-----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, QfCWASlRfmv9/ptr2LR7wCWCg4z2kKMnjlrRptKObUpb+fruN0An8j5opKyncANw SMjnYlidaasW2SrijSbTTQ== /in/edgar/work/0000950109-00-004389/0000950109-00-004389.txt : 20001110 0000950109-00-004389.hdr.sgml : 20001110 ACCESSION NUMBER: 0000950109-00-004389 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001109 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: 756460 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 September 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 -9,243,575 shares outstanding as of November 7, 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 September 30, 2000 and December 31, 1999 1 Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2000 and 1999 2 Consolidated Statements of Changes in Stockholders' Equity for the Nine Months Ended September 30, 2000 and 1999 3 Consolidated Statements of Cash Flows for the Nine Months Ended September 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 22 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 23 Signature Page 24
Alliance Bancorp and Subsidiaries Consolidated Statements of Financial Condition
September 30, December 31, (In thousands, except share data) 2000 1999 - ------------------------------------------------------------------------------------------------------------------------ (unaudited) Assets Cash and due from banks $ 25,577 48,922 Interest-bearing deposits 3,202 11,598 Investment securities available for sale, at fair value 55,838 64,494 Investment securities at amortized cost (fair value of $19,638) 19,403 - Mortgage-backed securities available for sale, at fair value 221,986 356,434 Mortgage-backed securities at amortized cost (fair value of $12,840) 12,449 - Loans, net of allowance for losses of $7,244 at September 30, 2000 and $6,031 at December 31, 1999 1,496,564 1,363,266 Accrued interest receivable 11,064 10,493 Real estate 18,443 20,796 Premises and equipment, net 12,566 12,528 Stock in Federal Home Loan Bank of Chicago, at cost 28,905 27,383 Due from broker - 550 Bank owned life insurance 46,892 20,878 Other assets 18,708 24,966 - --------------------------------------------------------------------------------------------------------------------- $ 1,971,597 1,962,308 - --------------------------------------------------------------------------------------------------------------------- Liabilities and Stockholders' Equity Liabilities: Deposits $ 1,267,924 1,242,198 Borrowed funds 525,594 538,150 Advances by borrowers for taxes and insurance 4,012 11,358 Accrued expenses and other liabilities 19,170 16,931 - --------------------------------------------------------------------------------------------------------------------- Total liabilities 1,816,700 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; 11,702,397 shares issued and 9,243,575 outstanding at September 30, 2000 11,700,010 shares issued and 10,177,188 outstanding at December 31, 1999 117 117 Additional paid-in capital 108,123 108,093 Retained earnings, substantially restricted 102,741 92,337 Treasury stock, at cost; 2,458,822 shares at September 30, 2000 and 1,522,822 at December 31, 1999 (46,440) (29,857) Accumulated other comprehensive loss (9,644) (17,019) - --------------------------------------------------------------------------------------------------------------------- Total stockholders' equity 154,897 153,671 - --------------------------------------------------------------------------------------------------------------------- Commitments and contingencies - --------------------------------------------------------------------------------------------------------------------- $ 1,971,597 1,962,308 - ---------------------------------------------------------------------------------------------------------------------
See accompanying notes to unaudited consolidated financial statements. 1 Alliance Bancorp and Subsidiaries Consolidated Statements of Income
Three Months Ended Nine Months Ended September 30, September 30, (In thousands, except per share amounts) 2000 1999 2000 1999 - ----------------------------------------------------------------------------------------------------------------------- (unaudited) Interest Income: Loans $ 29,723 24,125 84,507 71,437 Mortgage-backed securities 4,320 7,208 13,911 19,792 Investment securities 1,929 1,747 5,092 5,078 Interest-bearing deposits 126 447 422 2,619 - ----------------------------------------------------------------------------------------------------------------------- Total interest income 36,098 33,527 103,932 98,926 - ----------------------------------------------------------------------------------------------------------------------- Interest Expense: Deposits 14,846 12,699 41,879 39,381 Borrowed funds 7,780 7,070 20,792 19,803 - ----------------------------------------------------------------------------------------------------------------------- Total interest expense 22,626 19,769 62,671 59,184 - ----------------------------------------------------------------------------------------------------------------------- Net interest income 13,472 13,758 41,261 39,742 Provision for loan losses 1,200 50 1,600 150 - ----------------------------------------------------------------------------------------------------------------------- Net interest income after provision for loan losses 12,272 13,708 39,661 39,592 - ----------------------------------------------------------------------------------------------------------------------- Noninterest Income: Gain on sales of loans held for sale 3 5 38 474 Loss on sales of mortgage-backed securities available for sale - - (6,059) (22) Gain (loss) on sales of investment securities available for sale 506 (16) 15 (16) Income from real estate operations 2,421 1,007 4,531 2,735 Servicing fee income, net 39 16 145 247 ATM fee income 466 463 1,377 1,490 Other fees and commissions 1,775 3,686 4,783 13,200 Other, net 203 23 124 459 - ----------------------------------------------------------------------------------------------------------------------- Total noninterest income 5,413 5,184 4,954 18,567 - ----------------------------------------------------------------------------------------------------------------------- Noninterest Expense: Compensation and benefits 5,392 6,599 15,964 20,968 Occupancy expense 2,016 1,912 6,048 5,528 Federal deposit insurance premiums 68 186 206 579 Advertising expense 570 332 1,087 874 ATM expense 279 304 839 984 Computer services 329 289 1,015 953 Other 2,121 2,624 6,823 8,011 - ----------------------------------------------------------------------------------------------------------------------- Total noninterest expense 10,775 12,246 31,982 37,897 - ----------------------------------------------------------------------------------------------------------------------- Income before income taxes and extraordinary item 6,910 6,646 12,633 20,262 Income tax expense 2,264 2,018 3,964 6,526 - ----------------------------------------------------------------------------------------------------------------------- Income before extraordinary item 4,646 4,628 8,669 13,736 Extraordinary item-gain on early extinguishment of debt, net of tax expense of $3,069 - - 5,700 - - ----------------------------------------------------------------------------------------------------------------------- Net income $ 4,646 4,628 14,369 13,736 - ----------------------------------------------------------------------------------------------------------------------- Basic earnings per share Income before extraordinary item $ 0.50 0.43 0.90 1.24 Extraordinary item, net of tax - - 0.60 - - ----------------------------------------------------------------------------------------------------------------------- Net income 0.50 0.43 1.50 1.24 - ----------------------------------------------------------------------------------------------------------------------- Diluted earnings per share Income before extraordinary item 0.48 0.41 0.87 1.18 Extraordinary item, net of tax - - 0.57 - - ----------------------------------------------------------------------------------------------------------------------- Net income $ 0.48 0.41 1.44 1.18 - -----------------------------------------------------------------------------------------------------------------------
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) Nine Months Ended September 30, 1999 Balance at December 31, 1998 $ 116 107,130 80,219 (1,511) (17) 185,937 Net income 13,736 - - 13,736 - - 13,736 Other comprehensive income, net of tax Change in unrealized gain (loss) on securities available for sale, net of reclassification adjustment (10,404) - - - - (10,404) (10,404) ------------ Total comprehensive income 3,332 Cash dividends declared, $0.42 per share - - (4,575) - - (4,575) Purchase of treasury stock - - - (20,119) - (20,119) Proceeds from exercise of stock options 1 301 - - - 302 Tax benefit from stock related compensation - 199 - - - 199 - ----------------------------------------------------------------------------------------------------------------------------------- Balance at September 30, 1999 $ 117 107,630 89,380 (21,630) (10,421) 165,076 =================================================================================================================================== Nine Months Ended September 30, 2000 Balance at December 31, 1999 $ 117 108,093 92,337 (29,857) (17,019) 153,671 Net income 14,369 - - 14,369 - - 14,369 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 7,352 - - - - 7,352 7,352 ------------ Total comprehensive income 21,744 Cash dividends declared, $0.42 per share - - (3,965) - - (3,965) Purchase of treasury stock - - - (16,583) - (16,583) Proceeds from exercise of stock options - 25 - - - 25 Tax benefit from stock related compensation - 5 - - - 5 - ----------------------------------------------------------------------------------------------------------------------------------- Balance at September 30, 2000 $ 117 108,123 102,741 (46,440) (9,644) 154,897 ===================================================================================================================================
See accompanying notes to unaudited consolidated financial statements. 3 Alliance Bancorp and Subsidiaries Consolidated Statements of Cash Flows
Nine Months Ended September 30, (In thousands) 2000 1999 - -------------------------------------------------------------------------------------------------------------------- (unaudited) Cash Flows From Operating Activities: Net income $ 14,369 13,736 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,354 1,982 Provision for loan losses 1,600 150 Federal Home Loan Bank of Chicago stock dividend (1,522) - Amortization of premiums, discounts, and deferred loan fees 1,056 1,127 Originations of loans held for sale (81,056) (473,637) Sale of loans originated for resale 73,142 579,962 Gain on sales of loans (38) (474) Loss on sales of mortgage-backed securities available for sale 6,059 22 (Gain) loss on sales of investment securities available for sale (15) 16 Extraordinary item-gain on early extiguishment of debt, net of tax (5,700) - (Increase) decrease in accrued interest receivable (571) 592 Increase in other assets (1,446) (4,659) Increase (decrease) in accrued expenses and other liabilities 2,413 (2,627) - -------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 10,645 116,190 - -------------------------------------------------------------------------------------------------------------------- Cash Flows From Investing Activities: Loans originated or purchased for investment (355,745) (331,638) Purchases of: Mortgage-backed securities available for sale - (237,351) Mortgage-backed securities held to maturity (2,014) - Investment securities available for sale (12,899) (74,840) Investment securities held to maturity (19,400) - Stock in Federal Home Loan Bank of Chicago - (3,560) Premises and equipment (2,494) (2,037) Bank owned life insurance (25,000) - Proceeds from sale or maturity of: Mortgage-backed securities available for sale 115,180 114,022 Investment securities available for sale 12,505 12,016 Stock in Federal Home Loan Bank of Chicago - 1,451 Premises and equipment 102 - Loans held for investment 16,619 20,027 Proceeds from maturities of investment securities available for sale - 42,640 Net (increase) decrease in real estate joint ventures 2,259 (389) Principal collected on loans 211,109 241,621 Principal collected on mortgage-backed securities 23,494 96,952 - -------------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (36,284) (121,086) - --------------------------------------------------------------------------------------------------------------------
(continued) 4 Alliance Bancorp and Subsidiaries Consolidated Statements of Cash Flows (continued)
Nine Months Ended September 30, (In thousands) 2000 1999 - -------------------------------------------------------------------------------------------------------------------- (unaudited) Cash Flows From Financing Activities: Net increase (decrease) in deposits 25,726 (56,689) Proceeds from borrowed funds 342,353 134,327 Repayment of borrowed funds (346,181) (71,127) Net increase (decrease) in advance payments by borrowers for taxes and insurance (7,346) 799 Purchase of treasury stock (16,583) (20,119) Cash dividends paid (4,096) (4,705) Proceeds from exercise of stock options 25 302 - -------------------------------------------------------------------------------------------------------------------- Net cash used in financing activities (6,102) (17,212) - -------------------------------------------------------------------------------------------------------------------- Net decrease in cash and cash equivalents (31,741) (22,108) Cash and cash equivalents at beginning of period 60,520 80,997 - -------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of period $ 28,779 58,889 - -------------------------------------------------------------------------------------------------------------------- Supplemental Disclosures of Cash Flow Information: Cash paid during the period for: Interest $ 62,295 59,061 Income taxes 3,250 9,935 Supplemental Disclosures of Noncash Activities: Loans exchanged for mortgage-backed securities $ 1,030 473 Additions to real estate acquired in settlement of loans 770 270 - --------------------------------------------------------------------------------------------------------------------
See accompanying notes to unaudited consolidated financial statements. 5 Alliance Bancorp and Subsidiaries Notes to Consolidated Financial Statements (unaudited) Nine Months Ended September 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 - --------------------------------------------------------------------------------------------------------------------- Nine Months Ended September 30, 1999 Disclosure of reclassification amount: Unrealized holding gain (loss) on securities available for sale arising during the period $ (16,044) 5,615 (10,429) Less: reclassification adjustment for gain (loss) included in net income (38) 13 (25) - --------------------------------------------------------------------------------------------------------------------- Net unrealized gain (loss) on securities $ (16,006) 5,602 (10,404) - --------------------------------------------------------------------------------------------------------------------- Nine Months Ended September 30, 2000 Disclosure of reclassification amount: Unrealized holding gain (loss) on securities available for sale arising during the period $ 5,265 (1,841) 3,424 Less: reclassification adjustment for gain (loss) included in net income (6,044) 2,116 (3,928) - --------------------------------------------------------------------------------------------------------------------- Net unrealized gain (loss) on securities $ 11,309 (3,957) 7,352 Change in minimum pension liability 38 (15) 23 - --------------------------------------------------------------------------------------------------------------------- Other comprehensive income $ 11,347 (3,972) 7,375 - ---------------------------------------------------------------------------------------------------------------------
6 Alliance Bancorp and Subsidiaries Notes to Consolidated Financial Statements - (Continued) (unaudited) Nine Months Ended September 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 Nine Months Ended September 30, September 30, (In thousands, except share data) 2000 1999 2000 1999 - ---------------------------------------------------------------------------------------------------- Numerator: Income before extraordinary item $ 4,646 4,628 8,669 13,736 Extraordinary item, net of tax - - 5,700 - ---------------------------------------------- Net income $ 4,646 4,628 14,369 13,736 ---------------------------------------------- Denominator: Basic earnings per share-weighted average shares 9,267,532 10,846,200 9,589,485 11,092,453 Effect of dilutive securities-stock options 368,361 526,087 374,034 522,981 ---------------------------------------------- Diluted earnings per share-adjusted weighted average shares 9,635,893 11,372,287 9,963,519 11,615,434 ---------------------------------------------- Basic earnings per share Income before extraordinary item $ 0.50 0.43 0.90 1.24 Extraordinary item, net of tax - - 0.60 - ---------------------------------------------- Net income $ 0.50 0.43 1.50 1.24 ---------------------------------------------- Diluted earnings per share Income before extraordinary item $ 0.48 0.41 0.87 1.18 Extraordinary item, net of tax - - 0.57 - ---------------------------------------------- Net income $ 0.48 0.41 1.44 1.18 ----------------------------------------------
(4) Commitments and Contingencies At September 30, 2000, the Company had outstanding commitments to originate or purchase loans of $82.1 million and undisbursed balances of construction loans of $142.7 million. Unused equity lines of credit available to customers were $111.8 million at September 30, 2000. 7 Alliance Bancorp and Subsidiaries Notes to Consolidated Financial Statements - (Continued) (unaudited) Nine Months Ended September 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 September 30, 2000 Interest income $ 36,033 200 24 279 (438) 36,098 Interest expense 22,579 192 203 90 (438) 22,626 - ----------------------------------------------------------------------------------------------------------------------------------- Net interest income (loss) 13,454 8 (179) 189 - 13,472 Provision for loan losses 1,200 - - - - 1,200 - ----------------------------------------------------------------------------------------------------------------------------------- Net interest income (loss) after provision for loan losses 12,254 8 (179) 189 - 12,272 Other fees and commissions 1,292 466 - 560 (38) 2,280 Other noninterest income 882 - 2,302 2 (53) 3,133 Noninterest expense 8,886 1,388 9 583 (91) 10,775 - ----------------------------------------------------------------------------------------------------------------------------------- Income (loss) before income taxes 5,542 (914) 2,114 168 - 6,910 Income tax expense (benefit) 1,721 (362) 839 66 - 2,264 - ----------------------------------------------------------------------------------------------------------------------------------- Net income (loss) $ 3,821 (552) 1,275 102 - 4,646 - -----------------------------------------------------------------------------------------------------------------------------------
8 Alliance Bancorp and Subsidiaries Notes to Consolidated Financial Statements - (Continued) (unaudited) Three Months Ended September 30, 2000 and 1999
Mortgage Real Estate Inter-segment Consolidated (In thousands) Banking Brokerage Joint Ventures Other Eliminations Total - ----------------------------------------------------------------------------------------------------------------------------------- Three Months Ended September 30, 1999 Interest income $ 33,424 697 20 190 (804) 33,527 Interest expense 19,844 602 127 - (804) 19,769 - ----------------------------------------------------------------------------------------------------------------------------------- Net interest income (loss) 13,580 95 (107) 190 - 13,758 Provision for loan losses 50 - - - - 50 - ----------------------------------------------------------------------------------------------------------------------------------- Net interest income (loss) after provision for loan losses 13,530 95 (107) 190 - 13,708 Other fees and commissions 1,139 2,785 - 577 (336) 4,165 Other noninterest income 67 - 996 5 (49) 1,019 Noninterest expense 8,621 3,281 - 729 (385) 12,246 - ----------------------------------------------------------------------------------------------------------------------------------- Income (loss) before income taxes 6,115 (401) 889 43 - 6,646 Income tax expense (benefit) 1,801 (156) 351 22 - 2,018 - ----------------------------------------------------------------------------------------------------------------------------------- Net income (loss) $ 4,314 (245) 538 21 - 4,628 - ----------------------------------------------------------------------------------------------------------------------------------- Nine Months Ended September 30, 2000 Interest income $ 103,860 486 84 613 (1,111) 103,932 Interest expense 62,739 425 528 90 (1,111) 62,671 - ----------------------------------------------------------------------------------------------------------------------------------- Net interest income (loss) 41,121 61 (444) 523 - 41,261 Provision for loan losses 1,600 - - - - 1,600 - ----------------------------------------------------------------------------------------------------------------------------------- Net interest income (loss) after provision for loan losses 39,521 61 (444) 523 - 39,661 Other fees and commissions 3,783 1,199 - 1,737 (414) 6,305 Other noninterest income, net (5,398) - 4,318 (112) (159) (1,351) Noninterest expense 26,344 4,329 39 1,843 (573) 31,982 - ----------------------------------------------------------------------------------------------------------------------------------- Income (loss) before income taxes and extraordinary item 11,562 (3,069) 3,835 305 - 12,633 Income tax expense (benefit) 3,539 (1,217) 1,516 126 - 3,964 - ----------------------------------------------------------------------------------------------------------------------------------- Income (loss) before extraordinary item 8,023 (1,852) 2,319 179 - 8,669 Extraordinary item-gain on early extinguishment of debt, net of tax 5,700 - - - - 5,700 - ----------------------------------------------------------------------------------------------------------------------------------- Net income (loss) $ 13,723 (1,852) 2,319 179 - 14,369 - ----------------------------------------------------------------------------------------------------------------------------------- Assets $1,950,897 15,085 23,866 14,787 (33,038) 1,971,597 - -----------------------------------------------------------------------------------------------------------------------------------
9 Alliance Bancorp and Subsidiaries Notes to Consolidated Financial Statements - (Continued) (unaudited) Nine Months Ended September 30, 2000 and 1999
Mortgage Real Estate Inter-segment Consolidated (In thousands) Banking Brokerage Joint Ventures Other Eliminations Total - ----------------------------------------------------------------------------------------------------------------------------------- Nine Months Ended September 30, 1999 Interest income $ 98,602 2,255 24 522 (2,477) 98,926 Interest expense 59,286 2,036 339 - (2,477) 59,184 - ----------------------------------------------------------------------------------------------------------------------------------- Net interest income (loss) 39,316 219 (315) 522 - 39,742 Provision for loan losses 150 - - - - 150 - ----------------------------------------------------------------------------------------------------------------------------------- Net interest income (loss) after provision for loan losses 39,166 219 (315) 522 - 39,592 Other fees and commissions 3,785 10,917 - 1,826 (1,591) 14,937 Other noninterest income 712 - 2,867 200 (149) 3,630 Noninterest expense 26,610 10,961 12 2,054 (1,740) 37,897 - ----------------------------------------------------------------------------------------------------------------------------------- Income before income taxes 17,053 175 2,540 494 - 20,262 Income tax expense 5,250 68 1,003 205 - 6,526 - ----------------------------------------------------------------------------------------------------------------------------------- Net income $ 11,803 107 1,537 289 - 13,736 - ----------------------------------------------------------------------------------------------------------------------------------- Assets $1,970,997 40,787 27,007 25,474 (98,276) 1,965,989 - -----------------------------------------------------------------------------------------------------------------------------------
(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. 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 15.08% for the quarter ended September 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 September 30, 2000, cash and cash equivalents totaled $28.8 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, provided $10.6 million for the nine months ended September 30, 2000. Net cash related to investing activities, consisting primarily of disbursements for loans originated or purchased for investment, purchases of mortgage-backed securities, investment securities and bank owned life insurance policies, 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, utilized $36.3 million for the nine months ended September 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 $6.1 million for the nine months ended September 30, 2000. The Bank's tangible capital ratio at September 30, 2000 was 6.79%. This exceeded the tangible capital requirement of 1.5% of adjusted assets by $103.8 million. The Bank's core capital ratio at September 30, 2000 was 6.79%. This exceeded the core capital requirement of 3.0% of adjusted assets by $74.3 million. The Bank's risk-based capital ratio was 10.31% at September 30, 2000. The Bank currently exceeds the risk-based capital requirement of 8.0% of risk- weighted assets by $31.3 million. Changes in Financial Condition The Company had total assets of $1.97 billion at September 30, 2000, an increase of $9.3 million, or 0.5%, 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. 12 Loans totaled $1.5 billion at September 30, 2000, an increase of $133.3 million from December 31, 1999. 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 lines of credit and indirect auto lending in an attempt to improve the overall yield on loans. At September 30, 2000, 42% of the loan portfolio consisted of one-to four-family loans, 39% was multi-family, construction, land and commercial real estate loans, and the remaining 19% 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 $436.8 million for the nine months ended September 30, 2000, offset by loan sales of $89.8 million and principal repayments of $211.1 million. In the current quarter, the Bank purchased $25 million of Bank Owned Life Insurance ("BOLI") to fund future employee benefit costs of the Bank and its subsidiaries, financed by general operating funds of the Bank. The BOLI investment provides the Bank with an attractive investment alternative. The accounting effect of the BOLI increases noninterest-earning assets and noninterest income. In addition, the reduction of investable funds resulting from the BOLI purchase decreases net interest income and the interest rate spread. Deposits totaled $1.27 billion at September 30, 2000, an increase of $25.7 million from December 31, 1999. Since September 30, 1999, rates on deposit accounts have generally increased for financial institutions reflecting the Federal Reserve Bank's influence in increasing interest rates. Over 70 percent of the Liberty Federal's certificate of deposit accounts have repriced during this period of rising interest rates. In an effort to compete with other banks to retain deposits and improve its interest rate sensitivity position, Liberty Federal has had to offer longer term, higher yielding certificate of deposit accounts which have increased the cost of funds. The weighted average deposit cost at September 30, 2000 was 5.11% compared to 4.52% at December 31, 1999. Stockholders' equity totaled $154.9 million at September 30, 2000, an increase of $1.2 million from December 31, 1999. 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 September 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, 122,800 shares of stock had been repurchased for a total of $1,898,457 at an average price of $15.46 per share under the current share repurchase program. For the nine months ended September 30, 2000 stockholders' equity has been reduced by $16.6 million related to shares repurchased. At September 30, 2000, the number of common shares outstanding was 9,243,575 and the book value per common share outstanding was $16.76 per share. On September 22, 2000, the Company declared a $0.14 per share cash dividend payable October 13, 2000 to shareholders of record on September 30, 2000. 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. The Company does not believe these statements will have a material impact on its financial position or results of operations. 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 September 30, 2000 nor during the quarter ended September 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 ------------------------------------------------------------------------- September 30, June 30, March 31, December 31, September 30, (Dollars in thousands) 2000 2000 2000 1999 1999 - ---------------------------------------------------------------------------------------------------------------------- Non-accrual mortgage loans 90 days or more past due $ 4,598 3,393 3,143 3,701 3,656 Non-accrual commercial real estate loans 90 days or more past due 645 643 643 189 - Non-accrual consumer loans 90 days or more past due 728 720 685 651 302 ------------------------------------------------------------------- Total non-performing loans 5,971 4,756 4,471 4,541 3,958 Total foreclosed real estate 147 629 693 241 78 ------------------------------------------------------------------- Total non-performing assets $ 6,118 5,385 5,164 4,782 4,036 ------------------------------------------------------------------- Total non-performing loans to total loans 0.40% 0.32 0.32 0.33 0.30 Total non-performing assets to total assets 0.31% 0.28 0.28 0.24 0.21
The following table sets forth certain information regarding the Company's allowance for loan losses at the dates indicated.
Quarter Ended --------------------------------------------------------------------------- September 30, June 30, March 31, December 31, September 30, (Dollars in thousands) 2000 2000 2000 1999 1999 - -------------------------------------------------------------------------------------------------------------------- Balance at beginning of period $ 6,176 6,135 6,031 6,251 6,307 Provision for loan losses 1,200 200 200 50 50 Charge-offs 147 171 115 288 111 Recoveries 15 12 19 18 5 ----------------------------------------------------------------------- Balance at end of period $ 7,244 6,176 6,135 6,031 6,251 ----------------------------------------------------------------------- Ratio of net charge-offs during the period to average loans outstanding 0.01% 0.01 0.01 0.02 0.01 Ratio of allowance for loan losses to net loans receivable at end of period 0.48% 0.42 0.43 0.44 0.48 Ratio of allowance for loan losses to non-performing loans at end of period 121.32% 129.87 137.22 132.81 157.93
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 September 30, 2000 the Company had total classified assets of $5.4 million, of which $5.0 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.
September 30, June 30, March 31, December 31, September 30, 2000 2000 2000 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 $ 692,707 42.08% 713,377 44.42 724,859 48.02 723,311 49.39 712,290 51.90 Multi-family 210,214 12.77 205,793 12.81 176,778 11.71 172,614 11.79 164,828 12.01 Commercial real estate 149,802 9.10 142,373 8.87 142,794 9.46 140,480 9.59 119,376 8.70 Construction 281,746 17.11 246,811 15.37 191,116 12.66 173,866 11.87 143,229 10.44 Land 6,551 0.40 7,914 0.49 5,680 0.38 2,766 0.19 1,251 0.09 -------------------- ------------------ ------------------ ------------------ ------------------ Total mortgage loans 1,341,020 81.46 1,316,268 81.96 1,241,227 82.23 1,213,037 82.83 1,140,974 83.14 Other loans: Commercial leases 36,577 2.22 30,263 1.89 25,371 1.68 20,846 1.42 20,396 1.49 Home equity lines of credit 110,714 6.72 107,245 6.68 102,920 6.82 100,077 6.83 93,958 6.85 Automobile loans 138,616 8.42 134,245 8.36 123,354 8.17 115,004 7.85 102,212 7.45 Commercial business loans 4,518 0.27 4,080 0.25 4,012 0.27 4,163 0.28 4,071 0.30 Consumer loans 14,915 0.91 13,830 0.86 12,510 0.83 11,517 0.79 10,566 0.77 -------------------- ------------------ ------------------ ------------------ ------------------ Total loans receivable 1,646,360 100.00% 1,605,931 100.00 1,509,394 100.00 1,464,644 100.00 1,372,177 100.00 ------ ------ ------ ------ ------ Add (deduct): Loans in process (142,684) (135,872) (92,967) (95,726) (69,225) Premiums and deferred loan costs, net 132 131 397 379 485 Allowance for loan losses (7,244) (6,176) (6,135) (6,031) (6,251) ----------- ----------- ----------- ----------- --------- Loans receivable, net $ 1,496,564 1,464,014 1,410,689 1,363,266 1,297,186 ----------- ----------- ----------- ----------- ---------
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. The following table sets forth the amounts of interest-bearing assets and interest-bearing liabilities outstanding at September 30, 2000, which are anticipated by the Company to reprice or mature in each of the future time periods shown. Except as stated below, the amounts of assets and liabilities shown which reprice or mature during a particular period were based upon the contractual terms of the asset or liability or certain assumptions concerning the amortization or prepayment of such assets and liabilities. Savings accounts, NOW accounts and money market accounts were assumed to be withdrawn at annual percentage rates of 17%, 17%, 37% and 79%, respectively. FHLB advances that contain call provisions are assumed to mature on the call date. Management believes that these assumptions approximate actual experience and considers them reasonable, although the actual amortization and repayment of assets and liabilities may vary substantially. Interest Rate Sensitivity Gap Analysis
At September 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) $ 382,075 199,527 198,096 411,397 1,191,095 Equity lines of credit (1) 111,049 - - - 111,049 Consumer loans and leases (1) 8,646 61,155 111,179 14,713 195,693 Mortgage-backed securities (2) 77,295 45,542 36,043 87,436 246,316 Interest-bearing deposits 3,202 - - - 3,202 Investment securities (2) 30,224 - - 76,690 106,914 - ---------------------------------------------------------------------------------------------------------------------------- Total interest-earning assets 612,491 306,224 345,318 590,236 1,854,269 Interest-Bearing Liabilities: Savings accounts 36,048 54,753 35,694 85,551 212,046 NOW interest-bearing accounts 23,745 21,736 5,816 12,879 64,176 Money market accounts 56,602 7,882 3,753 3,411 71,648 Certificate accounts 632,591 212,897 17,735 - 863,223 Borrowed funds 193,200 242,394 90,000 - 525,594 - ---------------------------------------------------------------------------------------------------------------------------- Total interest-bearing liabilities 942,186 539,662 152,998 101,841 1,736,687 - ---------------------------------------------------------------------------------------------------------------------------- Interest sensitivity gap $ (329,695) (233,438) 192,320 488,395 117,582 - ---------------------------------------------------------------------------------------------------------------------------- Cumulative interest sensitivity gap $ (329,695) (563,133) (370,813) 117,582 - ---------------------------------------------------------------------------------------------------------------------------- Cumulative interest sensitivity gap as a percentage of total assets (16.60) % (28.35) (18.67) 5.92 Cumulative net interest-earning assets as a percentage of interest-bearing liabilities 65.01 % 62.00 77.32 106.77 - ----------------------------------------------------------------------------------------------------------------------------
(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. 16 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 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. 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 an immediate 300 basis point increase to an immediate 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 September 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 $1,183,831 $23,419 7.91% $1,063,287 $19,852 7.47% Equity lines of credit 112,643 2,572 9.06 95,985 1,812 7.49 Automobile loans 137,732 2,764 7.96 90,571 1,925 8.43 Consumer loans and leases 46,891 968 8.24 31,679 536 6.75 Mortgage-backed securities 250,055 4,320 6.91 447,762 7,208 6.44 Interest-bearing deposits 7,611 126 6.57 34,443 447 5.08 Investment securities 102,292 1,929 7.53 101,327 1,747 6.88 - ------------------------------------------------------------------------------------------------------ Total interest-earning assets 1,841,055 36,098 7.83 1,865,054 33,527 7.18 Noninterest-earning assets 98,507 96,741 - ------------------------------------------------------------------------------------------------------ Total assets $1,939,562 $1,961,795 - ------------------------------------------------------------------------------------------------------ Liabilities and Stockholders' Equity: Interest-bearing liabilities: Deposits: Savings accounts $1,063,943 $14,088 5.25% $1,023,140 $11,820 4.58% NOW interest-bearing accounts 64,659 150 0.92 64,929 152 0.93 Money market accounts 74,559 608 3.24 86,729 727 3.33 - ------------------------------------------------------------------------------------------------------ Total deposits 1,203,161 14,846 4.90 1,174,798 12,699 4.29 Borrowed funds 495,591 7,780 6.23 521,397 7,070 5.31 - ------------------------------------------------------------------------------------------------------ Total interest-bearing liabilities 1,698,752 22,626 5.28 1,696,195 19,769 4.60 Noninterest-bearing deposits 55,741 58,975 Other liabilities 34,072 34,944 - ------------------------------------------------------------------------------------------------------ Total liabilities 1,788,565 1,790,114 Stockholders' equity 150,997 171,681 - ------------------------------------------------------------------------------------------------------ Total liabilities and stockholders' equity $1,939,562 $1,961,795 - ------------------------------------------------------------------------------------------------------ Net interest income/ interest rate spread $13,472 2.55% $13,758 2.58% - ------------------------------------------------------------------------------------------------------ Net interest-earning assets/ net interest margin $ 142,303 2.93 % $ 168,859 2.95% - ------------------------------------------------------------------------------------------------------ Interest-earning assets to interest-bearing liabilities 1.08X 1.10X - ------------------------------------------------------------------------------------------------------ Nine Months Ended September 30, At September 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 $1,151,852 $67,275 7.79% $ 1,076,690 $59,793 7.40% $ 1,188,636 7.84% Equity lines of credit 108,061 7,016 8.65 95,393 5,226 7.32 111,145 9.11 Automobile loans 129,941 7,710 7.90 73,112 4,681 8.56 140,784 8.65 Consumer loans and leases 40,468 2,506 8.25 32,209 1,737 7.20 55,999 8.46 Mortgage-backed securities 276,813 13,911 6.70 417,887 19,792 6.31 234,435 7.02 Interest-bearing deposits 9,063 422 6.20 74,547 2,619 4.63 3,202 6.51 Investment securities 94,914 5,092 7.15 99,462 5,078 6.81 104,146 7.69 - ------------------------------------------------------------------------------------------------------ -------------------- Total interest-earning assets 1,811,112 103,932 7.65 1,869,300 98,926 7.06 1,838,347 7.97 Noninterest-earning assets 94,655 95,354 133,250 - ------------------------------------------------------------------------------------------------------ -------------------- Total assets $1,905,767 $ 1,964,654 $1,971,597 ====================================================================================================== ==================== Liabilities and Stockholders' Equity: Interest-bearing liabilities: Deposits: Savings accounts $1,049,902 $39,509 5.01% $1,043,407 $36,828 4.72% $1,075,269 5.48% NOW interest-bearing accounts 65,494 458 0.93 62,364 464 0.99 64,176 0.95 Money market accounts 78,778 1,912 3.23 85,538 2,089 3.27 71,648 3.33 - ----------------------------------------------------------------------------------------------------- --------------------- Total deposits 1,194,174 41,879 4.67 1,191,309 39,381 4.42 1,211,093 5.11 Borrowed funds 468,791 20,792 5.91 494,109 19,803 5.29 525,594 6.21 - ----------------------------------------------------------------------------------------------------- --------------------- Total interest-bearing liabilities 1,662,965 62,671 5.02 1,685,418 59,184 4.67 1,736,687 5.44 Noninterest-bearing deposits 56,584 63,899 56,831 Other liabilities 33,218 36,231 23,182 - ----------------------------------------------------------------------------------------------------- --------------------- Total liabilities 1,752,767 1,785,548 1,816,700 Stockholders' equity 153,000 179,106 154,897 - ----------------------------------------------------------------------------------------------------- --------------------- Total liabilities and stockholders' equity $1,905,767 $1,964,654 $1,971,597 ===================================================================================================== ===================== Net interest income/ interest rate spread $41,261 2.63% $39,742 2.39% 2.53% ===================================================================================================== ==== Net interest-earning assets/ net interest margin $ 148,147 3.04% $ 183,882 2.83% ===================================================================================================== Interest-earning assets to interest-bearing liabilities 1.09X 1.11X ============================================================================================
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 September 30, 2000 Nine Months Ended September 30, 2000 Compared To Compared To Three Months Ended September 30, 1999 Nine Months Ended September 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 $ 2,347 1,220 3,567 4,263 3,219 7,482 Equity lines of credit 344 416 760 755 1,035 1,790 Automobile loans 950 (111) 839 3,414 (385) 3,029 Consumer loans and leases 296 136 432 490 279 769 Mortgage-backed securities (3,381) 493 (2,888) (7,037) 1,156 (5,881) Interest-bearing deposits (420) 99 (321) (2,852) 655 (2,197) Investment securities 17 165 182 (236) 250 14 - ----------------------------------------------------------------------------------------------------------------------------------- Total 153 2,418 2,571 (1,203) 6,209 5,006 - ----------------------------------------------------------------------------------------------------------------------------------- Interest-Bearing Liabilities: Deposits 311 1,836 2,147 102 2,396 2,498 Funds borrowed (375) 1,085 710 (1,097) 2,086 989 - ----------------------------------------------------------------------------------------------------------------------------------- Total (64) 2,921 2,857 (995) 4,482 3,487 - ----------------------------------------------------------------------------------------------------------------------------------- Net change in net interest income $ 217 (503) (286) (208) 1,727 1,519 - -----------------------------------------------------------------------------------------------------------------------------------
Comparison of Operating Results for the Three Months Ended September 30, 2000 and September 30, 1999 General Net income totaled $4.6 million, or $0.48 per diluted share for the three months ended September 30, 2000, as compared to $4.6 million, or $0.41 per diluted share reported for the quarter ended September 30, 1999. Net interest income for the three months ended September 30, 2000 was $13.5 million, a decrease of $286,000, or 2.1%, from the September 30, 1999 quarter of $13.8 million. Interest Income Interest income for the quarter ended September 30, 2000 totaled $36.1 million, an increase of $2.6 million, or 7.7%, from the prior year's quarter. Interest income on mortgage loans, the largest component of interest-earning assets, increased $3.6 million, or 18%, to $23.4 million from the September 1999 quarter. The average balance of the mortgage portfolio increased $120.5 million. The annualized average yield on the mortgage loan portfolio increased to 7.91% for the three months ended September 30, 2000 from 7.47% 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 and construction loans. Interest income on equity lines of credit increased $760,000, or 41.9%, to $2.6 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 9.50% for the current quarter as compared to 8.10% for the comparable quarter a year ago. The average balance of equity 19 lines of credit increased $16.7 million, to $112.6 million from $96.0 million from the September 1999 quarter. Interest income on auto loans increased $839,000 to $2.8 million for the three months ended September 30, 2000. The average balance of the auto loan portfolio increased $47.2 million, while the annualized average yield on the portfolio decreased to 7.96% from 8.43%. 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 $196.7 million to $352.3 million as compared to $549.1 million for the September 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 $2.7 million from the prior year's third quarter. Interest Expense Interest expense on deposit accounts increased $2.1 million, or 16.9%, to $14.8 million, for the quarter ended September 30, 2000 compared to the prior year's quarter. The increase was due to the increase in the annualized average cost of deposits from 4.29% to 4.90%. For the quarter ended September 30, 2000, the Company recorded interest expense on borrowed funds of $7.8 million on an average balance of $495.6 million at an annualized cost of 6.23% related to FHLB borrowings. During the current quarter, the Company repaid $77.5 million of FHLB advances that matured or were called and added $122.5 million at current market rates, primarily to fund loan growth. Net Interest Income Net interest income for the three months ended September 30, 2000 decreased $286,000 or 2.1%, to $13.5 million from the 1999 period. The annualized average yield on interest-earning assets increased from 7.18% to 7.83% when comparing the 1999 and 2000 quarters. The annualized average cost of interest-bearing liabilities increased from 4.60% to 5.28%. 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 2.55% for the three-month period ended September 30, 2000 compared to 2.58% for the prior year's period. The average balance of interest-earning assets decreased while the average balance of interest-bearing liabilities increased during the quarter ended September 30, 2000 compared to the 1999 quarter. Provision for Loan Losses A provision of $1.2 million for loan losses was recorded during the quarter ended September 30, 2000. The increase in the provision recognizes the increase in non-performing loans and the change in the loan portfolio mix reflecting the increased concentration of multi-family, commercial and construction loans. By the nature of these loans, their size and complexity, they add an inherent element of risk to the portfolio, which was not there when the Bank was primarily a single-family lender. The allowance for loan losses represents 0.48% of total loans receivable at September 30, 2000. The amount of non- performing loans at September 30, 2000, was $6.0 million, or 0.40% of total loans, compared to $4.0 million or 0.30% of total loans at September 30, 1999. Noninterest Income Total noninterest income for the three months ended September 30, 2000 was $5.4 million, an increase of $229,000 from the third quarter of 1999. Other fees and commissions decreased $1.9 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 third quarter of 1999, mortgages totaling $147 million were sold, compared to $48 million sold in the current quarter. The current quarter's income from real estate operations of $2.4 million included a $1.5 million gain from the sale of a real estate investment by one of the Bank's subsidiaries. The $506,000 gain on the sale of investment securities in the current quarter relates to the sale of stock the Bank owned in an ATM network company. Other noninterest income for the current quarter includes $186,000 related to the BOLI investment. Noninterest Expense Noninterest expense for the quarter ended September 30, 2000 totaled $10.8 million, a decrease of $1.5 million, or 12.0% from the prior year's quarter. The largest component of noninterest expense, compensation and benefits, 20 decreased $1.2 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 September 30, 2000 was $2.3 million. The effective tax rate for the quarter was 32.8% compared to 30.4% for the 1999 quarter. Comparison of Operating Results for the Nine Months Ended September 30, 2000 and September 30, 1999 General Net income totaled $14.4 million, or $1.44 per diluted share for the nine months ended September 30, 2000, as compared to $13.7 million, or $1.18 per diluted share reported for the nine months ended September 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 $0.57 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 nine months ended September 30, 2000 was $41.3 million, an increase of $1.6 million, or 3.8%, from the September 30, 1999 period of $39.7 million. Interest Income Interest income for the nine months ended September 30, 2000 totaled $103.9 million, an increase of $5.0 million, or 5.1%, from the prior year's period. Interest income on mortgage loans, the largest component of interest-earning assets, increased $7.5 million, or 12.5%, to $67.3 million from the September 1999 period. The average balance of the mortgage portfolio increased $75.2 million. The annualized average yield on the mortgage loan portfolio increased to 7.79% for the nine months ended September 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 $1.8 million, or 34.3%, to $7.0 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 9.15% for the current period as compared to 7.87% for the comparable period a year ago. The average balance of equity lines of credit increased $12.7 million, to $108.1 million from $95.4 million from the September 1999 period. Interest income on auto loans increased $3.0 million to $7.7 million for the nine months ended September 30, 2000. The average balance of the auto loan portfolio increased $56.8 million, while the annualized average yield on the portfolio decreased to 7.90%. 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 $136.5 million to $371.7 million as compared to $517.3 million for the September 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 $5.9 million from the prior year's period. Interest Expense Interest expense on deposit accounts increased $2.5 million, or 6.3%, to $41.9 million, for the nine months ended September 30, 2000 compared to the prior year's period. The increase was due to the increase in the annualized average cost of deposits from 4.42% to 4.67%. For the nine months ended September 30, 2000, the Company recorded interest expense on borrowed funds of $20.8 million on an average balance of $468.8 million at an annualized cost of 5.91% related to FHLB borrowings. During the current period, the Company repaid $346.2 million of FHLB advances that matured or were called and added $342.4 million at current market rates. 21 Net Interest Income Net interest income for the nine months ended September 30, 2000 increased $1.6 million or 3.8%, to $41.3 million from the 1999 period. The annualized average yield on interest-earning assets increased from 7.06% to 7.65% when comparing the 1999 and 2000 periods. The annualized average cost of interest- bearing liabilities increased from 4.67% to 5.02%. This resulted in an annualized average net interest rate spread of 2.63% for the nine months ended September 30, 2000 compared to 2.39% for the prior year's period. Both the average balances of interest-earning assets and interest-bearing liabilities decreased during the nine months ended September 30, 2000 compared to the 1999 period. Provision for Loan Losses A provision of $1.6 million for loan losses was recorded during the nine months ended September 30, 2000. The increase in the provision recognizes the increase in non-performing loans and the change in the loan portfolio mix reflecting the increased concentration of multi-family, commercial and construction loans. By the nature of these loans, their size and complexity, they add an inherent element of risk to the portfolio, which was not there when the Bank was primarily a single-family lender. The allowance for loan losses represents 0.48% of total loans receivable at September 30, 2000. The amount of non-performing loans at September 30, 2000, was $6.0 million, or 0.40% of total loans, compared to $4.0 million or 0.30% of total loans at September 30, 1999. Noninterest Income Total noninterest income for the nine months ended September 30, 2000 was $5.0 million. The nine months ended September 30, 2000 included losses on sales of mortgage-backed and investment securities available for sale of $6.0 million. As previously mentioned, the Company sold 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 $8.4 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 nine months ended September 30, 1999, mortgages totaling $600 million were sold, compared to $89.8 million sold in the current nine months. The current nine months income from real estate operations of $4.5 million included a $1.5 million gain from the sale of a real estate investment by one of the Bank's subsidiaries. Other income for the nine months ended September 30, 1999, included a gain on the sale of Liberty Financial Services Inc.'s insurance book of business of $250,000. The current nine 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 nine months ended September 30, 2000 totaled $32 million, a decrease of $5.9 million, or 15.6% from the prior year's period. The largest component of noninterest expense, compensation and benefits, decreased $5.0 million, primarily due to the decrease in commissions paid related to the origination, sale and delivery of loans by Liberty Home Mortgage. Other noninterest expense decreased $1.2 million from the 1999 period primarily due to the decrease in loan costs associated with the origination, sale and delivery of loans by Liberty Home Mortgage. Income Tax Provision The provision for income taxes for the nine months ended September 30, 2000 was $4.0 million. The effective tax rate for the nine months was 32.9% compared to 32.2% for the 1999 period. Part II - Other Information Item 1. Legal Proceedings Not Applicable. 22 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. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibit No. 11 Statement re: Computation of Per Share Earnings
Three Months Ended September 30, 2000 1999 --------------------------------- Net income $ 4,646,000 4,628,000 --------------------------------- Basic earnings per share-weighted average shares 9,267,532 10,846,200 Effect of dilutive securities-stock options 368,361 526,087 --------------------------------- Diluted earnings per share-adjusted weighted average shares 9,635,893 11,372,287 --------------------------------- Basic earnings per share $ 0.50 0.43 --------------------------------- Diluted earnings per share $ 0.48 0.41 ---------------------------------
Nine Months Ended September 30, 2000 1999 ------------------------------------- Net income $ 14,369,000 13,736,000 ------------------------------------- Basic earnings per share-weighted average shares 9,589,485 11,092,453 Effect of dilutive securities-stock options 374,034 522,981 ------------------------------------- Diluted earnings per share-adjusted weighted average shares 9,963,519 11,615,434 ------------------------------------- Basic earnings per share $ 1.50 1.24 ------------------------------------- Diluted earnings per share $ 1.44 1.18 -------------------------------------
(b) Reports on Form 8-K. None 23 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: November 7, 2000 /s/ Kenne P. Bristol ------------------------ ----------------------------------- Kenne P. Bristol President and Chief Executive Officer Dated: November 7, 2000 /s/ Richard A. Hojnicki ------------------------ ------------------------------- Richard A. Hojnicki Executive Vice President and Chief Financial Officer 24 EX-27 2 0002.txt FINANCIAL DATA SCHEDULE
9 1,000 9-MOS DEC-31-2000 SEP-30-2000 25,577 3,202 0 0 277,824 31,852 0 1,503,808 7,244 1,971,597 1,267,924 193,200 355,576 0 0 0 117 154,780 1,971,597 84,507 19,003 422 103,932 41,879 20,792 41,261 1,600 (6,044) 31,982 12,633 8,669 5,700 0 14,369 1.50 1.44 3.04 5,971 0 0 0 6,031 433 46 7,244 4,793 0 2,451
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