<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the period ended: JUNE 30, 1995
[ ] 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 0-11401
SECURITY CHICAGO CORP.
--------------------------------------------------------------------------------
(Exact Name of Registrant as Specified In Its Charter)
DELAWARE 36-3236203
----------------------------------------- ---------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
196 E. PEARSON, CHICAGO, ILLINOIS 60611
----------------------------------------- ---------------------------
(Address of Principal Executive Offices) (Zip Code)
312/280-0360
-------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
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 the number of shares outstanding of each the issuer's classes of common
stock, as of the latest practicable date:
Class Outstanding at August 1, 1995
--------------------------------- -----------------------------------
Common Stock, par value $5.00 208,714 shares (excluding 31,286
shares held as treasury shares)
-1-
<PAGE>
SECURITY CHICAGO CORP.
AND SUBSIDIARY
INDEX
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1995 and
December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Income for the six month periods
ended June 30, 1995 and 1994 and the three month periods
ended June 30, 1995 and 1994. . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows for the six
month periods ended June 30, 1995 and 1994. . . . . . . . . . . . . . 5
Consolidated Statements of Changes in Stockholders' Equity
for the six month periods ended June 30, 1995 and 1994. . . . . . . . 6
Notes to the Consolidated Financial Statements as of
June 30, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis of the Financial
Condition and Results of Operation . . . . . . . . . . . . . . . . . . 8
Part II
Other Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
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<PAGE>
SECURITY CHICAGO CORP. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 30 December 31
1995 1994
---- ----
<S> <C> <C>
ASSETS
Cash and due from banks $ 5,734 $ 4,106
Federal funds sold 2,635 7,150
--------- ---------
Total cash and cash equivalents 8,369 11,256
Securities available-for-sale 3,483 5,513
Securities held-to-maturity (market value:
1995 - $23,773; 1994 - $21,380) 23,774 22,075
Loans, net of unearned discount and deferred loan fees 29,610 29,296
Less: Allowance for loan losses (354) (350)
--------- ---------
29,256 28,946
Leasehold improvements and equipment, net 179 211
Accrued interest and other assets 484 429
--------- ---------
$ 65,545 $ 68,430
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing $ 11,355 $ 14,445
Interest-bearing 44,175 43,984
--------- ---------
Total deposits 55,530 58,429
Demand note payable 880 880
Accrued interest and other liabilities 1,131 1,127
--------- ---------
57,541 60,436
Stockholders' equity
Common stock, $5 par value; 1,000,000 shares
authorized; 240,000 shares issued 1,200 1,200
Surplus 1,200 1,200
Retained earnings 6,623 6,328
Net unrealized gain (loss) on securities
available-for-sale, net of tax (348) (329)
Treasury stock, at cost (1995 - 30,846 shares;
1994 - 23,603 shares) (671) (405)
--------- ---------
8,004 7,994
--------- ---------
$ 65,545 $ 68,430
--------- ---------
--------- ---------
</TABLE>
--------------------------------------------------------------------------------
See accompanying notes to financial statements.
-3-
<PAGE>
SECURITY CHICAGO CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share data)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
INTEREST AND DIVIDEND INCOME
Loans, including fee income $ 647 $ 579 $ 1,280 $ 1,172
Securities
Taxable 280 253 554 500
Tax-exempt 22 30 44 66
Federal funds sold 75 53 121 108
Dividends 29 - 58 -
-------- -------- -------- --------
1,053 915 2,057 1,846
INTEREST EXPENSE
Deposits 396 342 751 694
Notes payable 21 13 40 23
-------- -------- -------- --------
417 355 791 717
NET INTEREST INCOME 636 560 1,266 1,129
Provision for loan losses - - - 2
-------- -------- -------- --------
636 560 1,266 1,127
OTHER INCOME
Service fees 190 157 372 296
Equity income in unconsolidated
non-affiliate - 63 - 114
Other income 38 47 80 106
-------- -------- -------- --------
228 267 452 516
OTHER EXPENSES
Salaries and employee benefits 280 318 571 635
Occupancy and equipment expense 141 138 291 279
Professional fees 46 8 93 97
Computer service fees 52 51 107 100
Other operating expenses 130 179 252 287
-------- -------- -------- --------
649 694 1,314 1,398
-------- -------- -------- --------
Income before income taxes 215 133 404 245
Provision for income taxes 56 16 109 43
-------- -------- -------- --------
NET INCOME $ 159 $ 117 $ 295 $ 202
-------- -------- -------- --------
-------- -------- -------- --------
Earnings per share $ 0.76 $ 0.54 $ 1.41 $ 0.93
Weighted average shares outstanding 209,434 216,397 209,718 216,397
</TABLE>
--------------------------------------------------------------------------------
See accompanying notes to financial statements.
-4-
<PAGE>
SECURITY CHICAGO CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands, except share data)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six months ended
June 30
1995 1994
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 295 $ 202
Adjustments to reconcile net income to net cash provided
by operating activities
Provision for depreciation and amortization 49 50
Provision for loan losses - 2
Net amortization of investment security premiums/
discounts 17 24
Undistributed equity income in unconsolidated
non-affiliate - (83)
Increase (decrease) in deferred loan fees (17) 7
(Increase) decrease in accrued interest receivable and
other assets (55) 67
Increase (decrease) in accrued interest payable and
other liabilities 123 67
------- -------
Net cash provided by operating activities 412 336
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturity of securities available-for-sale 2,000 4,000
Proceeds from maturity of securities held-to-maturity 4,232 2,088
Purchases of securities held-to-maturity (5,948) (5,584)
Net (increase) decrease in loans (293) 1,546
Purchase of investment in unconsolidated non-affiliate - (18)
Purchase of equipment, net (17) (13)
------- -------
Net cash provided by (used in) investing activities (26) 2,019
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in deposits (2,899) (203)
Cash dividends paid (108) (87)
Purchase of treasury stock (266) -
------- -------
Net cash used in financing activities (3,273) (290)
------- -------
Net increase (decrease) in cash and cash equivalents (2,887) 2,065
Cash and cash equivalents at beginning of period 11,256 14,113
------- -------
Cash and cash equivalents at end of period $ 8,369 $16,178
------- -------
------- -------
Supplemental disclosure of cash flow information
Cash paid during period for
Interest on deposits and other borrowings $ 733 $ 713
Income taxes 75 117
</TABLE>
--------------------------------------------------------------------------------
See accompanying notes to financial statements
-5-
<PAGE>
SECURITY CHICAGO CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES
IN STOCKHOLDERS' EQUITY FOR SIX MONTHS ENDED
June 30, 1995 and 1994
(In thousands, except share data)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Unrealized
Gain (Loss)
on Securities
Available-
Common Retained for-Sale Treasury
Stock Surplus Earnings Net of Tax Stock Total
----- ------- -------- ---------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 $ 1,200 $ 1,200 $ 6,328 $ (329) $ (405) $ 7,994
Net income for six months ended June 30, 1995 - - 295 - - 295
Purchase of 7,243 treasury shares - - - - (266) (266)
Change in unrealized gain (loss) on
securities available-for-sale, net of tax - - - (19) - (19)
--------- --------- --------- --------- --------- ---------
Balance at June 30, 1995 $ 1,200 $ 1,200 $ 6,623 $ (348) $ (671) $ 8,004
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
Balance at December 31, 1993 $ 1,200 $ 1,200 $ 5,083 $ 29 $ (405) $ 7,107
Net income for six months ended June 30, 1994 - - 202 - - 202
Cash dividends paid (at $0.40 per share) - - (87) - - (87)
Change in unrealized gain (loss) on
securities available-for-sale, net of tax - - - (42) - (42)
--------- --------- --------- --------- --------- ---------
Balance at June 30, 1994 $ 1,200 $ 1,200 $ 5,198 $ (13) $ (405) $ 7,180
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</TABLE>
See accompanying notes to financial statements.
-6-
<PAGE>
SECURITY CHICAGO CORP. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
--------------------------------------------------------------------------------
NOTE 1
Security Chicago Corp. (the "Corporation") is a one bank holding company which
owns 100% of the voting stock of First Security Bank of Chicago (the "Bank") a
state chartered commercial bank located in Chicago, Illinois. In the opinion of
management, the accompanying consolidated financial statements contain all
adjustments (consisting of normally recurring items) necessary to present fairly
the Corporation's financial position as of June 30, 1995 and December 31, 1994
and the results of its operations, cash flows and changes in stockholders'
equity for the six month and three month periods ended June 30, 1995 and 1994.
The results of operations for the period ended June 30, 1995 are not necessarily
indicative of the results to be expected for the full year.
The financial statements and notes are presented as permitted by Form 10-Q and
do not contain certain information included in the Corporation's annual
financial statements and notes thereto.
NOTE 2
Prior to August 1, 1994, the Corporation owned an approximate 20% interest in
First State Bancorp of Princeton, Illinois, Inc. ("Princeton"), a multibank
holding company located in north-central Illinois. Effective August 1, 1994,
Princeton merged with AMCORE Financial, Inc. ("AMCORE"), a multibank holding
company in northern Illinois. Pursuant to the terms of the merger the
Corporation exchanged its common stock interest in Princeton for 194,623 shares
of AMCORE common stock.
The Corporation accounted for its ownership interest in Princeton using the
equity method. Subsequent to the August 1, 1994 exchange of shares, the AMCORE
common shares were classified as available-for-sale and are carried at fair
value. At June 30, 1995, the carrying value of the AMCORE common stock was
$3,483,000.
At June 30, 1994, total assets of Princeton aggregated $159 million.
Princeton's net income for the six months ended June 30, 1994 was $579,000, of
which the Corporation recorded its $114,000 equity interest therein in the
consolidated statement of income as "Equity income in unconsolidated non-
affiliate".
NOTE 3
The Bank has the following contractual amounts of financial instruments
outstanding at June 30, 1995 (in 000's):
<TABLE>
<CAPTION>
<S> <C>
Commitments to originate loans $ 2,595
Standby letters of credit $ 480
</TABLE>
NOTE 4
On May 25, 1995, the Bank entered into a contract to purchase a building to
house its main office at 190 E. Delaware, Chicago. The Bank is committed to
advance approximately $2,800,000 for the purchase of the building and intends
to fund the purchase with cash and cash equivalents. This transaction is
expected to occur in January 1996.
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<PAGE>
SECURITY CHICAGO CORP. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
--------------------------------------------------------------------------------
RESULTS OF OPERATIONS
Consolidated net income of the Corporation for the second quarter of 1995
totaled $159,000 or $.76 per share a 40% increase compared to $117,000 or $.54
per share earned for the second quarter of 1994. Net income was $295,000 or
$1.41 per share and $202,000 or $.93 per share for the six month periods ended
June 30, 1995 and 1994, respectively. The primary factors that led to the
$93,000 (46%) increase in 1995 six month income and the $42,000 (36%) increase
in the second quarter income were improvements in net interest income, deposit
fee income, and reductions in operating expense levels. These improvements were
somewhat offset by a decline in equity earnings from an unconsolidated
subsidiary. These factors are discussed more fully below.
NET INTEREST INCOME:
As is discussed in note 2, in the accompanying June 30, 1995 consolidated
financial statements, in August of 1994 the Corporation received shares in
Amcore Financial, Inc. ("Amcore") in exchange for previously owned shares in
First State Bancorp of Princeton, Illinois, Inc. ("Princeton") pursuant to a
merger of these entities. In the June 30, 1994 income statement, the
Corporation recognized $114,000 of income ($63,000 for the second quarter) on
its investment in Princeton as equity income in an unconsolidated non-affiliate.
This is included in other income on the income statement. In the June 30, 1995
income statement, the Corporation received $58,000 ($29,000 for the second
quarter) in dividend income from its Amcore investment. This is included in
interest and dividend income in the June 30, 1995 income statement. The result
is a $56,000 decrease in income for the six month period and a $34,000 decrease
in income for the second quarter due to this exchange.
Excluding the dividend income of $58,000, net interest income totaled $1,208,000
for the six month period ended June 30, 1995 compared to $1,129,000 in 1994 for
the comparable period. Interest income increased $153,000 (on a fully tax
equivalent basis using 34% tax rate) over 1994, mainly due to $108,000 increase
in loan income as a result of increased rates over the prior period. This is
partially offset by a $74,000 increase in interest expense which is primarily
due to increased interest rates as well. The impact of changes in volumes and
rates for earning assets and interest bearing liabilities is as follows for the
six months ended June 30, 1995 and 1994. The following table analyzes the
change in net interest income, excluding dividend income, on a fully tax
equivalent basis using a 34% tax rate.
Favorable (Unfavorable) Changes In Net Interest Income (1)
(In 000's)
SIX MONTHS ENDED JUNE 30, 1995 OVER 1994
<TABLE>
<CAPTION>
Volume Rate Total
------ ---- -----
<S> <C> <C> <C>
Federal funds sold $ (50) $ 63 $ 13
Securities (33) 54 21
Loans (21) 129 108
------ ------ ------
Total earning assets (104) 246 142
Deposits (93) 150 57
Notes payable 7 10 17
------- ------ ------
Total interest bearing liabilities (86) 160 74
------ ------ ------
Change in net interest income $ (18) $ 86 $ 68
------ ------ ------
------ ------ ------
</TABLE>
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-8-
<PAGE>
SECURITY CHICAGO CORP. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
--------------------------------------------------------------------------------
In the above table, securities available-for-sale and held-to-maturity are
combined in the rate/volume analysis, and income from the Corporation's
investment in Princeton and Amcore is excluded from net interest income.
As can be seen in the preceding table, the impact of decreases in volumes of
earning assets and interest-bearing liabilities in 1995 was more than offset by
favorable improvements in rates.
Credit quality and collection experience continued to be good in 1995, resulting
in no provision for loan losses during the first half of 1995 compared to a
modest $2,000 provision for loan losses in the first half of 1994.
CHANGES IN NON-INTEREST INCOME AND NON-INTEREST EXPENSE
Service fee income improved $76,000 (26%) and $33,000 (21%) in the 1995 six
month period and three month period , respectively, compared to the year earlier
period, principally as a result of higher fees associated with commercial and
retail demand deposit account products. This increase was partially offset by a
$26,000 decrease in six month income and a $9,000 decrease in three month income
in Other income components resulting from reduced commissions on mortgage
origination and sales, as well as the Bank's discontinuance of the investment
brokerage function in January 1995.
Operating expenses for the six month period and three month period ended June
30, 1995 decreased $84,000 (6.0%) and $45,000 (6.5%), respectively, over the
1994 periods. The largest component of the decrease was a reduction in
compensation and benefits of $64,000 and $38,000 for the six month and three
month periods ending June 30, 1995 as the Bank continued its efforts to reduce
the number of full-time equivalents. In addition, various other operating
expenses, none of which were individually significant, decreased by $20,000 and
$7,000 collectively as a result of the Bank's efforts to improve operating
efficiencies.
The provision for income tax for the six month period and three month period
ended June 30, 1995 was $66,000 and $40,000 higher than the same periods for
1994 primarily as a result of an increase of $159,000 and $82,000 in income
before income taxes.
FINANCIAL CONDITION
Consolidated total assets aggregated $66 million and $68 million at June 30,
1995 and December 31, 1994, respectively. Most of the decrease in assets was in
fed funds sold and cash and cash equivalents, which were liquidated to fund
decreases in deposits during the six month period. Securities available-for-
sale decreased by $2 million as a result of maturities, and held-to-maturity
securities were substantially unchanged during the six months ended June 30,
1995. Similarly, loans were also substantially unchanged in that net loans
increased during the period by $505,000 (1.7%). Cash and cash equivalents
amounted to $8.4 million at June 30, 1995, which is a strong, high level of
liquidity.
The Corporation's allowance for loan losses was relatively unchanged at $354,000
at June 30, 1995. The allowance represented 1.2% of outstanding loans at both
June 30, 1995 and December 31, 1994.
--------------------------------------------------------------------------------
-9-
<PAGE>
SECURITY CHICAGO CORP. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
--------------------------------------------------------------------------------
CAPITAL RESOURCES
Bank regulatory agencies have adopted capital standards by which all banks and
bank holding companies will be evaluated. Under the risk-based method of
measurement, the resulting ratio is dependent upon not only the level of capital
and assets, but the composition of assets and capital and the amount of off-
balance sheet commitments. Since the Company has consolidated assets of less
than $150 million, regulatory minimum capital tests are applied primarily to the
subsidiary Bank. In accordance with the guidelines of the Federal Reserve,
unrealized net gains and losses net of deferred income taxes, which are recorded
as an adjustment to equity capital on the financial statements, are not included
in the calculation of these ratios.
The Corporations' equity capital was $8,004,000 at June 30, 1995 compared to
$7,994,000 at December 31, 1994. The slight increase was primarily attributable
to net income of $295,000 exceeding treasury stock purchases of $266,000 made
during 1995. The Bank's equity capital was $6,126,000 at June 30, 1995 compared
to $5,782,000 at June 30, 1994. The increase was attributable to net income for
the period. The Bank's regulatory capital position was as follows:
<TABLE>
<CAPTION>
Regulatory
Requirement 6/30/95 12/31/94
----------- ------- --------
<S> <C> <C> <C>
Risk-based total capital 8.0% 23.36% 22.24%
Risk-based tier 1 capital 4.0% 22.08% 21.00%
Tier 1 leveraged capital 4.0% - 5.0% 9.69% 8.71%
</TABLE>
Commitments for capital expenditures are an important factor in evaluating
capital adequacy. Additional capital expenditures are anticipated in
association with the future of the Corporation's main banking facility in
Chicago. As discussed in note 4, the Bank is committed to advance approximately
$2,800,000 for the purchase of a building to house its main office. This
transaction is expected to occur in January 1996.
LIQUIDITY
Liquidity measures the ability of the Corporation to meet maturing obligations
and its existing commitments, to withstand fluctuations in deposit levels, to
fund operations and to provide for customers' credit needs. The liquidity of
the Corporation principally depends on cash flows from operating activities,
investment in and maturity of assets, changes in balances of deposits and
borrowing and its ability to borrow funds in the money or capital markets.
Net cash outflows resulted primarily from a decrease in deposits of $2.9 million
which was funded through a like decrease in federal funds sold and cash and cash
equivalents. Cash inflows from the maturity of securities were reinvested in
securities and loans.
--------------------------------------------------------------------------------
-10-
<PAGE>
SECURITY CHICAGO CORP. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
--------------------------------------------------------------------------------
NEW ACCOUNTING PRONOUNCEMENTS
Effective January 1, 1995, the Company adopted Statement of Financial Accounting
Standard ("SFAS") No. 114, "Accounting by Creditors for Impairment of a Loan."
SFAS 114 requires that the fair value of impaired loans be calculated and if the
fair value is less than the loan's carrying value, a valuation allowance be
established. The adoption of this statement has not had a material effect on
the Company's financial statements.
--------------------------------------------------------------------------------
-11-
<PAGE>
SECURITY CHICAGO CORP. AND SUBSIDIARY
--------------------------------------------------------------------------------
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
Meeting of Stockholders
The annual Meeting of Stockholders was held on June 19, 1995.
Election of Directors
Messrs. Thomas R. Beverlin, Richard S. Bull, Frank W. Fernandes,
Ronald A. Landsman, James D. Polivka and Wallis L. Weinper and
Ms. Carol M. Ware were elected to serve as Directors of the
Corporation at the Annual Meeting.
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits - Material contracts
b. Reports on Form 8-K - none
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.
SECURITY CHICAGO CORP.
(Registrant)
Thomas R. Beverlin
--------------------
Thomas R. Beverlin
Executive Vice President
August 11, 1995
Sarah G. O'Sullivan
--------------------
Sarah G. O'Sullivan
Chief Financial Officer
August 11, 1995
--------------------------------------------------------------------------------
-12-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 5,734
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 2,635
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 3,483
<INVESTMENTS-CARRYING> 23,774
<INVESTMENTS-MARKET> 23,773
<LOANS> 29,610
<ALLOWANCE> (354)
<TOTAL-ASSETS> 65,545
<DEPOSITS> 55,530
<SHORT-TERM> 880
<LIABILITIES-OTHER> 1,131
<LONG-TERM> 0
<COMMON> 1,200
0
0
<OTHER-SE> 6,804
<TOTAL-LIABILITIES-AND-EQUITY> 65,545
<INTEREST-LOAN> 1,280
<INTEREST-INVEST> 656
<INTEREST-OTHER> 121
<INTEREST-TOTAL> 2,057
<INTEREST-DEPOSIT> 751
<INTEREST-EXPENSE> 791
<INTEREST-INCOME-NET> 1,266
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,314
<INCOME-PRETAX> 404
<INCOME-PRE-EXTRAORDINARY> 295
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 295
<EPS-PRIMARY> 1.41
<EPS-DILUTED> 1.41
<YIELD-ACTUAL> 4.25
<LOANS-NON> 40
<LOANS-PAST> 32
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 350
<CHARGE-OFFS> 2
<RECOVERIES> 6
<ALLOWANCE-CLOSE> 354
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 354
</TABLE>
<PAGE>
AGREEMENT TO ASSIGN REAL ESTATE SALES CONTRACT
This AGREEMENT TO ASSIGN REAL ESTATE SALES CONTRACT (this "Agreement") is
made in Chicago, Illinois this 25th day of May 1995, by and between LW PARTNERS
VIII LIMITED PARTNERSHIP, an Illinois limited partnership ("LW") and FIRST
SECURITY BANK OF CHICAGO, an Illinois banking corporation ("FSBC").
RECITALS
A. Pursuant to a certain Real Estate Sales Contract dated December 2,
1994, as amended by Amendment dated December 21, 1994 (the "Contract"),
Belgravia Group, Ltd. an Illinois corporation (Belgravia"), agreed to purchase
from the University of Chicago, an Illinois not-for-profit corporation (the
"University") certain property and improvements thereon commonly known as 190
East Delaware Place, Chicago, Illinois (the "Property") at a purchase price (the
"Purchase Price") of $2,350,000, plus or minus prorations and credits.
B. Pursuant to an Assignment and Assumption dated April 15, 1995,
Belgravia assigned to LW all of Belgravia's right, title and interest under the
Contract and LW assumed all of Belgravia's liabilities and obligations
thereunder.
C. LW desires to further assign all of its right, title and interest in
and to the Contract to FSBC.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, it is hereby agreed as follows:
1. ASSIGNMENT. Subject to the terms and conditions of this Agreement, LW
shall transfer, assign and set over unto FSBC all of the right, title and
interest of LW in and to the Contract. Such assignment shall be automatically
effective without further action of the parties immediately upon the later to
occur of the satisfaction of the Zoning Condition and the receipt of the Banking
Approval (as such terms are hereinafter defined). Such assignment shall be
without assumption by FSBC of any liability or obligation to the University
under the Contract which accrued prior to the effective date of the assignment.
2. EARNEST MONEY. Within five days after the date of full execution and
delivery of this Agreement, FSBC shall deposit $55,000 into an escrow (the
"Escrow") with Near North National Title Corporation to be held as earnest money
in an interest-bearing account for the mutual benefit of the parties, pursuant
to strict joint order escrow instructions and the terms of this Agreement. In
addition: (a) for each month in excess of one month that the Due Diligence
Period (as defined in the Contract) is extended pursuant to the Contract, FSBC
shall deposit into the Escrow, within five days after notice is delivered to
FSBC that LW has paid an additional $5,000 Monthly Extension Fee (as defined in
the Contract), the
<PAGE>
sum of $5,000 and (b) in the event LW increases the earnest money under the
Contract by $50,000 pursuant to Section 3 of the Contract, FSBC shall deposit
into the Escrow, within five days after notice is delivered to FSBC that LW has
made such $50,000 payment, the sum of $50,000. All deposits made by FSBC under
this Section 2 shall be deemed to be "Earnest Money" hereunder. All interest
earned on deposits in the Escrow shall be paid to FSBC except upon a default by
FSBC under this Agreement, in which event such amounts shall be paid to LW.
3. ASSIGNMENT PAYMENT. In consideration of: LW's assignment of the
Contract to FSBC, LW's satisfaction of the Zoning Condition and as reimbursement
for all costs incurred or to be incurred by LW in connection with the
transactions contemplated by the Contract and this Agreement, FSBC shall pay to
LW the sum of $450,000, as provided in Section 8 below. Said sum shall be due
and payable by cashier's check or wired funds at the Closing (hereinafter
defined).
4. ZONING PERIOD. LW shall cause the 120-day zoning period set forth in
Paragraph R.4(b) of the Contract to be extended as provided therein for such
time as may be necessary for LW to pursue satisfaction of the Zoning Condition
and shall pay to the University the Monthly Extension Fee (as defined in the
Contract) on or before the date due each month.
5. ENVIRONMENTAL.
(a) Within thirty days from the date hereof, LW shall deliver to FSBC
a Phase I environmental report of the Property, which report shall be
prepared by an environmental consulting firm reasonably acceptable to FSBC
and which shall be addressed to FSBC. If such environmental report
indicates that the University has not complied with its obligations under
the Contract or has breached any representation or warranty set forth in
the Contract or if FSBC, in its reasonable discretion, is otherwise
dissatisfied with the environmental condition of the Property, FSBC shall
have the right to terminate this Agreement by giving notice to LW within
thirty days after delivery of the report, in which event the Earnest Money
and all interest thereon shall promptly be returned to FSBC. The
provisions of this subsection (a) shall not be effective with respect to
the existence of asbestos at the Property, such matters being governed by
subsection (b) below.
(b) Within thirty days from the date of delivery of Phase I report
described above, LW shall obtain a contractor's proposal for the removal of
all asbestos from the Property. Such proposal shall be prepared by a
contractor reasonably acceptable to FSBC. At the Closing, LW shall: (i)
cause the University to grant a credit against the Purchase Price for an
amount equal to the cost for the removal of all asbestos from the Property
as set forth in LW's contractor's proposal, and (ii) pay to FSBC any such
amounts not so credit by the University.
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(c) Without limiting the generality of other provisions of this
Agreement, LW shall cause the University to comply with all requirements in
the Contract regarding the remediation of hazardous materials upon the
Property and delivery of appropriate evidence of compliance with laws
regarding the prior removal of underground storage tanks and the issuance
of all appropriate governmental certificates and documents with respect to
such removal. In the absence of contrary notice from FSBC to LW during the
thirty day period following delivery of the Phase I report as described in
subsection (a) above, LW shall be deemed to have complied with its
obligations under this subsection (c).
6. ZONING. LW represents that it has filed with the City of Chicago on
or about April 5, 1995 an application to amend the zoning classification of the
Property from R8 to B6-6. LW shall, at its sole cost and expense, proceed in
good faith and with due diligence to pursue such application, attend all
hearings and take all other appropriate action as shall be necessary or
appropriate to effect a change of zoning classification of the Property to B6-6
so as to allow the Property to be operated as a banking facility (the successful
completion of such zoning change is herein referred to as the "Zoning
Condition"). If the Zoning Condition is not fully satisfied on or prior to
December 1, 1995, FSBC may, at its election and upon notice to LW terminate this
Agreement in which event the Earnest Money and all interest thereon shall be
promptly paid to FSBC and neither party shall thereafter have any rights or
claims against the other party.
7. SURVEY. LW shall, at its sole cost and expense, cause the Survey
(hereinafter defined) to be certified to FSBC and FSBC's designees and deliver
the same to FSBC at Closing. Subject to the foregoing, FSBC hereby accepts the
Survey, provided that LW shall cause the title policy that is to be delivered to
FSBC at Closing to contain an encroachment endorsement against loss or damage
arising out of the .02 foot encroachment of the building located at the
southeast corner of the Property as noted on the Survey.
8. CLOSING. The closing for the purchase of the Property (the "Closing")
shall, subject to the terms and conditions of the Contract, be on a date
selected by FSBC (as designated on a notice given to LW not later than ten days
prior to the Closing) on or about December 5, 1995, but in no event earlier than
December 2, 1995 nor later than February 15, 1996. At the Closing, FSBC shall
pay to the University all sums required under the Contract for the purchase of
the Property. At the Closing (a) the earnest money deposited under the Contract
by LW (and interest thereon) and the Monthly Extension Fees paid by LW shall be
credit against the Purchase Price; (b) all of the Earnest Money and all interest
thereon shall be returned to FSBC; and (c) subject to Section 5(b) above, FSBC
shall pay to LW $450,000 plus the sums credited against the Purchase Price under
the foregoing clause (a). LW shall direct the University to convey title to the
Property directly to FSBC's designated nominee at the Closing, subject to the
terms of this Agreement.
9. DEFAULT: FAILURE TO SATISFY CONDITIONS.
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(a) If FSBC fails to perform any of FSBC's obligations under this
Agreement and such failure continues more than five days after notice to
FSBC, then LW's sole and exclusive remedies against FSBC shall be to (i)
terminate this Agreement in which event the Earnest Money and all interest
thereon shall be paid to LW as liquidated damages; and (ii) if, during a
period of six months following such termination, neither Belgravia, nor LW
or any of their respective officers, shareholders, employees, directors or
affiliates, or David W Ruttenberg or any of his relatives, partners or
employees or any entity in which any of said persons has a financial
interest purchases, leases or exchanges the Property, acquires any
financial interest in the Property, receives any fee, commission or
compensation with respect to the sale, lease or exchange of the Property,
or enters into any written or oral agreement with respect to any of the
foregoing,or is otherwise involved in any financial transaction with
respect to the Property, then FSBC shall also pay to LW, with ten days
following the expiration of said six month period, the sum of $50,000 as
additional liquidated damages. If any such uncured failure occurs after
the assignment of the Contract to FSBC has become effective, FSBC shall,
upon notice from LW, immediately reassign the Contract to LW.
(b) If LW fails to perform any of LW's obligations under this
Agreement or any representation or warranty of LW set forth herein is
breached, and such failure or breach continues more than five days after
notice to LW, then FSBC, at its election, may exercise any one or more of
the following remedies:
(i) terminate this Agreement by notice to LW in which event the
Earnest Money and all interest thereon shall be returned to FSBC;
(ii) enforce specific performance of this Agreement; and
(iii) pursue any other rights or remedies to which FSBC may be
entitled at law or in equity, provided that if any such failure is due
to the default by the University under the Contract without fault by
LW, FSBC shall have no right to collect money damages from LW on
account thereof.
(c) If the University breaches or defaults under its obligations
under the Contract, and such breach or default continues for five days
after notice from FSBC to LW, FSBC may, at its election, exercise any one
or more of the following remedies:
(i) if such breach or default occurs prior to the effective date
of the assignment of the Contract to FSBC: (A) terminate this
Agreement in which event the Earnest Money and all interest thereon
shall be returned to FSBC; or (B) cause LW, at LW's cost and expense,
to enforce such obligations or otherwise pursue its rights and
remedies under the Contract, as directed by FSBC; and
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(ii) if such breach or default occurs after the effective date of
the assignment of the Contract to FSBC, pursue its rights and remedies
under the Contract, in which event LW shall be obligated to cooperate
with FSBC in such efforts.
10. BANKING APPROVAL. Promptly following the full execution and delivery
of this Agreement, FSBC shall seek all bank regulatory governmental approvals
and consents for the operation of a banking facility at the Property as FSBC
shall, in its sole discretion, deem necessary or appropriate (the "Banking
Approval"). In the event, for any reason, the Banking Approval is not obtained
on or prior to October 2, 1995, FSBC may, at its election, upon notice to LW
delivered not later than October 6, 1995, terminate this Agreement, in which
event all Earnest Money and interest thereon shall be promptly returned to FSBC.
11. REPRESENTATION AND WARRANTIES
(a) LW hereby represents and warrants to FSBC that:
(i) The Recitals hereto are true and correct;
(ii) The Plat of Survey prepared by Chicago Guarantee Survey
Company, revision dated March 30, 1995 (#9412008), (the
"Survey"), properly depicts the general dimensions and
location of the Property;
(iii) Other than the Contract and this Agreement, to the best of
LW's knowledge, there are not contracts, options or
agreements in existence which related to the purchase of the
Property;
(iv) To the best of LW's knowledge, the University owns fee
simple title to the Property and has full power and
authority to enter into the Contract and to perform its
obligations thereunder;
(v) LW has full power and authority to enter into this Agreement
and to perform its obligations hereunder. The individual
executing this Agreement on behalf of LW is authorized to do
so;
(vi) LW holds good and valid title to the rights of Purchaser
under the Contract free and clear of all liens and
encumbrances;
(vii) The consummation of the transactions contemplated by this
Agreement shall not result in a breach of any of the terms
or conditions of, or constitute a default under any
agreement to which LW is now a party, or violate any
judgment; order, writ
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injunction or decree of any court, administrative agency or
governmental body in an action which LW is a party;
(viii) No consent of the University is required with respect to the
assignment of the Contract by Belgravia to LW or to the
assignment by LW to FSBC and the performance by LW of its
other obligations hereunder; and
(ix) The contract is in full force and effect and free from all
defaults by the seller and purchaser thereunder.
(b) The foregoing representations and warranties shall survive the
Closing for one year following the Closing.
(c) LW agrees to indemnify and hold harmless FSBC for all loss,
damage, cost and expense (including reasonable attorneys' fees) incurred or
suffered as a result of any breach of the foregoing representations and
warranties.
12. TITLE POLICY.
LW shall cause to be delivered to FSBC within fifteen days from the
date hereof a title commitment in accordance with Sections 1 and 2 of the
Conditions and Stipulations of the Contract and LW and FSBC shall have the
same rights and obligations with regard to the title commitment as are
applicable to the "Seller" and "Purchaser", respectively, under said
Sections 1 and 2.
13. MISCELLANEOUS.
(a) LW agrees not to modify, amend or terminate the Contract without
obtaining FSBC's prior written consent thereto.
(b) LW represents to FSBC that neither LW nor Belgravia has dealt
with or engaged any broker or finder in connection with this Agreement or
the transactions contemplated hereby other than any broker or finder whose
fee, commission or other compensation will be paid in full by LW. FSBC
represents to LW that FSBC has not dealt with or engaged any broker or
finder in connection with this Agreement or the transactions contemplated
hereby. The parties acknowledge that certain parties are listed as brokers
under the Contract. LW represents and warrants that the University (and in
no event FSBC) shall be responsible for paying any commissions owed in
connection with the sale of the Property. Each party hereby agrees to
indemnify and hold harmless the other party from and against all costs,
claims, losses, liabilities and expenses (including reasonable attorneys'
fees) incurred by the non-indemnifying party and arising from a breach or
inaccuracy of the foregoing representation made by the indemnifying party.
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(c) If any provision of this Agreement is held to be unenforceable or
invalid by any court of competent jurisdiction, LW and FSBC shall negotiate
an equitable adjustment to the provisions of this Agreement in order to
effect, to the maximum extent permitted by law, the purpose of this
Agreement (and absent any agreement by LW and FSBC, upon the request of
either hereto, a court of competent jurisdiction is empowered to make such
equitable adjustment), and the enforceability and validity of the remaining
provisions shall not be effected thereby.
(d) This Agreement constitutes the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof and
supersedes all previous agreements and understandings. This Agreement
shall not be amended or otherwise modified without the written consent of
LW and FSBC. This Agreement shall be binding upon and shall inure to the
benefit of LW and FSBC and their respective successors and assigns.
(e) In the event any litigation arises between the parties with
respect to this Agreement, the prevailing party in such litigation shall be
entitled to receive from the other party all of its reasonable attorney's
fees and costs incurred in connection therewith.
(f) This Agreement shall be governed by and construed in accordance
with the laws of the State of Illinois.
(g) Any notices and other documents required or permitted to be given
or delivered hereunder shall be in writing and shall be delivered (i)
personally, (ii) via certified or registered mail return receipt requested
or (iii) via overnight courier, addressed to the parties as follows:
If to LW: c/o Belgravia Group, Limited
325 West Huron Street
Suite 806
Chicago, Illinois 60610
Attention: David W. Ruttenberg
If to FSBC: First Security Bank of Chicago
196 East Pearson
Chicago, Illinois 60601
Attention: Thomas R. Beverlin
with a copy to: David Glickstein
Schwartz, Cooper, Greenberger & Krauss, Chtd.
180 North LaSalle Street
Suite 2700
Chicago, Illinois 60601
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Any notice given or other document sent as aforesaid shall be deemed given
and delivered (i) on the date received, if personally delivered, (ii) on
the second business day following the date on which such notice is
deposited with the postal service, if sent by certified or registered mail,
whether or not received, or (iii) on the first business day following the
date on which such notice is deposited with an overnight courier, if sent
by overnight courier, whether or not received. Either party to this
Agreement may change its address for notice purposes by giving notice
thereof to the other party as provided above.
(h) If any day required hereunder for the delivery of any notice or
the performance of any act falls upon a Saturday, Sunday or a day on which
state chartered banks in Illinois are not generally open for business, such
required day shall be extended until the next regular state banking day.
(i) This Agreement may be executed in one or more counterparts each
of which, when taken together, shall constitute one and the same Agreement.
(j) Upon request, each party agrees to perform such further acts and
execute such additional documents as the other party may deem necessary or
appropriate to evidence or effectuate the provisions hereof, including,
without limitation, execution and delivery of separate assignment documents
subject to the provisions of Sections 1 and 9(a) hereof, respectively.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
LW: FSBC:
LW PARTNERS VIII LIMITED FIRST SECURITY BANK OF
PARTNERSHIP, an Illinois limited CHICAGO, an Illinois banking
partnership corporation
By: Belgravia Group, Ltd
/s/ David W. Ruttenberg By: /s/ Thomas R. Beverlin
------------------------------ -----------------------------------
Its: General Partner Its: President
JOINDER
The undersigned, having a financial interest in LW, does hereby join in
making the warranties and representations set forth in Section 11 of the
foregoing Agreement and agrees
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that he shall be jointly and severally liable with LW for any breach thereof,
subject to the terms of Sections 11(b) and (c) of the Agreement.
DATED: May 25, 1995 /s/ David W. Ruttenberg
--------------------------------------
David W. Ruttenberg
ACKNOWLEDGEMENT
Belgravia does hereby acknowledge and represent to FSBC that it has
assigned to LW all of Belgravia's rights under the Contract.
Dated: May 25, 1995 Belgravia Group, Ltd
By: /s/ David W. Ruttenberg
----------------------------------
Title: President
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