UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------------------
FORM 10-Q
(Mark One)
[X] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the Quarterly Period Ended March 31, 2003.
or
[_] Transition Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the Transition Period From __________ to __________.
Commission File Number 1-13676
KANKAKEE BANCORP, INC.
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(Exact Name of Registrant as Specified in its Charter)
Delaware 36-3846489
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(State or Other Jurisdiction of Incorporation (I.R.S. Employer Identification Number)
or Organization)
310 South Schuyler Avenue, Kankakee, Illinois 60901
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(Address of Principal Executive Offices) (Zip Code)
(815) 937-4440
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(Registrant's telephone number, including area code)
Check whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 ___
---
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes ___ No X
---
As of May 13, 2003, there were 932,611 issued and outstanding shares of the
Issuer's common stock (exclusive of 817,389 shares of the Issuer's common stock
held as treasury stock).
KANKAKEE BANCORP, INC.
INDEX
Page
Number
Part I. FINANCIAL INFORMATION
Item 1. Consolidated Financial
Statements (Unaudited)
Statements of Financial Condition,
March 31, 2003 and December 31, 2002 3 - 4
Statements of Income and Comprehensive Income,
Three Months Ended March 31, 2003 and 2002 5
Statements of Cash Flows, Three Months
Ended March 31, 2003 and 2002 6 - 7
Notes to Financial Statements 8 - 10
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 11 - 21
Item 3. Quantitative and Qualitative Disclosures 13 - 14
About Market Risk
Item 4. Controls and Procedures 19
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 22
Item 2. Changes in Securities and Use of Proceeds 22
Item 3. Defaults Upon Senior Securities 22
Item 4. Submission of Matters to a Vote of Security Holders 22
Item 5. Other Information 22
Item 6. Exhibits and Reports on Form 8-K 22 - 23
SIGNATURES AND CERTIFICATIONS 24
2
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION (UNAUDITED)
KANKAKEE BANCORP, INC. AND SUBSIDIARY
March 31, December 31,
2003 2002
---- ----
Assets
Cash and due from banks $ 19,321,602 $ 16,576,706
Federal funds sold 22,111,098 19,178,334
Money market funds 3,458,217 11,670,916
------------ ------------
Cash and cash equivalents 44,890,917 47,425,956
------------ ------------
Certificates of deposit: 50,000 50,000
------------ ------------
Securities:
Investment securities:
Available-for-sale, at fair value 43,366,715 44,459,135
Held-to-maturity, at cost (fair value: March 31, 2003
$905,271; December 31, 2002 - $1,076,979) 891,761 1,066,664
------------ ------------
Total investment securities 44,258,476 45,525,799
------------ ------------
Mortgage-backed securities:
Available-for-sale, at fair value: 33,251,985 38,179,459
Held-to-maturity, at cost (fair value: March 31, 2003
$23,017; December 31, 2002 - $25,525) 23,017 25,525
------------ ------------
Total mortgage-backed securities 33,275,002 38,204,984
------------ ------------
Loans, net of allowance for losses on loans ($6,576,965 at
March 31, 2003; $6,524,306 at December 31, 2002) 360,689,206 384,238,637
Loans held for sale 894,350 128,000
Real estate held for sale 132,765 316,170
Federal Home Loan Bank stock, at cost 2,816,400 2,740,500
Office properties and equipment 10,445,961 10,377,731
Accrued interest receivable 2,669,427 2,795,701
Goodwill 3,065,821 3,065,821
Other intangible assets 956,278 1,181,212
Prepaid expenses and other assets 12,674,669 10,353,190
------------ ------------
Total assets $516,819,272 $546,403,701
============ ============
(Continued)
3
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION (UNAUDITED) (continued)
KANKAKEE BANCORP, INC. AND SUBSIDIARY
March 31, December 31,
2003 2002
---- ----
Liabilities and stockholders' equity
Liabilities:
Deposits
Noninterest bearing $ 33,192,989 $ 28,633,800
Interest bearing 386,594,901 403,397,808
Short-term borrowings 800,000 -
Long-term borrowings 48,200,000 59,700,000
Trust preferred debentures 10,000,000 10,000,000
Advance payments by borrowers for taxes and insurance 2,888,870 1,751,128
Other liabilities 2,317,156 1,814,306
------------ ------------
Total liabilities 483,993,916 505,297,042
------------ ------------
Stockholders' equity
Preferred stock, $.01 par value; authorized, 500,000
shares; none outstanding - -
Common stock, $.01 par value; authorized, 3,500,000
shares; shares issued 1,750,000 17,500 17,500
Additional paid-in capital 15,039,598 15,039,598
Retained income, partially restricted 39,712,873 38,517,217
Treasury stock (817,389 shares at March 31, 2003;
584,119 shares at December 31, 2002), at cost (23,407,048) (14,099,004)
Accumulated other comprehensive income 1,462,433 1,631,348
------------ ------------
Total stockholders' equity 32,825,356 41,106,659
------------ ------------
Total liabilities and stockholders' equity $516,819,272 $546,403,701
============ ============
See notes to consolidated financial statements (unaudited).
4
CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)
KANKAKEE BANCORP, INC. AND SUBSIDIARY
Three Months Ended March 31,
----------------------------
2003 2002
---- ----
Interest income:
Loans $ 6,210,834 $ 6,980,330
Mortgage-backed securities 653,397 588,562
Investment securities and other 469,069 210,880
------------ -----------
Total interest income 7,333,300 7,779,772
------------ -----------
Interest expense:
Deposits 2,613,801 3,571,121
Borrowed funds 728,032 361,949
------------ -----------
Total interest expense 3,341,833 3,933,070
------------ -----------
Net interest income 3,991,467 3,846,702
Provision for losses on loans 66,300 147,968
------------ -----------
Net interest income after provision for losses on loans 3,925,167 3,698,734
Other income:
Net gain on sale of real estate held for sale 26,486 10,209
Net gain on sales of loans held for sale 382,048 237,918
Net gain on sale of branch office 477,843 -
Fee income 632,556 590,416
Insurance commissions 5,008 10,793
Other 217,470 110,125
------------ -----------
Total other income 1,741,411 959,461
------------ -----------
Other expenses:
Compensation and benefits 1,908,419 1,802,732
Occupancy 339,039 297,744
Furniture and equipment 176,034 148,876
Federal deposit insurance premiums 17,584 18,267
Advertising 105,746 67,923
Provision for losses on foreclosed assets 9,914 6,000
Data processing services 131,748 115,043
Telephone and postage 138,022 136,052
Amortization of intangible assets 37,884 46,017
Other general and administrative 805,149 741,508
------------ -----------
Total other expenses 3,669,539 3,380,162
------------ -----------
Income before income taxes 1,997,039 1,278,033
Income taxes 626,500 384,846
------------ -----------
Net income $ 1,370,539 $ 893,187
============ ===========
Net income $ 1,370,539 $ 893,187
Other comprehensive income:
Change in unrealized gains on available-for-sale
securities, net of related income taxes (168,915) (366,576)
------------ -----------
Comprehensive income $ 1,201,624 $ 526,611
============ ===========
Basic earnings per share $ 1.28 $ 0.73
============ ===========
Diluted earnings per share $ 1.28 $ 0.72
============ ===========
See notes to consolidated financial statements (unaudited).
5
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
KANKAKEE BANCORP, INC. AND SUBSIDIARY
Three Months Ended March 31,
----------------------------
2003 2002
---- ----
Cash flows from operating activities:
Net income $ 1,370,539 $ 893,187
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for losses on loans 66,300 147,968
Provisions for losses on real estate held for sale 9,914 6,000
Depreciation and amortization 279,885 259,185
Amortization of investment premiums and discounts, net 31,768 8,709
Accretion of loan fees and discounts (43,784) (35,116)
(Increase) decrease in interest receivable 102,056 (85,462)
Increase in interest payable on deposits 22,356 44,484
Net gain on sales of loans (382,048) (237,918)
Net gain on sales of real estate held for sale (26,486) (10,209)
Federal Home Loan Bank of Chicago, stock dividend (75,900) (35,400)
Increase in cash surrender value of Bank
Owned Life Insurance (112,415) -
Gain on the sale of branch office (477,843) -
Other, net (633,371) (169,531)
------------ -------------
Net cash from operating activities before loan
originations and sales 130,971 785,897
Originations on loans held for sale (15,065,210) (15,892,028)
Proceeds from sales of loans 14,680,908 16,571,356
------------ -------------
Net cash from operating activities (253,331) 1,465,225
------------ -------------
Cash flow from investing activities:
Investment securities
Available-for-sale:
Purchases (6,905,101) (4,005,781)
Proceeds from calls and maturities 8,000,000 2,000,000
Held-to-maturity:
Proceeds from maturities 174,817 -
Mortgage-backed securities:
Available-for-sale:
Purchases - (30,607,096)
Proceeds from maturities and pay downs 4,637,391 1,221,649
Held-to-maturity:
Proceeds from maturities and pay downs 2,508 5,509
Proceeds from sales of real estate 157,878 -
Deferred loan fees and costs, net 97,254 (2,124)
Loans originated (35,753,694) (37,481,976)
Loans purchased - (1,400,000)
Principal collected on loans 52,813,078 36,575,893
Purchases of office properties and equipment, net (1,440,979) (506,178)
Purchases of Bank Owned Life Insurance - (8,000,000)
Cash transferred to buyer on sale of branch (12,314,815) -
------------ -------------
Net cash from investing activities 9,468,337 (42,200,104)
------------ -------------
See notes to consolidated financial statements (unaudited).
(Continued)
6
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) (continued)
KANKAKEE BANCORP, INC. AND SUBSIDIARY
Three Months Ended March 31,
2003 2002
---- ----
Cash flows from financing activities:
Net increase in non-certificate of deposit accounts $ 13,711,978 $ 2,640,828
Net increase (decrease) in certificate of deposit accounts (6,504,862) 4,334,305
Net increase in advance payments by
borrowers for taxes and insurance 1,225,766 1,194,882
Proceeds from short-term borrowings 800,000 -
Proceeds from other borrowings - 37,600,000
Repayments of other borrowings (11,500,000) (5,000,000)
Proceeds from exercise of stock options - 433,685
Dividends paid (174,882) (147,384)
Purchase of treasury stock (9,308,045) (687,452)
------------ ------------
Net cash from financing activities (11,750,045) 40,368,864
------------ ------------
Decrease in cash and cash equivalents (2,535,039) (366,015)
Cash and cash equivalents:
Beginning of period 47,425,956 26,662,714
------------ ------------
End of period $ 44,890,917 $ 26,296,699
============ ============
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest on deposits $ 2,591,445 $ 3,526,600
============ ============
Interest on borrowed funds $ 610,300 $ 334,800
============ ============
Income taxes $ 150,000 $ -
============ ============
Supplemental disclosures of non-cash investing activities:
Real estate acquired through foreclosure $ - $ 63,306
============ ============
Decrease in unrealized gains on securities available-for-sale ($254,008) ($551,242)
============ ============
Decrease in deferred taxes attributable to the
unrealized gains on securities available-for-sale $ 85,093 $ 184,666
============ ============
Sale of branch:
Assets disposed:
Loans ($6,370,117) $ -
Accrued interest receivable (24,218) -
Premises and equipment (164,639) -
Other assets (197,251) -
Liabilities assumed by buyer:
Non-certificate of deposit accounts 2,161,632 -
Certificates of deposit 17,243,008 -
Accrued interest payable 68,550 -
Escrows on loans 64,005 -
Other liabilities 11,688 -
Gain on the sale of branch office (477,843) -
------------ ------------
Cash paid $ 12,314,815 $ -
============ ============
See notes to consolidated financial statements (unaudited).
7
KANKAKEE BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2003
Note 1 - Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and with instructions
to Form 10-Q. Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States of America for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. The statement of condition
at December 31, 2002 has been derived from the audited financial statements at
that date, but does not include all of the information and footnotes required by
accounting principles generally accepted in the United States of America for
complete financial statements. Operating results for the three-month period
ended March 31, 2003 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2003. For further information, refer
to the consolidated financial statements and footnotes thereto included in the
annual report for Kankakee Bancorp, Inc. (the "Company") on Form 10-K for the
year ended December 31, 2002.
Note 2 - Earnings Per Share
Basic earnings per share of common stock have been determined by dividing
net income for the period by the average number of shares of common stock
outstanding. Diluted earnings per share of common stock have been determined by
dividing net income for the period by the average number of shares of common
stock and common stock equivalents outstanding. Common stock equivalents assume
exercise of stock options, and the purchase of treasury stock with the option
proceeds at the average market price for the period (when dilutive). The Company
has an incentive stock option plan for the benefit of directors, officers and
employees. Diluted earnings per share have been determined considering the stock
options granted, net of stock options which have been exercised.
Three months ended
March 31,
2003 2002
---- ----
Net income $1,370,539 $ 893,187
========== ==========
Average outstanding shares
of common stock 1,067,164 1,228,699
Average common stock equivalents 1,103 13,776
---------- ----------
Total 1,068,267 1,242,475
========== ==========
Basic earnings per share $ 1.28 $ 0.73
========== ==========
Diluted earnings per share $ 1.28 $ 0.72
========== ==========
8
Note 3 - Accounting for Certain Investments in Debt and Equity Securities
At March 31, 2003, stockholders' equity included a positive $1.4 million,
which represents the amount by which the market value of the available-for-sale
securities and the available-for-sale mortgage-backed securities exceeded the
book value, net of income tax of $758,000. An increase in market interest rates
during the three months ended March 31, 2003 resulted in a $169,000 decrease in
the market value, net of income tax effect, of the available-for-sale securities
and the available-for-sale mortgage-backed securities. At the end of 2002, the
market value of the available-for-sale securities portfolio exceeded the book
value by $1.6 million, net of income tax benefit.
Note 4 - Commitments and Contingencies
The Bank is party to financial instruments with off-balance-sheet risk in the
normal course of business to meet the financing needs of its customers. These
financial instruments include commitments to extend credit, standby letters of
credit, and financial guarantees. Those instruments involve, to varying degrees,
elements of credit and interest rate risk. The contract or notional amounts of
those instruments reflect the extent of involvement the Bank has in particular
classes of financial instruments.
The Bank's exposure to credit loss, in the event of nonperformance by the other
party to the financial instruments for commitments to extend credit and standby
letters of credit, is represented by the contractual notional amount of those
instruments. The Bank uses the same credit policies in making commitments and
conditional obligations as it does for on-balance-sheet instruments.
Financial instruments whose contract amount represent credit risk follows:
March 31, December 31,
2003 2002
---- ----
Commitments to originate new loans $ 26,220,000 $ 19,100,000
Commitments to extend credit 28,797,000 31,106,000
Standby letters of credit 1,233,000 1,228,000
Such commitments are recorded in the financial statements when they are funded
or related fees are incurred or received. These commitments are principally at
variable interest rates.
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements.
Standby letters of credit written are conditional commitments issued by the bank
to guarantee the performance of a customer to a third party. Those guarantees
are primarily issued to support public and private borrowing arrangements,
including commercial paper, bond financing, and similar transactions. The credit
risk involved in issuing letters of credit is essentially the same as that
involved in extending loan facilities to customers. In the event the
9
customer does not perform in accordance with the terms of the agreement with the
third party, the Bank would be required to fund the commitment. The maximum
potential amount of future payments the Bank could be required to make is
represented by the contractual amount shown in the summary above. If the
commitment is funded, the Bank would be entitled to seek recovery from the
customer. At March 31, 2003 and December 31, 2002, no amounts have been recorded
as liabilities for the Bank's potential obligations under these guarantees.
The Company and the Bank do not engage in the use of interest rate swaps,
futures, forwards, or option contracts.
Note 5 - Stock-Based Employee Compensation
The Company had one stock-based employee compensation plan which was in
existence for all periods presented. As permitted under accounting principles
generally accepted in the United States of America, grants of options under the
plan are accounted for under the recognition and measurement principles of APB
Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations. Because options granted under the plan had an exercise price
equal to market value of the underlying common stock on the date of the grant,
no stock-based employee compensation cost is included in determining net income.
Stock options were granted to newly elected directors in December 2001 and 2002
and vested immediately. As a result, there was no compensation expense to be
recognized for the three months ended March 31, 2003 or 2002, under APB Opinion
No. 25 or the fair value recognition provisions of FASB Statement No. 123,
Accounting for Stock-Based Compensation.
10
KANKAKEE BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company is a Delaware company formed in 1992 for the purpose of
becoming the savings and loan holding company of KFS Bank, F.S.B. (the "Bank"),
the Company's principal subsidiary. The Bank was originally chartered in 1885 as
an Illinois savings and loan association and was converted to a federally
chartered thrift institution in 1937.
The Company serves the financial needs of families and local businesses in
its primary market areas through its main office at 310 South Schuyler Avenue,
Kankakee, Illinois and thirteen branch offices located in the communities of
Ashkum, Bourbonnais, Bradley, Braidwood, Champaign, Coal City (2), Diamond,
Dwight, Herscher, Manteno, Momence and Urbana, Illinois. The Company's business
involves attracting deposits from the general public and using such deposits to
originate residential mortgage loans and, to a lesser extent, commercial real
estate, consumer, commercial business, multi-family and construction loans in
its market areas. The Company also invests in investment securities,
mortgage-backed securities and various types of short term liquid assets.
ECONOMIC CLIMATE
Over the last 27 months, the Federal Open Market Committee ("the FOMC")
lowered its target short-term interest rates by a total of five and one-quarter
percentage points. The federal funds target went from 6.50% to 1.25% and the
Federal Reserve discount rate went from 6.00% to 0.75%. The federal funds rate
is the rate at which financial institutions borrow from each other, while the
discount rate is the rate at which member banks borrow from the Federal Reserve.
The FOMC cited a slowing economy and recessionary trends as the primary reasons
for lowering interest rates. Lower short-term interest rates would tend to
stimulate economic activity by reducing the financing costs on borrowed funds
for both businesses and individuals.
A slowing economy would usually result in some increase in problem assets,
and could possibly result in some increase in loan losses. In a slowing economy
or recession, cash flows and profits of commercial customers decrease, which
could result in an increase in delinquencies. Additionally, individual borrowers
experience cash flow problems from job loss, reduction in investment returns or
other causes. This could also result in an increase in delinquencies. Due in
part to recent economic conditions, the Company experienced an increase of
delinquencies and problem loans. During the last half of 2002, this resulted in
a substantial increase in its provision for losses on loans.
Since the beginning of 2003, there have been few fundamental changes in the
economic environment. Some economic indicators are pointing toward a recovery,
while others are still weak, indicating that the economy remains slow. If the
economy does move into a full recovery, then the FOMC would likely increase in
its target rates.
The Company had a positive cumulative one-year gap of 10.1% at March 31,
2003. A positive gap indicates that an increase in market interest rates might
positively affect net interest income and the results of operations, due to
assets maturing, and repricing, from their current rates to higher rates, more
quickly than liabilities will mature and reprice to higher rates. Management
believes that the Company's current level of interest rate sensitivity is
reasonable,
11
in light of the current market rates and the possibility of increasing market
rates. However, significant fluctuations in interest rates may have an adverse
effect on the Company's financial condition and results of operations.
INITIATIVES AND SIGNIFICANT EVENTS
During the first quarter of 2003, the Company continued moving ahead with a
number of strategies designed to improve profitability and enhance stockholder
value, including the sale of the Hoopeston, Illinois branch. The Company
continues to evaluate service delivery systems and explore new market areas,
evaluating both potential acquisitions and sites for new branches.
Construction of a new branch office in Bradley, Illinois has begun, with
completion expected by the end of the third quarter of the year. This new office
will replace an existing in-store facility. In addition, office renovations are
planned for the branches in Manteno and Momence, Illinois, while possible
renovations at other offices are being evaluated. An ATM was installed at the
Urbana, Illinois office, and seven additional or replacement ATMs are scheduled
for installation during the year.
The Company has also continued to evaluate and improve its organizational
structure, including lines of authority, job functions and supervisory
responsibilities. As a result of this process, some positions have been
eliminated, some new positions have been added and a number of changes in
reporting responsibility have been implemented. Fundamental organizational
changes at the board level, designed to increase independence and improve
corporate governance, have been substantially completed, and the process of
conducting a search for a new CEO continues. Some costs associated with these
activities are reflected in expenses for the first quarter of 2003.
FINANCIAL CONDITION
Total assets of the Company decreased by $29.6 million, or 5.4%, to $516.8
million at March 31, 2003 from $546.4 million at December 31, 2002.
Cash and cash equivalents decreased by $2.5 million, or 5.3%, from $47.4
million at December 31, 2002 to $44.9 million at March 31, 2003. The decrease
was attributable to decreases in deposits and borrowed money, as well as
treasury stock purchases.
During the three-month period ended March 31, 2003, net loans receivable
decreased by $23.5 million, or 6.1%, from $384.2 million to $360.7 million. This
was primarily the result of loan repayments which totaled $52.8 million and the
sale of $6.4 million in loans as part of the sale of the Hoopeston, Illinois
branch, which were substantially offset by the origination of $24.3 million of
real estate loans and the origination of $11.5 million of consumer and
commercial business loans.
Loans held for sale increased by $766,000, from $128,000 at December 31,
2002 to $894,000 at March 31, 2003. This was the result of the origination of
$15.1 million of loans held for sale, which was partially offset by the sale of
$14.7 million of such loans, at a net gain of $382,000. The level of borrower
refinancing remained strong through the first quarter of 2003, with interest
rates down at levels not seen in decades. Gains on the sale of loans have been
greatly enhanced by these factors. We cannot assume that interest rates will
remain at current levels or that refinancing volume will continue at current
levels.
12
Securities available-for-sale decreased by $1.1 million, or 2.4%, to $43.4
million at March 31, 2003 from $44.5 million at December 31, 2002 as the result
of the maturity or the exercise of call options by issuers on $8.0 million of
securities, which was partially offset by purchases of $6.9 million in such
securities, and by a minimal net change in market value adjustments.
Mortgage-backed securities available-for-sale decreased by $4.9 million, or
12.9%, to $33.3 million at March 31, 2003 from $38.2 million at December 31,
2002. The decrease resulted from the maturity of $4.6 million of securities, and
by the net change in market value adjustments.
Deposits decreased by $12.2 million, or 2.8%, from $432.0 million at
December 31, 2002 to $419.8 million at March 31, 2003. During the three month
period, $17.2 million in certificate of deposit accounts and $2.2 million in
passbook, checking and money market accounts were sold with the Hoopeston,
Illinois branch. In addition, there was a $6.5 million decrease in certificate
of deposit accounts, a $13.7 million increase in passbook, checking and money
market accounts and a small increase in accrued interest on deposits.
Total borrowings decreased by $10.7 million, or 17.9%, from $59.7 million
at December 31, 2002 to $49.0 million at March 31, 2003. The decrease was the
result of $11.5 million in repayments, which were partially offset by new
borrowings of $800,000. Borrowings at March 31, 2003 consisted of $29.8 million
in advances from the Federal Home Loan Bank of Chicago, $800,000 in funds drawn
down on a line-of-credit and $18.4 million in funds from securities sold under
agreement to repurchase. Additionally, there were $10.0 million of trust
preferred debentures outstanding at both March 31, 2003 and December 31, 2002.
ASSET/LIABILITY MANAGEMENT
In an attempt to manage its exposure to changes in interest rates,
management closely monitors the Company's interest rate risk. The Bank has a
funds management committee, consisting of the president, certain vice presidents
and the controller of the Bank, which meets weekly and reviews the Bank's
interest rate risk position and evaluates its current asset/liability pricing
and strategies. This committee adjusts pricing and strategies as needed and
makes recommendations to the Bank's board of directors regarding significant
changes in strategy. In addition, on a quarterly basis the board reviews the
Bank's asset/liability position, including simulations of the effect on the
Bank's capital of various interest rate scenarios.
In managing its asset/liability mix, the Company, at times, depending on
the relationship between long-term and short-term interest rates, market
conditions and consumer preferences, may place somewhat greater emphasis on
maximizing its net interest margin than on better matching the interest rate
sensitivity of its assets and liabilities in an effort to improve its net
income. Management believes that the increased net income resulting from a
mismatch in the maturity of its asset and liability portfolios can, during
periods of declining or stable interest rates, provide returns that justify the
increased exposure to sudden and unexpected increases in interest rates which
can result from such a mismatch.
The Company attempts to manage its interest rate risk to the extent
consistent with its interest margin objectives through management of the mix of
its assets and liabilities in a number of ways, including the following:
13
. The Company prefers to lend on adjustable rate mortgages ("ARMs") in
its one-to-four family residential lending program. However, ARMs are
not currently in great demand, and less than 5% of the one-to-four
family loans originated during the first quarter of 2003 were ARMs
. The Company has increased originations of commercial business and
construction loans having adjustable or floating interest rates,
relatively short terms to maturity, or a combination thereof.
. The Company has continued its origination of consumer loans having
terms to maturity that are significantly shorter than residential
loans.
. The Company regularly reviews its policy on newly originated
fixed-rate mortgage loans, as to the question of which loans, if any,
should be retained in portfolio versus which should be sold in the
secondary market. Trends in the economy, trends in market interest
rates, the Company's interest margin and the Company's current
asset/liability mix are among the factors considered. Changes
resulting from these reviews take effect on a specific calendar date
and impact either those loans which are applied for on or after that
date, or those loans which are closed on or after that date. During
the first quarter of 2003, the Company sold most of the fixed-rate
mortgage loans it originated.
The Company currently does not enter into derivative financial instruments
including futures, forwards, interest rate risk swaps, option contracts, or
other financial instruments with similar characteristics. However, the Company
is a party to financial instruments with off-balance sheet risk in the normal
course of business to meet the financing needs of its customers such as
commitments to extend credit and letters of credit.
NON-PERFORMING ASSETS AND ALLOWANCE FOR LOSSES ON LOANS
The Company's non-performing assets increased to $12.5 million, or 2.42%,
of total assets at March 31, 2003 from $11.1 million, or 2.03% of total assets
at December 31, 2002. This represented an increase of $1.4 million over the
three-month period. Changes in individual loan categories are detailed in the
following table:
March 31 December 31
2003 2002 Change
---- ---- ------
Non-accruing loans:
Real estate:
One-to-four family $ 797 $ 1,115 ($318)
Multi family 118 118 -
Commercial 3,039 3,039 -
Construction and development 1,687 1,687 -
Commercial business 859 875 (16)
------- ------- ------
Total 6,500 6,834 (334)
------- ------- ------
Accruing loans delinquent 90
days or more:
Real estate:
Commercial 3,731 2,516 1,215
Consumer 325 290 35
Commercial business 1,448 633 815
------- ------- ------
Total 5,504 3,439 2,065
------- ------- ------
Foreclosed assets 133 316 (183)
Troubled debt restructuring 351 480 (129)
------- ------- ------
Total non-performing assets $12,488 $11,069 $1,419
======= ======= ======
14
Non-performing assets are presented on a gross balance basis and the totals
have not been reduced by specific reserves.
The ratio of the allowance for losses on loans to non-performing loans
decreased to 54.8% as of March 31, 2003 compared to 63.5% as of December 31,
2002. The decrease in this ratio, which excludes foreclosed assets and
restructured troubled debt, was the result of the increase of $1.7 million in
non-performing loans. Since the end of the first quarter of 2003, there has been
a reduction in the balance of non-performing loans as the result of aggressive
follow-up on delinquent loans by the Company.
The Company classified $4.9 million of its assets as Special Mention, $5.6
million as Substandard and $4.1 million as Loss as of March 31, 2003. No assets
were classified as Doubtful at March 31, 2003. This represents a decrease of
$1.1 million in the Special Mention category and a net decrease of $296,000 in
the other categories from the December 31, 2002 totals for classified assets.
The ratio of classified assets to total assets (including items classified as
Special Mention) was 2.83% at March 31, 2003 as compared to 2.93% at December
31, 2002. The ratio of the allowance for losses on loans to classified assets
increased to 45.0% as of March 31, 2003 compared to 40.8% as of December 31,
2002.
CRITICAL ACCOUNTING POLICIES
Accounting policies, the implementation of which requires difficult,
complex or subjective judgments on the part of management are critical to the
Company's financial condition and results of operations, and they may relate to
matters that are inherently uncertain. Changes in facts and circumstances can
result in material changes in estimates determined under these policies. Changes
in interest rates, deterioration in the performance of the economy, changes in
laws and regulations and deterioration in the financial condition of borrowers
are among those facts and circumstances that could affect the evaluation
process. Management believes that the Company's critical accounting policies
include determining the allowance for losses on loans.
DISCUSSION ON PROVISION FOR LOSSES ON LOANS
As with many financial institutions, the lagging economy has challenged
many companies, including some of the Bank's customers. During the last half of
2002, the Company experienced a significant increase in non-performing loans,
most of which related to commercial real estate and real estate development
loans. After an extensive evaluation, the Company recorded additions of $3.4
million to reserves for losses on loans during the last half of the year. Issues
related to these loans, including a bankruptcy filing, several foreclosures and
past due real estate taxes, necessitate ongoing review and evaluation as to the
adequacy of reserves. Based on this ongoing review, management has concluded
that it is not appropriate at this time to add additional reserves with respect
to these identified loans. Management is continuing to examine the loans with
the parties involved to determine the best course of action to realize maximum
satisfaction of these credits. While non-performing loans increased during the
first quarter of 2003, management's review of the loans which became
non-performing did not indicate the need to provide additional reserves.
Management will continue to monitor and evaluate non-performing assets.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2003 AND 2002
Net income for the quarter ended March 31, 2003 was $1.4 million compared
to $893,000 for the same period in 2002. This represented a $477,000, or 53.4%
increase. The increase in net income resulted from an increase in net interest
income of $145,000 (3.8%), an increase in other income of $782,000 (81.5%),
which included a $478,000 gain on the sale of a branch
15
operation, and a decrease in provision for losses on loans of $82,000 (55.2%).
These items were partially offset by an increase in other expenses of $289,000
(8.6%) and an increase in income tax expense of $242,000 (62.8%). Basic earnings
per share were $1.28 for the quarter ended March 31, 2003 compared to $.73 for
the comparable 2002 quarter. Diluted earnings per share were $1.28 for the
quarter ended March 31, 2003 compared to $.72 for the comparable 2002 quarter,
representing an increase of 77.8%.
Net interest income increased $145,000, or 3.8%, during the quarter ended
March 31, 2003, compared to the quarter ended March 31, 2002. The table
presented on page 21 ("Table I"), sets forth an analysis of the Company's net
interest income for the three-month periods ended March 31, 2003 and 2002.
As Table I indicates, interest income decreased $446,000, or 5.7%, to $7.3
million for the three-month period ended March 31, 2003 compared to the $7.8
million for the same period in 2002. The decrease in interest income was the
result of a decrease in the yield earned on interest-earning assets to 6.03%
during the 2003 period from 6.71% during the 2002 period, which was partially
offset by an increase in the average balance of interest-earning assets to
$492.8 million during the 2003 period from $470.4 million during the 2002
period. The increase in the average balance of interest-earning assets was due
to increases in balances of mortgage-backed securities, investment securities
and other interest-earning assets, which were partially offset by a decrease in
balances of loans during the quarter. The decrease in the yield earned on
interest-earning assets was the result of decreasing market interest rates
during the quarter, which resulted in lower yields on short term assets and a
lower yield on the reinvestment of principal repayments and prepayments on loans
and on newly originated loans. The decrease in average loans was primarily the
result of the refinancing of loans in the mortgage portfolio in the current low
interest rate environment. Most such long-term, fixed-rate mortgage loans were
sold with servicing retained.
Interest expense decreased $591,000, or 15.0%, to $3.3 million during the
first quarter from $3.9 million in the same period in 2002. The decrease in
interest expense was the result of a decrease in the average yield on
interest-bearing liabilities to 2.75% during the 2003 period from 3.50% during
the 2002 period, which was partially offset by an increase in the average
outstanding balance of interest-bearing liabilities to $493.0 million during the
2003 period from $455.8 million during the 2002 period. The increase in average
interest-bearing liabilities resulted from the implementation of a leveraging
strategy, increased use of borrowed funds, and the continuing movement to a
sales oriented operation. While the leveraging strategy was implemented in the
first quarter of 2002, it was done near the end of that quarter and had minimal
impact on average balances. The decrease in the average yield on
interest-bearing liabilities resulted from decreasing market interest rates
during the last twenty-seven months and continuing improvement in the deposit
mix, with a higher ratio of non-certificate deposit accounts.
The provision for losses on loans totaled $66,000 during the first quarter
of 2003, compared to $148,000 during the first quarter of 2002. The amount of
the provision for losses on loans is determined through regular review of the
various elements of the loan portfolio, and by a review of overall adequacy,
based on circumstances and factors known at the time of the review.
Other income for the three-month period ended March 31, 2003 increased
$782,000, or 81.5%, to $1.7 million compared to $959,000 for the same period in
2002. The increase was attributable to increases of $144,000 (60.6%) in gain on
sales of loans held for sale, $107,000 (97.5%) in other income and $42,000
(7.1%) in fee income. In addition, the Company recorded a gain on the sale of a
branch banking office in Hoopeston, Illinois totaling $478,000. The $144,000
increase in gain on the sale of loans held for sale was the result of more
aggressive pricing and better spreads on the loans sold during the 2003 period
compared to the 2002
16
period. The increase in other income was the result of a full quarter's earnings
from the investment in BOLI during 2003 compared to a few days during 2002.
Other expenses for the first quarter of 2003 increased $289,000 or 8.6%, to
$3.7 million from $3.4 million for the first quarter of 2002. There were
increases of $64,000 (8.6%) in other expenses, $106,000 (5.9%) in compensation
and benefits, $41,000 (13.9%) in occupancy expense and $38,000 (55.7%) in
advertising. These increases were partially offset by small decreases totaling
less than $9,000 in two areas of operating expenses. The increase in
compensation and benefits was primarily due to an increase in compensation
levels and an increase in employment taxes in the first quarter resulting from
the payment in January 2003 of bonuses accrued in and for 2002.
Federal income taxes increased $242,000 to $627,000 for the three-month
period ended March 31, 2003, compared to $385,000 for the same period in 2002.
The primary reason for this increase was the increase in pre-tax income for the
quarter.
LIQUIDITY AND CAPITAL RESOURCES
The Company maintains a certain level of cash and other liquid assets to
fund normal volumes of loan commitments, deposit withdrawals and other
obligations. The Office of Thrift Supervision (the "OTS") regulations currently
require each savings association to maintain sufficient liquidity to ensure its
safe and sound operation.
The Company's primary sources of funds are deposits and proceeds from
payments of principal and interest on loans and the sale or maturity of
investment securities and mortgage-backed securities. Management considers
current liquidity and additional sources of funds adequate to meet outstanding
liquidity needs.
The Bank is subject to various regulatory capital requirements administered
by the federal banking agencies. Failure to meet minimum capital requirements
can initiate certain mandatory -- and possibly additional discretionary
--actions by regulators that, if undertaken, could have a direct material effect
on the Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of assets, liabilities,
and certain off-balance-sheet items as calculated under regulatory accounting
practices. The Bank's capital amounts and classifications are also subject to
qualitative judgments by the regulators about components, risk weightings, and
other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the table
below) of Tangible and Core capital (as defined by the regulations) to tangible
assets (as defined) and Total and Tier I capital (as defined) to risk-weighted
assets (as defined). Management believes, as of March 31, 2003, that the Bank
meets all capital adequacy requirements to which it is subject.
As of the most recent notification from the Office of Thrift Supervision
(the "OTS"), categorized the Bank as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as well capitalized,
the Bank must maintain minimum total risk-based, Tier I risk-based and Tier I
leverage ratios as set forth in the table below. There are no conditions or
events since that notification that management believes have changed the Bank's
category.
17
To be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
------ ----------------- -----------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
(Dollars in Thousands)
As of March 31, 2003
Tangible Captial to Tangible Assets
KFS Bank, F.S.B. $36,943 7.25% $ 7,649 1.50% N/A
Core Capital to Tangible Assets
KFS Bank, F.S.B. 36,943 7.25% 20,396 4.00% $25,496 5.00%
Tier I Capital to Risk Weighted Assets
KFS Bank, F.S.B. 36,943 11.44% N/A 19,376 6.00%
Total Capital to Risk Weighted Assets
KFS Bank, F.S.B. 39,441 12.21% 25,835 8.00% 32,293 10.00%
As of December 31, 2002
Tangible Capital to Tangible Assets
KFS Bank, F.S.B. 35,726 6.73% 7,961 1.50% N/A
Core Capital to Tangible Assets
KFS Bank, F.S.B. 35,726 6.73% 21,230 4.00% 26,537 5.00%
Tier I Capital to Risk Weighted Assets
KFS Bank, F.S.B. 35,726 10.57% N/A 20,280 6.00%
Total Capital to Risk Weighted Assets
KFS Bank, F.S.B. 38,785 11.47% 27.040 8.00% 33,800 10.00%
STOCK REPURCHASE
During the quarter ended March 31, 2003, the Company repurchased 233,270
shares of common stock at a total cost of $9.3 million under the stock
repurchase program announced in January 2003. On a cumulative basis, through
March 31, 2003, a total of 986,389 shares of common stock of the Company had
been purchased under repurchase programs at a total cost of $26.9 million. As of
March 31, 2003, the Company held 817,389 shares of its common stock as treasury
stock. During the period from March 31, 2003 through May 13, 2003, no additional
shares of common stock were repurchased.
STOCK OPTIONS
During the first quarter of 2003, no options on shares of common stock were
exercised. At the end of the quarter, there were options outstanding to two
individuals on 4,750 shares of stock. Between March 31, 2003 and May 13, 2003,
neither individual had given notice of intent to exercise these options.
At the annual meeting of stockholders on April 25, 2003, a proposed stock
option plan on 116,500 shares of common stock was approved. On May 1, 2003,
options on 2,500 shares of common stock were granted to each director of the
Company and the Bank. The exercise price on the 15,000 options granted was set
at the closing price of $38.00 per share on May 1, 2003. No options under this
plan have been exercised through May 13, 2003.
18
During the April 2003 organizational meeting of the Board of Directors of
the Company, a short-term stock incentive plan was approved, the term of which
ran from May 1, 2003 through May 13, 2003. Under the terms of the plan, each
director of the Company and of the Bank was given the option to purchase 2,500
shares of common stock at the greater of the current market price or $40.02 per
share. Options under this plan totaled 15,000 shares of common stock. Under this
plan, directors exercising all of their own options also were given the option
to acquire shares under the same terms and conditions, through options not
exercised by other directors. No options were exercised during the term of the
plan.
DIVIDENDS
On April 24, 2003, a cash dividend of $.15 per share was declared, payable
on May 30, 2003 to stockholders of record as of May 14, 2003. The Company has
paid a dividend every quarter since the dividend program was instituted in the
first quarter of 1995. Future dividends will depend primarily upon earnings,
financial condition and need for funds, as well as restrictions imposed by
regulatory authorities regarding dividend payments and capital requirements.
CONTROLS AND PROCEDURES
Based upon an evaluation within the 90 days prior to the filing date of
this report, the Company's Principal Executive Officer and Chief Financial
Officer concluded that the Company's disclosure controls and procedures are
effective. There have been no significant changes in the Company's internal
controls or in other factors that could significantly affect the Company's
internal controls subsequent to the date of the evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
SPECIAL NOTE CONCERNING FORWARD-LOOKING STATEMENTS
This document (including information incorporated by reference) contains,
and future oral and written statements of the Company and its management may
contain, forward-looking statements, within the meaning of such term in the
Private Securities Litigation Reform Act of 1995, with respect to the financial
condition, results of operations, plans, objectives, future performance and
business of the Company. Forward-looking statements, which may be based upon
beliefs, expectations and assumptions of the Company's management and on
information currently available to management, are generally identifiable by the
use of words such as "believe," "expect," "anticipate," "plan," "intend"
"estimate," "may," "will," "would," "could," "should" or other similar
expressions. Additionally, all statements in this document, including
forward-looking statements, speak only as of the date they are made, and the
Company undertakes no obligation to update any statement in light of new
information or future events.
The Company's ability to predict results or the actual effect of future
plans or strategies is inherently uncertain. 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, the following:
. The strength of the United States economy in general and the strength
of the local economies in which the Company conducts its operations
which may be less favorable than expected and may result in, among
other things, a deterioration in the credit quality and value of the
Company's assets.
. The economic impact of past and any future terrorist threats and
attacks, acts of war or threats thereof, and the response of the
United States to any such threats and attacks.
19
. The effects of, and changes in, federal, state and local laws,
regulations and policies affecting banking, securities, insurance and
monetary and financial matters.
. The effects of changes in interest rates (including the effects of
changes in the rate of prepayments of the Company's assets) and the
policies of the Board of Governors of the Federal Reserve System.
. The ability of the Company to compete with other financial
institutions as effectively as the Company currently intends due to
increases in competitive pressures in the financial services sector.
. The inability of the Company to obtain new customers and to retain
existing customers.
. The timely development and acceptance of products and services,
including products and services offered through alternative delivery
channels such as the Internet.
. Technological changes implemented by the Company and by other parties,
including third party vendors, which may be more difficult or more
expensive than anticipated or which may have unforeseen consequences
to the Company and its customers.
. The ability of the Company to develop and maintain secure and reliable
electronic systems.
. The ability of the Company to retain key executives and employees and
the difficulty that the Company may experience in replacing key
executives and employees in an effective manner.
. Consumer spending and saving habits which may change in a manner that
affects the Company's business adversely.
. Business combinations and the integration of acquired businesses which
may be more difficult or expensive than expected.
. The costs, effects and outcomes of existing or future litigation.
. Changes in accounting policies and practices, as may be adopted by
state and federal regulatory agencies and the Financial Accounting
Standards Board.
The ability of the Company to manage the risks associated with the foregoing as
well as anticipated. These risks and uncertainties should be considered in
evaluating forward-looking statements and undue reliance should not be placed on
such statements. Additional information concerning the Company and its business,
including other factors that could materially affect the Company's financial
results, is included in the Company's filings with the Securities and Exchange
Commission.
20
TABLE I
NET INTEREST INCOME ANALYSIS (UNAUDITED)
KANKAKEE BANCORP, INC. AND SUBSIDIARY
Three Months Ended March 31,
---------------------------
2003 2002
---- ----
Average Interest Average Interest
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Paid Rate Balance Paid Rate
------- ---- ---- ------- ---- ----
(Dollars in Thousands)
Interest-earning assets:
Loans receivable (1) $371,992 $6,211 6.77% $393,954 $6,980 7.19%
Mortgage-backed securities (2) 35,399 469 5.37% 18,902 211 4.53%
Investment securities (3) 45,639 506 4.50% 35,674 458 5.21%
Other interest-earning assets 37,017 103 1.13% 19,415 99 2.07%
FHLB stock 2,789 44 6.40% 2,470 31 5.09%
-------- ------ -------- ------
Total interest-earning assets 492,836 7,333 6.03% 470,415 7,779 6.71%
-------- ------ -------- ------
Other assets 41,861 31,405
-------- --------
Total assets $534,697 $501,820
======== ========
Interest-bearing liabilities:
Certificate accounts $245,966 2,074 3.42% $250,953 2,844 4.60%
Savings deposits 73,709 231 1.27% 69,755 356 2.07%
Demand and NOW deposits 107,329 309 1.17% 96,961 371 1.55%
Borrowings 65,950 728 4.48% 38,150 362 3.85%
-------- ------ -------- ------
Total interest-bearing liabilities 492,954 3,342 2.75% 455,819 3,933 3.50%
-------- ------ -------- ------
Other liabilities 4,387 4,445
-------- --------
Total liabilities 497,341 460,264
-------- --------
Stockholders' equity 37,356 41,556
-------- --------
Total liabilities and stockholders' equity $534,697 $501,820
======== ========
Net interest income $3,991 $3,846
====== ======
Net interest rate spread 3.28% 3.21%
==== ====
Net earning assets ($118) $14,596
====== =======
Net yield on average interest-earning
assets (net interest margin) 3.28% 3.32%
==== ====
Average interest-earning assets to
average interest-bearing liabilities 99.98% 103.20%
===== ======
(1) Calculated including loans held for sale, and net of deferred loan fees,
loan discounts, loans in process and the allowance for losses on loans.
(2) Calculated including mortgage-backed securities available-for-sale.
(3) Calculated including investment securities available-for-sale and
certificates of deposit.
21
KANKAKEE BANCORP, INC.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings - There are no material pending legal proceedings TO
which the Company or the Bank is a party other than ordinary routine
litigation incidental to their respective businesses.
Item 2. Changes in Securities and Use of Proceeds - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits - 99.1 - Certification of Principal Executive Officer
99.2 - Certification of Chief Financial Officer
b. Reports on Form 8-K
On January 17, 2003, the Company filed a report on Form 8-K
stating under Item 5 that the Company had, on January 17, 2003,
issued a news release announcing the implementation of a number
of organizational changes intended to comply with the
requirements for public companies under the Sarbanes-Oxley Act
of 2002, and to ensure both greater independence on the board
and stronger leadership from its independent directors.
Additionally, it was announced that the Board had received the
resignation of the Company's President and CEO and had
established a procedure for securing his successor.
On February 3, 2003, the Company filed a report on Form 8-K
stating under Item 5 that the Company had, on February 3, 2003,
issued a news release announcing its earnings for the quarter
ended December 31, 2002, as well as other recent corporate
events.
On February 20, 2003, the Company filed a report on Form 8-K
stating under Item 5 that the Company, on February 18, 2003,
pursuant to a stock buyback program authorized by the Board of
Directors of the Company, after being approached by two
stockholders offering to sell their shares to the Company, the
Company purchased an aggregate of 174,270 shares of its common
stock in open market transaction at a purchase price of $40.02
per share, the current market price immediately prior to the
transaction. The sellers were Lawrence B. Seidman, and related
parties under his control, and Investors of America, Limited
Partnership.
On March 13, 2003, the Company filed a report on Form 8-K
stating under Item 5 that the Company, on March 10, 2003,
pursuant to a stock buyback program authorized by the Board of
Directors, repurchased from two stockholders an aggregate of
40,000 share of its common stock in open market transactions at
a purchase price of $39.27 per share, the current market price
immediately prior to
22
the transaction. The sellers were Tontine Management L.L.C. and Private
Capital Management, L.P. Both stockholders' ownership in our common stock
exceeded 10% as a result of our repurchases in February, and these latest
purchases brought both stockholders' ownership below 10%.
On April 24, 2003, the Company filed a report on Form 8-K pursuant to Item
12 that the Company, on April 24, 2003, issued a news release announcing
its earnings for the quarter ended March 31, 2003.
On April 30, 2003, the Company filed a report on Form 8-K stating under
Item 5 that the Company, on April 30, 2003, issued a news release
announcing a stock dividend, the results of the annual meeting of
stockholders and other corporate events.
23
KANKAKEE BANCORP, INC.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the Registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
KANKAKEE BANCORP, INC.
Registrant
Date: May 13, 2003 /s/ CAROL S. HOEKSTRA
-------------------------- -------------------------------------
Executive Vice President, Interim COO
(Principal Executive Officer)
Date: May 13, 2003 /s/ RONALD J. WALTERS
-------------------------- -------------------------------------
Vice President and Treasurer
(Principal Financial
And Accounting Officer)
24
I, Carol S. Hoekstra, Executive Vice President, Interim Chief Operating
Officer and Principal Executive Officer of the Company, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Kankakee Bancorp,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in the Report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b. evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a. all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b. any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to date of their evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 13, 2003
/s/ Carol S. Hoekstra
-----------------------------------------
Executive Vice President, Interim COO and
Principal Executive Officer
25
I, Ronald J. Walters, Vice President and Treasurer and Principal
Financial and Accounting Officer of the Company, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Kankakee Bancorp,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in the Report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b. evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a. all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b. any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to date of their evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 13, 2003
/s/ Ronald J. Walters
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Vice President, Treasurer and
Principal Financial and Accounting Officer
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