10-Q 1 d10q.txt FORM 10-Q ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2001 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to _________ Commission file number 0-20082 Alliance Bancorp (Exact name of registrant as specified in its charter) Delaware 36-3811768 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One Grant Square, Hinsdale, Illinois 60521 (Address of principal executive offices) (Zip Code) (630) 323-1776 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all the reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO____ --- Indicate the number of shares outstanding of each of the issuer's classes of stock, as of the latest practicable date. Common Stock, $0.01 par value -9,299,055 shares outstanding as of May 4, 2001. ================================================================================ Alliance Bancorp and Subsidiaries Form 10-Q Index -----

Alliance Bancorp and Subsidiaries Consolidated Statements of Financial Condition

See accompanying notes to unaudited consolidated financial statements. 1 Alliance Bancorp and Subsidiaries Consolidated Statements of Income

See accompanying notes to unaudited consolidated financial statements. 2 Alliance Bancorp and Subsidiaries Consolidated Statements of Changes in Stockholders' Equity

See accompanying notes to unaudited consolidated financial statements. 3 Alliance Bancorp and Subsidiaries Consolidated Statements of Cash Flows

See accompanying notes to unaudited consolidated financial statements. 4 Alliance Bancorp and Subsidiaries Notes to Consolidated Financial Statements (unaudited) Three Months Ended March 31, 2001 and 2000 (1) Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of only normal recurring accruals) necessary for a fair presentation have been included. The unaudited consolidated financial statements include the accounts of Alliance Bancorp (the "Company") and its wholly-owned subsidiaries. All material intercompany balances and transactions have been eliminated. (2) Comprehensive Income The following table sets forth the required disclosures of other comprehensive income and the reclassification amounts as presented in the consolidated statements of changes in stockholders' equity and the related tax effects allocated to each component of other comprehensive income for the periods indicated:

5 Alliance Bancorp and Subsidiaries Notes to Consolidated Financial Statements - (Continued) (unaudited) Three Months Ended March 31, 2001 and 2000 (3) Earnings per Share The following table sets forth the computation of basic and diluted earnings per share for the periods indicated:

(4) Commitments and Contingencies At March 31, 2001, the Company had outstanding commitments to originate or purchase loans of $23.4 million and undisbursed balances of construction loans of $164.4 million. Unused equity lines of credit available to customers were $111.7 million at March 31, 2001. 6 Alliance Bancorp and Subsidiaries Notes to Consolidated Financial Statements - (Continued) (unaudited) Three Months Ended March 31, 2001 and 2000 (5) Operating Segments The Company's operations include three primary segments: banking, mortgage brokerage and joint venture real estate developments. Through its banking subsidiary's network of 19 retail banking facilities in Chicago; north, west and southwestern Cook County; and DuPage County in Illinois, the Company provides traditional community banking services such as accepting deposits and making loans. Mortgage brokerage activities conducted through the Bank's subsidiary, Liberty Home Mortgage include the origination of primarily residential mortgage loans for sale to various investors as well as to the Bank. Joint venture real estate activities are primarily conducted through the Company's real estate subsidiaries. The real estate subsidiaries provide equity financing in various developments with reputable real estate developers, primarily for the construction of single family homes. The Company's three reportable segments are strategic business units that are separately managed as they offer different products and services and have different marketing strategies. Smaller operating segments are combined and are shown as "Other" below and consist of financial advice and brokerage services and holding company investments. Assets and results of operations are based on accounting principles generally accepted in the United States of America, with profit and losses of equity method investees excluded. Inter-segment revenues and expenses are eliminated in reporting consolidated results of operations. Operating segment information is as follows:

7 Alliance Bancorp and Subsidiaries Notes to Consolidated Financial Statements - (Continued) (unaudited) Three Months Ended March 31, 2001 and 2000

(6) Reclassifications Certain reclassifications of prior year amounts have been made to conform with the current year presentation. 8 Alliance Bancorp and Subsidiaries Management's Discussion and Analysis of Financial Condition and Results of Operations General Alliance Bancorp ( the "Company") is a registered savings and loan holding company incorporated under the laws of the state of Delaware and is engaged in the business of providing financial service products to the public through its wholly-owned subsidiary, Liberty Federal Bank (the "Bank"). The Bank, a Federal savings bank chartered under the authority of the Office of Thrift Supervision ("OTS"), originally was organized in 1934, and changed its charter from a federal savings and loan association to a federal savings bank in 1991. The Bank is a member of the Federal Home Loan Bank ("FHLB") System and its deposit accounts are insured to the maximum allowable amount by the Federal Deposit Insurance Corporation ("FDIC"). The Bank is regulated by the OTS and the FDIC and is further regulated by the Board of Governors of the Federal Reserve System as to reserves required to be maintained against deposits and certain other matters. The Bank is a community-oriented company providing financial services through nineteen full service retail banking facilities in Chicago; north, west and southwestern Cook County; and DuPage County in Illinois. The Bank offers a variety of deposit products in an attempt to attract funds from the general public in highly competitive market areas surrounding its offices. In addition to deposit products, the Bank also offers its customers financial advice and security brokerage services through INVEST Financial Corporation ("INVEST"). The Bank invests its retail deposits primarily in mortgage and consumer loans, investment securities and mortgage-backed securities, secured primarily by one- to four-family residential loans. The earnings of the Bank are primarily dependent on its net interest income, which is the difference between the interest income earned on its loans, mortgage-backed and investment securities portfolios, and its cost of funds, consisting of the interest paid on its deposits and borrowings. The Bank's earnings are also affected by noninterest income, including income related to loan origination fees contributed by Liberty Home Mortgage and the noncredit consumer related financial services offered by the Bank, such as net commissions received by the Bank from securities brokerage services, loan servicing income, fee income on transaction accounts, and interchange fees from its shared ATMs. In the current quarter, the Bank terminated its participation in a shared ATM network primarily due to increased costs. Currently the Bank operates eighteen ATM's located at its branch offices. The Bank's noninterest income has also been affected by gains from the sale of various assets, including loans, mortgage-backed securities, investment securities and real estate. Noninterest expense consists principally of employee compensation and benefits, occupancy expense, federal deposit insurance premiums, and other general and administrative expenses of the Bank and Liberty Home Mortgage. The Bank's results of operations are also significantly affected by general economic and competitive conditions, particularly changes in market interest rates, government policies and actions of regulatory authorities. On January 22, 2001, the Company entered into a definitive agreement with Charter One Financial, Inc. under which Alliance Bancorp would be merged into Charter One. Charter One is one of the 30 largest bank holding companies in the country with over $33 billion in assets and approximately 420 branch office locations in Ohio, Michigan, New York, Illinois, Massachusetts and Vermont. Terms of the agreement call for each share of Alliance common stock to be exchanged for $5.25 in cash and .72 shares of Charter One stock. The transaction has been approved by the boards of directors of both companies and is subject to approval by the Office of Thrift Supervision, the Federal Reserve Board, and Alliances' shareholders. The transaction will be accounted for as a purchase and is expected to be completed early in the third quarter of 2001. 9 Forward-Looking Statements This Quarterly Report on Form 10-Q, contains forward-looking statements within the meaning of the federal securities laws. The Company intends such forward- looking statements to be covered by the safe harbor provisions for forward- looking statements contained in the Private Securities Reform Act of 1995, and is including this statement for purposes of these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations of the Company, are generally identified by use of the words "believe," "expect," "intend," "anticipate," "estimate," "project," or similar expressions. The Company's ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations of the Company and the subsidiaries include, but are not limited to, changes in: interest rates, general economic conditions, legislative/regulatory changes, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board, the quality or composition of the loan or investment portfolios, demand for loan products, deposit flow, competition, demand for financial services in the Company's market area and accounting principles and guidelines. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Accordingly, results actually achieved may differ materially from expected results in these statements. The Company does not undertake, and specifically disclaims, any obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements. Liquidity/Capital Resources The Company's primary sources of funds are deposits, borrowings, principal and interest payments on loans and mortgage-backed securities and the sale of loans, mortgage-backed and investment securities. While maturities and scheduled amortization of loans and mortgage-backed securities are a predictable source of funds, deposit flows and mortgage prepayments are greatly influenced by interest rate cycles and economic conditions. The Company's most liquid assets are cash and cash equivalents, which include investments in highly liquid, short-term investments and interest-bearing deposits. The levels of these assets are dependent on the Company's operating, financing, lending and investing activities during any given period. At March 31, 2001, cash and cash equivalents totaled $84.8 million. Liquidity management for the Company is both a daily and long-term function of the Company's management strategy. Excess funds are generally invested in short-term investments and interest-bearing deposits. In the event that the Company should require funds beyond its ability to generate them internally, additional sources of funds are available through the use of FHLB advances. The Company's cash flows are comprised of three classifications: cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities. Net cash related to operating activities, consisting primarily of interest and dividends received less interest paid on deposits and the origination and sale of loans, provided $15.3 million for the three months ended March 31, 2001. Net cash related to investing activities, consisting primarily of disbursements for loans originated or purchased for investment, offset by principal collections on loans and mortgage-backed securities, provided $40.0 million for the three months ended March 31, 2001. Net cash utilized by financing activities, consisting primarily of net activity in deposit and escrow accounts, net activity from borrowed funds and the payment of dividends, totaled $22.6 million for the three months ended March 31, 2001. The Bank's tangible capital ratio at March 31, 2001 was 7.21%. This exceeded the tangible capital requirement of 1.5% of adjusted assets by $113.5 million. The Bank's core capital ratio at March 31, 2001 was 7.21%. This exceeded the core capital requirement of 4.0% of adjusted assets by $63.8 million. The Bank's risk-based capital ratio was 10.83% at March 31, 2001. The Bank currently exceeds the risk-based capital requirement of 8.0% of risk-weighted assets by $39.1 million. 10 Changes in Financial Condition The Company had total assets of $2.0 billion at March 31, 2001, a decrease of $10.8 million, or 0.5%, from December 31, 2000. Loans totaled $1.5 billion at March 31, 2001, a decrease of $33.8 million. Loan originations were $117.7 million for the three months ended March 31, 2001, offset by loan sales of $55.0 million and principal repayments of $96.4 million. Deposits totaled $1.3 billion at March 31, 2001, an increase of $29.3 million. The deposit base and the interest paid on deposits continues to be affected by alternative investment products and competition within the Company's market areas. The weighted average deposit cost at March 31, 2001 was 5.15% compared to 5.21% at December 31, 2000. Stockholders' equity totaled $170.6 million at March 31, 2001, an increase of $6.5 million. At March 31, 2001, the number of common shares outstanding was 9,295,331 and the book value per common share outstanding was $18.35 per share. On March 16, 2001, the Company declared a $0.14 per share cash dividend payable April 13, 2001 to shareholders of record on March 31, 2001. 11 Asset Quality Non-performing Assets The following table sets forth information as to non-accrual loans and real estate owned at the dates indicated. The Company discontinues the accrual of interest on loans ninety days or more past due, at which time all accrued but uncollected interest is reversed. There were no loans at March 31, 2001 nor during the quarter ended March 31, 2001, which met the definition of an impaired loan. A loan is considered impaired when it is probable that a creditor will be unable to collect contractual principal and interest due according to the contractual terms of the loan agreement. Loans considered for impairment do not include residential mortgage and consumer installment loans.

The following table sets forth certain information regarding the Company's allowance for loan losses at the dates indicated.

Classification of Assets The Company regularly reviews the assets in its portfolio to determine whether any assets require classification in accordance with applicable regulations. As of March 31, 2001 the Company had total classified assets of $3.9 million, of which $3.2 million were classified "substandard" and $658,000 were classified as "doubtful." The assets so classified consisted of auto loans, single family residential loans including equity lines of credit and foreclosed single family residential loans (real estate owned). 12 Loan Portfolio Composition The following table sets forth the composition of the Company's loan portfolio in dollar amounts and in percentages at the dates indicated.

13 Asset/Liability Management The Company's asset and liability management strategy attempts to minimize the risk of a significant decrease in net interest income caused by changes in the interest rate environment without penalizing current income. Net interest income, the primary source of the Company's earnings, is affected by interest rate movements. To mitigate the impact of changes in interest rates, a balance sheet must be structured so that repricing opportunities exist for both assets and liabilities in approximately equivalent amounts at basically the same time intervals. Imbalances in repricing opportunities at any point in time constitute an interest sensitivity gap, which is the difference between interest sensitive assets and interest sensitive liabilities. These static measurements do not reflect the results of any potential activity and are best used as early indicators of potential interest rate exposures. The following table sets forth the amounts of interest-bearing assets and interest-bearing liabilities outstanding at March 31, 2001, which are anticipated by the Company to reprice or mature in each of the future time periods shown. The amounts of assets and liabilities shown which reprice or mature during a particular period were based upon the contractual terms of the asset or liability or certain assumptions concerning the amortization and prepayment of such assets and liabilities. Savings accounts, Now accounts and money market accounts were assumed to be withdrawn at annual percentage rates of 17%, 37% and 79%, respectively. Management believes that these assumptions approximate actual experience and considers them reasonable, although the actual amortization and repayment of assets and liabilities may vary substantially. Interest Rate Sensitivity Gap Analysis

(1) For purposes of the gap analysis, loans and leases are not reduced by the allowance for loan losses and are reduced for non-performing loans. (2) Mortgage-backed and investment securities are not increased (decreased) by unrealized gains (losses) resulting from the accounting for available for sale securities under FASB No. 115. Certain shortcomings are inherent in the method of analysis presented in the foregoing table. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may 14 fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Additionally, certain assets, such as ARM loans, have features which restrict changes in interest rates on a short-term basis and over the life of the asset. Further, in the event of a change in interest rates, prepayment and early withdrawal levels would likely deviate significantly from those assumed in calculating the table. Finally, the ability of many borrowers to service their debt may decrease in the event of an interest rate increase. The Company seeks to reduce the volatility of its net interest income by managing the relationship of interest rate sensitive assets to interest rate sensitive liabilities. To accomplish this, the Company has attempted to increase the percentage of assets, whose interest rates adjust more frequently, and to reduce the average maturity of such assets. The Company currently originates shorter maturity fixed-rate commercial real estate loans, home equity lines of credit and consumer loans, which generally mature or reprice more quickly than fixed-rate residential real estate loans. Adjustable-rate loans are nearly as likely to refinance in low interest rate environments as fixed-rate loans. Often, interest rate cycles allow for these refinancings before the adjustable-rate loans can adjust to fully indexed market rates. In such declining interest rate environments, that result in high levels of loan refinancings, the Company may decide to acquire longer fixed-rate mortgage loans or mortgage-backed securities. To provide an acceptable level of interest rate risk, the Company will implement a funding strategy using long- term FHLB borrowings. As part of its asset/liability strategy, the Company has implemented a policy to maintain its cumulative one-year interest sensitivity gap ratio within a range of (15%) to 15% of total assets, which reflects the current interest rate environment and allows the Company to maintain an acceptable net interest rate spread. The gap ratio will fluctuate as a result of market conditions and management's expectation of future interest rate trends. Quantitative and Qualitative Disclosures About Market Risk As its primary interest rate risk planning tool, the Bank utilizes a market value model. The model measures the Bank's interest rate risk by approximating the Bank's net portfolio value ("NPV"), which is the net present value of expected cash flows from assets, liabilities and any off-balance sheet contracts, under a range of interest rate scenarios, which range from a 300 basis point increase to a 300 basis point decrease in market interest rates (measured in 100 basis point increments). The Bank's asset and liability structure results in a decrease in NPV in a rising interest rate scenario and an increase in NPV in a declining interest rate scenario. During periods of rising interest rates, the value of monetary assets declines more rapidly than the value of monetary liabilities rises. Conversely, during periods of falling interest rates, the value of monetary assets rises more rapidly than the value of monetary liabilities declines. However, the amount of change in value of specific assets and liabilities due to changes in interest rates is not the same in a rising rate environment as in a falling interest rate environment (i.e., the amount of value increase under a specific rate decline may not equal the amount of value decrease under an identical upward interest rate movement). There have been no material changes in market risk since December 31, 2000 as reported in the Company's Form 10-K for the year ended December 31, 2000. Analysis of Net Interest Income Net interest income represents the difference between income on interest- earning assets and expense on interest-bearing liabilities. Net interest income depends upon the volume of interest-earning assets and interest-bearing liabilities and the interest rate earned or paid on them. 15 Average Balance Sheets The following table sets forth certain information relating to the Company's Consolidated Statements of Financial Condition and reflects the average yield on assets and the average cost of liabilities for the periods indicated. Such yields and costs are derived by dividing income or expense by the average balance of assets or liabilities, respectively, for the periods shown. Average balances are derived from average daily balances and include non-performing loans. The yields and costs include fees, which are considered adjustments to yields.

16 Rate/Volume Analysis The following table presents the extent to which changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities have affected the Company's interest income and interest expense during the periods indicated. Information is provided in each category with respect to (i) changes attributable to changes in volume (changes in volume multiplied by prior rate), (ii) changes attributable to changes in rate (changes in rate multiplied by prior volume), and (iii) the net change. The changes attributable to the combined impact of volume and rate have been allocated proportionately to the changes due to volume and the changes due to rate.

Comparison of Operating Results for the Three Months Ended March 31, 2001 and March 31, 2000 General Net income totaled $4.6 million, or $0.47 per diluted share for the three months ended March 31, 2001, as compared to $5.2 million, or $0.52 per diluted share reported for the quarter ended March 31, 2000. During the quarter ended March 31, 2000, the Company had auctioned $125 million of FHLB of Chicago advances to other member banks of the FHLB of Chicago and recorded a pre-tax gain of $8.8 million on the sale of these advances. This gain was recorded as an "Extraordinary item-gain on early extinguishment of debt," net of tax of $5.7 million, or $0.57 per diluted share. Concurrently, the Company sold $122 million of investment and mortgage-backed securities, available for sale, recognizing losses of $6.3 million. The gain on these combined de-leveraging transactions, net of fees and tax was $1.4 million. Net interest income for the three months ended March 31, 2001 was $13.5 million, a decrease of $344,000, or 2.5%, from the March 31, 2000 quarter of $13.8 million. Interest Income Interest income for the quarter ended March 31, 2001 totaled $37.0 million, an increase of $3.4 million, or 10.1%, from the prior year's quarter. Interest income on mortgage loans, the largest component of interest-earning assets, increased $2.4 million, or 11.0%, to $23.8 million from the March 2000 quarter. The average balance of the mortgage loan portfolio increased $69.2 million. The annualized average yield on the mortgage loan portfolio 17 increased to 7.99% for the three months ended March 31, 2001 from 7.64% for the 2000 period. The increase in yields is due to the general increase in interest rates and the continued change in the mix of the loan portfolio from a one-to four-family lender to a multi-family and commercial real estate lender. Interest income on equity lines of credit increased $453,000, or 21.4%, to $2.6 million from the prior year's quarter. The average balance of equity lines of credit increased $17.3 million, to $121.2 million from $103.9 million for the March 2000 quarter. Interest income on auto loans increased $452,000 to $2.8 million for the three months ended March 31, 2001. The average balance of the auto loan portfolio increased $18.5 million, while the annualized average yield on the portfolio increased to 8.13% as compared to 7.78% for the comparable quarter a year ago. The average balance of the mortgage-backed securities portfolio decreased $92.0 million to $239.3 million from the March 2000 quarter. As previously mentioned, this was primarily as a result of the de-leveraging security sales in the first quarter of 2000. However, the annualized yield on this portfolio increased from 6.49% to 6.71% when comparing the quarters. Interest Expense Interest expense on deposit accounts increased $2.1 million, or 15.5%, to $15.4 million, for the quarter ended March 31, 2001 compared to the prior year's quarter. The increase is related to both an increase in the average deposit base and the annualized average cost of deposits. The average deposit base increased $38.3 million to $1.2 billion when comparing the quarters. The annualized average cost of deposits for the three months ended March 31, 2001 was 5.07%, an increase from the annualized average cost of 4.48% for the March 2000 period. Since March 31, 2000 and through the year ended December 31, 2000, rates on deposit accounts have generally increased, reflecting the Federal Reserve Bank's influence in increasing rates. In an effort to compete with other banks to retain deposits and improve its interest rate sensitivity position, the Bank has had to offer longer term, higher yielding certificate of deposit accounts which have increased the cost of funds. For the quarter ended March 31, 2001, the Company recorded interest expense on borrowed funds of $8.2 million on an average balance of $525 million at an annualized cost of 6.31% primarily related to FHLB borrowings. During the current quarter, the Company repaid $50 million of FHLB advances that matured. Net Interest Income Net interest income for the three months ended March 31, 2001 decreased $344,000 or 2.5%, to $13.5 million from the 2000 period. The annualized average yield on interest-earning assets increased from 7.43% to 7.80% when comparing the 2000 and 2001 quarters. The annualized average cost of interest-bearing liabilities increased from 4.78% to 5.44%. This resulted in an annualized average net interest rate spread of 2.36% for the three-month period ended March 31, 2001 compared to 2.65% for the prior year's period. During the current quarter, interest-bearing liabilities repriced faster than interest-bearing assets resulting in a decrease in the net interest rate spread. Both the average balance of interest-earning assets and interest-bearing liabilities increased during the quarter ended March 31, 2001 compared to the 2000 quarter. Provision for Loan Losses Based on management's evaluation of the loan portfolio, a provision of $200,000 for loan losses was recorded during the quarter ended March 31, 2001. The allowance for loan losses represents 0.49% of total loans receivable at March 31, 2001. The amount of non-performing loans at March 31, 2001, was $4.1 million, or 0.27% of total loans, compared to $4.5 million or 0.32% of total loans at March 31, 2000. Noninterest Income Total noninterest income for the three months ended March 31, 2001 was $2.9 million compared to an expense of $3.9 million in the 2000 quarter. The quarter ended March 31, 2000 included losses on sales of mortgage-backed and investment securities available for sale of $6.6 million. As previously mentioned, the Company sold these securities concurrently with the auction of FHLB advances as part of a de-leveraging strategy. The gain on the sale of the FHLB advances is shown as an extraordinary item-gain on early extinguishment of debt of $5.7 million, net of tax. Other fees and commissions increased $404,000, primarily due to an increase in loan origination fees contributed by Liberty Home Mortgage. Liberty Home Mortgage sold mortgages totaling $10 million in the first quarter of 2000 compared to $50 million sold in the current quarter. Other income for the quarter ended March 31, 2000, included a write-down in value of an equity investment of $112,000, reflecting a decrease in the respective 18 market value. The current quarter includes income of $413,000 from the investment in Bank Owned Life Insurance which was purchased in the third quarter of 2000. The current quarter's real estate income was $485,000, a decrease of $489,000 from the prior year's quarter. This decrease was primarily due to fewer sales in the March 2001 quarter. In the current quarter, the Bank terminated its participation in a shared ATM network primarily due to increased costs. ATM fee income, net of ATM expenses for the current quarter was $104,000, compared to $152,000 in the prior year's quarter. Noninterest Expense Noninterest expense for the quarter ended March 31, 2001 totaled $9.9 million, a decrease of $939,000, or 8.7% from the prior year's quarter. Compensation and benefits, the largest component of noninterest expense, decreased $458,000, primarily due to staff reductions at the mortgage broker subsidiary. Income Tax Provision The provision for income taxes for the three months ended March 31, 2001 was $1.7 million. The effective tax rate for the quarter was 26.9% compared to 32.9% for the 2000 quarter. The lower effective tax rate for the March 2001 quarter was due to a reduction in the provision of $225,000 as a result of the completion of a review of the Company's tax liability. Part II - Other Information Item 1. Legal Proceedings Not Applicable. Item 2. Changes in Securities Not Applicable. Item 3. Defaults Upon Senior Securities Not Applicable. Item 4. Submission of Matters to a Vote of Security Holders Not Applicable. Item 5. Other Information Not Applicable. 19 Item 6. Exhibits and Reports on Form 8-K. (a) Exhibit No. 11 Statement re: Computation of Per Share Earnings

(b) Reports on Form 8-K. A report on Form 8-K was filed by the Company on February 1, 2001 for the purpose of reporting, pursuant to Items 5 and 7 of the Form 8-K, that the Company entered into an Agreement and Plan of Merger with Charter One Financial, Inc. and Charter Michigan Bancorp, Inc. as of January 22, 2001. 20 SIGNATURES Pursuant to the requirements 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. Alliance Bancorp Dated: May 4, 2001 /s/ Kenne P. Bristol ------------------- ----------------------------- Kenne P. Bristol President and Chief Executive Officer Dated: May 4, 2001 /s/ Richard A. Hojnicki ------------------- ----------------------------- Richard A. Hojnicki Executive Vice President and Chief Financial Officer 21

ALLIANCE BANCORP 10-Q