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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual report pursuant to section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2001
Commission file number 0-18121
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MAF Bancorp, Inc.
(Exact name of registrant as specified in its charter)
Delaware 36-3664868
(State of incorporation) (IRS Employer identification No.)
55th Street & Holmes Avenue, Clarendon Hills, Illinois 60514-1500
Telephone Number (630) 325-7300
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
(Title of Class)
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
[X]
filing requirements for the past 90 days. Yes __________ No ____________
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ____________
Based upon the closing price of the registrant's common stock as of March 8,
2002, the aggregate market value of the voting stock held by non-affiliates of
the registrant was $665,917,422.*
The number of shares of Common Stock outstanding as of March 8, 2002: 23,084,024
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Documents Incorporated by Reference
PART III - Portions of the Proxy Statement for the Annual Meeting of
Shareholders to be held on May 1, 2002 are incorporated by reference into Part
III hereof.
* Solely for purposes of this calculation, all executive officers and directors
of the registrant are considered to be affiliates. Except to the extent shares
have been allocated to the plan accounts of directors and executive officers,
the affiliate holdings do not include shares held in certain employee benefit
plans administered by plan committees that include executive officers.
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MAF BANCORP, INC. AND SUBSIDIARIES
FORM 10-K
Index
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Part I. Page
----
Item 1. Business........................................................ 3
Item 2. Properties...................................................... 37
Item 3. Legal Proceedings............................................... 37
Item 4. Submission of Matters to a Vote of Security Holders............. 37
Part II.
Item 5. Market for the Registrant's Common Stock and Related
Stockholders Matters......................................... 37
Item 6. Selected Financial Data......................................... 38
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operation........................... 40
Item 7A. Quantatative and Qualitative Disclosures about Market Risk...... 57
Item 8. Financial Statements and Supplementary Data..................... 61
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosures......................... 95
Part III.
Item 10. Directors and Executive Officers of the Registrant.............. 95
Item 11. Executive Compensation.......................................... 95
Item 12. Security Ownership of Certain Beneficial Owners and Management.. 95
Item 13. Certain Relationships and Related Transactions.................. 95
Part IV.
Item 14. Exhibits, Financial Statements and Reports on Form 8-K.......... 95
Signature Page............................................................ 100
2
ITEM 1. BUSINESS
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
This report, in "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations" and elsewhere, contains, and other periodic
reports and press releases of the Company may contain, certain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The
Company intends such forward-looking statements to be covered by the safe harbor
provisions for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995, and is including this statement for purposes of
invoking these safe harbor provisions. Forward-looking statements, which are
based on certain assumptions and describe future plans, strategies and
expectations of the Company, are generally identifiable by use of the words
"believe," "expect," "intend," "anticipate," "estimate," "project," "plan," or
similar expressions. The Company's ability to predict results or the actual
effect of future plans or strategies is inherently uncertain, and actual results
may differ from those predicted. Factors which could have a material adverse
effect on the operations and future prospects of the Company and its
subsidiaries include, but are not limited to, unanticipated changes in interest
rates, deteriorating economic conditions which could result in increased
delinquencies in the Company's loan portfolio, legislative/regulatory changes,
monetary and fiscal policies of the U.S. Government, including policies of the
U.S. Treasury and the Federal Reserve Board, the quality or composition of the
Company's loan or investment portfolios, demand for loan products and secondary
mortgage market conditions, deposit flows, competition, demand for financial
services and residential real estate in the Company's market area, unanticipated
slowdowns in real estate lot sales or problems in closing pending real estate
contracts, delays in real estate development projects, the possible short-term
dilutive effect of potential acquisitions, and changes in accounting principles,
policies and guidelines. These risks and uncertainties should be considered in
evaluating forward-looking statements and undue reliance should not be placed on
such statements. The Company undertakes no obligation to update forward-looking
statements for the effect of future events.
GENERAL
MAF Bancorp. Inc. ("Company"), was incorporated under the laws of the state
of Delaware in 1989. The Company is a registered savings and loan holding
company primarily engaged in the retail banking business through its
wholly-owned subsidiary, Mid America Bank, fsb ("Bank") and, to a lesser extent,
in the residential real estate development business through MAF Developments,
Inc. ("MAFD"). With $5.6 billion in assets, the Bank is one of the largest
financial institutions in the Chicago metropolitan area. The Company's executive
offices are located at 55th Street and Holmes Avenue, Clarendon Hills, Illinois
60514-1500. The telephone number is (630) 325-7300.
The Company's primary assets are its investments in the Bank, as well as in
MAFD. The Company also maintains a small investment portfolio. The Company has a
$55.0 million unsecured term loan outstanding, as well as the use of a $40.0
million unsecured line of credit related to funding for past acquisitions, and
stock repurchase programs. The Company relies primarily on dividends from the
Bank, and to a lesser extent, dividends from MAFD and earnings on investments to
meet its funding requirements for acquisitions, debt service, operating
expenses, common stock repurchases, and dividend payments to common
shareholders. The Bank pays dividends to the Company periodically (historically
quarterly). During 2001, the Company received $52.5 million in dividends from
the Bank, and $1.6 million from MAFD. In 2001, the Company declared $10.5
million of cash dividends, or $.46 per share. The Company has periodically
repurchased shares of its common stock since 1993, and has a current repurchase
plan that allows for the purchase of up to 500,000 shares of common stock. To
date, 33,100 shares have been repurchased under this most recent program, at an
average price of $26.12 per share. The Company has utilized shares repurchased
primarily for acquisitions, and to a lesser extent for stock option exercises.
To date, no shares in treasury have been cancelled.
3
In November 2001, the Company purchased Mid Town Bancorp ("Mid Town") in
Chicago, Illinois, for a total of $69.0 million. The acquisition was funded with
$13.8 million in common stock and $55.2 million in cash. The Company
restructured its $29.4 million unsecured bank term loan, and $35.0 million line
of credit facility with a $55.0 million unsecured bank term loan, and a $40.0
million line of credit as part of the financing of this acquisition. Currently,
the Company is paying interest at the three-month London Interbank Offering Rate
("LIBOR") plus 110 basis points, for its $55.0 million outstanding on its
unsecured bank term loan, and three-month LIBOR plus 100 basis points for the
$10.0 million drawn on its line of credit. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources" under Item 7. of this report.
The Bank is a consumer-oriented financial institution offering various
financial services to its customers through 32 retail banking offices at
December 31, 2001. The Bank continues to expand its coverage of the greater
Chicago Metropolitan area, now with 11 locations on the north and northwest side
of Chicago, a strong presence in western Cook County and affluent DuPage County,
and increasing penetration of the rapidly-growing collar counties of Will and
Kane Counties as well as the southwest suburbs of Chicago. It is principally
engaged in the business of attracting deposits from the general public and using
such deposits, along with other borrowings, to make loans secured by real
estate, primarily one- to four-family residential mortgage loans. To a lesser
extent, the Bank also makes multi-family mortgage, commercial, residential
construction, land acquisition and development as well as consumer loans,
primarily home equity loans and lines of credit. In 2001, the Bank formed a
commercial business lending unit to target lending and deposit relationships
with small to medium-sized businesses in its primary market areas. The Bank also
has been in the business of real estate development, most recently through NW
Financial, Inc. Under OTS regulations, investments in subsidiaries engaged in
non-permissible activities for national banks, including real estate development
activities, are deducted from regulatory capital. As such, the Bank has been
performing its new real estate development projects through MAFD, while winding
down previous projects under the Bank. The final piece of real estate for
development at the Bank subsidiary level was sold during December 2001.
Additionally, the Bank operates an insurance agency, Mid America Insurance
Agency, Inc., which provides general insurance services, a title agency, Centre
Point Title Services, Inc., which provides limited title search services for
certain refinanced loan transactions of the Bank's loan customers, and Mid
America Investment Services, Inc. ("Mid America Investments"), which offers
investment services and securities brokerage primarily to Bank customers through
its affiliation with INVEST, a registered broker-dealer. In 2001, the Bank
formed Mid America, Re Inc., a wholly-owned captive reinsurance company, which
will share in a portion of mortgage insurance premiums received by certain
mortgage insurance companies on the Bank's mortgage loan originations in return
for assuming some of the risk of loss. The Company acquired two wholly-owned
subsidiaries of Mid Town at the time of acquisition: Mid Town Development
Corporation ("MTDC"), and Equitable Finance Corporation ("EFC"). MTDC's primary
activity was making mezzanine financing loans on commercial real estate
properties that the Bank was making the first mortgage on. EFC's primary
activity was making various types of "sub-prime" loans, generally short-term
unsecured personal loans. The Company does not intend to continue the activities
of these two subsidiaries and will wind down their operations as the loans
mature.
For financial information regarding the Company's two separate lines of
business (retail banking and land development), see "Note 20. Segment
Information" to the audited consolidated financial statements of the Company
included in "Item 8. Financial Statements and Supplementary Data."
As a federally chartered savings bank, the Bank's deposits are insured up
to the applicable limits by the Federal Deposit Insurance Corporation ("FDIC").
The Bank is a member of the Federal Home Loan Bank ("FHLB") of Chicago, which is
one of the twelve regional banks for federally insured savings institutions
comprising the FHLB system. The Bank is subject to extensive regulation,
supervision and examination by the OTS, as its chartering authority and primary
federal regulator, and by the FDIC, which insures its deposits up to applicable
limits. Such regulation and supervision establish a comprehensive framework of
activities in which the Bank can engage and is designed primarily for the
protection of the insurance fund and depositors. The regulatory structure also
gives the regulatory
4
authorities extensive discretion in connection with their supervisory and
enforcement activities. Any change in such regulation, whether by the OTS, the
FDIC or Congress could have a material impact on the Bank and its operations.
See "Regulation and Supervision - Federal Savings Institution Regulation" for
more information. The Bank is further regulated by the Board of Governors of
the Federal Reserve System as to reserves required to be maintained against
deposits and certain other matters.
COMPETITION
The Bank is faced with increasing competition in attracting retail customer
business, including deposit accounts and loan originations. Competition for
deposit accounts comes primarily from other savings institutions, commercial
banks, money market mutual funds, and insurance companies (primarily in the form
of annuity products). Factors affecting the attraction of customers include
interest rates offered, convenience of branch locations, ease of business
transactions, and office hours. Competition for loan products comes primarily
from mortgage brokers, other savings institutions, commercial banks and mortgage
banking companies. Factors affecting business include interest rates, terms,
fees, and customer service.
LENDING ACTIVITIES
General. The Bank's lending activities reflect its focus as a retail
banking institution serving its local market area by concentrating on
residential mortgage lending. The Bank is one of the largest originators of
residential mortgages in its market area. The Bank had record residential loan
originations in 2001, due to continued expansion into new lending markets, as
well as a large volume of refinancings in response to falling interest rates in
2001. The Bank's residential originations are generally conducted through its
branch retail network using primarily commissioned loan officers. The Bank has
traditionally held its originations of adjustable-rate or shorter-term mortgage
loans for its portfolio and sold a portion of its long-term fixed-rate loans
directly into the secondary market. The Bank originates long-term fixed-rate
mortgage loans in response to customer demand; however, the Bank sells selected
conforming and non-conforming long-term fixed-rate mortgage loans and a limited
amount of ARM loans in the secondary market, primarily to the Federal National
Mortgage Association ("FNMA"), and to a lesser extent, the Federal Home Loan
Mortgage Corporation ("FHLMC"), and Federal Home Loan Bank Mortgage Partnership
Program ("MPF"). The volume of current loan originations sold into the
secondary market varies over time based on the Bank's available cash or
borrowing capacity, Bank capital ratios, as well as in response to the Bank's
asset/liability management strategy. Consumer loans, primarily equity lines of
credit and short-term fixed-rate home equity loans, have been emphasized for
portfolio purposes over the past three years as a means of enhancing loan
yields, and shortening the duration of the Bank's loan portfolio, and
increasing the interest-sensitivity of its loan portfolio, as these loans are
generally based on the prime rate of interest plus or minus a stated margin.
The Bank also originates multi-family loans, and to a lesser extent, commercial
real estate, construction and land loans. In 2001, the Bank expanded into
commercial business lending, hiring a group of seasoned lenders from a
commercial bank to pursue loans and deposits from small to medium-sized
businesses in the Bank's primary market area. Through the acquisition of Mid
Town, the Bank acquired $8.9 million in commercial business loans, as well as
$73.6 million in commercial real estate loans.
At December 31, 2001, the Bank's total loan portfolio was $4.4 billion,
representing over 79% of the total assets of the Company.
5
Loan Portfolio Composition. The following table sets forth the composition of
the Bank's loans receivable portfolio in dollar amounts and in percentages at
the dates indicated:
December 31,
----------------------------------------------------------------------
2001 2000 1999
----------------------------------------------------------------------
Percent Percent Percent
of of of
Amount Total Amount Total Amount Total
---------- ------ ---------- ------ ---------- ------
(Dollars in thousands)
Real estate loans:
One- to four-family:
Held for investment $3,559,466 79.38% $3,807,980 87.50% $3,479,425 89.05%
Held for sale 161,105 3.59 41,074 .94 12,601 .32
Multi-family 197,685 4.41 173,072 3.98 164,878 4.22
Commercial 139,608 3.11 41,223 .95 38,817 .99
Construction 43,756 .98 29,566 .67 27,707 .71
Land 44,494 .99 40,497 .93 28,602 .73
---------- ------ ---------- ------ ---------- ------
Total real estate loans 4,146,114 92.46 4,133,412 94.97 3,752,030 96.02
---------- ------ ---------- ------ ---------- ------
Consumer loans:
Equity lines of credit 258,884 5.77 146,020 3.36 99,099 2.54
Home equity loans 52,216 1.16 64,465 1.48 48,397 1.24
Other 7,975 .18 4,783 .11 4,757 .12
---------- ------ ---------- ------ ---------- -------
Total consumer loans 319,075 7.11 215,268 4.95 152,253 3.90
Commercial business loans 19,116 .43 3,528 .08 3,132 .08
---------- ------ ---------- ------ ---------- -------
Total loans receivable 4,484,305 100.00% 4,352,208 100.00% 3,907,415 100.00%
====== ====== ======
Less:
Loans in process 21,678 12,912 11,893
Unearned discounts, premiums
and deferred loan fees, net (4,555) (7,076) (6,323)
Allowance for loan losses 19,607 18,258 17,276
---------- ---------- ----------
Loans receivable, net $4,447,575 $4,328,114 $3,884,569
========== ========== ==========
December 31,
-----------------------------------------
1998 1997
------------------- -------------------
Percent Percent
of of
Amount Total Amount Total
---------- ------ ---------- ------
Real estate loans:
One- to four-family:
Held for investment $2,877,482 86.07% $2,408,393 88.27%
Held for sale 89,406 2.67 6,537 0.24
Multi-family 137,254 4.11 105,051 3.85
Commercial 43,069 1.29 35,839 1.31
Construction 28,429 0.85 17,263 0.63
Land 24,765 0.74 24,425 0.90
---------- ------ ---------- ------
Total real estate loans 3,200,405 95.73 2,597,508 95.20
---------- ------ ---------- ------
Consumer loans:
Equity lines of credit 91,915 2.75 88,106 3.23
Home equity loans 42,398 1.27 34,447 1.26
Other 6,015 0.18 5,793 .21
---------- ------ ---------- ------
Total consumer loans 140,328 4.20 128,346 4.70
Commercial business loans 2,356 0.07 2,659 0.10
---------- ------ ---------- ------
Total loans receivable 3,343,089 100.00% 2,728,513 100.00%
====== ======
Less:
Loans in process 10,698 6,683
Unearned discounts, premiums (3,455) (772)
and deferred loan fees, net
Allowance for loan losses 16,770 15,475
---------- ----------
Loans receivable, net $3,319,076 $2,707,127
========== ==========
6
The following table shows the composition of the Bank's fixed- and
adjustable-rate loan portfolio as of the dates indicated.
December 31,
-------------------------------------------------------------------
2001 2000 1999
--------------------- -------------------- --------------------
Amount Percent Amount Percent Amount Percent
---------- ------- ---------- ------- ---------- -------
(Dollars in thousands)
Adjustable-rate loans:
Real estate:
One- to four-family $1,613,251 35.98% $1,950,183 44.81% $1,614,377 41.33%
Multi-family 111,311 2.48 111,660 2.57 102,112 2.61
Commercial 60,180 1.34 22,175 .51 19,889 .51
Construction 30,524 .68 15,456 .35 27,399 .70
Land 36,484 .81 24,997 .57 19,220 .48
---------- ------ ---------- ------ ---------- ------
Total adjustable-rate real estate loans 1,851,750 41.29 2,124,471 48.81 1,782,997 45.63
Consumer 234,642 5.23 148,005 3.40 100,936 2.59
Commercial business 16,266 .36 3,434 .08 2,303 .05
---------- ------ ---------- ------ ---------- ------
Total adjustable-rate loans receivable 2,102,658 46.88 2,275,910 52.29 1,886,236 48.27
---------- ------ ---------- ------ ---------- ------
Fixed-rate loans:
Real estate:
One- to four-family 1,946,215 43.40 1,857,797 42.69 1,865,048 47.72
One- to four-family held for sale 161,105 3.59 41,074 .94 12,601 .32
Multi-family 86,374 1.93 61,412 1.41 62,766 1.61
Commercial 79,428 1.77 19,048 .44 18,928 .48
Construction 13,232 .30 14,110 .32 308 .01
Land 8,010 .18 15,500 .36 9,382 .25
---------- ------ ---------- ------ ---------- ------
Total fixed-rate real estate loans 2,294,364 51.17 2,008,941 46.16 1,969,033 50.39
Consumer 84,433 1.88 67,263 1.55 51,317 1.31
Commercial business 2,850 .07 94 - 829 .03
---------- ------ ---------- ------ ---------- ------
Total fixed-rate loans receivable 2,381,647 53.12 2,076,298 47.71 2,021,179 51.73
---------- ------ ---------- ------ ---------- ------
Total loans receivable 4,484,305 100.00% 4,352,208 100.00% 3,907,415 100.00%
====== ====== ======
Less:
Loans in process 21,678 12,912 11,893
Unearned discounts, premiums and
deferred loan fees, net (4,555) (7,076) (6,323)
Allowance for loan losses 19,607 18,258 17,276
---------- ---------- ----------
Loans receivable, net $4,447,575 $ 4,328,114 $3,884,569
========== ========== ==========
7
Loan Maturity. The following table shows the contractual final maturity of
the Bank's loan portfolio at December 31, 2001. The loan amounts do not reflect
scheduled monthly principal repayment amounts. Principal repayments and
prepayments on mortgage loans totaled $1.88 billion, $704.4 million, and $737.0
million, for the years ended December 31, 2001, 2000 and 1999, respectively.
Based on these amounts, management believes the information in the following
table is not indicative of what the actual repayments on these loans will be.
At December 31, 2001
---------------------------------------------------------------------------------
Real Estate Mortgage Loans
--------------------------------------------------
One- to Comm-
Four- Multi- Comm- Con- ercial
Family Family ercial struction Land Consumer Business Total
------- ------ ------ --------- ---- -------- -------- -----
(In thousands)
Amount due:
One year or less $ 4,335 3,250 21,077 36,701 648 10,933 14,271 91,215
---------- ------- ------- ------ ------ ------- ------ ---------
After one year
1 year to 5 years 212,080 31,713 67,281 7,055 37,075 87,370 4,628 447,202
Over 5 years 3,343,051 162,722 51,250 - 6,771 220,772 217 3,784,783
---------- ------- ------- ------ ------ ------- ------ ----------
Total after 1 year 3,555,131 194,435 118,531 7,055 43,846 308,142 4,845 4,231,985
---------- ------- ------- ------ ------ ------- ------ ---------
Total amount due $ 3,559,466 197,685 139,608 43,756 44,494 319,075 19,116 4,323,200
========== ======= ======= ====== ====== ======= ====== =========
Less:
Loans in process 21,678
Deferred cost adjustments (4,555)
Allowance for loan losses 19,607
---------
Total loans receivable, net 4,286,470
Mortgage loans held for sale 161,105
---------
Total loans, net $4,447,575
=========
The following table sets forth at December 31, 2001 the dollar amount of
loans receivable held for investment due after one year, and whether such loans
have fixed or adjustable interest rates.
Due after one year
---------------------------------------------
Fixed Adjustable Total
---------- ---------- ---------
(In thousands)
Real estate loans:
One- to four-family $ 1,925,093 1,630,038 3,555,131
Multi-family 67,757 126,678 194,435
Commercial 72,237 46,294 118,531
Construction - 7,055 7,055
Land 7,367 36,479 43,846
Consumer 79,090 229,052 308,142
Commercial business 1,371 3,474 4,845
--------- --------- ---------
Total loans receivable $ 2,152,915 2,079,070 4,231,985
========= ========= =========
8
Residential Lending. The Bank also offers fixed-rate mortgage loans with
terms to maturity of 10, 15, 20 and 30 years and fixed-rate balloon loans that
mature after seven years. The Bank's fixed-rate loan products generally offer a
monthly repayment option and some loans carry a prepayment penalty for the first
five years of the loan. Interest rates charged on fixed-rate loans are
competitively priced on a daily basis based on secondary market prices and
market conditions. The Bank generally originates its fixed-rate and
adjustable-rate mortgage loans in a form consistent with secondary market
standards.
The Bank offers a mortgage loan modification program that allows the
borrower to receive a reduced interest rate, change in term, or a change in loan
program, in lieu of refinancing the original loan. The borrower is charged a fee
that varies based upon the modifications made, including an appraisal fee when
the Bank requires a reappraisal of the collateral. The program has been
advantageous to the Bank during the current year, by enabling the Bank to meet
customer demand for loan refinancings, limiting the disruption to its loan
operations for loan customers who are borrowing for home purchases, as well as
reducing the costs associated with refinance activity of existing borrowers.
The Bank's residential mortgage loans customarily include due-on-sale
clauses giving the Bank the right to declare the loan immediately due and
payable in the event, among other things, the borrower sells or otherwise
disposes of the property subject to the mortgage and the loan is not repaid. The
Bank has enforced due-on-sale clauses in its mortgage contracts for the purpose
of increasing its loan portfolio yield, often through the authorization of
assumptions of existing loans at higher rates of interest and the imposition of
assumption fees. ARM loans may be assumed provided homebuyers meet the Bank's
underwriting standards and the applicable fees are paid.
Loan applications are reviewed in accordance with the underwriting
standards approved by the Bank's Board of Directors and which generally conform
to FNMA standards. Loans in excess of $1.5 million must be approved by the Loan
Committee of the Board of Directors. In underwriting residential real estate
loans, the Bank evaluates both the borrower's ability to make monthly payments
and the value of the property securing the loan. Potential borrowers are
qualified for ARM loans and fixed-rate loans based on the initial or stated rate
of the loan, except for one-year ARM loans with a loan-to-value ratio in excess
of 70% and a term greater than 15 years, in which case the borrower is qualified
at 2% above the initial note rate. Despite the benefits of ARM loans to the
Bank's asset/liability management program, they do pose potential additional
risks, primarily because as interest rates rise, the underlying payment
requirements of the borrower rise, thereby increasing the potential risk of
default.
Upon receipt of a completed loan application from a prospective borrower,
credit reports are ordered and income, employment and financial information is
verified in accordance with underwriting standards. An appraisal of the real
estate intended to secure the proposed loan is undertaken by a Bank appraiser or
an independent appraiser previously approved by the Bank. It is the Bank's
policy to obtain title insurance on all mortgage loans. Borrowers also must
obtain hazard (including fire) insurance prior to closing. The Bank requires
flood insurance on a property located in special flood hazard areas. Borrowers
are generally required to advance funds on a monthly basis together with each
payment of principal and interest through a mortgage escrow account from which
the Bank makes disbursements for items such as real estate taxes and hazard
insurance premiums as they become due.
The Bank has adopted a policy of limiting the loan-to-value ratio on
originated first mortgage loans and refinanced loans to 97% and requiring that
loans exceeding 80% of the appraised value of the property or its purchase
price, whichever is less, generally be insured by a mortgage insurance company
approved by FNMA in an amount sufficient to reduce the Bank's exposure to no
greater than the 75% level. At December 31, 2001, the Bank has $143.0 million,
or 3.5% of one- to four-family mortgage loans that have a loan-to-value ratio of
greater than 80% without mortgage insurance. Recently, the Bank formed a captive
reinsurance subsidiary to accept a small, second-tier layer of risk on mortgage
loans with mortgage insurance, in exchange for a portion of the mortgage
insurance premiums paid by the customer
9
to certain mortgage insurance companies. See "Subsidiary Activities - Mid
America Re, Inc." for more information.
Multi-family Lending. The Bank originates multi-family residential mortgage
loans in its market area. At December 31, 2001, the Bank had multi-family loans
of $197.7 million, including a portfolio of purchased participating interests of
$2.0 million related to low-income housing. Multi-family loans represent 4.4% of
total loans receivable at December 31, 2001. ARM loans represented 56.3% of the
multi-family residential loan portfolio at December 31, 2001. Multi-family loans
are generally offered with initial fixed-rate periods of one, three, five, seven
and ten years. Multi-family residential mortgage loans are made for terms to
maturity of up to 25 years and carry a loan-to-value ratio not greater than 80%.
The Bank requires a positive net operating income to debt service ratio for
loans secured by multi-family residential property. Loans secured by properties
of five or more units are qualified on the basis of rental income generated by
the property.
Construction and Land Lending. The Bank originates loans to finance the
construction of one- to four-family residences, primarily in its market area. At
December 31, 2001, the Bank had $43.8 million of construction loans of which
$34.8 million financed the construction of one- to four-family residences. The
Bank also originates loans for the acquisition and development of unimproved
property to be used primarily for residential purposes in cases where the Bank
is to provide the construction funds to improve the properties. At December 31,
2001, the Bank's construction and land loans totaled $88.3 million, or 2.0%, of
total loans receivable.
The Bank uses underwriting and construction loan guidelines for financing
primarily individual, owner-occupied houses where qualified contractors are
involved. Construction loans are structured either to be converted to permanent
loans at the end of the construction phase or to be paid off upon receiving
financing from another financial institution. Construction loans are based on
the appraised value of the property, as determined by either an independent
appraiser, or an appraiser on staff at the Bank, and an analysis of the
potential marketability and profitability of the project. Construction loans
generally have terms of up to 12 months, with extensions as needed. Loan
proceeds are disbursed in increments as construction progresses and as
inspections warrant.
Land loans include loans to developers for the development of residential
subdivisions in the Bank's market area. At December 31, 2001, the Bank had land
loans to developers totaling $23.1 million. At December 31, 2001, the largest
aggregate amount of land acquisition and development loans to a single developer
amounted to $22.4 million. In addition, this borrower had construction loans
with the Bank totaling $4.3 million. Loans to developers are generally
short-term loans with terms of three to five years. Under Bank policy, the
loan-to-value ratio may not exceed 80% and is generally less than 75%. The
majority of such loans are floating rate based on the prime rate or LIBOR. Loans
generally are made to customers of the Bank and developers with whom the Bank
has had long-standing relationships. The Bank requires an independent appraisal
of the property and feasibility studies may be required to determine the profit
potential of the development project.
Land loans are also made to local builders for the purchase of improved
lots. At December 31, 2001, the Bank had land loans outstanding to local
builders totaling $10.8 million. Such loans are generally for terms of up to
three years and are generally granted at rates similar to rates quoted for ARM
residential mortgage loans. The loan-to-value ratio on such loans is limited to
75%. Land loans for the purchase of fully improved lots are also made to
individuals. At December 31, 2001, the Bank had land loans to individuals
totaling $10.6 million. Such loans are made for up to 15-year terms with
adjustable or fixed interest rates that are made at the prevailing rates for
one- to four-family residential loans.
Construction and land development loans afford the Bank the opportunity to
increase the interest rate sensitivity of its loan portfolio and to receive
yields higher than those obtainable on ARM loans secured by existing residential
properties. These higher yields correspond to the higher risks associated with
10
construction lending. Construction and land development loans involve additional
risks attributable to the fact that loan funds are advanced upon the security of
the project under construction, which is of uncertain value prior to its
completion. Because of the uncertainties inherent in estimating construction
costs as well as the market value of the completed project and the effects of
governmental regulation of real property, it is relatively difficult to evaluate
accurately the total funds required to complete a project and the related
loan-to-value ratio. As a result of the foregoing, construction and land
development lending often involves the disbursement of substantial funds with
repayment dependent, in part, on the success of the ultimate project rather than
the ability of the borrower or guarantor to repay principal and interest. If the
Bank is forced to foreclose on a project prior to or at completion due to a
default, there can be no assurance that the Bank will be able to recover all of
the unpaid balance of, and accrued interest on, the loan as well as related
foreclosure and holding costs. In addition, the Bank may be required to fund
additional amounts to complete the project and may have to hold the property for
an unspecified period of time. The Bank has attempted to address these risks
through its underwriting procedures and its limited amount of construction
lending on multi-family and commercial real estate properties.
Commercial Real Estate Lending. In connection with the Bank's policy of
maintaining an interest-rate sensitive loan portfolio, the Bank has originated
loans secured by commercial real estate, which generally carry a higher yield
and are made for a shorter term than fixed-rate one- to four-family residential
loans. At December 31, 2001, the Bank had $139.6 million of commercial real
estate loans. Historically, the Bank's policy has been to originate commercial
real estate loans on a limited basis. During 2001, the Bank's commercial real
estate portfolio increased by $73.6 million due primarily to the acquisition of
Mid Town. The Company may increase its commercial real estate lending in the
future in conjunction with its new business banking unit described below.
Commercial real estate loans are generally made in amounts up to 80% of the
appraised value of the property, as determined by an independent appraiser
previously approved by the Bank. Currently, all of the Bank's commercial real
estate loans are secured by improved properties located in the Chicago
metropolitan area. The Bank often requires borrowers to provide their personal
guarantees on loans made for commercial real estate.
Loans secured by commercial real estate properties are generally larger and
involve a greater degree of risk than residential mortgage loans. Because
payments on loans secured by commercial real estate properties are often
dependent on the successful operation or management of the properties, repayment
of such loans may be subject to adverse conditions in the real estate market or
the economy. The Bank seeks to minimize these risks by lending primarily on
existing income-producing properties and generally restricting such loans to
properties in the Chicago area. The Bank analyzes the financial condition of the
borrower and the reliability and predictability of the net income generated by
the security property in determining whether to extend credit. In
addition, the Bank generally requires a net operating income to debt service
ratio of at least 1.15 times. At December 31, 2001, the Bank's ten largest
commercial real estate loans totaled $32.1 million, all of which are current and
performing in accordance with their original terms.
Consumer Lending. The Bank's other lending activities consist of consumer
lending, primarily home equity lines of credit and fixed-rate second mortgage
loans. On December 31, 2001, outstanding balances on home equity lines
represented $258.9 million or 5.8% of the Bank's total loan portfolio. Home
equity lines of credit are generally extended up to 85% of the appraised value
of the property, less existing liens, generally at interest rates which range
from the designated prime rate minus .50% to plus .50%, based on balances drawn.
To a lesser extent, the Bank offers home equity lines of credit at greater than
85% of the appraised value of the property. The interest rate on 85%-100%
loan-to-value lines of credit is the designated prime rate plus 1.50% to 3.50%.
The Bank uses the same underwriting standards for home equity lines of credit as
it uses for residential mortgage loans. Other home equity loans consist of $52.2
million of primarily fixed-rate second mortgage loans that amortize over a three
to ten year period.
11
Commercial Business Lending. In 2001, in an effort to continue to expand
the lending services offered by the Bank, the Bank started a commercial business
lending unit by hiring a team of seasoned lending professionals from a
commercial bank. The focus of the Bank in this area of lending is to provide
lending and deposit services to small and medium-sized businesses in the
Chicagoland area, some of which already had a deposit relationship with the
Bank. Commercial business loans may be secured by business assets or real
estate, or in some instances, be unsecured. The Bank obtains personal guarantees
in situations where the business assets are not considered to be sufficient
collateral. Additionally, the Bank may provide letter of credit services to
certain lenders on a case-by-case basis.
Commercial business lending carries increased risks compared to other forms
of lending the Bank offers. Principal and interest repayment is often dependent
on strong and consistent management teams that can change quickly due to the
size of the companies targeted by the Bank. In addition, slowing economic
conditions could adversely impact these borrowers. As part of the initiation of
this unit, a comprehensive credit policy was established and approved by the
Board of Directors of the Bank for new commercial business loans, and is
monitored on a weekly basis by a committee of senior management that is
responsible for the approval of new loans. In addition, a credit scoring system
was established for reviewing previously approved and outstanding loans. A
committee of senior management of the Bank has been established to periodically
monitor credit quality of commercial business loans including loans on the
Bank's "watch list" to determine actions to be taken, including collection,
additional collateral, and accrual status. At December 31, 2001, the Bank's
portfolio of commercial business loans was $19.1 million, of which $8.9 million
was attributed to the acquisition of Mid Town.
Environmental Issues. The Bank encounters certain environmental risks in
its lending activities. Under federal and state environmental laws, lenders may
become liable for the costs of cleaning up hazardous materials found on security
property. Although environmental risks are usually associated with industrial
and commercial loans, risks may be substantial for residential lenders like the
Bank if environmental contamination makes the security property unsuitable for
use. This could also have an effect on nearby property values. In accordance
with FNMA and FHLMC guidelines, appraisals for single-family residences on which
the Bank lends include comments on environmental influences. The Bank attempts
to control its risk by training its appraisers and underwriters to be cognizant
of signs indicative of environmental hazards. No assurance can be given,
however, that the values of properties securing loans in the Bank's portfolio
will not be adversely affected by unforeseen environmental risks, although the
Bank is unaware of any material environmental issues which would subject it to
liability at this time.
Environmental concerns such as asbestos containing material, underground
storage tanks and lead based paint can pose a health risk to tenants and
negatively impact the collateral value of security property. Generally, the use
of these materials has been eliminated since 1978. All relevant factors in order
to determine whether an environmental review is needed and, if so, the scope and
detail, is considered prior to the origination of commercial and multi-family
loans. The relevant factors include, but are not limited to, the following: age
of property, use of property, location of property, knowledge of subject area,
borrower(s) financial capacity to withstand potential clean-up costs, loan
amount and loan-to-value ratio of the proposed loan. For loans in excess of $1.0
million, a satisfactory Phase I environmental exam is required as part of the
loan approval process, with further investigation in the form of a Phase II exam
taking place as dictated therein.
12
Originations, Purchases, Sales, Swaps of Mortgage Loans and
Mortgage-Backed Securities. The Bank originates and purchases both ARM and
fixed-rate loans. Its ability to originate loans is dependent upon the relative
customer demand for fixed-rate or ARM loans in the origination and purchase
market, which is affected by the term structure (short-term compared to
long-term) of interest rates as well as the current and expected future level of
interest rates. The Bank sells selected conforming and non-conforming long-term
fixed-rate and a limited amount of ARM mortgage loans in the secondary mortgage
market to manage its interest rate risk exposure. These loan sales also allow
the Bank to continue to make loans when deposit flows decline or funds are not
otherwise available for lending. Generally, the loans are sold for cash or
securitized and sold in the secondary mortgage market to investors such as FNMA,
FHLMC, and MPF as well as investment banks and other financial institutions. The
large majority of these loans are sold without recourse, except those loans sold
to MPF, where the Bank maintains a very limited level of risk in exchange for
better pricing on the loans sold. At December 31, 2001, the Bank has
approximately $6.6 million in net credit risk exposure on loans it has sold to
MPF.
The Bank has also exchanged or swapped loans out of its portfolio for
mortgage-backed securities primarily with FNMA and FHLMC. Generally, the
mortgage-backed securities are used to collateralize borrowings and deposits or
are sold in the secondary market to raise additional funds. Swap activity by the
Bank is governed by pricing levels in the secondary mortgage market for whole
mortgage loans versus securitized mortgage loans, as well as the level of rates
for collateralized borrowings. During the current year, the Bank swapped and
sold $76.7 million in loans receivable, compared to $9.3 million for the year
ended December 31, 2000.
In 2001, the Bank originated and purchased $2.83 billion in loans
receivable, compared to $1.48 billion in 2000. During 2001, with the decrease in
interest rates, fixed-rate mortgage loan originations accelerated to $1.71
billion, or 69.9% of total loan originations, compared to $466.9 million or
39.4% of total loan originations in 2000, as customers took advantage of the
ability to lock in historically low long-term mortgage rates. Of the fixed-rate
originations in 2001, $1.1 billion, or 65.1%, conformed to the requirements for
sale to FNMA and FHLMC and $597.4 million, or 34.9%, did not conform to the
requirements of these agencies. The Bank's "nonconforming" loans are generally
designated as such because the principal loan balance exceeds $275,000 ($300,700
as of January 1, 2002), which is the FHLMC, FNMA, and MPF purchase limit, and
not because the loans present increased risk of default to the Bank. Generally,
prior to 2001, nonconforming loans were held in the Bank's loan portfolio. In
2001, the Bank began selling non-conforming long-term fixed rate loans into the
secondary market. Loans with such excess balances generally carry interest rates
from one-eighth to three-eighths of one percent higher than similar, conforming
fixed-rate loans. Due to record fixed-rate originations, loan sale activity
soared in 2001. During the current year, the Bank sold $1.02 billion of loans
into the secondary market, compared to $335.7 million in 2000.
All of the mortgage-backed securities and collateralized mortgage
obligations, ("CMOs") in the Bank's portfolio are issued by or have collateral
backed by FNMA, FHLMC or GNMA, or are backed with whole loan collateral and have
an investment grade rating. At December 31, 2001, the amortized cost of
mortgage-backed securities totaled $140.9 million, or 2.5% of total assets. At
December 31, 2001, the Bank's mortgage-backed securities portfolio had a market
value of $142.2 million.
13
The following table sets forth the Bank's originations, purchases, sales,
swaps and principal repayments of loans receivable for the periods indicated.
Year Ended December 31,
--------------------------------------------
2001 2000 1999
--------- --------- ---------
(In thousands)
Loans originated:
Adjustable-rate loans originated:
One- to four-family $ 735,463 638,097 432,649
Multi-family 27,736 22,005 34,129
Commercial real estate 17,717 6,585 4,620
Construction 17,453 25,702 31,366
Land 30,272 26,195 14,389
Commercial business 7,147 118 1,030
Consumer 196,381 135,947 76,252
--------- --------- ---------
Total adjustable-rate loans originated 1,032,169 854,649 594,435
Fixed-rate loans originated:
One- to four-family 1,708,663 466,913 712,942
Multi-family 6,230 6,014 9,229
Commercial real estate 15,417 1,982 938
Construction 16,071 14,759 -
Land 6,274 15,952 10,589
Commercial business 790 - -
Consumer 41,980 50,393 38,579
--------- --------- ---------
Total fixed-rate loans originated 1,795,425 556,013 772,277
--------- --------- ---------
Total loans originated 2,827,594 1,410,662 1,366,712
Loans purchased:
Fixed-rate one- to four-family real estate - 3,220 36,521
Adjustable-rate one- to four-family real estate - 69,669 307,567
Other - 669 537
--------- --------- ---------
Total loans purchased - 73,558 344,625
--------- --------- ---------
Total loans originated and purchased 2,827,594 1,484,220 1,711,337
--------- --------- ---------
Loans acquired through acquisitions 210,020 5,292 399
--------- --------- ---------
Loans sold:
One- to four-family 940,952 326,375 340,308
Consumer loans 476 596 1,023
--------- --------- ---------
Total loans sold 941,428 326,971 341,331
Mortgage loan swaps (fixed rate) 76,670 9,290 62,583
Transfer to foreclosed real estate and charge-offs 2,756 4,038 6,540
Amortization and prepayments 1,884,663 704,420 736,956
--------- --------- ---------
Total loans sold, swaps, transfers,
amortization and prepayments 2,905,517 1,044,719 1,147,410
--------- --------- ---------
Net increase $ 132,097 444,793 564,326
========= ========= =========
14
Loan servicing fee income. Loan servicing fee income is generated from
loans that the Bank has originated and sold, or from purchased servicing rights,
and includes fees for the collection and remittance of mortgage payments,
insurance policies and real estate taxes. Typically, the Bank receives a
servicing fee for performing the aforementioned services equal to at least .25%
for fixed-rate mortgages and .25% to .375% for ARM loans on the outstanding
principal balance of the sold loan being serviced. Servicing fees are included
in income as loan payments are received. Costs of servicing loans for others are
charged to expense as incurred. The Bank is required to capitalize mortgage
servicing rights upon the sale of loans based on assumptions as to fee income
earned, estimated prepayment speeds of the underlying mortgage loans, and the
cost of servicing. Mortgage servicing rights are amortized based on the
estimated life of the loan servicing income stream, and recorded as a decrease
to loan servicing fee income. In addition, mortgage servicing rights are
periodically assessed for impairment, with any impairment or recovery recognized
through a valuation allowance. The following table shows the components of loan
servicing fee income in dollars and as a percentage of loans serviced for
others, as well as other information regarding loans serviced for others for the
years indicated:
Year Ended December 31,
------------------------------------------
2001 2000 1999
--------- --------- ---------
(Dollars in thousands)
Gross servicing revenue $ 3,083 2,724 3,032
Amortization of mortgage servicing rights (3,454) (1,038) (1,271)
Valuation allowance on mortgage servicing rights (904) - -
Recovery of valuation allowance of mortgage servicing rights - - 900
--------- --------- ---------
Loan servicing fee income (expense), net $ (1,275) 1,686 2,661
=========== ========= =========
As a percentage of average loans serviced for others:
Gross servicing revenue .291% .259% .264%
Amortization of mortgage servicing rights (.326) (.099) (.111)
Valuation allowance on mortgage servicing rights (.085) - -
Recovery of valuation allowance of mortgage servicing rights - - .078
--------- --------- ---------
Loan servicing fee income (expense), net (.120)% .160% .231%
=========== ========= =========
Loan sales for the year $ 1,019,145 335,665 402,891
=========== ========= =========
Average balance of loans serviced for others $ 1,060,194 1,050,287 1,148,514
Loans serviced for others at end of year 1,401,607 785,350 1,226,874
Mortgage servicing rights at end of year, net 10,531 5,107 7,334
Weighted average interest rate of loans serviced for others 7.10% 7.55% 7.28%
=========== ========= =========
Sales of Mortgage Servicing Rights. The Bank has generally maintained the
strategy of keeping the servicing on the loans it originates and sells into the
secondary market as a means of cross-selling loan customers other Bank products.
However, in 2000, the Bank sold approximately $600 million of mortgage servicing
rights at a pre-tax gain of $4.4 million, to take advantage of aggressive
pricing for servicing rights, and as a hedge against lower interest rates. While
the Bank still intends to grow its loan servicing portfolio, as it did in 2001,
management may periodically review opportunities to sell servicing rights in the
future.
15
Asset Quality and Allowance for Loan Losses
Collection procedures. When a borrower fails to make a required payment by
the end of the month in which the payment is due, the Bank generally institutes
collection procedures. The Bank will send a late notice, and in most cases,
delinquencies are cured promptly; however, if a loan has been delinquent for
more than 60 days, the Bank contacts the borrower in order to determine the
reason for the delinquency and to effect a cure, and, where appropriate, reviews
the condition of the property and the financial circumstances of the borrower.
Based upon the results of any such investigation, the Bank may: (1) accept a
repayment program for the arrearage from the borrower; (2) seek evidence, in the
form of a listing contract, of efforts by the borrower to sell the property if
the borrower has stated that he is attempting to sell; (3) request a deed in
lieu of foreclosure; or (4) initiate foreclosure proceedings. When a loan
payment is delinquent for three or more monthly installments, the Bank will
initiate foreclosure proceedings. Interest income on loans is reduced by the
full amount of accrued and uncollected interest on loans that are in process of
foreclosure or otherwise determined to be uncollectible.
Delinquent Loans. At December 31, 2001, 2000, and 1999, delinquencies in
the Bank's portfolio were as follows:
61-90 Days 91 or More Days
------------------------------- --------------------------------
Principal Principal
Number Balance of Percent Number Balance of Percent
of Delinquent of of Delinquent of
Loans Loans Total/1/ Loans Loans Total/1/
--------- --------- -------- -------- --------- --------
(Dollars in thousands)
December 31, 2001 62 $8,058 .18 % 158 $19,388 .42%
December 31, 2000 50 4,084 .10 115 14,764 .34
December 31, 1999 63 6,280 .16 130 13,224 .34
== ===== == ====== ===
- ---------------------
/1/ Percentage represents principal balance of delinquent loans to total loans
outstanding.
Non-Performing Loans. A loan is considered impaired when, based on current
information and events, it is probable that a creditor will be unable to collect
all amounts due according to the contractual terms of the loan. For loans that
are not individually significant (i.e. loans under $1.0 million), and represent
a homogeneous population, the Bank evaluates impairment collectively based on
management reports on the level and extent of delinquencies, as well as
historical loss experience for these types of loans. The Bank uses these
criteria on one- to four-family residential loans, consumer loans, multi-family
residential loans, and land loans. Impairment for loans considered individually
significant as well as commercial real estate and commercial business loans are
measured based on the present value of expected future cash flows discounted at
the loan's effective interest rate, or the fair value of the collateral if the
loan is collateral dependent. Charge-offs of principal occur when a loss has
occurred as a result of the book value exceeding the fair value.
A loan (whether considered impaired or not) is classified as non-accrual
when collectibility is in doubt or, when the borrower becomes 91 days past due
on contractual principal or interest payments. When a loan is placed on
non-accrual status, or in the process of foreclosure, previously accrued but
unpaid interest is reversed against interest income. Income is subsequently
recorded to the extent cash payments are received, or at a time when the loan is
brought current in accordance with its original terms.
16
The following table sets forth information regarding non-accrual loans,
loans which are 91 days or more delinquent but on which the Bank is accruing
interest, and foreclosed real estate held by the Bank at the dates indicated.
Since January 1, 2001, the Bank does not accrue interest on loans more than 90
days overdue.
December 31,
----------------------------------------------------
2001 2000 1999 1998 1997
-------- -------- -------- -------- --------
(Dollars in thousands)
One- to four-family and multi-family loans:
Non-accrual loans (1) $ 17,985 14,023 12,548 10,641 7,039
Accruing loans 91 or more days overdue - 1,732 771 1,381 2,071
-------- -------- -------- -------- --------
Total 17,985 15,755 13,319 12,022 9,110
-------- -------- -------- -------- --------
Commercial real estate, construction and land loans:
Non-accrual loans (1) 544 269 607 1,284 1,240
Accruing loans 91 or more days overdue - - - - -
-------- -------- -------- -------- --------
Total 544 269 607 1,284 1,240
-------- -------- -------- -------- --------
Other loans:
Non-accrual loans (1) 922 683 1,683 721 181
Accruing loans 91 or more days overdue - 2 41 22 124
-------- -------- -------- -------- --------
Total 922 685 1,724 743 305
-------- -------- -------- -------- --------
Total non-performing loans:
Non-accrual loans (1) 19,451 14,975 14,838 12,646 8,460
Accruing loans 91 or more days overdue - 1,734 812 1,403 2,195
-------- -------- -------- -------- --------
Total $ 19,451 16,709 15,650 14,049 10,655
======== ======== ======== ======== ========
Non-accrual loans to total loans .45% .35% .38% .39% .31%
Accruing loans 91 or more days overdue to total loans - .04 .02 .04 .08
-------- -------- -------- -------- --------
Non-performing loans to total loans .45% .39% .40% .43% .39%
======== ======== ======== ======== ========
Foreclosed real estate:
One- to four-family $ 1,405 1,762 1,220 1,736 489
Commercial real estate - 46 6,195 6,621 -
-------- -------- -------- -------- --------
Total foreclosed real estate, net of reserves $ 1,405 1,808 7,415 8,357 489
======== ======== ======== ======== ========
Total non-performing assets $ 20,856 18,517 23,065 22,406 11,144
======== ======== ======== ======== ========
Total non-performing assets to total assets .37% .36% .50% .54% .32%
======== ======== ======== ======== ========
- ------------------------------------
/1/ Consists of loans in the process of foreclosure or for which interest is
otherwise deemed uncollectible.
For the years ended December 31, 2001, 2000 and 1999, the amount of
interest income that would have been recorded on non-accrual loans amounted to
$1.1 million, $768,000 and $703,000 respectively, if the loans had been current.
For the year ended December 31, 2001, interest income on non-accrual loans
actually collected that was recorded amounted to $351,000.
Subsequent to December 31, 2001, one commercial real estate loan and a
secured line of credit to the same borrower aggregating $4.4 million were placed
on non-accrual status due to the borrower being in violation of certain loan
covenants. The Bank has a first mortgage lien on the property, a corporate
guarantee of a subsidiary company and several unlimited personal guarantees. The
Bank expects to be repaid in full from the net proceeds from the sale of the
property in the next 12-15 months.
Classified Assets. The federal regulators have adopted a classification
system for problem assets of insured institutions that covers all problem assets
and requires certain reserves. Under this classification system, problem assets
of insured institutions are classified as "substandard," "doubtful" or "loss."
An asset is considered "substandard" if it is inadequately protected by the
current net worth and paying capacity of the obligor or of the collateral
pledged, if any. "Substandard" assets include those
17
characterized by the "distinct possibility" that the insured institution will
sustain "some loss" if the deficiencies are not corrected. Assets classified as
"doubtful" have all of the weaknesses inherent in those classified
"substandard," with the added characteristic that the weaknesses present make
"collection or liquidation in full," on the basis of currently existing facts,
conditions, and values, "highly questionable and improbable." Assets classified
as "loss" are those considered "uncollectible" and of such little value that
their continuance as assets without the establishment of a specific loss
reserve is not warranted.
In connection with the filing of its periodic reports with the OTS, the
Bank regularly reviews the problem loans in its portfolio to determine whether
any loans require classification in accordance with applicable regulations. At
December 31, 2001 and 2000, all of the Bank's non-performing loans were
classified as substandard.
Allowance for Loan Losses. The Bank maintains an allowance for loan losses
in an amount deemed prudent by management. The allowance for loan losses is
established through a provision for loan losses based on management's periodic
evaluation of the risk inherent in its loan portfolio and changes in the nature
and volume of its loan activity. Such evaluation, which includes a review of all
loans of which full collectibility may not be reasonably assured, considers
among other matters, the estimated fair value of the underlying collateral,
economic conditions, historical loan loss experience and other factors that
warrant recognition in providing for an adequate loan loss allowance. Based on
such evaluation and consideration of these various factors, including the lack
of loan portfolio growth, exclusive of the Mid Town acquisition, the lowest
level of net charge-offs in 10 years and continued stable level of
non-performing loans concentrated in one- to four-family mortgages, the Bank did
not make a provision for loan losses in 2001. The $1.3 million increase in the
allowance for loan losses in 2001 was primarily due to the $1.4 million
allowance acquired in the Mid Town acquisition. While management uses available
information to recognize losses on loans, future adjustments to the allowance
for loan losses may be necessary based on changes in economic conditions and the
impact of such change on the Bank's borrowers.
The following table analyzes the Bank's allowance for loan losses for the
years indicated.
Year Ended December 31,
--------------------------------------------------------
2001 2000 1999 1998 1997
------- ------- ------- -------- --------
(Dollars in thousands)
Balance at beginning of year $ 18,258 17,276 16,770 15,475 17,914
Charge-offs:
One- to four-family (87) (136) (522) (290) (637)
Commercial real estate - - (88) (25) (2,994)
Multi-family - (275) - - -
Consumer (17) (120) (101) (87) (81)
------- ------- ------- -------- --------
(104) (531) (711) (402) (3,712)
------- ------- ------- -------- --------
Recoveries:
One- to four-family 39 9 105 1 106
Commercial real estate - - - - 5
Consumer 6 4 12 50 12
------- ------- ------- -------- --------
45 13 117 51 123
------- ------- ------- -------- --------
Charge-offs, net of recoveries (59) (518) (594) (351) (3,589)
Provision for loan losses - 1,500 1,100 800 1,150
Balance related to acquisition 1,408 - - 846 -
------- ------- ------- -------- --------
Balance at end of year $ 19,607 18,258 17,276 16,770 15,475
======= ======= ======= ======== ========
Net charge-offs to average loans outstanding .00% .01 .02 .01 .14
Allowance for loan losses to total loans receivable .45 .42 .44 .52 .57
Allowance for loan losses to total non-performing loans 100.80 109.27 110.39 119.37 145.24
Allowance for loan losses to total non-performing assets 94.01 98.60 74.90 74.85 138.86
======= ======= ======= ======== ========
18
At December 31, 2001, the Bank maintained no specific reserves on its loan
portfolio. The following table sets forth the Company's allocation of its
allowance for loan losses. This allocation is based on management's subjective
estimates. The amount allocated to a particular category should not be
interpreted as the only amount available for future charge-offs that may occur
within that category: it may not be indicative of future charge-off trends and
it may change from year to year based on management's assessment of the risk
characteristics of the loan portfolio. The allocation methods used for December
31, 2001, 2000 and 1999 were generally consistent. The change in amounts
allocated to various loan types in 2001 was primarily due to the allocation of
the Mid Town allowance for loan losses.
At December 31,
-----------------------------------------------------------------------------------
2001 2000 1999
------------------------- ------------------------- --------------------------
Loan category Loan category Loan category
as a % of as a % of as a % of
Allowance Total Loans Allowance Total Loans Allowance Total Loans
--------- -------------- --------- --------------- ---------- --------------
(Dollars in thousands)
One- to four-family residential $ 9,755 82.97 $ 9,803 88.44 % $ 8,705 89.37%
Multi-family 1,730 4.41 1,480 3.98 1,235 4.22
Commercial real estate 2,646 3.11 1,978 .95 2,078 0.99
Construction 501 .98 401 .67 256 0.71
Land 656 .99 606 .93 346 0.73
Consumer 1,804 7.11 1,575 4.95 1,085 3.90
Commercial business 250 .43 - .08 - .08
Unallocated portion 2,265 NA 2,415 NA 3,571 NA
------ ------ ------ ------ ------ ------
Total $ 19,607 100.00% $ 18,258 100.00% $ 17,276 100.00%
====== ====== ====== ====== ====== ======
At December 31, 2001, the Bank's loan portfolio consisted of 83.0% of one-
to four-family real estate loans, with an additional 7.1% being equity lines of
credit or home equity loans on one- to four-family real estate and other
consumer loans. Based on the Bank's underwriting standards, overall
loan-to-value ratios, concentration of lending primarily in its market area,
and historically low charge-off experience, management considers the risk of
loss due to these loans as minimal. The remaining 9.9% of the Bank's portfolio,
or $444.7 million, consist of multi-family mortgage, commercial real estate,
construction, land, and to a lesser extent, commercial business loans. These
loans generally tend to exhibit greater risk of loss than do one- to
four-family loans, primarily because such loans typically carry higher loan
balances and repayment is dependent, in large part, on sufficient income to
cover operating expenses. In addition, economic events and government
regulations, which are outside the control of the Bank and the borrower, could
impact the security of the loan or the future cash flow of affected properties.
Management has addressed these risks through its underwriting standards.
In its multi-family loan portfolio, the Bank has traditionally limited its
lending to small apartment buildings (less than 36 units) which management
believes have lower risk than larger properties. At December 31, 2001, in the
Bank's $197.7 million multi-family portfolio, only 11 loans are on properties
greater than 36 units. The average multi-family loan is $320,000. With respect
to construction and land loans, although a change in economic conditions could
impact the collateral value of the Bank's loans, a large percentage of this
collateral is on one- to four family residential properties whose values tend to
be more stable during times of economic difficulty. The Bank's commercial real
estate portfolio grew during 2001 due to the acquisition of Mid Town. Loans
secured by commercial real estate properties generally involve a greater degree
of risk than residential mortgage loans. Because payments on loans secured by
commercial real estate properties are often dependent on the successful
operation or management of the properties, repayment of such loans may be
subject to adverse conditions in the real estate market or the economy. The Bank
seeks to minimize these risks by lending primarily on existing income-producing
properties and generally restricting such loans to properties in the Chicago
area.
Net income of the Company could be affected if management's estimate of the
number of loans with loss, or the estimate of the amount of loss that may be
incurred are materially different, which could require an additional provision
for loan losses. Management believes the allowance for loan losses is
19
adequate at December 31, 2001. However, future adjustments to the allowance may
be necessary based on changes in economic conditions and the impact such
changes may have on the Bank's borrowers.
INVESTMENT ACTIVITIES
Federally chartered savings institutions have the authority to invest in
various types of liquid assets, including United States Treasury obligations,
securities of various federal agencies, certain certificates of deposit of
insured banks and savings institutions, certain bankers' acceptances, repurchase
agreements and federal funds. Subject to various restrictions, federally
chartered savings institutions may also invest in commercial paper, investment
grade corporate debt securities and mutual funds whose assets conform to the
investments that a federally chartered savings institution is otherwise
authorized to make directly. The Bank is required to maintain liquid assets at
prudent levels based on its operations.
The Bank's liquid investments include interest-bearing deposits, primarily
at the Federal Home Loan Bank of Chicago, federal funds sold and U.S. Government
and federal agency obligations. The Bank invests overnight federal funds with
two large commercial banks in Chicago, based upon periodic review of these
institutions' financial condition. The Bank generally limits overnight federal
funds sold investments to $100.0 million at any one institution.
Generally, the investment policy of the Bank is to invest funds among
various categories of investments and maturities based upon the Bank's
asset/liability management policies, investment quality and marketability,
liquidity needs and performance objectives.
The following table sets forth certain information regarding the book value
of the Company's and the Bank's liquidity and investment securities portfolio at
the dates indicated. At December 31, 2001 and 2000, the fair value of the
investment securities portfolio was $355.5 million and $187.8 million,
respectively.
December 31,
------------------------------------
2001 2000 1999
------- ------- -------
(In thousands)
Interest-bearing deposits $ 29,367 53,392 51,306
======= ======= =======
Federal funds sold $ 112,765 139,268 35,013
======= ======= =======
Investment securities:
Available for sale:
U.S. Government and agency securities $ 141,530 81,255 78,618
Asset-backed securities 81,670 80,614 105,241
Corporate debt securities 71,309 - -
Bank trust preferred securities 40,899 2,704 731
Marketable equity securities 20,053 9,921 9,515
------- ------- -------
Total investments available for sale 355,461 174,494 194,105
------- ------- -------
Held to maturity:
U.S. Government and agency securities - 9,986 9,983
Corporate debt securities - 2,647 2,016
------- ------- -------
Total investments held to maturity - 12,633 11,999
------- ------- -------
Total investment securities $ 355,461 187,127 206,104
======= ======= =======
Stock in the FHLB of Chicago $ 132,081 84,775 75,025
======= ======= =======
20
The table below sets forth information regarding the carrying value,
weighted average yields based on amortized cost, and maturities of the Company's
investment securities. At December 31, 2001, all investment securities are
classified as available for sale.
At December 31, 2001
-------------------------------------------------------------------------------------
One Year 1 to 5 to More than
or Less 5 Years 10 Years 10 Years
------------------- ------------------- ------------------- --------------------
Weighted Weighted Weighted Weighted
Carrying Average Carrying Average Carrying Average Carrying Average
Value Yield Value Yield Value Yield Value Yield
-------- ------ --------- ------ ------- ----- ------- -------
(Dollars in thousands)
U.S. Government and agency
securities $ 14,084 3.67% $ 106,114 5.44% $ 16,265 3.81% $ 5,067 2.70%
Asset-backed securities 10,098 5.88 8,412 2.30 33,882 3.12 29,278 4.32
Corporate debt securities - - 55,362 6.81 15,947 6.28 - -
Bank trust preferred securities - - - - - - 40,899 4.37
Marketable equity securities /1/
Common stock - - - - - - 4,930 2.57
Preferred stock - - - - - - 15,123 4.01
------ ---- ------- ---- ------ ---- ------ ----
Total $ 24,182 4.59% $ 169,888 5.73% $ 66,094 4.05% $ 95,297 4.12%
====== ==== ======= ==== ====== ==== ====== ====
---------------------------------------------
Total Investment Securities
---------------------------------------------
Average Weighted
Life Carrying Market Average
in Years Value Value Yield
-------- ---------- --------- -----
U.S. Government and agency
securities 3.63 $ 141,530 $ 141,530 4.94%
Asset-backed securities 12.40 81,670 81,670 3.82
Corporate debt securities 3.82 71,309 71,309 6.69
Bank trust preferred securities 26.16 40,899 40,899 4.37
Marketable equity securities (1)
Common stock - 4,930 4,930 2.57
Preferred stock - 15,123 15,123 4.01
------- ------- ------- ----
Total 10.28 $ 355,461 $ 355,461 4.89%
======= ======= ======= ====
- ----------------------
/1/ Marketable equity securities with no stated maturity are included in the
"More than 10 Years" category.
21
The classification of investments as held to maturity, available for sale,
or trading is made at the time of purchase based upon management's intent at
that time. On January 1, 2001, as allowed under the adoption of Statement of
Financial Accounting Standard ("SFAS") No. 133, "Accounting for Derivative
Investments and Hedging Activaties," the Bank transferred its remaining
investment securities previously in its held to maturity portfolio into its
available for sale portfolio. At December 31, 2001, $355.5 million of investment
securities were classified as available for sale and recorded at fair value
(cost basis of $350.6 million). At December 31, 2000, $174.5 million were
classified as available for sale (cost basis of $172.3 million). Stock in the
FHLB of Chicago is carried at cost.
SOURCES OF FUNDS
The Bank's primary sources of funds are deposits, amortization and
prepayment of loan principal (including mortgage-backed securities), borrowings
from the FHLB of Chicago, sales of mortgage loans, sales or maturities of
investment securities, mortgage-backed securities and short-term investments,
and funds provided from operations. At December 31, 2001, deposits accounted for
69.2% of total interest-bearing liabilities, up significantly from 62.1% as of
December 30, 2000, due to strong deposit inflows during 2001, less reliance on
borrowed funds as well as the acquisition of Mid Town, which had $270.3 million
of deposits at acquisition.
Deposits. The Bank offers a variety of deposit accounts having a wide range
of interest rates and terms. The Bank's deposits consist of passbook accounts,
NOW and checking accounts, money market and certificate accounts. The Bank only
solicits deposits from its market area and does not use brokers to obtain
deposits. The Bank relies primarily on competitive pricing policies,
advertising, and customer service to attract and retain these deposits. The flow
of deposits is influenced significantly by general economic conditions, changes
in money market and prevailing interest rates and competition. Recently, the
Bank has emphasized growth in core accounts, defined as commercial and
non-interest checking accounts, NOW accounts, money market accounts, and
passbooks by increased advertising and marketing of checking accounts, and the
addition of a more competitively priced money market product. In addition, the
ratio of core deposits to total deposits was enhanced with the acquisition of
Mid Town in 2001, which had 83% of their deposits in core accounts at
acquisition.
The following table sets forth the balances and percentages of the various
types of deposits offered by the Bank at the date indicated and the change in
the dollar amount of deposits between such dates:
December 31, 2001 December 31, 2000 December 31, 1999
------------------------------- ----------------------------------- --------------------
% of % of Increase % of
Amount Deposits Increase Amount Deposits (Decrease) Amount Deposits
---------- -------- -------- --------- -------- ---------- --------- ---------
Commercial checking $ 128,214 3.6% $ 79,742 $ 48,472 1.6% $ (604) $ 49,076 1.8%
Non-interest checking 121,066 3.4 28,595 92,471 3.1 23,626 68,845 2.6
NOW accounts 324,991 9.1 74,495 250,496 8.4 27,955 222,541 8.2
Money market accounts 368,672 10.4 139,614 229,058 7.7 66,755 162,303 6.0
Passbook accounts 898,073 25.3 159,467 738,606 24.9 12,430 726,176 26.9
--------- ----- ------- --------- ----- ------- --------- -----
Total core deposits 1,841,016 51.8 481,913 1,359,103 45.7 130,162 1,228,941 45.5
Certificate accounts, net 1,716,981 48.2 101,871 1,615,110 54.3 144,809 1,470,301 54.5
--------- ----- ------- --------- ----- ------- --------- -----
Total deposits $ 3,557,997 100.0% $ 583,784 $ 2,974,213 100.0% $ 274,971 $ 2,699,242 100.0%
========= ===== ======= ========= ===== ======= ========= =====
22
Deposit Portfolio. The following table sets forth the distribution and the
weighted average nominal interest rates of the Bank's average deposit accounts
for the years indicated:
Year Ended
----------------------------------------------------------------------
December 31, 2001 December 31, 2000
--------------------------------- ---------------------------------
Percent Weighted Percent Weighted
of Average of Average
Average Total Nominal Average Total Nominal
Balance Deposits Rate Balance Deposits Rate
----------- -------- ------- ----------- -------- -------
(Dollars in thousands)
Commercial checking accounts $ 70,359 2.25% - % $ 55,367 1.95% - %
Non-interest bearing checking 93,632 3.00 - 76,440 2.70 -
Interest bearing NOW accounts 245,719 7.87 1.03 223,358 7.88 1.22
Money market accounts 279,281 8.94 3.49 190,693 6.73 3.87
Passbook accounts 775,419 24.83 2.32 741,453 26.17 2.48
----------- ------- ----------- ------
Total checking, money market and
passbook accounts 1,464,410 46.89 1.73 1,287,311 45.43 1.92
----------- ------- ----------- ------
Certificate accounts with original maturities of:
6 months or less 506,087 16.21 4.50 323,096 11.40 5.24
7 to 12 months 238,010 7.62 5.31 478,393 16.89 5.50
Greater than 1 to 3 years 809,134 25.91 6.05 623,630 22.01 5.90
Greater than 3 years 105,097 3.37 5.69 120,853 4.27 5.78
----------- ------- ----------- ------
Total certificates of deposits 1,658,328 53.11 5.45 1,545,972 54.57 5.63
----------- ------- -----------
Total deposits $ 3,122,738 100.00% 3.86% $ 2,833,283 100.00% 4.08%
=========== ======= ==== =========== ====== ====
----------------------------------
December 31, 1999
----------------------------------
Percent Weighted
of Average
Average Total Nominal
Balance Deposits Rate
---------- -------- -------
Commercial checking accounts $ 50,252 1.89% - %
Non-interest bearing checking 62,508 2.34 -
Interest bearing NOW accounts 210,525 7.90 1.28
Money market accounts 158,991 5.96 3.40
Passbook accounts 737,322 27.65 2.48
---------- -------
Total checking, money market and
passbook accounts 1,219,598 45.74 1.98
---------- -------
Certificate accounts with original maturities of:
6 months or less 343,199 12.87 4.47
7 to 12 months 435,454 16.33 4.84
Greater than 1 to 3 years 511,750 19.19 5.40
Greater than 3 years 156,491 5.87 5.95
---------- -------
Total certificates of deposits 1,446,894 54.26 5.07
---------- -------
Total deposits $ 2,666,492 100.00% 3.74%
========== ======= ====
23
The following table presents, by various interest rate categories, the
amount of certificate accounts outstanding at December 31, 2001, 2000, and 1999,
and the periods to maturity of the certificate accounts outstanding at December
31, 2001:
Period to Maturity December 31, 2001
December 31, ----------------------------------------------
---------------------------------- Within 1 to 3 Over
2001 2000 1999 One Year Years 3 Years Total
---------- --------- --------- --------- ------- ------ ---------
(In thousands)
Certificate accounts:
Less than 5.00% $ 1,008,672 71,102 525,916 818,500 178,726 11,446 1,008,672
5.00% to 5.99% 225,792 693,431 774,505 166,039 45,812 13,941 225,792
6.00% to 6.99% 437,890 806,635 130,976 363,928 55,982 17,980 437,890
7.00% and greater 44,024 43,664 37,945 21,677 22,026 321 44,024
---------- --------- --------- --------- ------- ------ ---------
Total $ 1,716,378 1,614,832 1,469,342 1,370,144 302,546 43,688 1,716,378
========== ========= ========= ========= ======= ====== =========
At December 31, 2001, the Bank had outstanding $319.1 million in
certificate accounts in amounts of $100,000 or more maturing as follows:
Period to Maturity Amount
------------------ --------------
(In thousands)
Three months or less $ 101,083
Over three through six months 65,132
Over six through 12 months 90,154
Over 12 months 62,690
--------
Total $ 319,059
========
Borrowings. Although deposits are the Bank's primary source of funds, the
Bank's policy has been to utilize borrowings, such as advances from FHLB of
Chicago, and reverse repurchase agreements, when they are a less costly source
of funds or can be reinvested at a positive rate of return.
Federal Home Loan Bank of Chicago Advances. The Bank obtains advances from
the FHLB of Chicago upon the security of its capital stock in the FHLB of
Chicago and a blanket pledge of certain of its mortgage loans. See "Regulation
and Supervision - Federal Home Loan Bank System." Such advances are made
pursuant to several different credit programs, each of which has its own
interest rate and range of maturities. The maximum amount that the FHLB of
Chicago will advance to member institutions, including the Bank, for purposes
other than meeting withdrawals, fluctuates from time to time in accordance with
the policies of the FHLB of Chicago. The maximum amount of FHLB of Chicago
advances to a member institution generally is reduced by secured borrowings from
any other source. At December 31, 2001, the Bank's FHLB of Chicago advances
totaled $1.4 billion, representing 25.1% of total assets, compared to $1.7
billion, or 32.6% of total assets at December 31, 2000.
Included in FHLB of Chicago advances at December 31, 2001 are $560.0
million of fixed-rate advances with original scheduled maturities of 4 to 10
years, callable at the discretion of the FHLB of Chicago as follows: $190.0
million at 5.41% in 2002, $240.0 million at 5.87% in 2003, $80.0 million at
5.35% in 2004 and $50.0 million at 5.56% in 2005. The average term to maturity
on these advances is 5.8 years, while the average term to call is 1.5 years. At
inception, the Bank receives a lower cost of borrowing on such advances than on
similar termed non-callable advances, in return for granting the FHLB of Chicago
the right to call the advances prior to their final maturity. If called, the
FHLB of Chicago will provide replacement funding at the then prevailing market
rate of interest for the remaining term to maturity of the advances, subject to
standard terms and conditions.
24
Unsecured Term Bank Loan and Line of Credit. Since 1995, the Company has
maintained an unsecured bank term loan and line of credit facility for funding
of a prior acquisition. During the current year, with the acquisition of Mid
Town for $69.0 million, of which 80% was paid in cash, the Company repaid the
remaining $29.4 million on its unsecured term bank loan, and borrowed $55.0
million under a new unsecured term bank loan agreement. The loan provides for an
interest rate of one, two, three, six or twelve-month LIBOR, at the option of
the borrower, plus 110 basis points, payable at the end of the repricing period.
At December 31, 2001, the interest rate is currently three month LIBOR plus 110
basis points. The remaining principal amount outstanding at December 31, 2001
was $55.0 million. The loan requires increasing annual principal payments with
$11.0 million due at the final maturity of the loan on December 31, 2008.
Prepayments of principal are allowed without penalty at the end of any repricing
period.
In conjunction with the unsecured term bank loan, the Company now maintains
a $40.0 million one-year unsecured revolving line of credit that matures
annually on November 30. Prior to the acquisition of Mid Town, the Company
maintained a $35.0 million unsecured line of credit. The loan provides for an
interest rate of one, two, three, six or twelve-month LIBOR at the option of the
borrower plus 100 basis points and payable at the end of the repricing period.
At December 31, 2001, the interest rate is currently three-month LIBOR plus 100
basis points. At December 31, 2001, $10.0 million is outstanding on the line of
credit.
The credit agreement contains covenants that, among other things, require
the Company to maintain a minimum stockholders' equity balance and to obtain
certain minimum operating results, as well as requiring the Bank to maintain
"well capitalized" regulatory capital levels and certain non-performing asset
ratios. In addition, the Company has agreed not to pledge any stock of the Bank
or MAFD for any purpose. At December 31, 2001, the Company was in compliance
with these covenants.
A summary of the Company's borrowed funds at December 31, 2001 and 2000 is
as follows:
December 31, 2001 December 31, 2000
---------------------------------------- ----------------------
Weighted Weighted
Interest Rate Average Average
Range Rate Amount Rate Amount
--------------- -------- ----------- -------- ---------
(Dollars in thousands)
Fixed-rate advances from FHLB due:
Within 1 year 5.99% - 7.40% 6.46% $ 280,000 6.37% $ 365,000
1 to 2 years 4.87 - 6.78 6.08 135,500 6.43 305,000
2 to 3 years 4.81 - 7.22 6.30 260,000 6.35 55,500
3 to 4 years 4.70 - 7.20 6.01 205,000 6.61 205,000
4 to 5 years 5.37 - 6.82 6.16 55,000 6.16 195,000
5 to 6 years - - - - - 6.82 30,000
6 to 7 years 4.81 - 5.86 5.28 310,000 - -
7 to 8 years 5.61 - 5.86 5.73 50,000 5.26 285,000
Greater than 8 years 5.42 - 5.42 5.42 30,000 5.62 80,000
------------- --------- ---------
Total fixed rate advances 4.70 - 7.40 5.98 1,325,500 6.15 1,520,500
Adjustable-rate advances from FHLB due:
Within 1 year 1.93 - 2.32 2.11 80,000 6.81 100,000
1 to 2 years - - - - - 6.87 25,000
Greater than 2 years