CHICAGO, April 28 /PRNewswire/ -- Avondale Financial Corp. (Nasdaq: AVND),
the holding company for Avondale Federal Savings Bank, announced today it
posted a loss in the first quarter of 1997 as a result of a special
$13 million provision for loan losses during the quarter.  This provision is
the outgrowth of higher than expected delinquency rates and the resulting
potential for subsequent loan losses in one of the Bank's private label credit
card programs.
    Other than this loan portfolio, all other aspects of the Bank's loan
programs are performing in line with expectations.  Avondale continues to be
committed to its business strategy of using technology and third party
distribution to provide consumers with home-related credit through its first
mortgage, home equity lines of credit and private label credit card programs
distributed on a national basis.
    The portfolio for which the special provision was recorded -- and which
represents approximately 13% of the Bank's loans under management -- grew
significantly faster than expected, primarily the result of credit card
advances funded during November and December, 1996.
    Current delinquency rates in that portfolio are running significantly
higher than the Bank's statistical models had projected.  The Bank identified
the delinquency trend and, after consulting with its independent auditor,
believes this special provision against potential losses is the most prudent
course of action.
    The credit program which produced the potential losses is being terminated
and other loss reduction measures are being explored, including the potential
sale of the portfolio.
    Robert Engelman, President and Chief Executive Officer said, "We are
embarrassed by this situation.  This level of performance is not acceptable,
and we are taking all necessary steps to both correct the current situation
and prevent any reoccurrence.  We allowed a specific segment of our loan
business to grow too large in too short a period of time.  As the Bank
rebuilds its earnings momentum and capital base, we will undertake appropriate
initiatives to more tightly manage the impact of credit risk volatility."

    RESULTS OF OPERATIONS
    Net income declined $8.5 million to a $7.6 million loss for the three
months ended March 31, 1997 compared with $940,000 for the three months ended
March 31, 1996.  Outside of the special loan loss provision, the Company made
significant financial progress in net interest income, the result of its
increasing loan portfolio, and significant increases in noninterest income.
Earnings per share for the quarter was a $2.15 loss compared with $.23 for the
quarter a year ago.

    NET INTEREST MARGIN
    The Company's net interest income totaled $6.8 million, a 37% increase for
the quarter ended March 31, 1997 compared with $4.9 million for the same
quarter a year ago.  Net interest income also increased from the fourth
quarter of 1996 running rate, which totaled $5.5 million.  The increase is the
result of continued loan growth, with average loan balances increasing
$129 million from the year-ago period while investment and mortgage-backed
securities declined $125 million.  Average earning assets were $593 million
for the current quarter compared to $589 million a year ago.  The Company
anticipates completing its second securitization of home equity loans during
the second quarter of 1997, which will have some impact on the net interest
margin during the quarter.

    NONINTEREST INCOME
    Noninterest income was $1.6 million for the quarter, a significant
increase from $744,000 a year ago.  The large increase is attributable to loan
servicing fees, which increased $1.1 million to $1.2 million for the three
months ended March 31, 1997.  The Bank receives loan servicing income
connected with its first $75 million securitization of home equity loans,
which closed during the fourth quarter of 1996.  Security gains were $11,000
during the quarter, down from $585,000 in the quarter a year ago reflecting
the decline in the size of the portfolio, which has shrunk in size over the
past year, to provide funding for the increasing loan business.

    NONINTEREST EXPENSES
    Noninterest expenses were $5.8 million, an increase of $2 million from the
quarter a year ago.  The increase is attributable to additional staffing and
technology costs required to support the Bank's consumer lending business
lines.  First quarter noninterest expenses did decline slightly from the
noninterest expenses recorded during the fourth quarter of 1996.
    Avondale's first quarter efficiency ratio was 68%, compared with 65% in
the quarter ended March 31, 1996.

    BALANCE SHEET
    Total assets were $643 million as of March 31, 1997, compared to $580
million on March 31, 1996 and increased from $596 million on December 31,
1996.  The loan portfolio which grew $58 million was concentrated in the home
equity lines of credit which grew $46 million to $127 million, and $72 million
in private label credit card receivables which grew $15 million.  In spite of
the special loss provision, Avondale continues to maintain a strong capital
position.  The core capital ratio of 8.10% and risk-based capital ratio of
14.6% as of March 31, 1997 significantly exceed regulatory minimum
requirements.
    As of March 31, 1997, Avondale's book value per share was $14.88, a $2.39
loss from the December 31, 1996 book value of $17.27 and March 31, 1996 book
value of $16.21.

    ASSET QUALITY
    Total delinquency in the Bank's portfolio as of March 31, 1997 was
approximately 4.66%, 1.92% and 2.54%, respectively, in the 30, 60, and 90-day
past due time horizons.  Sixty days and over delinquencies were 4.46% as
compared with 3.0% on December 31, 1996.
    The private label credit card portfolio, requiring the special provision,
had 60 days and over delinquencies totaling 14.8%.  This compares with
delinquencies of 9.4% and 3.7% as of February 28, 1997 and December 31, 1996,
respectively, for this portfolio.
    Delinquency on the rest of the Bank's loan portfolio is in line with
expectations and is priced accordingly in each time horizon.  With the
exception of the one private label credit card portfolio, total delinquency
was 4.8%, .93% and 2.3% as of March 31, 1997, virtually the same delinquency
level as of December 31, 1996, which totaled approximately 5.0%, 1.4% and 1.6%
of the Company's loan portfolio in the 30, 60, and 90 days and over
categories, respectively.
    The Company's home equity loan program had 60 days and over delinquencies
of 3.0%, a slight decrease from December 31, 1996.  The remaining consumer
loan portfolio's 60 days and over delinquencies were 3.3% on March 31, 1997
compared with 4.2% on December 31, 1996.
    The Company maintains its allowance for loan losses at a level, which is
considered by management to be adequate to absorb loan losses on existing
loans, based on an evaluation of the collectibility of loans and prior loan
losses.  The provision for loan losses for the three months ended March 31,
1997 would have totaled $1.5 million, prior to the special provision an
increase of $850,000 from $650,000 for the quarter ended March 31, 1996.  The
allowance for loan losses was $20.5 million as of March 31, 1997, compared
with $4.0 million as of March 31, 1996 and $7.2 million on December 31, 1996.
Non-performing loans were 2.7% of total loans as of March 31, 1997.
    In addition, the Company has established a loss reserve of approximately
$2 million associated with the loans sold in the securitization pool.  This
reserve is accounted for in "other assets".  The Company's consumer loan
program has a higher level of projected loan delinquency and charge-off levels
compared with the Company's historic loan portfolio.  Associated with its
credit scoring models, a level of delinquent and charge-off loans is
projected.  The Company analyzes its consumer loan portfolio with the
projected delinquency expectations monthly, and can adjust the level of loan
loss provisions, loan approval parameters and pricing immediately.
    Avondale Financial Corp. is the holding company for Avondale Federal
Savings Bank.  The Bank operates five offices in the Chicago area.  Avondale
Financial Corp.'s shares trade on Nasdaq under the symbol AVND.


    SELECTED FINANCIAL RATIOS
    (UNAUDITED)                         At or For the Three Months Ended

                                   Mar. 31, 1997  Dec. 31, 1996  Mar. 31, 1996
    Performance Ratios:
      Return on average assets         (4.92)%          1.88%         0.62%
      Return on average equity        (52.34)          18.54          5.78
      Net interest rate spread          4.17            3.29          2.86
      Net interest margin               4.60            3.76          3.39
      Efficiency ratio                 68.41           45.00         65.07
      Other expense to average assets   3.75            3.84          2.52
      Average interest-earning assets
        to average interest-bearing
        liabilities                   109.29          110.09        111.99
      Net interest income to other
        expense                       118.20           94.40        130.76

    Asset Quality Ratios:
      Non-performing loans to total
        loans                           2.68%           1.63%         1.63%
      Non-performing assets to total
        assets                          1.66            0.93          0.85
      Allowance for loan loss to total
        loans                           5.35            2.22          1.72
      Allowance for loan losses to
        non-performing loans          200.01          136.15        105.29

    Capital Ratios:
      Average equity to average assets  9.40%          10.12%        10.75%
      Equity to total assets            8.26           10.19         10.63
      Tangible capital                  8.10            9.90         10.44
      Core capital                      8.10            9.90         10.44
      Risk-based capital               14.56           18.99         23.79


    AVONDALE FINANCIAL CORP.                     For the Three Months Ended
    CONSOLIDATED STATEMENTS OF INCOME          Mar. 31, 1997     Mar. 31, 1996
    (UNAUDITED)

    INTEREST INCOME:
      Loans                                       $9,741            $5,010
      Securities                                     600             1,582
      Mortgage-backed securities                   3,128             4,757
      Other                                          215               115
    Total interest income                         13,684            11,464

    INTEREST EXPENSE:
      Deposits                                     4,113             3,760
      Advances from the Federal Home Loan Bank     1,311             1,197
      Securities sold under agreements to
        repurchase                                   988             1,107
      Other borrowings                               445               419
    Total interest expense                         6,857             6,483
    NET INTEREST INCOME                            6,827             4,981
    Provision for loan losses                     14,514               650
    Net interest income after provision for
      loan losses                                 (7,687)            4,331

    NONINTEREST INCOME:
      Net security gains (losses)                     11               596
      Net gains on sales of loans                     --                 7
      Loan servicing income                        1,214                60
      Fees for other customer services               277                88
      Other operating income                         114               121
    Total noninterest income (expense)             1,616               872

    NONINTEREST EXPENSE:
      Salaries and employee benefits               2,182             1,964
      Occupancy and equipment expenses, net          504               233
      Federal deposit insurance premiums              67               196
      Advertising and public relations               194               234
      Data processing                                768               238
      Real estate owned expense, net                   5                30
      Legal and professional                         203               115
      Other operating expenses                     1,853               799
    Total noninterest expense                      5,776             3,809

    Income before income taxes                   (11,847)            1,394
    Provision (benefit) for income taxes          (4,268)              454
    NET INCOME (LOSS)                            $(7,579)             $940

    PER COMMON SHARE:
    Earnings per common share                      (2.15)             0.23
    Weighted average common shares
      outstanding                              3,529,418         4,025,660


    AVONDALE FINANCIAL CORP.
    CONSOLIDATED BALANCE SHEETS
    (UNAUDITED)                       Mar. 31,1997  Dec. 31,1996  Mar. 31,1996
                                       (in thousands except per share data)
    ASSETS

    Cash and due from banks              $11,917        $8,334       $6,014
    Interest-bearing deposits                997           740        1,591
         Total cash and cash equivalents  12,914         9,074        7,605

    Securities available for sale -
      At fair value                       35,270        35,901       48,166
    (amortized cost Mar 31, 1997 -
      $35,822; Dec 31, 1996 - $36,037
      and Mar 31, 1996 - $47,584)                                       --
    Securities held-to-maturity -
      At amortized cost                    1,000         6,498        6,885
    (fair value Mar 31, 1997 - $969;
      Dec 31, 1996 -  $6,488 and
      Mar 31, 1996 - $6,806)                                             --
    Mortgage-backed securities
      available-for-sale-At fair value   130,909       136,418      203,080
    (amortized cost Mar 31, 1997-
      $131,487; Dec 31, 1996 - $136,214
      and Mar 31, 1996 - $202,909)                                       --
    Mortgage-backed securities
      held-to-maturity -At amortized
      cost                                59,631        61,438       64,310
    (fair value Mar 31, 1997 - $59,056;
      Dec 31, 1996 - $61,387 and
      Mar 31, 1996 - $64,571)                                            --
    Loans                                383,117       324,508      235,118
    Less: Allowance for loan loss         20,501         7,208        4,043
         Loans, net                      362,616       317,300      231,075

    Federal Home Loan Bank stock -
      at cost                              4,790         4,790        4,790
    Office buildings and equipment, net    3,955         3,875        4,156
    Other real estate owned, net             270           270        1,062
    Accrued interest receivable            6,573         6,896        4,235
    Prepaid expenses and other assets      9,588        10,410        1,528
    Deferred income tax                    7,931         2,701        2,839
         Total assets                   $635,447      $595,571     $579,731

    LIABILITIES AND STOCKHOLDERS' EQUITY

    Deposits                            $360,676      $330,655     $329,152
    Advances from Federal Home Loan Bank  90,803        90,803       95,803
    Securities sold under agreements
      to repurchase                       85,900        69,146       42,568
    Other borrowings                      33,000        32,000       40,000
    Advance payments by borrowers
      for taxes and insurance                443           931          708
    Accrued interest payable               2,184         2,212        1,198
    Income taxes payable                     783           452          674
    Other liabilities                      9,199         8,483        8,000
         Total liabilities               582,988       534,682      518,103

    Common stock ($.01 par: 10,000,000
      shares authorized, 3,525,325,
      3,525,288 and 4,014,568  issued
      and outstanding, at Mar. 31, 1997,
      Dec. 31, 1996 and Mar 31, 1996,
      respectively )                          44            44           44
    Capital surplus                       43,108        43,199       43,018
    Retained earnings                     23,452        31,031       27,755
    Treasury stock                       (10,611)      (10,496)      (5,634)
    Unrealized net gain (loss) on
      securities available-for-sale,
      net of tax of ($442) at Mar. 31,
      1997, $21 at Dec. 31, 1996 and
      $287 at Mar. 31, 1996                 (698)           33          453
    Common Stock acquired by ESOP         (1,693)       (1,693)      (2,116)
    Unearned portion of restricted
      stock awards                        (1,143)       (1,229)      (1,892)
         Total stockholders' equity       52,459        60,889       61,628
         Total liabilities and
           stockholders' equity         $635,447      $595,571     $579,731

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