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1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
--- SECURITIES EXCHANGE ACT OF 1934
OR
--- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
Commission File Number 0-6136
RIVER FOREST BANCORP, INC.
(Exact name of registrant as specified in its charter)
Minnesota 41-0823592
(State of incorporation of organization) (I.R.S. Employer Identification No.)
Lincoln National Bank Building, 3959 N. Lincoln Ave., 60613
Chicago, Illinois
(Address of principal executive offices) (Zip Code)
(312) 549-7100
(Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of exchange on which registered
------------------- ------------------------------------
Common stock, par value $0.05 per share NASDAQ
Registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months 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 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. [ ]
Documents Incorporated By Reference
Parts I and II of this Form 10-K incorporate by reference certain information
from the Registrant's 1995 Annual Report to Shareholders. Part III of this Form
10-K incorporates by reference certain information from the Registrant's
definitive Proxy Statement dated March 26, 1996, for its Annual Meeting of
Shareholders to be held on May 22, 1996.
On March 1, 1996, the Registrant had 14,825,242 common shares outstanding. Of
these, 8,097,446 common shares having an aggregate market value (based on the
closing price for these shares as reported in a summary of national market
issues in The Wall Street Journal for stocks listed on NASDAQ on March 1, 1996)
of approximately $234.8 million, were owned by shareholders other than directors
and executive officers of the Registrant and any other person known by the
Registrant as of the date hereof to beneficially own five percent or more of
Registrant's common shares.
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PART I.
ITEM 1. BUSINESS
River Forest Bancorp, Inc. (Bancorp), incorporated on October 15, 1958, is a
multi-bank holding company in the business of providing financial services
through its banking subsidiaries to customers in the Chicago metropolitan area.
Bancorp has seven bank subsidiaries, which include River Forest State Bank and
Trust Company (River Forest), Lincoln National Bank (Lincoln), Commercial
National Bank (Commercial), First State Bank of Calumet City (Calumet City),
Madison Bank, N.A. (Madison), First National Bank of Wheeling (Wheeling) and
Aetna Bank, N.A.(Aetna). Bancorp's ownership interests in River Forest and
Lincoln are 98.9% and 93.0%, respectively. All of the other subsidiary banks are
wholly owned. Banks acquired within the last five years include Aetna (September
30, 1991) and Belmont National Bank (July 6, 1993). Belmont National Bank was
merged into Aetna during 1995.
All banks offer general banking services such as checking accounts, savings and
time deposit accounts; commercial, mortgage, home equity, student and personal
loans; safe deposit boxes and a variety of additional services. River Forest,
Commercial and Aetna provide trust services. Lincoln serves more than 400 state
licensed check-cashing facilities in the Chicago area and has provided a variety
of services to this industry for almost 50 years.
All Banks are insured by the Federal Deposit Insurance Corporation
(FDIC). River Forest and Calumet City are subject to regulation, supervision
and regular examination by the Illinois Commissioner of Banks and Trust
Companies and the FDIC. Lincoln, Commercial, Madison, Wheeling and Aetna are
subject to regulation, supervision and regular examination by the Office of the
Comptroller of Currency.
Bancorp plans to merge all of the subsidiary banks into one national bank by
early 1997. The merger of the banks is expected to provide operating
efficiencies and, more importantly, is expected to result in an enhancement of
customer service.
Bancorp owns an operations subsidiary, Bancorp Operations Company, that
comprises an insignificant portion of Bancorp's total assets and net income.
Bancorp Operations Company provides item processing, bookkeeping and other
ancillary bank support services to the Bancorp's bank subsidiaries.
COMPETITION
In Cook County, Illinois, where all seven Banks are located, there is active
competition for securing deposits and extending credit from other banks, savings
and loan associations, credit unions, brokerage firms and finance and insurance
companies. Competition is generally in the form of interest rates and points
charged on loans, interest rates paid on deposits, service charges, banking
hours, fiduciary services and other service-related products. Bancorp's
subsidiary banks respond to this competition by tailoring services to the needs
of customers in their communities, pricing products competitively and monitoring
and improving customer service.
EMPLOYEES
At Dec. 31, 1995, Bancorp employed a total of 678 full-time-equivalent persons,
consisting of 127 executives, management and supervisory personnel and 551
secretarial and clerical employees.
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SUPERVISION AND REGULATION
General
Bancorp is a bank holding company within the meaning of the Bank Holding Company
Act of 1956, as amended (the Act), and is registered as such with the Board of
Governors of the Federal Reserve System (the Federal Reserve Board). The Act
requires every bank holding company to obtain the prior approval of the Federal
Reserve Board before acquiring, merging with or consolidating into another bank
holding company, acquiring substantially all the assets of any bank, or
acquiring direct or indirect ownership or control of 5% or more of the voting
shares of any bank or bank holding company.
The Act also prohibits a bank holding company, with certain exceptions, from
acquiring direct or indirect ownership or control of 5% or more of the voting
shares of any company which is not a bank and from engaging in any business
other than that of banking, managing and controlling banks or furnishing
services to banks and their subsidiaries. However, Bancorp may engage in and own
shares of companies engaged in certain businesses determined by the Federal
Reserve Board to be closely related to banking or managing or controlling banks.
The Illinois Bank Holding Company Act of 1957 (the Illinois Act), as amended,
permits Bancorp to acquire banks located anywhere in Illinois. Other amendments
of the Illinois Act authorize combinations between banks and bank holding
companies located in Illinois and banks and bank holding companies located in
another state if that other state has passed legislation granting similar
privileges to Illinois banks and bank holding companies. Effective December 1,
1990, holding companies from any state were permitted to acquire Illinois banks
and bank holding companies if the other state allows Illinois bank holding
companies the same privilege. In June 1993, the Illinois Act was amended to
eliminate all branch restrictions. Accordingly, banks located in Illinois are
permitted to establish branches anywhere in the state.
The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA)
initiated new intense regulation for the financial services industry. FDICIA
generally provided for the recapitalization of the Bank Insurance Fund and made
significant changes in the legal environment for insured banks, including
reductions in insurance coverage for certain types of deposits, increases in
consumer-oriented requirements, and substantial revisions in the supervision,
examination and audit processes. FDICIA also required new reporting by banks and
mandated adoption of new regulations concerning capital, liquidity, internal
controls, safety and soundness and prompt corrective action.
Capital Adequacy
The Federal Reserve Board established risk-based capital guidelines. The main
objective of the risk-based capital requirements is to provide a fair and
consistent framework for comparing capital positions of all banking
institutions. Under these guidelines, capital consists of two components, core
capital elements (Tier 1 capital) and supplementary capital elements (Tier 2
capital). Assets and off-balance-sheet items are assigned broad risk categories.
The aggregate dollar value of each category is multiplied by a risk weight
associated with this category.
In 1992, the FDIC adopted new regulations which defined five capital categories
for purposes of implementing the requirements under FDICIA. The five capital
categories, which range from "well-capitalized" to "critically
under-capitalized", are based on the level of risk-based capital measures. The
minimum risk-based capital ratios for Tier 1 capital to risk-weighted assets and
total risk-based capital to risk-weighted assets are 4.0% and 8.0%,
respectively. At Dec. 31, 1995, Bancorp's Tier 1 capital and total risk-based
capital ratios were 12.6% and 13.9%, respectively.
In addition, bank regulatory agencies established a leverage ratio to supplement
the risk-based capital guidelines. The leverage ratio is intended to ensure that
adequate capital is maintained against risks other than credit risk. A minimum
required ratio of Tier 1 capital to total assets of 3.0% is required for the
highest quality bank holding
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companies that are not anticipating or experiencing significant growth. All
other banking institutions must maintain a leverage ratio of 4.0% to 5.0%
depending upon an institution's particular risk profile. At Dec. 31, 1995,
Bancorp's leverage ratio was 9.2%.
Interstate Banking
The Riegle-Neal Interstate Bank and Branching Efficiency Act of 1994 (IBBA)
permits bank holding companies that are adequately capitalized and managed to
acquire banks located in any other state after September 29, 1995, subject to
certain statewide and nationwide deposit concentration limits. States may also
prohibit acquisition of banks that have not been in existence for at least five
years.
The interstate branching by merger provision is effective on June 1, 1997,
unless a state takes legislative action prior to that date. States may pass laws
to either "opt-in" before June 1, 1997, or to "opt-out" by expressly prohibiting
merger transactions involving out-of-state banks, provided legislative action is
taken before June 1, 1997. The effects on Bancorp of such changes in interstate
banking and branching laws cannot be predicted. However, it is likely that there
will be increased competition from national and regional banking firms
headquartered outside of Illinois.
STATISTICAL DATA
Pages 3 through 10 contain supplemental statistical data. This data should be
read in conjunction with Bancorp's Management's Discussion and Analysis of
Financial Statements and the Consolidated Financial Statements and notes thereto
of the 1995 Annual Report to Shareholders (1995 Annual Report), incorporated
herein by reference in response to Items 7 and 8 hereof.
CHANGES IN INTEREST INCOME AND EXPENSE
The following table shows the changes in interest income and expense by major
categories of assets and liabilities attributable to changes in volume or rate
or both, for the periods indicated:
Year Ended December 31, 1995
----------------------------------------
(thousands) Volume Rate Total
-------- -------- --------
Interest Income:
Interest-earning deposits with banks $ 748 $ (34) $ 714
Federal funds sold (219) 663 444
Taxable securities 3,363 3,790 7,153
Tax-advantaged securities (172) (422) (594)
Trading account securities (769) 50 (719)
Loans, net of discount 29,980 19,386 49,366
-------- -------- --------
Net Increase 32,931 23,433 56,364
-------- -------- --------
Interest Expense:
NOW and money market deposits 17,421 6,166 23,587
Savings deposits (976) (53) (1,029)
Time deposits (467) 4,490 4,023
Short-term borrowings (128) 434 306
Secured-term debt, demand note and subordinated debentures (19) (19) (38)
-------- -------- --------
Net Increase 15,831 11,018 26,849
-------- -------- --------
Increase in Net Interest Income $ 17,100 $ 12,415 $ 29,515
======== ======== ========
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5
Year Ended December 31, 1994
----------------------------------------
Volume Rate Total
-------- -------- --------
Interest Income:
Interest-earning deposits with banks $ (480) $ (218) $ (698)
Federal funds sold (655) 950 295
Taxable securities 7,585 544 8,129
Tax-advantaged securities (1,347) 578 (769)
Trading account securities 1,021 0 1,021
Loans, net of discount 7,131 (2,208) 4,923
-------- -------- --------
Net Increase (Decrease) 13,255 (354) 12,901
-------- -------- --------
Interest Expense:
NOW and money market deposits 8,224 5,127 13,351
Savings deposits 500 (875) (375)
Time deposits (2,353) 230 (2,123)
Short-term borrowings 4 52 56
Secured-term debt, demand note and subordinated debentures (1,025) 291 (734)
-------- -------- --------
Net Increase 5,350 4,825 10,175
-------- -------- --------
Increase (Decrease) in Net Interest Income $ 7,905 $ (5,179) $ 2,726
======== ======== ========
The tax-equivalent adjustment for interest income on tax-advantaged loans and
securities is reflected through the rate column based on a marginal corporate
income tax rate of 35%. Volume variances are computed using the change in volume
multiplied by the previous year's rate. Rate variances are computed using the
changes in rate multiplied by the previous year's volume. The change in interest
due to both rate and volume has been allocated between the factors in proportion
to the relationship of the absolute dollar amounts of the change in each.
INTEREST RATE SENSITIVITY
Interest rate sensitivity is the fluctuation in earnings resulting from changes
in market interest rates. Management's primary objective regarding
asset/liability management is to position Bancorp such that changes in interest
rates do not have a material adverse impact on net income. Bancorp utilizes
off-balance-sheet financial instruments, such as interest rate swaps and floors,
as a tool for preventing adverse swings in net interest income.
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Management uses a variety of techniques to measure interest rate sensitivity.
One technique is interest rate gap analysis. The following table represents the
interest rate gap analysis for Bancorp at Dec. 31, 1995:
Maturing or Repricing
-------------------------------------------------------------
1-90 91-180 181-270 271 Days
(thousands) Days Days Days to 1 Year
-------------------------------------------------------------
Earning Assets:
Interest-bearing deposits with
banks $ -- $ 25,000 $ -- $ --
Federal funds sold 3,170 -- -- --
Securities available for sale 40,772 54,103 123,518 9,909
Securities held to maturity 292 212 512 990
Loans, net of unearned discount 820,630 21,568 13,119 201,971
Noninterest-earning assets -- -- -- --
-------------------------------------------------------------
Total assets 864,864 100,883 137,149 212,870
Interest-bearing deposits:
Savings and NOW (324,698) -- -- --
Money market (911,146) -- -- --
Certificates of deposit (122,965) (109,557) (39,031) (86,460)
-------------------------------------------------------------
Total interest-bearing deposits (1,358,809) (109,557) (39,031) (86,460)
Short-term borrowings (1,828) -- -- --
Noninterest-bearing deposits -- -- -- --
Noninterest-bearing liabilities
and shareholders' equity -- -- -- --
-------------------------------------------------------------
Total liabilities and
shareholders' equity (1,360,637) (109,557) (39,031) (86,460)
Interest rate swaps 156,817 16,100 -- --
-------------------------------------------------------------
Interest sensitivity gap $ (338,956) $ 7,426 $ 98,118 $ 126,410
=============================================================
Cumulative interest sensitivity gap $ (338,956) $ (331,530) $ (233,412) $ (107,002)
=============================================================
Cumulative gap as a percentage
of total assets (15.95)% (15.60)% (10.98)% (5.04)%
=============================================================
Maturing or Repricing
-------------------------------------------
Nonsensitive
Over 1 Year and Over 5
(thousands) to 5 Years Years Total
-------------------------------------------
Earning Assets:
Interest-bearing deposits with
banks $ -- $ -- $ 25,000
Federal funds sold -- -- 3,170
Securities available for sale 96,863 39,239 364,404
Securities held to maturity 2,357 10,204 14,567
Loans, net of unearned discount 252,986 248,508 1,558,782
Noninterest-earning assets -- 159,169 159,169
-------------------------------------------
Total assets 352,206 457,120 2,125,092
Interest-bearing deposits:
Savings and NOW -- -- (324,698)
Money market -- -- (911,146)
Certificates of deposit (82,087) (12,715) (452,815)
-------------------------------------------
Total interest-bearing deposits (82,087) (12,715) (1,688,659)
Short-term borrowings -- -- (1,828)
Noninterest-bearing deposits -- (209,881) (209,881)
Noninterest-bearing liabilities
and shareholders' equity -- (224,724) (224,724)
-------------------------------------------
Total liabilities and
shareholders' equity (82,087) (447,320) (2,125,092)
Interest rate swaps -- (172,917) --
-------------------------------------------
Interest sensitivity gap $ 270,119 $ (163,117) $ --
===========================================
Cumulative interest sensitivity gap $ 163,117 $ -- $ --
===========================================
Cumulative gap as a percentage
of total assets 7.68% -- --
===========================================
This table is not necessarily indicative of the impact on Bancorp from changes
in interest rates. The repricing of certain assets and liabilities may not
reprice at the same time or in the same magnitude due to different bases. The
repricing of assets and liabilities are also subject to competition and other
pressures.
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SECURITIES PORTFOLIO
Carrying Value of Securities by Category
The carrying value of securities held by Bancorp were as follows:
December 31
------------------------------------
(thousands) 1995 1994 1993
-------- -------- --------
Trading Account
U.S. Government and agencies $ -- $ 74,432 $ --
======== ======== ========
Available for sale
U.S. Government and agencies $226,200 $309,360 $263,877
State and municipal -- -- 473
Common stocks 34,761 19,107
Other 103,443 77,212 6,258
-------- -------- --------
Total $364,404 $405,679 $270,608
======== ======== ========
Held to maturity
U.S. Government and agency obligations $ -- $ 1,044 $ 8,605
State and municipal 8,199 11,096 21,984
Other 6,368 7,113 2,805
-------- -------- --------
Total $ 14,567 $ 19,253 $ 3,394
======== ======== ========
Maturities of Securities
The scheduled maturities by security type as of Dec. 31, 1995 were as follows:
From one From five Not due at
One year through five through ten After a single
(thousands) or less years years ten years maturity Total
-------- -------- -------- -------- -------- --------
U.S. Government
and agencies $208,498 $ 17,702 $ -- $ -- $ -- $226,200
State and municipal 2,001 2,357 3,140 701 -- 8,199
Common stocks -- -- -- -- 34,761 34,761
Other 19,809 79,161 1,034 -- 9,807 109,811
-------- -------- -------- -------- -------- --------
Total $230,308 $ 99,220 $ 4,174 $ 701 $ 44,568 $378,971
======== ======== ======== ======== ======== ========
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The weighted average yield for each range of maturities of securities at Dec.
31, 1995 was as follows:
From one From five Not due at
One year through five through ten After a single
(thousands) or less years years ten years maturity Total
------- ----- ----- --------- -------- -----
U.S. Government
and agencies 5.87% 5.42% -- % -- % -- % 5.84%
State and municipal 9.52 9.47 9.07 9.98 -- 9.37
Common stocks -- -- -- -- N/M N/M
Other 5.54 5.44 6.96 -- 7.45 5.65
Actual maturities may differ from those scheduled due to prepayments from
issuers. Common stock yields are not considered meaningful for purposes of this
analysis. Yields on tax-advantaged securities reflect a tax equivalent
adjustment based on a marginal corporate tax rate of 35%.
LOAN PORTFOLIO
Classification of Loans
Bancorp's loans were as follows:
December 31
------------------------------------------------------------------------------
(thousands) 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
Commercial real estate $ 560,467 $ 326,402 $ 263,903 $ 195,824 $ 184,211
Student 379,129 354,073 290,635 286,391 302,799
Residential mortgage 317,787 233,437 251,159 255,919 256,971
Home equity 170,793 57,093 37,578 30,489 29,407
Commercial 78,469 68,620 75,504 91,525 93,665
Consumer 30,273 32,393 27,880 34,353 44,119
Industrial revenue bonds 21,864 28,491 32,172 36,669 43,873
---------- ---------- ---------- ---------- ----------
Total $1,558,782 $1,100,509 $ 978,831 $ 931,170 $ 955,045
========== ========== ========== ========== ==========
Maturities of Loans and Sensitivity to Changes in Interest
The following table classifies the scheduled maturities for the following loan
portfolio categories at Dec. 31, 1995:
One year From one After
(thousands) or less to five years five years Total
------- ------------- ---------- -----
Commercial real estate $ 73,477 $215,772 $271,218 $560,467
Commercial 34,253 35,037 9,179 78,469
Industrial revenue bonds 5,592 3,040 13,232 21,864
Of the loans maturing after one year, $216.9 million have fixed rates. To manage
the interest rate exposure of specific, fixed-rate commercial real estate loans,
industrial development revenue bonds and other loans, Bancorp has entered into
interest rate swap and floor agreements. For additional information on such
financial instruments, see
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Note 9 to the Consolidated Financial Statements beginning on page 27 of the 1995
Annual Report, incorporated herein by reference in response to Item 8 hereof.
RISK ELEMENTS IN THE LOAN PORTFOLIO
Nonaccrual and Past Due Loans
Nonaccrual loans were as follows:
December 31
-----------------------------------------------------------------------------
(thousands) 1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Nonaccrual loans $ 8,536 $ 2,389 $ 3,098 $ 4,525 $ 8,492
Nonaccrual loans to total loans 0.55% 0.22% 0.32% 0.49% 0.89%
Interest income that should have been recorded under the original terms of these
loans and interest income actually recorded totaled $737,000 and $5,000,
respectively, for the year ended Dec. 31, 1995. For information regarding
impaired loans included in nonaccrual loans, see Note 4 to the Consolidated
Financial Statements on page 24 of the 1995 Annual Report, incorporated herein
by reference in response to Item 8 hereof.
Loans past due 90 days or more, including nonaccrual loans, were as follows:
December 31
-------------------------------------------------------------------
(thousands) 1995 1994 1993 1992 1991
------- ------- ------- ------- -------
Loans past due 90 days or more $29,787 $20,620 $14,281 $18,432 $27,494
Less guaranteed student loans 13,913 13,252 8,231 10,260 10,577
------- ------- ------- ------- -------
Net loans past due 90 days or more $15,874 $ 7,368 $ 6,050 $ 8,172 $16,917
======= ======= ======= ======= =======
Net loans past due 90 days or more
as a percentage of total loans 1.02% 0.67% 0.62% 0.88% 1.77%
======= ======= ======= ======= =======
Student loans that are greater than 90 days past due are classified as
performing due to the principal and accrued interest on such loans being
guaranteed by individual state or private non-profit agencies.
Potential Problem Loans
In addition to those loans disclosed under the preceding "Nonaccrual and Past
Due Loans" section, management identified, through their problem loan
identification system, certain other loans in the portfolio that exhibit a
higher than normal credit risk. However, these loans were not classified as
nonperforming loans. These other loans include loans that are past maturity more
than 45 days, have recent adverse operating cash flow or balance sheet trends,
or have general risk characteristics that the loan officer feels might
jeopardize the future timely collection of principal and interest payments. At
Dec. 31, 1995, the principal amount of these loans was $19.1 million. This
amount generally includes loans that were classified for regulatory purposes. At
Dec. 31, 1995, there were no significant loans classified by any bank regulatory
agency that were not included in this amount.
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Analysis of the Allowance for Possible Loan Losses
The activity in the allowance for possible loan losses was as follows:
Year Ended December 31
---------------------------------------------------------------------------
(thousands) 1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
Balance at beginning of year $ 20,157 $ 19,552 $ 17,490 $ 14,697 $ 10,917
Allowance of acquired subsidiaries -- -- 1,000 -- 2,885
Provision charged to operations 5,779 -- 1,176 4,432 1,226
Less charge-offs:
Commercial real estate loans 284 65 804 269 234
Student loans 81 45 107 983 317
Residential mortgage loans 4 20 96 630 5
Commercial loans and industrial revenue bonds 269 35 515 735 252
Home equity and consumer loans 181 148 330 562 607
-------- -------- -------- -------- --------
Total charge-offs 819 313 1,852 3,179 1,415
-------- -------- -------- -------- --------
Add recoveries:
Commercial real estate loans 44 210 296 61 3
Student loans 105 100 596 1,071 10
Residential mortgage loans 5 5 7 128 536
Commercial loans and industrial revenue bonds 69 303 537 51 149
Home equity and consumer loans 300 300 302 229 386
-------- -------- -------- -------- --------
Total recoveries 523 918 1,738 1,540 1,084
-------- -------- -------- -------- --------
Net (charge-offs) recoveries (296) 605 (114) (1,639) (331)
-------- -------- -------- -------- --------
Balance at end of year $ 25,640 $ 20,157 $ 19,552 $ 17,490 $ 14,697
======== ======== ======== ======== ========
Net (charge-offs)/recoveries to average loans
outstanding (0.02%) 0.06% (0.01%) (0.18%) (0.03%)
======== ======== ======== ======== ========
Allocation of the Allowance for Possible Loan Losses
The allocation of the allowance for possible loan losses was as follows:
December 31
---------------------------------------------------------------
(thousands) 1995 1994 1993 1992 1991
------- ------- ------- ------- -------
Commercial real estate $ 2,934 $ 5,491 $ 5,175 $ 3,915 $ 3,685
Student 11,489 1,202 1,424 1,430 1,515
Residential mortgage 1,327 2,451 2,233 2,560 1,930
Home equity 1,000 827 483 425 1,640
Commercial 445 1,368 1,168 1,600 410
Consumer 476 291 378 860 1,100
Industrial revenue bonds -- 310 421 625 745
Unallocated 7,969 8,217 8,270 6,075 3,672
------- ------- ------- ------- -------
Total $25,640 $20,157 $19,552 $17,490 $14,697
======= ======= ======= ======= =======
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Loan Portfolio Composition
The composition of the loan portfolio was as follows:
December 31
------------------------------------------------
(thousands) 1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Commercial real estate 36% 30% 27% 21% 19%
Student 24 32 30 31 32
Residential mortgage 20 21 26 27 27
Home equity 11 5 3 3 3
Commercial 5 6 8 10 10
Consumer 2 3 3 4 4
Industrial revenue bonds 2 3 3 4 5
--- --- --- --- ---
Total 100% 100% 100% 100% 100%
=== === === === ===
For further review of the loan loss provision and the allowance for possible
loan losses, reference is made to pages 14 through 16 of Management's Discussion
and Analysis of Financial Statements of the 1995 Annual Report, incorporated
herein by reference in response to Item 7 hereof.
DEPOSITS
The scheduled maturities of time deposits in denominations of $100,000 and
greater was as follows at Dec. 31, 1995:
(thousands)
Maturing within 3 months $ 61,892
After 3 but within 6 months 54,677
After 6 but within 12 months 81,190
After 12 months 34,767
--------
Total $232,526
========
RETURN ON EQUITY AND ASSETS
The following table presents certain ratios relating to Bancorp's equity and
assets:
December 31
----------------------------
1995 1994 1993
---- ---- ----
Return on average total assets 1.8% 1.5% 1.8%
Return on average common shareholders' equity 20.4 15.9 19.2
Dividend payout ratio 14.3 18.5 16.0
Average equity to average total assets 8.4 9.4 9.3
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ITEM 2. PROPERTIES
Bancorp utilizes the building facilities of Lincoln for its executive offices.
Lincoln's main office building is located at 3959 N. Lincoln Avenue, Chicago,
Illinois. The five story, 60,000 square foot building contains leased space on
its fourth and fifth floors that is potentially convertible for office use.
Other Lincoln properties include a 2,300 square foot drive-in facility at 3940
N. Damen Avenue, Chicago, Illinois with a parking lot. All of Lincoln's
buildings and the properties upon which they are situated are owned by Lincoln.
River Forest owns and occupies two buildings, totaling 13,600 square feet, and a
drive-in facility at 7727 W. Lake Street, River Forest, Illinois.
Commercial's main office building is a 34,000 square foot structure located at
4800 N. Western Avenue, Chicago, Illinois. Commercial also uses an adjacent
building at 2414 W. Lawrence for operations, a drive-in facility at 2420 W.
Lawrence and two parking lots at 2432 W. Lawrence and 4822 N. Lincoln all of
which are located in Chicago, Illinois. Commercial owns its buildings and the
land upon which they are situated.
Calumet City's main office building is a 18,000 square foot structure located at
925 Burnham Avenue, Calumet City, Illinois. The main office consists of a
two-story office building, a parking lot and an attached four lane drive-in
facility. Calumet also has a branch at 530 Torrence Avenue, Calumet City,
Illinois. Calumet City owns its buildings and the land upon which they are
situated.
Madison leases approximately 15,000 square feet of downtown office space at 10
S. Riverside Plaza, Chicago, Illinois. The lease contract expires in November
2003. In addition, Madison leases a 7,000 square foot structure for a branch
located at 9190 Golf Road, Niles, Illinois. The branch also has a detached
drive-in facility and a parking lot at the same address. The lease contract
expires in February 2010.
Wheeling's main office building is a 6,000 square foot structure located at 125
Old McHenry Road, Wheeling, Illinois. The structure has an attached six lane
drive-in facility. Wheeling also has a parking lot at the same address. Wheeling
owns the building and land upon which it is situated.
Aetna's main office building is a 30,000 square foot two-story structure located
at 2401 N. Halsted, Chicago, Illinois, with an attached four lane drive-in
facility. Attached to the main bank is a 7,500 square foot two-story building
that is currently being leased to tenants on the first floor. Aetna has two
branches. One branch is located at 3179 North Clark Street, Chicago, Illinois.
This site includes a 42,000 square foot two-story structure and a four lane
drive-in facility. This structure has a parking lot located at 3211-15 North
Clark Street, Chicago, Illinois. Bancorp Operations Company shares the offices
of this branch. Aetna's second branch is a 4,600 square foot facility at 3604 N.
Southport, Chicago, Illinois, with three drive-in lanes. Aetna owns all of its
buildings and the land upon which they are situated.
Bancorp considers its office and banking facilities adequate to support present
and immediately foreseeable future operations. All Banks have automated teller
machines.
ITEM 3. LEGAL PROCEEDINGS
At Dec. 31, 1995, Bancorp had student loans that may have lost their guarantees.
The potential loss of the guarantees was the result of certain, since
terminated, personnel in the student loan area that falsified some records of
telephone calls to students whose loans were delinquent. The telephone calls are
a required action to maintain the enforceability of the guarantee.
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Bancorp informed the U.S. Department of Education immediately upon discovery of
the problem. Management is cooperating fully with the Department's
investigation. Management believes that the affected student loans never lost
their guarantee and/or the Department of Education should allow Bancorp to cure
(i.e., reinstate the guarantee) the affected student loans. It is unclear what
actions, if any, the Department of Education will take in this matter. As a
result, the ultimate impact, if any, on Bancorp's results of operations cannot
presently be predicted, but management does not believe any actions by the
Department of Education will materially affect Bancorp's financial position,
liquidity or capital resources. Based on all currently available information,
management estimates the range of possible loss to be between $0 and $15
million. As a result of the investigation, Bancorp had $6.7 million of student
loans on nonaccrual status and allocated $10.5 million of the allowance for loan
losses to student loans at Dec. 31, 1995.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
PRICE RANGE OF COMMON STOCK
Bancorp's common stock trades on the Nasdaq National Market tier of The Nasdaq
Stock Market under the symbol: RFBC. The high and low prices for the common
stock for the calendar quarters indicated, as reported by NASDAQ, are listed on
page 1 of the 1995 Annual Report, incorporated herein by reference in response
to Item 7 hereof.
APPROXIMATE NUMBER OF EQUITY SECURITY HOLDERS
As of March 1, 1996, there were approximately 550 shareholders owning River
Forest Bancorp, Inc. common stock which has a par value of $0.05 per share.
Shareholders that own stock in nominee (i.e., street) name are excluded from the
number of security holders of record.
DIVIDENDS ON COMMON STOCK
Annual cash dividends per common share for the last five years are included on
page 1 of the 1995 Annual Report, incorporated herein by reference in response
to Item 7 hereof. Dividends have been declared and paid on a quarterly basis.
The declaration of dividends is at the discretion of Bancorp's Board of
Directors and depends upon, among other factors, earnings, capital requirements
and the operating and financial condition of Bancorp.
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ITEM 6. SELECTED FINANCIAL DATA
Refer to pages 1 and 32 of the 1995 Annual Report, incorporated herein by
reference for additional selected financial data. Bancorp's condensed statements
of income for the last five years were as follows:
December 31
----------------------------------------------------------------------------
(thousands, except per share data) 1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
Interest income $ 171,114 $ 114,541 $ 101,325 $ 110,481 $ 106,643
Interest expense 72,597 45,748 35,573 41,814 56,923
--------- --------- --------- --------- ---------
Net interest income 98,517 68,793 65,752 68,667 50,350
Provision for possible loan losses 5,779 -- 1,176 4,432 1,226
--------- --------- --------- --------- ---------
Net interest income after provision
for possible loan losses 92,738 68,793 64,576 64,235 49,124
Noninterest income, excluding
securities gains (losses) 15,146 13,221 12,869 9,698 9,556
Securities gains (losses), net (1,035) 14 (330) (69) (463)
Noninterest expense 51,650 45,222 38,626 37,911 30,202
Income tax expense 19,429 12,790 13,167 12,675 8,479
--------- --------- --------- --------- ---------
Net income available to common
shareholders $ 35,770 $ 24,016 $ 25,322 $ 23,278 $ 19,536
========= ========= ========= ========= =========
Net income per common share $ 2.35 $ 1.57 $ 1.66 $ 1.53 $ 1.29
========= ========= ========= ========= =========
Cash dividends declared per common share $ 0.36 $ 0.30 $ 0.27 $ 0.24 $ 0.17
========= ========= ========= ========= =========
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information contained under the captions "Financial Highlights" on page 1
and "Management's Discussion and Analysis of Financial Statements" on pages 5 -
16 of the 1995 Annual Report is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of Bancorp, including the notes thereto,
and other information on pages 17 - 32 of the 1995 Annual Report is incorporated
herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding directors and executive officers of Bancorp is
incorporated herein by reference to the descriptions under "Elections of
Directors and Ownership of Shares" on pages 2 - 3 of the 1996 Proxy Statement.
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ITEM 11. EXECUTIVE COMPENSATION
Information regarding executive compensation is incorporated by reference to the
material under the caption "Executive Compensation" on pages 4 - 15 of the 1996
Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding security ownership of certain beneficial owners and
management is incorporated by reference to the material under the headings
"Outstanding Voting Securities and Principal Shareholders" and "Election of
Directors and Ownership of Shares" on pages 1-2 and 3, respectively, of the 1996
Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions is
incorporated herein by reference to the material in Note 4 on page 24 of the
1995 Annual Report and to the material under the heading "Transactions with
Management and Others" on page 15 of the 1996 Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(13) The portions of Registrant's 1995 Annual Report incorporated by reference
into Part I or Part II of Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995.
Index
Pages
-----
Consolidated Statements of Condition 17
Consolidated Statements of Income 18
Consolidated Statements of Shareholders' Equity 19
Consolidated Statements of Cash Flows 20
Notes to Consolidated Financial Statements 21-32
Independent Auditors' Report 32
(27) Financial Data Schedule.
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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.
Michael J. McClure /s/ Vice President & Chief Accounting Officer March 20, 1996
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.
Joseph C. Glickman /s/ Chairman of the Board of Directors March 20, 1996
Robert J. Glickman /s/ President, Chief Executive Officer & Director March 20, 1996
Timothy H. Taylor /s/ Senior Vice President & Treasurer March 20, 1996
Michael J. McClure /s/ Vice President & Chief Accounting Officer March 20, 1996
Karl H. Horn /s/ Director March 20, 1996
Michael Levitt /s/ Director March 20, 1996
Rodney D. Lubeznik /s/ Director March 20, 1996
Michael Tang /s/ Director March 20, 1996
William H. Wendt, III /s/ Director March 20, 1996
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