-----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, M3b9wR3NMwg8um4+sG9YznOSeIbw+syLjdMyUhAPU1jCUJqCM4aRi9gHjb8MnqKn jf1wBmziNoFPE1TY2WO7Ww== /in/edgar/work/20000810/0000950109-00-003201/0000950109-00-003201.txt : 20000921 0000950109-00-003201.hdr.sgml : 20000921 ACCESSION NUMBER: 0000950109-00-003201 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000810 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLIANCE BANCORP CENTRAL INDEX KEY: 0000885638 STANDARD INDUSTRIAL CLASSIFICATION: [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: 690484 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 0001.txt 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 June 30, 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 -9,251,775 shares outstanding as of August 8, 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 June 30, 2000 and December 31, 1999 1 Consolidated Statements of Income for the Three and Six Months Ended June 30, 2000 and 1999 2 Consolidated Statements of Changes in Stockholders' Equity for the Six Months Ended June 30, 2000 and 1999 3 Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2000 and 1999 4 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11 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" 17 Part II. Other Information - -------- ----------------- Item 1. Legal Proceedings 23 Item 2. Changes in Securities 23 Item 3. Defaults upon Senior Securities 23 Item 4. Submission of Matters to a Vote of Security Holders 23 Item 5. Other Information 23 Item 6. Exhibits and Reports on Form 8-K 24 Signature Page 25 Alliance Bancorp and Subsidiaries Consolidated Statements of Financial Condition
June 30, December 31, (In thousands, except share data) 2000 1999 - -------------------------------------------------------------------------------------------------------------------- (unaudited) Assets Cash and due from banks $ 26,174 48,922 Interest-bearing deposits 667 11,598 Investment securities available for sale, at fair value 52,524 64,494 Investment securities at amortized cost (fair value of $9,479) 9,401 - Mortgage-backed securities available for sale, at fair value 225,345 356,434 Mortgage-backed securities at amortized cost (fair value of $13,134) 12,795 - Loans, net of allowance for losses of $6,176 at June 30, 2000 and $6,031 at December 31, 1999 1,464,014 1,363,266 Accrued interest receivable 11,316 10,493 Real estate 19,698 20,796 Premises and equipment, net 13,127 12,528 Stock in Federal Home Loan Bank of Chicago, at cost 28,361 27,383 Due from broker - 550 Other assets 43,073 45,844 - -------------------------------------------------------------------------------------------------------------------- $ 1,906,495 1,962,308 - -------------------------------------------------------------------------------------------------------------------- Liabilities and Stockholders' Equity Liabilities: Deposits $ 1,246,012 1,242,198 Borrowed funds 480,522 538,150 Advances by borrowers for taxes and insurance 11,930 11,358 Accrued expenses and other liabilities 17,723 16,931 - -------------------------------------------------------------------------------------------------------------------- Total liabilities 1,756,187 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; 11,701,460 shares issued and 9,356,138 outstanding at June 30, 2000 11,700,010 shares issued and 10,177,188 outstanding at December 31, 1999 117 117 Additional paid-in capital 108,110 108,093 Retained earnings, substantially restricted 99,389 92,337 Treasury stock, at cost; 2,345,322 shares at June 30, 2000 and 1,522,822 at December 31, 1999 (44,682) (29,857) Accumulated other comprehensive loss (12,626) (17,019) - -------------------------------------------------------------------------------------------------------------------- Total stockholders' equity 150,308 153,671 - -------------------------------------------------------------------------------------------------------------------- Commitments and contingencies - -------------------------------------------------------------------------------------------------------------------- $ 1,906,495 1,962,308 ====================================================================================================================
See accompanying notes to unaudited consolidated financial statements. 1 Alliance Bancorp and Subsidiaries Consolidated Statements of Income
Three Months Ended Six Months Ended June 30, June 30, (In thousands, except per share amounts) 2000 1999 2000 1999 - -------------------------------------------------------------------------------------------------------------------- (unaudited) Interest Income: Loans $ 28,223 23,437 54,784 47,312 Mortgage-backed securities 4,220 7,182 9,591 12,584 Investment securities 1,540 1,842 3,163 3,331 Interest-bearing deposits 196 441 296 2,172 - -------------------------------------------------------------------------------------------------------------------- Total interest income 34,179 32,902 67,834 65,399 - -------------------------------------------------------------------------------------------------------------------- Interest Expense: Deposits 13,726 13,043 27,033 26,682 Borrowed funds 6,513 6,618 13,012 12,733 - -------------------------------------------------------------------------------------------------------------------- Total interest expense 20,239 19,661 40,045 39,415 - -------------------------------------------------------------------------------------------------------------------- Net interest income 13,940 13,241 27,789 25,984 Provision for loan losses 200 50 400 100 - -------------------------------------------------------------------------------------------------------------------- Net interest income after provision for loan losses 13,740 13,191 27,389 25,884 - -------------------------------------------------------------------------------------------------------------------- Noninterest Income: Gain on sales of loans held for sale 21 87 35 469 Loss on sales of mortgage-backed securities available for sale - (17) (6,059) (22) Loss on sales of investment securities available for - - (491) - sale Income from real estate operations 1,136 1,217 2,110 1,728 Servicing fee income, net 53 83 106 231 ATM fee income 490 547 911 1,027 Other fees and commissions 1,733 4,710 3,008 9,514 Other, net 10 56 (79) 436 - -------------------------------------------------------------------------------------------------------------------- Total noninterest income 3,443 6,683 (459) 13,383 - -------------------------------------------------------------------------------------------------------------------- Noninterest Expense: Compensation and benefits 5,149 6,962 10,572 14,369 Occupancy expense 2,028 1,842 4,032 3,616 Federal deposit insurance premiums 69 192 138 393 Advertising expense 320 332 517 542 ATM expense 291 340 560 680 Computer services 332 327 686 664 Other 2,183 2,780 4,702 5,387 - -------------------------------------------------------------------------------------------------------------------- Total noninterest expense 10,372 12,775 21,207 25,651 - -------------------------------------------------------------------------------------------------------------------- Income before income taxes and extraordinary item 6,811 7,099 5,723 13,616 Income tax expense 2,240 2,592 1,700 4,508 - -------------------------------------------------------------------------------------------------------------------- Income before extraordinary item 4,571 4,507 4,023 9,108 Extraordinary item-gain on early extinguishment of debt, net of tax expense of $3,069 - - 5,700 - - -------------------------------------------------------------------------------------------------------------------- Net income $ 4,571 4,507 9,723 9,108 - -------------------------------------------------------------------------------------------------------------------- Basic earnings per share Income before extraordinary item $ 0.48 0.41 0.41 0.81 Extraordinary item, net of tax - - 0.58 - - -------------------------------------------------------------------------------------------------------------------- Net income 0.48 0.41 0.99 0.81 - -------------------------------------------------------------------------------------------------------------------- Diluted earnings per share Income before extraordinary item 0.46 0.39 0.40 0.78 Extraordinary item, net of tax - - 0.56 - - -------------------------------------------------------------------------------------------------------------------- Net income $ 0.46 0.39 0.96 0.78 - --------------------------------------------------------------------------------------------------------------------
See accompanying notes to unaudited consolidated financial statements. 2 Alliance Bancorp and Subsidiaries Consolidated Statements of Changes in Stockholders' Equity
Accumulated Additional Other Comprehensive Common Paid-in Retained Treasury Comprehensive (In thousands, except per share amounts) Income Stock Capital Earnings Stock Income (Loss) Total - ------------------------------------------------------------------------------------------------------------------------------------ (unaudited) Six Months Ended June 30, 1999 Balance at December 31, 1998 $ 116 107,130 80,219 (1,511) (17) 185,937 Net income 9,108 - - 9,108 - - 9,108 Other comprehensive income, net of tax Change in unrealized gain (loss) on securities available for sale, net of reclassification adjustment (9,206) - - - - (9,206) (9,206) ------- Total comprehensive loss (98) Cash dividends declared, $0.28 per share - - (3,100) - - (3,100) Purchase of treasury stock - - - (9,691) - (9,691) Proceeds from exercise of stock options 1 278 - - - 279 Tax benefit from stock related compensation - 194 - - - 194 - ------------------------------------------------------------------------------------------------------------------------------------ Balance at June 30, 1999 $ 117 107,602 86,227 (11,202) (9,223) 173,521 ==================================================================================================================================== Six Months Ended June 30, 2000 Balance at December 31, 1999 $ 117 108,093 92,337 (29,857) (17,019) 153,671 Net income 9,723 - - 9,723 - - 9,723 Other comprehensive income, net of tax Change in minimum pension liability 23 - - - - 23 23 Change in unrealized gain (loss) on securities available for sale, net of reclassification adjustment 4,370 - - - - 4,370 4,370 ------- Total comprehensive income 14,116 Cash dividends declared, $0.28 per share - - (2,671) - - (2,671) Purchase of treasury stock - - - (14,825) - (14,825) Proceeds from exercise of stock options - 12 - - - 12 Tax benefit from stock related compensation - 5 - - - 5 - ------------------------------------------------------------------------------------------------------------------------------------ Balance at June 30, 2000 $ 117 108,110 99,389 (44,682) (12,626) 150,308 ====================================================================================================================================
See accompanying notes to unaudited consolidated financial statements. 3 Alliance Bancorp and Subsidiaries Consolidated Statements of Cash Flows
Six Months Ended June 30, (In thousands) 2000 1999 - -------------------------------------------------------------------------------------------------------------------- (unaudited) Cash Flows From Operating Activities: Net income $ 9,723 9,108 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 1,535 1,274 Provision for loan losses 400 100 Amortization of premiums, discounts, and deferred loan fees 662 808 Originations of loans held for sale (46,367) (349,470) Sale of loans originated for resale 33,906 438,411 Gain on sales of loans (35) (469) Loss on sales of mortgage-backed securities available for sale 6,059 22 Loss on sales of investment securities available for sale 491 - Extraordinary item-gain on early extiguishment of debt, net of tax (5,700) - Increase in accrued interest receivable (823) (267) Increase in other assets (3,017) (2,215) Increase (decrease) in accrued expenses and other liabilities 952 (2,470) - -------------------------------------------------------------------------------------------------------------------- Net cash provided by (used in) operating activities (2,214) 94,832 - -------------------------------------------------------------------------------------------------------------------- Cash Flows From Investing Activities: Loans originated or purchased for investment (235,220) (223,796) Purchases of: Mortgage-backed securities available for sale - (237,351) Mortgage-backed securities held to maturity (12,899) - Investment securities available for sale (501) (64,655) Investment securities held to maturity (9,400) - Stock in Federal Home Loan Bank of Chicago (978) (2,500) Premises and equipment (2,134) (1,368) Proceeds from sale or maturity of: Mortgage-backed securities available for sale 115,180 84,665 Investment securities available for sale 12,505 - Stock in Federal Home Loan Bank of Chicago - 1,451 Loans held for investment 7,814 14,594 Proceeds from maturities of investment securities available for sale - 39,425 Net (increase) decrease in real estate joint ventures 1,487 (1,786) Principal collected on loans 137,893 178,170 Principal collected on mortgage-backed securities 16,881 75,192 - -------------------------------------------------------------------------------------------------------------------- Net cash provided by (used in) investing activities 30,628 (137,959) - --------------------------------------------------------------------------------------------------------------------
(continued) 4 Alliance Bancorp and Subsidiaries Consolidated Statements of Cash Flows (continued)
Six Months Ended June 30, (In thousands) 2000 1999 - -------------------------------------------------------------------------------------------------------------------- (unaudited) Cash Flows From Financing Activities: Net increase (decrease) in deposits 3,814 (66,771) Proceeds from borrowed funds 219,853 59,327 Repayment of borrowed funds (268,731) (6,800) Net increase (decrease) in advance payments by borrowers for taxes and insurance 572 (517) Purchase of treasury stock (14,825) (9,691) Cash dividends paid (2,788) (3,162) Proceeds from exercise of stock options 12 279 - -------------------------------------------------------------------------------------------------------------------- Net cash used in financing activities (62,093) (27,335) - -------------------------------------------------------------------------------------------------------------------- Net decrease in cash and cash equivalents (33,679) (70,462) Cash and cash equivalents at beginning of period 60,520 80,997 - -------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of period $ 26,841 10,535 ==================================================================================================================== Supplemental Disclosures of Cash Flow Information: Cash paid during the period for: Interest $ 39,972 39,270 Income taxes 3,250 6,485 Supplemental Disclosures of Noncash Activities: Loans exchanged for mortgage-backed securities $ 201 473 Additions to real estate acquired in settlement of loans $ 578 208 - --------------------------------------------------------------------------------------------------------------------
See accompanying notes to unaudited consolidated financial statements. 5 Alliance Bancorp and Subsidiaries Notes to Consolidated Financial Statements (unaudited) Six Months Ended June 30, 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 - --------------------------------------------------------------------------------------------------------------- Six Months Ended June 30, 1999 Disclosure of reclassification amount: Unrealized holding gain (loss) on securities available for sale arising during the period $(14,185) 4,965 (9,220) Less: reclassification adjustment for gain (loss) included in net income (22) 8 (14) - --------------------------------------------------------------------------------------------------------------- Net unrealized gain (loss) on securities $(14,163) 4,957 (9,206) - --------------------------------------------------------------------------------------------------------------- Six Months Ended June 30, 2000 Disclosure of reclassification amount: Unrealized holding gain (loss) on securities available for sale arising during the period $ 174 (61) 113 Less: reclassification adjustment for gain (loss) included in net income (6,550) 2,293 (4,257) - --------------------------------------------------------------------------------------------------------------- Net unrealized gain (loss) on securities $ 6,724 (2,354) 4,370 Change in minimum pension liability 38 (15) 23 - --------------------------------------------------------------------------------------------------------------- Other comprehensive income $ 6,762 (2,369) 4,393 - ---------------------------------------------------------------------------------------------------------------
6 Alliance Bancorp and Subsidiaries Notes to Consolidated Financial Statements - (Continued) (unaudited) Six Months Ended June 30, 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 Six Months Ended June 30, June 30, (In thousands, except share data) 2000 1999 2000 1999 - -------------------------------------------------------------------------------------------------------------------- Numerator: Income before extraordinary item $ 4,571 4,507 4,023 9,108 Extraordinary item, net of tax - - 5,700 - ----------------------------------------------------------------- Net income $ 4,571 4,507 9,723 9,108 ----------------------------------------------------------------- Denominator: Basic earnings per share-weighted average shares 9,542,593 11,042,591 9,752,231 11,217,619 Effect of dilutive securities-stock options 359,726 550,956 376,693 521,192 ----------------------------------------------------------------- Diluted earnings per share-adjusted weighted average shares 9,902,319 11,593,547 10,128,924 11,738,811 ----------------------------------------------------------------- Basic earnings per share Income before extraordinary item $ 0.48 0.41 0.41 0.81 Extraordinary item, net of tax - - 0.58 - ----------------------------------------------------------------- Net income $ 0.48 0.41 0.99 0.81 ----------------------------------------------------------------- Diluted earnings per share Income before extraordinary item $ 0.46 0.39 0.40 0.78 Extraordinary item, net of tax - - 0.56 - ----------------------------------------------------------------- Net income $ 0.46 0.39 0.96 0.78 -----------------------------------------------------------------
(4) Commitments and Contingencies At June 30, 2000, the Company had outstanding commitments to originate or purchase loans of $107.9 million and undisbursed balances of construction loans of $121.9 million. Unused equity lines of credit available to customers were $109.6 million at June 30, 2000. 7 Alliance Bancorp and Subsidiaries Notes to Consolidated Financial Statements - (Continued) (unaudited) Six Months Ended June 30, 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 Consolidated (In thousands) Banking Brokerage Joint Ventures Other Eliminations Total - ---------------------------------------------------------------------------------------------------------------------------------- Three Months Ended June 30, 2000 Interest income $ 34,191 159 14 168 (353) 34,179 Interest expense 20,275 146 171 - (353) 20,239 - ---------------------------------------------------------------------------------------------------------------------------------- Net interest income (loss) 13,916 13 (157) 168 - 13,940 Provision for loan losses 200 - - - - 200 - ---------------------------------------------------------------------------------------------------------------------------------- Net interest income after provision for loan losses 13,716 13 (157) 168 - 13,740 Other fees and commissions 1,339 376 - 660 (99) 2,276 Other noninterest income 92 - 1,128 - (53) 1,167 Noninterest expense 8,483 1,369 8 664 (152) 10,372 - ---------------------------------------------------------------------------------------------------------------------------------- Income (loss) before income taxes 6,664 (980) 963 164 - 6,811 Income tax expense (benefit) 2,189 (397) 380 68 - 2,240 - ---------------------------------------------------------------------------------------------------------------------------------- Net income (loss) 4,475 (583) 583 96 - 4,571 - ----------------------------------------------------------------------------------------------------------------------------------
8 Alliance Bancorp and Subsidiaries Notes to Consolidated Financial Statements - (Continued) (unaudited) Three Months Ended June 30, 2000 and 1999
Mortgage Real Estate Inter-segment Consolidated (In thousands) Banking Brokerage Joint Ventures Other Eliminations Total - ---------------------------------------------------------------------------------------------------------------------------------- Three Months Ended June 30, 1999 Interest income $ 32,951 486 2 119 (656) 32,902 Interest expense 19,671 537 109 - (656) 19,661 - ---------------------------------------------------------------------------------------------------------------------------------- Net interest income (loss) 13,280 (51) (107) 119 - 13,241 Provision for loan losses 50 - - - - 50 - ---------------------------------------------------------------------------------------------------------------------------------- Net interest income after provision for loan losses 13,230 (51) (107) 119 - 13,191 Other fees and commissions 1,358 3,696 - 681 (395) 5,340 Other noninterest income 118 - 1,274 1 (50) 1,343 Noninterest expense 8,726 3,779 2 713 (445) 12,775 - ---------------------------------------------------------------------------------------------------------------------------------- Income (loss) before income taxes 5,980 (134) 1,165 88 - 7,099 Income tax expense (benefit) 2,148 (53) 459 38 - 2,592 - ---------------------------------------------------------------------------------------------------------------------------------- Net income (loss) $ 3,832 (81) 706 50 - 4,507 - ---------------------------------------------------------------------------------------------------------------------------------- Six Months Ended June 30, 2000 Interest income $ 67,827 286 60 334 (673) 67,834 Interest expense 40,160 233 325 - (673) 40,045 - -------------------------------------------------------------------------------------------------------------------------------- Net interest income (loss) 27,667 53 (265) 334 - 27,789 Provision for loan losses 400 - - - - 400 - ---------------------------------------------------------------------------------------------------------------------------------- Net interest income after provision for loan losses 27,267 53 (265) 334 - 27,389 Other fees and commissions 2,491 733 - 1,177 (376) 4,025 Other noninterest income, net (6,280) - 2,016 (114) (106) (4,484) Noninterest expense 17,458 2,941 30 1,260 (482) 21,207 - ---------------------------------------------------------------------------------------------------------------------------------- Income (loss) before income taxes and extraordinary item 6,020 (2,155) 1,721 137 - 5,723 Income tax expense (benefit) 1,818 (855) 677 60 - 1,700 - ---------------------------------------------------------------------------------------------------------------------------------- Income (loss) before extraordinary item 4,202 (1,300) 1,044 77 - 4,023 Extraordinary item-gain on early extinguishment of debt, net of tax expense 5,700 - - - - 5,700 - ---------------------------------------------------------------------------------------------------------------------------------- Net income (loss) $ 9,902 (1,300) 1,044 77 - 9,723 - ---------------------------------------------------------------------------------------------------------------------------------- Assets $1,885,745 19,845 21,672 14,222 (34,989) 1,906,495 - ----------------------------------------------------------------------------------------------------------------------------------
9 Alliance Bancorp and Subsidiaries Notes to Consolidated Financial Statements - (Continued) (unaudited) Six Months Ended June 30, 2000 and 1999
Mortgage Real Estate Inter-segment Consolidated (In thousands) Banking Brokerage Joint Ventures Other Eliminations Total - ---------------------------------------------------------------------------------------------------------------------------------- Six Months Ended June 30, 1999 Interest income $ 65,178 1,558 4 332 (1,673) 65,399 Interest expense 39,442 1,434 212 - (1,673) 39,415 - ---------------------------------------------------------------------------------------------------------------------------------- Net interest income (loss) 25,736 124 (208) 332 - 25,984 Provision for loan losses 100 - - - - 100 - ---------------------------------------------------------------------------------------------------------------------------------- Net interest income after provision for loan losses 25,636 124 (208) 332 - 25,884 Other fees and commissions 2,646 8,132 - 1,249 (1,255) 10,772 Other noninterest income 645 - 1,871 195 (100) 2,611 Noninterest expense 17,989 7,680 12 1,325 (1,355) 25,651 - ---------------------------------------------------------------------------------------------------------------------------------- Income before income taxes 10,938 576 1,651 451 - 13,616 Income tax expense 3,449 224 652 183 - 4,508 - ---------------------------------------------------------------------------------------------------------------------------------- Net income $ 7,489 352 999 268 - 9,108 - ---------------------------------------------------------------------------------------------------------------------------------- Assets $ 1,926,441 58,641 25,960 11,525 (69,974) 1,952,593 - ----------------------------------------------------------------------------------------------------------------------------------
(6) Reclassifications Certain reclassifications of prior year amounts have been made to conform with the current year presentation. 10 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 and losses from the sale of various assets, including loans, mortgage-backed securities, investment securities 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. 11 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 13.15% for the quarter ended June 30, 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 June 30, 2000, cash and cash equivalents totaled $26.8 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, utilized $2.2 million for the six months ended June 30, 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, 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 $30.6 million for the six months ended June 30, 2000. Net cash utilized by financing activities, consisting primarily of net activity in deposit and escrow accounts, net repayment of borrowed funds, the payment of dividends and the purchase of treasury stock, totaled $62.1 million for the six months ended June 30, 2000. The Bank's tangible capital ratio at June 30, 2000 was 6.99%. This exceeded the tangible capital requirement of 1.5% of adjusted assets by $104.5 million. The Bank's core capital ratio at June 30, 2000 was 6.99%. This exceeded the core capital requirement of 3.0% of adjusted assets by $75.9 million. The Bank's risk-based capital ratio was 10.77% at June 30, 2000. The Bank currently exceeds the risk-based capital requirement of 8.0% of risk-weighted assets by $35.5 million. Changes in Financial Condition The Company had total assets of $1.9 billion at June 30, 2000, a decrease of $55.8 million, or 2.8%, from December 31, 1999. During the first 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. Loans totaled $1.5 billion at June 30, 2000, an increase of $100.7 million. The composition of the Bank's loan portfolio has been changing as a result of an emphasis on multi-family, commercial real estate loans, home equity 12 lines of credit and indirect auto lending in an attempt to improve the overall yield on loans. At June 30, 2000, 44% of the loan portfolio consisted of one-to four-family loans, 38% was multi-family, construction, land and commercial real estate loans, and the remaining 18% consisted of home equity lines of credit, indirect auto lending, commercial leases and other loans. Comparatively, at December 31, 1999, 49% of the loan portfolio consisted of one-to four-family loans, 34% was multi-family, construction, land and commercial real estate loans, and the remaining 17% consisted of home equity lines of credit, indirect auto lending, commercial leases and other loans. Loan originations were $281.6 million for the six months ended June 30, 2000, offset by loan sales of $41.7 million and principal repayments of $137.9 million. Deposits totaled $1.2 billion at June 30, 2000, an increase of $3.8 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 June 30, 2000 was 4.89% compared to 4.52% at December 31, 1999. Stockholders' equity totaled $150.3 million at June 30, 2000, a decrease of $3.4 million. On May 30, 2000, the Company announced the completion of the stock repurchase program it began in November, 1999, and also announced the adoption of a new stock repurchase program whereby up to 5 percent, or 468,000 shares of the outstanding common stock, could be repurchased over a period of twelve months. As of June 30, 2000, 813,200 shares of stock had been repurchased during the current year for a total of $14,441,287 at an average price of $17.76 to complete the program announced in November of 1999. Additionally, 9,300 shares of stock had been repurchased for a total of $140,690 at an average price of $15.13 per share under the current share repurchase program. For the six months ended June 30, 2000 stockholders' equity has been reduced by $14.8 million related to shares repurchased. At June 30, 2000, the number of common shares outstanding was 9,356,138 and the book value per common share outstanding was $16.07 per share. On June 16, 2000, the Company declared a $0.14 per share cash dividend payable July 14, 2000 to shareholders of record on June 30, 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 June 30, 2000 or any date subsequent thereto. The incremental costs related to the Year 2000 compliance were approximately $250,000 in 1999. 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. In June 2000, FASB issued SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities, an amendment of SFAS No. 133". This statement addresses various implementation issues relating to SFAS No. 133. Management, at this time, has not determined the impact of adopting this statement on January 1, 2001. 13 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 June 30, 2000 nor during the quarter ended June 30, 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 -------------------------------------------------------------------------------- June 30, March 31, December 31, September 30, June 30, (Dollars in thousands) 2000 2000 1999 1999 1999 - ------------------------------------------------------------------------------------------------------------------------------- Non-accrual mortgage loans 90 days or more past due $ 3,393 3,143 3,701 3,656 3,416 Non-accrual commercial real estate loans 90 days or more past due 643 643 189 - 250 Non-accrual consumer loans 90 days or more past due 720 685 651 302 177 -------------------------------------------------------------------------------- Total non-performing loans 4,756 4,471 4,541 3,958 3,843 Total foreclosed real estate 629 693 241 78 164 -------------------------------------------------------------------------------- Total non-performing assets $ 5,385 5,164 4,782 4,036 4,007 -------------------------------------------------------------------------------- Total non-performing loans to total loans 0.32 % 0.32 0.33 0.30 0.30 Total non-performing assets to total assets 0.28 % 0.28 0.24 0.21 0.21
The following table sets forth certain information regarding the Company's allowance for loan losses at the dates indicated.
Quarter Ended -------------------------------------------------------------------------------- June 30, March 31, December 31, September 30, June 30, (Dollars in thousands) 2000 2000 1999 1999 1999 - --------------------------------------------------------------------------------------------------------------------------------- Balance at beginning of period $ 6,135 6,031 6,251 6,307 6,346 Provision for loan losses 200 200 50 50 50 Charge-offs 171 115 288 111 109 Recoveries 12 19 18 5 20 -------------------------------------------------------------------------------- Balance at end of period $ 6,176 6,135 6,031 6,251 6,307 -------------------------------------------------------------------------------- Ratio of net charge-offs during the period to average loans outstanding 0.01 % 0.01 0.02 0.01 0.01 Ratio of allowance for loan losses to net loans receivable at end of period 0.42 % 0.43 0.44 0.48 0.49 Ratio of allowance for loan losses to non-performing loans at end of period 129.87 % 137.22 132.81 157.93 164.12
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 June 30, 2000 the Company had total classified assets of $4.6 million, of which $4.2 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). 14 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.
June 30, March 31, December 31, September 30, June 30, 2000 2000 1999 1999 1999 ------------------------------------------------------------------------------------------------ Percent Percent Percent Percent Percent of of of Of of Amount Total Amount Total Amount Total Amount Total Amount Total ------------------- ------------------- ------------------- ------------------ ----------------- (Dollars in thousands) Mortgage loans: One-to four-family $ 713,377 44.42 % 724,859 48.02 723,311 49.39 712,290 51.90 $736,983 54.70 Multi-family 205,793 12.81 176,778 11.71 172,614 11.79 164,828 12.01 164,051 12.18 Commercial real estate 142,373 8.87 142,794 9.46 140,480 9.59 119,376 8.70 123,103 9.14 Construction 246,811 15.37 191,116 12.66 173,866 11.87 143,229 10.44 111,888 8.30 Land 7,914 0.49 5,680 0.38 2,766 0.19 1,251 0.09 2,126 0.16 ------------------- ------------------- ------------------- ------------------ ----------------- Total mortgage loans 1,316,268 81.96 1,241,227 82.23 1,213,037 82.83 1,140,974 83.14 1,138,151 84.48 Other loans: Commercial leases 30,263 1.89 25,371 1.68 20,846 1.42 20,396 1.49 18,755 1.39 Home equity lines of credit 107,245 6.68 102,920 6.82 100,077 6.83 93,958 6.85 91,979 6.83 Automobile loans 134,245 8.36 123,354 8.17 115,004 7.85 102,212 7.45 85,082 6.31 Commercial business loans 4,080 0.25 4,012 0.27 4,163 0.28 4,071 0.30 3,936 0.29 Consumer loans 13,830 0.86 12,510 0.83 11,517 0.79 10,566 0.77 9,499 0.70 ------------------- ------------------- ------------------- ------------------ ----------------- Total loans receivable 1,605,931 100.00 % 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 (135,872) (92,967) (95,726) (69,225) (65,875) Premiums and deferred loan costs, net 131 397 379 485 330 Allowance for loan losses (6,176) (6,135) (6,031) (6,251) (6,307) ----------- ------------ ------------ ------------ ----------- Loans receivable, net $1,464,014 1,410,689 1,363,266 1,297,186 1,275,550 ----------- ------------ ------------ ------------ -----------
15 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, an attempt is made to structure the balance sheet 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 June 30, 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) $ 378,406 193,016 177,373 426,470 1,175,265 Equity lines of credit (1) 106,123 - - - 106,123 Consumer loans and leases (1) 8,033 52,597 109,846 13,568 184,044 Mortgage-backed securities (2) 76,971 41,045 26,306 108,666 252,988 Interest-bearing deposits 667 - - - 667 Investment securities (2) 29,680 - - 64,990 94,670 - -------------------------------------------------------------------------------------------------------------------- Total interest-earning assets 599,880 286,658 313,525 613,694 1,813,757 Interest-Bearing Liabilities: Savings accounts 36,529 55,485 36,172 86,694 214,880 NOW interest-bearing accounts 23,161 21,202 5,673 12,563 62,599 Money market accounts 60,203 8,384 3,992 3,627 76,206 Certificate accounts 627,434 193,882 15,446 - 836,762 Borrowed funds 261,950 193,572 25,000 - 480,522 - -------------------------------------------------------------------------------------------------------------------- Total interest-bearing liabilities 1,009,277 472,525 86,283 102,884 1,670,969 - -------------------------------------------------------------------------------------------------------------------- Interest sensitivity gap $ (409,397) (185,867) 227,242 510,810 142,788 - -------------------------------------------------------------------------------------------------------------------- Cumulative interest sensitivity gap $ (409,397) (595,264) (368,022) 142,788 - -------------------------------------------------------------------------------------------------------------------- Cumulative interest sensitivity gap as a percentage of total assets (21.26) % (30.91) (19.11) 7.41 Cumulative net interest-earning assets as a percentage of interest-bearing liabilities 59.44 % 59.83 76.53 108.55 - --------------------------------------------------------------------------------------------------------------------
(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 16 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 June 30, 2000, the cumulative one-year interest sensitivity gap as a percentage of assets was (21.26%) 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. 17 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 June 30, --------------------------------------------------------------- 2000 1999 ------------------------------ ------------------------------ Average Average Average Yield/ Average Yield/ (Dollars in thousands) Balance Interest Cost Balance Interest Cost - ------------------------------------------------------------- ------------------------------ Assets: Interest-earning assets: Mortgage loans, net $ 1,150,072 $ 22,436 7.80 % $1,059,629 $ 19,593 7.40 % Equity lines of credit 107,608 2,330 8.69 95,077 1,719 7.25 Automobile loans 131,531 2,609 7.96 73,386 1,561 8.53 Consumer loans and leases 40,335 848 8.42 31,413 564 7.19 Mortgage-backed securities 249,127 4,220 6.78 464,167 7,182 6.19 Interest-bearing deposits 12,388 196 6.34 37,853 441 4.61 Investment securities 87,978 1,540 7.01 111,099 1,842 6.64 - ---------------------------------------------------------------------------------------------- Total interest-earning assets 1,779,039 34,179 7.69 1,872,624 32,902 7.03 Noninterest-earning assets 94,194 97,245 - ---------------------------------------------------------------------------------------------- Total assets $ 1,873,233 $1,969,869 ============================================================================================== Liabilities and Stockholders' Equity: Interest-bearing liabilities: Deposits: Savings accounts $ 1,043,342 $ 12,938 4.97 % $1,039,348 $ 12,186 4.70 % NOW interest-bearing accounts 66,260 154 0.93 63,803 162 1.02 Money market accounts 78,314 634 3.25 85,520 695 3.26 - ---------------------------------------------------------------------------------------------- Total deposits 1,187,916 13,726 4.63 1,188,671 13,043 4.40 Borrowed funds 438,813 6,513 5.95 498,802 6,618 5.25 - ---------------------------------------------------------------------------------------------- Total interest-bearing liabilities 1,626,729 20,239 4.99 1,687,473 19,661 4.65 Noninterest-bearing deposits 57,926 65,170 Other liabilities 34,346 37,542 - ---------------------------------------------------------------------------------------------- Total liabilities 1,719,001 1,790,185 Stockholders' equity 154,232 179,684 - ---------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $ 1,873,233 $1,969,869 ============================================================================================== Net interest income/ interest rate spread $ 13,940 2.70 % $ 13,241 2.38 % ============================================================================================== Net interest-earning assets/net interest margin $ 152,310 3.13 % $ 185,151 2.83 % ============================================================================================== Interest-earning assets to interest-bearing liabilities 1.09 X 1.11 X ============================================================================================== Six Months Ended June 30, ---------------------------------------------------------- At June 30, 2000 1999 2000 --------------------------- --------------------------- ------------------- Average Average Average Yield/ Average Yield/ Yield/ (Dollars in thousands) Balance Interest Cost Balance Interest Cost Balance Cost - ----------------------------------------------------------- --------------------------- ------------------- Assets: Interest-earning assets: Mortgage loans, net $1,135,862 $ 43,856 7.72 % $1,083,393 $ 39,941 7.37 % $1,171,844 7.76 % Equity lines of credit 105,770 4,444 8.43 95,097 3,414 7.24 107,695 9.12 Automobile loans 126,046 4,946 7.87 64,383 2,756 8.63 136,320 8.49 Consumer loans and leases 37,256 1,538 8.26 32,475 1,201 7.41 48,155 8.38 Mortgage-backed securities 290,192 9,591 6.61 402,950 12,584 6.25 238,140 7.02 Interest-bearing deposits 9,789 296 6.07 94,599 2,172 4.57 667 6.87 Investment securities 91,224 3,163 6.94 98,530 3,331 6.78 90,286 7.25 - ------------------------------------------------------------------------------------------ --------------------- Total interest-earning assets 1,796,139 67,834 7.56 1,871,427 65,399 6.99 1,793,107 7.79 Noninterest-earning assets 92,731 94,658 113,388 - ------------------------------------------------------------------------------------------ --------------------- Total assets $1,888,870 $1,966,085 $1,906,495 ========================================================================================== ===================== Liabilities and Stockholders' Equity: Interest-bearing liabilities: Deposits: Savings accounts $1,042,882 $ 25,421 4.89 % $1,053,541 $ 25,008 4.79 % 1,051,642 5.24 % NOW interest-bearing accounts 65,912 308 0.94 61,081 312 1.03 62,599 0.95 Money market accounts 80,887 1,304 3.23 84,943 1,362 3.23 76,206 3.32 - ------------------------------------------------------------------------------------------ --------------------- Total deposits 1,189,681 27,033 4.56 1,199,565 26,682 4.49 1,190,447 4.89 Borrowed funds 455,391 13,012 5.73 480,465 12,733 5.27 480,522 6.08 - ------------------------------------------------------------------------------------------ --------------------- Total interest-bearing liabilities 1,645,072 40,045 4.88 1,680,030 39,415 4.71 1,670,969 5.23 Noninterest-bearing deposits 57,006 66,362 55,565 Other liabilities 32,790 36,875 29,653 - ------------------------------------------------------------------------------------------ --------------------- Total liabilities 1,734,868 1,783,267 1,756,187 Stockholders' equity 154,002 182,818 150,308 - ------------------------------------------------------------------------------------------ --------------------- Total liabilities and stockholders' equity $1,888,870 $1,966,085 $1,906,495 ========================================================================================== ===================== Net interest income/ interest rate spread $ 27,789 2.68 % $ 25,984 2.28 % 2.56 % ========================================================================================== ========== Net interest-earning assets/net interest margin $ 151,067 3.09 % $ 191,397 2.78 % ========================================================================================== Interest-earning assets to interest-bearing liabilities 1.09 X 1.11 X ===================================================================================
18 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 June 30, 2000 Six Months Ended June 30, 2000 Compared To Compared To Three Months Ended June 30, 1999 Six Months Ended June 30, 1999 --------------------------------------- --------------------------------------- Increase (Decrease) Increase (Decrease) In Net Interest Income In Net Interest Income Due To Due To --------------------------------------- --------------------------------------- (In thousands) Volume Rate Net Volume Rate Net - -------------------------------------------------------------------------------------------------------------------- Interest-Earning Assets: Mortgage loans, net $ 1,740 1,103 2,843 1,976 1,939 3,915 Equity lines of credit 244 367 611 418 612 1,030 Automobile loans 1,160 (112) 1,048 2,454 (264) 2,190 Consumer loans and leases 177 107 284 189 148 337 Mortgage-backed securities (3,593) 631 (2,962) (3,685) 692 (2,993) Interest-bearing deposits (367) 122 (245) (2,412) 536 (1,876) Investment securities (401) 99 (302) (247) 79 (168) - -------------------------------------------------------------------------------------------------------------------- Total (1,040) 2,317 1,277 (1,307) 3,742 2,435 - -------------------------------------------------------------------------------------------------------------------- Interest-Bearing Liabilities: Deposits (8) 691 683 (169) 520 351 Funds borrowed (878) 773 (105) (723) 1,002 279 - -------------------------------------------------------------------------------------------------------------------- Total (886) 1,464 578 (892) 1,522 630 - -------------------------------------------------------------------------------------------------------------------- Net change in net interest $ (154) 853 699 (415) 2,220 1,805 income - --------------------------------------------------------------------------------------------------------------------
Comparison of Operating Results for the Three Months Ended June 30, 2000 and June 30, 1999 General Net income totaled $4.6 million, or $0.46 per diluted share for the three months ended June 30, 2000, as compared to $4.5 million, or $0.39 per diluted share reported for the quarter ended June 30, 1999. Net interest income for the three months ended June 30, 2000 was $13.9 million, an increase of $699,000, or 5.3%, from the June 30, 1999 quarter of $13.2 million. Interest Income Interest income for the quarter ended June 30, 2000 totaled $34.2 million, an increase of $1.3 million, or 3.9%, from the prior year's quarter. Interest income on mortgage loans, the largest component of interest-earning assets, increased $2.8 million, or 14.5%, to $22.4 million from the June 1999 quarter. The average balance of the mortgage portfolio increased $90.4 million. The annualized average yield on the mortgage loan portfolio increased to 7.80% for the three months ended June 30, 2000 from 7.40% for the 1999 period. The increase in the annualized average yield reflects an increase in mortgage yields overall and changes in the mix of the loan portfolio, primarily from an increase in higher yielding loans such as commercial real estate. Interest income on equity lines of credit increased $611,000, or 35.5%, to $2.3 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 an average of 9.25% 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 $12.5 million, to $107.6 million from $95.1 million from the June 1999 quarter. Interest income on auto loans increased $1.0 million to $2.6 19 million for the three months ended June 30, 2000. The average balance of the auto loan portfolio increased $58.1 million, while the annualized average yield on the portfolio decreased to 7.96% from 8.53%. This decrease was a direct result of market conditions for offering competitive products. The average balance of the combined portfolios of mortgage-backed and investment securities decreased $238.2 million to $337.1 million as compared to $575.3 million for the June 30, 1999 quarter. This decrease was primarily as a result of the "de-leveraging" security sales in the first quarter of 2000. Interest income from these portfolios decreased $3.2 million from the prior year's second quarter. Interest Expense Interest expense on deposit accounts increased $683,000, or 5.2%, to $13.7 million, for the quarter ended June 30, 2000 compared to the prior year's quarter. The increase was due to the increase in the annualized average cost of deposits from 4.40% to 4.63%. For the quarter ended June 30, 2000, the Company recorded interest expense on borrowed funds of $6.5 million on an average balance of $438.8 million at an annualized cost of 5.95% related to FHLB borrowings. During the current quarter, the Company repaid $22.5 million of FHLB advances that matured or were called and added $104.9 million at current market rates, primarily to fund loan growth. Net Interest Income Net interest income for the three months ended June 30, 2000 increased $699,000 or 5.3%, to $13.9 million from the 1999 period. The annualized average yield on interest-earning assets increased from 7.03% to 7.69% when comparing the 1999 and 2000 quarters. The annualized average cost of interest-bearing liabilities increased from 4.65% to 4.99%. The increase in yields and costs are generally due to overall increases in interest rates. This resulted in an annualized average net interest rate spread of 2.70% for the three-month period ended June 30, 2000 compared to 2.38% for the prior year's period. Both the average balance of interest-earning assets and interest-bearing liabilities decreased during the quarter ended June 30, 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 June 30, 2000. The allowance for loan losses represents 0.42% of total loans receivable at June 30, 2000. The amount of non-performing loans at June 30, 2000, was $4.8 million, or 0.32% of total loans, compared to $3.8 million or 0.30% of total loans at June 30, 1999. Noninterest Income Total noninterest income for the three months ended June 30, 2000 was $3.4 million, a decrease of $3.2 million from the second quarter of 1999. Other fees and commissions decreased $3.0 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. In the second quarter of 1999, mortgages totaling $195 million were sold, compared to $30 million sold in the current quarter. Noninterest Expense Noninterest expense for the quarter ended June 30, 2000 totaled $10.4 million, a decrease of $2.4 million, or 18.8% from the prior year's quarter. The largest component of noninterest expense, compensation and benefits, decreased $1.8 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 June 30, 2000 was $2.2 million. The effective tax rate for the quarter was 32.9% compared to 36.5% for the 1999 quarter. 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. 20 Comparison of Operating Results for the Six Months Ended June 30, 2000 and June 30, 1999 General Net income totaled $9.7 million, or $0.96 per diluted share for the six months ended June 30, 2000, as compared to $9.1 million, or $0.78 per diluted share reported for the six months ended June 30, 1999. During the current period, 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 $0.58 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 six months ended June 30, 2000 was $27.8 million, an increase of $1.8 million, or 6.9%, from the June 30, 1999 period of $26.0 million. Interest Income Interest income for the six months ended June 30, 2000 totaled $67.8 million, an increase of $2.4 million, or 3.7%, from the prior year's period. Interest income on mortgage loans, the largest component of interest-earning assets, increased $3.9 million, or 9.8%, to $43.9 million from the June 1999 period. The average balance of the mortgage portfolio increased $52.5 million. The annualized average yield on the mortgage loan portfolio increased to 7.72% for the six months ended June 30, 2000 from 7.37% for the 1999 period. The increase in the annualized average yield reflects an increase in mortgage yields overall and changes in the mix of the loan portfolio, primarily from an increase in higher yielding loans such as commercial real estate. Interest income on equity lines of credit increased $1.0 million, or 30.2%, to $4.4 million from the prior year's period. The Bank's home equity line of credit product is priced based on the prime rate, which was an average of 8.97% for the current period as compared to 7.75% for the comparable period a year ago. The average balance of equity lines of credit increased $10.7 million, to $105.8 million from $95.1 million from the June 1999 period. Interest income on auto loans increased $2.2 million to $4.9 million for the six months ended June 30, 2000. The average balance of the auto loan portfolio increased $61.7 million, while the annualized average yield on the portfolio decreased to 7.87%. This decrease was a direct result of market conditions for offering competitive products. The average balance of the combined portfolios of mortgage-backed and investment securities decreased $120.1 million to $381.4 million as compared to $501.5 million for the June 30, 1999 period. This decrease was primarily as a result of the "de-leveraging" security sales in the first quarter of 2000. Interest income from these portfolios decreased $3.2 million from the prior year's period. Interest Expense Interest expense on deposit accounts increased $351,000, or 1.3%, to $27.0 million, for the six months ended June 30, 2000 compared to the prior year's period. The increase was due to the increase in the annualized average cost of deposits from 4.49% to 4.56%. For the six months ended June 30, 2000, the Company recorded interest expense on borrowed funds of $13.0 million on an average balance of $455.4 million at an annualized cost of 5.73% related to FHLB borrowings. During the current period, the Company repaid $268.7 million of FHLB advances that matured or were called and added $219.9 million at current market rates. Net Interest Income Net interest income for the six months ended June 30, 2000 increased $1.8 million or 6.9%, to $27.8 million from the 1999 period. The annualized average yield on interest-earning assets increased from 6.99% to 7.56% when comparing the 1999 and 2000 periods. The annualized average cost of interest-bearing liabilities increased from 4.71% to 4.88%. This resulted in an annualized average net interest rate spread of 2.68% for the six months ended June 30, 2000 compared to 2.28% for the prior year's period. Both the average balance of interest-earning assets and interest-bearing liabilities decreased during the six months ended June 30, 2000 compared to the 1999 period. 21 Provision for Loan Losses Based on management's evaluation of the loan portfolio, a provision of $400,000 for loan losses was recorded during the six months ended June 30, 2000. The allowance for loan losses represents 0.42% of total loans receivable at June 30, 2000. The amount of non-performing loans at June 30, 2000, was $4.8 million, or 0.32% of total loans, compared to $3.8 million or 0.30% of total loans at June 30, 1999. Noninterest Income Total noninterest income for the six months ended June 30, 2000 was an expense of $459,000. The six months ended June 30, 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 $6.5 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. During the six months ended June 30, 1999, mortgages totaling $453 million were sold, compared to $42 million sold in the current six months. Other income for the six months ended June 30, 1999, included a gain on the sale of Liberty Financial Services Inc.'s insurance book of business of $250,000. The current six months includes a write-down in value of an equity investment of $112,000, reflecting an other than temporary impairment in the value of the investment. Noninterest Expense Noninterest expense for the six months ended June 30, 2000 totaled $21.2 million, a decrease of $4.4 million, or 17.3% from the prior year's period. The largest component of noninterest expense, compensation and benefits, decreased $3.8 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 six months ended June 30, 2000 was $4.8 million. The effective tax rate for the six months was 32.9% compared to 33.1% for the 1999 period. The lower effective tax rate for the June 1999 period was due to a reduction in the provision of $700,000 as a result of the completion of a review of the Company's tax liability. The current period'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. 22 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 (a) The Company held its Annual Meeting of Shareholders on May 24, 2000 (b) The names of each director elected at the Annual Meeting are as follows: Fredric G. Novy Vernon B. Thomas, Jr. (c) The names of each of the directors whose term of office continued after the Annual Meeting are as follows: Kenne P. Bristol Edward J. Burns David D. Mill Edward J. Nusrala William R. Rybak Donald E. Sveen Richard E. Webber (d) The following matters were voted upon at the Annual Meeting and the number of votes cast with the respect to each matter is as follows: (i) The election of two directors for terms of three years each: For Withheld -------------------------------------------------------- Fredric G. Novy 8,115,754 613,921 Vernon B. Thomas, Jr. 8,119,722 609,953 (ii) The ratification of KPMG LLP as independent auditors of Alliance Bancorp for the fiscal year ending December 31, 2000: For Against Withheld -------------------------------------------------------- 8,506,596 205,027 18,079 Item 5. Other Information Not Applicable. 23 Item 6. Exhibits and Reports on Form 8-K. (a) Exhibit No. 11 Statement re: Computation of Per Share Earnings
Three Months Ended June 30, 2000 1999 ----------------------------- Net income $ 4,571,000 4,507,000 ----------------------------- Basic earnings per share-weighted average shares 9,542,593 11,042,591 Effect of dilutive securities-stock options 359,726 550,956 ----------------------------- Diluted earnings per share-adjusted weighted average shares 9,902,319 11,593,547 ----------------------------- Basic earnings per share $ 0.48 0.41 ----------------------------- Diluted earnings per share $ 0.46 0.39 ----------------------------- Six Months Ended June 30, 2000 1999 ----------------------------- Net income $ 9,723,000 9,108,000 ----------------------------- Basic earnings per share-weighted average shares 9,752,231 11,217,619 Effect of dilutive securities-stock options 376,693 521,192 ----------------------------- Diluted earnings per share-adjusted weighted average shares 10,128,924 11,738,811 ----------------------------- Basic earnings per share $ 0.99 0.81 ----------------------------- Diluted earnings per share $ 0.96 0.78 -----------------------------
(b) Reports on Form 8-K. None 24 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: August 8, 2000 /s/ Kenne P. Bristol ------------------- ------------------------------- Kenne P. Bristol President and Chief Executive Officer Dated: August 8, 2000 /s/ Richard A. Hojnicki ------------------- ------------------------------- Richard A. Hojnicki Executive Vice President and Chief Financial Officer 25 EX-27 2 0002.txt FINANCIAL DATA SCHEDULE
9 1,000 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 26,174 667 0 0 277,869 22,196 0 1,470,190 6,176 1,906,495 1,246,012 261,950 248,225 0 0 0 117 150,191 1,906,495 54,784 12,754 296 67,834 27,033 13,012 27,789 400 (6,550) 21,207 5,723 4,023 5,700 0 9,723 0.99 0.96 3.09 4,756 0 0 0 6,031 286 31 6,176 3,725 0 2,451
-----END PRIVACY-ENHANCED MESSAGE-----