Illinois Service federal Savings and Loan Association of Chicago
Chairman's Statement to the Shareholders at the annual meeting
January 19, 2011
It was a challenging 2010 for Illinois Service Federal (ISF) as the U.S. economy struggled and was unable to sustain a recovery. The continuing malaise of the financial markets and failures of financial institutions created a level of skepticism and shook the confidence of consumers and businesses. The quicksand of property value decline, especially in ISF's market areas impeded the progress of many financial institutions at a time when local communities were starved for access to credit.
In this environment,
The total assets of ISF increased $1.7 million to $149.2 million at the end of 2010. Deposit accounts increased by $5.2 million to $102.8 million. Passbook savings decreased $188,000, money market and NOW accounts increased $813,000 and checking accounts increased by $571,000. Certificates of deposit increased by $4.0 million as many of our customers preferred the yields offered on longer term deposits.
Loan growth in most categories was below management's targets reaching $3.7 million by 12-31-2010. ISF finished the year with total loans of $59.3 million. Mortgage loans increased by $3.7 million, commercial loans increased by $47 thousand and share loans decreased by $18 thousand. Consumer loans declined as well by $55 thousand.
Retained Earnings increased by our year-to-date net income of $77,000. The increase in market rates at year end resulted in a market value loss of our investment portfolio of $706,000. The net income of $77,000 combined with the loss in market value of our investment portfolio in the amount of $707,000 resulted in a decrease of $629,000 in Total Equity Capital. Total Equity Capital was $14,778,678 as of year-end.
During the year, management repaid $2 million in borrowings from the Federal Home Loan Bank, finishing the year with $30 million in Federal Home Loan Bank borrowings.
Our allowance for loan and lease losses (ALLL) was $777,494 at the beginning of 2010. ALLL provisions for the year totaled $1,048,303. Charge-offs net of recoveries was $574,448 and the year ended with ALLL at $1,299,933 or 2.19% of total loans.
Total interest income for the year 2010 was $6.93 million compared to the 2009 total interest income of $6.85 million. This was an increase of $80 thousand. Total interest expense for the year was $2.18 million compared to 2009 total interest expense of $2.34 million. Interest expense, in total decreased $160,000. Net interest margin increased $24 thousand to $4.75 million.
Other non-interest income was $1,339,666 in 2010 compared to $822,257 in the year 2009. In 2010 we sold investment securities at a gain of $281,000. In 2009 this figure was $124,000 or $157,000 more in investment gains. The strategy in 2010 was to record some investment gains prior to experiencing rising interest rates that would diminish the success of such a strategy.
Also included in the 2010 non-interest income is a Bank Enterprise Award Grant of $600,000. The grant added approximately $360,000 to income net of taxes. ISF recognized a CDFI and a Bank Enterprise Award Grant totaling $199,000 in 2009.
As mentioned previously, the net income for the year totaled $77,000 compared to our loss recorded in 2009 in the amount of $215,000. Our core regulatory capital ratio is 9.56% and our risk based capital ratio stands at 22.89%.
The board of directors, management, and staff of Illinois Service Federal Savings and Loan Association extend our appreciation to you, of our loyal customers who have remained patient and supportive during this year. Your continued support of your savings and loan association has been the bedrock of our strength and the inspiration that will bring out the very best from all of us.