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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported)
February 12, 1999
AVONDALE FINANCIAL CORP.
(Exact Name of Registrant as specified in its Charter)
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<S> <C> <C>
DELAWARE 0-24566 36-3895923
(State or other jurisdiction of incorporation) (Commission File No.) (IRS Employer Identification Number)
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20 NORTH CLARK STREET, CHICAGO, ILLINOIS 60602
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(Address of principal executive offices)
Registrant's telephone number, including area code: (312) 782-6200
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N/A
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(Former name or former address, if changed since last report)
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Item 5. Other Events
Avondale Financial Corp. ("Avondale") is filing this Current Report on Form
8-K to incorporate by reference herein the financial results for the quarter
ended December 31, 1998 of Coal City Corporation ("Coal City").
Item 7. Financial Statements and Exhibits
(c) Exhibits
99 Press Release of Coal City dated February 5, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
AVONDALE FINANCIAL CORP.
Date: February 12, 1999 By: /s/ ROBERT S. ENGELMAN, JR.
---------------------------
Robert S. Engelman, Jr.
President and Chief Executive
Officer
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EXHIBIT INDEX
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EXHIBIT
NUMBER DESCRIPTION
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99 Press Release of Coal City dated February 5, 1999.
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Coal City Corporation
1200 North Ashland
Chicago, IL 60622
PRESS RELEASE
For Information at Coal City Corporation or Manufacturers Bank contact:
Mitchell Feiger -- President (773) 292-6271
Donna Adam -- Controller (773) 292-6280
FOR IMMEDIATE RELEASE
Coal City Corp. reports 1998 fourth quarter net income of $439 thousand
CHICAGO, February 5, 1999 -- Coal City Corporation, the holding company for
Manufacturers Bank, announced today fourth quarter net income of $439 thousand.
In 1997, Coal City Corporation had fourth quarter net income of $850 thousand.
In 1997, net interest income after the provision for loan losses was $395
thousand higher than the same period in 1998. In addition, the fourth quarter
of 1998 had higher operating expenses from an after tax charge of $475 thousand
related to a kiting loss, and an additional after tax reserve for other real
estate owned (OREO) expenses of $132 thousand. Basic earnings per share for the
fourth quarter of 1998 was $4.51 compared to $17.12 for the same quarter last
year.
For the year ended December 31, 1998 the Company had net income of $6.3 million
or $105.47 per share compared to $3.4 million or $63.83 for the same period in
1997. The 1998 results include a $2.7 million after tax gain on the sale of
Coal City National Bank in January 1998, offset by the $475 thousand after tax
charge related to the kiting loss.
On October 13, 1998 the Company and Avondale Financial Corporation ("Avondale"),
the holding company for Avondale Federal Savings Bank, announced they had
entered into a definitive agreement in connection with a merger of equals. The
combined company will be called MB Financial, Inc. and have assets of
approximately $1.4 billion. Avondale is a publicly traded savings and loan
holding company headquartered in Chicago whose principal subsidiary, Avondale
Federal Savings Bank, operates five banking offices in the Chicago metropolitan
area. The transaction is expected to close in the first quarter of 1999,
subject to regulatory approval and the approval of the stockholders of both
Avondale and Coal City Corporation and certain other conditions.
Mitchell Feiger, President, said, "We are excited about the pending merger and
believe it will have very positive benefits for our customers and shareholders.
By combining our assets, our customers will enjoy the strength and security of a
top rated $1.4 billion bank with 13 conveniently located banking facilities in
the Chicagoland area."
RESULTS OF OPERATION
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The Company had net income of $439 thousand for the fourth quarter of 1998
compared to $850 thousand for the fourth quarter of 1997. Net interest income
was $6.9 million for the fourth quarter of 1998 compared to $7.5 million for the
same period in 1997, however fourth quarter 1997 net interest income included
$491 thousand from Coal City National Bank. Coal City National Bank was sold in
January 1998.
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Other income increased $254 thousand to $1.4 million for the quarter ended
December 31, 1998 from $1.1 million for the same period in 1997. This increase
was primarily due to gains on the sale of securities and higher loan fees.
Other expense increased from $6.8 million in the fourth quarter of 1997 to $7.4
million in the fourth quarter of 1998. The increase is attributable to the
kiting loss incurred in the fourth quarter of 1998 and is offset by lower
intangible amortization expenses.
NET INTEREST MARGIN
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The following table sets forth a summary of the Company's net interest income,
average earning assets and net interest margin (dollar amounts in thousands):
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For The Three Months Ended For The Year Ended
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Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1998 Dec. 31, 1997
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Net interest income $ 6,914 $ 7,511 $ 27,806 $ 26,514
Average earning assets $803,659 $719,726 $760,750 $649,105
Net interest margin (1) 3.43% 4.16% 3.68% 4.12%
Net interest margin 3.41% 4.14% 3.66% 4.08%
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(1) Net interest margin is presented on a fully tax equivalent basis assuming a
34% tax rate.
The Company's net interest income decreased $597 thousand for the quarter ended
December 31, 1998 compared to the quarter ended December 31, 1997. This
decrease is primarily due to the sale of Coal City National in January 1998. The
fourth quarter of 1997 includes $491 thousand of net interest income related to
Coal City National. For the year ended December 31, 1998, net interest income
increased $1.3 million to $27.8 million from $26.5 million for the year ended
December 31, 1997. The increase in net interest income resulted from an
increase in interest income of $5.9 million, or 11.5%, partially offset by an
increase in interest expense of $4.6 million, or 18.5%. Interest income
increased due to a $111.6 million, or 17.2% increase in average interest earning
assets while interest expense rose as a result of a $95.6 million, or 17.5%
increase in average interest bearing liabilities. Much of the increase is due
to the purchase of U.S. Bancorp, Inc. in May 1997 with averages and related
income included from the purchase date forward offset by the effect of the sale
of Coal City National Bank. The remaining increase is due to growth in the
Company's core banking businesses.
Although net interest income has increased in 1998, the net interest margin has
decreased from 4.08% for the year ended December 31, 1997 to 3.66% for the year
ended December 31, 1998. This decrease is due to increased leverage in the
Company's balance sheet as a result of the purchase of certain additional U.S.
Treasury investments and the addition of certain repurchase agreements used to
fund those investments.
OTHER INCOME
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Other income increased $254 thousand to $1.4 million for the quarter ended
December 31, 1998 from $1.1 million for the same period in 1997. This increase
was primarily due to gains on the sale of securities and higher loan fees.
For the year ended December 31, 1998, other income increased $5.0 million with
$4.1 million of the increase attributable to the gain resulting from the sale of
Coal City National Bank in January 1998. $463 thousand of the increase is due
to higher service fees and $246 thousand is attributable to increased income
related to the Company's lease financing business.
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OTHER EXPENSE
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Other expense increased from $6.8 million in the fourth quarter of 1997 to $7.4
million in the fourth quarter of 1998. The increase is attributable to the
kiting loss in the fourth quarter that was reserved for at its estimated
potential loss of $719 thousand and an additional reserve for OREO costs of $200
thousand. These higher costs were offset by the elimination of other expenses
related to the sale of Coal City National in January 1998.
For the year ended December 31, 1998, other expense increased $2.8 million to
$27.0 million from $24.2 million for the year ended December 31, 1997. This
increase occurred due to the purchase of U. S. Bancorp, Inc. in May 1997, as
expenses for U. S. Bancorp for the first four months of 1997 are not included in
the Company's financial statements for 1997.
BALANCE SHEET
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Total assets were $871.9 million at December 31, 1998 compared to $802.7 million
at December 31, 1997. The $69.2 million increase in total assets was due to an
increase of U.S. Treasury securities of $92.6 million offset by a decline in
assets as a result of the sale Coal City National Bank. Short-term borrowings
increased to fund the increase in U.S. Treasuries. Net loans increased $22.6
million from $519.4 million at December 31, 1997 to $542.0 million at December
31, 1998 due to strong loan demand offset by a reduction in loans as a result of
the sale of Coal City National Bank. Total deposits decreased from $684.1
million at December 31, 1997 to $645.7 million at December 31, 1998 also due to
the sale of Coal City National Bank. Additionally, in July 1998 the Company
issued $25.0 million in Corporation Obligated Mandatorily Redeemable Capital
Securities and retired $10.0 million of Corporation Obligated Mandatorily
Redeemable Preferred Securities issued in 1997. Additionally, in the fourth
quarter of 1998, $10.2 million of preferred stock was redeemed with a portion of
the proceeds from the $25.0 million issuance of Capital Securities.
The Company's total risk-based capital ratio was 10.00%, Tier 1 capital to risk-
weighted assets ratio was 7.38%, and Tier 1 capital to average asset ratio was
5.25% at December 31, 1998. The FDIC has categorized the bank subsidiary as
"Well-Capitalized" at December 31, 1998.
As of December 31, 1998, the Company's book value per share was $957, compared
to $852 at December 31, 1997.
ASSET QUALITY
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The following table presents a summary of non-performing assets as of the dates
indicated (dollars in thousands):
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December 31, 1998 December 31, 1997
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Non-accruing loans $ 4,789 $ 9,879
Loans 90 days or more past due, still
accruing interest 85 2
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Total non-performing loans 4,874 9,881
Other real estate owned 442 3,726
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Total non-performing assets $ 5,316 $ 13,607
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Total non-performing loans to total loans 0.89% 1.87%
Total non-performing assets to total assets 0.61% 1.70%
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A reconciliation of the activity of the Company's allowance for loan losses
follows (dollars in thousands):
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For The Three Months Ended For The Year Ended
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Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1998 Dec. 31, 1997
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Balance at beginning of period $ 7,245 $ 7,810 $ 7,922 $ 4,692
Decrease from sale of subsidiary --- --- (399) ---
Additions resulting from acquisitions --- --- --- 2,574
Provision for loan losses 187 389 750 971
Charge-offs (1,095) (280) (2,090) (343)
Recoveries 7 3 161 28
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Balance at December 31 $ 6,344 $ 7,922 $ 6,344 $ 7,922
======== ======== ======== ========
Total loans at December 31 $548,353 $527,321 $548,353 $527,321
Ratio of allowance to total loans 1.16% 1.50% 1.16% 1.50%
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The Company maintains its allowance for loan losses at a level that management
believes will be adequate to absorb estimated losses on existing loans, based on
an evaluation of the collectibility of loans and prior loss experience. In
January 1998, Coal City National Bank was sold, reducing the allowance for loan
losses by $399 thousand. In 1997, $2.6 million was added to the allowance with
the purchase of U.S. Bancorp, Inc.
This news release may contain forward-looking statements that involve risk and
uncertainties, with respect to the results of operations and other uncertainties
which may not be known or anticipated by the Company. While management of the
Company uses its best efforts to be accurate in making forward-looking
statements, any such statements are subject to risks and uncertainties that
could cause the Company's actual results to vary materially from the future
results indicated in such forward-looking statements.
TABLES TO FOLLOW
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COAL CITY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Statement Amounts in Thousands Except Earnings Per Share Data)
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Three Months Ended December 31, Years Ended December 31,
1998 1997 1998 1997
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Interest Income:
Loans $11,446 $11,639 $44,929 $41,313
Investment securities:
Taxable 3,172 2,383 11,787 8,527
Nontaxable 80 60 305 433
Federal funds sold 69 450 611 1,413
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Total interest income 14,767 14,532 57,632 51,686
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Interest expense on:
Deposits 5,497 5,970 22,319 21,617
Short-term borrowings 1,683 395 5,118 1,353
Long-term borrowings 673 656 2,389 2,202
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Total interest expense 7,853 7,021 29,826 25,172
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Net interest income 6,914 7,511 27,806 26,514
Provision for loan losses 187 389 750 971
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Net interest income after provision for loan losses 6,727 7,122 27,056 25,543
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Other income:
Service fees 911 513 3,548 3,085
Lease financing, net 229 303 1,418 1,172
Net gains on sale of securities available for sale 131 - 167 138
Gain on sale of Coal City National Bank - - 4,099 -
Other operating income 110 311 708 540
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1,381 1,127 9,940 4,935
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Other expense:
Salaries and employee benefits 3,121 3,022 12,954 11,556
Occupancy and equipment expenses 921 961 3,773 2,934
Intangible amortization expense 825 1,040 3,254 3,321
Other operating expenses 2,575 1,801 7,056 6,384
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7,442 6,824 27,037 24,195
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Income before income taxes and minority interest 666 1,425 9,959 6,283
Applicable income taxes 210 529 3,605 2,402
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Income before minority interest 456 896 6,354 3,881
Minority interest (17) (46) (99) (432)
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Net income 439 850 6,255 3,449
Other comprehensive income:
Unrealized securities gains, net of income taxes (444) 28 134 97
Less: reclassification adjustments for gains included
in net income, net of tax 86 - 110 91
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Other comprehensive income (530) 28 24 6
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Comprehensive income $ (91) $ 878 $ 6,279 $ 3,455
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Net income $ 439 $ 850 $ 6,255 $ 3,449
Preferred stock dividend 218 - 1,085 276
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Net income available to common stockholders $ 221 $ 850 $ 5,170 $ 3,173
=============================================================
Basic earnings per common share $ 4.51 $ 17.12 $105.47 $ 63.83
Weighted average common shares outstanding 48,957 49,641 49,021 49,713
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COAL CITY CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Statement Amounts in Thousands)
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<CAPTION>
December 31, December 31,
1998 1997
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<S> <C> <C>
ASSETS
Cash and due from banks $ 20,520 $ 36,302
Investment securities:
Securities available for sale 212,020 136,685
Securities held to maturity (fair value of $11,529 at December 31, 1998 and
$5,679 at December 31, 1997) 11,142 5,242
Stock in Federal Home Loan Bank 2,614 615
Federal funds sold 20,350 37,400
Loans (net of allowance for loan losses of $6,344 at December 31, 1998 and
$7,922 at December 31, 1997) 542,009 519,399
Lease investments, net 21,931 22,887
Premises and equipment, net 11,483 11,045
Other assets 11,529 10,703
Intangibles, net 18,293 22,418
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Total assets $ 871,891 $ 802,696
=====================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits:
Noninterest bearing $ 128,218 $ 131,064
Interest bearing 517,443 552,996
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Total deposits 645,661 684,060
Short-term borrowings 130,521 18,013
Long-term borrowings 12,034 22,415
Other liabilities 11,815 12,261
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Total liabilities 800,031 736,749
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Minority Interest in Subsidiary - 3,421
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Corporation Obligated Mandatorily Redeemable Preferred Securities of
Subsidiary Trust Holding Solely Junior Subordinated Debentures - 10,000
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Corporation Obligated Mandatorily Redeemable Capital Securities of
Subsidiary Trust Holding Solely Junior Subordinated Debentures 25,000 -
--------------------------------------
Stockholders' Equity
Preferred stock, Class B, $150,000 par value; authorized 100 shares;
issued December 31, 1997 68 shares - 10,200
Common stock, no par value, $10 stated value; authorized 200,000 shares;
issued December 31, 1998 48,957 shares; December 31, 1997
49,707 shares 490 497
Additional paid-in capital 23,794 24,446
Retained earnings 22,231 17,062
Accumulated other comprehensive income 345 321
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Total stockholders' equity 46,860 52,526
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Total liabilities and stockholders' equity $ 871,891 $ 802,696
======================================
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COAL CITY CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL RATIOS
(Unaudited)
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At or For the Three Months Ended At or For the Years Ended
-------------------------------- --------------------------------
Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1998 Dec. 31, 1997
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Performance Ratios:
Return on average assets 0.21 % 0.44 % 0.76 % 0.54 %
Return on average equity 3.22 6.48 11.16 7.08
Net Interest rate spread 2.77 3.42 2.96 3.40
Net interest margin 3.43 4.16 3.68 4.12
Other expense to average assets 3.35 3.39 3.22 3.34
Average interest-earning assets to
average interest-bearing liabilities 117.14 118.95 118.36 118.63
Net interest income to other expense 92.91 110.07 102.84 109.58
Asset Quality Ratios:
Non-performing loans to total loans 0.89 % 1.87 % 0.89 % 1.87 %
Non-performing assets to total assets 0.61 1.70 0.61 1.70
Allowance for loan losses to total loans 1.16 1.50 1.16 1.50
Allowance for loan losses to non-performing loans 130.16 80.17 130.16 80.17
Capital Ratios:
Average equity to average assets 6.13 % 6.51 % 6.67 % 6.72 %
Equity to total assets 5.37 6.54 5.37 6.54
Total capital (to risk-weighted assets) 10.00 10.00 10.00 10.00
Tier 1 capital (to risk-weighted assets) 7.38 7.09 7.38 7.09
Tier 1 capital (to average assets) 5.25 5.15 5.25 5.15
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