SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001
OR
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transaction period from to
Commission File Number: 0-33413
CLOVER LEAF FINANCIAL CORP.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 37-1416016
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
200 EAST PARK STREET, EDWARDSVILLE, ILLINOIS 62025
-------------------------------------------- -----
(Address of Principal Executive Office) (Zip Code)
(618) 656-6122
(Registrant's Telephone Number including area code)
Securities Registered Pursuant to Section 12(b) of the Act: NONE
----
Securities Registered Pursuant to Section 12(g) of the Act: COMMON STOCK, PAR VALUE $0.10 PER SHARE
---------------------------------------
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
Registrant was required to file reports) and (2) has been subject to such
requirements for the past 90 days.
YES X NO .
------------ ------------
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-B is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendments to this Form 10-KSB. [ ]
The registrant's revenues for the fiscal year ended December 31, 2001
were $6.0 million.
As of February 28, 2002, there were issued and outstanding 661,250
shares of the Registrant's Common Stock. The aggregate value of the voting stock
held by non-affiliates of the Registrant, computed by reference to the closing
price of the Common Stock as of February 28, 2002 was $7.1 million.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of the 2001 Annual Report to Stockholders (Parts II and IV)
2. Proxy Statement for the 2002 Annual Meeting of Stockholders (Part III)
PART I
------
ITEM 1. BUSINESS
-----------------
CLOVER LEAF FINANCIAL CORP.
Clover Leaf Financial Corp. was organized at the direction of the Board
of Directors of Clover Leaf Bank, SB for the purpose of acting as the stock
holding company of Clover Leaf Bank. Clover Leaf Financial's assets consist
primarily of the outstanding capital stock of Clover Leaf Bank and cash and
investments of $2.5 million, representing a portion of the net proceeds from
Clover Leaf Financial's stock offering completed December 27, 2001. At December
31, 2001, 661,250 shares of Clover Leaf Financial's common stock, par value
$0.10 per share, were held by the public. Clover Leaf Financial's principal
business is overseeing and directing the business of Clover Leaf Bank and
investing the net stock offering proceeds retained by it. At December 31, 2001,
Clover Leaf Financial had total consolidated assets of $96.1 million, total
deposits of $80.9 million and shareholders' equity of $12.5 million.
Clover Leaf Financial's office is located at 200 East Park Street,
Edwardsville, Illinois 62025. Its telephone number is (618) 656-6122.
CLOVER LEAF BANK, SB
Founded in 1889, Clover Leaf Bank is a customer-oriented, Illinois
chartered savings bank, which operates from its main office in Edwardsville,
Illinois, and one branch office. Clover Leaf Bank's deposits are insured by the
Savings Association Insurance Fund, as administered by the Federal Deposit
Insurance Corporation, up to the maximum amount permitted by law.
Clover Leaf Bank's executive office is located at 200 East Park Street,
Edwardsville, Illinois 62025. Its telephone number is (618) 656-6122.
MARKET AREA
Clover Leaf Bank's lending and deposit-gathering area is concentrated
in the neighborhoods surrounding its two offices in Edwardsville, Illinois,
which is located in Madison County. The population of Madison County grew 3.9%
from 1990 to 2000, compared to an 8.6% increase in the population of the State
of Illinois during the same period. During this same period, however, our local
market area, consisting of Edwardsville and surrounding towns, has experienced a
significant increase in housing starts. The economy in Clover Leaf Bank's market
area is not dependent on any single employer or type of business. While Madison
County's economy is primarily industrial, Edwardsville, as the county seat, has
a primarily service-oriented economy. The three largest employers in Madison
County, all of which are headquartered in Edwardsville, are Southern Illinois
University at Edwardsville, the Madison County Government and Edwardsville
Community Schools.
COMPETITION
We face significant competition in both originating loans and
attracting deposits. Madison County has a significant number of financial
institutions, many of which are significantly larger and have greater financial
resources than Clover Leaf Bank, and all of which are our competitors to varying
degrees. Our competition for loans comes principally from commercial banks,
savings institutions, mortgage banking companies, credit unions and insurance
companies. Our most direct competition for deposits historically has come from
commercial banks and credit unions. We face additional competition for deposits
from non-depository competitors such as mutual funds, securities and brokerage
firms and insurance companies. Management believes that the Gramm-Leach-Bliley
Act, which permits affiliation among banks, securities firms and insurance
companies, will increase competition in our market area.
LENDING ACTIVITIES
GENERAL. Our loan portfolio consists primarily of one- to four-family
residential real estate loans. The vast majority of these loans have fixed rates
of interest. In addition to one- to four-family residential real estate loans,
our loan portfolio consists of commercial and consumer loans, and, to a lesser
extent, construction and overdraft loans. At December 31, 2001, our total loans
were $63.1 million, of which $33.8 million, or 53.5%, were secured by one- to
four-family residential real estate, $14.0 million, or 22.1%, were secured by
commercial real estate, $6.4 million, or 10.2%, were consumer loans, $7.7
million, or 12.3%, were commercial business loans, and $1.2 million, or 1.9%,
were construction loans.
In an effort to increase our interest income and to reduce the risk to
our net income from changes in market interest rates, we have emphasized the
origination of commercial real estate and commercial business loans. Compared to
our residential mortgage loans, commercial real estate and commercial business
loans generally have higher interest rates and are more sensitive to changes in
market interest rates because they have adjustable interest rates and shorter
terms to maturity. In addition, in order to improve our asset quality and reduce
our delinquencies, we have discontinued our indirect automobile lending.
LOAN PORTFOLIO COMPOSITION. The following table shows the composition
of our loan portfolio in dollar amounts and in percentages (before deductions
for loans in process, deferred fees and allowances for losses) as of the dates
indicated.
AT DECEMBER 31,
----------------------------------------------------
2001 2000
------------------------- -------------------------
AMOUNT PERCENT AMOUNT PERCENT
---------- ----------- ---------- -----------
(DOLLARS IN THOUSANDS)
Real Estate Loans:
-----------------
One- to four-family.................. $ 33,773 53.53% $ 38,113 66.27%
Commercial........................... 13,971 22.14 5,350 9.30
Construction and land................ 1,193 1.89 749 1.30
--------- --------- --------- --------
Total real estate loans......... 48,937 77.56 44,212 76.87
--------- --------- --------- --------
Other Loans:
-----------
Consumer:
Deposit account..................... 80 0.13 326 0.57
Automobile.......................... 3,136 4.97 5,750 10.00
Home equity......................... 1,639 2.60 1,282 2.23
Other............................... 1,572 2.49 2,026 3.52
--------- --------- --------- --------
Total consumer loans............. 6,427 10.19 9,384 16.32
--------- --------- --------- --------
Commercial business.................. 7,732 12.25 3,914 6.81
--------- --------- --------- --------
Total gross loans............. 63,096 100.00 57,510 100.00%
========= ========
Less:
----
Deferred fees and discounts.......... 15 26
Allowance for losses................. 646 625
--------- ---------
Total loans receivable, net.......... $ 62,435 $ 56,859
========= =========
2
The following table illustrates the interest rate sensitivity of our
loan portfolio at December 31, 2001. Mortgages that have adjustable or
renegotiable interest rates are shown as maturing in the period during which the
full principal amount of the mortgage is due. The schedule does not reflect the
effects of possible prepayments or enforcement of due-on-sale clauses.
DUE AFTER ONE YEAR
DUE IN ONE YEAR OR LESS THROUGH FIVE YEARS DUE AFTER FIVE YEARS TOTAL
----------------------- ---------------------- -------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE AVERAGE
AMOUNT RATE AMOUNT RATE AMOUNT RATE AMOUNT RATE
-------- ----------- -------- ----------- -------- --------- -------- ----------
(DOLLARS IN THOUSANDS)
Real Estate loans:
One- to four-family.................$ 2,934 7.05% $ 13,055 7.20% $ 17,784 7.02% $ 33,773 7.05%
Commercial.......................... 3,672 5.96 9,843 6.96 456 7.95 13,971 6.73
Construction and land............... 1,193 7.12 -- -- -- -- 1,193 7.12
Commercial business loans.............. 1,865 6.07 5,328 6.64 539 6.29 7,732 6.48
Consumer loans......................... 3,923 8.05 2,225 9.21 279 10.09 6,427 8.54
-------- -------- -------- --------
Gross loans............................$ 13,587 6.82% $ 30,451 7.13% $ 19,058 7.16% $ 63,096 7.06%
======== ======== ======== ========
The total amount of loans due after December 31, 2002 which have
predetermined interest rates is $49.0 million, while the total amount of loans
due after such date which have floating or adjustable interest rates is
$500,000.
ONE- TO FOUR-FAMILY RESIDENTIAL REAL ESTATE LOANS. Historically, we
have emphasized the origination of one- to four-family loans secured by
residential real estate. As of December 31, 2001, these loans totaled $33.8
million, or 53.5% of our total loan portfolio. Virtually all of our residential
real estate loans have fixed rates of interest. Currently, we do not offer
adjustable interest rates on our one- to four-family mortgage loans primarily
because our customers prefer fixed-rate mortgage loans in the relatively low
interest rate environment that currently exists. We generally retain most of the
loans that we originate, although in the past we have sold loans on a
servicing-retained basis. We intend to sell a greater percentage of our
residential real estate loan originations on a servicing-retained basis. At
December 31, 2001, we were servicing $5.9 million in loans for others.
We currently offer one- to four-family residential mortgage loans with
terms of 5, 15 and 30 years. Our five-year loans provide for principal and
interest amortization of up to 30 years with a balloon payment at the end of the
five-year term. All of our 15- and 30-year loans amortize over the term of the
loan.
For one- to four-family residential real estate loans, we may lend up
to 80% of the property's appraised value, or up to 90% of the property's
appraised value if the borrower obtains private mortgage insurance. We require
title insurance on all of our one- to four-family mortgage loans, and we also
require that fire and extended coverage casualty insurance (and, if appropriate,
flood insurance) be maintained in an amount equal to at least the lesser of the
loan balance or the replacement cost of the improvements on the property. We
require a property appraisal for all mortgage loans that are underwritten to
comply with secondary market standards. Appraisals are conducted by our on-staff
appraisers as well as independent appraisers from a list approved by our board
of directors. Our residential real estate loans include "due-on-sale" clauses.
COMMERCIAL REAL ESTATE LOANS. We have increased our emphasis on
commercial real estate lending in recent years. Loans secured by commercial real
estate totaled $14.0 million, or 22.1% of our total loan portfolio as of
December 31, 2001. Our commercial real estate loans are secured predominately by
office buildings, and to a lesser extent warehouse properties and more
specialized properties such as churches. We originate commercial real estate
loans with a maximum term of three years. We offer both adjustable and fixed
rates of interest on commercial real estate loans, with the interest rate for
adjustable rate loans tied to the prime interest rate. Our largest commercial
real estate loan at December 31, 2001 had a principal balance of $1.1 million
and was collateralized by a law office building. This loan is performing in
accordance with its terms.
3
Commercial real estate loans generally have higher interest rates than
the interest rates on residential mortgage loans, and are more sensitive to
changes in market interest rates because they often have adjustable interest
rates and shorter terms. Commercial real estate loans have significant
additional risk compared to one- to four-family residential mortgage loans, as
they typically involve large loan balances concentrated with single borrowers or
groups of related borrowers. In addition, the repayment of commercial real
estate loans typically depends on the successful operation of the related real
estate project, and thus may be subject to a greater extent than residential
mortgage loans to adverse conditions in the real estate market or in the economy
generally.
In our underwriting of commercial real estate loans, we may lend up to
80% of the property's appraised value in the case of loans secured by
apartments, and up to 75% of the property's appraised value on loans secured by
other commercial properties. We require independent appraisals for all
commercial real estate loans in excess of $250,000. For loans that do not exceed
this amount, we require that an officer prepare a memorandum of value detailing
comparable values based upon tax bills, prior appraisals, and income information
on revenue-producing property. Decisions to lend are based on the economic
viability of the property and the creditworthiness of the borrower.
Creditworthiness is determined by considering the character, experience,
management and financial strength of the borrower, and the ability of the
property to generate adequate funds to cover both operating expenses and debt
service. In evaluating whether to make a commercial real estate loan, we place
primary emphasis on the ratio of net cash flow to debt service on the property,
and we generally require a ratio of cash flow to debt service of at least 120%,
computed after deduction for a vacancy factor and property expenses we deem
appropriate.
We require title insurance on all of our commercial real estate loans,
and we also require that fire and extended coverage casualty insurance (and, if
appropriate, flood insurance) be maintained. In addition, we generally require
that the borrower personally guarantee the repayment of the loan.
CONSTRUCTION AND LAND LOANS. We originate two types of residential
construction loans: (i) construction/speculative loans, and (ii)
construction/permanent loans. As of December 31, 2001, construction and land
loans totaled $1.2 million, or 1.9% of our total loan portfolio.
Construction/speculative loans are made to area homebuilders who do not
have, at the time the loan is originated, a signed contract with a homebuyer who
has a commitment for permanent financing with either Clover Leaf Bank or another
lender. The homebuyer may enter into a purchase contract either during or after
the construction period. These loans have the risk that the builder will have to
make interest and principal payments on the loan and finance real estate taxes
and other holding costs of the completed home for a significant time after the
completion of construction. Funds are disbursed in phases as construction is
completed. All construction/speculative loans require that the builder-borrower
personally guarantee the full repayment of the principal and interest on the
loan. These loans are generally originated for a term of twelve months, with
interest rates that are tied to the prime lending rate, and with a loan-to-value
ratio of no more than 75% of the lower of cost or the estimated value of the
completed property. Generally, we limit our construction/speculative loans to
one property per borrower at any given time, and the largest number of
construction/speculative loans we have originated to a single borrower at any
given time was for three properties. At December 31, 2001, the largest
outstanding concentration of credit to one builder consisted of one
construction/speculative loan with an aggregate balance of $299,000, which was
performing in accordance with its terms.
Construction/permanent loans are made to either a homebuilder or a
homeowner who, at the time of construction, has a signed contract together with
a commitment for permanent financing from Clover Leaf Bank for the finished
home. The construction phase of a loan generally lasts up to 6 months, and the
interest rate charged generally corresponds to the rate of the committed
permanent loan, with loan-to-value ratios of up to 80% (or up to 90% if the
borrower obtains private mortgage insurance) of the appraised estimated value of
the completed property or cost, whichever is less. Following the initial 6-month
period, construction/permanent loans convert to permanent loans, regardless of
whether the construction phase has been completed. At December 31, 2001 the
largest single outstanding construction loan of this type had an outstanding
balance of $285,000 and was performing in accordance with its terms.
4
Construction lending generally involves a greater degree of risk than
other one- to four-family mortgage lending. The repayment of the construction
loan is, to a great degree, dependent upon the successful and timely completion
of the home construction. Construction delays or the financial impairment of the
builder may further impair the borrower's ability to repay the loan.
Our procedures for underwriting construction/speculative loans include
an assessment of the borrower's credit history and the borrower's ability to
meet other existing debt obligations, as well as payment of principal and
interest on the proposed loan. We use the same underwriting standards and
procedures for construction/permanent lending as we do for one- to four-family
residential real estate lending.
We also originate land development loans to area homebuilders that are
secured by individual unimproved or improved residential building lots. Land
loans are generally offered with variable prime-based interest rates with terms
of up to two years. The maximum loan-to-value ratio is 65% of the lower of cost
or appraised value of the property.
CONSUMER LOANS. Our consumer loans consist primarily of automobile
loans, and to a lesser extent, home equity lines of credit and overdraft loans,
loans secured by deposits and securities, and unsecured personal loans. As of
December 31, 2001, consumer loans totaled $6.4 million, or 10.2% of our total
loan portfolio.
Automobile loans are generally offered with maturities of up to 60
months for new automobiles, while loans secured by used automobiles will have
maximum terms that vary depending on the age of the automobile. We require all
borrowers to maintain collision insurance on automobiles securing loans in
excess of $1,000, with Clover Leaf Bank listed as loss payee. In those instances
where the borrower fails to maintain adequate insurance coverage, we are further
protected against loss by vendors single interest insurance coverage.
Our indirect automobile loans have experienced relatively higher
delinquency and loss rates, and we discontinued this type of automobile lending
in July 2000. Our automobile loan portfolio totaled $3.2 million, or 5.0% of
total loans at December 31, 2001, compared to $5.8 million, or 10.0% of total
loans, at December 31, 2000.
Home equity lines of credit are generally made for owner-occupied
homes, and are secured by first or second mortgages on residential properties.
We are attempting to increase our originations of home equity loans through
targeted marketing. We generally offer home equity lines of credit with a
maximum loan to appraised value ratio of 85% (including senior liens on the
subject property). We currently offer these loans for terms of up to 10 years,
and with adjustable rates that are tied to the prime lending rate.
We offer overdraft loans by providing unsecured lines of credit to
qualifying checking accountholders. The line of credit must be pre-approved by
Clover Leaf Bank's loan department. Overdraft loans totaled $428,000, or 0.7% of
our total loan portfolio as of December 31, 2001.
Consumer loans generally entail greater credit risk than residential
mortgage loans, particularly in the case of loans that are unsecured or are
secured by assets that tend to depreciate in value, such as automobiles. In
these cases, repossessed collateral for a defaulted consumer loan may not
provide an adequate source of repayment for the outstanding loan and the
remaining value often does not warrant further substantial collection efforts
against the borrower. Further, consumer loan collections depend on the
borrower's continuing financial stability, and therefore are more likely to be
adversely affected by job loss, divorce, illness or personal bankruptcy.
Our procedures for underwriting consumer loans include an assessment of
the borrower's credit history and ability to meet other existing debt
obligations, as well as payments of principal and interest on the proposed
loans. The stability of the borrower's monthly income may be determined by
verification of gross monthly income from primary employment, and additionally
from any verifiable secondary income. Although the borrower's creditworthiness
is a primary consideration, the underwriting process also includes a comparison
of the value of the collateral security, if any, to the proposed loan amount. We
require independent appraisals for all consumer loans in excess of $50,000. For
loans that do not exceed this amount, we require that an officer prepare a
memorandum of value detailing comparable values based upon tax bills or other
available information.
5
COMMERCIAL BUSINESS LOANS. We currently offer commercial business loans
to existing customers in our market area, some of which are secured in part by
additional real estate collateral. We make various types of secured and
unsecured commercial business loans for the purpose of financing equipment
acquisition, expansion, working capital and other general business purposes. The
terms of these loans are generally for less than three years. Equipment loans
usually involve a one-time disbursement of funds, with repayment over the term
of the loan, while operating lines of credit involve multiple disbursements and
revolving notes that can be renewed annually. The loans are either negotiated on
a fixed-rate basis or carry variable interest rates indexed to the prime rate.
At December 31, 2001, we had 79 commercial business loans outstanding with an
aggregate balance of $7.7 million, or 12.3%, of the total loan portfolio. As of
December 31, 2001, our largest commercial business loan consisted of our
participation interest in a $1.4 million loan to a concrete plant, which is
secured by equipment, inventory, accounts receivable and a mortgage on the
commercial property.
In recent years, we have increased our emphasis on commercial business
lending. These loans tend to have higher rates of interest than residential
mortgage loans, and are more sensitive to changes in market interest rates
because they often have adjustable interest rates and shorter terms. In
addition, commercial business lending gives us greater access to commercial
borrowers that may open transactional checking accounts with Clover Leaf Bank.
Commercial credit decisions are based upon a complete credit review of
the borrower. A determination is made as to the borrower's ability to repay in
accordance with the proposed terms as well as an overall assessment of the
credit risks involved. Personal guarantees of borrowers are generally required.
In evaluating a commercial real estate loan, we place primary emphasis on the
ratio of net cash flow to debt service for the property, generally requiring a
ratio of at least 120%. Credit agency reports of the borrower's credit history
as well as bank checks and trade investigations supplement the analysis of the
borrower's creditworthiness. Collateral supporting a secured transaction is also
analyzed to determine its marketability and liquidity. Commercial business loans
generally bear higher interest rates than residential loans, but they also may
involve a higher risk of default since their repayment generally depends on the
successful operation of the borrower's business.
LOAN ORIGINATIONS, PURCHASES, SALES AND SERVICING. Although we
originate both fixed-rate and adjustable-rate loans, our ability to generate
each type of loan depends upon borrower demand, market interest rates, borrower
preference for fixed- versus adjustable-rate loans, and the interest rates
offered on each type of loan by competing lenders in our market area. This
includes banks, savings institutions, credit unions, mortgage banking companies,
and life insurance companies. Loan originations are derived from a number of
sources, including existing or prior customers and walk-in customers.
Loan originations are adversely affected by rising interest rates,
which typically result in decreased loan demand. Accordingly, the volume of our
loan originations and the interest rates we can charge on loans vary from period
to period. One- to four-family residential mortgage loans are generally
underwritten to conform to Fannie Mae and Freddie Mac seller/servicer
guidelines, and are currently originated on a fixed interest rate basis only. We
generally retain the loans that we originate. When we do sell mortgage loans, we
generally retain the servicing rights, which means that we will continue to
collect payments on the loans and supervise foreclosure proceedings, if
necessary. We retain a portion of the interest paid by the borrower on the
loans, generally 25 basis points, as consideration for our services. We
currently service $5.9 million of loans for others, and we intend to sell a
portion of our one- to four-family residential mortgage loans in the future in
an effort to reduce our interest rate risk.
6
The following table summarizes our loan origination and repayment
activities for the periods indicated. We did not purchase any loans during the
periods indicated.
YEARS ENDED DECEMBER,
----------------------------
2001 2000
------------- ------------
(IN THOUSANDS)
Loans receivable, net, at beginning of period. $ 56,859 $ 55,494
Originations by type:
Real estate
One- to four-family................................... 13,358 4,063
Commercial............................................ 11,836 3,023
Construction and land................................. -- --
Non-real estate
Consumer.............................................. 1,845 3,148
Commercial business................................... 2,952 2,697
------------ ------------
Total loans originated........................... 29,991 12,931
------------ ------------
Sales and Repayments......................................
Sales:
Real estate
One- to four-family................................ 3,091 2,132
Commercial......................................... -- --
Construction and land.............................. -- --
Non-real estate
Consumer............................................ -- --
Commercial business................................. --
------------ ------------
Total loans sold................................. 3,091 2,132
Principal repayments.................................... 21,432 9,266
------------ ------------
Total reductions................................. 24,523 11,398
Increase (decrease) in other items, net................... 108 (168)
------------ ------------
Net increase..................................... 5,576 1,365
------------ ------------
Loans receivable, net, at end of period................... $ 62,435 $ 56,859
============ ============
LOAN APPROVAL PROCEDURES AND AUTHORITY. Our lending activities are
subject to written underwriting standards and loan origination procedures
adopted by management and the Board of Directors. For single family,
owner-occupied real estate loans, the President of Clover Leaf Bank is
authorized to approve loans up to $250,000, while the Senior Vice President is
authorized to approve loans up to $200,000. For secured commercial real estate
loans and construction and land loans, the President and Senior Vice President
are authorized to approve loans up to $150,000 and $75,000, respectively; for
secured consumer loans, these officers may approve loans up to $50,000; and for
overdrafts and unsecured credits, these officers may approve loans up to $25,000
and $15,000, respectively. When acting together, these officers may approve new
loans in amounts up to 150% of their combined lending limits, and may approve
renewals of commercial business and commercial real estate loans in amounts up
to 200% of their combined lending limits where there has been no deterioration
in either the payment pattern or financial strength of the borrower. However,
the entire Board of Directors must approve all loans in excess of $625,000. In
addition, the Board of Directors generally ratifies all pre-authorized loan
approvals.
7
ASSET QUALITY
DELINQUENT LOANS. The following table sets forth Clover Leaf Bank's
loan delinquencies by type, amount and percentage at December 31, 2001.
LOANS DELINQUENT FOR:
------------------------------------------------------------------- --------------------------------
60-89 DAYS 90 DAYS AND OVER TOTAL DELINQUENT LOANS
-------------------------------- -------------------------------- --------------------------------
PERCENT PERCENT PERCENT
OF LOAN OF LOAN OF LOAN
NUMBER AMOUNT CATEGORY NUMBER AMOUNT CATEGORY NUMBER AMOUNT CATEGORY
-------- -------- ---------- -------- -------- ---------- -------- -------- ----------
(DOLLARS IN THOUSANDS)
Real Estate:
One- to four-family.. 10 516 1.5% 6 384 1.1% 16 900 2.7%
Consumer............... 15 106 1.7 17 164 2.6 32 270 4.2
Commercial business.... -- -- -- 4 1,006 13.0 4 1,006 13.0
------- ------- --------- ------- ------- --------- ------- ------- ---------
Total............. 25 622 1.0% 27 1,554 2.5% 52 2,176 3.4%
======= ======= ========= ======= ======= ========= ======= ======= =========
LOAN DELINQUENCIES AND COLLECTION PROCEDURES. When a borrower fails to
make required payments on a loan, we take a number of steps to induce the
borrower to correct the delinquency and restore the loan to a current status. We
will send a borrower a reminder notice 15 days after an account becomes
delinquent, and our employees are authorized to use their discretion whether
direct telephone contact is required at that time. If the borrower does not
remit the entire payment due by the end of the month, we try to make direct
contact with the borrower to arrange a payment plan. If a satisfactory payment
plan is not established within 50 days of a delinquency, we will send a demand
letter to the borrower. If a satisfactory payment plan has not been arranged
within 60 days following a delinquency, we may instruct our attorneys to
institute foreclosure proceedings depending on the loan-to-value ratio or our
relationship with the borrower. Foreclosed property is held as other real estate
owned.
Our policies require that management continuously monitor the status of
the loan portfolio and report to the Board of Directors on a monthly basis.
These reports include information on delinquent loans and foreclosed real estate
and our actions and plans to cure the delinquent status of the loans and to
dispose of any real estate acquired through foreclosure.
NON-PERFORMING LOANS. All loans are reviewed on a regular basis and are
placed on non-accrual status when, in the opinion of management, there is
reasonable probability of loss of principal or the collection of additional
interest is deemed insufficient to warrant further accrual. Generally, we place
all loans 90 days or more past due on non-accrual status. In addition, we place
any loan on non-accrual status if any part of it is classified as loss or if any
part has been charged-off. When a loan is placed on non-accrual status, total
interest accrued and unpaid to date is reversed. Subsequent payments are either
applied to the outstanding principal balance or recorded as interest income,
depending on the assessment of the ultimate collectibility of the loan. Loans
are charged-off no later than 120 days following their delinquency, unless the
loans are well-collateralized or in the process of collection.
As of December 31, 2001, our total non-accrual loans amounted to $1.4
million compared to $102,000 at December 31, 2000. The increase in non-accrual
loans resulted from increases in non-accruing loans in all categories of loans,
as we adopted and implemented a new loan policy and loan review policy during
the fourth quarter of 2000. The majority of the balance of our non-accrual loans
at December 31, 2001 consisted of a commercial business loan and a commercial
real estate line of credit, totaling $762,000, to a cabinet manufacturing
company that was subsequently destroyed due to fire. The borrower had complete
insurance coverage and had named Clover Leaf Bank as loss payee/mortgage. We do
not believe we will experience a loss on this loan. An additional $183,000 of
our non-accruing loans consisted of a construction loan to a builder who has
filed for bankruptcy. We do not believe we will experience a material loss as a
result of this loan, and we believe that we have provided for any such loss we
will experience as a result of this loan
8
The table below sets forth the amounts and categories of non-performing
assets in our loan portfolio. For all years presented, we had no troubled debt
restructurings (which involve forgiving a portion of interest or principal on
loans or making loans at materially less than market interest rates), and no
foreclosed assets.
YEARS
ENDED DECEMBER 31,
---------------------------
2001 2000
----------- -----------
(DOLLARS IN THOUSANDS)
Non-accruing loans:
One- to four-family..............................................$ 390 $ 24
Construction..................................................... 483 --
Commercial business.............................................. 462 --
Consumer......................................................... 104 78
----------- -----------
Total......................................................... 1,439 102
----------- -----------
Accruing loans delinquent more than 90 days:
One- to four-family.............................................. 16 --
Commercial business.............................................. 28 --
Consumer......................................................... 71 41
----------- -----------
Total......................................................... 115 41
----------- -----------
Total non-performing assets........................................$ 1,554 $ 143
=========== ===========
Total non-performing assets as a percentage of total assets........ 1.62% 0.17%
=========== ===========
Allowance for loan losses as a percentage of non-performing
loans............................................................ 41.57% 437.06%
=========== ===========
Allowance for loan losses as a percentage of gross loans
receivable....................................................... 1.02% 1.09%
=========== ===========
For the year ended December 31, 2001, $87,000 of gross interest income
would have been recorded had our non-accruing loans been current in accordance
with their original terms.
TROUBLED DEBT RESTRUCTURINGS. A troubled debt restructuring occurs when
we, for economic or legal reasons related to a borrower's financial
difficulties, grant a concession to the borrower, either as a deferment or
reduction of interest or principal on the loan, that we would not otherwise
consider. We had no troubled debt restructurings as of December 31, 2001.
REAL ESTATE OWNED. Real estate owned consists of property acquired
through formal foreclosure or by deed in lieu of foreclosure and is recorded at
the lower of recorded investment or fair value. Write-downs from recorded
investment to fair value which are required at the time of foreclosure are
charged to the allowance for loan losses. After transfer, the property is
carried at the lower of recorded investment or fair value, less estimated
selling expenses. Adjustments to the carrying value of the properties that
result from subsequent declines in value are charged to operations in the period
in which the declines occur. We held no property that was classified as real
estate owned as of December 31, 2001.
CLASSIFICATION OF ASSETS. Our policies, consistent with regulatory
guidelines, require that we classify loans and other assets, such as securities,
that are considered to be of lesser quality, as substandard, doubtful, or loss
assets. An asset is considered substandard if it is inadequately protected by
the current net worth and paying capacity of the obligor or of the collateral
pledged, if any. Substandard assets include those characterized by the distinct
possibility that the savings institution will sustain some loss if the
deficiencies are not corrected. Assets classified as doubtful have all of the
weaknesses inherent in those classified substandard with the added
characteristic that the weaknesses present make collection or liquidation in
full, on the basis of currently existing facts, conditions, and values, highly
questionable and improbable. Assets classified as loss are those considered
uncollectable and of such little value that their continuance as assets is not
warranted. Assets that do not expose us to risk sufficient to warrant
classification in one of the aforementioned categories, but which possess some
weaknesses, are required to be designated as special mention by management.
When we classify assets as either substandard or doubtful, we allocate
for analytical purposes a portion of our general valuation allowances or loss
reserves to these assets as deemed prudent by management. General
9
allowances represent loss allowances that have been established to recognize the
probable risk associated with lending activities, but which have not been
allocated to particular problem assets. When we classify problem assets as loss,
we are required either to establish a specific allowance for losses equal to
100% of the amount of the assets so classified, or to charge-off the amount of
the assets. Our determination as to the classification of assets and the amount
of valuation allowances is subject to review by regulatory agencies, which can
order the establishment of additional loss allowances. Management regularly
reviews our asset portfolio to determine whether any assets require
classification in accordance with applicable regulatory guidelines and generally
accepted accounting principles.
On the basis of management's review of our assets, at December 31,
2001, we had classified a total of $3.5 million of our loans and other assets as
follows:
AT OR FOR THE YEAR
ENDED
DECEMBER 31, 2001
-------------------
(IN THOUSANDS)
Special Mention................ $ 1,144
Substandard.................... 2,144
Doubtful assets................ 183
Loss assets.................... --
------------------
Total..................... $ 3,471
==================
General loss allowance......... $ 646
Specific loss allowance........ --
Charge-offs.................... 88
ALLOWANCE FOR LOAN LOSSES. The following table sets forth information
regarding our allowance for loan losses and other ratios at or for the dates
indicated.
YEARS ENDED DECEMBER 31,
-------------------------
2001 2000
------------ -----------
(DOLLARS IN THOUSANDS)
Balance at beginning of period.............................. $ 625 $ 455
Charge-offs:
One- to four-family....................................... -- --
Commercial business....................................... (4) (75)
Consumer.................................................. (127) (198)
---------- ---------
(131) (273)
---------- ---------
Recoveries:
One- to four-family....................................... -- --
Consumer.................................................. 64 15
---------- ---------
64 15
---------- ---------
Net charge-offs............................................. (67) (258)
Additions charged to operations............................. 88 428
---------- ---------
Balance at end of period.................................... $ 646 $ 625
========== =========
Ratio of net charge-offs during the period to
average loans outstanding during the period............... 0.11% 0.45%
========== =========
Ratio of net charge-offs during the period to
average non-performing assets.............................. 4.31% 180.42%
========== =========
The allowance for loan losses is a valuation account that reflects our
evaluation of the credit losses inherent in our loan portfolio. We
10
maintain the allowance through provisions for loan losses that we charge to
income. We charge losses on loans against the allowance for loan losses when we
believe the collection of loan principal is unlikely.
Our evaluation of risk in maintaining the allowance for loan losses
includes the review of all loans on which the collectibility of principal may
not be reasonably assured. We consider the following factors as part of this
evaluation: our historical loan loss experience, the nature and volume of the
loan portfolio, adverse situations that may affect the borrower's ability to
repay, estimated value of any underlying collateral, peer group information and
prevailing economic conditions. There may be other factors that may warrant our
consideration in maintaining an allowance at a level sufficient to provide for
probable losses. This evaluation is inherently subjective as it requires
estimates that are susceptible to significant revision as more information
becomes available or as future events change. Although we believe that we have
established and maintained the allowance for loan losses at adequate levels,
future additions may be necessary if economic and other conditions in the future
differ substantially from the current operating environment.
In addition, the Illinois Office of Banks and Real Estate and the
Federal Deposit Insurance Corporation, as an integral part of their examination
process, periodically review our loan portfolio and the related allowance for
loan losses. The Illinois Office of Banks and Real Estate and the Federal
Deposit Insurance Corporation may require us to increase the allowance for loan
losses based on their judgments of information available to them at the time of
their examination, thereby adversely affecting our results of operations.
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES. The following table
presents our allocation of the allowance for loan losses by loan category and
the percentage of loans in each category to total loans at the periods
indicated.
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------
2001 2000
------------------------------------ --------------------------------
PERCENT PERCENT
OF LOANS OF LOANS
LOAN IN EACH LOAN IN EACH
AMOUNT OF AMOUNTS CATEGORY AMOUNT OF AMOUNTS CATEGORY
LOAN LOSS BY TO TOTAL LOAN LOSS BY TO TOTAL
ALLOWANCE CATEGORY LOANS ALLOWANCE CATEGORY LOANS
--------- -------- ---------- --------- -------- ----------
(DOLLARS IN THOUSANDS)
Real Estate Loans:
One- to four-family....... $ 244 $ 33,773 53.53% $ 304 $ 38,113 66.27%
Commercial................ 212 13,971 22.14 -- 5,350 9.30
Construction and land..... -- 1,193 1.89 -- 749 1.30
Commercial business............ 36 7,732 12.25 90 3,914 6.81
Consumer....................... 154 6,427 10.19 231 9,384 16.32
--------- -------- --------- --------- -------- ---------
Total..................... $ 646 $ 63,096 100.00% $ 625 $ 57,510 100.00%
========= ======== ========= ========= ======== =========
Management evaluates the total balance of the allowance for loan losses
based on several factors that are not loan specific but are reflective of the
losses inherent in the loan portfolio, including management's periodic review of
loan collectibility in light of historical experience, the nature and volume of
the loan portfolio, adverse situations that may affect the borrower's ability to
repay, estimated value of any underlying collateral, prevailing economic
conditions such as housing trends, inflation rates and unemployment rates,
geographic concentrations of loans within Clover Leaf Bank's immediate market
area, and both peer financial institution historic loan loss experience and
allowance for loan loss levels. For a discussion of the increase in the
allowance for loan losses during the year ended December 31, 2001, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Comparison of Operating Results for the Years Ended December 31,
2001 and 2000--Provision for Loan Losses.
INVESTMENT ACTIVITIES
Clover Leaf Bank is permitted under federal and state law to invest in
various types of liquid assets, including U.S. Government obligations,
securities of various federal agencies and of state and municipal
11
governments, deposits at the Federal Home Loan Bank of Chicago, certificates of
deposit of federally insured institutions, certain bankers' acceptances and
federal funds. Within certain regulatory limits, Clover Leaf Bank may also
invest a portion of its assets in commercial paper and corporate debt
securities. We are also required to invest in Federal Home Loan Bank stock. See
"Regulation" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources."
SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," requires that securities be categorized as "held to maturity,"
"trading securities" or "available for sale," based on management's intent as to
the ultimate disposition of each security. SFAS No. 115 allows debt securities
to be classified as "held to maturity" and reported in financial statements at
amortized cost only if the reporting entity has the positive intent and ability
to hold those securities to maturity. Securities that might be sold in response
to changes in market interest rates, changes in the security's prepayment risk,
increases in loan demand, or other similar factors cannot be classified as "held
to maturity."
Debt and equity securities held for current resale are classified as
"trading securities." These securities are reported at fair value, and
unrealized gains and losses on the securities are included in earnings. Clover
Leaf Bank does not currently use or maintain a trading account. Debt and equity
securities not classified as either "held to maturity" or "trading securities"
are classified as "available for sale." These securities are reported at fair
value, and unrealized gains and losses on the securities are excluded from
earnings and reported, net of deferred taxes, as a separate component of equity.
Clover Leaf Bank has classified all of its securities as available for sale.
All of our securities carry market risk insofar as increases in market
interest rates may cause a decrease in their market value. Many also carry
prepayment risk insofar as they may be called prior to maturity in times of low
market interest rates, so that we may have to invest the funds at a lower
interest rate. Investments in securities are made based on certain
considerations, which include the interest rate, tax considerations, yield,
settlement date and maturity of the security, our liquidity position, and
anticipated cash needs and sources. The effect that the proposed security would
have on our credit and interest rate risk and risk-based capital is also
considered. We purchase securities to provide necessary liquidity for day-to-day
operations, and when investable funds exceed loan demand.
Generally, the investment policy of Clover Leaf Bank, as established by
the Board of Directors, is to invest funds among various categories of
investments and maturities based upon our liquidity needs, asset/liability
management policies, investment quality, marketability and performance
objectives.
Our investment policy does not permit engaging directly in hedging
activities or purchasing high-risk mortgage derivative products.
Our debt securities are mainly composed of securities issued by the
U.S. Government and government agencies (primarily Federal Home Loan Bank,
Fannie Mae and Freddie Mac), although from time to time we make other
investments as permitted by applicable laws and regulations.
The following table sets forth information relating to the amortized
cost and fair value of our securities, all of which are classified as available
for sale. For further information, see Notes 1 and 4 of the Notes to
Consolidated Financial Statements.
DECEMBER 31,
-------------------------------------------
2001 2000
--------------------- --------------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
----------- ------- ----------- -------
(IN THOUSANDS)
Federal agencies........... $ 8,352 $ 8,532 $ 12,376 $12,418
State and municipal........ 862 874 946 949
Mortgage-backed securities. 4,311 4,365 1,548 1,522
Corporate.................. 512 535 499 495
----------- ------- ----------- -------
Total................. $ 14,037 $14,306 $ 15,369 $15,384
=========== ======= =========== =======
12
The following table sets forth the scheduled maturities, amortized cost
and weighted average yields for our securities at December 31, 2001.
DUE AFTER ONE YEAR DUE AFTER FIVE YEARS
DUE IN ONE YEAR OR LESS THROUGH FIVE YEARS THROUGH TEN YEARS DUE AFTER TEN YEARS TOTAL
----------------------- -------------------- --------------------- -------------------- -------------------
WEIGHTED WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AMORTIZED AVERAGE AMORTIZED AVERAGE AMORTIZED AVERAGE AMORTIZED AVERAGE AMORTIZED AVERAGE
COST RATE COST RATE COST RATE COST RATE COST RATE
----------- ----------- ---------- --------- ----------- --------- ----------- ------- --------- --------
(DOLLARS IN THOUSANDS)
U. S. Government
agency securities $ 746 6.46% $ 4,153 6.38% $ 3,453 5.94% $ -- --% $ 8,352 6.20%
Obligations of
states and
political
subdivisions.. 20 4.85 841 4.94 -- -- -- -- 862 4.93
Mortgage-backed
securities.... -- -- -- -- 696 8.50 3,615 4.65 4,311 5.27
Corporate....... -- -- 512 6.71 -- -- -- -- 512 6.71
--------- --------- --------- --------- --------- -------- --------- ------- --------- -------
Total......... $ 766 6.42% $ 5,507 6.19% $ 4,149 6.37% $ 3,615 4.65% $ 14,037 5.86%
========= ========= ========= ========= ========= ======== ========= ======= ========= =======
SOURCES OF FUNDS
GENERAL. Deposits have been our primary source of funds for lending and
other investment purposes. In addition to deposits, we derive funds primarily
from principal and interest payments on loans. Loan repayments are a relatively
stable source of funds, while deposit inflows and outflows are significantly
influenced by market interest rates. Borrowings may be used on a short-term
basis to compensate for reductions in the availability of funds from other
sources, and may be used on a longer-term basis for general business purposes.
DEPOSITS. Residents of our primary market area are our main source of
deposits. Deposit account terms vary, with the principal differences being the
minimum balance required, the time periods the funds must remain on deposit and
the interest rate. We do not use brokers to obtain deposits. Our deposit
products include demand and NOW, money market, savings, and term certificate
accounts. In recent years, and in connection with our emphasis on the
origination of commercial business loans, we have promoted money market accounts
with adjustable interest rates. Interest rates paid, maturity terms, service
fees and withdrawal penalties are established by Clover Leaf Bank on a periodic
basis. Management determines the rates and terms based on rates paid by our
competitors, our needs for funds or liquidity, growth goals and federal and
state regulations.
13
DEPOSIT ACCOUNTS BY TYPE. The following table sets forth the dollar
amount of our deposits in the various types of deposit programs as of the dates
indicated.
YEARS ENDED DECEMBER 31,
----------------------------------------------
2001 2000
-------------------- --------------------
AMOUNT PERCENT AMOUNT PERCENT
-------- --------- -------- ---------
(DOLLARS IN THOUSANDS)
TRANSACTIONS AND SAVINGS DEPOSITS:
Demand accounts...................... $ 13,061 16.14% $ 5,414 7.12%
Savings accounts..................... 3,983 4.92 3,288 4.32
NOW accounts......................... 2,804 3.46 2,498 3.29
Money market accounts................ 13,893 17.17 5,515 7.25
-------- -------- -------- --------
Total non-certificates............. 33,741 41.69 16,715 21.98
-------- -------- -------- --------
CERTIFICATES OF DEPOSIT:
0.00 - 3.99%........................ 8,177 10.10 18 0.02
4.00 - 5.99%........................ 18,570 22.94 15,719 20.67
6.00 - 7.99%........................ 14,993 18.53 38,358 5.45
8.00 - 9.99%........................ -- -- 6 0.01
-------- -------- -------- --------
Total certificates of deposit...... 41,740 51.57 54,101 71.15
-------- -------- -------- --------
INDIVIDUAL RETIREMENT ACCOUNTS:
0.00 - 3.99%........................ 674 0.83 -- --
4.00 - 5.99%........................ 2,297 2.84 2,263 2.98
6.00 - 7.99%........................ 2,481 3.07 2,957 3.89
-------- -------- -------- --------
Total individual retirement
accounts........................... 5,452 6.74 5,220 6.87
-------- -------- -------- --------
Total time deposits................ $ 47,192 58.31 $ 59,321 78.02
======== ======== ======== ========
Total deposits....................... $ 80,933 100.00% $ 76,036 100.00%
======== ======== ======== ========
TIME DEPOSIT RATES AND MATURITIES. The following table indicates
interest rate and maturity information for our time deposits as of December 31,
2001.
MATURITY
-----------------------------------------------------
OVER OVER
INTEREST RATE ONE YEAR 1 TO 2 2 TO 3 OVER
OR LESS YEARS YEARS 3 YEARS TOTAL
--------------------------------- ---------- ---------- ----------- ---------- -----------
(IN THOUSANDS)
0-3.99%.......................... $ 6,069 $ 1,880 $ -- $ -- $ 8,851
4-5.99%.......................... 13,585 6,214 1,563 975 20,867
6-7.99%.......................... 11,194 5,712 -- -- 17,474
---------- ---------- ----------- ---------- -----------
Total time deposits.............. $ 30,848 $ 13,806 $ 1,563 $ 975 $ 47,192
========== ========== =========== ========== ===========
TIME DEPOSIT BALANCES AND MATURITIES. The following table indicates
balance and maturity information for our time deposits as of December 31, 2001.
MATURITY
-----------------------------------------------------
OVER OVER
INTEREST RATE 3 MONTHS 3 TO 6 6 TO 12 OVER
OR LESS MONTHS MONTHS 12 MONTHS TOTAL
--------------------------------- ---------- ---------- ----------- ----------- -----------
(IN THOUSANDS)
Time deposits less than $100,000...... $ 6,269 $ 7,250 $ 11,519 $ 14,709 $ 39,747
Time deposits of $100,000 or more..... 1,623 1,886 2,301 1,635 7,445
----------- ---------- ----------- ----------- -----------
Total time deposits................... $ 7,892 $ 9,136 $ 13,820 $ 16,344 $ 47,192
=========== ========== =========== =========== ===========
14
BORROWINGS. Clover Leaf Bank may obtain advances from the Federal Home
Loan Bank of Chicago upon the security of the common stock it owns in that bank
and certain of its residential mortgage loans and mortgage-backed securities,
provided certain standards related to creditworthiness have been met. These
advances are made pursuant to several credit programs, each of which has its own
interest rate and range of maturities. Federal Home Loan Bank advances are
generally available to meet seasonal and other deposit withdrawals and to permit
increased lending.
The following table sets forth the maximum month-end balance and
average balance of Federal Home Loan Bank advances for the periods indicated.
Other than Federal Home Loan Bank advances, we had no other borrowings during
the periods indicated.
YEARS ENDED DECEMBER 31,
---------------------------
2001 2000
------------- ------------
(IN THOUSANDS)
Maximum Balance:
---------------
FHLB advances........................ $ 3,000 $ 5,000
Average Balance:
---------------
FHLB advances........................ $ 1,849 $ 4,089
The following table sets forth total borrowings and the weighted
average interest rate paid on such borrowings at the dates indicated.
YEARS ENDED DECEMBER 31,
---------------------------
2001 2000
------------- ------------
(DOLLARS IN THOUSANDS)
FHLB advances.............................. $ 1,500 $ 3,000
Weighted average interest rate of FHLB
advances................................... 5.65% 6.15%
REGULATION
The following summarizes certain laws and regulations that are
considered material to Clover Leaf Financial and Clover Leaf Bank. However, this
summary does not purport to be complete and is qualified in its entirety by
reference to applicable laws and regulations. Any change in this regulation,
whether by the Federal Deposit Insurance Corporation, the Illinois Office of
Banks and Real Estate, the Board of Governors of the Federal Reserve System, the
Illinois General Assembly or Congress, could have a material adverse impact on
Clover Leaf Financial and Clover Leaf Bank.
CLOVER LEAF FINANCIAL
HOLDING COMPANY ACQUISITIONS. Clover Leaf Financial is a bank holding
company within the meaning of the Bank Holding Company Act and is registered
with and regulated by the Federal Reserve Board. Federal law generally prohibits
a company, without prior Federal Reserve approval, from acquiring the ownership
or control of any bank. In accordance with Federal Reserve Board policy, Clover
Leaf Financial is expected to act as a source of financial strength to Clover
Leaf Bank and to commit resources to support Clover Leaf Bank in circumstances
where Clover Leaf Financial might not do so absent such policy. Under the Bank
Holding Company Act, Clover Leaf Financial is subject to periodic examination by
the Federal Reserve Board and will be required to file periodic reports of its
operations and such additional information as the Federal Reserve Board may
require. Clover Leaf Financial also is subject to registration with, and
regulation by, the Commissioner under the Illinois Savings Bank Act.
BANK HOLDING COMPANY ACT ACTIVITIES AND OTHER LIMITATIONS. A bank
holding company is a legal entity separate and distinct from its subsidiary
bank. Normally, the major source of a holding company's revenue is dividends
from its subsidiary bank. The right of a bank holding company to participate as
a stockholder in any
15
distribution of assets of its subsidiary bank upon its liquidation or
reorganization is subject to the prior claims of creditors of the subsidiary
bank. The subsidiary bank is subject to claims by creditors for long-term and
short-term debt obligations, including obligations for federal funds purchased
and securities sold under repurchase agreements, as well as deposit liabilities.
The Bank Holding Company Act also prohibits a bank holding company,
with certain exceptions, from acquiring more than 5% of the voting shares of any
company that is not a bank and from engaging in any business other than banking
or managing or controlling banks. Under the Bank Holding Company Act, the
Federal Reserve Board is authorized to approve the ownership of shares by a bank
holding company in any company, the activities of which the Federal Reserve
Board has determined to be so closely related to banking or to managing or
controlling banks as to be a proper incident thereto. The Federal Reserve Board
has by regulation determined that certain activities are closely related to
banking within the meaning of the Bank Holding Company Act. These activities
include operating a mortgage company, finance company, credit card company,
factoring company, trust company or savings association; performing certain data
processing operations; providing limited securities brokerage services; acting
as an investment or financial advisor; acting as an insurance agent for certain
types of credit-related insurance; leasing personal property on a full-payout,
non-operating basis; providing tax planning and preparation services; operating
a collection agency; and providing certain courier services. The Federal Reserve
Board also has determined that certain other activities, including real estate
brokerage and syndication, land development and property management, are not
closely related to banking and a proper incident thereto. In making such
determinations, the Federal Reserve Board is required to weigh the expected
benefit to the public, such as greater convenience, increased competition or
gains in efficiency, against the possible adverse effects, such as undue
concentration of resources, decreased or unfair competition, conflicts of
interest or unsound banking practices.
A bank holding company that is registered as a "financial holding
company" is also permitted to engage in activities that are financial in nature
or incidental to such financial activities. Activities that are considered
financial in nature include: securities underwriting, dealing and market making;
insurance underwriting; and merchant banking.
CAPITAL REQUIREMENTS. The Federal Reserve Board has adopted capital
adequacy guidelines for bank holding companies (on a consolidated basis)
substantially similar to those of the FDIC for Clover Leaf Bank. Clover Leaf
Financial's pro forma Tier 1 and total capital significantly exceed the Federal
Reserve Board's capital adequacy requirements.
RESTRICTIONS ON TRANSACTIONS WITH AFFILIATES. Transactions between a
savings bank and its "affiliates" are subject to quantitative and qualitative
restrictions under Sections 23A and 23B of the Federal Reserve Act and FDIC
regulations. Affiliates of a savings bank include, among other entities, the
savings bank's holding company and companies that are controlled by or under
common control with the savings bank.
In general, the extent to which a savings bank or its subsidiaries may
engage in certain "covered transactions" with affiliates is limited to an amount
equal to 10% of the institution's capital and surplus, in the case of covered
transactions with any one affiliate, and to an amount equal to 20% of such
capital and surplus, in the case of covered transactions with all affiliates. In
addition, a savings bank and its subsidiaries may engage in covered transactions
and certain other transactions only on terms and under circumstances that are
substantially the same, or at least as favorable to the savings bank or its
subsidiary, as those prevailing at the time for comparable transactions with
nonaffiliated companies. A "covered transaction" is defined to include a loan or
extension of credit to an affiliate; a purchase of investment securities issued
by an affiliate; the purchase of assets from an affiliate, with certain
exceptions; the acceptance of securities issued by an affiliate as collateral
for a loan or extension of credit to any party; or the issuance of a guarantee,
acceptance or letter of credit on behalf of an affiliate.
In addition, Sections 22(h) and (g) of the Federal Reserve Act place
restrictions on loans to executive officers, directors and principal
stockholders. Under Section 22(h), loans to a director, an executive officer and
to a greater than 10% stockholder of a bank, and certain affiliated interests of
either, may not exceed, together with all other outstanding loans to such person
and affiliated interests, the bank's loans to one borrower limit (generally
equal to 15% of the institution's unimpaired capital and surplus). Section 22(h)
also requires that loans to directors,
16
executive officers and principal stockholders be made on terms substantially the
same as offered in comparable transactions to other persons and also requires
prior board approval for certain loans. In addition, the aggregate amount of
extensions of credit by a bank to all insiders cannot exceed the institution's
unimpaired capital and surplus. Furthermore, Section 22(g) places additional
restrictions on loans to executive officers.
ILLINOIS HOLDING COMPANY REGULATION. Clover Leaf Financial is
registered as savings bank holding company with the Illinois Office of Banks and
Real Estate. Under the Illinois Savings Bank Act and applicable regulations, an
Illinois-registered savings bank holding company is required to obtain an annual
audit of its financial statements, to file financial reports with the Illinois
Office of Banks and Real Estate and to maintain complete corporate books and
records. An Illinois savings bank holding company is subject to examination by
the Illinois Office of Banks and Real Estate. An Illinois savings bank holding
company may control more than 5% of the voting shares of another savings bank or
savings bank holding company if the target savings bank or savings bank holding
company is located in a state that permits the acquisition of an
Illinois-chartered savings bank or an Illinois savings bank holding company. The
Illinois Savings Bank Act provides that no person, acting directly or indirectly
or through or in concert with one or more other persons, may acquire control of
10% or more of an Illinois savings bank holding company unless 60 days' prior
written notice has been given to the Illinois Office of Banks and Real Estate.
FEDERAL SECURITIES LAWS. Clover Leaf Financial's common stock is
registered with the SEC under Section 12(g) of the Securities Exchange Act of
1934. Clover Leaf Financial is subject to the proxy and tender offer rules,
insider trading reporting requirements and restrictions, and certain other
requirements under the Exchange Act.
CLOVER LEAF BANK
GENERAL. Clover Leaf Bank is an Illinois-chartered savings bank, the
deposit accounts of which are insured by the Saving Association Insurance Fund
of the FDIC. As an FDIC insured, Illinois-chartered savings bank, Clover Leaf
Bank is subject to the examination, supervision, reporting and enforcement
requirements of the Illinois Office of Banks and Real Estate, as the chartering
authority for Illinois savings banks, and the FDIC, as administrator of the
Savings Association Insurance Fund, and to the statutes and regulations
administered by the Illinois Office of Banks and Real Estate and the FDIC
governing such matters as capital standards, mergers, establishment of branch
offices, subsidiary investments and activities and general investment authority.
Clover Leaf Bank is required to file reports with the Illinois Office of Banks
and Real Estate and the FDIC concerning its activities and financial condition,
and will be required to obtain regulatory approvals prior to entering into
certain transactions, including mergers with, or acquisitions of, other
financial institutions.
The Illinois Office of Banks and Real Estate and the FDIC have
extensive enforcement authority over Illinois-chartered savings banks, such as
Clover Leaf Bank. This enforcement authority includes, among other things, the
ability to issue cease-and-desist or removal orders, to assess civil money
penalties and to initiate injunctive actions. In general, these enforcement
actions may be initiated for violations of laws and regulations and unsafe and
unsound practices.
The Illinois Office of Banks and Real Estate has established a schedule
for the assessment of "supervisory fees" upon all Illinois savings banks to fund
the operations of the Illinois Office of Banks and Real Estate. These
supervisory fees are computed on the basis of each savings bank's total assets
(including consolidated subsidiaries) and are payable at the end of each
calendar quarter. A schedule of fees has also been established for certain
filings made by Illinois savings banks with the Illinois Office of Banks and
Real Estate. The Illinois Office of Banks and Real Estate also assesses fees for
examinations conducted by its staff, based upon the number of hours spent by the
staff performing the examination. During the year ended December 31, 2001,
Clover Leaf Bank incurred approximately $25,000 in supervisory fees and
expenses.
SUPERVISORY AGREEMENT. Clover Leaf Bank entered into a Supervisory
Agreement with the Illinois Office of Banks and Real Estate relating to the
preparation and timely filing of its audited financial statements. Under Section
9014 of the Illinois Savings Bank Act, we are required to file audited financial
statements with the Illinois Office of Banks and Real Estate within 90 days of
the end of our fiscal year. We failed to prepare and file audited
17
financial statements with the Illinois Office of Banks and Real Estate for the
year ended December 31, 2000 in a timely manner. As part of the Supervisory
Agreement, we agreed to file the required audited financial statements by May
31, 2001, and we further agreed that we would take certain actions in connection
with the engagement of auditors and the audit of our financial statements for
the year ending December 31, 2001. In accordance with the Supervisory Agreement,
we filed the audited financial statements for the year ended December 31, 2000
with the Illinois Office of Banks and Real Estate. Management intends to comply
with the remaining provisions of the Supervisory Agreement relating to the
preparation of future audited financial statements.
INSURANCE OF DEPOSIT ACCOUNTS. The Federal Deposit Insurance
Corporation has adopted a risk-based system for assessing deposit insurance
premiums. The Federal Deposit Insurance Corporation assigns an institution to
one of three capital categories based on the institution's financial
information, as of the reporting period ending seven months before the
assessment period, and one of three supervisory subcategories within each
capital group. The three capital categories are well capitalized, adequately
capitalized and undercapitalized. The supervisory subgroup to which an
institution is assigned is based on a supervisory evaluation provided to the
Federal Deposit Insurance Corporation by the institution's primary federal
regulator and information which the Federal Deposit Insurance Corporation
determines to be relevant to the institution's financial condition and the risk
posed to the deposit insurance funds. An institution's assessment rate depends
on the capital category and supervisory category to which it is assigned. The
Federal Deposit Insurance Corporation is authorized to raise the assessment
rates. The Federal Deposit Insurance Corporation has exercised this authority
several times in the past and may raise insurance premiums in the future. If
this type of action is taken by the Federal Deposit Insurance Corporation, it
could have an adverse effect on the earnings of Clover Leaf Bank.
CAPITAL REQUIREMENTS. The FDIC has capital adequacy regulations and
policies regarding the capital adequacy of state-chartered banks that, like
Clover Leaf Bank, are not members of the Federal Reserve System. The FDIC's
capital regulations establish a minimum 3.0% Tier I leverage capital requirement
for the most highly-rated state-chartered, non-member banks, with additional
capital of at least 100 to 200 basis points for all other state-chartered,
non-member banks, which effectively will increase the minimum Tier I leverage
ratio for such other banks to 4.0% to 5.0% or more. Under the FDIC's regulation,
the highest-rated banks are those that the FDIC determines are not anticipating
or experiencing significant growth and have well diversified risk, including no
undue interest rate risk exposure, excellent asset quality, high liquidity, good
earnings and, in general, are considered strong banking organizations, rated
composite 1 under the Uniform Financial Institutions Rating System. Leverage or
core capital is defined as the sum of common stock, capital surplus, retained
earnings, noncumulative perpetual preferred stock and related surplus, and
minority interests in consolidated subsidiaries, minus all intangible assets
other than certain qualifying supervisory goodwill, and certain purchased
mortgage servicing rights and purchased credit and relationships.
The FDIC also requires that savings banks meet a risk-based capital
standard. Under the risk-based capital standard, total capital, which is defined
as Tier I capital and supplementary (Tier 2 capital), must equal at least 8% of
risk-weighted assets. In determining the amount of risk-weighted assets, all
assets, plus certain off balance sheet assets, are multiplied by a risk-weight
of 0% to 100%, based on the risks the FDIC believes are inherent in the type of
asset.
The components of Tier I capital are equivalent to those discussed
above under the 3% leverage standard. The components of supplementary (Tier 2)
capital include certain perpetual preferred stock, certain mandatory convertible
securities, certain subordinated debt and intermediate preferred stock and
general allowances for loan and lease losses. Allowance for loan and lease
losses includable in supplementary capital is limited to a maximum of 1.25% of
risk-weighted assets. Overall, the amount of capital counted toward
supplementary capital cannot exceed 100% of core capital. At December 31, 2001,
Clover Leaf Bank met each of its capital requirements.
A bank which has less than the minimum leverage capital requirement
must, within 60 days from the date it fails to comply with this requirement,
submit to its FDIC regional director for review and approval a reasonable plan
describing the means and timing by which the bank will achieve its minimum
leverage capital requirement. A bank that fails to file such a plan with the
FDIC is deemed to be operating in an unsafe and unsound manner and may be
subject to a cease-and-desist order from the FDIC. FDIC regulations also provide
that any insured depository
18
institution with a ratio of Tier I capital to total assets that is less than
2.0% is deemed to be operating in an unsafe or unsound condition and is subject
to potential termination of deposit insurance. However, such an institution will
not be subject to an enforcement proceeding solely on account of its capital
ratios if it has entered into and is in compliance with a written agreement with
the FDIC to increase its Tier I leverage capital ratio and to take such other
action as may be necessary to operate in a safe and sound manner. The FDIC
capital regulation also provides, among other things, for the issuance by the
FDIC of a capital directive, which is a final order issued to a bank that fails
to maintain minimum capital to restore its capital to the minimum leverage
capital requirement within a specified time period. Such directive is
enforceable in the same manner as a final cease-and-desist order.
At December 31, 2001, Clover Leaf Bank exceeded all of its regulatory
capital requirements, with leverage, Tier 1 risk-based and total risk-based
capital ratios of 11.00%, 17.39% and 18.53%, respectively.
Any savings bank that fails any of the capital requirements is subject
to possible enforcement actions by the FDIC. These actions could include a
capital directive, a cease and desist order, civil money penalties, the
establishment of restrictions on the institution's operations, termination of
Federal deposit insurance and the appointment of a conservator or receiver.
Under the Illinois Savings Bank Act, a savings bank, such as Clover
Leaf Bank, must maintain minimum capital of 3% of total assets. The Illinois
Office of Banks and Real Estate may establish higher minimums based upon a
savings bank's history, management or earnings prospects.
At December 31, 2001, Clover Leaf Bank was deemed a well-capitalized
institution for purposes of the above regulations and as such is not subject to
the above mentioned restrictions.
Clover Leaf Bank would not be able to pay dividends on its capital
stock if its capital were reduced below the remaining balance of the liquidation
account established in connection with the conversion.
SAFETY AND SOUNDNESS GUIDELINES. The FDIC and the other federal banking
agencies have established guidelines for safety and soundness, addressing
operational and managerial standards, as well as compensation matters for
insured financial institutions. Institutions failing to meet these standards are
required to submit compliance plans to their appropriate federal regulators. The
FDIC and the other agencies also have established guidelines regarding asset
quality and earnings standards for insured institutions. Clover Leaf Bank
believes that it is in compliance with these guidelines and standards.
COMMUNITY REINVESTMENT ACT AND FAIR LENDING LAWS. Savings banks, such
as Clover Leaf Bank, have a responsibility under the Community Reinvestment Act
and related regulations of the FDIC to help meet the credit needs of their
communities, including low- and moderate-income neighborhoods. In addition, the
Equal Credit Opportunity Act and the Fair Housing Act (together, the "Fair
Lending Laws") prohibit lenders from discriminating in their lending practices
on the basis of characteristics specified in those statutes. An institution's
failure to comply with the provisions of Community Reinvestment Act could, at a
minimum, result in regulatory restrictions on its activities. Failure to comply
with the Fair Lending Laws could result in enforcement actions by the FDIC, as
well as the Department of Justice.
FEDERAL HOME LOAN BANK SYSTEM. Clover Leaf Bank is a member of the
Federal Home Loan Bank of Chicago, which is one of 12 regional Federal Home Loan
Banks that administers the home financing credit function of savings
institutions. Each Federal Home Loan Bank serves as a reserve or central bank
for its members within its assigned region. It is funded primarily from proceeds
derived from the sale of consolidated obligations of the Federal Home Loan Bank
System. It makes loans to members (i.e., advances) in accordance with policies
and procedures established by the Board of Directors of the Federal Home Loan
Bank. At December 31, 2001, Clover Leaf Bank had $1.5 million of Federal Home
Loan Bank advances. See the Notes to the Consolidated Financial Statements.
As a member, Clover Leaf Bank is required to purchase and maintain
stock in the Federal Home Loan Bank of Chicago in an amount equal to at least 1%
of its aggregate unpaid residential mortgage loans or similar
19
obligations at the beginning of each year. At December 31, 2001, Clover Leaf
Bank had $3.1 million in Federal Home Loan Bank stock, which was in compliance
with this requirement.
The Federal Home Loan Banks are required to provide funds for the
resolution of troubled savings institutions and to contribute to affordable
housing programs through direct loans or interest subsidies on advances targeted
for community investment and low- and moderate-income housing projects. These
contributions have adversely affected the level of Federal Home Loan Bank
dividends paid in the past and could do so in the future. These contributions
also could have an adverse effect on the value of Federal Home Loan Bank stock
in the future. The average dividend yield on Clover Leaf Bank's Federal Home
Loan Bank stock was 6.14% in 2001 and 7.09% in 2000.
FEDERAL RESERVE SYSTEM. The Federal Reserve Board requires all
depository institutions to maintain reserves against their transaction accounts
(primarily NOW and Super NOW checking accounts) and non-personal time deposits.
As of November 3, 1999, no reserves were required to be maintained on the first
$5.0 million of transaction accounts, reserves of 3% were required to be
maintained against the next $44.3 million of net transaction accounts, and a
reserve of $1.3 million plus 10% against net transaction accounts above this
amount. The above dollar amounts and percentages are subject to periodic
adjustment by the Federal Reserve Board. Because required reserves must be
maintained in the form of vault cash or a noninterest-bearing account at a
Federal Reserve Bank, the effect of this reserve requirement is to reduce an
institution's earning assets and constrain its ability to lend.
TAXATION
FEDERAL TAXATION
For federal income tax purposes, Clover Leaf Financial and Clover Leaf
Bank file a consolidated federal income tax return on a calendar year basis
using the accrual method of accounting.
Deferred income taxes arise from the recognition of items of income and
expense for tax purposes in years different from those in which they are
recognized in the consolidated financial statements. Clover Leaf Financial
accounts for deferred income taxes by the asset and liability method, applying
the enacted statutory rates in effect at the balance sheet date to differences
between the book basis and the tax basis of assets and liabilities. The
resulting deferred tax liabilities and assets are adjusted to reflect changes in
the tax laws.
Clover Leaf Financial is not currently subject to the alternative
minimum tax. Clover Leaf Financial may be subject to the corporate alternative
minimum tax in the future, to the extent it exceeds Clover Leaf Financial's
regular income tax for the year if its annual gross receipts for a three-year
consecutive period exceed $7 million. The alternative minimum tax will be
imposed at the rate of 20% of a specially computed tax base. Included in this
base are a number of preference items, including interest on certain tax-exempt
bonds issued after August 7, 1986, and an "adjusted current earnings"
computation which is similar to a tax earnings and profits computation. In
addition, for purposes of the alternative minimum tax, the amount of alternative
minimum taxable income that may be offset by net operating losses is limited to
90% of alternative minimum taxable income.
Clover Leaf Bank's income tax returns have not been audited by the
Internal Revenue Service for the past five years.
STATE TAXATION
ILLINOIS STATE TAXATION. Clover Leaf Financial is required to file
Illinois income tax returns and pay tax at an effective tax rate of 7.18% of
Illinois taxable income. For these purposes, Illinois taxable income generally
means federal taxable income subject to certain modifications, the primary one
of which is the exclusion of interest income on United States obligations.
20
DELAWARE TAXATION. As a Delaware holding company not earning income in
Delaware, Clover Leaf Financial is exempt from Delaware corporate income tax but
is required to file an annual report with and pay an annual franchise tax to the
State of Delaware.
ITEM 2. PROPERTIES
-------------------
At December 31, 2001, Clover Leaf Financial conducted its business from
our main office at 200 East Park Street, Edwardsville, Illinois. The following
table sets forth certain information with respect to the offices of Clover Leaf
Bank at December 31, 2001.
ORIGINAL YEAR
LEASED OR LEASED OR DATE OF LEASE
LOCATION OWNED ACQUIRED EXPIRATION
-------- ----- -------- --------------------------
200 East Park Street Owned 1976 N/A
Edwardsville, Illinois 62025
2143 South State Route 157 Owned 1999 N/A N/A
Edwardsville, Illinois 62025
ITEM 3. LEGAL PROCEEDINGS
--------------------------
Clover Leaf Bank is involved, from time to time, as plaintiff or
defendant in various legal actions arising in the normal course of its business.
At December 31, 2001, Clover Leaf Bank was not involved in any material legal
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------------------------------------------------------------
No matters were submitted to a vote of stockholders during the fourth
quarter of the year under report.
PART II
ITEM 5. MARKET FOR COMPANY'S COMMON STOCK AND RELATED STOCK HOLDER MATTERS
---------------------------------------------------------------------------
The section entitled "Market for Common Stock" section of Clover Leaf
Financial's Annual Report to Stockholders is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
--------------------------------
The section entitled "Selected Consolidated Financial Information and
Other Data" of Clover Leaf Financial's Annual Report to Stockholders is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
--------------------------------------------------------------------------------
OF OPERATIONS
-------------
The section entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations" of Clover Leaf Financial's Annual Report to
Stockholders is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
----------------------------------------------------
The financial statements of Clover Leaf Financial's Annual Report to
Stockholders are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
------------------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
None.
21
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
--------------------------------------------------------
The "Proposal I--Election of Directors" section of the Company's
definitive Proxy Statement for the Company's 2002 Annual Meeting of Stockholders
(the "2002 Proxy Statement") is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
-------------------------------
The "Proposal I--Election of Directors" section of the Company's 2002
Proxy Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
-----------------------------------------------------------------------
The "Proposal I--Election of Directors" section of the Company's 2002
Proxy Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
-------------------------------------------------------
The "Transactions with Certain Related Persons" section of the
Company's 2002 Proxy Statement is incorporated herein by reference.
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
-------------------------------------------------------------------------
(a)(1) FINANCIAL STATEMENTS
The exhibits and financial statement schedules filed as a part of this
Form 10-K are as follows:
(A) Independent Auditors' Report
(B) Consolidated Balance Sheets
(C) Consolidated Statements of Income
(D) Consolidated Statements of Changes in Equity
(E) Consolidated Statements of Cash Flows
(F) Notes to Consolidated Financial Statements
(a)(2) FINANCIAL STATEMENT SCHEDULES
All financial statement schedules have been omitted as the required
information is inapplicable or has been included in the Notes to Consolidated
Financial Statements.
22
(b) REPORTS ON FORM 8-K
None.
(c) EXHIBITS
3.1 Certificate of Incorporation of Clover Leaf Financial Corp.*
3.2 Bylaws of Clover Leaf Financial Corp.*
4 Form of Common Stock Certificate of Clover Leaf Financial Corp.*
10.1 Form of Employment Agreement for Dennis M. Terry*
10.2 Form of Employee Stock Ownership Plan*
10.3 Form of Severance Agreement*
10.4 Director Emeritus Plan*
10.5 Form of Director's Deferred Compensation Agreement*
10.6 Officer's Deferred Bonus Compensation Agreement*
13 Portions of 2001 Annual Report to Stockholders
21 Subsidiaries of the Registrant*
----------------------------------
* Incorporated by reference to the Registration Statement on Form SB-2 of
Clover Leaf Financial Corp. (Registration No. 333-69762) initially
filed with the Securities and Exchange Commission on September 21,
2001.
23
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CLOVER LEAF FINANCIAL CORP.
Date: March 26, 2002 By: /s/ Dennis M. Terry
--------------------------------------------
Dennis M. Terry
President and Chief Executive Officer
(Duly Authorized Representative)
Pursuant to the requirements of the Securities Exchange of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURES TITLE DATE
/s/ Dennis M. Terry President, Chief Executive March 26, 2002
------------------------------------ Officer and Director (Principal
Dennis M. Terry Executive Officer)
/s/ Darlene F. McDonald Vice President and Treasurer March 26, 2002
------------------------------------ (Principal Financial and
Darlene F. McDonald Accounting Officer)
/s/ Joseph J. Gugger Director March 26, 2002
------------------------------------
Joseph J. Gugger
Director
------------------------------------
Kenneth P. Highlander
/s/ Henry L. Malench Director March 26, 2002
------------------------------------
Henry L. Malench
/s/ Gary D. Niebur Director March 26, 2002
------------------------------------
Gary D. Niebur
/s/ Robert W. Schwartz Director March 26, 2002
------------------------------------
Robert W. Schwartz
/s/ Philip H, Weber Director March 26, 2002
------------------------------------
Philip H. Weber
24