 2000 compliant. Each of the
federal banking regulators is also examining the financial institutions under
its jurisdiction to assess each institution's compliance with the outstanding
guidance. If an institution's progress in addressing the Year 2000 problem
is deemed by its primary federal regulator to be less than satisfactory, the
institution will be required to enter into a memorandum of understanding with
the regulator which will, among other things, require the institution to
promptly develop and submit an acceptable plan for becoming Year 2000
compliant and to provide periodic reports describing the institution's
progress in implementing the plan. Failure to satisfactorily address the
Year 2000 problem may also expose a financial institution to other forms of
enforcement action that its primary federal regulator deems appropriate to
address the deficiencies in the institution's Year 2000 remediation program.
The Company licenses all software used in conducting its business from third
party software vendors. None of the Company's software has been internally
developed. The Company has developed a comprehensive list of all software
and all hardware in use within the organization. Every vendor has been
contacted regarding the Year 2000 issue, and the Company is closely tracking
the progress each is making in resolving the problems associated with the
issue. Software and hardware are upgraded as the vendors resolve Year 2000
problems. The vendor of the primary software in use at the Company released
its Year 2000 compliant software in July 1998. Testing standards have been
formulated for comprehensive testing of this software during the last half of
1998. Additionally, the Company has begun the process of contacting its
borrowers to determine the level of progress they have made in addressing the
impact that the Year 2000 issue will have on their respective businesses. In
addition, the Company is monitoring all other major vendors of services to
the Company for Year 2000 issues in order to avoid shortages of supplies and
services in the coming months. At the present time, no situations that will
require material cost expenditures to become fully compliant have been
identified.
Through June 30, 1998, the Company has incurred costs totaling approximately
$20,000 related to hardware and software upgrades because of the Year 2000
issue and anticipates incurring additional costs of approximately $60,000
during 1998, primarily related to additional planning and testing.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
This report contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. The Company intends
such forward-looking statements to be covered by the safe harbor provisions
for forward-looking statements contained in the Private Securities Reform Act
of 1995, and is including this statement for purposes of these safe harbor
provisions. Forward-looking statements, which are based on certain
assumptions and describe future plans, strategies and expectations of the
Company, are generally identifiable by use of the words "believe," "expect,"
"intend," "anticipate," "estimate," "project" or similar expressions. The
Company's ability to predict results or the actual effect of future plans or
strategies is inherently uncertain. Factors which could have a material
adverse effect on the operations and future prospects of the Company and its
subsidiaries include, but are not limited to, changes in: interest rates,
general economic conditions, legislative/regulatory changes, monetary and
fiscal policies of the U. S. Government, including
16
<PAGE>
policies of the U. S. Treasury and the Federal Reserve Board, the quality of
composition of the loan or investment portfolios, demand for loan products,
deposit flows, competition, demand for financial services in the Company's
market area and account principles, policies and guidelines. These risks and
uncertainties should be considered in evaluating forward-looking statements
and undue reliance should not be placed on such statements. Further
information concerning the Company and its business, including additional
factors that could materially affect the Company's financial results, is
included in the Company's filings with the Securities and Exchange Commission.
17
<PAGE>
<TABLE>
<CAPTION>
TABLE I
NET INTEREST INCOME ANALYSIS (UNAUDITED)
KANKAKEE BANCORP, INC. AND SUBSIDIARY
Three Months Ended June 30,
1998 1997
--------------------------------------- -----------------------------------
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) $250,134 $5,186 8.32% $230,553 $4,681 8.14%
Mortgage-backed securities 27,286 434 6.38% 33,029 569 6.91%
Investments securities (2) 59,399 932 6.29% 49,245 777 6.33%
Other interest-earning assets 34,362 451 5.26% 14,061 189 5.39%
FHLB stock 1,856 31 6.70% 1,881 31 6.61%
-------- ------ -------- ------
Total interest-earning assets 373,037 7,034 7.56% 328,769 6,247 7.62%
-------- ------ -------- ------
Other assets 29,705 14,596
-------- --------
Total assets $402,742 $343,365
-------- --------
-------- --------
Interest-bearing liabilities:
Time deposits $204,691 2,877 5.64% $176,681 2,482 5.63%
Savings deposits 59,982 407 2.72% 52,395 356 2.73%
Demand and NOW deposits 71,936 454 2.53% 49,796 352 2.84%
Borrowings 23,151 313 5.42% 24,098 351 5.84%
-------- ------ -------- ------
Total interest-bearing liabilities 359,760 4,051 4.52% 302,970 3,541 4.69%
-------- ------ -------- ------
Other liabilities 4,142 3,205
-------- --------
Total liabilities 363,902 306,175
-------- --------
Stockholders' equity 38,839 37,190
-------- --------
Total liabilities and
stockholders' equity $402,741 $343,365
-------- --------
-------- --------
Net interest income $2,983 $2,706
------ ------
------ ------
Net interest rate spread 3.04% 2.93%
------ ------
------ ------
Net earning assets $13,277 $25,799
------- -------
------- -------
Net yield on average interest-
earning assets (net interest
margin) 3.21% 3.30%
------ ------
------ ------
Average interest-earning assets to
average interest-bearing liabilities 103.69% 108.52%
------- -------
------- -------
(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.
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
TABLE II
NET INTEREST INCOME ANALYSIS (UNAUDITED)
KANKAKEE BANCORP, INC. AND SUBSIDIARY
Six Months Ended June 30,
1998 1997
--------------------------------------- -----------------------------------
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) $250,084 $10,286 8.29% $231,470 $9,360 8.15%
Mortgage-backed securities 27,868 902 6.53% 33,577 1,150 6.91%
Investments securities (2) 54,806 1,688 6.21% 49,893 1,686 6.81%
Other interest-earning assets 33,114 834 5.08% 14,864 275 3.73%
FHLB stock 1,856 61 6.63% 1,913 64 6.75%
-------- ------ -------- ------
Total interest-earning assets 367,728 13,771 7.55% 331,717 12,535 7.62%
-------- ------ -------- ------
Other assets 26,051 14,093
-------- --------
Total assets $393,779 $345,810
-------- --------
-------- --------
Interest-bearing liabilities:
Time deposits $200,384 5,590 5.63% $175,853 4,886 5.60%
Savings deposits 58,256 781 2.70% 52,286 705 2.72%
Demand and NOW deposits 68,509 864 2.54% 49,685 706 2.87%
Borrowings 24,427 668 5.51% 28,085 811 5.82%
-------- ------ -------- ------
Total interest-bearing liabilities 351,576 7,903 4.53% 305,909 7,108 4.69%
-------- ------ -------- ------
Other liabilities 3,667 2,960
-------- --------
Total liabilities 355,243 308,869
-------- --------
Stockholders' equity 38,536 36,941
-------- --------
Total liabilities and
stockholders' equity $393,779 $345,810
-------- --------
-------- --------
Net interest income $5,868 $5,427
------ ------
------ ------
Net interest rate spread 3.02% 2.93%
----- -----
----- -----
Net earning assets $16,152 $25,808
------- -------
------- -------
Net yield on average interest-
earning assets (net interest
margin) 3.22% 3.30%
----- -----
----- -----
Average interest-earning assets to
average interest-bearing liabilities 104.59% 108.44%
------- -------
------- -------
(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.
</TABLE>
19
<PAGE>
KANKAKEE BANCORP, INC.
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS - There are no material pending legal proceedings
to which the Company or the Bank is a party other than ordinary
routine litigation incidental to their respective businesses.
Item 2. CHANGES IN SECURITIES - None
Item 3. DEFAULTS UPON SENIOR SECURITIES - None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - The Annual
Meeting of Stockholders (the "Meeting") of the Company was held on
April 24, 1998. At the Meeting, James G. Schneider and Larry D.
Huffman were elected to serve as directors with terms expiring in
2001. Continuing with terms expiring in 2000 were Charles C. Huber,
Thomas M. Schneider and Wesley E. Walker. Continuing with terms
expiring in 1999 were William Cheffer and Michael A. Stanfa. The
matters approved by stockholders at the Meeting and the number of
votes cast for, against or withheld (as well as the number of
abstentions and broker non-votes) as to each matter are set forth
below:
<TABLE>
<CAPTION>
Number of Votes
---------------
For Withheld
--- --------
<S> <C> <C>
The election of the following
directors for a three-year term:
Larry D. Huffman 1,180,992 1,878
James G. Schneider 1,179,607 9,263
</TABLE>
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
--- ------- ------- ---------
<S> <C> <C> <C> <C>
The ratification of McGladrey &
Pullen, LLP, as the auditors for the
year ending December 31, 1998: 1,178,000 6,345 4,525 -
</TABLE>
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
20
<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: August 7, 1998 /s/ MICHAEL A. STANFA
---------------------------------- ---------------------------------
Executive Vice President
Date: August 7, 1998 /s/ RONALD J. WALTERS
---------------------------------- ---------------------------------
Vice President and Treasurer
(Principal Financial
and Accounting Officer)
21
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 18,624
<INT-BEARING-DEPOSITS> 5,900
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0
0
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</TABLE>
