SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to _______
Commission File No. 0-21347
ILLINOIS COMMUNITY BANCORP, INC.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
ILLINOIS 37-1361560
- ------------------------------- -------------------
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
210 E. Fayette, Effingham, Illinois 62401
- -------------------------------------- ----------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code:(217)347-7127
-------------
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
------ ------
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of the latest
practicable date.
Shares outstanding
Class at November 10, 1997
- ----------------------------- --------------------
Common Stock, Par Value $0.01 502,550
ILLINOIS COMMUNITY BANCORP, INC.
Index to Form 10-QSB
PART I FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements
- Consolidated Statements of
Financial Condition 1
- Consolidated Statements of Income 2
- Consolidated Statement of
Stockholders' Equity 3
- Consolidated Statement of Cash Flows 4
- Notes to Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8
PART II OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of
Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
ILLINOIS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
September 30 June 30
1997 1997
------------ -----------
Unaudited Audited
------------ -----------
(1,000's)
---------------------------
ASSETS
Cash and Cash Equivalents:
Cash $ 2,028 $ 1,708
Interest bearing deposits 355 767
--------- ---------
Total Cash and Cash Equivalents 2,383 2,475
Securities available for sale, amortized cost
of $7,600 and $7,497 at September 30, 1997
and June 30, 1997, respectively 7,853 7,925
Securities held to maturity, estimated market
value of $633 and $633 at September 30, 1997
and June 30, 1997, respectively 633 633
Loans receivable, net 45,414 45,219
Accrued interest receivable 388 453
Premises and equipment, net 2,702 2,742
Real estate held for sale 45 45
Prepaid income taxes 0 121
Organization expense 67 71
Other assets 95 115
--------- ---------
Total Assets $ 59,580 $ 59,799
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 43,101 $ 43,662
Advances from Federal Home Loan Bank 8,458 7,958
Other borrowings 306 316
Advances from borrowers for taxes and insurance 47 79
Accrued interest payable 160 154
Accrued income taxes 11 0
Deferred income taxes 36 97
Accrued dividends 0 75
Other liabilities 520 366
--------- ---------
Total Liabilities 52,639 52,707
--------- ---------
Commitments and Contingencies
Stockholders' Equity
Common stock, $0.01 par value; authorized
4,000,000 shares 502,550 shares issued
and outstanding 5 5
Paid-in capital 4,693 4,693
Retained earnings 2,553 2,432
Unrealized gain on securities held
available for sale 165 278
Unearned employee stock ownership plan (306) (316)
Stock held for benefit plan (169) 0
--------- ---------
Total Stockholders' Equity 6,941 7,092
--------- ---------
Total Liabilities and Stockholders' Equity $ 59,580 $ 59,799
========= =========
1
ILLINOIS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
September 30
-----------------------
1997 1997
------ ------
(1,000's)
-----------------------
Interest income:
Interest on loans $ 929 $ 772
Interest and dividends on securities 139 123
------- -------
Total interest income 1,068 895
------- -------
Interest expense:
Interest on deposits 519 443
Interest on Federal Home Loan Bank advances 122 45
Interest on other borrowings 7 6
------- -------
Total interest expense 648 494
------- -------
Net interest income 420 401
Provision for loan losses 16 82
------- -------
Net interest income after provision for
loan losses 404 319
------- -------
Non-interest income:
Other fees 45 21
Gain on sale of securities 212 0
Other 34 11
------- -------
Total other income 291 32
------- -------
Non-interest expense:
Compensation and employee benefits 273 199
Occupancy and equipment 101 51
Data processing 28 24
Audit, legal and other professional 24 40
SAIF deposit insurance 7 20
SAIF assessment 0 211
Advertising 8 9
Other 66 46
------- -------
507 600
------- -------
Income before income taxes 188 (249)
Provision for (benefit from) income taxes 67 (81)
------- -------
Net Income (Loss) $ 121 $ (168)
======= =======
Earnings (Loss) Per Share $ .26 $ (.36)
======= =======
2
ILLINOIS COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
Unearned Unrealized
Employee Gain (Loss)
Stock on Securities Stock
Common Paid-in Retained Ownership Available Held
Stock Capital Earnings Plan For Sale, Net for MRP Total
------- ------- -------- --------- ------------- ------- -------
(1,000's)
----------------------------------------------------------------------------------
Balance at June 30, 1997 $ 5 $ 4,693 $ 2,432 $ (316) $ 278 $ 0 $ 7,092
Net income 0 0 121 0 0 0 121
Change in unrealized gain
gain on securities
available for sale 0 0 0 0 (113) 0 (113)
Shares purchased 0 0 0 0 0 (169) (169)
Shares released for
allocation 0 0 0 10 0 0 10
------- ------- -------- -------- -------- ------- -------
Balance at September
30, 1997 $ 5 $ 4,693 $ 2,553 $ (306) $ 165 $ (169) $ 6,941
======= ======= ======== ======== ======== ======= =======
3
ILLINOIS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
September 30
-----------------------
1997 1997
-------- --------
(1,000's)
-----------------------
Operating activities:
Net income (loss) $ 121 $ (168)
Adjustments to reconcile net income to net
cash provided by operating activities
Provision for depreciation and amortization 67 17
Provision for loan losses 16 82
Net amortization and accretion of securities 1 1
Amortization of organization cost 4 0
Decrease (increase) in accrued interest receivable 65 (23)
Increase in other repossessed property 0 0
Decrease (increase) in other assets 20 (5)
Increase in accrued interest payable 6 7
Increase (decrease) in accrued income taxes 132 (88)
Increase in deferred income taxes 0 25
Increase in other liabilities 154 90
Gain on sale of securities (212) 0
ESOP benefit expense 10 10
-------- --------
Net cash provided by (used in) operating
activities 384 (52)
-------- --------
Investing activities:
Proceeds from matured securities available
for sale 1,000 800
Proceeds from sale of securities available
for sale 1,225 0
Purchase of securities held to maturity
and certificates of deposit 0 (99)
Purchase of securities available for sale (2,333) (427)
Proceeds from sale of loans 747 0
Increase in loans receivable (958) (3,377)
Repayment of mortgage-backed securities 216 82
Purchase of premises and equipment (26) (360)
-------- --------
Net cash used in investing activities (129) (3,381)
-------- --------
4
ILLINOIS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
September 30
-----------------------
1997 1997
-------- --------
(1,000's)
-----------------------
Financing activities:
Net (decrease) increase in deposits $ (561) $ 1,776
Advances from Federal Home Loan Bank 500 2,150
Decrease in advances from borrowers
for taxes and insurance (32) (66)
Repayment Employee Stock Ownership Plan loan (10) (10)
Dividends paid (75) 0
Purchase of MRP Plan stock (169) 0
-------- --------
Net cash provided by (used in) financing
activities (347) 3,850
-------- --------
Increase (decrease) in cash and cash equivalents (92) 417
Cash and cash equivalents at beginning of period 2,475 407
-------- --------
Cash and cash equivalents at end of period $ 2,383 $ 824
======== ========
Supplemental Disclosures:
Additional Cash Flows Information:
Cash paid for:
Interest on deposits, advances and
other borrowings $ 642 $ 437
Income taxes:
Federal $ 0 $ 0
Unrealized gain on securities available for sale $ (175) $ 51
Deferred taxes on unrealized gain on securities
available for sale 61 (18)
5
ILLINOIS COMMUNITY BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
---------------------
The consolidated financial statements include the accounts
of Illinois Community Bancorp, Inc. (the Company) and its
wholly owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in
consolidation. The accompanying consolidated financial
statements are unaudited and should be read in conjunction
with the consolidated financial statements and notes
thereto included in the Illinois Guarantee Bank, FSB (the
Bank)'s annual report on Form 10-KSB for the year ended
June 30, 1997. The accompanying unaudited consolidated
financial statements have been prepared in accordance with
the instructions for Form 10-QSB and, therefore, do not
include information or footnotes necessary for a complete
presentation of financial condition, results of operations,
and cash flows in conformity with generally accepted
accounting principles. In the opinion of management of the
Company the unaudited consolidated financial statements
reflect all adjustments (consisting only of normal
recurring accruals) necessary to present fairly the
financial position of the Company at September 30, 1997,
and the results of its operations and cash flows for the
three months ended September 30, 1997 and 1996. Operating
results for the three months ended September 30, 1997 are
not necessarily indicative of the results that may be
expected for the year ending June 30, 1998.
(2) Stock Conversion
----------------
On September 28, 1995, the Bank converted from a federally
chartered mutual savings bank to a federally chartered
capital stock savings bank through the sale and issuance of
502,550 shares of $1 par value common stock at a price of
$10 per share, resulting in gross proceeds of $5,025,500.
After reducing gross proceeds for conversion costs of
$462,500, net proceeds totaled $4,563,000.
In conjunction with the conversion, an employee stock
ownership plan established by the Bank borrowed $402,040
from a third party to purchase 40,204 shares of common
stock issued by the Bank. As of September 30, 1997, the
outstanding loan balance is recorded as a liability and, a
corresponding amount is reflected as a reduction to
stockholders' equity.
(3) Bank Holding Company
--------------------
On July 23, 1996, the shareholders' of Illinois Guarantee
Savings Bank approved the formation of a single bank
holding company, Illinois Community Bancorp, Inc. The
reorganization was consummated on September 27, 1996. Also
approved on September 27, 1996 was the Management
Recognition Plan of 4% outstanding stock and Stock Option
Plan of up to 10% of outstanding stock. In the first
quarter of calendar year 1997, the Company formed two
subsidiary corporations to conduct business as a leasing
corporation and a financial services corporation.
(4) Bank Charter
------------
On April 21, 1997, Illinois Guarantee Savings Bank changed
its name to Illinois Community Bank and its charter from a
federal savings bank to an Illinois chartered commercial
bank. Also on this date the Company became a bank holding
company regulated by the Board of Governors of the Federal
Reserve, upon its conversion from a Thrift Holding Company.
6
ILLINOIS COMMUNITY BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(5) Earnings Per Share
------------------
Only ESOP shares that are committed to be released are
considered outstanding for earnings per share calculations.
Earnings per share have been calculated based on 471,066
and 466,969 shares for the three months ended September 30,
1997 and 1996, respectively.
(6) Employee Stock Ownership Plan
-----------------------------
In connection with the conversion to the stock form of
ownership, the Board of Directors established an employee
stock ownership plan (ESOP) for the exclusive benefit of
participating employees. Employees age 21 or older who
have completed one year of service are eligible to
participate. Upon the issuance of the common stock, the
ESOP acquired $40,204 shares of $0.01 par value common
stock at the subscription price of $10.00 per share. The
Bank makes contributions to the ESOP equal to the ESOP's
debt service less dividends received by the ESOP. All
dividends received by the ESOP are used to pay debt
service. The ESOP shares initially were pledged as
collateral for its debt. As the debt is repaid, shares are
released from collateral and allocated to active employees,
based on the proportion of debt service paid in the year.
The Bank accounts for its ESOP in accordance with Statement
of Position 93-6. Accordingly, the debt of the ESOP is
recorded as debt and the shares pledged as collateral are
reported as unearned ESOP shares in the consolidated
balance sheets. As shares are released from collateral,
the Bank reports compensation expense equal to the current
market price of the shares, and the shares become
outstanding for earnings-per-share calculations. Dividends
on allocated shares are recorded as a reduction of retained
earnings; dividends on unallocated ESOP shares are recorded
as a reduction of debt or accrued interest. ESOP
compensation expense was $10,000 for the three months ended
September 30, 1997 and 1996, respectively.
The ESOP shares at September 30, 1997 were as follows:
Allocated shares $ 8,643
Shares released for allocation 1,005
Unallocated shares 30,556
----------
Total ESOP shares 40,204
==========
Fair value of unallocated shares $ 408,687
==========
(7) Management Recognition Plan
The Company approved the establishment of the Management
Recognition Plan "MRP" with the objectives to enable the
Company to attract and retain personnel of experience and
ability in key positions of responsibility. The
stockholders approved the MRP at the annual meeting on July
23, 1996. Those eligible to receive benefits under the MRP
will be on a discretionary basis and the MRP is a
non-qualified plan that will be managed through a separate
trust. The Company will contribute sufficient funds to the
MRP for the purchase of up to 20,102 shares of common
stock. Automatic grants will be made to the nonemployed
directors, with two years continuous service prior to the
effective plan date, of the lesser of 5% of the plan shares
per Director or 30% of the plan shares in the aggregate.
Nonemployed directors who join the Board within the two
year period before the effective date or after the
effective date shall receive up to 2% of the plan shares.
These awards will vest 20% on each anniversary date except
in the case of participant's death or disability where all
shares awarded will vest immediately. The Company intends
to expense the MRP awards over the years during which the
shares are payable, based on the market value of the common
stock at the time of the grant. The Company, on July 8,
1997, purchased 13,400 shares of its stock for $169,000.
These shares will be used to fund the MRP. Compensation
expense related to the MRP was $12,000 for the quarter
ended September 30, 1997.
7
ILLINOIS COMMUNITY BANCORP, INC.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
GENERAL
The principal business of the Company is the business of the
Bank. Therefore, substantially all of the discussion in the
Form 10-QSB relates to the operations of the Bank. The business
of the Bank consists of attracting deposits from the general
public and using these funds to originate residential mortgage
and home equity loans, business loans, multi-family and
commercial real estate loans, automobile loans, and consumer
loans. To a lesser extent, the Bank invests in interest-bearing
deposits, U.S. Government and federal agency securities,
mortgage-backed securities and local municipal securities. The
Bank's profitability depends primarily on its net interest
income, which is the difference between the interest income it
earns on loans and investment portfolio and its cost of funds,
which consists mainly of interest paid on deposits and Federal
Home Loan Bank short term borrowings. Net interest income is
affected by the relative amounts of interest-earning assets
approximate or exceed interest-bearing liabilities, a positive
interest rate spread will generate new interest income.
The Bank's profitability is also affected by the level of
noninterest income and expense. Noninterest income consists
primarily of loan fees and late charges, recently supplemented
by fees generated from the sales of qualified mortgage loans to
the secondary mortgage market, and by commissions generated
through Trust and Brokerage services. Non-interest expense
consists of salaries and benefits, occupancy related expenses,
deposit insurance premiums, and other operating expenses.
The operations of the Bank, and financial institutions in
general, are significantly influenced by general economic
conditions and related monetary and fiscal policies of financial
institutions' regulatory agencies. Deposit flows and the cost
of funds are influenced by interest rates on competing
investments and general market rates of interest. Lending
activities are affected by the demand for financing real estate
and other types of loans, which in turn is affected by the
interest rates at which such financing may be offered and other
factors affecting loan demand and the availability of funds.
BUSINESS STRATEGY
New management joined the Bank in 1995 and the managerial
structure has developed in accordance with new business
strategies intended to increase presence, new market segment
penetration, and overall market share in its primary market area
of Effingham County, Illinois ("Primary Market Area"). These
new strategies, under the guidance and implementation of the
newly formed management team, have increased lending activities,
non-traditional banking services activities, and sources of fee
income. New business development strategies include (i) hiring
of experienced commercial banking personnel including a new
Chief Credit Officer, Chief Administrative Officer, Controller,
and a Trust and Investment Management Officer; (ii) instituting
a manager call program encouraging direct contact with local
businesses, property developers, realtors, home builders, auto
dealers and others; (iii) improving customer service, educating
staff, and developing a sales culture bank wide. Illinois
Leasing Corporation, Inc., a subsidiary of the holding company,
has provided enhanced services in its first year of operation in
the form of commercial equipment leasing and alternatives to
traditional commercial lending. The Bank's Trust and Investment
Management Center began operations in April, 1997. Full service
brokerage and investment management services, offered at the
bank through our affiliate PRIMEVEST Financial Services, allows
the Bank to better serve our customers' overall long term
investment and financial planning needs.
8
ILLINOIS COMMUNITY BANCORP, INC.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
The Bank's primary sources of funds consist of deposits,
repayment and prepayment of loans and mortgage-backed
securities, maturities of investments and interest-bearing
deposits, and funds provided from operations. While schedules
repayments of loans and mortgage-backed securities and
maturities of investment securities are predictable sources of
funds, deposit flows and loan prepayments are greatly influenced
by the general level of interest rates, economic conditions and
competition. The Bank uses its liquidity resources principally
to fund existing and future loan commitments, to fund maturing
certificates of deposit and demand deposit withdrawals, to
invest in other interest-earning assets, to maintain liquidity,
and to meet operating expenses. Liquidity management is both a
daily and long-term function of management. If the Bank
requires funds beyond its ability to generate internally, the
Bank believes it could borrow additional funds from the FHLB.
The Bank requested additional advances of $500,000 from the FHLB
during the quarter ended September 30, 1997.
The primary investing activity of the Bank is the origination of
loans. During the quarter ended September 30, 1997, purchases
of investment securities totaled $2.3 million while loan
origination's totaled $6.8 million. These investments were
funded primarily from loan and mortgage-backed security
repayments of $6.1 million, sales of loans to FHLMC of $747,000,
and investment security maturities and sales of $2.5 million.
At September 30, 1997, the Bank had $2.6 million in outstanding
commitments to originate loans and $1.3 million of unused lines
of credit. The Bank anticipates that it may not have sufficient
funds available to meet its current loan origination commitments
and additional advances from FHLB may be requested.
Certificates of deposit which are scheduled to mature in one
year or less totaled $16.7 million at September 30, 1997. Based
on historical experience, management believes that a significant
portion of such deposits will remain with the Bank.
ASSET/LIABILITY MANAGEMENT
The principal operating objective of the Bank is the achievement
of a positive interest rate spread that can be sustained during
fluctuations in prevailing interest rates. Since the Bank's
principal interest-earning assets have substantially longer
terms to maturity than its primary source of funds, i.e.,
deposit liabilities, increase in general interest rates will
generally result in an increase in the Bank's cost of funds
before the yield on its asset portfolio adjusts upwards. Savings
institutions have generally sought to reduce their exposure to
adverse changes in interest rates by attempting to achieve a
closer match between the periods in which their interest-bearing
liabilities and interest-earning assets can be expected to
reprice through the origination of adjustable-rate mortgages and
loans with shorter terms.
The term "interest rate sensitivity" refers to those assets and
liabilities which mature and reprice periodically in response to
fluctuations in market rates and yields. Thrift institutions
have historically operated in a mismatched position with
interest-sensitive liabilities greatly exceedin
interest-sensitive assets in the short-term time periods. As
noted above, one of the principal goals of the Bank's
asset/liability program is to more closely match the interest
rate sensitivity characteristics of the asset and liability
portfolios.
In order to properly manage interest rate risk, the Bank's
management monitors the difference between the Bank's maturing
and repricing assets and liabilities and develops and implements
strategies to decrease the "negative gap" between the two.
Management assesses the Bank's asset/liability mix, recommends
strategies to the Board of Directors that will enhance income
while managing the Bank's vulnerability to changes in interest
rates, and reports to the Board of Directors the results of the
strategies used.
9
ILLINOIS COMMUNITY BANCORP, INC.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
ASSET/LIABILITY MANAGEMENT (CONT.)
Since the early 1980's, the Bank has stressed the origination of
adjustable rate mortgage loans. At September 30, 1997, the Bank
had 22.0 million, or 48.7% of total loans, of adjustable or
fixed rate loans either repricing or maturing in one year or
less. In addition, the Bank had $303,000 in adjustable rate
mortgage-backed securities at September 30, 1997.
In order to increase the interest rate sensitivity of its
assets, the Bank has also maintained a consistent level of short
and intermediate-term investment securities and other assets.
At September 30, 1997, the Bank had $603,000 of investment
securities including mortgage-backed securities and
interest-bearing deposits maturing within one year and $3.4
million maturing within one to five years. At September 30,
1997, the Bank also had $4.2 million in investment securities
including mortgage-backed securities maturing after five years,
of which $1.5 million represented the Bank's investment in an
asset management adjustable rate fund, which is an uninsured
mutual fund, which thereby carries greater risk than government
insured investment securities.
In the future, in managing its interest rate sensitivity, the
Bank intends to continue to stress the origination of
adjustable-rate mortgages and loans with shorter maturities, the
purchase of adjustable rate mortgage-backed securities and the
maintenance of a consistent level of short-term securities. In
addition, the Bank has increased its origination of fixed-rate
mortgage loans, and then sell such loans in the secondary
mortgage market to FHLMC.
REGULATORY CAPITAL
The Company is regulated by the Board of Governors of the
Federal Reserve System ("FRB") and is subject to securities
registration and public reporting regulations of the Securities
and Exchange Commission. The Bank is regulated by the Federal
Deposit Insurance Corporation ("FDIC") and the Illinois
Commissioner of Banks and Real Estate (the "Commissioner").
The Bank is subject to the capital requirements of the FDIC and
the Commissioner. The FDIC requires the Bank to maintain
minimum ratios of tier 1 capital to total risk-weighted assets
and total capital to risk-weighted assets of 4% and 8%,
respectively. Tier 1 capital consists of total shareholders
equity calculated in accordance with generally accepted
accounting principles less intangible assets, and total capital
is comprised of Tier 1 capital plus certain adjustments, the
only one of which is applicable to the Bank is the allowance for
possible loan losses. Risk-weighted assets refer to the on-and
off-balance sheet exposures of the Bank adjusted for relative
risk levels using formulas set forth in FDIC regulations. The
Bank is also subject to a FDIC leverage capital requirement,
which calls for a minimum ratio of Tier 1 capital (as defined
above) to quarterly average total assets of 3% to 5%, depending
on the institution's composite ratings as determined by its
regulators.
10
ILLINOIS COMMUNITY BANCORP, INC.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
REGULATORY CAPITAL
At September 30, 1997, the Bank was in compliance with all of
the aforementioned capital requirements as summarized below:
September 30,
1997
------------
(1,000's)
------------
Tier I Capital:
Common stockholders' equity $ 6,359
Unrealized holding loss (gain) on
securities available for sale (165)
-------
Total Tier I capital $ 6,194
=======
Tier II Capital:
Total Tier I capital $ 6,194
Qualifying allowance for loan losses 360
-------
Total capital $ 6,554
=======
Risk-weighted assets $39,817
Quarter average assets $59,093
To be Well Capitalized
under the Prompt
For Capital Corrective Action
Actual Adequacy Purposes Provisions
--------------- ----------------- -------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------- ----- ------- -----
As of September 30, 1997:
Total Risk-Based Capital
(to Risk-Weighted Assets) $6,554 16.46% $3,185 8.0% $3,982 10.0%
Tier I Capital
(to Risk-Weighted Assets) 6,194 15.56% 1,593 4.0% 2,389 6.0%
Tier I Capital
(to Average Assets) 6,194 10.48% 2,364 4.0% 2,955 5.0%
At the time of the conversion of the Bank to a stock
organization, a special liquidation account was established
for the benefit of eligible account holders and the supplemental
eligible account holders in an amount equal to the net worth of
the Bank. The special liquidation account will be maintained
for the benefit of eligible account holders and the supplemental
eligible accounts holders who continue to maintain their
accounts in the Bank after the conversion on September 27, 1995.
In the event of a complete liquidation distribution from the
liquidation account in an amount proportionate to the current
adjusted qualifying balances for accounts then held. With the
reorganization completed on September 27, 1996, this liquidation
account became part of stockholders' equity for the Company
under the same terms and conditions as if the reorganization had
not occurred. The Company may not declare or pay cash dividends
on or repurchase any of its common stock if stockholders' equity
would be reduced below applicable regulatory capital
requirements or below the special liquidation account.
11
ILLINOIS COMMUNITY BANKCORP, INC.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
FINANCIAL CONDITION
The Bank's total assets decreased $219,000 or 0.37%, from $59.8
million at June 30, 1997, to $59.6 million at September 30,
1997. The Bank continues to experience loan growth and
increased loan receivables by $195,000 or 0.43%, from $45.2
million at June 30, 1997 to $45.4 million at September 30, 1997.
Deposits decreased $561,000 from $43.7 million at June 30, 1997,
to $43.1 million at September 30, 1997. The deposits were not
sufficient to meet the demands of loan originations. The Bank
had to request addition advances from the FHLB in the amount of
$500,000 during the quarter to fund the loan originations.
RESULTS OF OPERATIONS
Net income for the three months ended September 30, 1997 was
$121,000 compared to $(168,000) net loss for the three months
ended September 30, 1996. This increase in net income of
$289,000 was primarily from the gain on sale of securities of
$212,000, a decrease in non-interest expense of $93,000, and a
reduction in loan loss provision of $66,000 which was offset
partially by an increase in provision for income taxes of
$148,000.
Net interest income for the three months ended September 30,
1997 was $420,000 compared to $401,000 for the three months
ended September 30, 1996.
Interest income increased by $173,000 from $895,000 to$1,068,000
or by 19.3%, during the 1997 period compared to the 1996 period.
This increase is attributed to growth in interest earning assets
from $47.0 million at September 30, 1996 to $54.0 million at
September 30, 1997. In addition, average yield on interest
earning assets increased from 7.79% to 7.97% for the quarters
ended September 30, 1996 and 1997, respectively.
Interest expense increased $154,000 or 31.2%, to $648,000 for
the three months ended September 30, 1997 from $494,000 for the
same period in 1996. This increase was primarily from growth in
interest bearing liabilities from $43.4 million at September 30,
1996 to $51.9 million at September 30, 1997.
The allowance for loan losses is established through a provision
for loan losses based on management's evaluation of the risk
inherent in its loan portfolio and the general economy. Such
evaluation considers numerous factors including, general
economic conditions, loan portfolio composition, prior loss
experience, the estimated fair value of the underlying
collateral and other factors that warrant recognition in
providing for an adequate loan loss allowance. During the three
months ended September 30, 1997 and 1996, the Bank's provision
for loan losses was $16,000 and $82,000, respectively.
The allowance for loan losses was $365,000 or .80% of loans
receivable at September 30, 1997, compared to $351,000, or .78%
of loans receivable at June 30, 1997. The Bank's level of
non-performing loans was 0.39% of total loans at June 30, 1997
compared to 0.59% as of September 30, 1997. Based on current
reserve levels in relation to total loans receivable and
classified assets and the identification and diligent effort put
forth by management to address problem loan situations in recent
years, management believes its reserves are currently adequate.
Noninterest income was $291,000 for the three months ended
September 30, 1997 compared to $32,000 for the three months
ended September 30, 1996. The increase in noninterest income
was largely due to sale of FHLMC stock, which resulted in a gain
of $212,000 in the 1997 period.
12
ILLINOIS COMMUNITY BANCORP, INC.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
RESULTS OF OPERATIONS (CONT.)
Noninterest expense decreased from $600,000 for the three months
ended September 30, 1996 to $507,000 for the three months ended
September 30, 1997. This decrease of $93,000 resulted from the
one time SAIF special assessment of $211,000 during the quarter
ended September 30, 1996, which was not included in the 1997
results. This decrease was partially offset by the increase in
compensation and employee benefits and occupancy and equipment
expense of $124,000 for the quarter ended September 30, 1997
compared to the 1996 period. Primarily, these expenses
increased from the operation of the branch location opened in
January of 1997.
The Company's effective tax rate for the three months ended
September 30, 1997 and 1996 was approximately 36% and 33%,
respectively.
NONPERFORMING ASSETS
At September 30, 1997, the Bank had $313,000 in nonperforming
assets. On September 30, 1996, the Bank had $221,000 in
nonperforming assets.
IMPACT OF INFLATION AND CHANGING PRICES
The unaudited consolidated financial statements and related data
presented herein have been prepared in accordance with generally
accepted accounting principles, which require the measurement of
financial position and results of operations in terms of
historical dollars without considering changes in the relative
purchasing power of money over time because of inflation.
Unlike most industrial companies, virtually all of the assets
and liabilities of the Bank are monetary in nature. As a
result, interest rates have a more significant impact on the
Bank's performance than the effects of general levels of
inflation. Interest rates do not necessarily move in the same
direction or in the same magnitude as the prices of goods and
services.
13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
None.
Item 2. Changes in Securities
---------------------
None.
Item 3. Defaults Upon Senior Securities
-------------------------------
None.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Not applicable.
Item 5. Other Information
-----------------
None
Item 6. Exhibits and Reports on Form 8-K
---------------------------------
Exhibits:
Exhibit 27 - Financial Data Schedule
Reports on Form 8-K:
None
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of
1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
Illinois Community Bancorp, Inc.
Date: November 10, 1997 /s/ Douglas A. Pike
----------------------------
Douglas A. Pike
President and Chief Executive
Officer
Date: November 10, 1997 /s/ Ronald R. Schettler
----------------------------
Ronald R. Schettler
Senior Vice President and Chief
Financial Officer