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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, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission File Number 0-19829
CALUMET BANCORP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 36-3785272
(State or other jurisdiction of (IRS 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 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 9, 1997, the Company has 2,109,797 shares of $0.01 par value
common stock outstanding.
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PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS PAGE NO.
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Consolidated Statements of Financial Condition
as of March 31, 1997 and December 31, 1996 3
Consolidated Statements of Income
for the three months ended March 31, 1997 and 1996 4
Consolidated Statements of Cash Flows
for the three months ended March 31, 1997 and 1996 5
Consolidated Statements of Stockholders' Equity
for the three months ended March 31, 1997 and 1996 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 13
ITEM 2 - CHANGES IN SECURITIES 13
ITEM 3 - DEFAULT UPON SENIOR SECURITIES 13
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 13
ITEM 5 - OTHER INFORMATION 13
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 13
SIGNATURE PAGE 14
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CALUMET BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands)
(UNAUDITED)
MARCH 31, DECEMBER 31,
1997 1996
-------------------------
ASSETS:
Cash $3,442 $3,021
Interest bearing deposits 2,273 6,154
-------------------------
CASH AND CASH EQUIVALENTS 5,715 9,175
Securities available-for-sale 51,479 57,362
Securities held-to-maturity 26,915 27,970
Loans receivable, net 375,199 381,200
Investment in limited partnerships 24,765 24,458
Real estate held for sale acquired through foreclosure 2,013 1,665
Office properties and equipment, net 4,356 4,320
Other assets 4,115 4,067
------------------------
TOTAL ASSETS $494,557 $510,217
========================
LIABILITIES:
Deposits $349,550 $357,330
Federal Home Loan Bank advances and other borrowings 56,550 59,850
Advance payments by borrowers for taxes and insurance 2,227 3,124
Income taxes 726 742
Other liabilities 6,659 7,407
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TOTAL LIABILITIES 415,712 428,453
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 2,000,000 shares authorized -- --
Common stock, $.01 par value, 4,200,000 shares authorized
3,614,341 (1997) and 3,614,341 (1996) shares issued 36 36
Additional paid-in capital 35,115 35,090
Unrealized gains on securities available for sale,
net of income tax expense of $35 and $149 41 239
Retained earnings - substantially restricted 75,588 73,817
Unearned ESOP shares (707) (849)
Stock held for management recognition plan (102) (137)
Treasury stock (1,376,194 shares (1997); 1,237,313 shares (1996)) (31,126) (26,432)
------------------------
TOTAL STOCKHOLDERS' EQUITY 78,845 81,764
------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $494,557 $510,217
========================
See notes to consolidated financial statements.
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CALUMET BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
---------------------
1997 1996
---------------------
INTEREST AND DIVIDEND INCOME:
Loans $8,396 $8,305
Securities and deposits 1,360 1,612
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Total interest and dividend income 9,756 9,917
INTEREST EXPENSE:
Deposits 4,353 4,577
Federal Home Loan Bank advances and other borrowings 878 682
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Total interest expense 5,231 5,259
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NET INTEREST INCOME 4,525 4,658
Provision for losses on loans 200 200
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Net interest income after provision for losses 4,325 4,458
OTHER INCOME:
Gain on loans sold 18 53
Gain (loss) on sales of real estate (42) 46
Gain on sales of securities 31 20
Income from limited partnerships 881 520
Insurance commissions 23 31
Other 104 164
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Total other income 1,015 834
OTHER EXPENSES:
Compensation and benefits 1,774 1,691
Office occupancy and equipment 307 324
Federal insurance premiums 60 213
Advertising and promotion 58 50
Data processing 125 104
Other 424 472
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Total other expenses 2,748 2,854
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Income before income taxes 2,592 2,438
Income taxes 821 849
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NET INCOME $1,771 $1,589
=====================
EARNINGS PER SHARE $0.72 $0.57
=====================
See notes to consolidated financial statements.
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CALUMET BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
---------------------
1997 1996
---------------------
OPERATING ACTIVITIES:
Net income $1,771 $1,589
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for losses on loans 200 200
Provision for depreciation 85 79
Amortization of deferred loan and commitment fees (139) (306)
Amortization and accretion of premiums and discounts 50 57
Amortization and allocation of stock based benefits 176 176
Gain on sales of securities available-for-sale (31) (19)
Equity in income from limited partnerships (881) (520)
Net loss (gain) on sale of real estate 42 (46)
Originations of loans held for sale (2,907) (2,496)
Gain on loans sold (18) (53)
Proceeds from loans sold 2,925 2,549
Decrease in interest receivable 48 112
(Decrease) increase in interest payable 103 (16)
Change in operating assets and liabilities:
Increase in other assets (96) (822)
Increase (decrease) in income taxes (16) 1,591
Increase (decrease) in other liabilities (850) 268
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NET CASH PROVIDED BY OPERATING ACTIVITIES 462 2,343
INVESTING ACTIVITIES:
Securities available-for-sale:
Purchases (10,558) (2,684)
Proceeds from sale 14,530 2,092
Repayments and maturities 1,634 679
Securities held-to-maturity:
Repayments and maturities 1,002 2,192
Principal and fees collected on loans 21,117 23,843
Loans originated (14,886) (16,820)
Loans purchased (593) (2,460)
Investments in limited partnerships (545) (1,311)
Return of investment in limited partnerships 1,119 456
Proceeds from sales of real estate 50 143
Purchases of office property and equipment (121) (21)
---------------------
NET CASH PROVIDED BY INVESTING ACTIVITIES 12,749 6,109
See notes to consolidated financial statements.
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CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Dollars in thousands)
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
------------------------
1997 1996
------------------------
FINANCING ACTIVITIES:
Net increase (decrease) in demand and passbook accounts ($937) $2,156
Net increase (decrease) in certificates of deposit (6,843) 1,356
Proceeds of Federal Home Loan Bank advances and other borrowings 8,500 4,000
Repayment of Federal Home Loan Bank advances and other borrowings (11,800) (16,000)
Net decrease in advance payments by
borrowers for taxes and insurance (897) (1,042)
Purchase of treasury stock (4,694) (141)
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NET CASH USED IN FINANCING ACTIVITIES (16,671) (9,671)
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DECREASE IN CASH AND CASH EQUIVALENTS (3,460) (1,219)
Cash and cash equivalents at beginning of period 9,175 8,657
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $5,715 $7,438
========================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest on deposits $4,244 $4,547
Cash paid during the period for interest on notes payable 884 728
------------------------
$5,128 $5,275
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Cash paid (refunded) during the period for income taxes $552 ($304)
========================
Noncash transactions:
Loans to facilitate sales of real estate owned $ -- $135
Loans transferred to real estate owned 440 51
See notes to consolidated financial statements.
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CALUMET BANCORP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in thousands)
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
----------------------
1997 1996
----------------------
COMMON STOCK:
Beginning and end of period $36 $36
----------------------
ADDITIONAL PAID-IN CAPITAL:
Beginning of period 35,090 34,665
Tax benefit of MRP deduction 25 17
----------------------
End of period 35,115 34,682
----------------------
UNREALIZED GAINS ON SECURITIES AVAILABLE FOR SALE:
Beginning of period, net of income tax expense
of $149 and $217 239 423
Change in unrealized gains, net of income tax
benefit of $114 and $230 (198) (400)
----------------------
End of period 41 23
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RETAINED EARNINGS:
Beginning of period 73,817 68,418
Net income 1,771 1,589
----------------------
End of period 75,588 70,007
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LESS UNEARNED ESOP SHARES:
Beginning of period (849) (1,414)
Shares to be released 142 141
End of period (707) (1,273)
----------------------
LESS STOCK HELD FOR MRP:
Beginning of period (137) (273)
Amortization 35 34
----------------------
End of period (102) (239)
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LESS TREASURY STOCK:
Beginning of period (26,432) (17,745)
Purchases (4,694) (141)
----------------------
End of period (31,126) (17,886)
----------------------
TOTAL STOCKHOLDERS' EQUITY $78,845 $85,350
======================
See notes to consolidated financial statements.
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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, 1997 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1997. Certain 1996 amounts have been reclassified to conform to 1997
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, 1996.
NOTE B - EARNINGS PER SHARE
Earnings per share of Common Stock outstanding for the three months
ended March 31, 1997 and 1996, 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 2,443,829 and 2,811,394 for the three months ended March
31, 1997 and 1996, 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
77,798 and 134,378 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, 1997, the Company had approved loan commitments totalling
$9.6 million to originate loans, $1.5 million to sell loans, $4.3 million in
undisbursed loans-in-process, $20.0 million in unused lines of credit, and $7.6
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 Financial Corporation, 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 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 deposit insurance premiums, advertising, data
processing, 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.
FINANCIAL CONDITION
Total assets decreased $15.7 million, or 3.1%, to $494.6 million at
March 31, 1997, from $510.2 million at December 31, 1996. Net loans receivable
decreased $6.0 million, or 1.6%, to $375.2 million at March 31, 1997, from
$381.2 million at December 31, 1996, with originations and purchases of $15.5
million, and repayments of $21.1 million, during the first quarter.
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The Company's lending activities have been concentrated primarily in
residential real estate secured by first liens. At March 31, 1997,
approximately 57.1% of the Company's mortgage loans were secured by one-to-four
family residential properties, 14.1% by multifamily income producing
properties, and 28.8% by commercial properties and land. At December 31, 1996,
these concentrations were 57.1%, 14.3%, and 28.6%, respectively. At March 31,
1997, the Company's mortgage loan portfolio was geographically distributed
primarily in Illinois (34.4%), Colorado (26.7%), Idaho (18.4%), and New Mexico
(13.7%). At December 31, 1996, these distributions were 35.0%, 26.4%, 18.5%,
and 13.7%, respectively.
Deposits decreased $7.8 million, or 2.2%, to $349.6 million at March
31, 1997, from $357.3 million at December 31, 1996. Federal Home Loan Bank
advances decreased by $3.3 million, or 5.5%, to $56.6 million at March 31,
1997, from $59.9 million at December 31, 1996.
Stockholders' equity decreased $2.9 million, or 3.6%, to $78.8 million
at March 31, 1997, from $81.8 million at December 31, 1996. Stockholders'
equity was increased by $1.8 million net income for the three months ended
March 31, 1997. The decrease came primarily from the Company's repurchase of
138,881 shares of its stock for $4.7 million, or an average cost of $33.80 per
share. The Company has 2,238,147 shares of common stock (including 70,725
unearned ESOP shares) outstanding on March 31, 1997, with a book value of
$35.23 per share.
ASSET QUALITY
Non-performing loans decreased to $4.9 million, or 1.31% of net loans
receivable at March 31, 1997, from $6.3 million, or 1.66% of net loans
receivable at December 31, 1996. Non-performing assets decreased to $6.9
million, or 1.40% of total assets at March 31, 1997, from $8.0 million, or
1.57% of total assets at December 31, 1996. The allowance for losses on loans
increased to $5.9 million, or 119.76% of non-performing loans at March 31,
1997, from $5.6 million, or 88.89% of non-performing loans at December 31,
1996. The allowance for losses on loans increased to 1.57% of net loans
receivable at March 31, 1997, from 1.48% of net loans receivable at December
31, 1996.
RESULTS OF OPERATIONS
The Company reported net income of $1.8 million for the first quarter of 1997,
compared to $1.6 million net income for the first quarter of 1996. Earnings
per share of common stock for the first quarter of 1997 were $0.72, compared to
$0.57 for the first quarter of 1996. Return on average assets for the first
quarter of 1997 was 1.41%, compared to 1.27% for the same quarter last year.
Return on average stockholders' equity for the first quarter of 1997 was 8.88%,
compared to 7.48% for the same quarter last year. Operating expenses as a
percent of average assets decreased to 2.18% in 1997, from 2.28% in 1996. Net
non-interest expense as a percent of average assets improved to 1.37% for the
first quarter of 1997, from 1.61% for the first quarter of 1996. The Company's
efficiency ratio
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improved to 51.5% during the first quarter of 1997, from 54.0% during the first
quarter of 1996.
NET INTEREST INCOME
Net interest income decreased by $133,000, to $4.5 million during the
first quarter of 1997, compared to $4.7 million during the first quarter of
1996, primarily due to a $161,000 decrease in total interest and dividend
income, offset by a $28,000 decrease in the cost of borrowings. The average
yield on interest earning assets decreased to 8.35% during the first quarter of
1997, from 8.40% in 1996, while the average cost of funds decreased to 5.12%,
from 5.24% for these same periods, resulting in an increase in the rate spread
to 3.23% in 1997, from 3.16% in 1996. Approximately $104,000 of the decrease
in interest and dividend income was due to a $5.1 million reduction in average
volume of interest earning assets, while the other $57,000 was due to the
reduced interest rate between the two periods. Approximately $122,000 of
benefit from the reduced interest rate on deposits and borrowings was offset by
a $94,000 increase in cost for $7.3 million of additional interest bearing
liabilities.
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 1997, the same as for 1996. Net recoveries of $42,000
and $30,000 were credited to the allowance during the first quarter of 1997 and
1996, respectively.
OTHER INCOME
Other income increased $181,000, to $1.0 million during the first quarter of
1997, from $834,000 in the first quarter of 1996, primarily due to a $361,000
increase in income from limited partnerships, offset by an $88,000 change from
gains to losses on the sale of real estate acquired through foreclosure and a
$63,000 increase in losses attributable to the operation of real estate
acquired through foreclosure, which is included in miscellaneous other income.
The increased income from limited partnerships came primarily from the
Company's $298,000 share of gain on the sale of an apartment complex held by a
Colorado based partnership, and liquidation of that partnership.
OPERATING EXPENSES
Operating expenses decreased $106,000, to $2.7 million during the
first quarter of 1997, from $2.9 million during the first quarter of 1996,
primarily due to a $153,000
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decrease in Federal deposit insurance premiums resulting from a reduction in
the assessment rate to 6.48 cents annually per $100 of deposits in 1997, from
23 cents annually per $100 of deposits in 1996. Compensation expense increased
$83,000, or 4.91%, to $1.8 million during the first quarter of 1997, from $1.7
million during the first quarter of 1996. The compensation increase was due to
normal salary and bonus increases approved during the first quarter. Data
processing expense increased $21,000, primarily due to additional transaction
account services offered to customers, but transaction account fee income,
included in other income, increased by $26,000 during the same period.
Miscellaneous other expense decreased $48,000, to $424,000 during the first
quarter of 1997, from $472,000 in 1996, primarily due to a $52,000 decrease in
legal fees.
INCOME TAXES
The Company's effective income tax rate for the first quarter of 1997 was 31.7%
compared to 34.8% for the first quarter of 1996. The decrease in effective tax
rate was due to increased low income housing tax credits and dividends received
deductions.
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 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
1997 and 1996, the Company originated and purchased mortgage loans in the
amounts of $15.5 million and $19.3 million, respectively. Loan repayments for
these same two periods were $21.1 million and $23.8 million, respectively. The
net reduction in loans receivable was the result of seasonal reduction of loan
originations during the winter months, and increasing competition from mortgage
brokers.
During the first quarter of 1997 the Company's deposits decreased by $7.8
million, primarily due to increased competition from mutual funds and other
investment vehicles. This decrease was funded from net loan repayments and the
proceeds of sales and maturities of securities. The Company also reduced
borrowings by $3.3 million during the first quarter of 1997. During the first
quarter of 1996, the Company increased its deposit base by $3.5 million,
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.
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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 1997 and 1996 were 8.1%
and 7.8%, respectively. The Association's average short term liquidity ratios
for these same periods were 2.2% and 2.0%, respectively.
The Association is also required to maintain specific amounts of
capital pursuant to federal regulations. As of March 31, 1997, the Association
was in compliance with all regulatory capital requirements, with tangible and
core capital of 10.6%, and risk-based capital of 17.5%, well above the
requirements of 1.5%, 3.0%, and 8.0%, respectively.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Holding 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.
CALUMET BANCORP, INC.
DATE: MAY 9, 1997 /S/THADDEUS WALCZAK
---------------------
THADDEUS WALCZAK,
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
DATE: MAY 9, 1997 /S/JOHN GARLANGER
-----------------
JOHN GARLANGER,
CHIEF FINANCIAL OFFICER
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