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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 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
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Commission File Number 0-19829
CALUMET BANCORP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 36-3785272
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1350 EAST SIBLEY BOULEVARD, DOLTON, ILLINOIS 60419
(Address of principal executive offices) (Zip Code)
(708)841-9010
(Registrant's telephone number, including area code)
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
--- ---
As of May 10, 1996, the Company has 2,523,678 shares of $0.01 par value common
stock issued and outstanding.
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS PAGE NO.
--------
Consolidated Statements of Financial Condition
as of March 31, 1996 and December 31, 1995 3
Consolidated Statements of Income
for the Three Months Ended March 31, 1996 and March 31, 1995 4
Consolidated Statements of Cash Flows
for the Three Months Ended March 31, 1996 and March 31, 1995 5
Consolidated Statements of Stockholders' Equity
for the Three Months Ended March 31, 1996 and March 31, 1995 7
Notes to Consolidated Financial Statements 8
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 9
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS 14
ITEM 2 - CHANGES IN SECURITIES 14
ITEM 3 - DEFAULT 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
SIGNATURE PAGE 15
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CALUMET BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands)
(Unaudited)
March 31, December 31,
1996 1995
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Assets:
Cash $ 2,750 $ 2,616
Interest-bearing deposits 4,688 6,041
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CASH AND CASH EQUIVALENTS 7,438 8,657
Investment securities available-for-sale 67,451 68,153
Investment securities held-to-maturity 30,374 32,620
Loans receivable, net 371,090 375,467
Investment in limited partnerships 16,619 16,226
Real estate held for sale,
acquired through foreclosure 2,286 2,483
Office properties and equipment, net 4,209 4,267
Other assets 2,952 1,655
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TOTAL ASSETS $502,419 $509,528
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Liabilities:
Deposits $366,464 $362,922
Federal Home Loan Bank advances 43,140 55,140
Advance payments by borrowers for
taxes and insurance 2,016 3,058
Income taxes 1,872 529
Miscellaneous liabilities 3,577 3,769
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TOTAL LIABILITIES 417,069 425,418
Stockholders' Equity:
Preferred stock, $.01 par value,
4,200,000 shares authorized - -
Common stock, $.01 par value,
4,200,000 shares authorized
3,599,372 shares issued and outstanding 36 36
Additional paid-in-capital 34,620 34,665
Retained earnings - substantially restricted 70,069 68,418
Net unrealized gains on securities available-for-sale,
net of income tax expense of $14 and $217 23 423
Less: Unearned ESOP shares (1,273) (1,414)
Stock held for management recognition plan (239) (273)
Treasury stock (931,494 and 926,494 shares) (17,886) (17,745)
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TOTAL STOCKHOLDERS' EQUITY 85,350 84,110
-------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $502,419 $509,528
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CALUMET BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(Unaudited)
Three months ended March 31,
1996 1995
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Interest Income:
Loans $8,305 $8,036
Investment securities 1,612 1,718
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Total interest income 9,917 9,754
Interest Expense:
Deposits 4,577 3,670
Federal Home Loan Bank advances 682 906
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Total interest expense 5,259 4,576
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Net interest income 4,658 5,178
Provision for losses on loans 200 200
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Net interest income after
provision for losses on loans 4,458 4,978
Other Income:
Fees on loans sold 53 158
Gain (loss) on sale of real estate 46 (130)
Gain (loss) on sale of securities 20 (112)
Income from limited partnerships 520 68
Insurance commissions 31 37
Other 164 182
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Total other income 834 203
Other Expenses:
Compensation 1,691 1,616
Occupancy 324 352
Federal insurance premiums 213 203
Other general and administrative 626 643
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Total other expenses 2,854 2,814
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Income before income taxes 2,438 2,367
Income taxes 849 889
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Net income $1,589 $1,478
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Earnings per share $0.57 $0.51
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CALUMET BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Three months ended
March 31,
1996 1995
------------ ------------
Operating Activities:
Net income $ 1,589 $ 1,478
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for losses on loans 200 200
Provision for depreciation 79 83
Amortization of deferred loan and commitment fees (306) (200)
Amortization and accretion of premiums & discounts 57 5
Amortization and allocation of stock based benefits 176 105
Loss (gain) on sales of securities (19) 112
Equity income from limited partnerships (520) (68)
Loss (gain) on sales of real estate (46) 130
Change in operating assets and liabilities:
Decrease (increase) in interest receivable 112 (56)
Decrease (increase) in other assets (822) 3,189
(Decrease) increase in interest payable (16) 514
Increase in income taxes payable 1,591 436
Increase in miscellaneous liabilities 268 275
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NET CASH PROVIDED BY OPERATING ACTIVITIES 2,343 6,203
Investing Activities:
Investment securities available-for-sale:
Purchases (2,684) (14,215)
Proceeds from sales 2,092 7,354
Maturities - 13,700
Repayments 679 640
Investment securities held-to-maturity:
Purchases - (55)
Proceeds from sales of FHLB Stock 986 -
Maturities - -
Repayments 1,206 820
Principal and fees collected on loans 23,843 14,103
Loans originated (16,820) (15,347)
Loans purchased (2,460) (720)
Originations of loans held for sale (2,549) (4,418)
Cost of loans sold 2,549 4,418
Investments in limited partnerships (1,311) -
Return of investment in limited partnerships 456 713
Proceeds from sales of real estate 143 589
Purchases of office property and equipment (21) (49)
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NET CASH PROVIDED BY INVESTING ACTIVITIES 6,109 7,533
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CALUMET BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Three months ended
March 31,
1996 1995
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Financing activities:
Net increase (decrease) in demand and passbook accounts 2,156 (3,015)
Net increase in certificates of deposit 1,356 5,351
Proceeds of Federal Home Loan Bank advances 4,000 11,000
Repayments of Federal Home Loan Bank advances (16,000) (25,000)
Net (decrease) in advance payments by
borrowers for taxes and insurance (1,042) (910)
Purchase of treasury stock (141) -
Net proceeds from exercise of stock options - 11
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NET CASH USED IN FINANCING ACTIVITIES (9,671) (12,563)
------ ------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,219) 1,173
Cash and cash equivalents at beginning of period 8,657 9,350
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $7,438 $10,523
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Supplemental disclosures of cash flow information --
Cash paid during the period for:
Interest on deposits $4,547 $3,156
Interest on Federal Home Loan Bank advances 728 947
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$5,275 $4,103
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Income taxes (refund) $(304) $453
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Non-cash transactions:
Loans transferred to real estate owned $51 $625
Loans and non-cash transfers to facilitate
sales of real estate owned $135 -
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CALUMET BANCORP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in thousands)
(Unaudited)
Three months ended
March 31,
1996 1995
------------ ------------
Common stock:
Beginning/end of period $36 $36
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Additional paid-in-capital:
Beginning of period 34,665 34,494
Tax benefit of MRP deduction 17 -
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End of period 34,682 34,494
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Unrealized gains and (losses) on
securities available for sale:
Beginning of period, net of income tax
(expense) benefit of ($217) and $1,269 423 (1,953)
Change in unrealized gains and (losses), net of
income tax (expense) benefit of $230 and ($707) (400) 1,110
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End of period, net of income tax
(expense) benefit of ($14) and $562 23 (843)
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Retained earnings:
Beginning of period 68,418 62,453
Net income 1,589 1,478
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End of period 70,007 63,931
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Less unearned ESOP shares:
Beginning of period (1,414) (1,980)
Shares released 141 71
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End of period (1,273) (1,909)
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Less stock held for MRP:
Beginning of period (273) (410)
Amortization 34 34
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End of period (239) (376)
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Less Treasury stock:
Beginning of period (17,745) (14,354)
Purchases (141) -
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End of period (17,886) (14,354)
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Total stockholders' equity $85,350 $80,990
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles ("GAAP")
for interim financial information and with the instructions to Form 10-Q and
Regulation S-X. Accordingly, they do not include all of the information
required by GAAP for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for fair presentation have been included. The results of
operations for the three months ended March 31, 1996 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1996. Certain 1995 amounts have been reclassified to conform to 1996
presentation. For further information, refer to the consolidated financial
statements and notes thereto included in the Calumet Bancorp, Inc. (the
"Company") Annual Report on Form 10-K for the year ended December 31, 1995.
NOTE B - EARNINGS PER SHARE
Earnings per share of Common Stock outstanding for the three months ended
March 31, 1996 and 1995, respectively, have been determined by dividing net
income for the period by the weighted average number of shares of common stock
and common stock equivalents outstanding. Common stock equivalents assume the
exercise of stock options and use of proceeds to purchase Treasury Stock at the
average market price for the period. The weighted average number of shares of
common stock and common stock equivalents outstanding used for this calculation
were 2,811,394 and 2,920,443 for the three months ended March 31, 1996 and
1995, respectively. The average number of uncommitted (unearned) shares held
for the Company's Employee Stock Ownership Plan ("ESOP") and included in the
weighted average shares outstanding for these same periods were 134,378 and
194,494 respectively. Shares committed to be released to the ESOP are expensed
during the period based on original cost.
NOTE C - COMMITMENTS AND CONTINGENCIES
At March 31 1996, the Company had approved loan commitments totalling $9.2
million to originate loans, $4.5 million to sell loans, $14.8 million in
undisbursed loans-in-process, $22.7 million in unused lines of credit, and $8.8
million in credit enhancement arrangements. Commitments to fund loans and those
under credit enhancement arrangements have credit risk essentially the same as
that involved in extending loans to customers and are subject to the Company's
normal credit policies.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
Calumet Bancorp, Inc. (the "Company") completed its initial public
offering of Common Stock on February 20, 1992. It owns all of the outstanding
Common Stock of Calumet Federal Savings and Loan Association of Chicago (the
"Association"), a federally chartered stock savings and loan association which
operates five financial services offices in the Chicago area -- in Dolton,
Lansing, Sauk Village, and two in southeastern Chicago. The Association owns
two first tier subsidiaries, Calumet Savings Service Corporation and Calumet
Residential Corporation, both wholly owned. Calumet Residential Corporation
owns 51% of a second tier subsidiary, Calumet United Limited Liability Company.
Calumet Savings Service Corporation owns two second tier subsidiaries, Calumet
Mortgage Corporation of Idaho and Calumet Mortgage Corporation of New Mexico,
both wholly owned.
The Company's business activities currently consist of investment in
equity securities, participation as a limited partner in real estate investment
and loan servicing partnerships, and operation of the Association. The
Association's principal business consists of attracting deposits from the
public and investing these deposits, together with funds generated from
operations and borrowings, primarily in residential mortgage loans. The
Association's deposit accounts are insured to the maximum allowable by the
FDIC.
The Association's results of operations are dependent primarily on net
interest income, which is the difference between the interest income earned on
its loan and investment securities portfolios and its cost of funds, consisting
of interest paid on its deposits and borrowings. The Association's operating
results are also affected by the sale of insurance, annuities and real estate
through its second tier subsidiaries, and to a lesser extent, loan commitment
fees, customer service charges and other income. Operating expenses of the
Association are primarily employee compensation and benefits, equipment and
occupancy costs, federal insurance of accounts premiums and other
administrative expenses. The Association's results of operations are further
affected by economic and competitive conditions, particularly changes in market
interest rates, government policies and actions of regulatory authorities.
Current banking legislation in Congress deals with, among other things,
the recapitalization of the Savings Association Insurance Fund ("SAIF"), and
the disparity in deposit insurance premiums between savings institutions
insured by SAIF and banks insured by the Bank Insurance Fund ("BIF"). Although
a number of solutions to these problems have been proposed, it appears likely
that any final Congressional legislation will include among its provisions, a
one-time special assessment on all SAIF-insured institutions, including the
Association, of 0.85% of total deposits. For the Association, this would
result in a one-time after-tax charge of approximately $2.0
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million, assuming the assessment is fully tax deductible. While this charge
would have a negative impact on the Company's earnings and book value for the
period of assessment, it is expected that any legislation providing for such an
assessment would also mandate a significant reduction in SAIF-insured
institution's deposit insurance premium assessments. This action would have a
positive effect on the Association's earnings in future periods.
FINANCIAL CONDITION
Total assets decreased $7.1 million, or 1.4%, to $502.4 million at March
31, 1996, from $509.5 million at December 31, 1995. Net loans receivable
decreased $4.4 million, or 1.2%, to $371.1 million at March 31, 1996, from
$375.5 million at December 31, 1995, with originations and purchases of $19.3
million during the first quarter.
The Company's lending activities have been concentrated primarily in
residential real estate secured by first liens. At March 31, 1996,
approximately 57.8% of the Company's mortgage loans were secured by one-to-four
family residential properties, 16.0% by multifamily income producing
properties, and 26.2% by commercial properties and land. At December 31, 1995,
these concentrations were 57.6%, 16.3%, and 26.1%, respectively. At March 31,
1996, the Company's mortgage loan portfolio was geographically distributed
primarily in Illinois (36.3%), Colorado (27.5%), Idaho (17.1%), and New Mexico
(13.1%). At December 31, 1995, these distributions were 37.2%, 28.0%, 16.7%,
and 11.5%, respectively.
Deposits increased $3.5 million, or 1.0%, to $366.5 million at March 31,
1996, from $362.9 million at December 31, 1995. These funds, together with
funds generated from operations and asset reductions, were used to pay down
Federal Home Loan Bank advances as they became due, reducing advances by $12.0
million, or 21.8%, to $43.1 million at March 31, 1996, from $55.1 million at
December 31, 1995.
Stockholders' equity increased $1.3 million, or 1.5%, to $85.4 million at
March 31, 1996, from $84.1 million at December 31, 1995. The increase came
primarily from earnings of $1.6 million, reduced by $400,000 in net unrealized
losses on securities. $175,000 in credits from employee benefit plans was
offset by Treasury stock repurchases of $141,000.
During the first quarter of 1996 the Company repurchased 5,000 shares of
its stock at $28.13 per share. The Company has 2,667,878 shares of common
stock (including 127,305 unearned ESOP shares) outstanding on March 31, 1996,
with a book value of $31.99 per share.
ASSET QUALITY
Non-performing loans decreased to $3.9 million, or 1.05% of total loans at
March 31, 1996, from $5.8 million, or 1.53% of total loans at December 31,
1995. Non-performing assets decreased to $6.2
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million, or 1.23% of total assets at March 31 , 1996, from $8.2 million, or
1.62% of total assets at December 31, 1995. The allowance for losses on loans
increased to $5.1 million, or 131.07% of non- performing loans at March 31,
1996, from $4.9 million, or 84.58% of non-performing loans at December 31,
1995. The allowance for losses on loans increased to 1.37% of total loans at
March 31, 1996, from 1.30% of total loans at December 31, 1995.
RESULTS OF OPERATIONS
Net income for the three months ended March 31, 1996 was $1.6 million,
increased from $1.5 million for the first three months of 1995. Earnings per
share of common stock was $0.57, compared to $0.51 for the same two periods.
Return on average assets improved to 1.27% for the first quarter of 1996,
compared to 1.19% last year, and return on average stockholders' equity
improved to 7.48%, from 7.41% for the first quarter of 1995.
NET INTEREST INCOME
The Company's net interest income decreased by $520,000, to $4.7 million ,
or 3.95% of average interest earning assets, during the first quarter of 1996,
compared to $5.2 million, or 4.43% of average interest earning assets for the
first quarter of 1995. The Company has been more aggressive in pricing its
deposit accounts in order to build deposit base, and has used increased
deposits to repay advances. The average yield on interest earning assets
increased to 8.40% during the first quarter of 1996, from 8.35% in 1995, while
the average cost of funds increased to 5.24%, from 4.55% for these same
periods, resulting in a decrease in the rate spread to 3.16% in 1996, from
3.80% in 1995.
During the first quarter of 1995 the Company recovered $330,000 in
nonaccrued interest as the result of collection in full of interest on two
seriously delinquent loans. This had the effect of increasing the average
yield on interest earning assets, the rate spread, and the net interest margin
by 0.28% for the quarter. The $330,000 collected, net of an estimated income
tax provision of $124,000, increased
earnings per share by $0.07, and return on average assets by 0.04%.
PROVISION FOR LOAN LOSSES
The allowance for losses on loans is established through a provision for
losses on loans based on management's evaluation of the risk inherent in its
loan portfolio and general economic conditions. Management's evaluation
includes a review of all loans on which full collectibility may not be
reasonably assured, the estimated fair value of the underlying collateral,
economic conditions, historical loan loss experience and the Company's internal
credit review process. The provision for losses on loans has been maintained at
$200,000 per quarter for 1996, the same as for 1995. Net recoveries of $30,000
were credited to the allowance during the first quarter of 1996 and 1995.
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OTHER INCOME
Other income increased to $834,000 during the first quarter of 1996, from
$203,000 in the first quarter of 1995, primarily due to the $452,000 increase
in income from limited partnerships and the change from losses to gains on the
sale of real estate acquired through foreclosure and on the sale of securities.
Gains on the sale of real estate acquired through foreclosure amounted to
$46,000 during the first quarter of 1996, compared to losses of $130,000 during
the first quarter of 1995, an improvement of $176,000. During the three months
ended March 31, 1996, gains from the sale of securities amounted to $20,000,
compared to losses of $112,000 for the three months ended March 31, 1995, an
improvement of $132,000. Fees on loans sold decreased to $53,000 in 1996, from
$158,000 in 1995, primarily due to a decrease in volume of loans sold in 1996,
and to the proliferation of no-point, low-point loans in the market. Net
income on real estate owned, acquired through foreclosure, decreased $21,000,
to a loss of $43,000 in 1996, from a loss of $22,000 in 1995, primarily due to
costs of newly acquired Florida condominium units not yet fully leased. Rental
income on offices owned by the Company decreased $24,000 due to loss of several
tenants and to conversion of some space to Company use. Deposit account fees,
including ATM fees, increased $10,000 in the first quarter of 1996, and
miscellaneous other income increased another $15,000. Total other income
increased to 0.67% of average assets in 1996, from 0.16% in 1995.
OPERATING EXPENSES
Operating expenses increased $40,000 during the first quarter of 1996,
primarily due to a $75,000 increase in compensation expense and a $10,000
increase in Federal insurance of accounts premiums, offset by a $28,000
decrease in occupancy costs and a $17,000 decrease in other general and
administrative costs. Operating expenses as a percent of average assets
increased to 2.28% in 1996, from 2.27% in 1995. The Company's efficiency
ratio, which is its operating expense divided by the total of its net interest
margin and other income, remained at 54% for the first quarters of both 1996
and 1995.
INCOME TAXES
During the first quarter of 1996 the Company provided an estimated
$849,000 for income taxes, with an effective tax rate of 34.8%, compared to
$889,000, an effective tax rate of 37.6% for the first quarter of 1995. The
difference is due primarily to reductions in state tax provisions for changes
in state allocation factors.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds include deposits and Federal Home
Loan Bank advances, principal and interest payments on loans and securities,
maturing investment securities, and sales of
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securities from the available-for-sale portfolio. While maturities and
scheduled amortization of loans and mortgage-backed securities are a
predictable source of funds, deposit flows and mortgage prepayments are greatly
influenced by interest rates, general economic conditions, and competition.
The primary investing activity of the Company is the origination and
purchase of mortgage loans and the purchase of securities. During the first
quarter of 1996 and 1995, the Company originated and purchased mortgage loans
in the amounts of $19.3 million and $16.1 million, respectively. During the
first quarter of 1996 and 1995, the Company purchased securities in the amount
of $2.7 million and $14.3 million, respectively.
During the first quarter of 1996 and 1995, the Company increased its
deposit base by $3.5 million and $2.9 million, respectively, through a
combination of more aggressive rates and new products. These funds, together
with funds from operations, loan repayments, and securities, were used to repay
maturing Federal Home Loan Bank advances a net $12.0 million in 1996 and $14.0
million in 1995.
Federal regulations require a savings institution to maintain an average
daily balance of liquid assets equal to at least 5% of the average daily
balance of its net withdrawable deposits and short term borrowings. In
addition, short term liquid assets must constitute 1% of net withdrawable
deposits and short term borrowings. Management has consistently maintained
levels in excess of the regulatory requirement. The Association's average
liquidity ratios for the first three months of 1996 and 1995 were 7.8%. The
Association's average short term liquidity ratios for these same periods were
2.0% and 2.3%, respectively.
The Association is also required to maintain specific amounts of capital
pursuant to federal regulations. As of March 31, 1996, the Association was in
compliance with all regulatory capital requirements, with tangible and core
capital of 12.0%, and risk-based capital of 19.9%, well above the requirements
of 1.5%, 3.0%, and 8.0%, respectively.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company and the Association are not engaged in any legal
proceedings of a material nature at the present time.
Item 2. Changes in Securities
Not applicable.
Item 3. Default upon Senior Securities
Not applicable.
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
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 thereto duly authorized.
DATE: MAY 13, 1996 CALUMET BANCORP, INC.
/S/ THADDEUS WALCZAK
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THADDEUS WALCZAK
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
DATE: MAY 13, 1996 /S/ JOHN GARLANGER
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JOHN GARLANGER
CHIEF FINANCIAL OFFICER
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