-----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, E+2vS92vaPDHyzvBOpAdOsXLtna9FQerodQqIn2S307ioI9ckV1CNuey17tZZsWu 8WV8T7VJZXePkaUx8DIq8g== 0000950109-00-002014.txt : 20000510 0000950109-00-002014.hdr.sgml : 20000510 ACCESSION NUMBER: 0000950109-00-002014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000509 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLIANCE BANCORP CENTRAL INDEX KEY: 0000885638 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 363811768 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-20082 FILM NUMBER: 623216 BUSINESS ADDRESS: STREET 1: ONE GRANT SQUARE CITY: HINSDALE STATE: IL ZIP: 60521 BUSINESS PHONE: 7083231780 MAIL ADDRESS: STREET 1: ONE GRANT SQUARE CITY: HINSDALE STATE: IL ZIP: 60522 FORMER COMPANY: FORMER CONFORMED NAME: HINSDALE FINANCIAL CORPORATION DATE OF NAME CHANGE: 19930328 10-Q 1 FORM 10-Q ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, DC 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, 2000 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 0-20082 Alliance Bancorp (Exact name of registrant as specified in its charter) Delaware 36-3811768 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One Grant Square, Hinsdale, Illinois 60521 (Address of principal executive offices) (Zip Code) (630) 323-1776 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all the 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 ----- ----- Indicate the number of shares outstanding of each of the issuer's classes of stock, as of the latest practicable date. Common Stock, $0.01 par value -9,668,555 shares outstanding as of May 5, 2000. ================================================================================ Alliance Bancorp and Subsidiaries Form 10-Q Index ----- Part I. Financial Information Page - ------- --------------------- ---- Item 1. Financial Statements (unaudited) Consolidated Statements of Financial Condition as of March 31, 2000 and December 31, 1999 1 Consolidated Statements of Income for the Three Months Ended March 31, 2000 and 1999 2 Consolidated Statements of Changes in Stockholders' Equity for the Three Months Ended March 31, 2000 and 1999 3 Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2000 and 1999 4 Notes to Consolidated Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Item 3. Quantitative and Qualitative Disclosures About Market Risk See "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Asset/Liability Management" 15 Part II. Other Information - -------- ----------------- Item 1. Legal Proceedings 19 Item 2. Changes in Securities 19 Item 3. Defaults upon Senior Securities 19 Item 4. Submission of Matters to a Vote of Security Holders 19 Item 5. Other Information 19 Item 6. Exhibits and Reports on Form 8-K 20 Signature Page 21 Alliance Bancorp and Subsidiaries Consolidated Statements of Financial Condition
March 31, December 31, (In thousands, except share data) 2000 1999 - -------------------------------------------------------------------------------------------------------------------- (unaudited) Assets Cash and due from banks $ 22,795 48,922 Interest-bearing deposits 3,299 11,598 Investment securities available for sale, at fair value 52,714 64,494 Mortgage-backed securities available for sale, at fair value 234,276 356,434 Loans, net of allowance for losses of $6,135 at March 31, 2000 and $6,031 at December 31, 1999 1,410,689 1,363,266 Accrued interest receivable 9,404 10,493 Real estate 23,064 20,796 Premises and equipment, net 12,334 12,528 Stock in Federal Home Loan Bank of Chicago, at cost 27,859 27,383 Due from broker - 550 Other assets 40,598 45,844 - -------------------------------------------------------------------------------------------------------------------- $ 1,837,032 1,962,308 - -------------------------------------------------------------------------------------------------------------------- Liabilities and Stockholders' Equity Liabilities: Deposits $ 1,255,942 1,242,198 Borrowed funds 398,150 538,150 Advances by borrowers for taxes and insurance 10,307 11,358 Accrued expenses and other liabilities 16,826 16,931 - -------------------------------------------------------------------------------------------------------------------- Total liabilities 1,681,225 1,808,637 - -------------------------------------------------------------------------------------------------------------------- Stockholders' Equity: Preferred stock, $.01 par value; authorized 1,500,000 shares; none outstanding - - Common stock, $.01 par value; authorized 21,000,000 shares; 11,701,010 shares issued and 9,724,055 outstanding at March 31, 2000 11,700,010 shares issued and 10,177,188 outstanding at December 31, 1999 117 117 Additional paid-in capital 108,103 108,093 Retained earnings, substantially restricted 96,127 92,337 Treasury stock, at cost; 1,976,955 shares at March 31, 2000 and 1,522,822 at December 31, 1999 (38,175) (29,857) Accumulated other comprehensive loss (10,365) (17,019) - -------------------------------------------------------------------------------------------------------------------- Total stockholders' equity 155,807 153,671 - -------------------------------------------------------------------------------------------------------------------- Commitments and contingencies - -------------------------------------------------------------------------------------------------------------------- $ 1,837,032 1,962,308 - --------------------------------------------------------------------------------------------------------------------
See accompanying notes to unaudited consolidated financial statements. 1 Alliance Bancorp and Subsidiaries Consolidated Statements of Income
Three Months Ended March 31, (In thousands, except per share amounts) 2000 1999 - -------------------------------------------------------------------------------------------------------------------- (unaudited) Interest Income: Loans $ 26,561 23,875 Mortgage-backed securities 5,371 5,402 Investment securities 1,623 1,489 Interest-bearing deposits 100 1,731 - -------------------------------------------------------------------------------------------------------------------- Total interest income 33,655 32,497 - -------------------------------------------------------------------------------------------------------------------- Interest Expense: Deposits 13,307 13,639 Borrowed funds 6,499 6,115 - -------------------------------------------------------------------------------------------------------------------- Total interest expense 19,806 19,754 - -------------------------------------------------------------------------------------------------------------------- Net interest income 13,849 12,743 Provision for loan losses 200 50 - -------------------------------------------------------------------------------------------------------------------- Net interest income after provision for loan losses 13,649 12,693 - -------------------------------------------------------------------------------------------------------------------- Noninterest Income: Gain on sales of loans held for sale 14 382 Loss on sales of mortgage-backed securities available for sale (6,059) (5) Loss on sales of investment securities available for sale (491) - Income from real estate operations 974 511 Servicing fee income 53 148 ATM fee income 421 480 Other fees and commissions 1,275 4,804 Other, net (89) 380 - -------------------------------------------------------------------------------------------------------------------- Total noninterest income (3,902) 6,700 - -------------------------------------------------------------------------------------------------------------------- Noninterest Expense: Compensation and benefits 5,423 7,407 Occupancy expense 2,004 1,774 Federal deposit insurance premiums 69 201 Advertising expense 197 210 ATM expense 269 340 Computer services 354 337 Other 2,519 2,607 - -------------------------------------------------------------------------------------------------------------------- Total noninterest expense 10,835 12,876 - -------------------------------------------------------------------------------------------------------------------- Income (loss) before income taxes and extraordinary item (1,088) 6,517 Income tax expense (benefit) (540) 1,916 - -------------------------------------------------------------------------------------------------------------------- Income (loss) before extraordinary item (548) 4,601 Extraordinary item-gain on early extinguishment of debt, net of tax expense of $3,069 5,700 - - -------------------------------------------------------------------------------------------------------------------- Net income $ 5,152 4,601 - -------------------------------------------------------------------------------------------------------------------- Basic earnings per share Income (loss) before extraordinary item $ (0.05) 0.40 Extraordinary item, net of tax 0.57 - - -------------------------------------------------------------------------------------------------------------------- Net income 0.52 0.40 - -------------------------------------------------------------------------------------------------------------------- Diluted earnings per share Income (loss) before extraordinary item (0.05) 0.39 Extraordinary item, net of tax 0.57 - - -------------------------------------------------------------------------------------------------------------------- Net income $ 0.52 0.39 - --------------------------------------------------------------------------------------------------------------------
See accompanying notes to unaudited consolidated financial statements. 2 Alliance Bancorp and Subsidiaries Consolidated Statements of Changes in Stockholders' Equity
Additional Comprehensive Common Paid-in Retained Treasury (In thousands, except per share amounts) Income Stock Capital Earnings Stock - ------------------------------------------------------------------------------------------------------------------------------ (unaudited) Three Months Ended March 31, 1999 Balance at December 31, 1998 $ 116 107,130 80,219 (1,511) Net income 4,601 - - 4,601 - Other comprehensive income, net of tax Change in unrealized gain (loss) on securities available for sale, net of reclassification adjustment (1,144) - - - - ---------------- Total comprehensive income 3,457 Cash dividends declared, $0.14 per share - - (1,557) - Purchase of treasury stock - - - (6,796) Proceeds from exercise of stock options - 5 - - Tax benefit from stock related compensation - 6 - - - ------------------------------------------------------------------------------------------------------------------------------ Balance at March 31, 1999 $ 116 107,141 83,263 (8,307) - ------------------------------------------------------------------------------------------------------------------------------ Three Months Ended March 31, 2000 Balance at December 31, 1999 $ 117 108,093 92,337 (29,857) Net income 5,152 - - 5,152 - Other comprehensive income, net of tax Change in minimum pension liability 23 - - - - Change in unrealized gain (loss) on securities available for sale, net of reclassification adjustment 6,631 - - - - ---------------- Total comprehensive income 11,806 Cash dividends declared, $0.14 per share - - (1,362) - Purchase of treasury stock - - - (8,318) Proceeds from exercise of stock options - 5 - - Tax benefit from stock related compensation - 5 - - - ------------------------------------------------------------------------------------------------------------------------------ Balance at March 31, 2000 $ 117 108,103 96,127 (38,175) - ------------------------------------------------------------------------------------------------------------------------------ Accumulated Other Comprehensive (In thousands, except per share amounts) Income (Loss) Total - ----------------------------------------------------------------------------------------- Three Months Ended March 31, 1999 Balance at December 31, 1998 (17) 185,937 Net income - 4,601 Other comprehensive income, net of tax Change in unrealized gain (loss) on securities available for sale, net of reclassification adjustment (1,144) (1,144) Total comprehensive income Cash dividends declared, $0.14 per share - (1,557) Purchase of treasury stock - (6,796) Proceeds from exercise of stock options - 5 Tax benefit from stock related compensation - 6 - ----------------------------------------------------------------------------------------- Balance at March 31, 1999 (1,161) 181,052 - ----------------------------------------------------------------------------------------- Three Months Ended March 31, 2000 Balance at December 31, 1999 (17,019) 153,671 Net income - 5,152 Other comprehensive income, net of tax Change in minimum pension liability 23 23 Change in unrealized gain (loss) on securities available for sale, net of reclassification adjustment 6,631 6,631 Total comprehensive income Cash dividends declared, $0.14 per share - (1,362) Purchase of treasury stock - (8,318) Proceeds from exercise of stock options - 5 Tax benefit from stock related compensation - 5 - ----------------------------------------------------------------------------------------- Balance at March 31, 2000 (10,365) 155,807 - -----------------------------------------------------------------------------------------
See accompanying notes to unaudited consolidated financial statements. 3 Alliance Bancorp and Subsidiaries Consolidated Statements of Cash Flows
Three Months Ended March 31, (In thousands) 2000 1999 - -------------------------------------------------------------------------------------------------------------------- (unaudited) Cash Flows From Operating Activities: Net income $ 5,152 4,601 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 750 621 Provision for loan losses 200 50 Amortization of premiums, discounts, and deferred loan fees 322 356 Originations of loans held for sale (15,637) (204,243) Sale of loans originated for resale 9,791 251,995 Gain on sales of loans (14) (382) Loss on sales of mortgage-backed securities available for sale 6,059 5 Loss on sales of investment securities available for sale 491 - Extraordinary item-gain on early extiguishment of debt, net of tax (5,700) - Decrease in accrued interest receivable 1,089 307 Increase in other assets (1,745) (1,277) Increase in accrued expenses and other liabilities 1 601 - -------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 759 52,634 - -------------------------------------------------------------------------------------------------------------------- Cash Flows From Investing Activities: Loans originated or purchased for investment (102,503) (79,528) Purchases of: Mortgage-backed securities available for sale - (139,816) Investment securities available for sale - (44,630) Stock in Federal Home Loan Bank of Chicago (476) - Premises and equipment (556) (524) Proceeds from sale of: Mortgage-backed securities available for sale 115,180 74,308 Investment securities available for sale 12,505 - Loans held for investment 2,374 6,155 Proceeds from maturities of investment securities available for sale - 18,400 Net (increase) decrease in real estate joint ventures (1,815) 2,325 Principal collected on loans 57,870 92,583 Principal collected on mortgage-backed securities available for sale 10,512 44,215 - -------------------------------------------------------------------------------------------------------------------- Net cash provided by (used in) investing activities 93,091 (26,512) - -------------------------------------------------------------------------------------------------------------------- Cash Flows From Financing Activities: Net increase (decrease) in deposits 13,744 (30,642) Proceeds from borrowed funds 115,000 - Repayment of borrowed funds (246,231) (3,000) Net decrease in advance payments by borrowers for taxes and insurance (1,051) (1,880) Purchase of treasury stock (8,318) (6,796) Cash dividends paid (1,425) (1,605) Proceeds from exercise of stock options 5 5 - -------------------------------------------------------------------------------------------------------------------- Net cash used in financing activities (128,276) (43,918) - -------------------------------------------------------------------------------------------------------------------- Net decrease in cash and cash equivalents (34,426) (17,796) Cash and cash equivalents at beginning of period 60,520 80,997 - -------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of period $ 26,094 63,201 - -------------------------------------------------------------------------------------------------------------------- Supplemental Disclosures of Cash Flow Information: Cash paid during the period for: Interest $ 20,164 19,762 Income taxes - 1,000 Supplemental Disclosures of Noncash Activities: Loans exchanged for mortgage-backed securities $ - 473 Additions to real estate acquired in settlement of loans $ 496 52 - --------------------------------------------------------------------------------------------------------------------
See accompanying notes to unaudited consolidated financial statements. 4 Alliance Bancorp and Subsidiaries Notes to Consolidated Financial Statements (unaudited) Three Months Ended March 31, 2000 and 1999 (1) 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 Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of only normal recurring accruals) necessary for a fair presentation have been included. The unaudited consolidated financial statements include the accounts of Alliance Bancorp (the "Company") and its wholly-owned subsidiaries. All material intercompany balances and transactions have been eliminated. (2) Comprehensive Income The following table sets forth the required disclosures of other comprehensive income and the reclassification amounts as presented in the statements of changes in stockholders' equity and the related tax effects allocated to each component of other comprehensive income for the periods indicated:
Before Tax Net Tax (Expense) of Tax (In thousands) Amount or Benefit Amount - -------------------------------------------------------------------------------------------------------------------- Three Months Ended March 31, 1999 Disclosure of reclassification amount: Unrealized holding gain (loss) on securities available for sale arising during the period $ (1,765) 618 (1,147) Less: reclassification adjustment for gain (loss) included in net income (5) 2 (3) - -------------------------------------------------------------------------------------------------------------------- Net unrealized gain (loss) on securities $ (1,760) 616 (1,144) - -------------------------------------------------------------------------------------------------------------------- Three Months Ended March 31, 2000 Disclosure of reclassification amount: Unrealized holding gain (loss) on securities available for sale arising during the period $ 3,650 (1,276) 2,374 Less: reclassification adjustment for gain (loss) included in net income (6,550) 2,293 (4,257) - -------------------------------------------------------------------------------------------------------------------- Net unrealized gain (loss) on securities $ 10,200 (3,569) 6,631 Change in minimum pension liability 38 (15) 23 - -------------------------------------------------------------------------------------------------------------------- Other comprehensive income $ 10,238 (3,584) 6,654 - --------------------------------------------------------------------------------------------------------------------
5 Alliance Bancorp and Subsidiaries Notes to Consolidated Financial Statements - (Continued) (unaudited) Three Months Ended March 31, 2000 and 1999 (3) Earnings per Share The following table sets forth the computation of basic and diluted earnings per share for the periods indicated:
Three Months Ended March 31, ---------------------------------- (In thousands, except share data) 2000 1999 - -------------------------------------------------------------------------------------------------------------------- Numerator: Income (loss) before extraordinary item $ (548) 4,601 Extraordinary item, net of tax 5,700 - ---------------------------------- Net income $ 5,152 4,601 ---------------------------------- Denominator: Basic earnings per share-weighted average shares 9,961,869 11,394,593 Effect of dilutive securities-stock options - 488,674 ---------------------------------- Diluted earnings per share-adjusted weighted average shares 9,961,869 11,883,267 ---------------------------------- Basic earnings per share Income (loss) before extraordinary item $ (0.05) 0.40 Extraordinary item, net of tax 0.57 - ---------------------------------- Net income $ 0.52 0.40 ---------------------------------- Diluted earnings per share Income (loss) before extraordinary item $ (0.05) 0.39 Extraordinary item, net of tax 0.57 - ---------------------------------- Net income $ 0.52 0.39 ----------------------------------
(4) Commitments and Contingencies At March 31, 2000, the Company had outstanding commitments to originate or purchase loans of $124.8 million and undisbursed balances of construction loans of $92.2 million. Unused equity lines of credit available to customers were $112.6 million at March 31, 2000. 6 Alliance Bancorp and Subsidiaries Notes to Consolidated Financial Statements - (Continued) (unaudited) Three Months Ended March 31, 2000 and 1999 (5) Operating Segments The Company's operations include three primary segments: banking, mortgage brokerage and joint venture real estate developments. Through its banking subsidiary's network of 19 retail banking facilities in Chicago; north, west and southwestern Cook County; and DuPage County in Illinois, the Company provides traditional community banking services such as accepting deposits and making loans. Mortgage brokerage activities conducted through the Bank's subsidiary, Liberty Home Mortgage include the origination of primarily residential mortgage loans for sale to various investors as well as to the Bank. Joint venture real estate activities are primarily conducted through the Company's real estate subsidiaries. The real estate subsidiaries provide equity financing in various developments with reputable real estate developers, primarily for the construction of single family homes. The Company's three reportable segments are strategic business units that are separately managed as they offer different products and services and have different marketing strategies. Smaller operating segments are combined and are shown as "Other" below and consist of financial advice and brokerage services and holding company investments. Assets and results of operations are based on generally accepted accounting principles, with profit and losses of equity method investees excluded. Inter-segment revenues and expenses are eliminated in reporting consolidated results of operations. Operating segment information is as follows:
Mortgage Real Estate Inter-segment (In thousands) Banking Brokerage Joint Ventures Other Eliminations - ----------------------------------------------------------------------------------------------------------------------------------- Three Months Ended March 31, 2000 Interest income $ 33,636 127 46 166 (320) Interest expense 19,885 87 154 - (320) - ----------------------------------------------------------------------------------------------------------------------------------- Net interest income 13,751 40 (108) 166 - Provision for loan losses 200 - - - - - ----------------------------------------------------------------------------------------------------------------------------------- Net interest income after provision for loan losses 13,551 40 (108) 166 - Other fees and commissions 1,152 357 - 517 (277) Other noninterest income, net (6,372) - 888 (114) (53) Noninterest expense 8,975 1,572 22 596 (330) - ----------------------------------------------------------------------------------------------------------------------------------- Income (loss) before income taxes and extraordinary item (644) (1,175) 758 (27) - Income tax expense (benefit) (371) (458) 297 (8) - - ----------------------------------------------------------------------------------------------------------------------------------- Income (loss) before extraordinary item (273) (717) 461 (19) - - ----------------------------------------------------------------------------------------------------------------------------------- Extraordinary item-gain on early extinguishment of debt, net of tax expense 5,700 - - - - - ----------------------------------------------------------------------------------------------------------------------------------- Net income (loss) $ 5,427 (717) 461 (19) - - ----------------------------------------------------------------------------------------------------------------------------------- Assets $ 1,812,085 12,626 24,921 14,920 (27,520) - ----------------------------------------------------------------------------------------------------------------------------------- Consolidated (In thousands) Total - -------------------------------------------------------------------- Three Months Ended March 31, 2000 Interest income 33,655 Interest expense 19,806 - -------------------------------------------------------------------- Net interest income 13,849 Provision for loan losses 200 - -------------------------------------------------------------------- Net interest income after provision for loan losses 13,649 Other fees and commissions 1,749 Other noninterest income, net (5,651) Noninterest expense 10,835 - --------------------------------------------------------------------- Income (loss) before income taxes and extraordinary item (1,088) Income tax expense (benefit) (540) - -------------------------------------------------------------------- Income (loss) before extraordinary item (548) - -------------------------------------------------------------------- Extraordinary item-gain on early extinguishment of debt, net of tax expense 5,700 - -------------------------------------------------------------------- Net income (loss) 5,152 - -------------------------------------------------------------------- Assets 1,837,032 - --------------------------------------------------------------------
7 Alliance Bancorp and Subsidiaries Notes to Consolidated Financial Statements - (Continued) (unaudited) Three Months Ended March 31, 2000 and 1999
Mortgage Real Estate Inter-segment (In thousands) Banking Brokerage Joint Ventures Other Eliminations - ----------------------------------------------------------------------------------------------------------------------------------- Three Months Ended March 31, 1999 Interest income $ 32,227 1,072 2 213 (1,017) Interest expense 19,771 897 103 - (1,017) - ----------------------------------------------------------------------------------------------------------------------------------- Net interest income 12,456 175 (101) 213 - Provision for loan losses 50 - - - - - ----------------------------------------------------------------------------------------------------------------------------------- Net interest income after provision for loan losses 12,406 175 (101) 213 - Other fees and commissions 1,288 4,436 - 568 (860) Other noninterest income 527 - 597 194 (50) Noninterest expense 9,263 3,901 10 612 (910) - ----------------------------------------------------------------------------------------------------------------------------------- Income before income taxes 4,958 710 486 363 - Income tax expense 1,301 277 193 145 - - ----------------------------------------------------------------------------------------------------------------------------------- Net income $ 3,657 433 293 218 - - ----------------------------------------------------------------------------------------------------------------------------------- Assets $ 1,922,003 61,800 19,091 24,939 (85,197) - ----------------------------------------------------------------------------------------------------------------------------------- Consolidated (In thousands) Total - ---------------------------------------------------------------------- Three Months Ended March 31, 1999 Interest income 32,497 Interest expense 19,754 - ----------------------------------------------------------------------- Net interest income 12,743 Provision for loan losses 50 - ----------------------------------------------------------------------- Net interest income after provision for loan losses 12,693 Other fees and commissions 5,432 Other noninterest income 1,268 Noninterest expense 12,876 - ---------------------------------------------------------------------- Income before income taxes 6,517 Income tax expense 1,916 - ---------------------------------------------------------------------- Net income 4,601 - ---------------------------------------------------------------------- Assets 1,942,636 - ----------------------------------------------------------------------
(6) Reclassifications Certain reclassifications of prior year amounts have been made to conform with the current year presentation. 8 Alliance Bancorp and Subsidiaries Management's Discussion and Analysis of Financial Condition and Results of Operations General Alliance Bancorp ( the "Company") is a registered savings and loan holding company incorporated under the laws of the state of Delaware and is engaged in the business of providing financial service products to the public through its wholly-owned subsidiary, Liberty Federal Bank (the "Bank"). The Bank, a Federal savings bank chartered under the authority of the Office of Thrift Supervision ("OTS"), originally was organized in 1934, and changed its charter from a federal savings and loan association to a federal savings bank in 1991. The Bank is a member of the Federal Home Loan Bank ("FHLB") System and its deposit accounts are insured to the maximum allowable amount by the Federal Deposit Insurance Corporation ("FDIC"). The Bank is regulated by the OTS and the FDIC and is further regulated by the Board of Governors of the Federal Reserve System as to reserves required to be maintained against deposits and certain other matters. The Bank is a community-oriented company providing financial services through nineteen full service retail banking facilities in Chicago; north, west and southwestern Cook County; and DuPage County in Illinois. The Bank offers a variety of deposit products in an attempt to attract funds from the general public in highly competitive market areas surrounding its offices. In addition to deposit products, the Bank also offers its customers financial advice and security brokerage services through INVEST Financial Corporation ("INVEST"). The Bank invests its retail deposits primarily in mortgage and consumer loans, investment securities and mortgage-backed securities, secured primarily by one-to four-family residential loans. The earnings of the Bank are primarily dependent on its net interest income, which is the difference between the interest income earned on its loans, mortgage-backed and investment securities portfolios, and its cost of funds, consisting of the interest paid on its deposits and borrowings. The Bank's earnings are also affected by noninterest income, including income related to loan origination fees contributed by Liberty Home Mortgage and the noncredit consumer related financial services offered by the Bank, such as net commissions received by the Bank from securities brokerage services, commissions from the sale of insurance products, loan servicing income, fee income on transaction accounts, and interchange fees from its shared ATMs. The Bank's noninterest income has also been affected by gains from the sale of various assets, including loans, mortgage-backed securities, investment securities, loan servicing, and real estate. Noninterest expense consists principally of employee compensation and benefits, occupancy expense, federal deposit insurance premiums, and other general and administrative expenses of the Bank and Liberty Home Mortgage. The Bank's results of operations are also significantly affected by general economic and competitive conditions, particularly changes in market interest rates, government policies and actions of regulatory authorities. Forward-Looking Statements This Quarterly Report on Form 10-Q may contain certain forward-looking statements consisting of estimates with respect to the financial condition, results of operations and business of the Company that are subject to various factors which could cause actual results to differ materially from these estimates. These factors include, but are not limited to, general economic conditions, changes in interest rates, deposit flows, loan demand, real estate values, and competition; changes in accounting principles, policies, or guidelines; changes in legislation or regulation; and other economic, competitive, governmental, regulatory, and technological factors affecting the Company's operations, pricing, products and services, including Year 2000 issues. 9 Liquidity/Capital Resources The Company's primary sources of funds are deposits, borrowings, principal and interest payments on loans and mortgage-backed securities and the sale of loans, mortgage-backed and investment securities. 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 rate cycles and economic conditions. The Bank is required by regulation to maintain specific minimum levels of liquid investments. Regulations currently in effect require the Bank to maintain liquid assets at least equal to 4.0% of the sum of its average daily balance of net withdrawable accounts and short-term borrowed funds. This regulatory requirement may be changed from time to time by the OTS to reflect current economic conditions and deposit flows. The Bank's average liquidity ratio was 11.66% for the quarter ended March 31, 2000. The Company's most liquid assets are cash and cash equivalents, which include investments in highly liquid, short-term investments and interest-bearing deposits. The levels of these assets are dependent on the Company's operating, financing, lending and investing activities during any given period. At March 31, 2000, cash and cash equivalents totaled $26.1 million. Liquidity management for the Company is both a daily and long-term function of the Company's management strategy. Excess funds are generally invested in short-term investments and interest-bearing deposits. In the event that the Company should require funds beyond its ability to generate them internally, additional sources of funds are available through the use of FHLB advances. The Company's cash flows are comprised of three classifications: cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities. Net cash related to operating activities, consisting primarily of interest and dividends received less interest paid on deposits, the origination and sale of loans, the gain on early extinguishment of debt and the loss on sales of mortgage-backed and investment securities available for sale, provided $759,000 for the three months ended March 31, 2000. Net cash related to investing activities, consisting primarily of disbursements for loans originated or purchased for investment, purchases of mortgage-backed and investment securities available for sale, offset by sales of mortgage-backed and investment securities available for sale, maturities of investment securities available for sale, principal collections on loans and mortgage-backed securities, provided $93.1 million for the three months ended March 31, 2000. Net cash utilized by financing activities, consisting primarily of net activity in deposit and escrow accounts, net proceeds from borrowed funds, the payment of dividends and the purchase of treasury stock, totaled $128.3 million for the three months ended March 31, 2000. The Bank's tangible capital ratio at March 31, 2000 was 7.30%. This exceeded the tangible capital requirement of 1.5% of adjusted assets by $105.9 million. The Bank's core capital ratio at March 31, 2000 was 7.30%. This exceeded the core capital requirement of 3.0% of adjusted assets by $78.5 million. The Bank's risk-based capital ratio was 11.51% at March 31, 2000. The Bank currently exceeds the risk-based capital requirement of 8.0% of risk-weighted assets by $42.2 million. Changes in Financial Condition The Company had total assets of $1.8 billion at March 31, 2000, a decrease of $125.3 million, or 6.4%, from December 31, 1999. During this quarter, the Company auctioned $125 million of FHLB of Chicago advances to other member banks of the FHLB of Chicago. The Company recorded a pre-tax gain of $8.8 million on the sale of these advances. Concurrently, the Company sold $122 million of investment and mortgage-backed securities, available for sale, recognizing losses of $6.3 million. The gain on these combined transactions, net of fees and tax was $1.4 million. This de-leveraging transaction represented approximately 6% of the Company's assets. It is anticipated through re-leveraging that the Company will invest prudently in commercial and multi-family loan products at increased spreads. 10 Loans totaled $1.4 billion at March 31, 2000, an increase of $47.4 million. Loan originations were $118.1 million for the three months ended March 31, 2000, offset by loan sales of $12.2 million and principal repayments of $57.9 million. Deposits totaled $1.3 billion at March 31, 2000, an increase of $13.7 million. The deposit base and the interest paid on deposits continues to be affected by alternative investment products and competition within the Company's market areas. The weighted average deposit cost at March 31, 2000 was 4.66% compared to 4.52% at December 31, 1999. Stockholders' equity totaled $155.8 million at March 31, 2000, an increase of $2.1 million. On November 3, 1999, the Company announced a stock repurchase plan under which the Company is authorized to repurchase up to 1,036,000 shares of its outstanding common stock. At March 31, 2000, 676,933 shares had been repurchased. A cost of $8.3 million was recorded in the current year, which is reflected as a reduction in stockholders' equity. At March 31, 2000, the number of common shares outstanding was 9,724,055 and the book value per common share outstanding was $16.02 per share. On March 17, 2000, the Company declared a $0.14 per share cash dividend payable April 14, 2000 to shareholders of record on March 31, 2000. Year 2000 The Company had developed and implemented a plan to deal with the issues associated with programming code within computer systems and related embedded technology with respect to the rollover of the two digit year value to 00 ("Year 2000"). The issue was whether computer systems would properly recognize date sensitive information when the year changed to 2000. The Company has not experienced any significant issues associated with the Year 2000 problem as a result of the date change to March 31, 2000 or any date subsequent thereto. The incremental costs related to the Year 2000 compliance were approximately $250,000 in 1999 and $250,000 in 1998, respectively. Any additional incremental costs associated with Year 2000 issues are not expected to exceed $50,000. Management will continue to monitor operations through the year 2000 and although no assurances can be given, it is not expected that any future adverse developments will arise with respect to Year 2000. Readers should be cautioned that forward looking statements contained in the Year 2000 disclosure should be read in conjunction with the Company's disclosures regarding "Forward-Looking Statements" Recent and Proposed Changes in Accounting Pronouncements In June 1998, FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," which is effective for fiscal years beginning after June 15, 1999. The statement requires all derivatives to be measured at fair value and to be recognized as either assets or liabilities in the statement of financial position. In June 1999, FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities-Deferral of the Effective Date of FASB Statement No. 133." This statement defers the effective date for one year. Management, at this time, has not determined the impact of adopting this statement on January 1, 2001. 11 Asset Quality Non-performing Assets The following table sets forth information as to non-accrual loans and real estate owned at the dates indicated. The Company discontinues the accrual of interest on loans ninety days or more past due, at which time all accrued but uncollected interest is reversed. There were no loans at March 31, 2000 nor during the quarter ended March 31, 2000, which met the definition of an impaired loan. A loan is considered impaired when it is probable that a creditor will be unable to collect contractual principal and interest due according to the contractual terms of the loan agreement. Loans considered for impairment do not include residential mortgage and consumer installment loans.
Quarter Ended -------------------------------------------------------------------------------- March 31, December 31, September 30, June 30, March 31, (Dollars in thousands) 2000 1999 1999 1999 1999 - -------------------------------------------------------------------------------------------------------------------- Non-accrual mortgage loans 90 days or more past due $ 3,143 3,701 3,656 3,416 4,513 Non-accrual commercial real estate loans 90 days or more past due 643 189 - 250 - Non-accrual consumer loans 90 days or more past due 685 651 302 177 157 -------------------------------------------------------------------------------- Total non-performing loans 4,471 4,541 3,958 3,843 4,670 Total foreclosed real estate 693 241 78 164 148 -------------------------------------------------------------------------------- Total non-performing assets $ 5,164 4,782 4,036 4,007 4,818 -------------------------------------------------------------------------------- Total non-performing loans to total loans 0.32 % 0.33 0.30 0.30 0.37 Total non-performing assets to total assets 0.28 % 0.24 0.21 0.21 0.25
The following table sets forth certain information regarding the Company's allowance for loan losses at the dates indicated.
Quarter Ended -------------------------------------------------------------------------------- March 31, December 31, September 30, June 30, March 31, (Dollars in thousands) 2000 1999 1999 1999 1999 - -------------------------------------------------------------------------------------------------------------------- Balance at beginning of period $ 6,031 6,251 6,307 6,346 6,350 Provision for loan losses 200 50 50 50 50 Charge-offs 115 288 111 109 59 Recoveries 19 18 5 20 5 -------------------------------------------------------------------------------- Balance at end of period $ 6,135 6,031 6,251 6,307 6,346 -------------------------------------------------------------------------------- Ratio of charge-offs during the period to average loans outstanding 0.01 % 0.02 0.01 0.01 0.01 Ratio of allowance for loan losses to net loans recievable at end of period 0.43 % 0.44 0.48 0.49 0.50 Ratio of allowance for loan losses to non-performing loans at end of period 137.22 % 132.81 157.93 164.12 135.89
Classification of Assets The Company regularly reviews the assets in its portfolio to determine whether any assets require classification in accordance with applicable regulations. As of March 31, 2000 the Company had total classified assets of $4.9 million, of which $4.5 million were classified "substandard" and $400,000 were classified as "doubtful." The assets so classified consisted of auto loans, single family residential loans including equity lines of credit and foreclosed single family residential loans (real estate owned). 12 Loan Portfolio Composition The following table sets forth the composition of the Company's loan portfolio in dollar amounts and in percentages at the dates indicated.
March 31, December 31, September 30, June 30, 2000 1999 1999 1999 ---------------------------------------------------------------------------------------------- Percent Percent Percent Percent of of of of Amount Total Amount Total Amount Total Amount Total ---------------------- ---------------------- ------------- ---------------------- ---------- (Dollars in thousands) Mortgage loans: One-to four-family 724,859 48.02 % 723,311 49.39 712,290 51.90 736,983 54.70 Multi-family 176,778 11.71 172,614 11.79 164,828 12.01 164,051 12.18 Commercial real estate 142,794 9.46 140,480 9.59 119,376 8.70 123,103 9.14 Construction 191,116 12.66 173,866 11.87 143,229 10.44 111,888 8.30 Land 5,680 0.38 2,766 0.19 1,251 0.09 2,126 0.16 ---------------------- ---------------------- ------------- ---------------------- ---------- Total mortgage loans 1,241,227 82.23 1,213,037 82.83 1,140,974 83.14 1,138,151 84.48 Other loans: Commercial leases 25,371 1.68 20,846 1.42 20,396 1.49 18,755 1.39 Home equity lines of credit 102,920 6.82 100,077 6.83 93,958 6.85 91,979 6.83 Automobile loans 123,354 8.17 115,004 7.85 102,212 7.45 85,082 6.31 Commercial business loans 4,012 0.27 4,163 0.28 4,071 0.30 3,936 0.29 Consumer loans 12,510 0.83 11,517 0.79 10,566 0.77 9,499 0.70 ---------------------- ---------------------- ------------- ---------------------- ---------- Total loans receivable 1,509,394 100.00 % 1,464,644 100.00 1,372,177 100.00 1,347,402 100.00 ---------- ---------- ---------- ---------- Add (deduct): Loans in process (92,967) (95,726) (69,225) (65,875) Premiums and deferred loan costs, net 397 379 485 330 Allowance for loan losses (6,135) (6,031) (6,251) (6,307) ------------- ------------- ------------- ------------ Loans receivable, net 1,410,689 1,363,266 1,297,186 1,275,550 ------------- ------------- ------------- ------------
March 31, 1999 ----------------------- Percent of Amount Total ---------------------- Mortgage loans: One-to four-family 767,380 57.89 Multi-family 171,485 12.94 Commercial real estate 111,569 8.42 Construction 83,308 6.29 Land 1,885 0.14 ---------------------- Total mortgage loans 1,135,627 85.68 Other loans: Commercial leases 21,030 1.59 Home equity lines of credit 91,234 6.88 Automobile loans 63,811 4.81 Commercial business loans 4,118 0.31 Consumer loans 9,652 0.73 ---------------------- Total loans receivable 1,325,472 100.00 ---------- Add (deduct): Loans in process (52,768) Premiums and deferred loan costs, net 254 Allowance for loan losses (6,346) ------------ Loans receivable, net 1,266,612 ------------ 13 Asset/Liability Management The Company's asset and liability management strategy attempts to minimize the risk of a significant decrease in net interest income caused by changes in the interest rate environment without penalizing current income. Net interest income, the primary source of the Company's earnings, is affected by interest rate movements. To mitigate the impact of changes in interest rates, a balance sheet must be structured so that repricing opportunities exist for both assets and liabilities in approximately equivalent amounts at basically the same time intervals. Imbalances in repricing opportunities at any point in time constitute an interest sensitivity gap, which is the difference between interest sensitive assets and interest sensitive liabilities. These static measurements do not reflect the results of any potential activity and are best used as early indicators of potential interest rate exposures. Interest Rate Sensitivity Gap Analysis
At March 31, 2000 ----------------------------------------------------------------- More Than More Than 1 Year 1 Year 3 Years More Than (Dollars in thousands) Or Less To 3 Years To 5 Years 5 Years Total - -------------------------------------------------------------------------------------------------------------------- Interest-Earning Assets: Mortgage loans (1) $ 344,645 200,054 195,906 401,887 1,142,492 Equity lines of credit (1) 103,197 - - - 103,197 Consumer loans and leases (1) 8,258 41,180 104,932 12,267 166,637 Mortgage-backed securities (2) 74,996 28,101 20,829 122,592 246,518 Interest-bearing deposits 3,299 - - - 3,299 Investment securities (2) 29,178 - - 54,908 84,086 - -------------------------------------------------------------------------------------------------------------------- Total interest-earning assets 563,573 269,335 321,667 591,654 1,746,229 Interest-Bearing Liabilities: Savings accounts 35,867 54,478 35,515 85,120 210,980 NOW interest-bearing accounts 23,991 21,961 5,876 13,012 64,840 Money market accounts 64,150 8,934 4,253 3,865 81,202 Certificate accounts 647,817 178,795 16,198 - 842,810 Borrowed funds 234,450 113,700 50,000 - 398,150 - -------------------------------------------------------------------------------------------------------------------- Total interest-bearing liabilities 1,006,275 377,868 111,842 101,997 1,597,982 - -------------------------------------------------------------------------------------------------------------------- Interest sensitivity gap $ (442,702) (108,533) 209,825 489,657 148,247 - -------------------------------------------------------------------------------------------------------------------- Cumulative interest sensitivity gap $ (442,702) (551,235) (341,410) 148,247 - -------------------------------------------------------------------------------------------------------------------- Cumulative interest sensitivity gap as a percentage of total assets (23.89) % (29.75) (18.43) 8.00 Cumulative net interest-earning assets as a percentage of interest-bearing liabilities 56.01 % 60.17 77.18 109.28 - --------------------------------------------------------------------------------------------------------------------
(1) For purposes of the gap analysis, mortgage, equity and consumer loans and leases are not reduced by the allowance for loan losses and are reduced for non-performing loans. (2) Mortgage-backed and investment securities are not increased (decreased) by unrealized gains (losses) resulting from the accounting for available for sale securities under FASB No. 115. Certain shortcomings are inherent in the method of analysis presented in the foregoing table. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Additionally, certain assets, such as ARM loans, have features which restrict changes in interest rates on a short-term basis and over the life of the asset. Further, in the event of a change in interest rates, prepayment and early withdrawal levels would likely deviate significantly from those assumed in calculating the table. Finally, the ability of many borrowers to service their debt may decrease in the event of an interest rate increase. The Company seeks to reduce the volatility of its net interest income by managing the relationship of interest rate sensitive assets to interest rate sensitive liabilities. To accomplish this, the Company has attempted to increase 14 the percentage of assets, whose interest rates adjust more frequently, and to reduce the average maturity of such assets. The Company currently originates shorter maturity fixed-rate commercial real estate loans, home equity lines of credit and consumer loans, which generally mature or reprice more quickly than fixed-rate residential real estate loans. Adjustable-rate loans are nearly as likely to refinance in low interest rate environments as fixed-rate loans. Often, interest rate cycles allow for these refinancings before the adjustable-rate loans can adjust to fully indexed market rates. In such declining interest rate environments, that result in high levels of loan refinancings, the Company may decide to acquire longer fixed-rate mortgage loans or mortgage-backed securities. To provide an acceptable level of interest rate risk, the Company will implement a funding strategy using long-term FHLB borrowings. As part of its asset/liability strategy, the Company has implemented a policy to maintain its cumulative one-year interest sensitivity gap ratio within a range of (15%) to 15% of total assets, which reflects the current interest rate environment and allows the Company to maintain an acceptable net interest rate spread. The gap ratio will fluctuate as a result of market conditions and management's expectation of future interest rate trends. At March 31, 2000, the cumulative one-year interest sensitivity gap as a percentage of assets was (23.89%) compared to (14.77%) at December 31, 1999. The major factor contributing to the change was a shift from the "More Than 1 Year to 3 Years" category to the "1 Year Or Less" category of over $140 million of eighteen month certificates of deposit, which were promoted by the Bank in the fall of 1999. Currently, the Bank is promoting a longer-term certificate of deposit and is negotiating longer-term advances with the FHLB of Chicago to improve the interest sensitivity gap. Quantitative and Qualitative Disclosures About Market Risk As its primary interest rate risk planning tool, the Bank utilizes a market value model. The model measures the Bank's interest rate risk by approximating the Bank's net portfolio value ("NPV"), which is the net present value of expected cash flows from assets, liabilities and any off-balance sheet contracts, under a range of interest rate scenarios, which range from a 300 basis point increase to a 300 basis point decrease in market interest rates (measured in 100 basis point increments). The Bank's asset and liability structure results in a decrease in NPV in a rising interest rate scenario and an increase in NPV in a declining interest rate scenario. During periods of rising interest rates, the value of monetary assets declines more rapidly than the value of monetary liabilities rises. Conversely, during periods of falling interest rates, the value of monetary assets rises more rapidly than the value of monetary liabilities declines. However, the amount of change in value of specific assets and liabilities due to changes in interest rates is not the same in a rising rate environment as in a falling interest rate environment (i.e., the amount of value increase under a specific rate decline may not equal the amount of value decrease under an identical upward interest rate movement). There have been no material changes in market risk since December 31, 1999 as reported in the Company's Form 10-K for the year ended December 31, 1999. Analysis of Net Interest Income Net interest income represents the difference between income on interest-earning assets and expense on interest-bearing liabilities. Net interest income depends upon the volume of interest-earning assets and interest-bearing liabilities and the interest rate earned or paid on them. 15 Average Balance Sheets The following table sets forth certain information relating to the Company's Consolidated Statements of Financial Condition and reflects the average yield on assets and the average cost of liabilities for the periods indicated. Such yields and costs are derived by dividing income or expense by the average balance of assets or liabilities, respectively, for the periods shown. Average balances are derived from average daily balances and include non-performing loans. The yields and costs include fees, which are considered adjustments to yields.
Three Months Ended March 31, ----------------------------------------------------------------------------- 2000 1999 ----------------------------------------------------------------------------- Average Average Average Yield/ Average Yield/ (Dollars in thousands) Balance Interest Cost Balance Interest Cost - -------------------------------------------------------------------------------------------------------------- Assets: Interest-earning assets: Mortgage loans, net $ 1,121,652 $ 21,420 7.64 % $ 1,107,156 $ 20,348 7.35 % Equity lines of credit 103,931 2,114 8.16 95,117 1,695 7.23 Automobile loans 120,560 2,337 7.78 55,380 1,195 8.75 Consumer loans and leases 34,177 690 8.08 33,536 637 7.63 Mortgage-backed securities 331,257 5,371 6.49 341,732 5,402 6.32 Interest-bearing deposits 7,189 100 5.58 151,345 1,731 4.57 Investment securities 94,472 1,623 6.88 85,960 1,489 6.95 - -------------------------------------------------------------------------------------------------------------- Total interest-earning assets 1,813,238 33,655 7.43 1,870,226 32,497 6.96 Noninterest-earning assets 91,268 92,073 - -------------------------------------------------------------------------------------------------------------- Total assets $ 1,904,506 $ 1,962,299 ============================================================================================================== Liabilities and Stockholders' Equity: Interest-bearing liabilities: Deposits: Savings accounts $ 1,042,422 $ 12,483 4.80 % $ 1,067,734 $ 12,822 4.87 % NOW interest-bearing accounts 65,564 154 0.94 58,359 150 1.04 Money market accounts 83,460 670 3.22 84,366 667 3.21 - -------------------------------------------------------------------------------------------------------------- Total deposits 1,191,446 13,307 4.48 1,210,459 13,639 4.57 Borrowed funds 471,968 6,499 5.52 462,127 6,115 5.29 - -------------------------------------------------------------------------------------------------------------- Total interest-bearing liabilities 1,663,414 19,806 4.78 1,672,586 19,754 4.77 NOW noninterest-bearing deposits 56,086 67,553 Other liabilities 31,234 36,208 - -------------------------------------------------------------------------------------------------------------- Total liabilities 1,750,734 1,776,347 Stockholders' equity 153,772 185,952 - -------------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $ 1,904,506 $ 1,962,299 ============================================================================================================== Net interest income/ interest rate spread $ 13,849 2.65 % $ 12,743 2.19 % ============================================================================================================== Net interest-earning assets/ net interest margin $ 149,824 3.06 % $ 197,640 2.73 % ============================================================================================================== Interest-earning assets to interest-bearing liabilities 1.09 X 1.12 X ============================================================================================================== At March 31, 2000 ---------------------------- Yield/ (Dollars in thousands) Balance Cost - ------------------------------------------------------------- Assets: Interest-earning assets: Mortgage loans, net $ 1,140,171 7.62 % Equity lines of credit 103,329 8.66 Automobile loans 125,296 8.32 Consumer loans and leases 41,893 8.25 Mortgage-backed securities 234,276 6.72 Interest-bearing deposits 3,299 6.14 Investment securities 80,573 6.89 - ------------------------------------------------------------- Total interest-earning assets 1,728,837 7.59 Noninterest-earning assets 108,195 - ------------------------------------------------------------- Total assets $ 1,837,032 - ------------------------------------------------------------- Liabilities and Stockholders' Equity: Interest-bearing liabilities: Deposits: Savings accounts $ 1,053,790 4.99 % NOW interest-bearing accounts 64,840 0.97 Money market accounts 81,202 3.33 - ------------------------------------------------------------- Total deposits 1,199,832 4.66 Borrowed funds 398,150 5.61 - ------------------------------------------------------------- Total interest-bearing liabilities 1,597,982 4.90 NOW noninterest-bearing deposits 56,110 Other liabilities 27,133 - ------------------------------------------------------------- Total liabilities 1,681,225 Stockholders' equity 155,807 - ------------------------------------------------------------- Total liabilities and stockholders' equity $ 1,837,032 - ------------------------------------------------------------- Net interest income/ interest rate spread 2.69 % ============================= =============== Net interest-earning assets/ net interest margin ============================= Interest-earning assets to interest-bearing liabilities =============================
16 Rate/Volume Analysis The following table presents the extent to which changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities have affected the Company's interest income and interest expense during the periods indicated. Information is provided in each category with respect to (i) changes attributable to changes in volume (changes in volume multiplied by prior rate), (ii) changes attributable to changes in rate (changes in rate multiplied by prior volume), and (iii) the net change. The changes attributable to the combined impact of volume and rate have been allocated proportionately to the changes due to volume and the changes due to rate.
Three Months Ended March 31, 2000 Compared To Three Months Ended March 31, 1999 --------------------------------------- Increase (Decrease) In Net Interest Income Due To --------------------------------------- (In thousands) Volume Rate Net - -------------------------------------------------------------------------------------------------------- Interest-Earning Assets: Mortgage loans, net $ 267 805 1,072 Equity lines of credit 175 244 419 Automobile loans 1,289 (147) 1,142 Consumer loans and leases 13 40 53 Mortgage-backed securities (171) 140 (31) Interest-bearing deposits (1,944) 313 (1,631) Investment securities 149 (15) 134 - -------------------------------------------------------------------------------------------------------- Total (222) 1,380 1,158 - -------------------------------------------------------------------------------------------------------- Interest-Bearing Liabilities: Deposits (147) (185) (332) Borrowed funds 126 258 384 ======================================================================================================== Total (21) 73 52 ======================================================================================================== Net change in net interest income $ (201) 1,307 1,106 ========================================================================================================
Comparison of Operating Results for the Three Months Ended March 31, 2000 and March 31, 1999 General Net income totaled $5.2 million, or $0.52 per diluted share for the three months ended March 31, 2000, as compared to $4.6 million, or $0.39 per diluted share reported for the quarter ended March 31, 1999. During the current quarter, the Company auctioned $125 million of FHLB of Chicago advances to other member banks of the FHLB of Chicago and recorded a pre-tax gain of $8.8 million on the sale of these advances. This gain was recorded as an "Extraordinary item-gain on early extinguishment of debt," net of tax of $5.7 million, or $0.57 per diluted share. Concurrently, the Company sold $122 million of investment and mortgage-backed securities, available for sale, recognizing losses of $6.3 million. The gain on these combined transactions, net of fees and tax was $1.4 million. This de-leveraging transaction represented approximately 6% of the Company's assets. Net interest income for the three months ended March 31, 2000 was $13.8 million, an increase of $1.1 million, or 8.7%, from the March 31, 1999 quarter of $12.7 million. Interest Income Interest income for the quarter ended March 31, 2000 totaled $33.7 million, an increase of $1.2 million, or 3.6%, from the prior year's quarter. Interest income on mortgage loans, the largest component of interest-earning assets, increased $1.1 million, or 5.3%, to $21.4 million from the March 1999 quarter. The average balance of the mortgage portfolio increased $14.5 million. The annualized average yield on the mortgage loan portfolio increased 17 to 7.64% for the three months ended March 31, 2000 from 7.35% for the 1999 period. Interest income on equity lines of credit increased $419,000, or 24.7%, to $2.1 million from the prior year's quarter. The Bank's home equity line of credit product is priced based on the prime rate, which was 8.69% for the current quarter as compared to 7.75% for the comparable quarter a year ago. The average balance of equity lines of credit increased $8.8 million, to $103.9 million from $95.1 million from the March 1999 quarter. Interest income on auto loans increased $1.1 million to $2.3 million for the three months ended March 31, 2000. The average balance of the auto loan portfolio increased $65.2 million, while the annualized average yield on the portfolio decreased to 7.78%. This decrease was a direct result of market conditions for offering competitive products. The average balance of interest-bearing cash decreased $144.2 million, to $7.2 million. The March 1999 quarter was unusually high as a result of repositioning the investment portfolios to accommodate the cash flow and liquidity needs of the Bank. Interest Expense Interest expense on deposit accounts decreased $332,000, or 2.4%, to $13.3 million, for the quarter ended March 31, 2000 compared to the prior year's quarter. The decrease is related to both a decrease in the average deposit base and the annualized average cost of deposits. The average deposit base decreased $19.0 million to $1.2 billion when comparing the quarters. The annualized average cost of deposits for the three months ended March 31, 2000 was 4.48%, a decrease from the annualized average cost of 4.57% for the March 1999 period. For the quarter ended March 31, 2000, the Company recorded interest expense on borrowed funds of $6.5 million on an average balance of $472 million at an annualized cost of 5.52% related to FHLB borrowings. During the current quarter, the Company repaid $130 million of FHLB advances that matured or were called and added $115 million at current market rates. Net Interest Income Net interest income for the three months ended March 31, 2000 increased $1.1 million or 8.7%, to $13.8 million from the 1999 period. The annualized average yield on interest-earning assets increased from 6.96% to 7.43% when comparing the 1999 and 2000 quarters. The annualized average cost of interest-bearing liabilities increased from 4.77% to 4.78%. This resulted in an annualized average net interest rate spread of 2.65% for the three-month period ended March 31, 2000 compared to 2.19% for the prior year's period. Both the average balance of interest-earning assets and interest-bearing liabilities decreased during the quarter ended March 31, 2000 compared to the 1999 quarter. Provision for Loan Losses Based on management's evaluation of the loan portfolio, a provision of $200,000 for loan losses was recorded during the quarter ended March 31, 2000. The allowance for loan losses represents 0.43% of total loans receivable at March 31, 2000. The amount of non-performing loans at March 31, 2000, was $4.5 million, or 0.32% of total loans, compared to $4.7 million or 0.37% of total loans at March 31, 1999. Noninterest Income Total noninterest income for the three months ended March 31, 2000 was an expense of $3.9 million. The quarter ended March 31, 2000 included losses on sales of mortgage-backed and investment securities available for sale of $6.6 million. As previously mentioned, the Company sold these securities concurrently with the auction of FHLB advances as part of a de-leveraging strategy. The gain on the sale of the FHLB advances is shown as an extraordinary item-gain on early extinguishment of debt of $5.7 million, net of tax. Other fees and commissions decreased $3.5 million, primarily due to a decrease in loan origination fees contributed by Liberty Home Mortgage. The national market demand for home mortgage loans changed dramatically from the beginning of 1999 due to increasing mortgage rates. Liberty Home Mortgage sold mortgages totaling $260 million in the first quarter of 1999 compared to $30 million sold in the current quarter. Other income for the quarter ended March 31, 1999, included a gain on the sale of Liberty Financial Services Inc.'s insurance book of business of $250,000. The current quarter includes a write-down in value of an equity investment of $112,000, reflecting a decrease in the respective market value. 18 Noninterest Expense Noninterest expense for the quarter ended March 31, 2000 totaled $10.8 million, a decrease of $2.0 million, or 15.9% from the prior year's quarter. Compensation and benefits decreased $2.0 million, primarily due to the decrease in commissions paid related to the origination, sale and delivery of loans by Liberty Home Mortgage. Income Tax Provision The provision for income taxes for the three months ended March 31, 2000 was $2.5 million. The effective tax rate for the quarter was 32.9% compared to 29.4% for the 1999 quarter. The lower effective tax rate for the March 1999 quarter was due to a reduction in the provision of $600,000 as a result of the completion of a review of the Company's tax liability. The current quarter's income tax provision reflects lower state taxable income as a direct result of certain structural changes initiated by the Company in July of 1999 in order to position itself for future business opportunities. Part II - Other Information Item 1. Legal Proceedings Not Applicable. Item 2. Changes in Securities Not Applicable. Item 3. Defaults Upon Senior Securities Not Applicable. Item 4. Submission of Matters to a Vote of Security Holders Not Applicable. Item 5. Other Information Not Applicable. 19 Item 6. Exhibits and Reports on Form 8-K. (a) Exhibit No. 11 Statement re: Computation of Per Share Earnings
Three Months Ended March 31, 2000 1999 ------------------------------------------ Net income $ 5,152,000 4,601,000 ------------------------------------------ Basic earnings per share-weighted average shares 9,961,869 11,394,593 Effect of dilutive securities-stock options - 488,674 ------------------------------------------ Diluted earnings per share-adjusted weighted average shares 9,961,869 11,883,267 ------------------------------------------ Basic earnings per share $ 0.52 0.40 ------------------------------------------ Diluted earnings per share $ 0.52 0.39 ------------------------------------------
(b) Reports on Form 8-K. A report on Form 8-K was filed by the Company on February 28, 2000 for purposes of reporting pursuant to Items 5 and 7 of Form 8-K, the successful completion of an auction of $100,000,000 of Federal Home Loan Bank advances. 20 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. Alliance Bancorp Dated: May 5, 2000 /s/ Kenne P. Bristol ------------------------ ------------------------------- Kenne P. Bristol President and Chief Executive Officer Dated: May 5, 2000 /s/ Richard A. Hojnicki ------------------------ ------------------------------- Richard A. Hojnicki Executive Vice President and Chief Financial Officer 21 EX-27 2 FINANCIAL DATA SCHEDULE
9 1,000 3-MOS DEC-31-2000 MAR-31-2000 22,795 3,299 0 0 286,990 0 0 1,416,824 6,135 1,837,032 1,255,942 234,450 190,833 0 0 0 117 155,690 1,837,032 26,561 6,994 100 33,655 13,307 6,499 13,849 200 (6,550) 10,835 (1,088) (548) 5,700 0 5,152 0.52 0.52 3.06 4,471 0 0 0 6,031 115 19 6,135 3,684 0 2,451
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