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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[_] Definitive Proxy Statement
[X] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Kankakee Bancorp, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
----------------------
KANKAKEE BANCORP, INC.
----------------------
310 South Schuyler Avenue
P.O. Box 3 (815) 937-4440
Kankakee, IL 60901-0003 Fax (815) 937-3674
April 16, 2002
To all of our Stockholders:
It is with great pride that we have enclosed our earnings release for the
quarter ending March 31, 2002. I'd like to take a few moments to point out some
of the reasons that we at the Bank are excited not only about our best first
quarter earnings per share in the history of Kankakee Bancorp, but our optimism
for future earnings growth.
. Our fully diluted earnings per share increased on a quarter to quarter
basis from $.50 per to share to $.72 per share, representing a 44%
increase in earnings per share! I might point out that this tremendous
increase is even more impressive when you look at our 31% EPS growth
rate in 2001 and the added expenses of approximately $190,000, or $.10
per share, in extraordinary proxy expenses.
. Our new President and CEO, Larry Huffman, has been in charge for over
a year now and has not only improved earnings in the short term, but
has implemented programs that will help continue to improve earnings
and profitability in the future.
. We continue to aggressively repurchase stock in the open market. Since
conversion, we have repurchased one-third of the shares initially
issued. In fact, we repurchased 20% of our stated current repurchase
plan in the first quarter of 2002. Furthermore, we have augmented our
capital position through our issuance of Trust Preferred securities to
allow the bank flexibility in the future to be an opportunistic buyer
of our own stock.
. On Tuesday, April 9, 2002, your Board of Directors voted to increase
the quarterly dividend 25% from $.12 to $.15 per share.
. Most importantly, your company's results have been clearly recognized
in the increased value of our stock. Every stockholder has been the
beneficiary of management's efforts to increase profitability, which,
in turn, creates value through our stock price appreciation. Our
stock's performance in relation to the Nasdaq Bank Stock index as of
April 9, 2002 is as follows:
One-Year Three-Year
-------- ----------
Nasdaq Bank Index 28.29% 35.31%
Kankakee Bancorp (KNK) 62.34% 56.55%
Differential (%) 120.03% 60.15%
. Loans to long-term borrowers that were previously reported as
classified assets, in the amount of $3,500,000, were moved into
non-performing status increasing our ratio of non-performing assets to
total assets from 0.45% to 1.07%. As with most financial institutions
in this difficult economy, we have experienced some deterioration in
asset quality. After evaluating our problem loans, we believe that any
potential losses would be minimal and we do not anticipate any
significant increases in the future.
We believe that the bank is in a great position to take advantage of
opportunities on many fronts. Internal growth, accretive acquisitions, stock
repurchases, or other strategic alternatives are constantly evaluated by your
management group. Please take some time to look at our results and feel free to
contact me or any of your Company's management team. We look forward to your
thoughts and appreciate your continued support.
Sincerely,
/s/ William Cheffer
William Cheffer
Chairman of the Board
The annual meeting is April 26/th/. Please sign and return the enclosed BLUE
proxy so it is received in time for the meeting. Even if you have previously
sent in a white card, you have every legal right to revoke your vote by signing
and returning the Board's BLUE proxy. Only your latest dated proxy counts.
If you have any questions about the Bank, please call Larry Huffman, our
President and CEO at 815-937-4440. If you need assistance in voting your shares,
please call our proxy solicitor, Morrow & Company, Inc. at 800-607-0088.
Additional Important Information. On March 11, 2002, Kankakee Bancorp, Inc.
filed a definitive proxy statement with the Securities and Exchange Commission,
which was supplemented on March 18, 2002, relating to the annual meeting of
stockholders to be held on April 26, 2002. We urge stockholders to read our
definitive proxy statement because it contains important information about us
and the nominees for director. You may obtain a free copy of our definitive
proxy statement and any other soliciting materials relating to our solicitation
on the Securities and Exchange Commission's website at www.sec.gov, or by
contacting Morrow & Co., Inc., our proxy solicitor, at 1-800-607-0088.
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NEWS RELEASE
April 15, 2002
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KANKAKEE BANCORP, INC.
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310 South Schuyler Avenue
P.O. Box 3 (815) 937-4440
Kankakee, IL 60901-0003 Fax (815) 937-3674
For more information contact:
William Cheffer, Chairman
Larry D. Huffman, President and CEO
Michael A. Stanfa, Executive Vice President For Immediate Release
Ronald J. Walters, Vice President and Treasurer
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KANKAKEE BANCORP ANNOUNCES ITS BEST FIRST QUARTER EARNINGS EVER AND
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A 25% INCREASE IN ITS QUARTERLY DIVIDEND
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Kankakee, Illinois.....(April 15, 2002) Kankakee Bancorp, Inc. (AMEX:KNK),
today released the financial results for the quarter ended March 31, 2002. The
Company reported net income of $893,000 for the quarter compared to $631,000 for
the comparable 2001 quarter. Net income for the first quarter was $262,000, or
41.6%, greater than net income for the first quarter of 2001. Basic earnings per
share were $.73 for the quarter ended March 31, 2002 compared to $.51 for the
2001 period. Diluted earnings per share were $.72 for the quarter ended March
31, 2002 compared to $.50 for the comparable 2001 period, an increase of 44.0%.
During the quarter the Company incurred additional costs, necessitated by a
proxy contest, which totaled approximately $190,000. After the effect of income
taxes, net income was reduced by approximately $125,000 and diluted earnings per
share were reduced by approximately $.10 per share, as a direct result of the
proxy contest. The annualized return on stockholders' equity was 8.7% for the
quarter ended March 31, 2002 compared to 6.6% for the comparable 2001 period, a
31.8% increase. Absent the costs related to the proxy contest, the annualized
return on stockholders' equity for the quarter ended March 31, 2002 would have
been 9.9%, or a 50.0% increase over the prior year.
According to William Cheffer, Chairman of Kankakee Bancorp, Inc., "We are
pleased that the
programs begun two years ago to increase profitability and long-term stockholder
value have not only continued to generate, but have accelerated, positive
results. This is reflected in the strong net income and earnings per share
numbers recorded for the first quarter. The results would have been even better
had we not been faced with a costly proxy contest. We are confident that the
plans we have had in place, and new initiatives undertaken during the first
quarter, will continue to result in increased profitability and long-term
stockholder value."
New Initiatives
---------------
During 2001, the Company began reviewing the potential benefits of Bank
Owned Life Insurance, (commonly referred to as "BOLI"), which is variable rate,
single premium whole life insurance on the lives of key employees of the
Company. The Company is the beneficiary of the policies, and the policies build
cash value. Neither the increase in cash value, which is included in other
income, nor the death benefits are taxable to the Company. This provides a
significant enhancement to earnings, which will be used to offset increases in
the cost of employee benefits such as health insurance. The Company's
wholly-owned subsidiary, Kankakee Federal Savings Bank, completed the BOLI
purchase, totaling $8.0 million, in the last half of March 2002, and therefore,
the effects of this transaction on first quarter results were minimal.
In late March, Kankakee Federal Savings Bank reimplemented a capital
utilization strategy, which involved the purchase of $30.0 million of
adjustable-rate, mortgage-backed securities, using borrowed funds. The
securities are the collateral for the borrowed funds, and there is a positive
spread in the transaction which enhances net interest income, net income and
earnings per share. The Company has evaluated the program, and it is comfortable
with potential earnings volatility that may result from interest rate
fluctuation. The effects of this transaction on the results for the first
quarter were also minimal.
The Company engaged an independent third party to evaluate its existing
branch network and other service delivery systems, focusing on locations, market
areas, physical layouts, accessibility and market potentials. This evaluation
also included a review of other potential market areas
2
suggested by both management and the third party. During March of this year the
preliminary reports were received and are in the process of review. While no
decisions have yet been made as the result of these evaluations, they will
likely precipitate some changes in the organization, with a view toward
increased earnings and an enhancement of long-term stockholder value.
During the quarter, the Company committed to the issuance of $10.0 million
in trust preferred securities as part of a large pool of such securities. These
securities, carry a variable rate of interest, and are includable, within
specified limits, in regulatory capital. The proceeds from the issuance of these
securities, which were received in the second week of April 2002, could be used
to repurchase stock, fund an accretive acquisition or purchase securities as
part of a leveraging strategy. Interest payments on these securities are
deductible for income tax purposes.
According to Larry D. Huffman, President and CEO of Kankakee Bancorp, Inc.,
"We are obviously pleased with our first quarter results representing one of the
strongest quarters in the history of Kankakee Bancorp. The new initiatives,
coupled with our successful existing plan, gives us great optimism for
additional earnings growth in the future."
Quarterly Results
-----------------
During the first quarter of 2002, net interest income before provision for
losses on loans was $3.8 million, or $501,000 (15.0%) more than for the same
period in 2001. The annualized return on assets for the first quarter of 2002
was .72% compared to .56% for the first quarter of 2001, an increase of 28.6%.
Other income increased by $361,000, or 60.6%, from $598,000 for the first
quarter of 2001 to $959,000 for the first quarter of 2002. This was due to
increases of $117,000 in fee income, $238,000 in gain on the sale of loans held
for sale and $22,000 in other income. These increases were partially offset by a
decrease of $16,000 in insurance commissions. The increase in gain on the sale
of loans held for sale was the result of the sale of most originated fixed-rate
mortgage loans, which was resumed during the second quarter of 2001. The
decrease in insurance commissions resulted from a corresponding decrease in
sales of annuity products during the first
3
quarter of 2002 compared to the first quarter of 2001. The 24.8% increase in fee
income was primarily the result of an increase in checking accounts subject to
fees.
General and administrative expenses increased by $401,000, or 13.4%, from
$3.0 million for the first quarter of 2001 to $3.4 million for the first quarter
of 2002. There were increases in compensation and benefits of $248,000 (15.9%),
other expenses of $205,000 (38.2%), data processing costs of $14,000 (14.2%),
and telephone and postage costs of $34,000 (33.4%). These increases were
partially offset by decreases of $6,000 (2.1%) in occupancy costs, $35,000
(19.1%) in furniture and equipment expense, $11,000 (64.1%) in provision for
losses on foreclosed assets, $48,000 (50.9%) in amortization of intangible
assets and several other small decreases. The major reason for the increase in
other expenses, and a significant reason for the overall increase in general and
administrative expenses, was additional costs incurred in preparation for the
annual meeting.
The provision for losses on loans totaled $148,000 during the first quarter
of 2002 compared to $15,000 during the first quarter of 2001. The increase in
the provision for losses on loans during the first quarter of 2002 compared to
the first quarter of 2001 was the result of several factors, including the
increase in the total loan portfolio and an increase in non-performing assets.
Non-performing assets increased by approximately $3.5 million. The increase was
primarily due to previously classified loans to three of the Company's long-term
borrowers that became non-performing during the first quarter of 2002. Many
financial institutions, such as the Company, have experienced an increase in
non-performing assets during this difficult economic period, as even well
-established business borrowers have developed cash flow and other business
related problems. It is management's belief that the allowance for losses on
loans at March 31, 2002, remains adequate, even in light of the first quarter
movement of these loans from classified to non-performing. However, there can be
no assurance that the allowance for losses on loans will be adequate to cover
all losses.
The Company's total assets were $531.6 million at March 31, 2002, an
increase of $41.3
4
million, or 8.4%, during the first quarter from total assets of $490.3 million
at December 31, 2001. Increases of $1.6 million in investment securities
available for-sale, $29.3 million in mortgage-backed securities
available-for-sale, $2.1 million in net loans and $8.7 million in other assets
were partially offset by decreases of $366,000 in cash and cash equivalents and
$441,000 in loans held for sale.
Stockholders' equity totaled $41.3 million at March 31, 2002, reflecting a
slight increase of $125,000 compared to December 31, 2001. The increase was the
result of net income, which was substantially offset by the Company's common
stock repurchases, dividend payment, and a decrease in unrealized gains on
securities available-for-sale during the first quarter. Equity per share of
common stock decreased by $0.10, or less than one percent, to $33.76 at March
31, 2002 from $33.86 at December 31, 2001. At March 31, 2002, the capital ratios
of Kankakee Federal Savings Bank, the Company's wholly-owned subsidiary,
continued to be in excess of regulatory requirements.
Stock Repurchase Programs and Stock Options
-------------------------------------------
During the quarter ended March 31, 2002, the Company repurchased 18,036
shares of common stock at a total cost of $687,000 under its current stock
repurchase program. Through March 31, 2002, a total of $15.0 million had been
used to repurchase 687,543 shares of common stock under repurchase programs.
Subsequent to March 31, 2002 and through April 15, 2002, 1,546 additional shares
of common stock were repurchased at a total cost of $59,000.
Options on 25,435 shares of common stock were exercised during the first
quarter of 2002. As of March 31, 2002, a total of 526,243 shares of common stock
were held as treasury stock. Between April 1, 2002 and April 15, 2002, options
on 7,700 shares of common stock were exercised. Through April 15, 2002, the
Company had received no notification from the one remaining option holder of the
intention to exercise options.
Kankakee Bancorp, Inc. Announces a 25% Increase in Its Second Quarter
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Dividend
--------
Kankakee Bancorp, Inc., also announced today that on April 9, 2002, the
Board of Directors
5
declared a cash dividend of fifteen cents a share for the second quarter of
2002. The Company's strong earnings performance provided the Board with the
opportunity to increase the dividend by 25% over the first quarter dividend of
twelve cents per share. The dividend will be paid on May 31, 2002 to
stockholders of record on May 15, 2002. The Company has paid a dividend every
quarter since the dividend program was instituted during the first quarter of
1995.
Kankakee Bancorp, Inc., and Kankakee Federal Savings Bank, are
headquartered in Kankakee, Illinois, which is 60 miles directly south of
downtown Chicago. In addition to its main office, the Bank operates fourteen
offices in the following Illinois communities: Ashkum, Bourbonnais, Bradley,
Braidwood, Champaign, Coal City (2), Diamond, Dwight, Herscher, Hoopeston,
Manteno, Momence and Urbana.
# # #
Financial Highlights
Condensed Consolidated Statements of Income
Attached
This release may contain forward looking statements. Forward looking statements
are identifiable by the inclusion of such qualifications as expects, intends,
believes, may, likely or other indications that the particular statements are
not based upon facts but are rather based upon the Company's beliefs as of the
date of this release. Actual events and results may differ significantly from
those described in such forward looking statements, due to changes in the
economy, interest rates or other factors. For additional information about these
factors, please review our filings with the Securities and Exchange Commission.
6
KANKAKEE BANCORP, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands, Except Per Share Data)
(Unaudited)
Three Months Ended March 31,
2002 2001
--------- ----------
Total interest income $ 7,780 $ 8,195
Total interest expense 3,933 4,850
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Net interest income 3,847 3,345
Provision for losses on loans 148 15
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Net interest income after
provision for losses on loans 3,699 3,330
Other income:
Net gain on sales of assets 248 10
Fee income 590 473
Other 121 115
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Total other income 959 598
Other expenses:
General and administrative 3,380 2,980
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Income before income taxes 1,278 948
Income tax expense 385 317
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Net income $ 893 $ 631
========= ==========
Net income $ 893 $ 631
Other comprehensive income:
Unrealized gains (losses) on available-for-sale
securities, net of related income taxes (366) 474
--------- ----------
Comprehensive income $ 527 $ 1,105
========= ==========
Basic earnings per share $ 0.73 $ 0.51
========= ==========
Diluted earnings per share $ 0.72 $ 0.50
========= ==========
Selected operating ratios (annualized):
Net interest margin (ratio of net interest
income to average interest-earning assets) 3.32% 3.16%
Return on assets (ratio of net income to
average total assets) 0.72% 0.56%
Return on equity (ratio of net income
to average equity) 8.72% 6.55%
7
KANKAKEE BANCORP, INC. AND SUBSIDIARY
FINANCIAL HIGHLIGHTS
(Dollars in Thousands, Except Per Share Data)
(Unaudited)
March 31, December 31,
2002 2001
--------------- ------------
Selected Financial Condition Data:
Total assets $ 531,554 $ 490,280
Net loans, including loans held for sale 396,292 394,618
Allowance for losses on loans 2,728 2,582
Mortgage-backed securities 32 37
Mortgage-backed securities - available-for-sale 40,899 11,636
Investment securities, including certificates of deposit 1,516 1,515
Investment securities-available-for-sale 36,319 34,755
Deposits 422,486 415,467
Total borrowings 62,600 30,000
Unrealized gains on securities available-
for-sale, net of related income taxes 239 605
Stockholders' equity 41,316 41,191
Shares outstanding 1,223,757 1,216,358
Stockholders' equity per share $ 33.76 $ 33.86
Selected asset quality ratios:
Non-performing assets to total assets 1.07% 0.45%
Allowance for losses on loans to non-performing loans 59.69% 230.33%
Classified assets to total assets 1.91% 1.80%
Allowance for losses on loans to classified assets 26.91% 29.32%
Non-performing asset analysis:
Non-accrual loans $ 3,410 $ 730
Loans past due 90 days and accruing 1,160 391
Real estate owned and repossessed assets 521 469
Restructured troubled debt 602 611
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Total $ 5,693 $ 2,201
=============== ============
Net loan charge-offs for quarter ($3)
===============
Three Months
Ended
03/31/02
(Unaudited)
---------------
Financial condition averages:
Total assets $ 501,820
Earning assets 470,415
Net loans, including loans held for sale 393,954
Stockholders' equity 41,556
Deposits 417,669
Borrowings 38,150
8
Average outstanding shares, including equivalents 1,242,286
9
BLUE PROXY CARD
PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
KANKAKEE BANCORP, INC.
For the Annual Meeting of Stockholders -- April 26, 2002
The undersigned hereby appoints William Cheffer, Larry D. Huffman and
Michael A. Stanfa, or each of them acting in the absence of the others,
P with power of substitution, attorneys and proxies, for and in the name and
place of the undersigned, to vote the number of shares of common stock that
R the undersigned would be entitled to vote if then personally present at the
annual meeting of the stockholders of Kankakee Bancorp, Inc., to be held at
O Sully's-Sullivan's Warehouse, a banquet facility located at 555 South West
Avenue, Kankakee, Illinois 60901, on Friday, April 26, 2002, at 10:00 a.m.,
X local time, or any adjournments or postponements of the meeting, upon the
matters set forth in the notice of annual meeting and proxy statement
Y (receipt of which is hereby acknowledged) as designated on the reverse
side, and in their discretion, the proxies are authorized to vote upon such
other business as may come before the meeting:
[_] Check here for address change. [_] Check here if you plan to attend
the meeting.
New Address:________________________
____________________________________
____________________________________
(Continued and to be signed on reverse side.)
PLEASE DETACH HERE
.................................................................................
PLEASE MARK VOTE IN BOX IN THE BLUE PROXY CARD
[X] FOLLOWING MANNER USING DARK INK ONLY
The board of directors recommends a vote FOR all proposals.
1. Election of Directors FOR WITHHOLD FOR ALL 2. To ratify the selection of FOR AGAINST ABSTAIN
William Cheffer and Michael A. Stanfa ALL ALL EXCEPT McGladrey & Pullen, LLP, [_] [_] [_]
[_] [_] [_] as auditors for Kankakee
(INSTRUCTIONS: To withhold authority to Bancorp, Inc. for 2002.
vote for any individual nominee, write that
nominee's name in the space below.)
_______________________________________________
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH
SPECIFICATION MADE. IF NO CHOICES ARE
INDICATED, THIS PROXY WILL BE VOTED FOR ALL
PROPOSALS.
Dated ____________________________________ 2002
_______________________________________________
(signature)
_______________________________________________
(signature)
_______________________________________________
(title)
NOTE: Please sign exactly as your name(s)
appears. For joint accounts, each owner should
sign. When signing as executor, administrator,
attorney, trustee or guardian, etc., please
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE give your full title.
ENCLOSED POSTAGE-PAID ENVELOPE.
PLEASE DETACH HERE
.....................................................................................................................................