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 December 31, 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.
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(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
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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 ___________
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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 February 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.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31 June 30
----------- -----------
1996 1996
----------- -----------
Unaudited Audited
----------- -----------
ASSETS (1,000's)
---------------------------
Cash and Cash Equivalents:
Cash $ 1,377 $ 267
Interest bearing deposits 378 140
----------- -----------
Total Cash and Cash Equivalents 1,755 407
Securities available for sale, amortized cost of $7,415 and $7,664
at December 31, 1996 and June 30, 1996, respectively 7,728 7,881
Securities held to maturity, estimated market value of $398 and
$299 at December 31, 1996 and June 30, 1996, respectively 398 299
Loans receivable, net 41,368 36,069
Accrued interest receivable 348 309
Premises and equipment, net 2,105 1,262
Real estate held for sale 49 49
Prepaid income taxes 30 0
Other assets 180 145
----------- -----------
Total Assets $ 53,961 $ 46,421
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 40,159 $ 36,548
Advances from Federal Home Loan Bank 5,758 1,608
Other borrowings 336 356
Advances from borrowers for taxes and insurance 38 91
Accrued interest payable 141 103
Accrued income taxes 0 41
Deferred income taxes 56 16
Other liabilities 207 356
------------ -----------
Total Liabilities 46,695 39,119
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Commitments and Contingencies
Stockholders' Equity
Common stock, $0.01 par value; authorized 4,000,000 shares
502,550 shares issued and outstanding 5 503
Paid-in capital 4,684 4,066
Retained earnings 2,709 2,947
Unrealized gain on securities held available for sale 204 142
Unearned employee stock ownership plan ( 336) ( 356)
----------- -----------
Total Stockholders' Equity 7,266 7,302
----------- -----------
Total Liabilities and Stockholders' Equity $ 53,961 $ 46,421
=========== ===========
1
ILLINOIS COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
December 30 December 31
------------------------ -----------------------
1996 1995 1996 1995
----------- ----------- ---------- -----------
(1,000's)
-------------------------------------------------
Interest income:
Interest on loans $ 830 $ 550 $ 1,602 $ 1,017
Interest and dividends on securities 120 195 243 395
----------- ----------- ---------- -----------
Total interest income 950 745 1,845 1,412
----------- ----------- ---------- -----------
Interest expense:
Interest on deposits 470 407 913 817
Interest on Federal Home
Loan Bank advances 81 0 126 0
Interest on other borrowings 9 8 15 8
----------- ----------- ---------- -----------
Total interest expense 560 415 1,054 825
----------- ----------- ---------- -----------
Net interest income 390 330 791 587
Provision for loan losses 15 0 97 0
----------- ----------- ---------- -----------
Net interest income after
provision for loan losses 375 330 694 587
----------- ----------- ---------- -----------
Non-interest income:
Other fees 28 6 49 12
Insurance commissions 0 0 0 2
Other 10 14 21 23
----------- ----------- ---------- -----------
Total other income 38 20 70 37
----------- ----------- ---------- -----------
Non-interest expense:
Compensation and employee benefits 173 111 372 201
Occupancy and equipment 32 20 83 44
Data processing 23 18 47 37
Audit, legal and other professional 34 7 74 12
SAIF deposit insurance 25 22 45 43
SAIF assessment 0 0 211 0
Advertising 9 9 18 21
Other 43 35 89 72
----------- ----------- ---------- -----------
339 222 939 430
----------- ----------- ---------- -----------
Income (loss) before income taxes 74 128 ( 175) 194
Provision for (benefit from)
income taxes 24 31 ( 57) 59
----------- ----------- ---------- -----------
Net Income (Loss) $ 50 $ 97 ($ 118) $ 135
=========== =========== ========== ===========
Earnings (Loss) Per Share: $ 0.11 $ 0.21 ($ 0.25) $ 0.29
=========== =========== ========== ===========
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,
bank only $ 503 $ 4,066 $ 2,947 ($ 356) $ 142 $ 7,302
Net income (loss) 0 17 ( 135) 0 0 ( 118)
Change in unrealized gain on
securities available for sale 0 0 0 0 62 62
Holding company formation and
stock exchange with bank ( 498) 601 ( 103) 0 0 0
Shares released for allocation 0 0 0 20 0 20
---------- ----------- ------------ --------- --------- ---------
Balance at December 31, 1996 $ 5 $ 4,684 $ 2,709 ($ 336) $ 204 $ 7,266
========== =========== ============ ========= ========= =========
3
ILLINOIS COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended Six Months Ended
December 31 December 31
------------------------ ------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
(1,000's)
----------------------------------------------------
Operating activities:
Net income (loss) $ 50 $ 97 ($ 118) $ 135
Adjustments to reconcile net income to net
cash provided by operating activities
Provision for depreciation 16 8 33 15
Provision for loan losses 15 0 97 0
Net amortization and accretion of securities 2 2 3 3
Decrease (increase) in accrued interest receivable ( 16) ( 54) ( 39) ( 45)
Increase in other repossessed property 0 0 0 ( 2)
Decrease (increase) in other assets ( 30) 3 ( 35) 136
(Increase (decrease) in accrued interest payable 31 0 38 ( 20)
Increase (decrease) in accrued income taxes 17 ( 4) ( 71) 57
Increase in deferred income taxes ( 19) 65 6 65
Increase (decrease) in other liabilities ( 239) ( 119) ( 149) ( 35)
Dividends on investments ( 34) ( 31) ( 73) ( 63)
ESOP benefit expense 10 0 20 0
---------- ---------- ---------- ----------
Net cash provided by operating activities ( 197) ( 33) ( 288) 246
---------- ---------- ---------- ----------
Investing activities:
Proceeds from securities held to maturity
and certificates of deposit 0 967 0 3,154
Proceeds from matured securities available for sale 637 0 1,437 0
Purchase of securities held to maturity 0 ( 827) ( 99) ( 1,075)
Purchase of securities available for sale ( 839) 0 ( 1,266) 0
Increase in loans receivable ( 2,648) ( 2,858) ( 5,986) ( 6,297)
Loans sold 590 0 590 0
Loans purchased 0 ( 500) 0 ( 500)
Repayment of mortgage-backed securities 66 165 148 269
Purchase of premises and equipment ( 516) ( 466) ( 876) ( 585)
---------- ---------- ---------- ----------
Net cash used in investing activities ( 2,710) ( 3,519) ( 6,052) ( 5,034)
---------- ---------- ---------- ----------
4
ILLINOIS COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended Six Months Ended
December 30 December 31
----------------------- ------------------------
1996 1995 1996 1995
--------- ---------- ---------- ----------
(1,000's)
---------------------------------------------------
Financing activities:
Net increase (decrease) in deposits $ 1,835 $ 1,240 $ 3,611 $ 1,195
Advances from Federal Home Loan Bank 2,000 0 4,150 0
Increase (decrease) in advances from borrowers
for taxes and insurance 13 ( 58) ( 53) ( 215)
Proceeds from Employee Stock Ownership Plan note 0 0 0 392
Repayment Employee Stock Ownership Plan loan ( 10) ( 10) ( 20) ( 10)
Proceeds from issuance of common stock 0 0 0 503
Additional paid-in capital 0 0 0 4,060
Purchase of employee stock ownership plan stock 0 0 0 ( 402)
--------- --------- ---------- ----------
Net cash provided by financing activities 3,838 1,172 7,688 5,523
--------- --------- ---------- ----------
Increase (decrease) in cash and cash equivalents 931 ( 2,380) 1,348 735
Cash and cash equivalents at beginning of period 824 4,705 407 1,590
--------- ---------- ---------- ----------
Cash and cash equivalents at end of period $ 1,755 $ 2,325 $ 1,755 $ 2,325
========= ========== ========== ==========
Supplemental Disclosures:
Additional Cash Flows Information:
Cash paid for:
Interest on deposits, advances and
other borrowings $ 579 $ 415 $ 1,016 $ 845
Income taxes:
Federal $ 0 $ 22 $ 0 ($ 11)
Schedule of Noncash investing activities:
Stock dividends on FHLB stock $ 0 $ 0 $ 0 $ 0
Unrealized gain on securities available for sale $ 45 $ 121 $ 96 $ 120
Deferred tax on unrealized gain on
securities available for sale $ 15 $ 42 $ 34 $ 42
Investment and mortgage-backed securities
transfer to available for sale $ 0 $ 6,364 $ 0 $ 6,364
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 Savings
Bank, FSB (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 December 31, 1996, and the results of its operations and
cash flows for the three months and six months ended December 31, 1996 and
1995.
Information for the year ended June 30, 1996 and prior periods is for the
Savings Bank. Information for the six months ended December 31, 1996 is for
the Company and its subsidiaries. Operating results for the six months
ended December 31, 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 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 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
that these corporations will not 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 467,974 shares for the three months ended December
31, 1996 and $467,472 for the six months ended December 31, 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 $0.01 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 $20,000 and $10,000 for the six
months ended December 31, 1996 and 1995, respectively.
(5) Employee Stock Ownership Plan, Concluded
----------------------------------------
The ESOP shares at September 30, 1996 were as follows:
Allocated shares $ 2,010
Shares released for allocation 3,618
Unallocated shares 34,576
--------
Total ESOP shares $ 40,204
========
Fair value of unallocated shares $414,912
========
(6) New Facility
------------
The Savings Bank completed their new branch facility in January of 1997.
Projections of total costs for this facility and related equipment amounts
to $1.8 million, with $1.6 million of this cost incurred as of December 31,
1996.
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 Savings Bank.
Therefore, substantially all of the discussion in the 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) opening a new branch office which
opened in January 1997 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. Through the holding company
subsidiaries, the Company will offer leasing and will also be able to further
diversify the products that it offers when it completes its conversion to an
Illinois state chartered commercial bank. See "Part II - - Item 5 - - Other
Information," for more information on the conversion to a commercial bank.
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 not be adequate to meet the Savings Bank's liquidity needs for the
immediate future. The Savings Bank will borrow from FHLB to meet liquidity
demands.
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 excess in regulatory requirements. The
Saving Bank's liquidity ratios at December 31, 1996 and June 30, 1996 were
10.49% 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 December 31, 1996 and
June 30, 1996, cash and cash equivalents totaled $1.8 million 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 December 31, 1996, the Savings Bank had $1.3 million in fixed term and
fixed rate advances maturing in April and May of 1997 and $4.5 million in
daily advances.
At December 31, 1996, the Savings Bank had outstanding commitments to originate
loans of $654,000 for 1 to 4 family dwellings. The Savings Bank had $580,000
in unused lines of credits and $24,000 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 December 31, 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
REGULATORY CAPITAL
A reconciliation of stockholders' equity, as reported in the consolidated
financial statements of the Savings Bank as of December 31, 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 $ 6,563 $ 6,563 $ 6,563
Less Real Estate Held For Sale 49 49 49
Less Unrealized Gain On
Securities Available for Sale 204 204 204
Additional capital item -
general loan loss reserves 0 0 314
---------- --------- ----------
Regulatory capital, as computed 6,310 6,310 6,624
Minimum capital requirement 804 1,609 2,563
---------- --------- ----------
Regulatory capital in excess of
minimum capital requirement $ 5,506 $ 4,701 $ 4,061
========== ========= ==========
FINANCIAL CONDITION
The Company's total assets increased $7.5 million, or 16.2%, from $46.4 million
at June 30, 1996 to $54.0 million at December 31, 1996. The Savings Bank
continues to experience loan growth, and loan receivables increased by $5.3
million, or 14.7%, from $36.3 million at June 30, 1996 to $41.6 million at
December 31, 1996. The Savings Bank anticipates loan growth to continue but at
a reduced rate. Premises and equipment, net, increased $843,000, or 66.8%, from
$1.3 million at June 30, 1996 to $2.1 million at December 31, 1996 primarily
from the construction of the new branch facility. Deposits increased $3.6
million, or 9.9%, from $36.5 million at June 30, 1996 to $40.1 million at
December 31, 1996 from increased 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 additional advances from the
FHLB in the amount of $4.2 million during the six months to fund the loan
originations and construction costs.
RESULTS OF OPERATIONS - THREE MONTHS ENDED DECEMBER 31, 1996
Net income for the three months ended December 31, 1996 was $50,000 compared to
$97,000 for the three months ended December 31, 1995. The decrease in net
income resulted from the provision for loan losses of $15,000 and increase in
non-interest expense of $117,000, which was partially offset by an increase in
net interest income of $60,000, an increase in non-interest income of $18,000,
and a decrease in provision for income taxes of $7,000.
Net interest income for the three months ended December 31, 1996 was $390,000
compared to $330,000 for the three months ended December 31, 1995. 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 $205,000 from $745,000 to $950,000 or by 27.5%,
during the three month 1996 period 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 7.90% in 1996 from 7.62% in 1995. 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
RESULTS OF OPERATIONS - THREE MONTHS ENDED DECEMBER 31, 1996, CONTINUED
Interest expense increased $145,000 or 34.9%, to $560,000 for the three months
ended December 31, 1996 from $415,000 for the same period in 1995. The increase
was primarily attributable to the increase in interest bearing liabilities of
12.0 million, or 34.9%, from 34.2 million in 1995 to 46.2 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 December 31, 1996 and 1995, the Savings Bank's provision
for loan losses was $15,000 and $0, respectively.
The Savings Bank's allowance for loan losses was $313,000 or .75% of loans
receivable at December 31, 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 0.24% as of December 31,
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 increased $18,000 to $38,000 for the three months ended
December 31, 1996. The increase in noninterest income was largely due to an
increase in fees collected on loans and deposit accounts.
Noninterest expense increased from $222,000 for the three months ended December
31, 1995 to $339,000 for the three months ended December 31, 1996. This
fluctuation resulted from increases in compensation expense, occupancy and
professional 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 Savings Bank's effective tax rate for the three months ended December 31,
1996 and 1995 was approximately 32.4% and 24.2%, respectively.
NONPERFORMING ASSETS
At December 31, 1996, the Savings Bank had $148,000 nonperforming assets. On
June 30, 1996, the Savings Bank also had $400,000 nonperforming assets.
RESULTS OF OPERATIONS - SIX MONTHS ENDED DECEMBER 31, 1996 AND 1995
Net Income - The Savings Bank's net loss for the six months ended December 31,
1996 was ($118,000) compared to $135,000 net income for the six months ended
December 31, 1995. This decrease of $253,000 after tax and $369,000 before
income tax resulted primarily from an increase in noninterest expense of
$509,000, which was partially offset by the increase in net interest income
after provision for loan losses of $107,000 and non-interest income increase of
$33,000.
Net Interest Income - Net interest income for the six months ended December 31,
1996 was $791,000 compared to $587,000 for the six months ended December 31,
1995. The increase in net interest income was due to an increase in interest-
earning assets of $7.7 million for 1996 when compared to 1995 and an increase
in the interest rate spread if 2.53% in 1995 to 2.92% in 1996.
11
ILLINOIS COMMUNITY BANCORP, INC.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
RESULTS OF OPERATIONS - SIX MONTHS ENDED DECEMBER 31, 1996 AND 1995, CONCLUDED
Interest Income - Interest income increased by $433,000 from $1.4 million to
$1.8 million or by 30.7%, during 1996 compared to 1995. This increase resulted
from the increase experienced by the Savings Bank in the average yield on
interest-earning assets to 7.89% in 1996 from 7.51% in 1995. This increase was
reflective of the general increase in market interest rates. The increase in
market interest rates resulted in higher yields on new loan origination as well
as on existing ARM loans in the Savings Bank's portfolio. In addition, average
balance of interest earning asset increased by $7.7 million from December 31,
1995 to $46.8 million at December 31, 1996 due primarily to strong loan demand.
Interest Expense - Interest expense increased by $229,000 or 27.8%, to
$1,054,000 for the six months ended December 31, 1996 from $825,000 for the
same period in 1995. The increase was primarily attributable to the increase in
the deposits and FHLB advances from 33.9 million in 1995 to 45.9 million in
1996.
Provision for Loan Losses - 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 six months ended December 31,
1996 and 1995, the Savings Bank's provision for loan losses was $97,000 and $0,
respectively.
The Savings Bank's allowance for loan losses was $313,000 or .75% of loans
receivable at December 31, 1996, compared to $165,000, or .57% of loans
receivable at December 31, 1995. The allowance for loan losses and the
allowance as a percentage of loans receivable decreased primarily from the
increase in loans receivable. The Savings Bank's level of non-performing loans
was 1.03% of total loans at December 31, 1995 compared to 0.24% as of December
31, 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. The Savings Bank regularly
reviews its loan portfolio, including problem loans, to determine whether any
loans require classification and/or the establishment of appropriate reserves.
Management believes it has established its existing allowance for loan losses
in accordance with GAAP, however future reserves may be necessary if economic
conditions or other circumstances differ substantially from the assumptions
used in making the initial determination.
Noninterest Income - Noninterest income was $70,000 for the six months ended
December 31, 1996 compared to $37,000 for the 1995 period. The increase in
noninterest income was largely due to an increase in fees collected on loans
and deposit accounts.
Noninterest Expense - The Savings Bank's noninterest expense increased by
$509,000 for the six months ended December 31, 1995 to $939,000 for the six
months ended December 31, 1996. This increase resulted from increases in
compensation expense, occupancy, professional expenses, and $211,000 SAIF
special assessment. The increase in compensation expense was in part the result
of normal salary increases, coupled with both the hiring of an additional
senior 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 was due in general to increased
expenses of a publicly held company.
The Savings Bank's effective tax rate for the six months ended December 31, 1996
and 1995 was approximately 32.6% and 30.4%, respectively.
NONPERFORMING ASSETS
At December 31, 1996, the Savings Bank had $148,000 in nonperforming assets. On
December 31, 1995, the Savings Bank had $120,000 nonperforming assets. On June
30, 1996, the Savings Bank had $400,000 nonperforming assets.
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ILLINOIS COMMUNITY BANCORP, INC.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
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.
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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
-----------------
In January 1997, Illinois Guarantee Savings Bank, FSB, the wholly-
owned subsidiary of Illinois Community Bancorp, Inc., announced that
it had applied to the Illinois Office of Banks and Real Estate to
become a state-chartered commercial bank. The conversion from its
present federal charter will result in significant savings in
supervisory costs and direct access to a highly qualified, locally-
based financial institutions regulator. In addition, conversion to a
commercial bank as a wholly-owned subsidiary of Illinois Community
Bankcorp, Inc. will provide the Bank with additional operating
flexibility and enhance its ability to provide a full range of banking
products and services to the community. Illinois Guarantee Savings
Bank's deposits will continue to be insured by the Federal Deposit
Insurance Corporation. The Bank will also continue to be operated
locally and customers will not experience any changes in the Bank's
operations. In addition to the Bank's application, Illinois Community
Bancorp, Inc. must also receive approval from the Board of Governors
of the Federal Reserve System to become a bank holding company. When
the applications are approved, the conversion should occur this
spring.
Item 6. Exhibits and Reports on Form 8-K
---------------------------------
Exhibits:
None.
Reports on Form 8-K:
None
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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
Date: February 10, 1997 /s/ Douglas A. Pike
----------------- ________________________________________
Douglas A. Pike
President and Chief Operations Officer
Date: February 10, 1997 /s/ Ronald R. Schettler
----------------- _________________________________________
Ronald R. Schettler
Senior Vice President and Chief Financial
Officer
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