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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1996
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from __________ to ___________
Commission file number 0-14468.
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First Oak Brook Bancshares, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 36-3220778
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1400 Sixteenth Street, Oak Brook, Illinois 60521
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (630) 571-1050
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Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock ($2 par value)
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 and 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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K ((S)229.405 of this chapter) 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-K
or any amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 15, 1997 was: $56,789,649 based upon the last sales price
of the registrant's Class A Common stock at $25.25 per share as reported by the
National Association of Securities Dealers Automated Quotation System.
The number of shares outstanding of each of the registrant's classes of common
stock as of March 15, 1997: 1,522,772 shares of Common Stock and 1,739,851
shares of Class A Common Stock.
Documents incorporated by reference: Portions of the Company's Annual Report to
Shareholders for the fiscal year ended December 31, 1996, and Proxy Statement
for its 1997 Annual Meeting of Shareholders to be filed on or about April 1,
1997 are incorporated by reference into Parts I., II. and III. hereof, to the
extent indicated in the Form 10-K Cross-Reference Index.
Form 10-K Cross-Reference Index
Certain information required to be included in Form 10-K is also included in the
1996 Annual Report to Shareholders or in the Proxy Statement used in connection
with the 1997 Annual Meeting of Shareholders to be held on May 6, 1997. The
following Cross-Reference Index shows the page location in the 1996 Annual
Report or in the Proxy Statement of only that information which is to be
incorporated by reference into Form 10-K. All other sections of the 1996 Annual
Report or the Proxy Statement are not required in Form 10-K and should not be
considered a part thereof.
1996 1996 1997
FORM ANNUAL PROXY
Item No. Part I 10-K REPORT STATEMENT
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1. Business................................................ 2-11
Statistical Disclosure by Bank Holding Companies .... 6-18
2. Properties............................................. 11-13
3. Legal Proceedings....................................... 13
4. Submission of Matters to a Vote of Security Holders .... 13
Part II
5. Market for Registrant's Common Equity
and Related Stockholder Matters....................... 29-32,
34
6. Selected Financial Data................................. 6
7. Management's Discussion and Analysis of
Financial Condition and Results of Operation.......... 6-18
8. Financial Statements and Supplementary Data............. 19-33
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................... 14
Part III
10. Directors and Executive Officers of the Registrant .... 5
11. Executive Compensation.................................. 9-13
12. Security Ownership of Certain Beneficial
Owners and Management................................. 2-3
13. Certain Relationships and Related Transactions.......... 6
Part IV
14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K............................... 16-19
Signatures.............................................. 20
1
PART I
ITEM 1. BUSINESS
General
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First Oak Brook Bancshares, Inc. ("the Company") was organized under Delaware
law on March 3, 1983, as a bank holding company under the Bank Holding Company
Act of 1956, as amended. The Company owns all of the outstanding capital stock
of Oak Brook Bank ("the Bank"), Oak Brook, Illinois, which is an Illinois state-
chartered bank. The bank has seven locations in DuPage County and two locations
in Cook County. A tenth location is under development in Aurora, Illinois,
located in DuPage County.
The Company has two classes of common stock, Class A Common stock and Common
stock. The Common stock is convertible into Class A Common at any time on a
one-for-one basis. The Company has authorized shares of Class A Common and
Common stock of 4,000,000 and 3,000,000, respectively.
As of December 31, 1996, the Company had total assets of $768,655,000; loans of
$420,164,000, deposits of $648,303,000, and shareholders' equity of $59,553,000.
The business of the Company consists primarily of the ownership, supervision and
control of its subsidiary bank. The Company provides its subsidiary bank with
advice, counsel and specialized services in various fields of financial, audit,
legal and banking policy and operations. The Company also engages in
negotiations designed to lead to the acquisition of other banks and closely
related businesses.
The Bank is engaged in the general retail and commercial banking business. The
services offered include demand, savings, and time deposits, corporate cash
management services, and commercial and personal lending products. In addition,
related products and services are offered including discount brokerage, mutual
funds and annuity sales, and foreign currency and precious metal sales. Oak
Brook Bank has a full service trust and land trust department.
The Bank originates the following types of loans: commercial, real estate (land
acquisition, development & construction, commercial mortgages, residential
mortgages and home equity), credit card and consumer installment loans. The
extension of credit inherently involves certain levels and types of risk
(general economic conditions, industry and concentration risk, interest rate
risk, and credit and default risk) which the Company prudently manages through
the establishment of lending, credit and asset/liability management policies and
procedures.
2
Loans originated comply with the Bank's loan policies and governmental rules,
regulations and laws. While the subsidiary bank's loan policy varies for
different loan products, the policy generally covers such items as: percentages
to be advanced against collateral, blanket or specific liens, insurance
requirements, maximum terms, down payment requirements, debt-to-income ratio,
credit history and other matters of credit concern.
The Bank's loan policy grants limited loan approval authority to designated loan
officers. Where a credit request exceeds the loan officer's approval authority,
approval by a more senior lending officer and/or bank loan committee is
required. The loan policy sets forth those credit requests that, either because
of the amount and/or type, require the approval of the bank loan committee.
The chart that follows sets forth the credit risks, loan origination procedures,
underwriting standards and lien position generally associated with the Bank's
lending in each major loan category. The major loan categories are residential
real estate, including purchase money, refinance and home equity loans;
commercial real estate, including land acquisition, development and construction
loans; commercial loans; auto loans (direct and indirect); credit card loans and
student loans. These loans, except for credit cards, are made generally in the
Chicago Metropolitan area and are generally secured by collateral located in the
Chicago Metropolitan area.
The chart sets forth the information generally considered in approving each
category of loans. The collateral stated for each category is the collateral
generally required for these loans. Each loan is reviewed on its own merits and
the information set forth in the chart does not necessarily apply to each loan
within a category. The lien position (if any) and collateral documentation for
commercial loans, commercial real estate and construction loans are structured
specifically for each loan.
3
LOAN TYPE
YEAR END BAL. PRINCIPAL SIGNIFICANT MAJOR
(000's) CREDIT LOAN ORIGINATION UNDERWRITING
% OF LOANS RISKS DOCUMENTATION STANDARDS LIEN POSITION
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Commercial Borrower default Personal Determination of eligible and Unsecured:
- -Working capital Industry change financial ineligible receivables Companies with
- -Term General economic statements of Advances generally not to exceed significant net
conditions guarantors 80% of eligible collateral worth
Balance $40,895 Personal tax Annual credit review relative to debt
% 9.7% returns of Debt to tangible net worth normally and
guarantors less than 4 to 1 solid operating
Business Assessment of company's cash flow history
financial -net annual cash flow should be Secured:
statements, or tax 120% of the total estimated Blanket first lien
returns (if annual debt service (with a 100% on all
applicable) floor) business assets
Cash flow Maximum length of term loans (unmonitored or
projections generally 7 years with
Credit history Personal guaranties of owners of limited monitoring)
Mercantile reports closely held companies (full or Secured:
Supplier partial) Specific first
references Periodic monitoring of A/R lien on
Customer Periodic audit for asset based assets being
references loans financed
If applicable Loan covenant restrictions (including leases)
-Collateral -Other borrowings
valuation -Payment of dividends
-A/R, A/P listing -Limit on owner withdrawals
and aging -Sale of company
-Machinery, -Capital expenditures
furniture, -Debt to net worth limits
fixtures and -Minimum tangible net worth
equipment, Evidence of insurance
inventory lists
-Pre-loan audit
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Commercial Borrower default Personal Loans to appraised value generally Secured:
Mortgages Industry change financial not to exceed 80% (with a ceiling First mortgages
General economic statements of of 85%) Assignment of
Balance $63,394 conditions guarantors Assessment of property's cash flow rents/leases
% 15.1% Personal tax -net annual cash flow should be Security agreement
returns of 120% of the total estimated on fixtures
guarantors annual debt service (with a 100% Environmental
Business floor) indemnity agreement
financial Personal guaranties of owners (full
statements, or tax or partial)
returns (if Evidence of insurance
applicable) Tax and insurance reserves (if
Cash flow applicable)
projections
Credit history
Lender references
Appraisals
Environmental
assessments
Credit history of
tenants
Financial
information on
tenants
Review of leases
Market trends and
conditions
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4
LOAN TYPE
YEAR END BAL. PRINCIPAL SIGNIFICANT MAJOR
(000's) CREDIT LOAN ORIGINATION UNDERWRITING
% OF LOANS RISKS DOCUMENTATION STANDARDS LIEN POSITION
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Land acquisition, Project Personal financial Land acquisition loan to value Secured:
development completion statements of guarantors generally not exceed 50% (with a First mortgages
and construction Borrower default Personal tax returns of ceiling of 65%) Assignment of
Industry change guarantors Land development loan to value rents/leases
Balance $35,902 Business financial generally not exceed 75% Assignment of unit
% 8.5% statements or tax returns Construction loan to value generally sale contracts
(if applicable) not exceed 75% (with a ceiling of Assignment of
Cash flow projections 85%) of retail value plans,
Credit history Assessment of project cash flow specifications
Industry experience and Disbursement escrows construction and
reputation Personal guaranties (full or partial) service contracts
Contractor references Evidence of insurance Assignment of
Lender references Inspection developers rights
Market trends and conditions Environmental
Project feasibility Residential subdivision projects indemnity agreement
-Market acceptance - Minimum unit release
-Project marketing strategy requirements for accelerated
-Engineering review payback
Appraisals - Interest reserves (if applicable)
Environmental assessments
Review of other current
projects by developer
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Residential Real
Estate
A) Portfolio Borrower default Application (including Debt to income generally not to Secured:
1) Purchase money -Reduction of financials) exceed 39% gross annual income -First mortgages
2) Refinance income Verification of employment Principal/interest/taxes/insurance
-Excessive debt and income less than 28% of gross annual
-Future death, Verification of deposits income
disability or (excluding home equity) Loan to value
B) Secondary divorce Collateral appraisal, -generally not to exceed 80% for
Market Decline in market generally two appraisals loans under $500,000
1) Purchase money value for property values in -generally not to exceed 65%
2) Refinance Completion of excess of $500,000 (ceiling of 75%) for loans
construction Credit history greater than $500,000
Insurance (flood, hazard)
Balance $93,730 Two year job history or employment
% 22.3% in related field.
No serious prior derogatory credit
history
No current delinquencies
Secondary market loans (additional
to above):
-Loan to value which exceed 80%
require private mortgage insurance
-Investor approval
C) Home equity Same as above Same as above Same as above -Primarily Second
mortgages
Balance $55,297
% 13.1%
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5
LOAN TYPE
YEAR END BAL. PRINCIPAL SIGNIFICANT MAJOR
(000's) CREDIT LOAN ORIGINATION UNDERWRITING
% OF LOANS RISKS DOCUMENTATION STANDARDS LIEN POSITION
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Credit card Borrower default Application (with financials) Debt to income generally not to Unsecured
-Reduction of Credit history exceed 39% gross annual income
Balance $58,114 income Verification of employment No serious prior derogatory credit
% 13.8% -Excessive debt and income history
-Future death, Tax returns (if self No current delinquencies
disability or employed) Established credit
divorce Stable employment and residence
Fraud No excessive debt
No more than 9 active bank cards
Approved credit line proportionate to
income
Minimum income requirement
Student cards only:
No minimum income requirement
Established credit not required
No derogatory credit
No more than three active bank
cards
No more than $10,000 available in
credit lines
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Consumer
Installment
Auto (primarily Borrower default Application (with financials) Debt to income ratio generally not to Secured, recorded
indirect) -Reduction of Verification of employment exceed 45% of gross annual income lien on title
income Credit history No serious prior derogatory credit Single interest
Balance $59,211 -Excessive debt Evidence of insurance history insurance
% 14.1% -Future death, No current delinquencies
disability or Stable employment and residence
divorce Established credit unless down
Collateral value payment (greater than) 25%
decline
Casualty
Dealer New dealerships are submitted Direct:
-Business decline for credit approval New cars - loans generally not to
-Industry decline -Review dealers trade and exceed 80% of purchase price
-General references Used cars (generally not older than 4
economic -Review dealer financial years)-loans limited to 100% of
conditions statements NADA loan value
-Fraud -Mercantile report
-Annual review Indirect:
-Signed dealer agreement New cars-
-invoice up to $18,000, will finance
up to $500 over invoice
-invoice over $18,000, will finance
up to $1,000 over invoice
Used cars (generally not older than 4
years)-loans limited to 100% of
NADA loan
Student
Loss of Application Unsecured,
Balance $6,195 Government Government guaranty
% 1.5% guaranty
Other Various Various Various Various
Balance $8,165
% 1.9%
6
Competition
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The Company and its subsidiary bank operate primarily in DuPage County,
Illinois, with seven locations, and two locations in Cook County, Illinois, one
of which is located in western Cook County and the other on Chicago's North
Shore.
At June 30, 1996, the Company's seven DuPage County, Illinois, offices held $528
million in deposits for an approximate 5.3% market share in relation to the
total deposits in DuPage County commercial banks. The Company's two offices in
Cook County, Illinois, contained $77 million in deposits for an approximate .1%
market share of Cook County. The Company's offices are part of the Chicago
banking market, as defined by the Federal Reserve Bank of Chicago, consisting of
Cook, DuPage and Lake Counties, which at June 30, 1996, had $98.0 billion in
deposits.
The Company's subsidiary bank is located in a highly competitive market facing
competition for deposits, loans and other banking services from many financial
intermediaries, including savings and loan associations, finance companies,
credit unions, mortgage companies, retailers, stockbrokers, insurance companies,
mutual funds and investment companies, many of which have greater assets and
resources than the Company.
Regulation and Supervision
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General
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The Company is a bank holding company subject to the restrictions and
regulations adopted under the Bank Holding Company Act of 1956, as amended (the
"BHCA"), and interpreted by the Board of Governors of the Federal Reserve System
(the "Federal Reserve Board"), and the Company is also subject to Federal
Securities Laws and Delaware Law. The BHCA requires every bank holding company
to obtain the prior approval of the Federal Reserve Board before acquiring
direct or indirect ownership or control of 5% or more of the voting shares of
any bank or bank holding company. However, no acquisition may be approved if it
is prohibited by applicable state law. The Company is examined by the Federal
Reserve Bank of Chicago.
The subsidiary bank is subject to extensive governmental regulation and periodic
regulatory reporting requirements. The regulations by various governmental
entities, as well as Federal and State laws of general application affect the
Company and the subsidiary bank in many ways including but not limited to:
requirements to maintain reserves against deposits, payment of FDIC insurance,
restrictions on investments, establishment of lending limits and payment of
dividends. The subsidiary bank is primarily supervised and examined by the
Illinois Office of Banks
7
and Real Estate and the Federal Deposit Insurance Corporation ("FDIC").
The Federal Reserve Bank examines and supervises bank holding companies pursuant
to risk-based capital adequacy guidelines. These guidelines establish a uniform
capital framework that is sensitive to risk factors, including off-balance sheet
exposures, for all federally supervised banking organizations. This can impact
a bank holding company's ability to pay dividends and expand its business
through the acquisition of subsidiaries if capital falls below the levels
established by these guidelines. As of December 31, 1996 the Company's Tier 1,
total risk-based capital and leveraged ratios were in excess of minimum
regulatory guidelines and also exceed the FDIC criteria for "well capitalized"
banks. See the Company's Annual Report at page 30 for a more detailed
discussion of the Risk Based Assessment System and the impact upon the Company
and its subsidiary bank.
Federal Deposit Insurance
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Under Federal law, the FDIC has authority to impose special assessments on
insured depository institutions, to repay FDIC borrowings from the United States
Treasury or other sources, and to establish semi-annual assessment rates for
Bank Insurance Fund ("BIF") member banks to maintain the BIF at the designated
reserve ratio required by law. Effective January 1, 1997 the FDIC Assessment
Rate Schedule for BIF members ranged from zero for "well capitalized"
institutions to $.27 per $100 for "undercapitalized" institutions as set forth
in the following table:
BIF RATES
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Supervisory Subgroup
Capital ----------------------------------
Group A B C
------- --------- --------- ---------
Well capitalized 0(c) 3(c) 17(c)
Adequate 3 10 24
Under capitalized 10 24 27
Pursuant to the Deposit Insurance Fund Act of 1996 ("Funds Act"), the FDIC
eliminated the $2,000 minimum annual assessment and in 1996 refunded to BIF
institutions the fourth quarter minimum assessment.
The Funds Act also authorized the Financing Corporation ("FICO") to levy annual
assessments of BIF-assessable deposits to service FICO bond obligations. On
January 2, 1997 the Company's subsidiary bank was assessed $19,400 for its
semiannual FICO payment. The BIF assessment must equal 1/5 of the FICO
assessment rate that is applied to deposits assessable by the Savings
Association Insurance Fund ("SAIF"). The annual assessment rates for FICO were
determined from the September 30,
8
1996 call reports and for BIF institutions the rate was 1.296c per $100.
The subsidiary bank is not restricted by the limitations on Brokered Deposits
and can pass-through the $100,000 FDIC insurance coverage to each participant in
or beneficiary of a qualified employee benefit plan.
The Riegle/Neal Interstate Banking and Branching Efficiency Act of 1994 ("The
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Interstate Banking Act")
- ------------------------
The Interstate Banking Act allowed "adequately capitalized" and "adequately
managed" bank holding companies to acquire banks in any state as of September
29, 1995. The Act also allows interstate merger transactions after June 1,
1997.
The Interstate Banking Act amends Section (d) of the Bank Holding Company Act of
1956 authorizing the Federal Reserve to approve a bank holding company's
application to acquire either control or substantial assets of a bank located
outside of the bank holding company's home state regardless of whether the
acquisition would be prohibited by state law. The Federal Reserve may approve
these transactions only for "adequately capitalized" and "adequately managed"
bank holding companies.
The Interstate Banking Act also amended the Federal Deposit Insurance Act and
beginning June 1, 1997 responsible agencies may approve merger transactions
between insured banks with different home states regardless of whether the
transaction is prohibited under state law. Through interstate merger
transactions, banks will be able to acquire branches of out of state banks by
converting their offices into branches of the resulting bank. The Act provides
that it will be the exclusive means for bank holding companies to obtain
interstate branches. In these transactions, the resulting bank must remain
"adequately capitalized" and "adequately managed" upon completion of the merger.
The Act also states that a home state may enact a law preventing these
transactions; Illinois will allow these transactions effective June 1, 1997.
Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA")
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The FIRREA has broadened the regulatory powers of federal bank regulatory
agencies. One of the provisions of FIRREA contains a "cross-guarantee"
provision which could impose liability on the Company for losses incurred by the
FDIC in connection with assistance provided to or the failure of any of the
Company's insured depository institutions. The U.S. Court of Appeals Second
Circuit recently upheld the FDIC's power to charge losses from a bank failure to
another bank in the same corporate organization. The Company, under Federal
Reserve Board policy,
9
is a source of financial strength to its subsidiary bank and is expected to
commit resources to support the subsidiary bank. As a result, the Company could
be required to commit resources to its subsidiary bank in circumstances where it
might not do so absent such policies.
Comprehensive Environmental Response Compensation and Liability Act ("CERCLA")
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In 1992 the U.S. Environmental Protection Agency ("USEPA") adopted the CERCLA
which provided lenders with an exemption from liability if the lender did not
participate in the management of the contaminated property. The Secured Lender
Exemption Rule protected secured lenders from CERCLA liability if they did not
exercise significant control over the borrowers day-to-day operations and did
not fail to foreclose and promptly dispose of the contaminated property.
However, the Third Circuit Court of Appeals decision in Frank J. Kelley,
Attorney General for the State of Michigan, v. Environmental Protection Agency,
Chemical Manufactures Association v. Environmental Protection Agency, 15 F. 3d
1100 (D.C. Cir. 1994) ("Kelley") invalidated the secured lender exemption, and
the U.S. Supreme Court denied the appeal.
In response to the Kelley decision, CERCLA was amended by The Economic Growth
and Regulatory Paperwork Reduction Act of 1996. The CERCLA amendment excludes
lenders that hold ownership to property primarily to protect a security interest
(unless the lender actually participates in the management or operational
affairs of the property instead of merely having the capacity to influence or
has unexercised rights to control property operations) from the definition of
"owner or operator" and are therefore exempt from liability for environmental
cleanups.
The state of Illinois amended its Innocent Landowner Law to protect lenders and
purchasers from environmental clean up liabilities. The law provides "innocent
landowner" protection for lenders and purchasers who perform Phase I and Phase
II environmental assessments or audits meeting the statutory requirements. This
law will protect the banks from prosecution by the Illinois Environmental
Protection Agency.
The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA")
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The FDICIA significantly expanded the regulatory and enforcement powers of
federal banking regulators. FDICIA gives federal banking regulators
comprehensive directions to promptly direct or require the correction of
problems of inadequately capitalized banks in a manner that is least costly to
the Federal Deposit Insurance Fund. The degree of corrective regulatory
involvement in the operations and management of banks and their holding
companies will be largely determined by the actual or anticipated
10
capital position of the institution. See the Company's Annual Report pages 18
and 30 detailing the Company's capital position.
FDICIA also directs federal banking regulatory agencies to issue new safety and
soundness standards governing operational and managerial activities of banks and
their holding companies particularly in regard to internal controls, loan
documentation, credit underwriting, interest rate exposure, asset growth and
executive compensation. The following regulations were passed to implement some
of the above objectives:
. In September, 1996, the Federal Banking Agencies amended the Uniform
Financial Institutions Rating System, effective January 1, 1997, to include
sensitivity to market risks. Market risks reflect the degree to which
changes in interest rates and other market rates can affect a financial
institution's assets, earnings, liabilities and capital values. If the
regulators determine a bank is in a high risk position, additional capital
may be required. The Company and its subsidiary bank, on a regular basis,
monitor and establish policy limits on interest rate risk.
Other Laws and Regulations
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Proposals that change the laws and regulations governing banks, bank holding
companies and other financial institutions are discussed in Congress, the state
legislatures and before the various bank regulatory agencies. Banks are subject
to a number of federal and state laws and regulations which have a material
impact on their business. These include, among others, state usury laws,
consumer protection laws and regulations, (e.g., the Truth in Lending Act, the
Equal Credit Opportunity Act, the Expedited Funds Availability Act, the
Community Reinvestment Act, the Truth in Savings Act), as well as the electronic
funds transfer laws, Bank Secrecy Act, environmental laws and privacy laws.
Statistical Disclosure by Bank Holding Companies
- ------------------------------------------------
See "Financial Review" on pages 6 through 18, inclusive, of the Company's 1996
Annual Report to Shareholders, which is incorporated herein by reference for the
statistical disclosure by bank holding companies.
ITEM 2. PROPERTIES
The Company's offices are located in Oak Brook, Illinois. The subsidiary bank
and its branches conduct business in both owned and leased premises. The
Company believes its facilities are suitable and adequate to operate its banking
business. For information concerning lease obligations, see Note 6 of the Notes
11
to Consolidated Financial Statements and lease exhibits previously filed and
incorporated by reference.
The Company and Oak Brook Bank occupy space in a five-year old, three-story,
100,000 square foot, modern office building located at 1400 Sixteenth Street,
Oak Brook, Illinois, which is owned and operated by Oak Brook Bank. The first
and second floors and portions of the third floor and lower level are occupied
by Oak Brook Bank. The Company leases a small portion (1,700 square feet) from
Oak Brook Bank. A portion of the third floor is rented to third parties.
Oak Brook Bank began developing a new branch in Aurora, Illinois during the
first quarter of 1997. The traditional style building will be approximately
4,400 square feet, constructed of brick with a slate roof and accentuated by a
clock tower. This location will offer a drive-up facility and is expected to
open in the first quarter of 1998.
In addition, Oak Brook Bank operates the following branches:
Addison - A 25 year old, 14,500 square foot, two-story brick, colonial
building including a full basement and attached drive-up facility in
Addison, Illinois. The second floor is rented to third parties. This
facility and real estate are owned by Oak Brook Bank and was formerly the
Heritage Bank of Addison, acquired September, 1974.
Bensenville - Approximately 2,000 square feet of leased space in a modern,
two-story glass bui lding in Bensenville, Illinois. Opened in May, 1986.
Broadview - A 43 year old, 6,955 square foot, one-story brick building in
Broadview, Illinois. This facility and real estate are owned by Oak Brook
Bank. Formerly Liberty Bank acquired March, 1991.
Broadview Drive-up - Oak Brook Bank also owns a detached one-story drive-up
facility across the street from the Broadview location.
Burr Ridge - Approximately 6,600 square feet of leased space in a one-
story contemporary building located in Burr Ridge, Illinois. A portion of
this space is used for record storage. Opened in October, 1988.
Glenview - Approximately 1,800 square feet of leased space in a strip
shopping center in Glenview, Illinois. Opened in March, 1990.
12
Lisle - Approximately 1,300 square feet of leased space in a neighborhood
shopping center in a primarily residential section of Lisle, Illinois. A
detached drive-up automated teller machine is also operated at this
location. Opened in October, 1985.
Naperville - A 2,400 square foot, two-story contemporary Palladian-style
building with a full basement and attached drive-up facility in Naperville,
Illinois. This facility is owned by Oak Brook Bank. Opened in June, 1988.
Warrenville - Approximately 4,400 square feet of leased space on the first
floor of a two-story tudor-style building with a full basement and attached
drive-up facility in Warrenville, Illinois. Formerly Warrenville Bank &
Trust acquired April, 1983.
ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiary bank were not subject to any pending or
threatened legal actions as of December 31, 1996. No such actions have arisen
subsequent to year-end.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of shareholders during the fourth
quarter of this year.
13
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
See page 34 and Notes 9, 12 and 13 of the Notes to Consolidated Financial
Statements on pages 29 through 32, inclusive, of the Company's 1996 Annual
Report to Shareholders which is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
See "Earnings Summary and Selected Consolidated Financial Data" on page 6 of the
Company's 1996 Annual Report to Shareholders, which is incorporated herein by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
See "Financial Review" on pages 6 through 18, inclusive, of the Company's 1996
Annual Report to Shareholders, which is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements and related notes are on pages 19 through
33, inclusive, of the Company's 1996 Annual Report to Shareholders, which is
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
14
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
See "Directors and Executive Officers" on page 5 of the Company's Proxy
Statement to be filed on or before April 1, 1997, which is incorporated herein
by reference.
ITEM 11. EXECUTIVE COMPENSATION
See "Summary Compensation Table" and footnotes, "Five Year Performance
Comparison" and "Aggregated Option Exercises and Year-End Option Values Table"
and "Option Grants Table" on pages 9 through 14, inclusive, of the Company's
Proxy Statement to be filed on or before April 1, 1997, which is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
See "Information Concerning Security Ownership of Certain Beneficial Owners and
Management" on pages 2 and 3 of the Company's Proxy Statement to be filed on or
before April 1, 1997, which is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See "Certain Transactions" on page 6 of the Company's Proxy Statement to be
filed on or before April 1, 1997, which is incorporated herein by reference.
15
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
ANNUAL REPORT
PAGE
----
(a) 1. The following financial statements are
filed as part of this report:
Annual Report to Shareholders -
Report of Independent Auditors 19
Consolidated Balance Sheets - December 31, 1996
and 1995 20
Consolidated Statements of Income for the Three
Years Ended December 31, 1996 21
Consolidated Statements of Changes in
Shareholders' Equity for The Three Years Ended
December 31, 1996 22
Consolidated Statements of Cash Flows for the
Three Years Ended December 31, 1996 23
Notes to Consolidated Financial Statements 24-33
2. Financial statement schedules: All schedules are omitted as they are not
applicable or information is included in the consolidated financial
statements or the notes thereto.
(b) The following Reports on Form 8-K were filed during the last quarter of the
period covered by this report: None
(c) The following exhibits are included herein:
Exhibit (3) Articles of Incorporation including Amendments thereto
and By Laws of First Oak Brook Bancshares, Inc.
(Exhibit 3 to the Company's Form 10-K Annual Report for
the year ended December 31, 1994, incorporated herein
by reference).
Exhibit (10.1) Loan Agreement between First Oak Brook Bancshares, Inc.
and LaSalle National Bank dated December 1, 1991 and
amendments dated January 31, 1993 and March 31, 1994.
(Exhibit 10.1 to the Company's Form 10-K Annual Report
for the year ended December 31, 1994, incorporated
herein by reference).
16
Exhibit (10.2) Lease Agreement between First Oak Brook Bancshares,
Inc. and Oak Brook Bank dated November 8, 1991.
(Exhibit 10.2 to the Company's Form 10-K Annual Report
for the year ended December 31, 1994, incorporated
herein by reference).
Exhibit (10.3) Data Processing Agreement between First Data Resources
Inc. and Oak Brook Bank dated November 22, 1991.
(Exhibit 10.3 to the Company's Form 10-K Annual Report
for the year ended December 31, 1994, incorporated
herein by reference.) Amendment thereto dated June 19,
1996, filed herewith.
Exhibit (10.4) First Oak Brook Bancshares, Inc. Employees' Stock Bonus
Plan as amended and restated effective July 19, 1994.
(Exhibit 10.4 to the Company's Form 10-K Annual Report
for the year ended December 31, 1994, incorporated
herein by reference).
Exhibit (10.5) First Oak Brook Bancshares, Inc. Amended and Restated
1987 Stock Option Plan effective September 21, 1987.
(Exhibit 10.5 to the Company's Form 10-K Annual Report
for the year ended December 31, 1994, incorporated
herein by reference).
Exhibit (10.6) Lease Agreement between Oak Brook Bank, not personally,
but solely as Trustee under Trust Agreement dated
August 1, 1989 and known as Trust Number 2200 and Life
Investors Insurance Co. of America, an Iowa
Corporation, for Suite 300 of the Oak Brook Bank
Building. (Exhibit 10.6 to the Company's Form 10-K
Annual Report for the year ended December 31, 1994,
incorporated herein by reference).
17
Exhibit (10.7) Lease Agreement between Oak Brook Bank, not personally,
but solely as Trustee under Trust Agreement dated
August 1, 1989 and known as Trust Number 2200 and CB
Commercial Real Estate Group, Inc., a Delaware
Corporation, for Suite 301 of the Oak Brook Bank
Building. (Exhibit 10.7 to the Company's Form 10-K
Annual Report for the year ended December 31, 1994,
incorporated herein by reference).
Exhibit (10.8) License Agreement, between Jack Henry & Associates,
Inc. and First Oak Brook Bancshares, Inc. dated March
10, 1993. (Exhibit 10.8 to the Company's Form 10-K
Annual Report for the year ended December 31, 1994,
incorporated herein by reference).
Exhibit (10.9) Form of Transitional Employment Agreement for Eugene P.
Heytow, Richard M. Rieser, Jr. and Frank M. Paris.
(Exhibit 10.9 to the Company's Form 10-K Annual Report
for the year ended December 31, 1994, incorporated
herein by reference).
Exhibit (10.10) Form of Transitional Employment Agreement for Senior
Officers. (Exhibit 10.10 to the Company's Form 10-K
Annual Report for the year ended December 31, 1994,
incorporated herein by reference).
Exhibit (10.11) Form of Agreement Regarding Post-Employment Restrictive
Covenants for Eugene P. Heytow, Richard M. Rieser, Jr.
and Frank M. Paris. (Exhibit 10.11 to the Company's
Form 10-K Annual Report for the year ended December 31,
1994, incorporated herein by reference).
Exhibit (10.12) Form of Supplemental Pension Benefit Agreement for
Eugene P. Heytow. (Exhibit 10.12 to the Company's Form
10-K Annual Report for the year ended December 31,
1994, incorporated herein by reference).
18
Exhibit (10.13) Form of Supplemental Pension Benefit Agreement for
Richard M. Rieser, Jr. (Exhibit 10.13 to the Company's
Form 10-K Annual Report for the year ended December 31,
1994, incorporated herein by reference).
Exhibit (10.14) Senior Executive Insurance Plan. (Exhibit 10.14 to the
Company's Form 10-K Annual Report for the year ended
December 31, 1995, incorporated herein by reference).
Exhibit (10.15) First Oak Brook Bancshares, Inc. Performance Bonus Plan
(Amended and Restated).
Exhibit (13) Annual Report to Shareholders.
Exhibit (21) Subsidiary of the Registrant.
Exhibit (23) Consent of Ernst & Young LLP.
Exhibit (27) Financial Data Schedule.
Exhibits 10.9 through 10.15 are management contracts or compensatory plans or
arrangements required to be filed as an Exhibit to this Form 10-K pursuant to
Item 14(c) hereof.
19
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
FIRST OAK BROOK BANCSHARES, INC.
--------------------------------
(Registrant)
BY: /S/EUGENE P. HEYTOW
------------------------------
(Eugene P. Heytow,
Chairman of the Board and
Chief Executive Officer)
DATE: March 17, 1997
------------------------------
Pursuant to the requirements of the Securities Exchange Act 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.
Signature Title Date
- --------- ----- ----
/S/EUGENE P. HEYTOW Chairman of the Board March 17, 1997
- --------------------------- and Chief Executive
Eugene P. Heytow Officer
/S/FRANK M. PARIS Vice Chairman of March 17, 1997
- --------------------------- the Board
Frank M. Paris
/S/RICHARD M. RIESER, JR. President, March 17, 1997
- --------------------------- Assistant Secretary,
Richard M. Rieser, Jr. and Director
/S/ALTON WITHERS Director March 17, 1997
- ---------------------------
Alton Withers
/S/MIRIAM LUTWAK FITZGERALD Director March 17, 1997
- ---------------------------
Miriam Lutwak Fitzgerald
/S/GEOFFREY R. STONE Director March 17, 1997
- ---------------------------
Geoffrey R. Stone
/S/ROBERT WROBEL Director March 17, 1997
- ---------------------------
Robert Wrobel
/S/ROSEMARIE BOUMAN Vice President, Chief March 17, 1997
- --------------------------- Financial Officer,
Rosemarie Bouman Treasurer (Principal
Accounting Officer)
20