-----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, HxtUkJdBjtfC2Nd/875XfTD4eOPiyUxOzPEdFUhue9GvUtKHseLWlSWM81wjKxSo NLIWb6MkwEDe5ceu6cYDxQ== 0000950137-98-001945.txt : 19980508 0000950137-98-001945.hdr.sgml : 19980508 ACCESSION NUMBER: 0000950137-98-001945 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980507 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: SEC FILE NUMBER: 000-19829 FILM NUMBER: 98612519 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 MARCH 31, 1998 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 MARCH 31, 1998 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 May 8, 1998, the Company has 3,141,497 shares of $0.01 par value common stock outstanding. 1 2 PART 1 - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS PAGE NO. ------- Consolidated Statements of Financial Condition as of March 31, 1998 and December 31, 1997 3 Consolidated Statements of Income for the three months ended March 31, 1998 and 1997 4 Consolidated Statements of Cash Flows for the three months ended March 31, 1998 and 1997 5 Consolidated Statements of Stockholders' Equity and Other Comprehensive Income for the three months ended March 31, 1998 and 1997 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 15 ITEM 2 - CHANGES IN SECURITIES 15 ITEM 3 - DEFAULT UPON SENIOR SECURITIES 15 ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 15 ITEM 5 - OTHER INFORMATION 15 ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 15 SIGNATURE PAGE 15 2 3 CALUMET BANCORP, INC. CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Dollars in thousands)
(UNAUDITED) MARCH 31, DECEMBER 31, 1998 1997 -------------------------- ASSETS: Cash $ 3,034 $ 2,932 Interest bearing deposits 6,468 5,351 -------------------------- CASH AND CASH EQUIVALENTS 9,502 8,283 Securities available-for-sale 52,010 46,967 Securities held-to-maturity (fair value: $17,725 (1998); $18,606 (1997)) 17,887 18,768 Loans receivable, net 374,376 376,988 Investment in limited partnerships 24,190 24,645 Real estate held for sale acquired through foreclosure 3,878 2,491 Office properties and equipment, net 4,707 4,468 Accrued interest receivable and other assets 3,718 4,016 -------------------------- TOTAL ASSETS $ 490,268 $ 486,626 ========================== LIABILITIES: Deposits $ 347,979 $ 348,461 Federal Home Loan Bank advances 45,060 45,060 Advance payments by borrowers for taxes and insurance 2,375 3,237 Income taxes 2,728 1,229 Accrued interest payable and other liabilities 6,364 7,025 -------------------------- TOTAL LIABILITIES 404,506 405,012 STOCKHOLDERS' EQUITY: Preferred stock, $.01 par value, 2,000,000 shares authorized - - Common stock, $.01 par value, 4,200,000 shares authorized, 3,616,090 shares issued 36 36 Additional paid-in capital 35,217 35,217 Retained earnings - substantially restricted 60,780 56,786 Accumulated other comprehensive income, net of tax 1,315 1,303 Unearned ESOP shares (141) (283) Treasury stock (474,593 shares) (11,445) (11,445) -------------------------- TOTAL STOCKHOLDERS' EQUITY 85,762 81,614 -------------------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 490,268 $ 486,626 ==========================
See notes to consolidated financial statements. 3 4 CALUMET BANCORP, INC. CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except per share data)
(UNAUDITED) THREE MONTHS ENDED MARCH 31, ----------------- 1998 1997 ----------------- INTEREST AND DIVIDEND INCOME: Loans $8,422 $8,396 Securities and deposits 1,112 1,360 ----------------- Total interest and dividend income 9,534 9,756 INTEREST EXPENSE: Deposits 4,278 4,353 Federal Home Loan Bank advances 708 878 ----------------- Total interest expense 4,986 5,231 ----------------- NET INTEREST INCOME 4,548 4,525 Provision for losses on loans 106 200 ----------------- Net interest income after provision for losses 4,442 4,325 OTHER INCOME: Gain on loans sold 38 18 Losses on sales of real estate - (42) Gains on sales of securities 25 31 Income from limited partnerships 4,125 881 Insurance commissions 63 23 Other 281 104 ----------------- Total other income 4,532 1,015 OTHER EXPENSES: Compensation and benefits 1,678 1,774 Office occupancy and equipment 319 307 Federal insurance premiums 55 60 Advertising and promotion 57 58 Data processing 139 125 Other 496 424 ----------------- Total other expenses 2,744 2,748 ----------------- Income before income taxes 6,230 2,592 Income taxes 2,236 821 ----------------- NET INCOME $3,994 $1,771 ================= BASIC EARNINGS PER SHARE $ 1.27 $ 0.52 ================= DILUTED EARNINGS PER SHARE $ 1.17 $ 0.48 =================
See notes to consolidated financial statements. 4 5 CALUMET BANCORP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands)
(UNAUDITED) THREE MONTHS ENDED MARCH 31, -------------------- 1998 1997 -------------------- OPERATING ACTIVITIES: Net income $ 3,994 $ 1,771 Adjustments to reconcile net income to net cash provided by operating activities: Provision for losses on loans 106 200 Provision for depreciation 92 85 Amortization of deferred loan and commitment fees (154) (139) Amortization and accretion of premiums and discounts 38 50 Amortization and allocation of stock based benefits 142 176 Gain on sales of securities available-for-sale (25) (31) Equity in income from limited partnerships (4,125) (881) Net loss on sale of real estate - 42 Originations of loans held for sale (4,160) (2,907) Gain on loans sold (38) (18) Proceeds from loans sold 4,198 2,925 Change in operating assets and liabilities: Decrease (increase) in accrued interest receivable and other assets 298 (48) Increase (decrease) in income taxes 1,589 (16) Decrease in accrued interest payable and other liabilities (661) (747) --------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 1,294 462 INVESTING ACTIVITIES: Securities available-for-sale: Purchases (15,992) (10,558) Proceeds from sale 8,410 14,530 Repayments and maturities 2,500 1,634 Securities held-to-maturity: Purchases - - Repayments and maturities 830 1,002 Principal and fees collected on loans 22,261 21,117 Loans originated (20,729) (14,886) Loans purchased (260) (593) Investments in limited partnerships (2,742) (545) Return of investment in limited partnerships 7,322 1,119 Proceeds from sales of real estate - 50 Purchases of office property and equipment (331) (121) --------------------- NET CASH PROVIDED BY INVESTING ACTIVITIES 1,269 12,749
See notes to consolidated financial statements. 5 6 CALUMET BANCORP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) (Dollars in thousands)
(UNAUDITED) THREE MONTHS ENDED MARCH 31, -------------------- 1998 1997 -------------------- FINANCING ACTIVITIES: Net increase (decrease) in demand and passbook accounts $ 2,121 $ (937) Net decrease in certificates of deposit (2,603) (6,843) Proceeds of Federal Home Loan Bank advances 14,000 8,500 Repayment of Federal Home Loan Bank advances (14,000) (11,800) Net decrease in advance payments by borrowers for taxes and insurance (862) (897) Net proceeds from exercise of stock options - - Purchase of treasury stock - (4,694) -------------------- NET CASH USED IN FINANCING ACTIVITIES (1,344) (16,671) -------------------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,219 (3,460) Cash and cash equivalents at beginning of year 8,283 9,175 -------------------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 9,502 $ 5,715 ==================== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the year for interest on deposits $ 4,357 $ 4,244 Cash paid during the year for interest on notes payable 698 884 -------------------- $ 5,055 $ 5,128 ==================== Cash paid during the year for income taxes $ 640 $ 552 ==================== Noncash transactions: Loans transferred to real estate owned $ 1,387 $ 440
See notes to consolidated financial statements. 6 7 CALUMET BANCORP, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND OTHER COMPREHENSIVE INCOME (Dollars in thousands)
(UNAUDITED) COMPREHENSIVE INCOME STOCKHOLDERS' EQUITY THREE MONTHS ENDED THREE MONTHS ENDED MARCH 31, MARCH 31, ------------------------------------------ 1998 1997 1998 1997 ------------------------------------------ Common stock: Beginning and end of period $ 36 $ 36 ------------------- Additional paid-in capital: Beginning of period 35,217 35,090 Tax benefit of MRP deduction - 25 ------------------- End of period 35,217 35,115 ------------------- Retained earnings: Beginning of period 56,786 73,817 NET INCOME $3,994 $1,771 3,994 1,771 ------------------- End of period 60,780 75,588 ------------------- Accumulated other comprehensive income: Beginning of period unrealized gains on securities, net of income taxes 1,303 239 Unrealized holding losses on securities arising during period, net of income taxes (34) (177) Reclassification adjustment for gains on securities included in net income, net of income taxes (16) (21) Effect of tax rate adjustment on unrealized gains 62 - ---------------- Other comprehensive income 12 (198) 12 (198) --------------------------------------- End of period accumulated other comprehensive income 1,315 41 COMPREHENSIVE INCOME $4,006 $1,573 ------------------- ================ Less unearned ESOP shares: Beginning of period (283) (849) Shares to be released 142 142 ------------------- End of period (141) (707) ------------------- Less stock held for MRP: Beginning of period - (137) Amortization - 35 ------------------- End of period - (102) ------------------- Less treasury stock: Beginning of period (11,445) (26,432) Purchases - (4,694) ------------------- End of period (11,445) (31,126) ------------------- Total stockholders' equity $85,762 $78,845 ===================
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 ended March 31, 1998 are not necessarily indicative of the results that may be expected for the year ending December 31, 1998. Certain 1997 amounts have been reclassified to conform to 1998 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, 1997. NOTE B - EARNINGS PER SHARE In 1997, the FASB issued SFAS No. 128, Earnings per Share. SFAS No. 128 is effective for the quarter ending December 31, 1997, and all prior earnings per share amounts have been restated to be comparable. All earnings per share data prior to the Company's November 17, 1997 three-for-two stock split have been restated to be comparable. Basic earnings per share of common stock has been determined by dividing net income for each period by the weighted average number of shares of common stock outstanding. Diluted earnings per share has been determined by dividing net income for the period by the weighted average number of shares of common stock outstanding and additional shares issuable under stock options. Common stock issuable under stock options assumes the exercise of stock options and the use of proceeds to purchase treasury stock at the average market price for the period. Shares of common stock purchased by the Company's Employee Stock Ownership Plan ("ESOP") prior to December 31, 1992, are included in shares outstanding for purposes of calculating earnings per share. Shares committed to be released to the ESOP during the year are expensed during the year based on original cost. The ESOP did not purchase any shares subsequent to December 31, 1992, which would be subject to AICPA Statement of Position 93-6, "Employers' Accounting for Employee Stock Ownership Plans." 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 the three months ended March 31, 1998 and 1997 were 31,826 and 116,697 respectively. The following table presents a reconciliation of the denominators used to compute basic earnings per share and diluted earnings per share for the three months ended March 31, 1998 and 1997.
Three months ended March 31, ----------------------- (Dollars in thousands, except per share data) 1998 1997 ----------------------- Weighted average shares of common stock outstanding 3,141,497 3,435,890 Dilutive effects of assumed stock option exercises 258,823 229,854 ----------------------- Weighted average shares of common stock and common stock equivalents 3,400,320 3,665,744 ======================= Earnings per share: Net income available to common shareholders $ 3,994 $ 1,771 Basic earnings per share $ 1.27 $ 0.52 Earnings per share assuming dilution: Net income available to common shareholders $ 3,994 $ 1,771 Diluted earnings per share $ 1.17 $ 0.48
8 9 NOTE C - COMPREHENSIVE INCOME During the first quarter of 1998 the Company adopted Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income. Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from nonowner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. Specifically, the Company has reported the change in unrealized gains and losses on securities as an addition to (deduction from) net income to arrive at comprehensive income of $4.0 million for the first quarter of 1998, compared to $1.6 million for the first quarter of 1997. NOTE D - COMMITMENTS AND CONTINGENCIES At March 31, 1998, the Company had approved loan commitments totalling $9.5 million to originate loans, $5.9 million in undisbursed loans-in-process, $15.6 million in unused lines of credit, and $9.4 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. (the "Company") 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, 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 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 expenses of the Association are primarily employee compensation and benefits, equipment and occupancy costs, federal deposit insurance 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 increased $3.7 million, or 0.8%, to $490.3 million at March 31, 1998, from $486.6 million at December 31, 1997. Net loans receivable decreased $2.6 million, or 0.7%, to $374.4 million at March 31, 1998, from $377.0 million at December 31, 1997, with originations and purchases of $21.0 million, and repayments of $22.3 million, during the first quarter. 9 10 The Company's lending activities have been concentrated primarily in residential real estate secured by first liens. At March 31, 1998, approximately 59.4% of the Company's mortgage loans were secured by one-to-four family residential properties, 12.2% by multifamily income producing properties, and 28.4% by commercial properties and land. At December 31, 1997, these concentrations were 58.7%, 12.4%, and 28.9%, respectively. At March 31, 1998, the Company's mortgage loan portfolio was geographically distributed primarily in Illinois (33.8%), Colorado (21.9%), Idaho (20.9%), and New Mexico (16.2%). At December 31, 1997, these distributions were 33.1%, 24.1%, 20.6%, and 14.9%, respectively. Deposits decreased $482,000, or 0.1%, to $348.0 million at March 31, 1998, from $348.5 million at December 31, 1997. Federal Home Loan Bank advances remained at $45.1 million at March 31, 1998, the same as at December 31, 1997. Stockholders' equity increased $4.1 million, or 5.1%, to $85.8 million at March 31, 1998, from $81.6 million at December 31, 1997, primarily as the result of $4.0 million in net income. The Company has 3,141,497 shares of common stock (including 21,218 unallocated ESOP shares) outstanding on March 31, 1998, with a book value of $27.30 per share. ASSET QUALITY The allowance for losses on loans decreased to 1.50% of loans receivable at March 31, 1998, from 1.54% of loans receivable at December 31, 1997, primarily due to the chargeoff of a $350,000 loan which had been previously fully reserved. Nonperforming loans to loans receivable decreased to 0.83% at March 31, 1998, from 1.39% at December 31, 1997, primarily due to the foreclosure of three large related loans, including the $350,000 loan referenced above. Nonperforming assets to total assets decreased to 1.45% at March 31, 1998, from 1.64% at December 31, 1997. The allowance for losses on loans amounted to 181.22% of nonperforming loans at March 31, 1998, increased from 110.93% at December 31, 1997. RESULTS OF OPERATIONS The Company reported net income of $4.0 million for the first quarter of 1998, compared to $1.8 million net income for the first quarter of 1997. Basic earnings per share (BEPS) of common stock for the first quarter of 1998 increased to $1.27, compared to $0.52 for the first quarter of 1997, and diluted earnings per share (DEPS) increased to $1.17, compared to $0.48, for the same periods. The primary reason for the increase was the sale of a limited partnership investment property at a gain of $3.6 million, which resulted in after tax net income of $2.3 million, or BEPS of $0.74 and DEPS of $0.69. Operating expenses as a percent of average assets increased to 2.25% in 1998, from 2.18% in 1997. The Company's efficiency ratio improved to 30.6% during the first quarter of 1998, from 51.5% during the first quarter of 1997. Adjusted to eliminate the effect of partnership investment gains during both periods, the efficiency ratio improved to 51.5% during 1998, from 54.5% in 1997. Return on average assets for the first quarter of 1998 was 3.28% (1.36% adjusted ), compared to 1.41% (1.25% adjusted) for the same quarter last year. Return on average stockholders' equity for the first quarter of 1998 was 19.43% (8.17% adjusted), compared to 8.88% (7.87% adjusted) for the same quarter last year. NET INTEREST INCOME Net interest income remained at $4.5 million during the first quarter of 1998, the same as the first quarter of 1997. The average yield on interest earning assets increased to 8.47% during the first quarter of 1998, from 8.35% during the first quarter of 1997, while the average cost of funds increased to 5.13%, from 5.12% for these same periods, resulting in an increase in the rate spread to 3.34% in 1998, from 3.23% in 1997. The net interest margin increased to 4.04% for the first quarter of 1998, compared to 3.87% for the first quarter of 1997. 10 11 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 Company's quarterly provision for losses on loans was reduced to $106,000 for the first quarter of 1998, from $200,000 for the first quarter of 1997. Nonperforming loans to loans receivable decreased to 0.83% at March 31, 1998, from 1.39% at December 31, 1997. Nonperforming assets to total assets decreased to 1.45% at March 31, 1998, from 1.64% at December 31, 1997. The allowance for losses on loans amounted to 181.22% of nonperforming loans at March 31, 1998, increased from 110.93% at December 31, 1997. OTHER INCOME Other income increased $3.5 million, to $4.5 million during the first quarter of 1998, from $1.0 million in the first quarter of 1997, primarily due to a $3.2 million increase in income from limited partnerships. The Company closed out a partnership investment in a 288 unit apartment complex located in Fort Lauderdale, Florida, with the sale of the property, realizing a gain of $3.6 million, and offsetting $1.9 million in losses recognized in prior periods. The following table presents additional detail on miscellaneous other income for the periods indicated.
Three months ended March 31, --------------------------- 1998 1997 --------------------------- Miscellaneous other income: Rental income $ 33 $ 39 Income from real estate owned, net - (104) Checking and ATM/debit card fees 140 124 Credit enhancement fees 30 10 Investment commissions 46 15 Other miscellaneous 32 20 --------------------------- Total miscellaneous other income $ 281 $ 104 ===========================
11 12 OPERATING EXPENSES Operating expenses remained constant at $2.7 million for the first quarters of 1998 and 1997. Compensation expense decreased $96,000, or 5.4%, to $1.7 million in 1998, from $1.8 million in 1997, offsetting various other expenses which increased a net $92,000, including a $39,000 increase in professional fees paid. The following table presents additional detail on miscellaneous other expenses for the periods indicated.
Three months ended March 31, --------------------------- 1998 1997 --------------------------- Miscellaneous other expense: Stationery and supplies $ 77 $ 95 Telephone and postage 74 68 Loan expense 7 6 Insurance 26 32 Security 27 23 Audit and examination fees 54 48 Legal fees 39 18 Consulting fees 32 10 Benefit plan administration fees 8 18 Dues and subscriptions 19 6 Checking and ATM/debit card expenses 47 32 Minority interest 11 8 Other 75 60 --------------------------- Total miscellaneous other expense $ 496 $ 424 ===========================
INCOME TAXES The Company's effective income tax rate for the first quarter of 1998 was 35.9% compared to 31.7% for the first quarter of 1997. During the first quarter of 1997, low income housing credits and dividends received deductions reduced the Company's effective tax rate. The increase in effective tax rate for the first quarter of 1998 was due to the reduced benefit of low income housing tax credits and dividends received deductions because of the significant increase in pretax income as a result of the large gain realized during the first quarter of 1998. 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 quarter of 1998 and 1997, the Company originated and purchased mortgage loans in the amounts of $21.0 million and $15.5 million, respectively. Loan repayments for these same two periods were $22.3 million and $21.1 million, respectively. The net reduction in loans receivable was the result of seasonal reduction of loan originations during the winter months, and increasing competition from mortgage brokers. During the first quarter of 1998 the Company's deposits decreased by $482,000. Short term borrowings from the FHLB of $14.0 million during the first quarter of 1998 were repaid within the quarter. 12 13 Federal regulations require a savings institution to maintain an average daily balance of liquid assets equal to at least 4% of the average daily balance of its 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 three months of 1998 and 1997 were 11.1% and 8.1%, respectively. The Association is also required to maintain specific amounts of capital pursuant to federal regulations. As of March 31, 1998, the Association was in compliance with all regulatory capital requirements, with tangible and core capital of 10.7%, risk-based capital of 17.5%, and tier one capital of 16.2%, well above the requirements for capital adequacy of 1.5%, 3.0%, 8.0%, and 4.0%, respectively. The minimum requirement for well capitalized institutions under the prompt corrective action regulations are 10.0% risk-based capital and 6.0% tier one capital. DISCLOSURES ABOUT MARKET RISK The business of the Company and the composition of its balance sheet consists of investments in interest-earning assets (primarily loans, mortgage-backed securities, and other securities) which are primarily funded by interest-bearing liabilities (deposits and borrowings). Such financial instruments have varying levels of sensitivity to changes in market interest rates resulting in market risk. All of the financial instruments of the Company are for other than trading purposes. Approximately 95% of the Company's financial assets and 100% of its financial liabilities are held and managed by the Association. The following discussion pertains primarily to the financial instruments held by the Association. In order to measure the market risk inherent in the Association's financial assets and liabilities, management utilizes a quarterly report ("model") prepared for the Association by the Office of Thrift Supervision ("OTS") based on information provided by the Association which measures the Association's exposure to interest rate risk. The model calculates the present value of assets, liabilities, off-balance sheet financial instruments, and equity at current interest rates, and at hypothetical higher and lower interest rates at one percent intervals. The present value of each major category of financial instrument is calculated by the model using estimated cash flows based on weighted average contractual rates and terms at discount rates representing the estimated current market interest rate for similar financial instruments. The resulting present value of longer term fixed-rate financial instruments are more sensitive to change in a higher or lower market interest rate scenario, while adjustable-rate financial instruments largely reflect only a change in present value representing the difference between the contractual and discounted rates until the next interest rate repricing date. For further information regarding the underlying assumptions of the model, as well as its shortcomings, refer to management's discussion and analysis included in the Calumet Bancorp, Inc. Annual Report on Form 10-K for the year ended December 31, 1997. The following table reflects the estimated present value of interest-earning assets, interest-bearing liabilities, and off-balance sheet financial instruments as calculated by the OTS for the Association as of December 31, 1997, at then current interest rates and at hypothetical higher and lower interest rates of one and two percent. 13 14
Present Value at December 31, 1997 ============================================================ Down 2% Down 1% Current Up 1% Up 2% ============================================================ INTEREST-EARNING ASSETS: Mortgage loans, including mortgage- backed securities: Adjustable rate $228,046 $225,376 $222,736 $219,929 $216,675 Fixed rate 173,247 170,385 165,515 158,982 152,010 Commercial and consumer loans 9,925 9,882 9,840 9,800 9,759 Securities 46,676 45,407 44,101 42,663 41,139 ------------------------------------------------------------ TOTAL INTEREST-EARNING ASSETS 457,894 451,050 442,192 431,374 419,583 Other assets 22,640 22,767 22,928 23,076 23,201 ------------------------------------------------------------ Total assets $480,534 $473,817 $465,120 $454,450 $442,784 ============================================================ INTEREST BEARING LIABILITIES: Passbook accounts $ 60,775 $ 60,538 $ 59,044 $ 56,944 $ 54,995 NOW accounts 24,046 23,632 22,976 22,357 21,779 Money market accounts 8,412 8,322 8,215 8,110 8,006 Certificates of deposit 261,784 259,691 257,663 255,653 253,706 ------------------------------------------------------------ TOTAL DEPOSITS 355,017 352,183 347,898 343,064 338,486 Borrowings 46,411 45,685 44,976 44,283 43,606 ------------------------------------------------------------ TOTAL INTEREST-BEARING LIABILITIES 401,428 397,868 392,874 387,347 382,092 Other liabilities 8,706 8,705 8,705 8,704 8,703 ------------------------------------------------------------ Total liabilities $410,134 $406,573 $401,579 $396,051 $390,795 ============================================================ Loan commitments $ 315 $ 230 $ 99 $ (62) $ (237) ============================================================ NET PORTFOLIO VALUE (NPV) $ 70,715 $ 67,474 $ 63,640 $ 58,337 $ 51,752 ============================================================ RATIO OF NPV TO PV OF TOTAL ASSETS 14.72% 14.24% 13.68% 12.84% 11.69% ============================================================
14 15 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 Not applicable. ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K None 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. CALUMET BANCORP, INC. DATE: MAY 8, 1998 /s/THADDEUS WALCZAK ------------------------------ THADDEUS WALCZAK, CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER DATE: MAY 8, 1998 /s/JOHN GARLANGER ------------------------------ JOHN GARLANGER, CHIEF FINANCIAL OFFICER 15 EX-27 2 FINANCIAL DATA SCHEDULE
9 3-MOS DEC-31-1998 MAR-31-1998 3,034 6,468 0 0 52,010 17,887 17,725 381,985 5,828 490,268 347,979 27,000 11,467 18,060 0 0 36 85,726 490,268 8,422 1,112 0 9,534 4,278 4,986 4,548 106 25 2,744 6,230 3,994 0 0 3,994 1.27 1.17 4.04 3,216 0 0 0 6,070 350 2 5,828 5,828 0 0
-----END PRIVACY-ENHANCED MESSAGE-----