-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, A5uY8HKb7MpWt2qU7tEHQtVZK5xToB+h/XaciI2sdx4eqNfy4Ea4/0DuGVUyyXD6 udxnRl1GVCLmcZ5ah5Ju0w== 0000950137-97-002698.txt : 19970813 0000950137-97-002698.hdr.sgml : 19970813 ACCESSION NUMBER: 0000950137-97-002698 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970812 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CALUMET BANCORP INC /DE CENTRAL INDEX KEY: 0000879694 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 363785272 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19829 FILM NUMBER: 97656588 BUSINESS ADDRESS: STREET 1: 1350 E SIBLEY BLVD CITY: DOLTON STATE: IL ZIP: 60419 BUSINESS PHONE: 7088419010 MAIL ADDRESS: STREET 1: 1350 E SIBLEY BLVD CITY: DOLTON STATE: IL ZIP: 60419 10-Q 1 FORM 10-Q DATED JUNE 30, 1997 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q (Mark one) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______ to ______ Commission File Number 0-19829 CALUMET BANCORP, INC. (Exact name of registrant as specified in its charter) DELAWARE 36-3785272 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification Number) 1350 EAST SIBLEY BOULEVARD, DOLTON, ILLINOIS 60419 (Address of principal executive offices) (Zip Code) (708) 841-9010 (Registrant's telephone number, including area code) Indicate by check mark whether Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 8, 1997, the Company has 2,110,797 shares of $0.01 par value common stock issued and outstanding. 1 2 PART I - FINANCIAL INFORMATION PAGE NO. ITEM 1 - FINANCIAL STATEMENTS Consolidated Statements of Financial Condition as of June 30, 1997 and December 31, 1996 3 Consolidated Statements of Income for the three months ended June 30, 1997 and 1996, and for the six months ended June 30, 1997 and 1996 4 Consolidated Statements of Cash Flows for the six months ended June 30, 1997 and 1996 5 Consolidated Statements of Stockholders' Equity for the six months ended June 30, 1997 and 1996 7 Notes to Consolidated Financial Statements 8 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9 PART II - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS 14 ITEM 2 - CHANGES IN SECURITIES 14 ITEM 3 - DEFAULT UPON SENIOR SECURITIES 14 ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 14 ITEM 5 - OTHER INFORMATION 15 ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 15 SIGNATURE PAGE 16 2 3 CALUMET BANCORP, INC. CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED) (Dollars in thousands)
JUNE 30, DECEMBER 31, 1997 1996 ------------------------ ASSETS: Cash $2,459 $3,021 Interest bearing deposits 6,983 6,154 ----------------------- CASH AND CASH EQUIVALENTS 9,442 9,175 Securities available-for-sale 49,791 57,362 Securities held-to-maturity 26,068 27,970 Loans receivable, net 372,290 381,200 Investment in limited partnerships 27,490 24,458 Real estate held for sale acquired through foreclosure 2,167 1,665 Office properties and equipment, net 4,288 4,320 Other assets 5,025 4,067 ----------------------- TOTAL ASSETS $496,561 $510,217 ======================= LIABILITIES: Deposits $354,118 $357,330 Federal Home Loan Bank advances and other borrowings 54,950 59,850 Advance payments by borrowers for taxes and insurance 2,414 3,124 Income taxes 1,675 742 Other liabilities 6,432 7,407 ---------------------- TOTAL LIABILITIES 419,589 428,453 STOCKHOLDERS' EQUITY: Preferred stock, $.01 par value, 2,000,000 shares authorized -- -- Common stock, $.01 par value, 4,200,000 shares authorized 3,615,841 (1997) and 3,614,341 (1996) shares issued 36 36 Additional paid-in capital 35,160 35,090 Unrealized gains on securities available for sale, net of income tax expense of $257 and $149 425 239 Retained earnings - substantially restricted 77,653 73,817 Unearned ESOP shares (566) (849) Stock held for management recognition plan (68) (137) Treasury stock (1,505,044 shares (1997); 1,237,313 shares (1996)) (35,668) (26,432) ---------------------- TOTAL STOCKHOLDERS' EQUITY 76,972 81,764 ---------------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $496,561 $510,217 ======================
See notes to consolidated financial statements. 3 4 CALUMET BANCORP, INC. CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except per share data)
(UNAUDITED) (UNAUDITED) THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ------------------------------------------- 1997 1996 1997 1996 ------------------------------------------- INTEREST AND DIVIDEND INCOME: Loans $8,443 $8,171 $16,839 $16,476 Securities and deposits 1,333 1,546 2,693 3,158 ------------------------------------------- Total interest and dividend income 9,776 9,717 19,532 19,634 INTEREST EXPENSE: Deposits 4,379 4,566 8,732 9,143 Federal Home Loan Bank advances and other borrowings 900 652 1,778 1,334 ------------------------------------------- Total interest expense 5,279 5,218 10,510 10,477 ------------------------------------------- NET INTEREST INCOME 4,497 4,499 9,022 9,157 Provision for losses on loans 200 200 400 400 ------------------------------------------- Net interest income after provision for losses on loans 4,297 4,299 8,622 8,757 OTHER INCOME: Gain on loans sold 53 52 71 105 Gain on sales of real estate 80 12 38 58 Gain on sales of securities 69 -- 100 20 Income from limited partnerships 649 534 1,530 1,054 Insurance commissions 40 79 63 110 Other 129 139 233 303 ------------------------------------------- Total other income 1,020 816 2,035 1,650 OTHER EXPENSES: Compensation and benefits 1,238 1,195 3,012 2,886 Office occupancy and equipment 307 323 614 647 Federal insurance premiums 59 210 119 423 Advertising and promotion 78 71 136 121 Data processing 128 117 253 221 Other 375 435 799 907 ------------------------------------------- Total other expenses 2,185 2,351 4,933 5,205 ------------------------------------------- Income before income taxes 3,132 2,764 5,724 5,202 Income taxes 1,067 850 1,888 1,699 ------------------------------------------- NET INCOME $2,065 $1,914 $3,836 $3,503 =========================================== EARNINGS PER SHARE $0.90 $0.71 $1.62 $1.27 ===========================================
See notes to consolidated financial statements. 4 5 CALUMET BANCORP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands)
(UNAUDITED) SIX MONTHS ENDED JUNE 30, ----------------- 1997 1996 ----------------- OPERATING ACTIVITIES: Net income $3,836 $3,503 Adjustments to reconcile net income to net cash provided by operating activities: Provision for losses on loans 400 400 Provision for depreciation 172 159 Amortization of deferred loan and commitment fees (350) (572) Amortization and accretion of premiums and discounts 97 126 Amortization and allocation of stock based benefits 351 351 Gain on sales of securities available-for-sale (100) (20) Equity in income from limited partnerships (1,530) (1,054) Net gain on sale of real estate (38) (58) Originations of loans held for sale (3,111) (4,925) Gain on loans sold (71) (52) Proceeds from loans sold 3,183 4,977 Increase in interest receivable (128) (12) Increase in interest payable 113 59 Change in operating assets and liabilities: (Increase) decrease in other assets (830) 88 Increase in income taxes 880 406 Increase (decrease) in other liabilities (1,088) 764 ---------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 1,786 4,140 INVESTING ACTIVITIES: Securities available-for-sale: Purchases (29,085) (23,396) Proceeds from sale 35,232 18,514 Repayments and maturities 1,826 1,099 Securities held-to-maturity: Repayments and maturities 1,797 3,297 Principal and fees collected on loans 44,478 50,279 Loans originated (35,740) (37,816) Loans purchased (593) (3,312) Investments in limited partnerships (3,732) (3,387) Return of investment in limited partnerships 2,230 1,491 Proceeds from sales of real estate 251 212 Purchases of office property and equipment (140) (114) ----------------- NET CASH PROVIDED BY INVESTING ACTIVITIES 16,524 6,867
See notes to consolidated financial statements. 5 6 CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (Dollars in thousands)
(UNAUDITED) SIX MONTHS ENDED JUNE 30, -------------------------- 1997 1996 -------------------------- FINANCING ACTIVITIES: Net increase in demand and passbook accounts $ 2,305 $ 5,496 Net increase (decrease) in certificates of deposit (5,517) 1,082 Proceeds of Federal Home Loan Bank advances and other borrowings 32,440 19,900 Repayment of Federal Home Loan Bank advances and other borrowings (37,340) (31,200) Net decrease in advance payments by borrowers for taxes and insurance (710) (700) Net proceeds from exercise of stock options 15 6 Purchase of treasury stock (9,236) (7,003) -------------------------- NET CASH USED IN FINANCING ACTIVITIES (18,043) (12,419) -------------------------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 267 (1,412) Cash and cash equivalents at beginning of period 9,175 8,657 -------------------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 9,442 $ 7,245 ========================== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for interest on deposits $ 8,609 $ 9,031 Cash paid during the period for interest on notes payable 1,788 1,386 -------------------------- $ 10,397 $ 10,417 ========================== Cash paid during the period for income taxes $ 1,685 $ 912 Noncash transactions: ========================== Loans to facilitate sales of real estate owned $ 88 $ 552 Loans transferred to real estate owned 803 107
See notes to consolidated financial statements. 6 7 CALUMET BANCORP, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Dollars in thousands)
(UNAUDITED) SIX MONTHS ENDED JUNE 30, ---------------------- 1997 1996 ---------------------- COMMON STOCK: Beginning and end of period $36 $36 ------------------------ ADDITIONAL PAID-IN CAPITAL: Beginning of period 35,090 34,665 Proceeds of option stock issued 15 6 Tax benefits of MRP/option deductions 55 35 ------------------------ End of period 35,160 34,706 ------------------------ UNREALIZED GAINS ON SECURITIES AVAILABLE FOR SALE: Beginning of period, net of income tax expense of $149 and $217 239 423 Change in unrealized gains, net of income tax benefit of $108 and $292 186 (495) ------------------------ End of period 425 (72) ------------------------ RETAINED EARNINGS: Beginning of period 73,817 68,418 Net income 3,836 3,503 ------------------------ End of period 77,653 71,921 ------------------------ LESS UNEARNED ESOP SHARES: Beginning of period (849) (1,414) Shares to be released 283 283 End of period ------------------------ (566) (1,131) ------------------------- LESS STOCK HELD FOR MRP: Beginning of period (137) (273) Amortization 69 68 ------------------------ End of period (68) (205) ------------------------ LESS TREASURY STOCK: Beginning of period (26,432) (17,745) Purchases (9,236) (7,003) ------------------------ End of period (35,668) (24,748) ------------------------ TOTAL STOCKHOLDERS' EQUITY $76,972 $80,507 =========================
See notes to consolidated financial statements. 7 8 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE A - BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles ("GAAP") for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the information required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included. The results of operations for the three months and the six months ended June 30, 1997 are not necessarily indicative of the results that may be expected for the year ending December 31, 1997. Certain 1996 amounts have been reclassified to conform to 1997 presentation. For further information, refer to the consolidated financial statements and notes thereto included in the Calumet Bancorp, Inc. (the "Company") Annual Report on Form 10-K for the year ended December 31, 1996. NOTE B - EARNINGS PER SHARE Earnings per share of Common Stock outstanding for the three months and the six months ended June 30, 1997 and 1996, respectively, 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 the exercise of stock options and use of proceeds to purchase Treasury Stock at the average market price for the period. The weighted average number of shares of common stock and common stock equivalents outstanding used for this calculation were 2,302,267 and 2,700,192 for the three months ended June 30, 1997 and 1996, and 2,373,048 and 2,755,793 for the six months ended June 30, 1997 and 1996, respectively. The average number of uncommitted (unearned) shares held for the Company's Employee Stock Ownership Plan ("ESOP") and included in the weighted average shares outstanding for these same periods were 63,653, 120,233, 70,725 and 127,305, respectively. Shares committed to be released to the ESOP are expensed during the period based on original cost. In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share." The overall objective of SFAS No. 128 is to simplify the calculation of earnings per share (EPS). Under this statement, primary EPS computed in accordance with APB Opinion No. 15 will be replaced with a new, simpler calculation called basic EPS. Basic EPS will be calculated by dividing income available to common shareholders (i.e., net income less preferred stock dividends, if applicable) by the weighted average common shares outstanding without consideration for common stock equivalents such as options, warrants and convertible securities. Fully diluted EPS will not change significantly but has been renamed diluted EPS. 8 9 SFAS No. 128 is effective for both interim and annual financial statements for periods ending after December 15, 1997. Earlier application is not permitted. Upon adoption, the Company will be required to change the method currently used to compute EPS and to restate all prior periods. The impact of SFAS No. 128 on the calculation of primary and fully diluted EPS is not expected to be material. NOTE C - COMMITMENTS AND CONTINGENCIES At June 30, 1997, the Company had approved loan commitments totalling $9.2 million to originate loans, $700,000 to sell loans, $8.1 million in undisbursed loans-in-process, $18.3 million in unused lines of credit, and $7.6 million in credit enhancement arrangements. Commitments to fund loans and those under credit enhancement arrangements have credit risk essentially the same as that involved in extending loans to customers and are subject to the Company's normal credit policies. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL Calumet Bancorp, Inc. completed its initial public offering of Common Stock on February 20, 1992. It owns all of the outstanding Common Stock of Calumet Federal Savings and Loan Association of Chicago (the "Association"), a federally chartered stock savings and loan association which operates five financial services offices in the Chicago area -- in Dolton, Lansing, Sauk Village, and two in southeastern Chicago. The Association owns two first tier subsidiaries, Calumet Savings Service Corporation and Calumet Residential Corporation, both wholly owned. Calumet Residential Corporation owns 51% of a second tier subsidiary, Calumet United Limited Liability Company. Calumet Savings Service Corporation owns two second tier subsidiaries, Calumet Mortgage Corporation of Idaho and Calumet Financial Corporation (of Illinois), both wholly owned. The Company's business activities currently consist of investment in equity securities, participation as a limited partner in real estate investment and loan servicing partnerships, and operation of the Association. The Association's principal business consists of attracting deposits from the public and investing these deposits, together with funds generated from operations and borrowings, primarily in residential mortgage loans. The Association's deposit accounts are insured to the maximum allowable by the FDIC. The Association's results of operations are dependent primarily on net interest income, which is the difference between the interest income earned on its loan and investment securities portfolios and its cost of funds, consisting of interest paid on its deposits and borrowings. The Association's operating results are also affected by the sale of insurance, annuities and real estate through its second tier subsidiaries, and to a lesser extent, loan commitment fees, customer service charges and other income. Operating 9 10 expenses of the Association are primarily employee compensation and benefits, equipment and occupancy costs, federal insurance of accounts premiums, advertising, data processing, and other administrative expenses. The Association's results of operations are further affected by economic and competitive conditions, particularly changes in market interest rates, government policies and actions of regulatory authorities. FINANCIAL CONDITION Total assets decreased $13.7 million, or 2.7%, to $496.6 million at June 30, 1997, from $510.2 million at December 31, 1996. Net loans receivable decreased $8.9 million, or 2.3%, to $372.3 million at June 30, 1997, from $381.2 million at December 31, 1996, with originations and purchases of $36.3 million during the first six months of 1997. The Company's lending activities have been concentrated primarily in residential real estate secured by first liens. At June 30, 1997, approximately 57.6% of the Company's mortgage loans were secured by one-to-four family residential properties, 13.1% by multifamily income producing properties, and 29.3% by commercial properties and land. At December 31, 1996, these concentrations were 57.1%, 14.4%, and 28.6%, respectively. At June 30, 1997, the Company's mortgage loan portfolio was geographically distributed primarily in Illinois (34.1%), Colorado (25.2%), Idaho (20.5%), and New Mexico (14.2%). At December 31, 1996, these distributions were 35.0%, 26.4%, 18.5%, and 13.7%, respectively. Deposits decreased $3.2 million, or 0.9%, to $354.1 million at June 30, 1997, from $357.3 million at December 31, 1996. Funds generated from operations and asset reductions, were used to pay down Federal Home Loan Bank advances as they became due, reducing advances by $4.9 million, or 8.2%, to $55.0 million at June 30, 1997, from $59.9 million at December 31, 1996. Stockholders' equity decreased $4.8 million, or 5.9%, to $77.0 million at June 30, 1997, from $81.8 million at December 31, 1996. The decrease came primarily from treasury stock purchases of $9.2 million, offset by earnings of $3.8 million, $422,000 in credits from employee benefit plans, and $186,000 in net unrealized gains on securities. During the first six months of 1997 the Company repurchased 267,731 shares of its stock at an average price of $34.50 per share. The Company has 2,110,797 shares of common stock (including 63,653 unearned ESOP shares) outstanding on June 30, 1997, with a book value of $36.47 per share. ASSET QUALITY The allowance for losses on loans increased to 1.59% of net loans receivable at June 30, 1997, from 1.48% of net loans receivable at December 31, 1996. Nonperforming loans to net loans receivable decreased to 0.97% at June 30, 1997, from 1.66% at December 31, 1996 , while nonperforming assets to total assets decreased to 10 11 1.16% at June 30, 1997, from 1.57% at December 31, 1996. The allowance for losses on loans amounted to 163.97% of nonperforming loans at June 30, 1997, increased from 88.89% at December 31, 1997. The significant decrease in nonperforming loans at June 30, 1997, was due to the recent improvement in several large loans which have had periodic performance problems in recent years. RESULTS OF OPERATIONS The Company reported net income of $2.1 million for the second quarter of 1997, compared to $1.9 million net income for the second quarter of 1996. Earnings per share of common stock for the second quarter of 1997 were $0.90, compared to $0.71 for the second quarter of 1996. Net income for the six months ended June 30, 1997 was $3.8 million, compared to $3.5 million for the six months ended June 30, 1996, while earnings per share increased to $1.62 for the first six months of 1997, from $1.27 for the first six months of 1996. Return on average assets increased to 1.67% for the second quarter of 1997, from 1.53% for the same quarter last year. Return on average stockholders' equity for the second quarter of 1997 was 10.81%, compared to 9.23% for the same quarter last year. Return on average assets increased to 1.53% for the first half of 1997, from 1.40% in the first half of 1996. Return on average stockholders' equity for the first half of 1997 was 9.84%, compared to 8.35% in 1996. NET INTEREST INCOME Net interest income was $4.5 million for the second quarter of 1997, approximately the same as the $4.5 million earned during the second quarter of 1996. A $59,000 increase in interest income was offset by a $61,000 increase in the cost of funds. The average yield on interest earning assets increased to 8.52% during the second quarter of 1997, from 8.23% in 1996, while the average cost of funds increased to 5.21%, from 5.17% for these same periods, resulting in an increase in the rate spread to 3.31% in 1997, from 3.06% in 1996. The increase in the yield on interest earning assets resulted in an increase of approximately $251,000 in interest income, but was offset by a decrease of approximately $192,000 in interest income due to a $13.3 million decrease in the volume of average interest earning assets. The increase in the cost of funds was due to both rate and volume increases in the cost of borrowings of $248,000, not entirely offset by rate and volume decreases in the cost of deposits of $187,000. Net interest income decreased by $135,000, to $9.0 million during the first six months of 1997, compared to $9.2 million during the first six months of 1996, primarily due to a $102,000 decrease in interest income and a $33,000 increase in the cost of funds. The average yield on interest earning assets increased to 8.43% during the first half of 1997, compared to 8.31% for the first half of 1996, while the average cost of funds decreased to 5.16% in 1997, from 5.20% in 1996, resulting in an increase in the rate spread to 3.27% in 1997, compared to 3.11% in 1996. The increased yield on interest 11 12 earning assets added approximately $143,000 to interest income, but an $8.6 million reduction in the volume of interest earning assets reduced interest income by approximately $245,000. The increased volume of borrowings added approximately $444,000 to the cost of funds, while both rate and volume decreases reduced the cost of deposits by approximately $411,000. PROVISION FOR LOAN LOSSES 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 its loan portfolio and general economic conditions. Management's evaluation includes a review of all loans on which full collectibility may not be reasonably assured, the estimated fair value of the underlying collateral, economic conditions, historical loan loss experience and the Company's internal credit review process. The provision for losses on loans has been maintained at $200,000 per quarter for 1997, the same as for 1996. Net chargeoffs to the allowance for losses on loans amounted to $104,000 during the first half of 1997. Net recoveries credited to the allowance for losses on loans amounted to $45,000 during the first half of 1996. OTHER INCOME Other income increased by $204,000, to $1.0 million during the second quarter of 1997, from $816,000 in the second quarter of 1996, primarily due to a $115,000 increase in income from limited partnerships, a $68,000 increase in gains on sales of real estate acquired through foreclosure, and a $69,000 increase in gains on sales of securities. Other income increased by $385,000, to $2.0 million during the first half of 1997, from $1.7 million during the first half of 1996, primarily due to a $476,000 increase in income from limited partnerships, and an $80,000 increase in gains on the sales of securities, but offset by decreases in insurance commissions of $47,000, brokerage commissions of $68,000, and gains on loans sold of $34,000. The increase in income from limited partnerships was due in part to an increase of $9.6 million in investment in limited partnerships from June 30, 1996 to June 30, 1997, and also due to a $298,000 gain on the sale of an investment property by one of the partnerships in 1997. OPERATING EXPENSES Operating expenses decreased by $166,000, to $2.2 million during the second quarter of 1997, from $2.4 million during the second quarter of 1996, primarily as the result of a $151,000 decrease in Federal deposit insurance premiums and a $47,000 decrease in legal expenses, offset by a $43,000, or 3.60% increase in compensation expense. Operating expenses as a percent of average assets decreased to 1.76% in the second quarter of 1997, from 1.87% in 1996. Net non-interest expense as a percent of average assets improved to 0.94% for the second quarter of 1997, from 1.22% for the 12 13 second quarter of 1996. The Company's efficiency ratio was 41.1% for the second quarter of 1997, compared to 46.0% in 1996. Operating expenses decreased by $272,000, to $4.9 million during the first half of 1997, from $5.2 million in the first half of 1996, primarily as the result of a $304,000 decrease in Federal deposit insurance premiums and a $99,000 decrease in legal fees, offset by a $126,000, or 4.37% increase in compensation expense. Operating expenses as a percent of average assets decreased to 1.97% in the first half of 1997, from 2.08% in the first half of 1996. Net non-interest expense as a percent of average assets improved to 1.16% for the first half of 1997, from 1.42% in the first half of 1996. The Company's efficiency ratio was 46.3% for the first half of 1997, compared to 50.0% in 1996. INCOME TAXES During the second quarter of 1997 the Company accrued additional state income taxes due to a change in interstate income allocation factors which had the effect of increasing the Company's effective income tax rate to 34.07% for the quarter and 32.98% for the first half of 1997, compared to 30.75% and 32.66% for the comparable 1996 periods. The Company's effective tax rate is less than statutory rates primarily due to the dividend received deduction and low income housing credits. LIQUIDITY AND CAPITAL RESOURCES The Company's primary sources of funds include deposits and Federal Home Loan Bank advances, principal and interest payments on loans and securities, maturing investment securities, and sales of securities from the available-for-sale portfolio. While maturities and scheduled amortization of loans and mortgage-backed securities are a predictable source of funds, deposit flows and mortgage prepayments are greatly influenced by interest rates, general economic conditions, and competition. The primary investing activity of the Company is the origination and purchase of mortgage loans and the purchase of securities. During the first half of 1997 the Company originated and purchased mortgage loans in the amount of $36.3 million, compared to $41.1 million during the first half of 1996. Loan repayments of $44.5 million in 1997 compare to $50.3 million in 1996. During the first half of 1997 the Company purchased securities in the amount of $29.1 million, compared to $23.4 million during the first half of 1996. The Company sold $35.2 million of securities during the first half of 1997, compared to $18.5 million during 1996. The Company also invested an additional $3.7 million in 1997, compared to $3.4 million in 1996, in limited partnerships developing residential and commercial properties in Illinois. Net proceeds from the reduction in loans and investments was used primarily to fund a $3.2 million decrease in deposits (primarily due to better rates available to customers in other types of financial instruments and the continuing success of the stock market) and to repay a net $4.9 million in borrowings. 13 14 Federal regulations require a savings institution to maintain an average daily balance of liquid assets equal to at least 5% of the average daily balance of its net withdrawable deposits and short term borrowings. In addition, short term liquid assets must constitute 1% of net withdrawable deposits and short term borrowings. Management has consistently maintained levels in excess of the regulatory requirement. The Association's average liquidity ratios for the first six months of 1997 and 1996 were 8.1% and 8.1%, respectively. The Association's average short term liquidity ratios for these same periods were 2.9% and 2.1%, respectively. The Association is also required to maintain specific amounts of capital pursuant to federal regulations. On April 30, 1997, the Board of Directors of the Association declared a $6.0 million dividend payable to the Company on June 30, 1997. As of June 30, 1997, and after payment of the dividend to the Company, the Association was in compliance with all regulatory capital requirements, with tangible and core capital of 9.2%, and risk-based capital of 15.5%, well above the requirements of 1.5%, 3.0%, and 8.0%, respectively. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Holding Company and the Association are not engaged in any legal proceedings of a material nature at the present time. ITEM 2. CHANGES IN SECURITIES Not applicable. ITEM 3. DEFAULT UPON SENIOR SECURITIES Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) The Company held its annual meeting of shareholders on April 30,1997. (b) The names of each director elected at the annual meeting are as follows: William A. McCann Darryl Erlandson The names of each director whose term of office continued after the annual meeting are as follows: Thaddeus Walczak Dr. Henry J Urban Carole J. Lewis Louise Czarobski 14 15 Tytus R. Bulicz (c) The following matters were voted upon at the annual meeting and the number of votes cast with respect to the matter follows: (i) Ratification of the appointment of Crowe, Chizek & Company LLP as the Company's independent auditors for the fiscal year ending December 31, 1997: For Against Abstain --------- ------------ ----------- 2,044,977 15,055 12,941 (ii) Approval of the Calumet Bancorp, Inc. 1997 Stock Option Plan: For Against Abstain --------- ------------- ------------ 1,782,414 15,260 275,299 (d) None. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K None 15 16 SIGNATURES Pursuant to the requirement of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereto duly authorized. DATE: AUGUST 8, 1997 CALUMET BANCORP, INC. /S/THADDEUS WALCZAK ------------------------- THADDEUS WALCZAK, CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER DATE: AUGUST 8, 1997 /S/JOHN GARLANGER ------------------------- JOHN GARLANGER, CHIEF FINANCIAL OFFICER 16 EX-27 2 FINANCIAL DATA SCHEDULE
9 3-MOS DEC-31-1997 JUN-30-1997 2,459 6,983 0 0 49,791 26,068 25,700 380,437 5,926 496,561 354,118 17,775 10,521 37,175 0 0 36 76,936 196,561 8,443 1,333 0 9,776 4,379 5,279 4,497 200 69 2,185 3,132 3,132 0 0 2,065 0.90 0.90 3.92 3,614 0 0 0 5,872 147 1 5,926 5,926 0 0
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