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Article Excerpt
CoVest Bancshares, Inc.'s Net income for the third quarter of 2003 was $1,770,000, up 4% over $1,708,000 for the same period in 2002, and up 4% over $1,707,000 for the second quarter of 2003. Basic earnings per share were $0.52, a 4% increase, compared to $0.50 for the same period in 2002. Diluted earnings per share were $0.50, a 4% increase, compared to $0.48 for the same period in 2002.
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Return on average equity and return on average assets for the third quarter of 2003 were 13.94% and 1.17%, respectively, compared to 14.58% and 1.15% for the same quarter in 2002. Return on average equity and return on average assets for the second quarter of 2003 were 13.80% and 1.11%, respectively.
The Company's efficiency ratio (defined as total non-interest expense divided by the sum of net interest income and total non-interest income) for the third quarter of 2003 was 54.31%, compared to 53.86% for the same period in 2002. The Company's efficiency ratio for the second quarter of 2003 was 55.89%. The goal for calendar year 2003 is to maintain an efficiency ratio at lower than 56%.
Net interest income for the third quarter of 2003 increased $144,000, or a 3% increase, compared to the same period in 2002, or a 3% decrease, compared to the second quarter of 2003. Net interest margin for the third quarter of 2003 was 3.59%, compared to 3.58% for the same period in 2002 versus 3.64% for the second quarter of 2003. The net interest spread for the third quarter of 2003 was 3.28%, a 3% increase, compared to 3.18% for the third quarter of 2002, or a 2% decrease, compared to 3.35% for the second quarter of 2003. The average yield on interest earning assets for the third quarter of 2003 was 5.47%, a 77 basis point decrease, compared to 6.24% for the same period in 2002. The average cost of interest bearing liabilities for the third quarter of 2003 was 2.19%, an 87 basis point decrease, compared to 3.06% for the same period in 2002. The decrease in the cost of average interest bearing liabilities exceeded the decrease in the yield on average interest earning assets. The increase in average non-interest bearing deposits by $4.2 million, or 13%, contributed to the improved interest margin.
The Company's total interest income (tax equivalent) on earning assets decreased 10% to $8,013,000 for the third quarter of 2003, compared to $8,930,000 for the same period in 2002. It was the Company's strategy since 2002 to concentrate in funding adjustable rate loans to minimize exposure to rising interest rates. The Company has been asset sensitive since February 2002. The Company's loan portfolio was comprised of 83% in adjustable/floating rate loans at September 30, 2003. The average balance of loans for the third quarter of 2003 increased 9% to $546.0 million, compared to $503.0 million for the same period in 2002. The biggest increase was in multi-family loans, which is mostly comprised of adjustable rate term loans with floors and prepayment penalties established upon origination. The Company repurchased $16.5 million of medium-term multi-family loan participations that have an average yield of 7.00%, in April 2003. Loan principal prepayments in the multi-family loan portfolio for the third quarter of 2003 totaled $13.3 million. Loan costs associated with loan prepayments, which are accounted for as reduction to interest income, amounted to $46,000 for the third quarter of 2003. The average yield on loans for the third quarter of 2003 decreased to 5.54%, a 115 basis point decrease, compared to 6.69% for the same period in 2002. The increased volume of loans partially offset the effect of income reduction from falling rates. In February 2002, the Company set a 5.00% floor on its home equity loan portfolio. The average balance of home equity and home improvement loans decreased 18% to $25.7 million for the third quarter of 2003, compared to $31.3 million for the same period in 2002. The Company's ALCO Committee at its May 2003 meeting approved the removal of the 5.00% floor, effective August 2003. The Company hopes that this change in pricing strategy will help to increase loan volume. The average balance of securities for the third quarter of 2003 decreased 43% to $39.5 million, compared to $68.9 million for the same period in 2002. The Company tries to limit its security purchases to cover collateral requirements for its borrowings and repurchase agreements. The average yield on securities for the third quarter of 2003 was 4.60%, a 14 basis point decrease, compared to 4.74% for the same period in 2002. Overnight investments averaged $2.2 million in the third quarter of 2003, a 68% decrease, compared to $6.8 million for the same period in 2002. The redeployment of funds to higher yielding loans contributed to a higher interest margin for the third quarter of 2003, compared to the same period in 2002 and the second quarter of 2003. Included in equity investments at the holding company are $1.9 million of trust preferred issues with fixed rates ranging from 6.75% to 10.00%.
Total interest expense for the third quarter of 2003 decreased 28% to $2,765,000, compared to $3,815,000 for the third...
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