<PAGE>
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(MARK ONE)
(X)QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1997
--------------------------------
OR
( )TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ______________ to _______________
Commission file number 0-14468
-------
First Oak Brook Bancshares, Inc.
-------------------------------------------------------------
(Exact Name of registrant as specified in its charter)
Delaware 36-3220778
- ----------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1400 Sixteenth Street, Oak Brook, Illinois 60523
- --------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (630) 571-1050
--------------
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 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 number of shares outstanding of each of the issuer's classes of common
stock, as of July 31, 1997.
Class A 1,761,367
- -------------------------------- ---------------------------------------
CLASS NUMBER OF SHARES
Common 1,516,091
- -------------------------------- ---------------------------------------
CLASS NUMBER OF SHARES
<PAGE>
FIRST OAK BROOK BANCSHARES, INC. AND SUBSIDIARY
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I. Financial Information
- ------------------------------
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets
June 30, 1997 and December 31, 1996 3
Condensed consolidated statements of income
Three months ended June 30, 1997 and 1996 and
Six months ended June 30, 1997 and 1996 5
Condensed consolidated statements of cash flows
Six months ended June 30, 1997 and 1996 7
Notes to condensed consolidated financial
statements -- June 30, 1997 9
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 12
Part II. Other Information
- ---------------------------
Item 1. Legal Proceedings *
Item 2. Changes in Securities *
Item 3. Defaults upon Senior Securities *
Item 4. Submission of Matters
to a Vote of Security Holders 22
Item 5. Other Information *
Item 6. Exhibits and Reports on Form 8-K 24
Signatures 25
- ----------
</TABLE>
* Not applicable
-2-
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIRST OAK BROOK BANCSHARES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1997 AND DECEMBER 31, 1996
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---------- ------------
<S> <C> <C>
Assets
- ------
Cash and due from banks $ 47,697 $ 38,816
Federal funds sold 58,000 22,150
Interest-bearing deposits
with banks $ 10,124 289
Securities held-to-maturity, at
amortized cost (fair value $135,831
and $132,057 for June 30, 1997 and
December 31, 1996) 134,479 130,408
Securities available-for-sale, at
fair value 153,232 135,546
Loans, net of unearned discount 375,407 420,164
Less allowance for loan losses (4,904) (4,109)
-------- --------
Net loans 370,503 416,055
-------- --------
Premises and equipment, net 17,893 17,470
Other assets 8,748 7,921
-------- --------
Total assets $800,676 $768,655
======== ========
</TABLE>
-3-
<PAGE>
FIRST OAK BROOK BANCSHARES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS (CONT.)
(Unaudited)
(In Thousands Except Share Information)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---------- ------------
Liabilities
- -----------
<S> <C> <C>
Noninterest-bearing demand deposits $157,621 $147,497
-------- --------
Interest-bearing deposits:
Savings deposits and interest
bearing checking accounts 173,361 180,083
Money market accounts 33,697 32,027
Time deposits
Under $100,000 126,637 141,291
$100,000 and over 143,848 147,405
-------- --------
Total interest-bearing deposits 477,543 500,806
-------- --------
Total deposits 635,164 648,303
-------- --------
Securities sold under agreements
to repurchase 56,158 43,205
Treasury, tax and loan demand notes 20,000 11,982
Federal Home Loan Bank advances 12,500 -
Other liabilities 11,508 5,612
-------- --------
Total liabilities 735,330 709,102
-------- --------
Shareholders' Equity
- --------------------
Class A Common Stock (aggregate
liquidation preference of $11,047) 3,737 3,709
Common stock 3,384 3,382
Surplus 10,619 10,472
Unrealized gain on securities
available-for-sale, net of taxes 161 273
Retained earnings 51,030 42,487
Less cost of shares in treasury,
118,000 Class A and 174,023 common
shares in 1997 and 172,527 common
shares in 1996 (3,585) (770)
-------- --------
Total shareholders' equity 65,346 59,553
-------- --------
Total liabilities and
shareholders' equity $800,676 $768,655
======== ========
</TABLE>
-4-
<PAGE>
See Notes to Condensed Consolidated Financial Statements.
FIRST OAK BROOK BANCSHARES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
---------------- -------------------
1997 1996 1997 1996
------- ------- ---------- -------
<S> <C> <C> <C> <C>
Interest income:
Interest on loans $ 9,859 $ 8,987 $19,321 $17,530
Interest on securities:
U.S. Treasury and Government
agencies 3,285 2,955 6,459 5,929
Obligations of states and political
subdivisions 601 715 1,260 1,419
Other securities 53 118 104 208
Interest on Federal funds sold and
securities purchased under
agreements to resell 112 178 299 291
Interest on deposits with banks 3 3 7 6
------- ------- ------- -------
Total interest income 13,913 12,956 27,450 25,383
------- ------- ------- -------
Interest expense:
Interest on savings deposits and
interest bearing checking accounts 1,557 1,724 3,116 3,485
Interest on money market accounts 257 213 533 421
Interest on time deposits 3,718 3,453 7,631 6,702
Interest on Federal funds purchased
and securities sold under
agreements to repurchase 662 698 1,232 1,368
Interest on Treasury, tax and loan
demand notes 171 88 288 179
Interest on Federal Home Loan Bank
advances 116 - 162 42
------- ------- ------- -------
Total interest expense 6,481 6,176 12,962 12,197
------- ------- ------- -------
Net interest income 7,432 6,780 14,488 13,186
Provision for loan losses 1,175 330 1,550 660
------- ------- ------- -------
Net interest income after provision for
loan losses $ 6,257 $ 6,450 $12,938 $12,526
------- ------- ------- -------
</TABLE>
-5-
<PAGE>
FIRST OAK BROOK BANCSHARES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (CONT.)
(Unaudited)
(In Thousands Except Share Information)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
---------------------- --------------------------
1997 1996 1997 1996
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Other income:
Service charges on deposit accounts $ 701 $ 598 $ 1,400 $ 1,202
Trust and investment management fees 212 169 497 337
Other operating income 510 392 956 744
Investment securities gains (losses) - (7) (9) 3
Gain on sale of credit card portfolio 9,117 - 9,117 -
---------- ---------- ---------- ----------
Total other income 10,540 1,152 11,961 2,286
---------- ---------- ---------- ----------
Other expenses:
Salaries and employee benefits 3,119 3,025 6,238 5,988
Occupancy expense 353 356 740 698
Equipment expense 388 433 781 856
Data processing 429 382 872 761
Professional fees 112 87 216 163
Postage, stationery and supplies 192 193 367 378
Advertising and business development 369 397 754 794
FDIC premiums 20 1 40 1
Gain on other real estate owned - (515) -
Other operating expenses 516 396 1,019 836
---------- ---------- ---------- ----------
Total other expenses 5,498 5,270 10,512 10,475
---------- ---------- ---------- ----------
Income before provision for income
taxes 11,299 2,332 14,387 4,337
Provision for income taxes 4,173 594 5,048 1,070
---------- ---------- ---------- ----------
Net income $ 7,126 $ 1,738 $ 9,339 $ 3,267
========== ========== ========== ==========
Earnings per common share and common
equivalent share $ 2.12 $ .50 $ 2.76 $ .95
========== ========== ========== ==========
Dividends per share:
Class A Common $ .130 $ .090 $ .260 $ .180
Common .105 .075 .210 .150
========== ========== ========== ==========
Weighted average number of common
shares and common share
equivalents 3,365,558 3,451,477 3,380,250 3,448,039
========== ========== ========== ==========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
-6-
<PAGE>
FIRST OAK BROOK BANCSHARES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(In Thousands)
<TABLE>
<CAPTION>
1997 1996
-------- --------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 9,339 $ 3,267
Adjustments to reconcile net income to net
cash provided by operating activities:
Gain on credit card portfolio sale (9,117) -
Depreciation, discount accretion, premium
amortization and amortization of intangibles 1,266 1,752
Provision for loan losses 1,550 660
Investment securities (gains) losses 9 (3)
Increase in other assets (850) (539)
Increase in other liabilities 5,955 163
-------- --------
Net cash provided by operating activities 8,152 5,300
-------- --------
Cash flows from investing activities:
Purchase of domestic certificates of deposit (10,000) -
Purchase of securities held-to-maturity (26,235) (24,754)
Purchase of securities available-for-sale (53,549) (55,137)
Proceeds from maturities of securities
held-to-maturity 18,696 19,102
Proceeds from sales and maturities of
securities available-for-sale 38,792 58,308
Proceeds from credit card portfolio sale 64,000 -
Increase in loans (10,880) (33,901)
Additions to premises and equipment (1,308) (456)
-------- --------
Net cash provided by (used in) investing
activities 19,516 (36,838)
-------- --------
Cash flows from financing activities:
Increase in demand deposits 10,125 11,669
Decrease in savings and interest bearing
checking accounts (6,722) (2,924)
Increase in money market accounts 1,670 1,745
Increase (decrease) in time deposits (18,211) 40,033
Increase in securities sold under
agreements to repurchase 12,952 1,342
Increase in Treasury, tax and
loan demand notes 8,018 9,671
Proceeds from Federal Home Loan Bank advances 12,500 -
Repayment of Federal Home Loan Bank advances - (3,500)
Exercise of stock options 177 -
Purchase of treasury stock (2,815) (37)
Cash dividends (796) (606)
-------- --------
Net cash provided by financing activities 16,898 57,393
-------- --------
</TABLE>
-7-
<PAGE>
FIRST OAK BROOK BANCSHARES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
(Continued)
<TABLE>
<CAPTION>
1997 1996
-------- -------
<S> <C> <C>
Net increase in cash and cash equivalents 44,566 25,855
Cash and cash equivalents at beginning
of period 61,255 37,511
-------- -------
Cash and cash equivalents at end of
period $105,821 $63,366
======== =======
Supplemental disclosures:
Interest paid $ 13,326 $12,100
Income taxes paid 1,515 1,200
======== =======
</TABLE>
-8-
<PAGE>
FIRST OAK BROOK BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
1. Basis of Presentation:
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with the rules and regulations of the
Securities and Exchange Commission. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring items) considered necessary
for a fair presentation have been included. Operating results for the three
and six months period ended June 30, 1997 are not necessarily indicative of
the results that may be expected for the year ended December 31, 1997. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10-K for
the year ended December 31, 1996.
New Accounting Pronouncements: In February 1997, the Financial Accounting
Standards Board issued Statement No. 128, "Earnings per Share," which is
required to be adopted on December 31, 1997. At that time, the Company will
be required to change the method currently used to compute earnings per
share and to restate all prior periods. Under the new requirements for
calculating primary earnings per share, the dilutive effect of stock options
will be excluded. The impact is expected to result in an increase in primary
earnings per share for the three months ended June 30, 1997 and June 30,
1996 of $.06 and $.02 per share, respectively. For the six months ended June
30, 1997 and June 30, 1996, primary earnings per share would increase $.08
and $.02 per share, respectively. The impact of Statement No. 128 on the
calculation of fully diluted earnings per share for these quarters and the
year to date is not expected to be material.
2. Commitments and Contingent Liabilities:
In the normal course of business, there are various outstanding commitments
and contingent liabilities, including commitments to extend credit, which
are not reflected in the financial statements. The Company's exposure to
credit loss in the event of nonperformance by the other party to the
commitments and lines of credit is limited to their contractual amount.
Many commitments to extend credit expire without being used; therefore, the
amounts stated below do
-9-
<PAGE>
FIRST OAK BROOK BANCSHARES, INC. AND SUBSIDIARY
not necessarily represent future cash commitments. These commitments are
subject to the same credit policy as followed for loans recorded in the
financial statements.
The summary of these commitments to extend credit follows (in thousands):
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
------------- -----------------
<S> <C> <C>
Commercial $116,479 $ 89,797
Home equity 72,908 66,772
Credit card and
check credit 1,209 305,061
</TABLE>
-10-
<PAGE>
FIRST OAK BROOK BANCSHARES, INC. AND SUBSIDIARY
3. Shareholders' Equity:
Shares authorized, issued and outstanding are as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
--------- ------------
<S> <C> <C>
Preferred Stock, Series B,
no par value:
Authorized 100,000 100,000
Issued None None
Outstanding None None
Class A Common Stock,
$2.00 par value:
Authorized 4,000,000 4,000,000
Issued 1,868,652 1,854,482
Outstanding 1,750,652 1,854,482
Common Stock,
$2.00 par value:
Authorized 3,000,000 3,000,000
Issued 1,691,989 1,691,138
Outstanding 1,517,966 1,518,611
</TABLE>
Each share of Class A Common stock is entitled to one-twentieth of one vote
and a cash dividend of at least 120% of the dividend declared on the Common
stock. Holders of the Class A Common stock, upon liquidation of the Company,
are entitled to receive an aggregate amount per share equal to the $6.31
offering price of the Class A Common stock before any amount is paid to
holders of the Common stock.
The Common stock is convertible into Class A Common stock on a one-for-one
basis at any time.
On July 16, 1997 the Board declared an increase in its October cash dividend--
15% on its Class A Common and 19% on its Common stock. The new Class A Common
quarterly dividend will be $.15 per share, up from the current quarterly
dividend of $.13 per share. The new Common quarterly dividend will be $.125
per share, up from the current quarterly dividend of $.105. The dividends
will both be payable October 22, 1997 to shareholders of record on October 10,
1997.
-11-
<PAGE>
FIRST OAK BROOK BANCSHARES, INC. AND SUBSIDIARY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Earnings Highlights - Second Quarter Results
- -------------------
Net income for the second quarter of 1997 was $7,126,000 compared with
$1,738,000 earned in the second quarter of 1996, an increase of $5,388,000.
Earnings per share for the second quarter of 1997 were $2.12 as compared to $.50
for 1996.
On June 30, 1997, the Company closed the sale of its credit card portfolio to
MBNA America Bank, N.A., the world's second largest credit card issuer with over
$40 billion in outstandings. Although credit card lending was still a high-
return business, future growth potential was questionable, acquiring and
retaining customers was becoming more difficult and more costly, and consumer
delinquency and bankruptcy was increasing. MBNA purchased substantially all of
the portfolio, which totaled approximately $53 million. Oak Brook Bank retained
approximately $1.3 million in outstandings, approximately one third of which
consisted of accounts delinquent 60 days or more and the remainder of which were
accounts on fixed payment schedules.
The Company recognized a net gain of $5.0 million on the sale. The gain
consisted of a premium of $11.5 million less accrued expenses of $2.4 million,
provision for loan losses of $.8 million and a tax provision of $3.3 million.
Expenses included charges for such items as future contractually obligated data
processing minimum fees net of estimated merchant credit card processing fees,
net operating costs during interim servicing (servicing costs less servicing
revenue) and payroll related costs, including stay and performance bonuses and
severances. Based on a review of the $1.3 million portfolio retained, management
determined that an $800,000 provision for loan losses was prudent given the
discontinued credit card operations and the inherent risks related to the
accounts.
The Company will receive 25% of the income generated by MBNA from the portfolio
for each of the next five twelve month periods beginning July 1, 1997 subject to
a maximum annual payment of $900,000. The net proceeds from the sale,
approximately $58 million, were reinvested in the Bank's securities portfolio.
This combined income stream from initial sale proceeds and annual payments
should have a neutral to slightly positive effect on near term future earnings
versus the net income generated from the transferred credit card portfolio.
The Company cautions that the matters discussed contain certain forward-looking
statements that involve potential risks and uncertainties that may affect the
Company's future results, which
-12-
<PAGE>
FIRST OAK BROOK BANCSHARES, INC. AND SUBSIDIARY
could differ materially from those discussed. Factors that could cause or
contribute to such differences include, but are not limited to, failure to
satisfy the conditions precedent to the transaction described, failure of the
purchaser to maintain volume and/or yield on the transferred portfolio, the
impact of changes in the financial markets and competition from financial and
non-financial service firms on the card revenues achieved by the purchaser after
the transaction, the Company's ability to achieve its reinvestment yield on the
sale proceeds and other factors affecting the Company and its business as
reflected from time to time in the Company's filings with the Securities and
Exchange Commission. The forward-looking statements speak as of the date hereof
and the Company undertakes no obligation to update the statements to reflect
subsequent circumstances or events.
Second quarter income before the net gain on the sale of the credit card
portfolio was $2,130,000, a 23% increase over the 1996 second quarter. Earnings
per share, excluding the nonrecurring gain, were $.63 in 1997 compared with $.50
in the second quarter of 1996.
Key performance indicators for the 1997 second quarter (both before and after
nonrecurring gain) compare to the 1996 second quarter as follows (amounts in
thousands except earning per share):
<TABLE>
<CAPTION>
1997
(excluding
nonrecurring
1997 gain) 1996
------- ------- -------
<S> <C> <C> <C>
Net income $7,126 $2,130 $1,738
Earnings per share $ 2.12 $ .63 $ .50
Return on average assets 3.80% 1.14% 0.97%
Return on average
shareholders' equity 48.32% 14.44% 12.76%
</TABLE>
Key indicators have increased due to improved core earnings and the second
quarter nonrecurring gain on the sale of the credit card portfolio. Earnings
per share and return on average shareholders' equity also reflect the positive
impact of the stock buyback program initiated in the first quarter of 1997. See
Capital discussion for details about the stock buyback.
Net interest income is the difference between interest earned on loans and
investments and interest paid on deposits and other interest-bearing
liabilities. Net interest income, on a tax-equivalent basis, increased $600,000
or 8%. This increase is attributable to a 5% increase in average earning
assets,
-13-
<PAGE>
FIRST OAK BROOK BANCSHARES, INC. AND SUBSIDIARY
primarily loans, coupled with a 3% increase in the net interest margin. The net
interest margin for the second quarter of 1997 was 4.48% compared to 4.35% for
the same period last year.
Average loans for the second quarter of 1997 grew 10% or $37 million in
comparison to the second quarter of 1996. The increase was primarily in
indirect auto, up $23 million, and home equity loans, up $10 million.
Average balances and effective interest yields and rates on a tax equivalent
basis for the second quarters of 1997 and 1996 were as follows (dollars in
thousands):
<TABLE>
<CAPTION>
1997 1996
-------------------- --------------------
Average Effective Average Effective
Balance Yield Balance Yield
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Federal funds sold $ 8,235 5.46% $ 13,564 5.28%
Interest-bearing
deposits with banks 198 6.09 215 5.61
Securities 257,967 6.50 257,098 6.38
Loans 423,977 9.36 386,365 9.40
-------- ---- -------- ----
Total earning assets/
yield $690,377 8.25% $657,242 8.13%
======== ==== ======== ====
Interest-bearing
deposits $464,394 4.78% $460,515 4.71%
Short-term debt 64,472 5.18 63,789 4.96
Long-term debt 8,214 5.67 - -
-------- ---- -------- ----
Total interest-bearing
liabilities/cost of
funds $537,080 4.84% $524,304 4.74%
======== ==== ======== ====
Net interest margin 4.48% 4.35%
==== ====
Net interest spread 3.41% 3.39%
==== ====
</TABLE>
Based on management's review of the adequacy of the loan loss reserve, the
provision for loan losses was increased to $1,175,000 for the second quarter of
1997. The terms of the June 30, 1997 credit card portfolio sale required the
Company to retain approximately $1.3 million in outstandings approximately one
third of which consisted of accounts delinquent 60 days or more and the
remainder of which were accounts on fixed payment schedules. Management
determined that a special provision for loan losses of $800,000 was prudent due
to the discontinued
-14-
<PAGE>
FIRST OAK BROOK BANCSHARES, INC. AND SUBSIDIARY
credit card operation and the inherent risks related to the retained accounts.
Total other income including the credit card portfolio sale increased
$9,389,000. Excluding the sale, other income increased $272,000, or 24%.
Service charges on deposit accounts increased $103,000 primarily due to an
increase in business account analysis fees. Trust and investment management fee
income rose $43,000 principally due to an increase in assets under investment
management. Discretionary assets under investment management totaled $115
million at June 30, 1997 compared to $84 million at June 30, 1996. The $119,000
increase in other operating income was principally attributable to increased
merchant credit card processing fees.
Other expenses for the second quarter rose $229,000, or 4%, compared to 1996.
Salaries rose $94,000, or 3%, as a result of increased base salaries in certain
positions due to a highly competitive job market and the hiring of experienced
personnel.
Other operating expenses increased $120,000, or 30%, primarily as the result of
increased merchant interchange fees.
Earnings Highlights - Six Month Results
- -------------------
Net income for the six months ended June 30, 1997 was $9,339,000, compared with
$3,267,000 earned in 1996, an increase of $6,072,000. Earnings per share for
the first six months of 1997 were $2.76 as compared to $.95 earned in 1996.
Year to date results include the sale of Oak Brook Bank's credit card portfolio
on June 30, 1997 and the sale of surplus property formerly leased to a third
party in February, 1997. The credit card portfolio sale resulted in a net gain
of $5 million, and the company recognized an after-tax gain of $340,000 on the
property sale. Excluding these nonrecurring items, net income for the year to
date increased $736,000, or 23%, over 1996. Earnings per share rose to $1.18
per share in 1997 from $.95 per share in 1996.
-15-
<PAGE>
FIRST OAK BROOK BANCSHARES, INC. AND SUBSIDIARY
Key performance indicators for the first six months of 1997 and 1996 compare as
follows (amounts in thousands except earnings per share:
<TABLE>
<CAPTION>
1997
(excluding
nonrecurring
1997 items) 1996
------- ------- -------
<S> <C> <C> <C>
Net income $9,339 $4,003 $3,267
Earnings per share $ 2.76 $ 1.18 $ .95
Return on average assets 2.49% 1.06% .93%
Return on average shareholders'
equity 32.08% 13.75% 12.02%
</TABLE>
Key indicators have increased due to improved earnings and nonrecurring items.
Earnings per share and return on average shareholders' equity also reflect the
positive impact of the stock buyback program initiated in the first quarter of
1997. See Capital discussion for details about the stock buyback.
On a tax equivalent basis, net interest income for the first six months of 1997
totaled $14,488,000 as compared to $13,186,000 in 1996, a 10% increase. This
increase is due to a 7% increase in average earning assets and a 2% increase in
the net interest margin to 4.39% in 1997 from 4.31% in 1996.
-16-
<PAGE>
FIRST OAK BROOK BANCSHARES, INC. AND SUBSIDIARY
Average balances and effective interest yields and rates on a tax equivalent
basis for the first six months of 1997 and 1996 were as follows (dollars in
thousands):
<TABLE>
<CAPTION>
1997 1996
-------------------- ---------------------------
Average Effective Average Effective
Balance Yield Balance Yield
------- ----- ------- -----
<S> <C> <C> <C> <C>
Federal Funds sold $ 11,250 5.36% $ 10,966 5.34%
Interest-bearing
deposits with banks 256 5.57 233 5.18
Securities 259,115 6.48 258,018 6.34
Loans 421,822 9.27 376,625 9.40
-------- ---- -------- ----
Total earning assets/
yield $692,443 8.16 $645,842 8.11%
======== ==== ======== ====
Interest-bearing
deposits $476,066 4.78 $451,802 4.72%
Short-term debt 59,907 5.12 61,677 5.04
Long-term debt 5,746 5.69 1,750 4.83
-------- ---- -------- ----
Total interest-bearing
liabilities/cost of
funds $541,719 4.83% $515,229 4.76%
======== ==== ======== ====
Net interest margin 4.39% 4.31%
==== ====
Net interest spread 3.34% 3.35%
==== ====
</TABLE>
Total other income rose $9,675,000 over 1996. Excluding the gain on the sale of
the credit card portfolio, other income increased $558,000, or 24%. Service
charges on deposit accounts increased $198,000, or 16%, as a result of higher
business account analysis fees. Trust and investment management fees increased
47%, or $160,000, over 1996 due to increased discretionary assets under
investment management and a change from annual billing in 1996 to quarterly in
1997. Discretionary assets under investment management grew to $115 million as
of June 30, 1997, up $30 million from June 30, 1996. The remaining increase in
other operating income of $212,000, or 28%, was attributable to increased
merchant credit card processing fees.
Other expenses increased $37,000. Excluding the gain on the property sale in
February, 1997, other expenses increased 552,000, or 5%. Salaries and employee
benefits increased $250,000, or 4%, as compared to 1996 due to a highly
competitive job market dictating higher base salaries in certain positions
coupled with hiring experienced personnel.
-17-
<PAGE>
FIRST OAK BROOK BANCSHARES, INC. AND SUBSIDIARY
Equipment expenses for the first six months of 1997 decreased $75,000, or 9%.
This decrease reflects lower depreciation costs as assets become fully
depreciated.
Data processing costs increased $111,000, or 15%, primarily as a result of
higher credit card processing fees.
Other operating expenses rose $183,000, or 22%, over 1996. This increase is
principally attributable to increased merchant interchange fees.
Asset Quality
- -------------
Asset quality remains good, with nonperforming loans (nonaccrual loans and loans
past due 90 days or more and still accruing) totaling $1,570,000, or .42%, of
loans outstanding. There was no other real estate owned as of June 30, 1997.
At June 30, 1997, the Company's loan loss reserve totaled $4,904,000, or 1.31%,
of loans outstanding.
Net chargeoffs year-to-date totaled $754,000, or .36% (annualized), of average
loans outstanding. Of the total net chargeoffs year-to-date, $554,000 related
to the credit card portfolio and $200,000 related to the $1.7 million December
31, 1996 nonaccrual loan balance, which consisted of one commercial real estate
development loan originally collateralized by fourteen condominium units and a
combination of improved and unimproved land zoned for 136 multi-family housing
units. On May 23, 1997, the borrower sold the property to a new development
group; Oak Brook Bank received the closing proceeds and charged off the
remaining $200,000 principal balance.
-18-
<PAGE>
FIRST OAK BROOK BANCSHARES, INC. AND SUBSIDIARY
The following table summarizes the Company's nonperforming assets (in
thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
----------- -----------
<S> <C> <C>
Nonaccrual $ 168 $1,730
Loans which are past due
90 days or more 1,402 349
------ ------
Total nonperforming loans 1,570 2,079
Other real estate owned - -
------ ------
Total nonperforming assets $1,570 $2,079
====== ======
Nonperforming loans to loans
outstanding .42% .49%
Nonperforming assets to loans
outstanding and other real
estate owned .42% .49%
Allowance for loan losses to
nonperforming loans 3.12x 1.98x
</TABLE>
Loans past due 90 days or more as of June 30, 1997 included a $727,000
commercial loan with quarterly interest only payments, collateralized almost
entirely by Oak Brook Bank certificates of deposit. The March 31, 1997 interest
due was unpaid as of June 30, 1997; payment was received on July 1, 1997, curing
the delinquency.
Capital
- -------
Shareholders' equity remains strong at $65 million. The unrealized gain on
securities available for sale at June 30, 1997 is $161,000 compared to a
$273,000 gain at December 31, 1996.
The Company and its subsidiary bank's Tier 1, total risk-based capital and
leveraged ratios are in excess of minimum regulatory guidelines and also exceed
the FDIC criteria for "well capitalized" banks. The following table shows the
capital ratios of the Company and its subsidiary bank as of June 30, 1997 and
the minimum ratios for "well capitalized" banks. The Federal regulators exclude
the after-tax unrealized gain/loss on securities available for sale from these
ratios.
-19-
<PAGE>
FIRST OAK BROOK BANCSHARES, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
Well Company Oak Brook
Capitalized Consolidated Bank
------------ ------------- ----------
<S> <C> <C> <C>
Tier 1
Risk-based >6% 14.44% 13.48%
--
Total Capital
Ratio >10% 15.53% 14.56%
--
Tier 1 Capital
leverage >5% 8.58% 8.00%
--
</TABLE>
On January 28, 1997, the Company's Board of Directors authorized a stock
repurchase program allowing the Company to repurchase up to 4%, or approximately
135,000 shares, of its Class A or common stock over the next 18 months.
Repurchases are being made in the open market or through negotiated transactions
from time to time depending on market conditions. As of June 30, 1997, a total
of 119,496 shares of stock have been repurchased at an average price of $23.56.
The repurchased stock is held as treasury stock to be used for general corporate
purposes.
Liquidity
- ---------
Effective management of balance sheet liquidity is necessary to fund growth in
earning assets and to pay liability maturities, depository customers' withdrawal
requirements and shareholders' dividends.
The Company has numerous sources of liquidity including a significant portfolio
of shorter term assets, readily marketable investment securities, its deposit
base, and access to borrowing arrangements. Available borrowing arrangements
are summarized as follows:
Oak Brook Bank:
.Informal Federal funds lines of $49 million with seven correspondent banks,
subject to continued good financial standing.
.Reverse repurchase agreement lines of $150 million with two brokerage firms
and three correspondent banks, subject to the availability of collateral and
continued good financial standing.
-20-
<PAGE>
FIRST OAK BROOK BANCSHARES, INC. AND SUBSIDIARY
. Advances up to $21 million from the Federal Home Loan Bank of Chicago. The
$12.5 million advance outstanding at June 30, 1997, consists of a $2.5
million borrowing at a rate of 5.85% maturing February 20, 1998, a $5
million, 5.48% borrowing callable after February 21, 1998 maturing February
22, 2000 and a $5 million, 5.71% borrowing callable after June 18, 1998
maturing June 18, 2002.
Parent Company:
. Revolving credit arrangement for $5 million. The line is currently unused
and matures on May 1, 1998. It is anticipated to be renewed annually.
. The parent company also had cash, short-term investments, and other readily
marketable securities totaling $5 million at June 30, 1997.
-21-
<PAGE>
FIRST OAK BROOK BANCSHARES, INC. AND SUBSIDIARY
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders was held May 6, 1997 at 1400 Sixteenth
Street, Oak Brook Bank Conference Center, Oak Brook, Illinois.
Matters presented to the shareholders for vote were the election of
directors and the ratification of the selection of the independent
auditors. The results of the votes on these matters are as follows:
ELECTION OF DIRECTORS
- ------------------------------------
<TABLE>
<CAPTION>
FOR DIRECTORS
EUGENE RICHARD FRANK MIRIAM ALTON GEOFFREY ROBERT
HEYTOW RIESER PARIS FITZGERALD WITHERS STONE WROBEL
------ ------ ----- ---------- ------- --------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Total Common
Votes 1,225,903 1,225,903 1,225,903 1,225,903 1,225,903 1,225,903 1,225,903
Total Class A
Votes 79,384 79,467 79,434 79,434 79,477 79,477 79,477
--------- --------- --------- --------- --------- --------- ---------
Total Votes 1,305,287 1,305,370 1,305,337 1,305,337 1,305,380 1,305,380 1,305,380
Percent of Total
Vote 81% 81% 81% 81% 81% 81% 81%
WITHHOLD DIRECTORS
EUGENE RICHARD FRANK MIRIAM ALTON GEOFFREY ROBERT
HEYTOW RIESER PARIS FITZGERALD WITHERS STONE WROBEL
------- ------ ------ ---------- ------- --------- ------
Total Common
Votes 0 0 0 0 0 0 0
Total Class A
Votes 128 45 78 78 35 35 35
------ --------- --------- --------- --------- --------- ---------
Total Votes 128 45 78 78 35 35 35
Percent of Total
Vote .008% .003% .005% .005% .002% .002% .002%
</TABLE>
-22-
<PAGE>
FIRST OAK BROOK BANCSHARES, INC. AND SUBSIDIARY
RATIFICATION OF THE SELECTION OF THE INDEPENDENT AUDITORS
- ---------------------------------------------------------
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--- ------- -------
<S> <C> <C> <C>
Total Common
Votes 1,224,164 1,219 562
Total Class A
Votes 78,140 264 1,302
--------- ----- -----
Total Votes 1,302,304 1,483 1,864
Percent of Total
Vote 80.8% .09% .12%
</TABLE>
The number of Common and Class A Common shares eligible to vote were 1,523,895
and 1,741,040 respectively. The Class A Common shares represent 87,052 votes
because each share is entitled to 1/20th of one vote.
-23-
<PAGE>
FIRST OAK BROOK BANCSHARES, INC. AND SUBSIDIARY
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
Exhibit (27) Financial Data Schedule
B. Reports on Form 8-K
Item 2. Acquisition or Disposition of Assets - Sale of Mastercard
Portfolio
-24-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST OAK BROOK BANCSHARES, INC.
----------------------------------------
(Registrant)
Date August 12, 1997 /S/RICHARD M. RIESER, JR.
---------------------- ---------------------------------
Richard M. Rieser, Jr.,
President, Assistant
Secretary, and Director
Date August 12, 1997 /S/ROSEMARIE BOUMAN
---------------------- --------------------------------
Rosemarie Bouman,
Vice President, Chief
Financial Officer and
Chief Accounting Officer
-25-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEC FORM
10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 47,697
<INT-BEARING-DEPOSITS> 10,124
<FED-FUNDS-SOLD> 58,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 153,232
<INVESTMENTS-CARRYING> 134,479
<INVESTMENTS-MARKET> 135,831
<LOANS> 375,407
<ALLOWANCE> 4,904
<TOTAL-ASSETS> 800,676
<DEPOSITS> 635,164
<SHORT-TERM> 78,658
<LIABILITIES-OTHER> 11,509
<LONG-TERM> 10,000
0
0
<COMMON> 7,121
<OTHER-SE> 58,224
<TOTAL-LIABILITIES-AND-EQUITY> 800,676
<INTEREST-LOAN> 19,321
<INTEREST-INVEST> 7,823
<INTEREST-OTHER> 306
<INTEREST-TOTAL> 27,450
<INTEREST-DEPOSIT> 11,280
<INTEREST-EXPENSE> 12,962
<INTEREST-INCOME-NET> 14,488
<LOAN-LOSSES> 1,550
<SECURITIES-GAINS> 9
<EXPENSE-OTHER> 10,512
<INCOME-PRETAX> 14,387
<INCOME-PRE-EXTRAORDINARY> 14,387
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,339
<EPS-PRIMARY> 2.76
<EPS-DILUTED> 2.76
<YIELD-ACTUAL> 4.39
<LOANS-NON> 168
<LOANS-PAST> 1,402
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,109
<CHARGE-OFFS> 856
<RECOVERIES> 101
<ALLOWANCE-CLOSE> 4,904
<ALLOWANCE-DOMESTIC> 4,904
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
