SECURITY AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(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, 1996
------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________
OTS Docket No. 6332
ILLINOIS COMMUNITY BANCORP, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
United States 37-1361560
- ------------------------------------- -------------------------------
(State or other jurisdiction (I.R.S. Employer ID Number)
of incorporation or organization)
210 E. Fayette, Effingham, Illinois 62401
- -------------------------------------------------------
(Address of principal executive offices) (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. (Note: Registrant is successor to Illinois
Guarantee Savings Bank, FSB, whose shares were previously registered with the
Office of Thrift Supervision).
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.
Class Shares outstanding at November 10, 1995
- ------------------------------- ---------------------------------------
Common Stock, Par Value $1.00 502,550
Traditional Small Business Disclosure Format (check one):
Yes X No
--- ---
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 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
ILLINOIS COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
September 30 June 30
------------ -----------
1996 1996
------------ -----------
Unaudited Audited
------------ -----------
ASSETS (1,000's)
---------------------------
Cash and Cash Equivalents:
Cash $ 814 $ 267
Interest bearing deposits 10 140
---------- ----------
Total Cash and Cash Equivalents 824 407
Securities available for sale, amortized cost of
$5,562 and $5,898 at September 30, 1996 and
June 30, 1996, respectively 5,821 6,108
Securities held to maturity, estimated market
value of $398 and $299 at September 30, 1996 and
June 30, 1996, respectively 398 299
Mortgage-backed securities available for sale,
amortized cost of $1,684 and $1,766 at September 30, 1996
and June 30, 1996, respectively 1,694 1,773
Loans receivable, net 39,308 36,069
Accrued interest receivable 332 309
Premises and equipment, net 1,605 1,262
Real estate held for sale 49 49
Prepaid income taxes 47 0
Other assets 150 145
---------- ----------
Total Assets $ 50,228 $ 46,421
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 38,325 $ 36,548
Advances from Federal Home Loan Bank 3,758 1,608
Other borrowings 346 356
Advances from borrowers for taxes and insurance 25 91
Accrued interest payable 110 103
Accrued income taxes 0 41
Deferred income taxes 41 16
Other liabilities 446 356
---------- ----------
Total Liabilities 43,051 39,119
---------- ----------
Commitments and Contingencies
Stockholders' Equity
Common stock, $1.00 par value; authorized 1,000,000
shares 502,550 shares issued and outstanding 503 503
Paid-in capital 4,066 4,066
Retained earnings 2,779 2,947
Unrealized gain on securities held available for sale 175 142
Unearned employee stock ownership plan ( 346) ( 356)
---------- ----------
Total Stockholders' Equity 7,177 7,302
---------- ----------
Total Liabilities and Stockholders' Equity $ 50,228 $ 46,421
========== ==========
1
ILLINOIS COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
September 30
-------------------
1996 1995
-------- --------
(1,000's)
-------------------
Interest income:
Interest on loans $ 772 $ 467
Interest and dividends on securities 123 200
-------- --------
Total interest income 895 667
Interest expense:
Interest on deposits 443 410
Interest on Federal Home Loan Bank advances 45 0
Interest on other borrowings 6 0
-------- --------
Total interest expense 494 410
-------- --------
Net interest income 401 257
Provision for loan losses 82 0
-------- --------
Net interest income after provision for loan losses 319 257
-------- --------
Non-interest income:
Other fees 21 6
Insurance commissions 0 2
Other 11 9
-------- --------
Total other income 32 17
-------- --------
Non-interest expense:
Compensation and employee benefits 199 90
Occupancy and equipment 51 24
Data processing 24 19
Audit, legal and other professional 40 5
SAIF deposit insurance 20 21
SAIF assessment 211 0
Advertising 9 12
Other 46 37
-------- --------
600 208
-------- --------
Income before income taxes ( 249) 66
Provision for (benefit from) income taxes ( 81) 28
-------- --------
Net Income (Loss) ($ 168) $ 38
======== ========
Earnings Per Share: ($ .36) $ N/A
======== ========
2
ILLINOIS COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
Unrealized
Gain
Unearned (Loss) on
Employee Securities
Stock Available
Common Paid-in Retained Ownership For
Stock Capital Earnings Plan Sale, Net Total
------ ------- -------- --------- ---------- -------
(1,000's)
-----------------------------------------------------------
Balance at June 30, 1996 $ 503 $ 4,066 $ 2,947 ($ 356) $ 142 $7,302
Net income 0 0 ( 168) 0 0 ( 168)
Change in unrealized gain on
securities available for sale 0 0 0 0 33 33
Shares released for allocation 10 10
------ ------- -------- -------- ---------- -------
Balance at September 30, 1996 $ 503 $ 4,066 $ 2,779 ($ 346) $ 175 $7,177
====== ======= ======== ======== ========== =======
3
ILLINOIS COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
September 30
---------------------------------
1996 1995
-------------- ------------
Operating activities:
Net income (loss) $ (168) $ 38
Adjustments to reconcile net income to net
cash provided by operating activities
Provision for depreciation 17 7
Provision for loan losses 82 0
Net amortization and accretion of securities 1 1
Decrease (increase) in accrued interest receivable (23) 9
Increase in other repossessed property 0 (2)
Decrease (increase) in other assets (5) 133
Increase (decrease) in accrued interest payable 7 (20)
Increase (decrease) in accrued income taxes (88) 61
Increase in deferred income taxes 25 0
Increase in other liabilities 90 84
Dividends on investments (39) (32)
ESOP benefit expense 10 0
---------- ------------
Net cash provided by operating activities (91) 279
---------- ------------
Investing activities:
Proceeds from securities held to maturity
and certificates of deposit 0 2,187
Proceeds from matured securities available for sale 800 0
Purchase of securities held to maturity
and certificates of deposit (99) (248)
Purchase of securities available for sale (427) 0
Increase in loans receivable (3,338) (3,439)
Repayment of mortgage-backed securities 82 104
Purchase of premises and equipment (360) (119)
---------- ------------
Net cash used in investing activities (3,342) (1,515)
---------- ------------
4
ILLINOIS COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
September 30
------------------
1996 1995
------- -------
Financing activities:
Net increase (decrease) in deposits $ 1,776 $ (45)
Advances from Federal Home Loan Bank 2,150 0
Decrease in advances from borrowers
for taxes and insurance (66) (157)
Proceeds from Employee Stock Ownership Plan note 0 392
Repayment Employee Stock Ownership Plan loan (10) 0
Proceeds from issuance of common stock 0 503
Additional paid-in capital 0 4,060
Purchase of employee stock ownership plan stock 0 (402)
------- -------
Net cash provided by financing activities 3,850 4,351
------- -------
Increase (decrease) in cash and cash equivalents 417 3,115
Cash and cash equivalents at beginning of period 407 1,590
------- -------
Cash and cash equivalents at end of period $ 824 $ 4,705
======= =======
Supplemental Disclosures:
Additional Cash Flows Information:
Cash paid for:
Interest on deposits, advances and other
borrowings $ 437 $ 430
Income taxes:
Federal $ 0 $ (33)
Unrealized gain on securities available for sale $ 51 $ (3)
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 subsidiary,
Illinois Guarantee Savings Bank, FSB (the Savings Bank). 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 Savings Bank's annual report
on Form 10-KSB for the year ended June 30, 1996. 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, 1995, and the
results of its operations and cash flows for the three months ended
September 30, 1996 and 1995.
Operating results for the three months ended September 30, 1996 are not
necessarily indicative of the results that may be expected for the year
ending June 30, 1997.
(2) Stock Conversion
----------------
On September 28, 1995, the Savings Bank converted from a federally
chartered mutual savings bank to a federally chartered capital stock
savings bank through the sale of 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 Savings Bank borrowed $402,040 from a third party to
purchase 40,204 shares of common stock issued by the Savings Bank. As of
September 30, 1996, 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. The
Company formed two subsidiary corporations to conduct business as a leasing
corporation and a financial services corporation. The Company anticipates
these corporations not to have a material effect on the consolidated
operations of the Company during the 1997 fiscal year.
(4) Earnings Per Share
------------------
The 502,550 shares of common stock were issued on September 28, 1995;
accordingly, earnings per share for the periods prior to September 30, 1995
are not applicable.
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 466,969 shares for the three months ending
September 30, 1996.
6
ILLINOIS COMMUNITY BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(5) 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 $1 par
value common stock at the subscription price of $10.00 per share. The
Savings 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 Savings 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 Savings 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 and $0 for the three months
ended September 30, 1996 and 1995, respectively.
(5) Employee Stock Ownership Plan, Concluded
----------------------------------------
The ESOP shares at September 30, 1996 were as follows:
Allocated shares $ 1,005
Shares released for allocation 3,618
Unallocated shares 35,581
---------
Total ESOP shares $ 40,204
=========
Fair value of unallocated shares $ 426,972
=========
(6) New Facility
------------
The Savings Bank anticipates the completion of their new branch facility in
December of 1996. Projections of total costs for this facility and related
equipment amounts to $1.8 million, with $1.1 million of this cost incurred
as of September 30, 1996.
7
ILLINOIS COMMUNITY BANCORP, INC.
Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
The holding company reorganization was not consummated until September 27, 1996.
Therefore, the discussion in this Form 10-QSB relates to the operations of the
Savings Bank.
The principal business of the Savings Bank consists of attracting deposits from
the general public and using these funds to originate mortgage loans secured
by one- to four-family residences located primarily in Effingham, Illinois and
surrounding areas. The Savings Bank engages in various forms of consumer and
commercial lending and invests in mortgage-backed U.S. Government and federal
agency securities, local municipal issues, and interest-bearing deposits. The
Savings Bank's profitability depends primarily on its net interest income,
which is the difference between the interest income it earns on its loans,
mortgage-backed and investment portfolio and its cost of funds, which consists
mainly of interest paid on deposits. Net interest income is affected by the
relative amounts of interest-earning assets and interest-bearing liabilities
and the interest rates earned or paid on these balances.
The Savings Bank's profitability is also affected by the level of noninterest
income and expense. Noninterest income consists primarily of late charges and
other fees. Noninterest expense consists of salaries and benefits, occupancy
related expenses, deposit insurance premiums paid to the SAIF, and other
operating expenses.
The operations of the Savings Bank, and savings associations 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
The business strategy is to operate as a well capitalized, profitable and
independent community savings bank dedicated to financing home ownership and
consumer needs in its primary market area of Effingham County, Illinois
("Primary Market Area"). The Savings Bank has implemented this strategy by:
(1) closely monitoring the needs of customers and providing quality service;
(2) emphasizing consumer-oriented banking by originating construction and
permanent loans on residential and commercial real estate and consumer loans,
and by offering other financial services and products; (3) improving and
maintaining high asset quality; (4) maintaining capital in excess of
regulatory requirements; and (5) managing interest rate risk by emphasizing
the origination of loans with adjustable rates or shorter terms and
investments in short-term and liquid investments. The Savings Bank has adopted
various new business strategies intended to increase its presence in its
Primary Market Area, thereby increasing its lending activities and sources of
income. These steps include (i) instituting a marketing program to contact
local realtors, builders, auto dealers and others in order to increase the
origination of one-family to four-family residential loans, construction loans
and permanent loans, secured by multi-family and commercial real estate, and
consumer loans, including direct and indirect automobile loans through
arrangements with local auto dealers; (ii) planning the opening of a new
branch office expected to open in December 1996 in the northern section of its
Primary Market Area, an area of Effingham, Illinois which is experiencing
growth in commercial and retail activities, and is in close proximity to
expanding residential area; (iii) installing automated teller machines (ATM's)
at its main office and the new branch office, as well as other possible "stand
alone" locations; and (iv) offering new products to its customers and
potential customers, including home equity lending and debit card program.
8
ILLINOIS COMMUNITY BANCORP, INC.
Management's Discussion and Analysis of Financial Condition and Results
of Operations
Liquidity and Capital Resources
The Savings 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. Scheduled
repayments of loans and mortgage-backed securities and maturities of
investment securities are predictable influenced by general interest rates,
economic conditions and competition. The Savings 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. Management believes that loan repayments and other sources of funds
will be adequate to meet the Savings Bank's liquidity needs for the immediate
future.
The Savings Bank is required to maintain minimum levels of liquid assets as
defined by OTS regulations. This requirement, which may be varied at the
direction of the OTS depending upon economic conditions and deposit flows, is
based upon a percentage of deposits and short-term borrowings. The required
minimum ratio is currently 5%. The Savings Bank has historically maintained a
level of liquid assets in excess of regulatory requirements. The Savings
Bank's liquidity ratios at September 30, 1996 and June 30, 1996 were 16.53%
and 14.38%, respectively.
A portion of the Savings Bank's liquidity consists of cash and cash equivalents,
which include investments in highly liquid, short-term deposits. The level of
these assets is dependent on the Savings Bank's operating, investing, lending
and financing activities during any given period. At September 30, 1996 and
June 30, 1996, cash and cash equivalents totaled $824,000 and $407,000,
respectively.
Liquidity management is both a daily and long-term function of business
management. If the Savings Bank requires funds beyond its ability to generate
them internally, the Savings Bank may borrow additional funds from the FHLB.
At September 30, 1996, the Savings Bank had $1.3 million in fixed term and
fixed rate advances maturing in April and May of 1997 and $2.5 million in
daily advances.
At September 30, 1996, the Savings Bank had outstanding commitments to originate
loans of $818,000 for 1 to 4 family dwellings and $604,000 for other real
estate. The Savings Bank had $419,000 in unused lines of credits and $300,000
of commercial letters of credit outstanding. The Savings Bank anticipates that
it will have to borrow additional FHLB advances to meet its current loan
origination commitments.
Regulatory Capital
Federally insured savings associations such as the Savings Bank are required to
maintain a minimum level of regulatory capital. The capital regulations
require institutions to have tangible capital equal to 1.5% of total adjusted
assets (as defined by regulation), a minimum core capital ratio of 3% of
adjusted total assets, and a risk-based capital ratio of 8% of risk-based
assets (as defined by regulation). The risk-based capital requirement is
calculated based on the credit risk presented by both on-balance-sheet assets
and off-balance-sheet commitments and obligations. Assets are assigned a
credit-risk weighing based upon their relative risk ranging from 0% for assets
based by the full faith and credit of the United States or that pose no credit
risk to the institution to 100% for assets such as delinquent or repossessed
assets. As of September 30, 1996, the Savings Bank was in compliance with all
of these capital requirements.
9
ILLINOIS COMMUNITY BANCORP, INC.
Management's Discussion and Analysis of Financial Condition and Results
of Operations
A reconciliation of stockholders' equity, as reported in the consolidated
financial statements of the Savings Bank as of September 30, 1996, to the three
capital standards, as required under the Financial Institutions Reform, Recovery
and Enforcement Act of 1989 (FIRREA), is as follows:
Regulatory Capital
-------------------------------------
Tangible Core Risk-based
Capital Capital Capital
-------- --------- -----------
Stockholders' equity $ 7,077 $ 7,077 $ 7,077
Less Real Estate Held For Sale 49 49 49
Less Unrealized Gain On Securities Available for Sale 175 175 175
Additional capital item - general loan loss reserves 0 0 309
Regulatory capital, as computed 6,853 6,853 7,162
Minimum capital requirement 750 1,500 2,323
-------- --------- -----------
Regulatory capital in excess of minimum
capital requirement $ 6,103 $ 5,353 $ 4,839
======== ========= ===========
Financial Condition
The Savings Bank total assets increased $3.8 million, or 8.2%, from $46.4
million at June 30, 1996 to $50.2 million at September 30, 1996. The Savings
Bank continues to experience loan growth and increased loan receivables by
$3.3 million, or 9.0%, from $36.3 million at June 30, 1996 to $39.6 million at
September 30, 1996. The Savings Bank anticipates loan growth to continue but
at a reduced rate. Premise and equipment, net increased $343,000, or 27.2%,
from $1.3 million at June 30, 1996 to $1.6 million at September 30, 1996
primarily from the construction of the new branch facility. Deposits increased
$2.8 million, or 7.6%, from $36.5 million at June 30, 1996 to $39.3 million at
September 30, 1996 from increase market awareness in the community. The
deposit growth was not sufficient to meet the demands of loan originations and
branch construction cost. The Savings Bank had to request addition advances
from the FHLB in the amount of $2.2 million during the quarter to fund the
loan originations and construction costs.
Results of Operations
Net loss for the three months ended September 30, 1996 was ($168,000) compared
to $38,000 net income for the three months ended September 30, 1995. The
decrease in net income resulted from provision for loan loss of $82,000 and
increase in non-interest expense of $392,000, which includes SAIF special
assessment of $211,000, which was partially offset by an increase in net
interest income of $144,000 and benefit from income taxes of $109,000.
Net interest income for the three months ended September 30, 1996 was $401,000
compared to $257,000 for the three months ended September 30, 1995. The
improvement was mainly attributable to the stock issuance on September 28,
1995 and the investment of such funds in interest-earning assets. The impact
of the additional proceeds was improved by the increase in the interest rate
spread from 2.09% in 1995 to 2.77% in 1996. The increase was due to a more
significant increase in the yield on interest-earning assets as compared to
the increase in cost of interest-bearing liabilities.
Interest income increased by $228,000 from $667,000 to $885,000 or by 34.2%,
during 1996 compared to 1995. This increase resulted from the increase in
interest earnings assets from the conversion proceeds and an increase
experienced by the Savings Bank in the average yield on interest-earning
assets to 7.79% in 1996 from 7.20% in 1996. This increase was reflective of
the general increase in market interest rates that occurred and in higher
yields on new loan origination as well as on existing ARM loans in the Savings
Bank's portfolio.
10
ILLINOIS COMMUNITY BANCORP, INC.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Interest expense increased $84,000 or 20.5%, to $494,000 for the three months
ended September 30, 1996 from $410,000 for the same period in 1995. The
increase was primarily attributable to the increase in interest bearing
liabilities of 8.7 million, or 26.8%, from 32.5 million in 1995 to 41.2
million in 1996.
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, 1996 and 1995, the
Savings Bank's provision for loan losses was $82,000 and $0, respectively.
The Savings Bank's allowance for loan losses was $309,000 or .78% of loans
receivable at September 30, 1996, compared to $227,000, or .63% of loans
receivable at June 30, 1996. The Savings Bank's level of non-performing loans
was 0.96% of total loans at June 30, 1996 compared to 0.93% as of September
30, 1996. 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 $32,000 for the three months ended September 30, 1996.
The increase in noninterest income was largely due to an increase in fees
collected on loans and deposit accounts.
Noninterest expense increased from $208,000 for the three months ended September
30, 1995 to $600,000 for the three months ended September 30, 1996. This
fluctuation resulted from increases in compensation expense, occupancy,
professional and SAIF assessments. The increase in compensation expense was in
part the result of normal salary increases, coupled with both the hiring of an
additional loan officer and other employees. The increase in occupancy expense
was in part due to remodeling the existing building and in part due to
increased depreciation expense on equipment purchased during the fiscal year
ended June 30, 1996. The increase in professional expenses were primarily
additional services performed in conjunction being a publicly held company.
The SAIF assessment of $211,000 was a one time expense of all SAIF insured
institutions to recapitalize this insurance fund.
The Savings Bank's effective tax rate for the three months ended September 30,
1996 and 1995 was approximately 33% and 41%, respectively.
Nonperforming Assets
At September 30, 1996, the Savings Bank had $417,000 nonperforming assets. On
June 30, 1996, the Savings Bank also had $400,000 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 Savings
Bank are monetary in nature. As a result, interest rates have a more
significant impact on the Savings 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.
11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
None.
Item 2. Changes in Securities
---------------------
On September 27, 1996, 502,550 shares of the registrant's common stock
became registered with the Commission under the Securities Exchange Act
of 1934, through the consummation of the reorganization of Illinois
Guarantee Savings Bank, FSB into the holding company form of ownership.
This transaction was more fully discussed in the registrants annual
report on Form 10-KSB, as filed with the Commission on October 14,
1996.
Item 3. Defaults Upon Senior Securities
-------------------------------
None.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Not applicable.
Item 5. Other Information
-----------------
The Savings Bank is also considering converting from a federally
chartered savings bank to a National Bank or Illinois Chartered
Commercial Bank. Converting to a Commercial Bank or National Bank would
allow the Savings Bank to more aggressively market the commercial and
retail banking products described above.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
Exhibits:
Exhibit 27 -- Financial Data Schedule
Reports on Form 8-K:
None
12
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 Guarantee Savings Bank FSB and Subsidiary
/s/ Douglas A. Pike
Date: November 12, 1996 --------------------------------------
----------------- Douglas A. Pike
President and Chief Operations Officer
Date: November 12, 1996 /s/ Ronald R. Schettler
----------------- --------------------------------------
Ronald R. Schettler
Senior Vice President and Chief Financial Officer
13